<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2000
FILE NO. 33-83138
811-8722
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 6
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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) 452-4000
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<TABLE>
<CAPTION>
COPY TO:
<S> <C>
JAMES G. POTTER, JR., ESQ. STEPHEN E. ROTH, ESQ.
PROVIDENT MUTUAL LIFE SUTHERLAND ASBILL & BRENNAN LLP
INSURANCE COMPANY 1275 PENNSYLVANIA AVENUE, N.W.
1000 CHESTERBROOK BOULEVARD WASHINGTON, D.C. 20004-2415
BERWYN, PA 19312
(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) of Rule 485
[X] on May 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
Title of Securities Being Registered:
Interests in Flexible Premium Adjustable Variable Life Insurance Policies
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<PAGE> 2
PROSPECTUS
FOR
FLEXIBLE PREMIUM
ADJUSTABLE VARIABLE
LIFE INSURANCE POLICY
ISSUED BY
PROVIDENTMUTUAL LIFE AND ANNUITY
COMPANY OF AMERICA
<TABLE>
<S> <C>
[PROVIDENT MUTUAL LOGO]
OPTIONSVL PROVIDENTMUTUAL LIFE AND ANNUITY
FORM 5.00 COMPANY OF AMERICA
16071
</TABLE>
<PAGE> 3
PROSPECTUS
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
ISSUED BY
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
SERVICE CENTER: 300 CONTINENTAL DRIVE, NEWARK, DELAWARE 19173
CORPORATE HEADQUARTERS: 1000 CHESTERBROOK BOULEVARD, BERWYN, PENNSYLVANIA 19312
TELEPHONE: (302) 452-4000
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 purpose of the Policy is to provide insurance
coverage for the lifetime of the Insured. The Policy gives the policyowner (the
"Owner") the right to vary the frequency and amount of premium payments, to
choose 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, or both. The Providentmutual Variable Life Separate Account
has twenty-seven Subaccounts, the assets of which are each invested in shares of
a corresponding investment Portfolio that is part of one of the following mutual
fund companies:
<TABLE>
<S> <C> <C>
- ------------------------------------------ ------------------------------------------
THE MARKET STREET FUND, INC. STRONG VARIABLE INSURANCE FUNDS, INC.
- ------------------------------------------ ------------------------------------------
- All Pro Large Cap Growth Portfolio - Strong Mid Cap Growth Fund II
- All Pro Large Cap Value Portfolio
- All Pro Small Cap Growth Portfolio ------------------------------------------
- All Pro Small Cap Value Portfolio
- Equity 500 Index Portfolio ------------------------------------------
- International Portfolio VARIABLE INSURANCE
- Growth Portfolio PRODUCTS FUND
- Aggressive Growth Portfolio ------------------------------------------
- Managed Portfolio - Equity-Income Portfolio
- Bond Portfolio - Growth Portfolio
- Money Market Portfolio - High Income Portfolio
- Overseas Portfolio
- ------------------------------------------
------------------------------------------
- ------------------------------------------
THE ALGER AMERICAN FUND ------------------------------------------
- ------------------------------------------ VARIABLE INSURANCE
- Small Capitalization Portfolio PRODUCTS FUND II
------------------------------------------
- ------------------------------------------ - Asset Manager Portfolio
- Contrafund(R) Portfolio
- ------------------------------------------ - Investment Grade Bond Portfolio
NEUBERGER BERMAN
ADVISERS MANAGEMENT TRUST ------------------------------------------
- ------------------------------------------
- Limited Maturity Bond Portfolio ------------------------------------------
- Partners Portfolio VAN ECK WORLDWIDE INSURANCE TRUST
- ------------------------------------------ ------------------------------------------
- Worldwide Bond Portfolio
- ------------------------------------------ - Worldwide Emerging Markets Portfolio
STRONG OPPORTUNITY FUND II, INC. - Worldwide Hard Assets Portfolio
- ------------------------------------------ - Worldwide Real Estate Portfolio
- Strong Opportunity Fund II
------------------------------------------
- ------------------------------------------
</TABLE>
The Owner bears the entire investment risk for all amounts allocated to the
Subaccounts; there is no guaranteed minimum 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 monthly deductions and certain other fees and charges. 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
decreases the Face Amount. Generally, during the first 3 Policy Years, the
Policy will remain in force as long as the Minimum Guarantee Premium is paid or
there is sufficient value in the Policy to pay certain monthly charges imposed
under the Policy. After the third Policy Year, the Policy will only remain in
force if there is sufficient value to pay the monthly deductions and other
charges under the 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.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
May 1, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY OF THE POLICY
The Policy................................................ 3
Purpose of the Policy..................................... 3
The Death Benefit......................................... 4
Flexibility to Adjust Amount of Death Benefit............. 4
Policy Account Value...................................... 4
Allocation of Net Premiums................................ 5
Transfers................................................. 5
Free-Look................................................. 5
Loan Privilege............................................ 5
Partial Withdrawal of Net Cash Surrender Value............ 6
Surrender of the Policy................................... 6
Accelerated Death Benefit................................. 6
Tax Treatment............................................. 6
Illustrations............................................. 7
Charges Assessed Under the Policy......................... 7
Table of Fund Fees and Expenses............................. 9
The Company, Separate Account and Funds..................... 12
Providentmutual Life and Annuity Company of America....... 12
Providentmutual Variable Life Separate Account............ 12
The Funds................................................. 12
Additional Information About the Funds and Portfolios..... 16
Detailed Description of Policy Provisions................... 18
Death Benefit............................................. 18
Ability to Adjust Face Amount............................. 20
Insurance Protection...................................... 21
Payment and Allocation of Premiums........................ 21
Policy Account Value...................................... 23
Policy Duration........................................... 24
Transfers of Policy Account Value......................... 24
Free-Look Privileges...................................... 26
Loan Privileges........................................... 26
Surrender Privilege....................................... 28
Partial Withdrawal Privilege.............................. 28
Accelerated Death Benefit................................. 29
Charges and Deductions...................................... 32
Premium Expense Charge.................................... 32
Surrender Charges......................................... 32
Monthly Deductions........................................ 34
Face Amount Increase Charge............................... 35
Partial Withdrawal Charge................................. 35
Transfer Charge........................................... 35
Mortality and Expense Risk Charge......................... 36
Other Charges............................................. 36
The Guaranteed Account...................................... 37
Minimum Guaranteed and Current Interest Rates............. 37
Transfers from Guaranteed Account......................... 38
Other Policy Provisions..................................... 39
Benefit Payable on Final Policy Date...................... 39
Payment of Policy Benefits................................ 39
</TABLE>
<PAGE> 5
<TABLE>
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PAGE
----
<S> <C>
The Policy................................................ 39
Ownership................................................. 40
Beneficiary............................................... 40
Change of Owner and Beneficiary........................... 40
Split Dollar Arrangements................................. 40
Protection of Proceeds.................................... 40
Assignments............................................... 40
Misstatement of Age and Sex............................... 41
Suicide................................................... 41
Contestability............................................ 41
Settlement Options........................................ 41
Supplementary Benefits...................................... 41
Federal Income Tax Considerations........................... 43
Introduction.............................................. 43
Tax Status of the Policy.................................. 43
Tax Treatment of Policy Benefits.......................... 43
Special Rules for Pension and Profit-Sharing Plans........ 45
Special Rules for Section 403(b) Arrangements............. 45
Business Uses of the Policy............................... 45
Possible Tax Law Changes.................................. 46
PLACA's Taxes............................................. 46
Policies Issued in Conjunction with Employee Benefit
Plans..................................................... 46
Legal Developments Regarding Unisex Actuarial Tables........ 46
Voting Rights............................................... 46
Standard & Poor's........................................... 47
Changes to the Separate Account and the Funds............... 48
Changes to Separate Account Operations.................... 48
Changes to Available Portfolios........................... 48
Termination of Participation Agreements................... 48
Officers and Directors of PLACA............................. 49
Distribution of Policies.................................... 51
Policy Reports.............................................. 51
State Regulation............................................ 52
Legal Proceedings........................................... 52
Experts..................................................... 52
Legal Matters............................................... 52
Definitions................................................. 53
Financial Statements........................................ F-1
Appendix A -- Illustration of Death Benefits, Policy Account
Values and Net Cash Surrender Values.......... A-1
</TABLE>
<PAGE> 6
SUMMARY OF THE POLICY
The following summary of the Policy provisions should be read in
conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated, the description of the Policy in this
prospectus assumes that the Insured is alive, the Policy is in force and there
is no outstanding loan.
The Policy is not a deposit or obligation of any bank, and no bank endorses
or guarantees the Policy or Policy values. Neither the Federal Deposit Insurance
Corporation nor any federal agency insures or guarantees Policy values or your
investment in the Policy.
THE POLICY
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 is similar in many ways to a
fixed-benefit life insurance policy. As with a fixed-benefit life insurance
policy, the Owner of a Policy makes premium payments in return for insurance
coverage on the person insured. Also, like many fixed-benefit life insurance
policies, the Policy provides for accumulation of Net Premiums and a Net Cash
Surrender Value which is payable if the Policy is surrendered during the
Insured's lifetime. As with many fixed-benefit life insurance policies, the Net
Cash Surrender Value during the early Policy Years is likely to be substantially
lower than the aggregate premium payments made.
However, the Policy differs from a fixed-benefit life insurance policy in
several important respects. Unlike a fixed-benefit life insurance policy, under
the Policy, the Death Benefit may and the Policy Account Value will increase or
decrease to reflect the investment performance of any Subaccounts to which
Policy Account Value is allocated. Also, unless the entire Policy Account Value
is allocated to the Guaranteed Account, there is no guaranteed minimum Net Cash
Surrender Value. If Net Cash Surrender Value is insufficient to pay charges due,
then, after a grace period, the Policy will Lapse without value. (See "Policy
Duration".) However, PLACA guarantees that the Policy will remain in force
during the first 3 Policy Years as long as certain requirements related to the
Minimum Guarantee Premium have been met. (See "Policy Lapse.") If a Policy
Lapses while loans are outstanding, certain amounts may become subject to income
tax and a 10% penalty tax. (See "Federal Income Tax Considerations.")
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.
PLACA offers other variable life insurance policies that have different
Death Benefits, policy features, and optional programs. However, these other
policies also have different charges that would affect the Owner's Subaccount
performance and Policy Account Value. To obtain more information about these
other policies, contact PLACA's Service Center or the Owner's agent.
The most important features of the Policy, such as charges and deductions,
Death Benefits, and calculation of Policy values, are summarized on the
following pages.
PURPOSE OF THE POLICY
The Policy is designed to provide lifetime insurance benefits and long-term
investment of Policy Account Value. A prospective Owner should evaluate the
Policy along with other insurance coverage that he or she may have, as well as
their need for insurance and the Policy's long-term investment potential. It may
not be advantageous to replace existing insurance coverage with the Policy. In
particular, replacement should be carefully considered if the decision to
replace existing coverage is based solely on a comparison of Policy
illustrations.
3
<PAGE> 7
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 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 Death Benefit equal to the greater of (a) the Face Amount and (b) the
specified percentage of the Policy Account Value. Death Benefit Option B
provides a Death Benefit equal to the greater of (a) the Face Amount plus the
Policy Account Value and (b) the specified percentage of the Policy Account
Value. (See "Death Benefit".)
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 "Death Benefit" and "Ability
to Adjust Face Amount".) 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 "Monthly
Deductions".)
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 of 1986 (the "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 "Policy Account Value").
The Policy Account Value in the Subaccounts reflects the investment
performance of those Subaccounts, any Net Premiums allocated to those
Subaccounts, any transfers to or from those Subaccounts, any partial withdrawals
from those Subaccounts, 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.
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".)
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".)
4
<PAGE> 8
ALLOCATION OF NET PREMIUMS
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 in the application or by subsequent written notice. The Owner bears
the entire risk of Policy Account Value in the Subaccounts.
Providentmutual Variable Life Separate Account consists of twenty-seven
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; Strong Opportunity Fund II, Inc.;
Strong Variable Insurance Funds, Inc.; Van Eck Worldwide Insurance 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.
Where state law requires a return of premiums paid when a Policy is
returned under the Free-Look provision any portion of 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, Policy Account Value in the Money
Market Subaccount is allocated to each of the chosen Subaccounts as indicated in
the application. (See "Payment and Allocation of Premiums".)
TRANSFERS
The Owner may transfer Policy Account Value between and among the
Subaccounts and Guaranteed Account. Transfers between and among the Subaccounts
or into the Guaranteed Account are made as of the date PLACA receives 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. (See "Transfers of Policy Account
Value".)
FREE-LOOK
The Policy provides for an initial Free-Look period. The Owner may cancel
the Policy before the later 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; (ii) the amount deducted for premium taxes; (iii)
any Monthly Deductions charged against the Policy Account Value; and (iv) an
amount reflecting other charges directly or indirectly deducted under the
Policy. Where state law requires, the refund will instead equal the premiums
paid. (See "Free-Look Privileges".)
A Free-Look privilege also applies after a requested increase in Face
Amount. (See "Free-Look For Increase in Face Amount".)
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. PLACA transfers Policy Account Value in an amount equal to the loan to the
Loan Account where it becomes collateral for the loan. The transfer is made
pro-rata from each Subaccount and the Guaranteed Account or as specified by the
Owner when applying for the loan. This collateral in the Loan Account earns
interest at an effective annual rate of at least 4%. (See "Loan Privileges".)
5
<PAGE> 9
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 including a 10% penalty
tax. (See "Tax Treatment of Policy Benefits".)
PARTIAL WITHDRAWAL OF NET CASH SURRENDER VALUE
After the first Policy Year, the Owner may, subject to certain
restrictions, withdraw part 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 is 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 or allocated to such Subaccounts as specified by the Owner. If
Death Benefit Option A is in effect, PLACA will reduce the Face Amount by the
amount of the withdrawal. (See "Partial Withdrawal Privilege".)
SURRENDER OF THE POLICY
The Owner may at any time surrender the Policy and receive the entire Net
Cash Surrender Value. (See "Surrender Privilege".)
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"
below.)
TAX TREATMENT
PLACA believes that a Policy should generally be deemed a life insurance
contract under Federal tax law. However, due to limited guidance, there is some
uncertainty about the application of the Federal tax law to the Policy,
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 definition of a life insurance
contract. Any Owner contemplating the adoption of such limitations should
consult 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".)
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 Policy. In addition, prior to age 59 1/2 any such distributions generally
will be subject to a 10% penalty tax. (For further discussion of Modified
Endowment Contracts, See "Tax Treatment of Policy Benefits".)
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".)
6
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ILLUSTRATIONS
Illustrations of Death Benefits, Policy Account Value and Net Cash
Surrender Value in this prospectus or used in connection with the purchase of a
Policy are based on hypothetical rates of return. These rates are not
guaranteed. They are illustrative only and should not be considered a
representation of past or future performance. Actual rates of return may be
higher or lower than those reflected in Policy illustrations, and therefore,
actual Policy values will be different from those illustrated.
CHARGES ASSESSED UNDER THE POLICY
Premium Expense Charge. A Premium Charge will be deducted from each
premium payment. This charge consists of:
1. 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. Premium
taxes vary from state to state but range from 0% to 4%. No premium tax
charge is deducted in jurisdictions that impose no premium tax. 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;
2. Percent of Premium Sales Charge which is equal to 2% of the amount
of the premium payment. PLACA currently intends to stop deducting this
charge once the aggregate amount collected equals or exceeds a specified
amount;
3. 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.
Monthly Deductions. On the Policy Date and on each Policy Processing Date
thereafter, the Policy Account Value is 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 is determined by multiplying the Net Amount at Risk by the
applicable cost of insurance rate(s) in the Policy. The Monthly Administrative
Charge is currently $7.50; the maximum permissible Monthly Administrative Charge
is $12. (See "Monthly Administrative Charge".)
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
10th 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
10th Policy Year. (See "Surrender Charges".) An Additional Surrender Charge
which is an Additional Deferred Sales Charge is imposed if the Policy is
surrendered or lapses at any time within 10 years after the effective date of an
increase in Face Amount. (See "Surrender Charges".) A portion of an Additional
Surrender Charge is deducted if the related increment of Face Amount is
decreased within 10 years after such increase took effect. (See "Surrender
Charges".)
The Deferred Administrative Charge is the charge described below less the
amount of any Deferred Administrative Charge previously paid at the time of a
decrease in Face Amount.
<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>
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<PAGE> 11
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 12
policy months after an increase) up to one Target Premium plus 7% of all other
premiums received to the date of surrender, lapse or decrease. The Deferred
Sales Charge and any Additional Deferred Sales Charges, however, will not exceed
the Maximum Deferred Sales Charge and Maximum Additional Deferred 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 Premium during the seventh year, 36% during the eighth year, 24% during
the ninth year, 12% during the tenth year, and 0% during years eleven and later.
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
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" below.)
Transfer Charge. For each transfer of Policy Account Value between or
among the Subaccounts and the Guaranteed Account after the twelfth transfer in a
Policy Year, PLACA deducts $25 from the amount transferred to compensate it for
administrative costs in handling such transfers. (See "Transfer Charge" below.)
Partial Withdrawal Charge. PLACA deducts a $25 charge from Policy Account
Value with each partial withdrawal to compensate it for administrative costs.
(See "Partial Withdrawal Charge" below.)
Daily Charges Against the Subaccounts. PLACA imposes a daily charge for
its assumption of certain mortality and expense risks in connection with the
Policy 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
it will not exceed an annual rate of 0.90%. (See "Mortality and Expense Risk
Charges".)
Investment Advisory Fees and Other Expenses of the Funds. 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. (See
"Table of Fund Fees and Expenses" below).
8
<PAGE> 12
The following table shows the fees and expenses charged by the Portfolio
for the fiscal year ended December 31, 1999. The purpose of the table is to
assist you in understanding the various costs and expenses that you will bear
directly and indirectly. Expenses of the Portfolios may be higher or lower in
the future. Please refer to the Portfolio's Prospectuses for more information.
TABLE OF FUND FEES AND EXPENSES
<TABLE>
<CAPTION>
ALL PRO
ALL PRO ALL PRO ALL PRO SMALL
LARGE CAP LARGE CAP SMALL CAP CAP
MARKET STREET FUND, INC. ANNUAL EXPENSES GROWTH VALUE GROWTH VALUE
(AS A PERCENTAGE OF AVERAGE NET ASSETS) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- -------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Management Fees (Investment Advisory
Fees)................................ 0.70% 0.70% 0.90% 0.90%
Other Expenses (after reimbursement)... 0.19% 0.21% 0.21% 0.30%
---- ---- ---- ----
Total Fund Annual Expenses............. 0.89% 0.91% 1.11% 1.20%
</TABLE>
<TABLE>
<CAPTION>
EQUITY 500 AGGRESSIVE
MARKET STREET FUND, INC. ANNUAL EXPENSES INDEX INTERNATIONAL GROWTH GROWTH MANAGED BOND
(AS A PERCENTAGE OF AVERAGE NET ASSETS) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------- -------------- ------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (Investment Advisory
Fees)................................ 0.24% 0.75% 0.32% 0.41% 0.40% 0.35%
Other Expenses(3)...................... 0.04% 0.23% 0.16% 0.16% 0.17% 0.17%
---- ---- ---- ---- ---- ----
Total Fund Annual Expenses............. 0.28% 0.98% 0.48% 0.57% 0.57% 0.52%
<CAPTION>
MONEY
MARKET STREET FUND, INC. ANNUAL EXPENSES MARKET
(AS A PERCENTAGE OF AVERAGE NET ASSETS) PORTFOLIO
- ---------------------------------------- ---------
<S> <C>
Management Fees (Investment Advisory
Fees)................................ 0.25%
Other Expenses(3)...................... 0.15%
----
Total Fund Annual Expenses............. 0.40%
</TABLE>
<TABLE>
<CAPTION>
THE ALGER AMERICAN FUND ANNUAL SMALL
EXPENSES(2) CAPITALIZATION
(AS A PERCENTAGE OF AVERAGE NET ASSETS) PORTFOLIO
- --------------------------------------- --------------
<S> <C>
Management Fees (Investment Advisory
Fees)................................ 0.85%
Other Expenses......................... 0.05%
----
Total Fund Annual Expenses............. 0.90%
</TABLE>
<TABLE>
<CAPTION>
LIMITED
NEUBERGER BERMAN ADVISERS MATURITY
MANAGEMENT TRUST ANNUAL EXPENSES(2) BOND PARTNERS
(AS A PERCENTAGE OF AVERAGE A NET ASSETS PORTFOLIO PORTFOLIO
- ---------------------------------------- -------------- -------------
<S> <C> <C>
Management Fees (Investment Advisory
Fees)................................ 0.65% 0.80%
Other Expenses......................... 0.11% 0.07%
---- ----
Total Fund Annual Expenses (after
reimbursement)(1).................... 0.76% 0.87%
</TABLE>
<TABLE>
<CAPTION>
STRONG OPPORTUNITY FUND II, INC. STRONG
ANNUAL EXPENSES(2) OPPORTUNITY
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FUND II
- --------------------------------------- --------------
<S> <C>
Management Fees (Investment Advisory
Fees)................................ 1.00%
Other Expenses (after reimbursement)... 0.14%
----
Total Fund Annual Expenses (after
reimbursement)(1).................... 1.14%
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
STRONG VARIABLE INSURANCE FUNDS, INC. STRONG MID
ANNUAL EXPENSES(2) CAP GROWTH
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FUND II
- --------------------------------------- --------------
<S> <C>
Management Fees (Investment Advisory
Fees)................................ 1.00%
Other Expenses (after reimbursement)... 0.15%
----
Total Fund Annual Expenses (after
reimbursement)(1).................... 1.15%
</TABLE>
<TABLE>
<CAPTION>
WORLDWIDE WORLDWIDE WORLDWIDE
VAN ECK WORLDWIDE INSURANCE WORLDWIDE EMERGING HARD REAL
TRUST ANNUAL EXPENSES(2) BOND MARKET ASSETS ESTATE
(AS A PERCENTAGE OF AVERAGE NET ASSETS) PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------- -------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Management Fees (Investment Advisory
Fees)................................ 1.00% 1.00% 1.00% 1.00%
Other Expenses (after reimbursement)... 0.22% 0.34% 0.26% 0.44%
---- ---- ---- ----
Total Fund Annual Expenses (after
reimbursement)(1).................... 1.22% 1.34% 1.26% 1.44%
</TABLE>
<TABLE>
<CAPTION>
EQUITY- HIGH
INCOME GROWTH INCOME OVERSEAS
VARIABLE INSURANCE PRODUCTS FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
("VIP FUND") ANNUAL EXPENSES(2) (INITIAL (INITIAL (INITIAL (INITIAL
(AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS) CLASS) CLASS) CLASS)
- --------------------------------------- -------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Management Fees (Investment Advisory
Fees)................................ 0.48% 0.58% 0.58% 0.73%
Other Expenses (after reimbursement)... 0.08% 0.07% 0.11% 0.14%
---- ---- ---- ----
Total Fund Annual Expenses (after
reimbursement)(1).................... 0.56% 0.65% 0.69% 0.87%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT
ASSET GRADE
MANAGER CONTRAFUND(R) BOND
VARIABLE INSURANCE PRODUCTS FUND II ("VIP PORTFOLIO PORTFOLIO PORTFOLIO
II FUND") ANNUAL EXPENSES(2) (INITIAL (INITIAL (INITIAL
(AS A PERCENTAGE OF AVERAGE NET ASSETS) CLASS) CLASS) CLASS)
- ----------------------------------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Management Fees (Investment Advisory
Fees)................................. 0.53% 0.58% 0.43%
Other Expenses (after reimbursement).... 0.09% 0.07% 0.11%
---- ---- ----
Total Fund Annual Expenses (after
reimbursement)(1)..................... 0.62% 0.65% 0.54%
</TABLE>
- ---------------
(1) For certain portfolios, certain expenses were reimbursed or fees waived
during 1999. It is anticipated that expense reimbursement and fee waiver
arrangements will continue past the current year. Absent the expense
reimbursement, the 1999 Total Annual Expenses would have been 1.21% for the
All Pro Small Cap Value Portfolio, 0.57% for the VIP Fund Equity-Income
Portfolio, 0.66% for the VIP Fund Growth Portfolio, 0.91% for the VIP Fund
Overseas Portfolio, 0.63% for the VIP II Fund Asset Manager Portfolio, 0.67%
for the VIP II Fund Contrafund(R) Portfolio, 3.23% for the Van Eck Worldwide
Real Estate Portfolio, and 1.17% for the Strong Mid Cap Growth Fund II.
Similar expense reimbursement and fee waiver arrangements were also in place
for the other Portfolios and it is anticipated that such arrangements will
continue past the current year. However, no expenses were reimbursed or fees
waived during 1999 for these Portfolios because the level of actual expenses
and
10
<PAGE> 14
fees never exceeded the thresholds at which the reimbursement and waiver
arrangements would have become operative.
(2) The fee and expense information regarding the Funds was provided by those
Funds. The VIP Fund, the VIP II Fund, the Neuberger Berman Advisers
Management Trust, the Van Eck WIT, the Strong Opportunity Fund II, Inc., the
Strong Variable Insurance Funds, Inc., and the Alger American Fund are not
affiliated with PLACA.
(3) Since the Equity 500 Index Portfolio has recently commenced operations,
"Other Expenses" is based on estimated amounts for 2000. This estimate
anticipates an expense reimbursement or fee waiver arrangement for 2000.
Absent this arrangement, estimated Total Fund Annual Expenses would be
0.39%.
11
<PAGE> 15
THE COMPANY, SEPARATE ACCOUNT AND FUNDS
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
The Contracts are issued by PLACA which is a stock life insurance company
originally incorporated under the name of Washington Square Life Insurance
Company in the Commonwealth of Pennsylvania in 1958. The name of the Company was
changed to Providentmutual Life and Annuity Company of America in 1991 and the
Company was redomiciled as a Delaware insurance company on October 28, 1992.
PLACA is currently licensed to transact life insurance business in 49 states and
the District of Columbia. As of December 31, 1999, PLACA had total assets of
approximately $1.7 billion.
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 1999 had consolidated assets of approximately $9.2
billion. On December 31, 1997, PLACA and PMLIC entered into a Support Agreement
whereby PMLIC agrees to maintain PLACA's total adjusted capital at the level of
200% of the "company action level" for risk-based capital at the end of each
calendar quarter during the term of the agreement. Under the Support Agreement,
PMLIC also agrees to maintain PLACA's cash or cash equivalents from time to time
as may be necessary during the term of the agreement in an amount sufficient for
the payment of benefits and other contractual claims pursuant to policies and
other contracts issued by PLACA. 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 Policies. 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 is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
PROVIDENTMUTUAL VARIABLE LIFE SEPARATE ACCOUNT
Providentmutual Variable Life Separate Account (the "Separate Account") is
a separate investment account of PLACA established by the Board of Directors of
PLACA under Delaware law to support the Policies and other variable life
insurance policies. PLACA has registered the Separate Account 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 Separate Account.
The assets of the Separate 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 Separate Account equal to the reserves
or other contract liabilities of the Separate Account are not chargeable with
liabilities that arise from any other business PLACA conducts. PLACA may
transfer to its General Account any assets of the Separate Account that exceed
the reserves and the Contract liabilities of the Separate Account (which will
always be at least equal to the aggregate Policy Account value allocated to the
Separate Account under the Policies). The income, gains and losses, realized or
unrealized, from assets allocated to the Separate Account are credited to or
charged against the Separate Account without regard to other income, gains or
losses of PLACA. PLACA may accumulate in the Separate Account the accrued
charges for mortality and expense risks and investment results attributable to
assets representing such charges. The Separate Account currently has
twenty-seven Subaccounts, each corresponding to an investment portfolio (a
"Portfolio") of one of the mutual fund companies listed below.
THE FUNDS
The Portfolios are each part of one of eight mutual fund companies (each, a
"Fund"): Market Street Fund, Inc.; Neuberger Berman Advisers Management Trust;
the Strong Opportunity Fund II, Inc.; the Strong Variable Insurance Funds, Inc.;
The Alger American Fund; Van Eck Worldwide Insurance Trust;
12
<PAGE> 16
Variable Insurance Products Fund; and Variable Insurance Products Fund II. Each
of the Funds are registered with the SEC under the 1940 Act as an open-end
management investment company. The SEC does not, however, supervise the
management or the investment practices and policies of the Funds or their
Portfolios. The assets of each Portfolio are separate from the assets of other
Portfolios of that Fund and each Portfolio has separate investment objectives
and policies. Some of the Funds may, in the future, create additional
Portfolios. The investment experience of each Subaccount depends on the
investment performance of its corresponding Portfolio.
THESE PORTFOLIOS ARE NOT AVAILABLE FOR PURCHASE DIRECTLY BY THE GENERAL
PUBLIC, AND ARE NOT THE SAME AS OTHER MUTUAL FUND PORTFOLIOS WITH VERY SIMILAR
OR NEARLY IDENTICAL NAMES THAT ARE SOLD DIRECTLY TO THE PUBLIC. However, the
investment objectives and policies of certain Portfolios available under the
Policy are very similar to the investment objectives and policies of other
portfolios that are or may be managed by the same investment adviser or manager.
Nevertheless, the investment performance of the Portfolios available under the
Policy may be lower or higher than the investment performance of these other
(publicly available) portfolios. THERE CAN BE NO ASSURANCE, AND PLACA MAKES NO
REPRESENTATION, THAT THE INVESTMENT PERFORMANCE OF ANY OF THE PORTFOLIOS
AVAILABLE UNDER THE POLICY WILL BE COMPARABLE TO THE INVESTMENT PERFORMANCE OF
ANY OTHER PORTFOLIO, EVEN IF THE OTHER PORTFOLIO HAS THE SAME INVESTMENT ADVISER
OR MANAGER, THE SAME INVESTMENT OBJECTIVES AND POLICIES, AND A VERY SIMILAR
NAME.
The following table summarizes each Portfolio's investment objective(s) and
identifies its investment adviser (and subadviser, if applicable).
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE AND INVESTMENT ADVISER
--------- -------------------------------------------
<S> <C>
ALL PRO LARGE CAP GROWTH -- Seeks to achieve long-term capital appreciation. The
PORTFOLIO Portfolio pursues its objective by investing primarily in
equity securities of companies among the 750 largest by
market capitalization at the time of purchase, which the
subadvisers believe show potential for growth in future
earnings. Investment adviser is Market Street Investment
Management Company; subadvisers are Cohen, Klingenstein &
Marks, Inc. and Geewax, Terker & Co.
ALL PRO LARGE CAP VALUE -- Seeks to provide long-term capital appreciation. The
PORTFOLIO Portfolio attempts to achieve this objective by investing
primarily in undervalued equity securities of companies
among the 750 largest by market capitalizations at the time
of purchase that the subadvisers believe offer above-average
potential for growth in future earnings. Investment adviser
is Market Street Investment Management Company; subadvisers
are Equinox Capital Management, Inc., Sanford C. Bernstein &
Company, Inc., and Mellon Equity Associates.
ALL PRO SMALL CAP GROWTH -- Seeks to achieve long-term capital appreciation. The
PORTFOLIO Portfolio pursues its objective by investing primarily in
equity securities of companies included in the Wilshire 5000
Equity Index at the time of purchase, which the subadvisers
believe show potential for growth in future earnings.
Investment adviser is Market Street Investment Management
Company; subadvisers are Standish, Ayer & Wood and Husic
Capital Management.
ALL PRO SMALL CAP VALUE -- Seeks to provide long-term capital appreciation. The
PORTFOLIO Portfolio pursues this objective by investing primarily in
undervalued equity securities of companies included in the
Wilshire 5000 Equity Index at the time of purchase, which
the subadvisers believe offer above-average potential for
growth in future earnings. Investment adviser is Market
Street Investment Management Company; subadvisers are Reams
Asset Management Company, LLC and Sterling Capital
Management Company.
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE AND INVESTMENT ADVISER
--------- -------------------------------------------
<S> <C>
EQUITY 500 INDEX PORTFOLIO -- Seeks to provide long-term capital appreciation by
investing primarily in common stocks included in the
Standard & Poor's 500(R) Composite Stock Price Index.*
Investment adviser is Market Street Investment Management
Company; subadviser is State Street Global Advisors.
INTERNATIONAL PORTFOLIO -- Seeks long-term growth of capital principally through
investments in a diversified portfolio of marketable equity
securities of established foreign issuer companies.
Investment adviser is Market Street Investment Management
Company; subadviser is The Boston Company Asset Management,
Inc.
GROWTH 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. Investment adviser is Sentinel Advisors
Company.
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. Investment adviser is
Sentinel Advisors Company.
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. Investment adviser is Sentinel Advisors
Company.
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.
Investment adviser is Sentinel Advisors Company.
MONEY MARKET PORTFOLIO -- Seeks to provide maximum current income consistent with
capital preservation and liquidity by investing in
high-quality money market instruments. Investment adviser is
Sentinel Advisors Company.
ALGER AMERICAN SMALL -- Seeks long-term capital appreciation. It focuses on
CAPITALIZATION PORTFOLIO small, fast-growing companies that offer innovative
products, services or technologies to a rapidly expanding
marketplace. Under normal circumstances, the portfolio
invests primarily in the equity securities of small
capitalization companies. A small capitalization company is
one that has a market capitalization within the range of the
Russell 2000 Growth Index(R) or the S&P SmallCap 600
Index(R). Investment adviser is Fred Alger Management, Inc.
NEUBERGER BERMAN LIMITED -- Seeks the highest available current income consistent
MATURITY BOND PORTFOLIO with low risk to principal and liquidity and secondarily,
total return, through investment mainly in investment grade
bonds. Investment adviser is Neuberger Berman Management
Incorporated.
NEUBERGER BERMAN PARTNERS -- Seeks capital growth through investment mainly in common
PORTFOLIO stocks of medium- to large-capitalization companies.
Investment adviser is Neuberger Berman Management
Incorporated.
</TABLE>
- ---------------
<TABLE>
<S> <C>
* "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by PMLIC and
its affiliates and subsidiaries. The Policy is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the advisability
of investing in the Policy. See "Additional Information -- Standard & Poor's" below which
sets forth certain additional disclaimers and limitations of liabilities on behalf of S&P.
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE AND INVESTMENT ADVISER
--------- -------------------------------------------
<S> <C>
STRONG OPPORTUNITY FUND II -- Seeks capital growth by investing primarily in stocks of
medium- capitalization companies that the Portfolio's
manager believes are underpriced, yet have attractive growth
prospects. Investment adviser is Strong Capital Management,
Inc.
STRONG MID CAP GROWTH FUND II -- Seeks capital growth by investing at least 65% of its
assets in stocks of medium-capitalization companies that the
Portfolio's managers believe have favorable prospects for
accelerating growth of earnings, but are selling at
reasonable valuations based on earnings, cash flow, or asset
value. Investment adviser is Strong Capital Management, Inc.
VAN ECK WORLDWIDE BOND -- Seeks high total return through a flexible policy of
PORTFOLIO investing globally, primarily in debt securities. Investment
adviser is Van Eck Associates Corporation.
VAN ECK WORLDWIDE EMERGING -- Seeks long-term capital appreciation by investing
MARKETS PORTFOLIO primarily in equity securities in emerging markets around
the world. Investment adviser is Van Eck Global Asset
Management (Asia) Limited.
VAN ECK WORLDWIDE HARD ASSETS -- Seeks long-term capital appreciation by investing
PORTFOLIO globally, primarily in "Hard Assets Securities." Hard Assets
Securities include equity securities of Hard Asset Companies
and securities, including structured notes, whose value is
linked to the price of a Hard Asset commodity or a commodity
index. Hard Asset Companies include companies that are
directly or indirectly engaged to a significant extent in
the exploration, development, production, or distribution of
one or more of the following (together, "Hard Assets"): (a)
precious metals; (b) ferrous and non-ferrous metals; (c)
gas, petroleum, petrochemicals, or other hydrocarbons; (d)
forest products; (e) real estate; and (f) other basic
non-agricultural commodities. Income is a secondary
consideration. Investment adviser is Van Eck Associates
Corporation.
VAN ECK WORLDWIDE REAL ESTATE -- Seeks to maximize total return by investing primarily in
PORTFOLIO equity securities of domestic and foreign companies which
are principally engaged in the real estate industry or which
own significant real estate assets. Investment adviser is
Van Eck Associates Corporation.
VIP EQUITY-INCOME PORTFOLIO -- Seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these
securities, the VIP 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. Investment adviser is Fidelity Management
& Research Company.
VIP GROWTH PORTFOLIO -- Seeks to achieve capital appreciation. The VIP 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. Investment
adviser is Fidelity Management & Research Company.
VIP HIGH INCOME 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. Investment adviser is Fidelity Management &
Research Company.
</TABLE>
15
<PAGE> 19
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE AND INVESTMENT ADVISER
--------- -------------------------------------------
<S> <C>
VIP OVERSEAS PORTFOLIO -- Seeks long term growth of capital primarily through
investments in foreign securities. The VIP Overseas
Portfolio provides a means for diversification by
participating in companies and economies outside of the
United States. Investment adviser is Fidelity Management &
Research Company; subadvisers are Fidelity Management &
Research (U.K.) Inc., Fidelity Management & Research (Far
East) Inc., Fidelity International Investment Advisors, and
Fidelity International Investment Advisors (U.K.) Limited.
VIP II ASSET MANAGER PORTFOLIO -- Seeks to obtain high total return with reduced risk over
the long-term by allocating its assets among stocks, bonds
and short-term money market instruments. Investment adviser
is Fidelity Management & Research Company; subadvisers are
Fidelity Management & Research (U.K.) Inc. and Fidelity
Management & Research (Far East) Inc.
VIP II CONTRAFUND(R) Portfolio -- Seeks capital appreciation by investing in securities of
companies where value is not fully recognized by the public.
Investment adviser is Fidelity Management & Research
Company; subadvisers are Fidelity Management & Research
(U.K.) Inc. and Fidelity Management & Research (Far East)
Inc.
VIP II INVESTMENT GRADE BOND -- Seeks high current income by investing in
PORTFOLIO investment-grade debt securities. Investment adviser is
Fidelity Management & Research Company.
</TABLE>
ADDITIONAL INFORMATION ABOUT THE FUNDS AND PORTFOLIOS
NO ONE CAN ASSURE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVES AND
POLICIES.
More detailed information concerning the investment objectives, policies
and restrictions of the Portfolios, the expenses of the Portfolios, the risks
attendant to investing in the Portfolios and other aspects of the Funds'
operations can be found in the current prospectus for each Fund that accompanies
this Prospectus and the current statement of additional information for each
Fund. The Funds' prospectuses should be read carefully before any decision is
made concerning the allocation of Net Premium Payments or transfers of Policy
Account Value among the Subaccounts.
Not all of the Portfolios described in the prospectuses for the Funds are
available with the Policy. Moreover, if investment in the Funds or a particular
Portfolio is no longer possible, in PLACA's judgment becomes inappropriate for
the purposes of the Policy, or for any other reason in PLACA's sole discretion,
PLACA may substitute another fund or portfolio without the Owner's consent. The
substituted fund or portfolio may have different fees and expenses. Substitution
may be made with respect to existing investments or the investment of future Net
Premiums, or both. However, no such substitution will be made without any
necessary approval of the Securities and Exchange Commission. Furthermore, PLACA
may close Subaccounts to allocations of Net Premiums or Policy Account Value, or
both, at any time in its sole discretion. Shares of each Fund are purchased and
redeemed at net asset value, without a sales charge.
PLACA may receive compensation from the investment adviser of a Fund (or
affiliates thereof) in connection with administration, distribution, or other
services provided with respect to the Funds and their availability through the
Policies. The amount of this compensation is based upon a percentage of the
assets of the Fund attributable to the Policies and other policies issued by
PLACA. These percentages differ, and some advisers (or affiliates) may pay PLACA
more than others.
Shares of the Funds are sold to separate accounts of insurance companies
that are not affiliated with PLACA or each other, a practice known as "shared
funding." They are also sold to separate accounts to serve as the underlying
investment for both variable annuity contracts and variable life insurance
policies, a practice known as "mixed funding." As a result, there is a
possibility that a material conflict may arise between the interests of Owners,
whose Policy Account Values are allocated to the Separate Account, and
16
<PAGE> 20
of owners of other contracts or policies whose values are allocated to one or
more other separate accounts investing in any one of the Portfolios. Shares of
some of the Funds may also be sold directly to certain pension and retirement
plans qualifying under Section 401 of the Code. As a result, there is a
possibility that a material conflict may arise between the interests of Owners
or owners of other policies or contracts (including policies issued by other
companies), and such retirement plans or participants in such retirement plans.
In the event of any such material conflicts, PLACA will consider what action may
be appropriate, including removing the Portfolio as an investment option under
the Policies or replacing the Portfolio with another Portfolio. There are
certain risks associated with mixed and shared funding and with the sale of
shares to qualified pension and retirement plans, as disclosed in each Fund's
prospectus.
17
<PAGE> 21
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 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.
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."
Under either Option, the duration of the Death Benefit coverage depends upon the
Policy's Net Cash Surrender Value. (See "Policy Duration.")
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 decrease pro rata 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
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<PAGE> 22
the 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 or 12 months
after a Face Amount increase, at any time while the Policy is in force, the
Owner may change the Death Benefit Option in effect 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
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<PAGE> 23
Amount of $500,000 and a Policy Account Value of $50,000 and, therefore, the
Death Benefit is $550,000 ($500,000 + $50,000) and a Net Amount at Risk of
$500,000 ($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 Code for life insurance,
PLACA will not effect the change.
A change in the Death Benefit Option may have federal income tax
consequences. The Owner of a Policy should consult a tax advisor before changing
the Death Benefit Option.
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 or decrease in Face Amount may have tax
consequences. The Owner of a Policy should consult a tax advisor before
increasing or decreasing the Face Amount. 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.") In addition, different cost of insurance rates may apply to
the increase in insurance coverage. (See "Monthly Deductions.")
After increasing the Face Amount, the Owner will have the right: (a) during
the Free-Look Period following the effective date of the increase, to have the
increase canceled and receive a credit or refund equal to the Cost of Insurance
Charge and the increase charge deducted for the increase; and (b) 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
"Transfers of Policy Account Value.")
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 Code, PLACA will not effect the decrease.
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<PAGE> 24
A decrease in the Face Amount generally will decrease the total Net Amount
at Risk which will decrease an Owner's monthly Cost of Insurance Charges. A
decrease in the Face Amount may result in the imposition of a Surrender Charge
as of the Policy Processing Day on which the decrease becomes effective. (See
"Surrender Charges.")
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 by making a partial withdrawal of Net Cash
Surrender Value. The consequences of each are summarized below.
A decrease in Face Amount will 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 specified percentage. If
the insurance protection is increased, Monthly Deductions will increase as well.
Under Death Benefit Option A, until the specified percentage of Policy
Account Value exceeds the Face Amount, then (a) if the Owner increases the
premium payments from the current level, the amount of insurance protection will
generally be reduced, and (b) 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 specified 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 specified
percentage of Policy Account Value, then (a) if the Owner increases premium
payments from the current level, the amount of insurance protection will
increase and (b) if the Owner reduces the premium payments from the current
level, the amount of insurance protection will decrease.
A partial withdrawal of Net Cash Surrender Value will reduce the Death
Benefit. If Death Benefit Option A is in effect, the withdrawal will decrease
the Policy's Face Amount by the amount withdrawn plus the partial withdrawal
expense charge. If Death Benefit Option B is in effect, it will not reduce the
amount of insurance protection unless the Death Benefit is based on the
specified percentage of Policy Account Value. In this event, however, the
decrease in the Death Benefit will be greater than the amount of the withdrawal.
Increasing or decreasing the Policy's Insurance Protection may have tax
consequences. The Owner of a Policy should consult a tax advisor before
increasing or decreasing the Policy's Insurance Protection.
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
21
<PAGE> 25
Company ("1717") 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.
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.")
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. 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 are considered
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 and frequency of premium payments. However,
payment of the Planned Periodic Premiums does not 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 may lapse whenever the Net Cash Surrender Value is insufficient to pay
the Monthly Deductions and any other charges and if a Grace Period expires
without an adequate payment by the Owner.
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<PAGE> 26
Premium Limitations. The Code provides for exclusion of the Death Benefit
from a Beneficiary's 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 procedures to monitor whether
aggregate premiums paid under a Policy exceed those limits. If 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
maximum amount which may be paid under the Policy. The excess will be refunded.
If total premiums do exceed the maximum premium limitations established by the
Code, however, the excess of a Policy's Death Benefit over the Policy's Cash
Surrender Value should still be excludable from gross income.
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.") PLACA reserves the right to require satisfactory
evidence of insurability before accepting a premium payment that would increase
the Net Amount At Risk.
Allocation of Net Premiums. The Owner indicates in the application 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 allocates the Net Premiums as of the date it receives such
premium at its Service Center.
Certain states require PLACA to refund all payments (less any partial
withdrawals and indebtedness) in the event the Owner cancels the Policy during
the Free-Look period. See "Free-Look Privileges." In those states, PLACA will
allocate to the Money Market Subaccount any premiums the Owner requests be
allocated to Subaccount(s) which are received at our Service Center within 15
days from the later of: (1) the Policy Issue Date; or (2) the date PLACA
receives the Minimum Initial Premium. After this 15-day period ends, the value
in the Money Market Subaccount is allocated among the Subaccounts as indicated
in the application. PLACA invests all Net Premiums paid thereafter based on the
allocation percentages then in effect.
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.
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 the Cash Surrender
Value.
The Policy Account Value and Cash Surrender Value will reflect the
investment performance of the chosen Subaccounts, the crediting of interest 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 equals the Net
Premiums received less any Monthly Deductions on the Policy Date. On each
Valuation Day after the Policy Date, the Policy Account Value is:
1. Policy Account Value in each Subaccount, determined by multiplying
the number of units of the Subaccount by the Subaccount's Unit Value on
that date;
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<PAGE> 27
2. Policy Account Value in the Guaranteed Account; plus
3. Policy Account Value in the Loan Account.
Determination of Number of Units for the Subaccounts. Allocated Net
Premiums or Policy Account Value transferred to a Subaccount are used to
purchase units of that Subaccount; units are redeemed when amounts are deducted,
transferred or withdrawn. The number of units of 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. The Net Investment Factor for each Subaccount
measures the investment performance of a Subaccount. The factor increases to
reflect investment income and capital gains, realized and unrealized, for the
shares of the underlying Portfolio. The factor decreases to reflect any capital
losses, realized or unrealized, for the shares of the underlying Portfolio as
well as the asset charge for mortality and expense risks.
POLICY DURATION
Policy Lapse. 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
other 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 Policy provides for a 61-day Grace Period that is measured from the
date on which notice is sent by PLACA indicating that the Grace Period has
begun. Thus, the Policy does not lapse, and the insurance coverage continues,
until the expiration of this Grace Period. 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.
Reinstatement. A Policy that lapses 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 date that the reinstatement application is approved. Upon
reinstatement, the Policy Account Value is based upon the premium paid to
reinstate the Policy. A reinstated Policy has the same Policy Date as it had
prior to the lapse.
TRANSFERS OF POLICY ACCOUNT VALUE
Transfers. The Owner may transfer the Policy Account Value between and
among the Subaccounts and the Guaranteed Account by making a written transfer
request to PLACA. The amount transferred must be at least $1,000, unless the
total value in an account is less than $1,000, in which case the entire amount
may be transferred.
After 12 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 single written request are treated as one transfer.
Transfers (other than transfers from Guaranteed Account Value) are made as of
the date PLACA receives a written request at its Service Center. Transfers
resulting from Policy loans, the exercise of exchange privileges, the
reallocation from the Money Market Subaccount following the 15-day period after
the Issue Date, Dollar-Cost Averaging and Automatic Asset
24
<PAGE> 28
Rebalancing, are not subject to a transfer charge and do not count as one of the
12 "free" transfers in any Policy Year. Under present law, transfers are not
taxable transactions.
Special Transfer Right. During the first two years following the Issue
Date, the Owner may, on one occasion, transfer the entire Policy Account Value
in the Subaccounts to the Guaranteed Account without a transfer charge and
without such transfer counting toward the twelve transfers permitted without
charge during a Policy Year.
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.") 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.
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 a transfer charge and without having such
transfer count toward the twelve transfers permitted without charge during a
Policy Year.
Telephone Transfers. Transfers will be made upon instructions given by
telephone, provided the appropriate election has been made at the time of
application or proper authorization is provided to PLACA. PLACA reserves the
right to suspend telephone transfer privileges at any time for any class of
policies, for any reason. PLACA will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine and if it follows such
procedures it will not be liable for any losses due to authorized or fraudulent
instructions. PLACA, however, may be liable for such losses if it does not
follow those reasonable procedures. The procedures PLACA will follow for
telephone transfers include requiring some form of personal identification prior
to acting on instructions received by telephone, providing written confirmation
of the transaction and making a tape-recording of the instructions given by
telephone.
Automatic Asset Rebalancing. Automatic asset rebalancing is a feature
which, if elected, authorizes periodic transfers of Policy Account Values
between the Subaccounts in order to maintain the allocation of such values in
percentages that match the then current premium allocation percentages. Election
of this feature may be made in the application or at any time after the policy
is issued by properly completing the election form and returning it to PLACA.
The election may be revoked at any time. Rebalancing may be done quarterly or
annually. Rebalancing terminates when the total value in the subaccounts is less
than $1,000. PLACA reserves the right to suspend automatic asset rebalancing at
any time, for any class of Policies, for any reason.
Dollar-Cost Averaging. Dollar-Cost Averaging is a program which, if
elected, enables the Owner to systematically and automatically transfer, on a
monthly basis, specified dollar amounts from any selected Subaccount to any
other Subaccount or the Guaranteed Account. Transfers may not come from the
Guaranteed Account. By allocating on a regularly scheduled basis as opposed to
allocating the total amount at one particular time, an Owner may be less
susceptible to the impact of short term market fluctuations. PLACA, however,
makes no guarantee that Dollar-Cost Averaging will result in a profit or protect
against loss.
Dollar-Cost Averaging may be elected for a period of 6, 12, 18, 24, 30 or
36 months. To qualify for Dollar-Cost Averaging, the following minimum amount of
Policy Account Value must be allocated to a Subaccount: 6 months -- $3,000; 12
months -- $6,000; 18 months -- $9,000; 24 months -- $12,000; 30
months -- $15,000; 36 months -- $18,000. At least $500 must be transferred from
the Subaccount each
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<PAGE> 29
month. The amount required to be allocated to the Subaccount can be made from an
initial or subsequent investment or by transferring amounts into the Subaccount
from the other Subaccounts or from the Guaranteed Account (See "Transfers from
Guaranteed Account."). Each monthly transfer is split among the Subaccounts or
the Guaranteed Account based upon the percentages elected. Dollar-Cost Averaging
may not be elected if Automatic Asset Rebalancing has been elected or if a
policy loan is outstanding.
Dollar-Cost Averaging may be elected in the application or by completing an
election form and returning it to PLACA by the beginning of the month. When an
election form is received, Dollar-Cost Averaging will commence on the first
Policy Processing Day after the later of (a) the Policy Date; (b) the 15-day
period when premiums are allocated to the Money Market Subaccount in certain
states; and (c) when the Subaccount value equals or exceeds the greater of the
minimum amount stated above and the amount of the first monthly transfer.
Once Dollar-Cost Averaging transfers have commenced, they occur monthly on
the Policy Processing Day until the specified number of transfers has been
completed, or (a) a policy loan is requested, (b) the policy goes into the grace
period, or (c) there is insufficient value in the Subaccount to make the
transfer. The Owner may instruct PLACA in writing to cancel Dollar-Cost
Averaging transfers at any time.
Transfers made under the Dollar-Cost Averaging program do not count toward
the twelve transfers permitted each Policy Year without imposing the Transfer
Charge. PLACA reserves the right to discontinue offering automatic transfers
upon 30 days' written notice to the Owner. Written notice will be sent to the
Owner confirming each transfer and when the Dollar-Cost Averaging program is
terminated. The Owner and agent are responsible for reviewing the confirmation
to verify that the transfers are being made as requested.
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 Service Center, 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 Service Center or the PLACA representative through
whom the Policy was purchased; (ii) any Premium Expense Charges deducted from
premiums paid; (iii) any Monthly Deductions charged against the accounts; (iv)
any Mortality and Expense Risk charges deducted from the value of the net assets
of the Subaccounts; and (v) any advisory fees or other expenses of the Fund . A
refund of all premiums paid is made for Policy's delivered in states that
require such a refund.
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 the 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 Face Amount Increase Charge will be credited to the
accounts in the same proportion as they were deducted, unless the Owner requests
a refund of such amount.
LOAN PRIVILEGES
General. The Owner may at any time after the Issue Date borrow money from
PLACA using the Policy Account Value as the security for the loan. The Owner may
obtain Policy loans in a minimum amount of $500 (or such lesser 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.
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<PAGE> 30
Interest Rate Charged. Interest is charged on Policy loans at an effective
annual rate of 6%. Interest is due at the end of each Policy Year. If interest
is not paid when due, it is added to the loan balance and bear interest at the
same rate. Unpaid interest is 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 is the loan amount plus accrued interest
to the next Policy Anniversary, less interest at an effective annual rate of 4%
which is earned to such Policy Anniversary. PLACA will deduct the collateral for
the loan from each account based on the allocation described in the preceding
paragraph and transfer this amount to the Loan Account. The collateral is
recalculated: (a) when loan interest is repaid or added to 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 credits 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 is transferred to the Subaccounts or
the Guaranteed Account: (a) when loan interest is paid added to the loaned
amount; (b) when a loan repayment is made; and (c) when a new loan is made.
PLACA currently credits 4% interest annually to the amount in the Loan Account
until the policy's 10th anniversary or until Attained Age 65, whichever is
later, and 5.75% annually thereafter. The tax consequences of a Policy loan
after the later of a Policy's 10th anniversary or Attained Age 65 are less
clear. Owners should consult a tax adviser with respect to such consequences.
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 is a loan repayment, unless it receives written instructions
that the payment is a premium payment. Repayments up to the amount of the
outstanding loan is 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. (See "Policy Duration.")
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
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<PAGE> 31
as Modified Endowment Contracts.") 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, lapse of the Policy with
outstanding loans may result in adverse tax consequences. (See "Distributions
from Policies Not Classified as Modified Endowment Contracts.")
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 determined by PLACA as of the date it
receives, at its Service Center, 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 at the Service Center. A surrender may
have adverse federal income tax consequences. (See "Tax Treatment of Policy
Benefits.")
PARTIAL WITHDRAWAL PRIVILEGE
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 surrender charges.
The withdrawn amount and withdrawal charge will be allocated based on the
proportion that the Policy Account 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.")
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.
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<PAGE> 32
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.
Option B. The Face Amount will never be decreased by a partial withdrawal.
A partial withdrawal will, however, always decrease the Death Benefit.
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.
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.") A request for partial withdrawal may not be
allowed if, or to the extent that, 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.")
ACCELERATED DEATH BENEFIT
Applicants residing in states that have approved the Accelerated Death
Benefit rider (the "ADB rider") may elect to add it to their Policy at issue,
subject to PLACA receiving satisfactory additional evidence of insurability. The
ADB rider 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 ADB rider
will be approved in all states or that it will be approved under the terms
described herein.
The ADB rider 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
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<PAGE> 33
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.
There is no charge for adding the ADB rider 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 ADB Rider. The federal income tax consequences
associated with adding the ADB rider or receiving the accelerated death benefit
are uncertain. Accordingly, Owners should consult a tax adviser before adding
the ADB rider to a Policy or requesting an accelerated death benefit.
Amount of the Accelerated Death Benefit. The ADB rider 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 ADB rider 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 ADB rider, to reflect inflation.
The term Eligible Death Benefit under the ADB rider 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 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 ADB
rider) 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 ADB Rider. The ADB rider 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 ADB
rider, interest will accrue daily, at a rate determined as described in the ADB
rider, on
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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.
Effect on Existing Policy. The Insurance Proceeds 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 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.
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<PAGE> 35
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. In the event that
there are any profits from fees and charges deducted under the Policy, including
but not limited to mortality and expense risk charges, such profits could be
used to finance the distribution of the contracts.
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 but range from 0% to 4%. 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. No premium tax charge is deducted in
jurisdictions that impose no premium tax.
Percent of Premium Sales Charge. A 2% 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 Target Premium established at issue. The 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. 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 Guideline Annual Premiums as described
under Surrender Charge. 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 Code ties PLACA's corporate tax
liability (i.e., "tax burden"), in part, to the receipt of such premium
payments. PLACA represents that this 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 10th Policy Year. A portion of this Surrender
Charge will be deducted if the Owner decreases the Initial Face Amount before
the end of the 10th Policy Year. An Additional Surrender Charge, which is an
Additional Deferred Sales Charge, is imposed if the Policy is surrendered or
lapses at any time within 10 years after the effective date of an increase in
Face Amount. A portion of an Additional Surrender Charge also is deducted if the
related increment of Face Amount is decreased within 10 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 and cost of insurance charge.
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<PAGE> 36
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 increase pro rata for each full year.
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 Target Premium for the Initial Face
Amount. It equals 48% of that 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 all premiums actually
received during the first Policy Year up to one 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 prior decrease in Face Amount.
Additional Deferred Sales Charge. An Additional Deferred Sales Charge is
associated with each increase in Face Amount. Each Additional Deferred Sales
Charge is calculated in a manner similar to the Deferred Sales Charge associated
with the Initial Face Amount. The Maximum Additional Deferred Sales Charge for
an increase in Face Amount is 60% of the Target Premium for that increase. This
maximum remains level for six years following the effective date of an increase.
It equals 48% of that premium during the seventh year, and declines by 12% per
year to 0% by the beginning of the 11th year after the effective date of the
increase. The Additional Deferred Sales Charge actually deducted is the lesser
of this maximum and 28% of premiums received up to the first Target Premium for
that increase, during the first twelve months after an increase and 7% of all
premiums attributable to that increase thereafter, less any Additional Deferred
Sales Charge for such increase previously paid at the time of a decrease in Face
Amount.
Allocation of Policy Account Value and Subsequent Premium Payments. A
special method is used to allocate a portion of the existing Policy Account
Value to an increase in Face Amount 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 Guideline Annual Premium for the
Initial Face Amount and the 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 that there is more than one increase in Face Amount,
Guideline Annual Premiums for each increment of Face Amount are used to allocate
Policy Account Values and subsequent 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
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<PAGE> 37
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 is 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 makes
the deduction 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.
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 most recent Face Amount
Increase 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 is based on the
Attained Age, Sex, Premium Class of the Insured and Duration. The actual monthly
cost on insurance rates will be based on 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
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<PAGE> 38
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 mortality 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) is 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 of Face Amount increase, will be deducted
from the accounts based on the allocation schedule for Monthly Deductions in
effect at such 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.
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 twelve 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,
Automatic Asset Rebalancing, Dollar-Cost Averaging, the exercise of special
transfer rights and the initial reallocation of account values from the Money
Market
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Subaccount to other Subaccounts. These transfers will not count against the
twelve free transfers in any Policy Year.
MORTALITY AND EXPENSE RISK CHARGE
A daily charge will be deducted from the value of the net assets of the
Separate Account 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 0.001781%) 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 the 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 Funds' 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.
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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 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 Account, 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.
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
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the account during the prior Policy Month, from the beginning of the month to
the date of deduction or withdrawal.
Surrenders and partial withdrawals from the Guaranteed Account may be
delayed for up to six months. (See "Payment of Policy Benefits.")
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.
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OTHER POLICY PROVISIONS
BENEFIT 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 Separate 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 Option. If the
Beneficiary is changed, any prior arrangements with respect to the Payment
Option will be canceled.
THE POLICY
The Policy and the application(s) 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.
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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 OR 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. A change in the Policy's ownership
may have federal income tax consequences. (See "Tax Treatment of Policy
Benefits.")
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
Policy 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.
PROTECTION OF PROCEEDS
Beneficiaries generally may not pledge or otherwise encumber or alienate
payments under this Policy before they are due.
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
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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.
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.
CONTESTABILITY
PLACA has the right to contest the validity of a Policy based on material
misstatements made in the application for the Policy or a change. However, PLACA
will not contest the Policy (or any change) after it (or the change) has been in
force during the Insured's lifetime for two years.
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.
Installments of a Specified Amount Option. Payable in equal installments
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.
Installments for a Specified Period Option. Payable in the number of equal
monthly installments set forth in the election. Payments may be increased by
additional interest which would increase the installments certain. The
guaranteed interest rate is 3% per year.
Life Income Option. Payable in equal monthly installments 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 installments,
with a number of installments 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
In addition to the ADB rider, the following riders offer other
supplementary benefits. Most are subject to various age and underwriting
requirements and, unless otherwise indicated, must be purchased when the Policy
is issued. The cost of each rider is included in the monthly deduction.
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Disability Waiver Benefit. A Disability Waiver Benefit rider provides 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.
Disability Waiver of Premium Benefit. A Policy may include the Disability
Waiver of Premium Benefit rider that provides 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.
At the time of application, a monthly benefit amount is selected by the
Owner. 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.
An Owner cannot elect this rider and another disability waiver benefit rider
with the same Policy.
Change of Insured. A Change of Insured rider permits the Owner to change
the Insured, subject to certain conditions and evidence of insurability. The
Monthly Deduction for the cost of insurance is adjusted to that for the New
Insured as of the effective date of the change.
Children's Term Rider. A Children's Term Insurance rider provides 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. This rider must be selected at the time of application for
the Policy or an increase in Face Amount.
Other Insured Convertible Term Life Insurance. An Other Insured
Convertible Term Life Insurance rider provides additional term insurance on an
insured other than the Insured, on whom the Insured has an insurable interest.
This rider will terminate at the earlier of attained age 100 of the Other
Insured or at the termination or maturity of the Policy. If the Policy is
extended by the Final Policy Date Extension rider, the Convertible Term Life
Insurance rider will terminate on the original maturity date.
Final Policy Date Extension. A Final Policy Date Extension rider extends
the Final Policy Date of a Policy 20 years from the original Final Policy Date.
It may only be added on or after the anniversary nearest the younger insured's
90th birthday. There is no charge for adding this rider. The death benefit after
the original Final Policy Date will be the Policy Account Value. All other
riders attached and in effect on the original Final Policy Date will terminate
on the original Final Policy Date.
The tax consequences of (1) adding a Final Policy Date Extension rider to
the Policy, and (2) the Policy continuing in force after the Insured's 100th
birthday are uncertain. Prospective Owners and Owners considering the addition
of a Final Policy Date Extension to a Policy should consult their own legal or
other advisers as to such consequences.
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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 tax 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. No representation is made as to the likelihood
of continuation of the present federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. The manner in which these
requirements are to be applied to certain features of the Policy is not directly
addressed by the Code, and there is limited guidance as to how these
requirements are to be applied. Nevertheless, PLACA believes that a Policy
should satisfy the applicable Code requirements. Because of the absence of
pertinent interpretations of the Code, however, there is some uncertainty about
the application of these requirements to the Policy, particularly if the Owner
pays the full amount of premiums permitted under the Policy. If it is
subsequently determined that a Policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the Policy into compliance
with such requirements and we reserve the right to restrict Policy transactions
in order to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for federal income tax purposes to be the owners of the assets
of the separate account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
the separate account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of an Owner to allocate
premium payments and the Policy Account Value and the narrow investment
objective of certain Portfolios, have not been explicitly addressed in published
rulings. While PLACA believes that the Policies do not give Owners investment
control over Separate Account assets, PLACA reserves the right to modify the
Policies as necessary to prevent an Owner from being treated as the owner of the
Separate Account assets supporting the Policy.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Portfolios, will satisfy these diversification
requirements.
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 death benefit under a Policy should be
excludible from the gross income of the beneficiary.
Federal, state and local transfer, estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or beneficiary. A tax adviser should be consulted on
these consequences.
Generally, the Owner will not be deemed to be in constructive receipt of
the Policy Account Value until there is a distribution. When distributions from
a Policy occur, or when loans are taken out from or secured by a Policy, the tax
consequences depend on whether the Policy is classified as a "Modified Endowment
Contract."
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Modified Endowment Contracts. Under the Internal Revenue Code, certain
life insurance contracts are classified as "Modified Endowment Contracts," with
less favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Policies as to premiums and benefits, the individual
circumstances of each Policy will determine whether it is classified as a
Modified Endowment Contract. The rules are too complex to be summarized here,
but generally depend on the amount of premiums paid during the first seven
Policy years or seven years following a material change to the Policy. Certain
changes in a Policy after it is issued could also cause it to be classified as a
Modified Endowment Contract. A reduction in the Death Benefit at any time below
the lowest level of Death Benefit payable during the first seven Policy years
could cause the Policy to become a Modified Endowment Contract. A current or
prospective Owner should consult with a competent adviser to determine whether a
Policy transaction will cause the Policy to be classified as a Modified
Endowment Contract.
Distributions Other Than Death Benefits from Modified Endowment
Contracts. Policies classified as Modified Endowment Contracts are subject to
the following tax rules:
- All distributions other than death benefits from a Modified Endowment
Contract, including distributions upon surrender and withdrawals, are
treated first as distributions of gain taxable as ordinary income and as
tax-free recovery of the Owner's investment in the Policy only after all
gain has been distributed.
- Loans taken from or secured by a Policy classified as a Modified
Endowment Contract are treated as distributions and taxed in same manner
as surrenders and withdrawals.
- A 10 percent additional income tax is imposed on the amount subject to
tax except where the distribution or loan is made when the Owner has
attained age 59 1/2 or is disabled, or where the distribution 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)
of the Owner and the Owner's beneficiary or designated beneficiary.
If a Policy becomes a Modified Endowment Contract, distributions that occur
during the contract year will be taxed as distributions from a Modified
Endowment Contract. In addition, distributions from a Policy within two years
before it becomes a Modified Endowment Contract will be taxed in this manner.
This means that a distribution made from a Policy that is not a Modified
Endowment Contract could later become taxable as a distribution from a Modified
Endowment Contract.
Distributions Other Than Death Benefits from Policies that are not Modified
Endowment Contracts. Distributions other than death benefits from a Policy that
is not classified as a Modified Endowment Contract are generally treated first
as a recovery of the Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for Federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole or
in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are generally not treated as distributions. However, the tax consequences
associated with Policy loans after the later of the Policy's 10th anniversary or
Attained Age 65 is less clear and a tax adviser should be consulted about such
loans.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a Modified Endowment Contract are subject to the 10 percent
additional income tax.
Investment in the Policy. The Owner's investment in the Policy is
generally the aggregate premium payments. When a distribution is taken from the
Policy, the Owner's investment in the Policy is reduced by the amount of the
distribution that is tax-free.
Policy Loans. In general, interest on a Policy loan will not be
deductible. Before taking out a Policy loan, an Owner should consult a tax
adviser as to the tax consequences.
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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 Owner's income when a taxable distribution occurs.
Accelerated Death Benefit Rider. The Federal income tax consequences
associated with the Accelerated Death Benefit rider are uncertain. Owners should
consult a qualified tax adviser about the consequences of requesting payment
under this rider.
SPECIAL RULES FOR PENSION AND PROFIT-SHARING PLANS
If a Policy is purchased by a pension or profit-sharing plan, or similar
deferred compensation arrangement, the Federal, state and estate tax
consequences could differ. A competent tax adviser should be consulted in
connection with such a purchase.
The amounts of life insurance that may be purchased on behalf of a
participant in a pension or profit-sharing plan are limited. The current cost of
insurance for the net amount at risk is treated as a "current fringe benefit"
and must be included annually in the plan participant's gross income. PLACA
reports this cost (generally referred to as the "P.S. 58" cost) to the
participant annually. If the plan participant dies while covered by the plan and
the Policy proceeds are paid to the participant's beneficiary, then the excess
of the death benefit over the Policy Account Value is not taxable. However, the
cash value will generally be taxable to the extent it exceeds the participant's
cost basis in the Policy. Policies owned under these types of plans may be
subject to restrictions under the Employee Retirement Income Security Act of
1974 ("ERISA"). You should consult a qualified adviser regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy tax
requirements to be treated as nontaxable. Plan loan requirements and provisions
may differ from Policy loan provisions. Failure of plan loans to comply with the
requirements and provisions of the DOL regulations and of tax law may result in
adverse tax consequences and/or adverse consequences under ERISA. Plan
fiduciaries and participants should consult a qualified adviser before
requesting a loan under a Policy held in connection with a retirement plan.
SPECIAL RULES FOR SECTION 403(b) ARRANGEMENTS
If a Policy is purchased in connection with a section 403(b) tax-sheltered
annuity program, the "Special Rules for Pension and Profit-Sharing Plans"
discussed above may be applicable. In addition, premiums, distributions and
other transactions with respect to the Policy must be administered, in
coordination with the section 403(b) annuity, to comply with the requirements of
section 403(b) of the tax law. A competent tax adviser should be consulted.
BUSINESS USES OF THE POLICY
Businesses can use the Policy in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit
plans, retiree medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and circumstances. If an Owner
is purchasing the Policy for any arrangement the value of which depends in part
on its tax consequences, he or she should consult a qualified tax adviser. In
recent years, moreover, Congress has adopted new rules relating to life
insurance owned by businesses. Any business contemplating the purchase of a new
Policy or a change in an existing Policy should consult a tax adviser.
OTHER TAX CONSIDERATIONS
The transfer of the Policy or designation of a beneficiary may have
federal, state, and/or local transfer and inheritance tax consequences,
including the imposition of gift, estate, and generation-skipping transfer
taxes. For example, the transfer of the Policy to, or the designation as a
beneficiary of, or the payment of proceeds to, a person who is assigned to a
generation which is two or more generations below the generation assignment of
the owner may have a generation skipping transfer tax consequences under
45
<PAGE> 49
federal tax law. The individual situation of each owner or beneficiary will
determine the extent, if any, to which federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy proceeds
will be treated for purposes of federal, state and local estate, inheritance,
generation skipping and other taxes.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Policy could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Policy.
PLACA'S TAXES
Under current Federal income tax law, PLACA is not taxed on the Separate
Accounts' operations. Thus, currently PLACA does not deduct charges from the
Separate Account for its Federal income taxes. PLACA reserves the right to
charge the Separate Account for any future Federal income taxes that it may
incur.
Under current laws in several states, PLACA may incur state and local taxes
(in addition to premium taxes). These taxes are not now significant and we are
not currently charging for them. If they increase, PLACA may deduct charges for
such taxes.
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 "Monthly Deductions.")
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. 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.")
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, 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.
VOTING RIGHTS
All of the assets held in the Subaccounts of the Separate 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
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<PAGE> 50
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.
STANDARD & POOR'S
Standard & Poor's(R), S&P 500(R), Standard & Poor's 500 and 500 are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by
PLACA and the Market Street Fund, Inc. ("Market Street"). Neither the Policy nor
the Equity 500 Index Portfolio is sponsored, endorsed, sold or promoted by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P").
S&P makes no representation or warranty, express or implied, to the owners
of the Policy and the Equity 500 Index Portfolio or any member of the public
regarding the advisability of investing in securities generally or in the Policy
and the Equity 500 Index Portfolio particularly or the ability of the S&P 500
Index to track general stock market performance. S&P's only relationship to
PLACA and Market Street is the licensing of certain trademarks and trade names
of S&P and of the S&P 500 Index which is determined, composed and calculated by
S&P without regard to PLACA, Market Street, the Policy, or the Equity 500 Index
Portfolio. S&P has no obligation to take the needs of PLACA, Market Street, or
the owners of the Policy or the Equity 500 Index Portfolio into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not responsible
for and has not participated in the determination of the prices and amount of
the Policy or the Equity 500 Index Portfolio or the timing of the issuance or
sale of the Policy or the Equity 500 Index Portfolio or in the determination or
calculation of the equation by which the Policy or the Equity 500 Index
Portfolio are to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the Policy or the
Equity 500 Index Portfolio.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY PLACA, MARKET STREET, OWNERS OF THE
POLICY AND THE EQUITY 500 INDEX PORTFOLIO, OR ANY OTHER PERSON OR ENTITY FROM
THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS
OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
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<PAGE> 51
CHANGES TO THE SEPARATE ACCOUNT OR FUNDS
CHANGES TO SEPARATE ACCOUNT OPERATIONS
The voting rights described in this Prospectus are created under applicable
Federal securities laws and regulations. If these laws or regulations change to
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 changed 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 supporting
the Policies from one Subaccount to another or from the Separate Account to
another separate account, (2) to create additional separate accounts, (3) to
create Subaccounts from, or combine or remove Subaccounts from the Separate
Account or other separate accounts, or to combine any two or more Subaccounts,
(4) 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, (5) to deregister the
unit investment trust under the 1940 Act; and (6) to modify the provisions of
the Policies to comply with applicable laws.
CHANGES TO AVAILABLE PORTFOLIOS
It is possible that PLACA may determine that 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 a Portfolio of a Fund not currently available under the
Policies. If required by law, the approval of the SEC and possibly one or more
state insurance departments would be obtained.
Each of the Funds sells its shares to the Separate Account in accordance
with the terms of a participation agreement between it and PLACA. The
termination provisions of those agreements vary. Should an agreement between
PLACA and a Fund terminate, the Separate Account will not be able to purchase
additional shares of that Fund. In that event, Owners would no longer be able to
allocate Policy Account Value or Net Premium Payments to Subaccounts investing
in Portfolios of that Fund. Additionally, in certain circumstances, it is
possible that a Fund may refuse to sell its shares to the Separate Account
despite the fact that the participation agreement between the Fund and PLACA has
not been terminated. In such an event, PLACA will not be able to honor requests
of Owners to allocate their Policy Account Value or Net Premium Payments to
Subaccounts investing in shares of Portfolios of that Fund.
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares
to Subaccounts of the Separate 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.
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<PAGE> 52
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.
The Strong Opportunity Fund II, Inc. and Strong Variable Insurance
Funds, Inc. The Agreement with the Strong Opportunity Fund II, Inc. and
Strong Variable Insurance Funds, Inc. provides for termination as to any
Fund: 1) upon six (6) months' advance notice (after the Agreement has been
in force for one year); 2) upon annual renewal of the Agreement with thirty
(30) days' prior written notice; 3) by the investment adviser (the
"Adviser"), Fund or distributors in the event: (a) PLACA has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; or (b) any of
the Policies are not registered, issued or sold in accordance with
applicable law or such law precludes the use of Fund shares as the
underlying investment media of the Policies; 4) by PLACA in the event that:
(a) any of the Fund shares are not registered, issued or sold in accordance
with applicable law or such law precludes the use of such shares as the
underlying investment media of the Policies; (b) the Fund ceases to qualify
as a regulated investment company under the Code; or (c) a Fund fails to
meet diversification requirements; 5) upon thirty (30) days' written notice
in the event of a material breach of the Agreement that is not cured during
such 30-day period, and (b)(i) upon institution of formal proceedings
relating to the legality of the terms and conditions of the Agreement
against the Separate Account, PLACA, any designee, the Funds, Adviser or
distributors by the NASD, the SEC or any other regulatory body provided
that the terminating party has a reasonable belief that the institution of
formal proceedings is not without foundation and will have a material
adverse impact on the terminating party, (ii) by the non-assigning party
upon the assignment of the Agreement in contravention of the terms hereof,
or (iii) as is required by law, order or instruction by a court of
competent jurisdiction or a regulatory body or self-regulatory organization
with jurisdiction over the terminating party.
Van Eck Worldwide Insurance Trust. The agreement with Van Eck Trust
provides for termination 1) by PLACA, Van Eck Trust or Van Eck Trust's
Distributor 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 or such law precludes the use of Trust
shares, 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) by PMLIC if a Portfolio fails to meet the
diversification and other requirements of the Internal Revenue Code, or
PMLIC reasonably believes it may fail to do so, 5) upon assignment of the
agreement unless both parties agree to the assignment in writing.
PLACA'S EXECUTIVE OFFICERS AND DIRECTORS
PLACA is governed by a board of directors. The following table sets forth
the name, address, and principal occupation during the past 5 years of each of
PLACA's executive officers and directors. Unless
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<PAGE> 53
otherwise noted, each person's address is Provident Mutual Life Insurance
Company, 1000 Chesterbrook Boulevard, Berwyn, Pennsylvania 19312.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME POSITION WITH PLACA PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ---- ------------------- ----------------------------------------
<S> <C> <C>
Robert W. Kloss Director and President 1996 to present -- President and Chief Executive
Officer of Provident Mutual Life Insurance
Company; 1994 to 1996 -- President and Chief
Operating Officer of Provident Mutual Life
Insurance Company
James G. Potter, Jr Director, Secretary 1997 to present -- Executive Vice President,
and Legal Officer General Counsel & Secretary of Provident Mutual
Life Insurance Company; 1989 to 1997 -- Chief
Legal Officer of Prudential Banks
James D. Kestner Director 1994 to present -- Vice President of Provident
Mutual Life Insurance Company
Sarah C. Lange Director 1983 to present -- Senior Vice President and
Chief Investment Officer of Provident Mutual
Life Insurance Company
Alan F. Hinkle Director, Vice 1996 to present -- Executive Vice President and
President and Actuary Chief Actuary of Provident Mutual Life Insurance
Company; 1974 to 1996 -- Vice President and
Individual Actuary of Provident Mutual Life
Insurance Company
Joan C. Tucker* Director and 1996 to present -- Executive Vice President,
Vice President Corporate Operations at Provident Mutual Life
Insurance Company; 1996 -- Senior Vice
President, Insurance Operations of Provident
Mutual Life Insurance Company; 1993 to
1996 -- Vice President Individual Insurance
Operations at Provident Mutual Life Insurance
Company
Mary Lynn Finelli Director 1996 to present -- Executive Vice President and
Chief Financial Officer of Provident Mutual Life
Insurance Company; 1986 to 1996 -- Vice
President and Controller of Provident Mutual
Life Insurance Company
Mehran Assadi* Director 1998 to present -- Executive Vice President and
Chief Information Officer of Provident Mutual
Life Insurance Company; 1982 to 1998 -- Vice
President, Technology and Business Development
at St. Paul Company
Linda M. Springer Director 1996 to present -- Vice President and Controller
of Provident Mutual Life Insurance Company; 1995
to 1996 -- Assistant Vice President and Actuary
of Provident Mutual Life Insurance Company
Stephen L. White Vice President and 1995 to present -- Vice President and Actuary of
Actuary Provident Mutual Life Insurance Company
Michael Funck Financial Reporting 1995 to present -- Manager, Finance and
Officer Accounting of Provident Mutual Life Insurance
Company
Rosanne Gatta Treasurer 1994 to present -- Vice President and Treasurer
of Provident Mutual Life Insurance Company
</TABLE>
- ---------------
* The address is 300 Continental Drive, Newark, Delaware 19713
PLACA holds the Separate Account's assets physically segregated and apart
from the general account. PLACA maintains records of all purchases and sale of
portfolio shares by each of the Subaccounts. A fidelity bond in the amount of
$10 million per occurrence and $20 million in the aggregate covering PLACA's
officers and employees has been issued by Reliance Insurance Company.
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<PAGE> 54
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") 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 was organized under the laws of Pennsylvania on January 22, 1969 and is an
indirect wholly-owned subsidiary of PMLIC. 1717 acts as the principal
underwriter of the Policies (as well as other variable life policies) pursuant
to an Underwriting Agreement to which the Accounts, 1717 and PLACA are parties.
1717 retains no compensation as principal underwriter of the Policies. 1717 is
also the principal underwriter of variable annuity contracts issued by PLACA and
variable life and annuity contracts issued by PMLIC.
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 Year 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. Agents may also
receive compensation in the form of non-cash compensation, subject to applicable
regulatory requirements. In some circumstances and to the extent permitted by
applicable regulatory requirements, 1717 may reimburse certain sales and
marketing expenses or pay other forms of special compensation to selling
broker-dealers. 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 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 (excluding automatic rebalancing of Policy Account
Value), the taking 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 each Portfolio in which he or she is invested.
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<PAGE> 55
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.
LEGAL PROCEEDINGS
PMLIC and its subsidiaries, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, PMLIC and PLACA believe that as
of the date of this Prospectus there are no pending or threatened lawsuits that
are reasonably likely to have a material adverse impact on the Separate Account,
PLACA or PMLIC.
EXPERTS
The Financial Statements listed on Page F-1, have been included in this
Prospectus, in reliance on the reports of PricewaterhouseCoopers LLP,
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, Vice President and Actuary of PMLIC, as stated in his opinion
filed as an exhibit to the Registration Statement.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP, of Washington, D.C. has provided advice
relating to certain aspects of federal securities law applicable to the issue
and sale of the Policies. James G. Potter, Jr., General Counsel of PMLIC, has
provided advice on certain matters relating to the laws of Delaware regarding
the Policies and PLACA's issuance of the Policies.
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<PAGE> 56
DEFINITIONS
ADDITIONAL SURRENDER CHARGE... The separately determined deferred
administrative charge and 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.
APPLICATION................... The application the Owner must complete to
purchase a Policy plus all forms required by
PLACA or applicable law.
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
designated 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.
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.
GUIDELINE ANNUAL PREMIUM...... The "guideline annual premium" as defined in
applicable regulations under the 1940 Act. It
is approximately equal to the amount of premium
that would be required on an annual basis to
keep the Policy in force if the Policy had a
mandatory fixed premium schedule assuming
(among other things) a 5% net investment
return.
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<PAGE> 57
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.
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 Cash Surrender Value 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
Planned Periodic Premium.
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
54
<PAGE> 58
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;
with extra rating, non-smoker, non-smoker with
extra rating, and preferred.
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.
SERVICE CENTER................ The Technology and Service Center located at
300 Continental Drive, Newark, Delaware 19713.
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.
TARGET PREMIUM................ An amount of premium payments, computed
separately for each increment of Face Amount,
used to compute Surrender Charges and
Additional Surrender Charges.
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.
55
<PAGE> 59
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Providentmutual Variable Life Separate Account
Report of Independent Accountants...................... F-2
Statements of Assets and Liabilities, December 31,
1999.................................................. F-3
Statements of Operations for the Year Ended December
31, 1999.............................................. F-8
Statements of Operations for the Year Ended December
31, 1998.............................................. F-13
Statements of Operations for the Year Ended December
31, 1997.............................................. F-18
Statements of Changes in Net Assets for the Year Ended
December 31, 1999..................................... F-22
Statements of Changes in Net Assets for the Year Ended
December 31, 1998..................................... F-27
Statements of Changes in Net Assets for the Year Ended
December 31, 1997..................................... F-32
Notes to Financial Statements.......................... F-36
Providentmutual Life and Annuity Company of America
Report of Independent Accountants...................... F-56
Statements of Financial Condition as of December 31,
1999 and 1998......................................... F-57
Statements of Operations for the Years Ended December
31, 1999, 1998, and 1997.............................. F-58
Statements of Equity for the Years Ended December 31,
1999, 1998, and 1997.................................. F-59
Statements of Cash Flows for the Years Ended December
31, 1999, 1998, and 1997.............................. F-60
Notes to Financial Statements.......................... F-61
</TABLE>
F-1
<PAGE> 60
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Policyholders and
Board of Directors of
Providentmutual Life and Annuity Company of America:
In our opinion, the accompanying statements of assets and liabilities of the
Providentmutual Variable Life Separate Account (comprising twenty-eight
subaccounts, hereafter collectively referred to as the "Separate Account") and
the related statements of operations and of changes in net assets present
fairly, in all material respects, the financial position of the Separate Account
at December 31, 1999, the results of its operations and changes in its net
assets for each of the three years in the period then ended, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the management of the Separate Account; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities owned at December 31, 1999 by correspondence with the transfer
agents, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
February 23, 2000
F-2
<PAGE> 61
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1999
- --------------------------------------------------------------------------------
<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........................... $3,904,672
Money Market Portfolio..................... $7,210,373
Bond Portfolio............................. $1,324,837
Managed Portfolio.......................... $1,164,717
Aggressive Growth Portfolio................ $2,352,333
International Portfolio.................... $3,347,428
Dividends receivable......................... 31,273
Receivable from Providentmutual Life and
Annuity Company of America................. 40,427
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS................................... $3,904,672 $7,282,073 $1,324,837 $1,164,717 $2,352,333 $3,347,428
========== ========== ========== ========== ========== ==========
Held for the benefit of policyholders........ $3,852,944 $7,255,348 $1,290,648 $1,048,734 $2,301,469 $3,299,561
Attributable to Providentmutual Life and
Annuity Company of America................. 51,728 26,725 34,189 115,983 50,864 47,867
---------- ---------- ---------- ---------- ---------- ----------
$3,904,672 $7,282,073 $1,324,837 $1,164,717 $2,352,333 $3,347,428
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE> 62
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALL PRO LARGE ALL PRO LARGE ALL PRO SMALL ALL PRO SMALL
CAP GROWTH CAP VALUE CAP GROWTH CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment in the Market Street Fund, Inc., at market value:
All Pro Large Cap Growth Portfolio........................ $1,828,788
All Pro Large Cap Value Portfolio......................... $485,162
All Pro Small Cap Growth Portfolio........................ $1,043,448
All Pro Small Cap Value Portfolio......................... $573,321
---------- -------- ---------- --------
NET ASSETS.................................................. $1,828,788 $485,162 $1,043,448 $573,321
========== ======== ========== ========
Held for the benefit of policyholders....................... $1,747,812 $459,906 $ 998,896 $553,167
Attributable to Providentmutual Life and Annuity Company of
America................................................... 80,976 25,256 44,552 20,154
---------- -------- ---------- --------
$1,828,788 $485,162 $1,043,448 $573,321
========== ======== ========== ========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 63
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in the Variable Insurance Products
Fund, at market value:
Equity-Income Portfolio..................... $12,550,381
Growth Portfolio............................ $19,190,345
High Income Portfolio....................... $2,443,033
Overseas Portfolio.......................... $6,621,461
Investment in the Variable Insurance Products
Fund II, at market value:
Asset Manager Portfolio..................... $3,357,990
Index 500 Portfolio......................... $21,344,259
Receivable from Providentmutual Life and
Annuity Company of America.................. 48,000
----------- ----------- ---------- ---------- ---------- -----------
NET ASSETS.................................... $12,550,381 $19,190,345 $2,443,033 $6,621,461 $3,357,990 $21,392,259
=========== =========== ========== ========== ========== ===========
Held for the benefit of policyholders......... $12,492,543 $19,134,591 $2,401,393 $6,561,904 $3,305,700 $21,350,911
Attributable to Providentmutual Life and
Annuity Company of America.................. 57,838 55,754 41,640 59,557 52,290 41,348
----------- ----------- ---------- ---------- ---------- -----------
$12,550,381 $19,190,345 $2,443,033 $6,621,461 $3,357,990 $21,392,259
=========== =========== ========== ========== ========== ===========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE> 64
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY Neuberger Neuberger
INVESTMENT FIDELITY BERMAN LIMITED BERMAN
GRADE BOND CONTRAFUND(R) MATURITY BOND PARTNERS
SUBACCOUNT Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment in the Variable Insurance Products Fund II, at
market value:
Investment Grade Bond Portfolio........................... $1,766,878
Contrafund(R) Portfolio................................... $10,289,770
Investment in the Neuberger Berman Advisers Management
Trust, at market value:
Limited Maturity Bond Portfolio........................... $1,091,364
Partners Portfolio........................................ $2,525,724
---------- ----------- ---------- ----------
NET ASSETS.................................................. $1,766,878 $10,289,770 $1,091,364 $2,525,724
========== =========== ========== ==========
Held for the benefit of policyholders....................... $1,731,973 $10,232,384 $1,065,378 $2,427,032
Attributable to Providentmutual Life and Annuity Company of
America................................................... 34,905 57,386 25,986 98,692
---------- ----------- ---------- ----------
$1,766,878 $10,289,770 $1,091,364 $2,525,724
========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statement
F-6
<PAGE> 65
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK
VAN ECK VAN ECK WORLDWIDE VAN ECK ALGER AMERICAN
WORLDWIDE WORLDWIDE EMERGING WORLDWIDE SMALL
BOND HARD ASSETS MARKETS REAL ESTATE CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in the Van Eck Worldwide Insurance Trust,
at market value:
Van Eck Worldwide Bond Portfolio................... $529,057
Van Eck Worldwide Hard Assets Portfolio............ $577,999
Van Eck Worldwide Emerging Markets Portfolio....... $2,145,910
Van Eck Worldwide Real Estate Portfolio............ $152,847
Investment in the Alger American Fund, at market
value:
Alger American Small Capitalization Portfolio...... $5,744,229
-------- -------- ---------- -------- ----------
NET ASSETS........................................... $529,057 $577,999 $2,145,910 $152,847 $5,744,229
======== ======== ========== ======== ==========
Held for the benefit of policyholders................ $497,375 $540,198 $2,121,998 $131,766 $5,701,476
Attributable to Providentmutual Life and Annuity
Company of America................................. 31,682 37,801 23,912 21,081 42,753
-------- -------- ---------- -------- ----------
$529,057 $577,999 $2,145,910 $152,847 $5,744,229
======== ======== ========== ======== ==========
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE> 66
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<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....................................... $ 9,498 $281,219 $ 17,985 $ 4,783 $ 9,548 $ 23,987
EXPENSES
Mortality and expense risks..................... 21,440 38,521 8,454 5,758 12,145 16,572
-------- -------- -------- -------- -------- --------
Net investment (loss) income.................... (11,942) 242,698 9,531 (975) (2,597) 7,415
-------- -------- -------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested.......... 55,482 14,131 32,620 236,787 123,072
Net realized gain (loss) from redemption of
investment shares............................. 51,110 (4,307) 12,101 10,420 25,236
-------- -------- -------- -------- -------- --------
Net realized gain on investments................ 106,592 9,824 44,721 247,207 148,308
-------- -------- -------- -------- -------- --------
Net unrealized appreciation (depreciation) of
investments:
Beginning of year............................. 197,030 26,571 38,577 133,217 65,845
End of year................................... 158,461 (44,027) (24,425) 190,731 606,265
-------- -------- -------- -------- -------- --------
Net unrealized (depreciation) appreciation of
investments during the year................... (38,569) (70,598) (63,002) 57,514 540,420
-------- -------- -------- -------- -------- --------
Net realized and unrealized gains (losses) on
investments................................... 68,023 (60,774) (18,281) 304,721 688,728
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net assets resulting
from operations............................... $ 56,081 $242,698 $(51,243) $(19,256) $302,124 $696,143
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
F-8
<PAGE> 67
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALL PRO ALL PRO
ALL PRO LARGE ALL PRO LARGE SMALL SMALL
CAP GROWTH CAP VALUE CAP GROWTH CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................................... $ 54 $ 1,599 $ 594
EXPENSES
Mortality and expense risks................................. 6,892 2,211 $ 2,993 2,592
-------- -------- -------- --------
Net investment loss......................................... (6,838) (612) (2,993) (1,998)
-------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested......................
Net realized gain from redemption of investment shares...... 59,937 21,529 96,011 2,248
-------- -------- -------- --------
Net realized gain on investments............................ 59,937 21,529 96,011 2,248
-------- -------- -------- --------
Net unrealized appreciation (depreciation) of investments:
Beginning of year......................................... 31,368 21,256 49,117 22,620
End of year............................................... 224,085 (5,174) 372,314 (5,515)
-------- -------- -------- --------
Net unrealized appreciation (depreciation) of investments
during the year........................................... 192,717 (26,430) 323,197 (28,135)
-------- -------- -------- --------
Net realized and unrealized gains (losses) on investments... 252,654 (4,901) 419,208 (25,887)
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from
operations................................................ $245,816 $ (5,513) $416,215 $(27,885)
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
F-9
<PAGE> 68
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................................ $ 148,010 $ 20,603 $ 184,305 $ 54,422 $ 79,081 $ 132,241
EXPENSES
Mortality and expense risks...................... 73,008 91,540 14,505 29,448 18,061 106,942
---------- ---------- --------- ---------- -------- ----------
Net investment income (loss)..................... 75,002 (70,937) 169,800 24,974 61,020 25,299
---------- ---------- --------- ---------- -------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested........... 327,180 1,295,428 6,890 87,778 100,169 89,735
Net realized gain (loss) from redemption of
investment shares.............................. 244,315 278,673 (27,226) 134,635 21,574 575,621
---------- ---------- --------- ---------- -------- ----------
Net realized gain (loss) on investments.......... 571,495 1,574,101 (20,336) 222,413 121,743 665,356
---------- ---------- --------- ---------- -------- ----------
Net unrealized appreciation (depreciation) of
investments:
Beginning of year.............................. 1,077,750 2,627,782 (159,189) 120,843 174,522 2,218,476
End of year.................................... 997,899 5,885,573 (156,577) 1,733,389 284,627 4,625,801
---------- ---------- --------- ---------- -------- ----------
Net unrealized (depreciation) appreciation of
investments during the year.................... (79,851) 3,257,791 2,612 1,612,546 110,105 2,407,325
---------- ---------- --------- ---------- -------- ----------
Net realized and unrealized gain (loss) on
investments.................................... 491,644 4,831,892 (17,724) 1,834,959 231,848 3,072,681
---------- ---------- --------- ---------- -------- ----------
Net increase in net assets resulting from
operations..................................... $ 566,646 $4,760,955 $ 152,076 $1,859,933 $292,868 $3,097,980
========== ========== ========= ========== ======== ==========
</TABLE>
See accompanying notes to financial statements
F-10
<PAGE> 69
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY BERMAN BERMAN BERMAN LIMITED BERMAN
GRADE BOND CONTRAFUND(R) BALANCED GROWTH MATURITY BOND PARTNERS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................... $ 50,917 $ 28,227 $ 9,406 $ 107,676 $ 51,545 $ 4,019
EXPENSES
Mortality and expense risks................. 9,846 48,329 1,113 4,103 6,265 8,634
-------- ---------- -------- --------- -------- --------
Net investment income (loss)................ 41,071 (20,102) 8,293 103,573 45,280 (4,615)
-------- ---------- -------- --------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested...... 15,974 206,999 13,935 6,990
Net realized gain (loss) from redemption of
investment shares......................... 790 173,375 (16,493) (112,803) (17,023) 30,465
-------- ---------- -------- --------- -------- --------
Net realized gain (loss) on investments..... 16,764 380,374 (2,558) (112,803) (17,023) 37,455
-------- ---------- -------- --------- -------- --------
Net unrealized appreciation (depreciation)
of investments:
Beginning of year......................... 55,564 1,044,526 12,499 32,289 5,385 18,863
End of year............................... (26,628) 2,405,959 (14,450) (17,944)
-------- ---------- -------- --------- -------- --------
Net unrealized (depreciation) appreciation
of investments during the year............ (82,192) 1,361,433 (12,499) (32,289) (19,835) (36,807)
-------- ---------- -------- --------- -------- --------
Net realized and unrealized (loss) gain on
investments............................... (65,428) 1,741,807 (15,057) (145,092) (36,858) 648
-------- ---------- -------- --------- -------- --------
Net (decrease) increase in net assets
resulting from operations................. $(24,357) $1,721,705 $ (6,764) $ (41,519) $ 8,422 $ (3,967)
======== ========== ======== ========= ======== ========
</TABLE>
See accompanying notes to financial statements
F-11
<PAGE> 70
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN VAN ECK VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE WORLDWIDE ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING REAL SMALL
APPRECIATION BOND HARD ASSETS MARKETS ESTATE CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................... $ 26,734 $ 4,868 $ 1,545
EXPENSES
Mortality and expense risks................. $ 1,619 3,260 2,665 $ 8,384 597 $ 25,644
-------- -------- --------- ---------- -------- ----------
Net investment (loss) income................ (1,619) 23,474 2,203 (8,384) 948 (25,644)
-------- -------- --------- ---------- -------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested...... 11,945 446,274
Net realized gain (loss) from redemption of
investment shares......................... 11,508 11,290 (29,183) (146,766) 1,132 61,846
-------- -------- --------- ---------- -------- ----------
Net realized gain (loss) on investments..... 11,508 23,235 (29,183) (146,766) 1,132 508,120
-------- -------- --------- ---------- -------- ----------
Net unrealized (depreciation) appreciation
of investments:
Beginning of year......................... (51,652) 65,524 (137,564) (424,268) 3,621 164,065
End of year............................... (29,178) (35,662) 775,273 (7,346) 1,355,653
-------- -------- --------- ---------- -------- ----------
Net unrealized appreciation (depreciation)
of investments during the year............ 51,652 (94,702) 101,902 1,199,541 (10,967) 1,191,588
-------- -------- --------- ---------- -------- ----------
Net realized and unrealized gain (loss) on
investments............................... 63,160 (71,467) 72,719 1,052,775 (9,835) 1,699,708
-------- -------- --------- ---------- -------- ----------
Net increase (decrease) in net assets
resulting from operations................. $ 61,541 $(47,993) $ 74,922 $1,044,391 $ (8,887) $1,674,064
======== ======== ========= ========== ======== ==========
</TABLE>
See accompanying notes to financial statements
F-12
<PAGE> 71
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<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....................................... $ 32,506 $200,082 $51,027 $13,745 $ 10,230 $ 10,981
EXPENSES
Mortality and expense risks..................... 13,985 25,182 6,139 2,618 9,880 11,192
-------- -------- ------- ------- -------- --------
Net investment income (loss).................... 18,521 174,900 44,888 11,127 350 (211)
-------- -------- ------- ------- -------- --------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized gain distributions reinvested.......... 215,993 91 17,406 97,659 92,754
Net realized gain from redemption of investment
shares........................................ 25,043 10,106 16,185 41,538 7,476
-------- -------- ------- ------- -------- --------
Net realized gain on investments................ 241,036 10,197 33,591 139,197 100,230
-------- -------- ------- ------- -------- --------
Net unrealized appreciation of investments:
Beginning of year............................. 172,999 12,860 29,978 155,190 29,510
End of year................................... 197,030 26,571 38,577 133,217 65,845
-------- -------- ------- ------- -------- --------
Net unrealized appreciation (depreciation) of
investments during the year................... 24,031 13,711 8,599 (21,973) 36,335
-------- -------- ------- ------- -------- --------
Net realized and unrealized gains on
investments................................... 265,067 23,908 42,190 117,224 136,565
-------- -------- ------- ------- -------- --------
Net increase in net assets resulting from
operations.................................... $283,588 $174,900 $68,796 $53,317 $117,574 $136,354
======== ======== ======= ======= ======== ========
</TABLE>
See accompanying notes to financial statements
F-13
<PAGE> 72
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALL PRO ALL PRO
ALL PRO LARGE ALL PRO LARGE SMALL SMALL
CAP GROWTH CAP VALUE CAP GROWTH CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends
EXPENSES
Mortality and expense risks................................. $ 259 $ 304 $ 314 $ 329
------- ------- ------- -------
Net investment loss......................................... (259) (304) (314) (329)
------- ------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested
Net realized loss from redemption of investment shares...... (1,657) (6,212) (9,872) (9,805)
------- ------- ------- -------
Net realized loss on investments............................ (1,657) (6,212) (9,872) (9,805)
------- ------- ------- -------
Net unrealized appreciation of investments:
Beginning of year.........................................
End of year............................................... 31,368 21,256 49,117 22,620
------- ------- ------- -------
Net unrealized appreciation of investments during the
year...................................................... 31,368 21,256 49,117 22,620
------- ------- ------- -------
Net realized and unrealized gains on investments............ 29,711 15,044 39,245 12,815
------- ------- ------- -------
Net increase in net assets resulting from operations........ $29,452 $14,740 $38,931 $12,486
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements
F-14
<PAGE> 73
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................................ $ 81,811 $ 29,841 $ 93,141 $ 40,087 $ 42,970 $ 63,803
EXPENSES
Mortality and expense risks...................... 48,070 51,289 10,379 16,730 10,984 54,109
-------- ---------- --------- -------- -------- ----------
Net investment income (loss)..................... 33,741 (21,448) 82,762 23,357 31,986 9,694
-------- ---------- --------- -------- -------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested........... 291,150 780,585 59,183 118,152 128,911 147,780
Net realized gain from redemption of investment
shares......................................... 88,248 127,759 3,646 31,224 30,583 418,425
-------- ---------- --------- -------- -------- ----------
Net realized gain on investments................. 379,398 908,344 62,829 149,376 159,494 566,205
-------- ---------- --------- -------- -------- ----------
Net unrealized appreciation (depreciation) of
investments:
Beginning of year.............................. 689,708 749,980 92,199 12,760 120,277 762,238
End of year.................................... 1,077,750 2,627,782 (159,189) 120,843 174,522 2,218,476
-------- ---------- --------- -------- -------- ----------
Net unrealized appreciation (depreciation) of
investments during the year.................... 388,042 1,877,802 (251,388) 108,083 54,245 1,456,238
-------- ---------- --------- -------- -------- ----------
Net realized and unrealized gain (loss) on
investments.................................... 767,440 2,786,146 (188,559) 257,459 213,739 2,022,443
-------- ---------- --------- -------- -------- ----------
Net increase (decrease) in net assets resulting
from operations................................ $801,181 $2,764,698 $(105,797) $280,816 $245,725 $2,032,137
======== ========== ========= ======== ======== ==========
</TABLE>
See accompanying notes to financial statements
F-15
<PAGE> 74
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER & NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN BERMAN LIMITED & BERMAN
GRADE BOND CONTRAFUND(R) BALANCED GROWTH MATURITY BOND PARTNERS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................... $34,930 $ 15,801 $ 10,205 $35,042
EXPENSES
Mortality and expense risks................. 5,834 22,599 3,166 $ 10,244 4,092 $ 241
------- ---------- -------- --------- ------- -------
Net investment income (loss)................ 29,096 (6,798) 7,039 (10,244) 30,950 (241)
------- ---------- -------- --------- ------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested...... 4,144 116,250 71,678 353,563
Net realized gain (loss) from redemption of
investment shares......................... 3,572 53,379 (5,814) (27,730) 373 (2,190)
------- ---------- -------- --------- ------- -------
Net realized gain (loss) on investments..... 7,716 169,629 65,864 325,833 373 (2,190)
------- ---------- -------- --------- ------- -------
Net unrealized appreciation of investments:
Beginning of year......................... 20,012 204,136 34,081 138,020 13,790
End of year............................... 55,564 1,044,526 12,499 32,289 5,385 18,863
------- ---------- -------- --------- ------- -------
Net unrealized appreciation (depreciation)
of investments during the year............ 35,552 840,390 (21,582) (105,731) (8,405) 18,863
------- ---------- -------- --------- ------- -------
Net realized and unrealized gain (loss) on
investments............................... 43,268 1,010,019 44,282 220,102 (8,032) 16,673
------- ---------- -------- --------- ------- -------
Net increase in net assets resulting from
operations................................ $72,364 $1,003,221 $ 51,321 $ 209,858 $22,918 $16,432
======= ========== ======== ========= ======= =======
</TABLE>
See accompanying notes to financial statements
F-16
<PAGE> 75
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE VAN ECK ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING WORLDWIDE SMALL
APPRECIATION BOND HARD ASSETS MARKETS REAL ESTATE CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................... $ 3,318 $ 1,970 $ 5,912
EXPENSES
Mortality and expense risks................. $ 4,421 3,195 2,120 5,032 $ 64 $ 13,957
-------- ------- --------- --------- ------- --------
Net investment income (loss)................ (4,421) 123 (150) 880 (64) (13,957)
-------- ------- --------- --------- ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested...... 34,155 48,391 5,255 284,477
Net realized gain (loss) from redemption of
investment shares......................... (42,850) 7,111 (45,006) (63,895) (5,674) (7,361)
-------- ------- --------- --------- ------- --------
Net realized gain (loss) on investments..... (8,695) 7,111 3,385 (58,640) (5,674) 277,116
-------- ------- --------- --------- ------- --------
Net unrealized appreciation (depreciation)
of investments:
Beginning of year......................... (36,829) 7,894 (3,949) (165,992) 82,155
End of year............................... (51,652) 65,524 (137,564) (424,268) 3,621 164,065
-------- ------- --------- --------- ------- --------
Net unrealized appreciation (depreciation)
of investments during the year............ (14,823) 57,630 (133,615) (258,276) 3,621 81,910
-------- ------- --------- --------- ------- --------
Net realized and unrealized gain (loss) on
investments............................... (23,518) 64,741 (130,230) (316,916) (2,053) 359,026
-------- ------- --------- --------- ------- --------
Net increase (decrease) in net assets
resulting from operations................. $(27,939) $64,864 $(130,380) $(316,036) $(2,117) $345,069
======== ======= ========= ========= ======= ========
</TABLE>
See accompanying notes to financial statements
F-17
<PAGE> 76
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<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....................................... $ 17,576 $104,494 $12,984 $ 4,398 $ 4,527 $ 3,778
EXPENSES
Mortality and expense risks..................... 6,086 13,586 1,402 898 4,955 5,375
-------- -------- ------- ------- -------- -------
Net investment income (loss).................... 11,490 90,908 11,582 3,500 (428) (1,597)
-------- -------- ------- ------- -------- -------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Realized gain distributions reinvested.......... 64,240 637 898 29,576
Net realized gain from redemption of investment
shares........................................ 8,284 4,094 3,520 28,779 4,619
-------- -------- ------- ------- -------- -------
Net realized gain on investments................ 72,524 4,094 4,157 29,677 34,195
-------- -------- ------- ------- -------- -------
Net unrealized appreciation of investments:
Beginning of year............................. 53,902 2,198 6,860 42,267 24,229
End of year................................... 172,999 12,860 29,978 155,190 29,510
-------- -------- ------- ------- -------- -------
Net unrealized appreciation of investments
during the year............................... 119,097 10,662 23,118 112,923 5,281
-------- -------- ------- ------- -------- -------
Net realized and unrealized gains on
investments................................... 191,621 14,756 27,275 142,600 39,476
-------- -------- ------- ------- -------- -------
Net increase in net assets resulting
from operations............................... $203,111 $ 90,908 $26,338 $30,775 $142,172 $37,879
======== ======== ======= ======= ======== =======
</TABLE>
See accompanying notes to financial statements
F-18
<PAGE> 77
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends........................................ $ 37,203 $ 16,922 $ 29,332 $ 10,489 $ 27,124 $ 18,761
EXPENSES
Mortality and expense risks...................... 23,064 24,779 4,291 7,257 6,126 19,263
-------- -------- -------- -------- -------- --------
Net investment income (loss)..................... 14,139 (7,857) 25,041 3,232 20,998 (502)
-------- -------- -------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested........... 187,050 75,747 3,625 41,640 68,039 38,068
Net realized gain from redemption of investment
shares......................................... 56,511 29,405 10,154 24,813 3,869 78,340
-------- -------- -------- -------- -------- --------
Net realized gain on investments................. 243,561 105,152 13,779 66,453 71,908 116,408
-------- -------- -------- -------- -------- --------
Net unrealized appreciation (depreciation) of
investments:
Beginning of year.............................. 140,032 120,385 17,486 44,125 42,785 130,599
End of year.................................... 689,708 749,980 92,199 12,760 120,277 762,238
-------- -------- -------- -------- -------- --------
Net unrealized appreciation (depreciation) of
investments during the year.................... 549,676 629,595 74,713 (31,365) 77,492 631,639
-------- -------- -------- -------- -------- --------
Net realized and unrealized gain on
investments.................................... 793,237 734,747 88,492 35,088 149,400 748,047
-------- -------- -------- -------- -------- --------
Net increase in net assets
resulting from operations...................... $807,376 $726,890 $113,533 $ 38,320 $170,398 $747,545
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
F-19
<PAGE> 78
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER &
INVESTMENT FIDELITY & BERMAN & BERMAN BERMAN LIMITED
GRADE BOND CONTRAFUND(R) BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.............................................. $10,062 $ 2,887 $ 3,239 $ 3,868
EXPENSES
Mortality and expense risks............................ 1,476 7,089 1,484 $ 5,067 1,400
------- -------- ------- -------- -------
Net investment income (loss)........................... 8,586 (4,202) 1,755 (5,067) 2,468
------- -------- ------- -------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested................. 7,630 8,314 50,230
Net realized gain (loss) from redemption of investment
shares............................................... 2,284 25,400 618 5,576 (214)
------- -------- ------- -------- -------
Net realized gain (loss) on investments................ 2,284 33,030 8,932 55,806 (214)
------- -------- ------- -------- -------
Net unrealized appreciation of investments:
Beginning of year.................................... 5,863 15,525 1,403 11,488 208
End of year.......................................... 20,012 204,136 34,081 138,020 13,790
------- -------- ------- -------- -------
Net unrealized appreciation of investments during the
year................................................. 14,149 188,611 32,678 126,532 13,582
------- -------- ------- -------- -------
Net realized and unrealized gain on investments........ 16,433 221,641 41,610 182,338 13,368
------- -------- ------- -------- -------
Net increase in net assets resulting from
operations........................................... $25,019 $217,439 $43,365 $177,271 $15,836
======= ======== ======= ======== =======
</TABLE>
See accompanying notes to financial statements
F-20
<PAGE> 79
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING SMALL
APPRECIATION BOND HARD ASSETS MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends.............................................. $3,474 $ 4,182 $ 403
EXPENSES
Mortality and expense risks............................ $ 3,060 1,180 1,321 2,514 $ 5,530
-------- ------ -------- --------- --------
Net investment income (loss)........................... (3,060) 2,294 2,861 (2,111) (5,530)
-------- ------ -------- --------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain distributions reinvested................. 9,129 3,087 29,556
Net realized gain (loss) from redemption of investment
shares............................................... (14,973) 483 12,840 12,776 (646)
-------- ------ -------- --------- --------
Net realized gain (loss) on investments................ (5,844) 483 15,927 12,776 28,910
-------- ------ -------- --------- --------
Net unrealized appreciation (depreciation) of
investments:
Beginning of year.................................... (33,973) 2,328 12,095 4,779 (4,261)
End of year.......................................... (36,829) 7,894 (3,949) (165,992) 82,155
-------- ------ -------- --------- --------
Net unrealized appreciation (depreciation) of
investments during the year.......................... (2,856) 5,566 (16,044) (170,771) 86,416
-------- ------ -------- --------- --------
Net realized and unrealized gain (loss) on
investments.......................................... (8,700) 6,049 (117) (157,995) 115,326
-------- ------ -------- --------- --------
Net increase (decrease) in net assets resulting from
operations........................................... $(11,760) $8,343 $ 2,744 $(160,106) $109,796
======== ====== ======== ========= ========
</TABLE>
See accompanying notes to financial statements
F-21
<PAGE> 80
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<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 (loss) income.............. $ (11,942) $ 242,698 $ 9,531 $ (975) $ (2,597) $ 7,415
Net realized gain on investments.......... 106,592 9,824 44,721 247,207 148,308
Net unrealized (depreciation) appreciation
of investments during the year.......... (38,569) (70,598) (63,002) 57,514 540,420
---------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets from
operations.............................. 56,081 242,698 (51,243) (19,256) 302,124 696,143
---------- ----------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums............... 1,074,495 10,836,005 332,588 194,230 412,431 661,165
Cost of insurance and administrative
charges................................. (303,622) (797,781) (97,177) (89,639) (167,274) (167,001)
Surrenders and forfeitures................ (189,291) (59,612) (15,922) (9,974) (27,978) (24,702)
Net (withdrawals) repayments due to policy
loans................................... (31,216) 4,739 (15,470) (8,925) (33,883) (12,649)
Transfers between investment portfolios... 470,309 (7,352,211) (135,405) 449,128 32,008 91,516
Transfers due to death benefits........... (1,337) (1,278)
---------- ----------- ---------- ---------- ---------- ----------
Net increase in net assets derived from
policy transactions..................... 1,020,675 2,631,140 68,614 534,820 213,967 547,051
---------- ----------- ---------- ---------- ---------- ----------
Total increase in net assets.............. 1,076,756 2,873,838 17,371 515,564 516,091 1,243,194
NET ASSETS
Beginning of year....................... 2,827,916 4,408,235 1,307,466 649,153 1,836,242 2,104,234
---------- ----------- ---------- ---------- ---------- ----------
End of year............................. $3,904,672 $ 7,282,073 $1,324,837 $1,164,717 $2,352,333 $3,347,428
========== =========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-22
<PAGE> 81
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALL PRO ALL PRO
ALL PRO LARGE ALL PRO LARGE SMALL SMALL
CAP GROWTH CAP VALUE CAP GROWTH CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment loss........................................ $ (6,838) $ (612) $ (2,993) $ (1,998)
Net realized gain on investments........................... 59,937 21,529 96,011 2,248
Net unrealized appreciation (depreciation) of investments
during the year.......................................... 192,717 (26,430) 323,197 (28,135)
---------- -------- ---------- --------
Net increase (decrease) in net assets from operations...... 245,816 (5,513) 416,215 (27,885)
---------- -------- ---------- --------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................................ 410,602 235,417 146,222 217,981
Cost of insurance and administrative charges............... (107,613) (46,883) (37,756) (35,684)
Surrenders and forfeitures................................. (30,667) (6,497) (3,858) (191)
Net withdrawals due to policy loans........................ (16,290) (11,460) (4,008) (5,077)
Transfers between investment portfolios.................... 1,079,015 82,627 249,104 142,715
---------- -------- ---------- --------
Net increase in net assets derived from policy
transactions............................................. 1,335,047 253,204 349,704 319,744
---------- -------- ---------- --------
Total increase in net assets............................... 1,580,863 247,691 765,919 291,859
NET ASSETS
Beginning of year........................................ 247,925 237,471 277,529 281,462
---------- -------- ---------- --------
End of year.............................................. $1,828,788 $485,162 $1,043,448 $573,321
========== ======== ========== ========
</TABLE>
See accompanying notes to financial statements
F-23
<PAGE> 82
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................... $ 75,002 $ (70,937) $ 169,800 $ 24,974 $ 61,020 $ 25,299
Net realized gain (loss) on investments.......... 571,495 1,574,101 (20,336) 222,413 121,743 665,356
Net unrealized (depreciation) appreciation of
investments during the year.................... (79,851) 3,257,791 2,612 1,612,546 110,105 2,407,325
----------- ----------- ---------- ---------- ---------- -----------
Net increase in net assets from operations....... 566,646 4,760,955 152,076 1,859,933 292,868 3,097,980
----------- ----------- ---------- ---------- ---------- -----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums...................... 2,929,981 3,422,090 451,275 1,525,307 779,887 6,727,693
Cost of insurance and administrative charges..... (913,963) (1,072,275) (185,657) (338,270) (213,071) (1,698,031)
Surrenders and forfeitures....................... (249,092) (370,650) (29,802) (66,192) (40,031) (426,927)
Net withdrawals due to policy loans.............. (79,425) (71,729) (12,437) (44,838) (41,805) (166,653)
Transfers between investment portfolios.......... 657,552 1,206,940 219,593 250,238 281,207 1,580,849
Withdrawals due to death benefits................ (10,825) (4,635) (3,418) (77,679)
----------- ----------- ---------- ---------- ---------- -----------
Net increase in net assets derived from policy
transactions................................... 2,334,228 3,109,741 442,972 1,322,827 766,187 5,939,252
----------- ----------- ---------- ---------- ---------- -----------
Total increase in net assets..................... 2,900,874 7,870,696 595,048 3,182,760 1,059,055 9,037,232
NET ASSETS
Beginning of year.............................. 9,649,507 11,319,649 1,847,985 3,438,701 2,298,935 12,355,027
----------- ----------- ---------- ---------- ---------- -----------
End of year.................................... $12,550,381 $19,190,345 $2,443,033 $6,621,461 $3,357,990 $21,392,259
=========== =========== ========== ========== ========== ===========
</TABLE>
See accompanying notes to financial statements
F-24
<PAGE> 83
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER NEUBERGER
INVESTMENT FIDELITY BERMAN BERMAN BERMAN LIMITED BERMAN
GRADE BOND CONTRAFUND(R) BALANCED GROWTH MATURITY BOND PARTNERS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)................ $ 41,071 $ (20,102) $ 8,293 $ 103,573 $ 45,280 $ (4,615)
Net realized gain (loss) on investments..... 16,764 380,374 (2,558) (112,803) (17,023) 37,455
Net unrealized (depreciation) appreciation
of investments during the year............ (82,192) 1,361,433 (12,499) (32,289) (19,835) (36,807)
---------- ----------- --------- ----------- ---------- ----------
Net (decrease) increase in net assets from
operations................................ (24,357) 1,721,705 (6,764) (41,519) 8,422 (3,967)
---------- ----------- --------- ----------- ---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................. 408,193 2,629,902 30,596 122,455 359,023 431,555
Cost of insurance and administrative
charges................................... (125,447) (641,252) (17,818) (47,317) (61,450) (148,466)
Surrenders and forfeitures.................. (78,777) (232,393) (743) (4,937) (55,990) (44,451)
Net (withdrawals) repayments due to policy
loans..................................... (12,459) (89,980) 192 48 (6,347) (10,397)
Transfers between investment portfolios..... 375,555 1,420,233 (576,638) (2,035,198) (10,622) 2,058,260
Withdrawals due to death benefits........... (5,412) (4,020) (1,057)
---------- ----------- --------- ----------- ---------- ----------
Net increase (decrease) in net assets
derived from policy transactions.......... 567,065 3,081,098 (564,411) (1,968,969) 224,614 2,285,444
---------- ----------- --------- ----------- ---------- ----------
Total increase (decrease) in net assets..... 542,708 4,802,803 (571,175) (2,010,488) 233,036 2,281,477
NET ASSETS
Beginning of year......................... 1,224,170 5,486,967 571,175 2,010,488 858,328 244,247
---------- ----------- --------- ----------- ---------- ----------
End of year............................... $1,766,878 $10,289,770 -- -- $1,091,364 $2,525,724
========== =========== ========= =========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-25
<PAGE> 84
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE VAN ECK ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING WORLDWIDE SMALL
APPRECIATION BOND HARD ASSETS MARKETS REAL ESTATE CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment (loss) income........... $ (1,619) $ 23,474 $ 2,203 $ (8,384) $ 948 $ (25,644)
Net realized gain (loss) on
investments.......................... 11,508 23,235 (29,183) (146,766) 1,132 508,120
Net unrealized appreciation
(depreciation) of investments during
the year............................. 51,652 (94,702) 101,902 1,199,541 (10,967) 1,191,588
--------- --------- -------- ---------- -------- ----------
Net increase (decrease) in net assets
from operations...................... 61,541 (47,993) 74,922 1,044,391 (8,887) 1,674,064
--------- --------- -------- ---------- -------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums............ 52,425 94,818 151,588 402,320 63,311 1,102,941
Cost of insurance and administrative
charges.............................. (27,936) (46,560) (35,575) (107,952) (7,593) (344,012)
Surrenders and forfeitures............. (9,792) (20,025) (2,094) (14,113) (17) (208,635)
Net withdrawals due to policy loans.... (2,760) (6,828) (5,013) (8,664) (22,006)
Transfers between investment
portfolios........................... (854,349) (135,667) 73,320 (58,680) 32,608 391,868
Withdrawals due to death benefits...... (1,499) (3,576)
--------- --------- -------- ---------- -------- ----------
Net (decrease) increase in net assets
derived from policy transactions..... (842,412) (114,262) 182,226 211,412 88,309 916,580
--------- --------- -------- ---------- -------- ----------
Total (decrease) increase in net
assets............................... (780,871) (162,255) 257,148 1,255,803 79,422 2,590,644
NET ASSETS
Beginning of year.................... 780,871 691,312 320,851 890,107 73,425 3,153,585
--------- --------- -------- ---------- -------- ----------
End of year.......................... -- $ 529,057 $577,999 $2,145,910 $152,847 $5,744,229
========= ========= ======== ========== ======== ==========
</TABLE>
See accompanying notes to financial statements
F-26
<PAGE> 85
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<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)............. $ 18,521 $ 174,900 $ 44,888 $ 11,127 $ 350 $ (211)
Net realized gain on investments......... 241,036 10,197 33,591 139,197 100,230
Net unrealized appreciation
(depreciation) of investments during
the year............................... 24,031 13,711 8,599 (21,973) 36,335
---------- ------------ ---------- -------- ---------- ----------
Net increase in net assets from
operations............................. 283,588 174,900 68,796 53,317 117,574 136,354
---------- ------------ ---------- -------- ---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums.............. 700,982 12,157,013 286,323 145,810 390,883 542,593
Cost of insurance and administrative
charges................................ (223,112) (517,784) (74,547) (44,806) (145,982) (131,026)
Surrenders and forfeitures............... (20,394) (78,839) (5,714) (1,879) (26,378) (19,231)
Net withdrawals due to policy loans...... (51,892) (268,614) (4,688) 295 (41,359) (2,014)
Transfers between investment
portfolios............................. 517,850 (10,774,581) 447,809 134,941 273,343 242,053
---------- ------------ ---------- -------- ---------- ----------
Net increase in net assets derived from
policy transactions.................... 923,434 517,195 649,183 234,361 450,507 632,375
---------- ------------ ---------- -------- ---------- ----------
Total increase in net assets............. 1,207,022 692,095 717,979 287,678 568,081 768,729
NET ASSETS
Beginning of year...................... 1,620,894 3,716,140 589,487 361,475 1,268,161 1,335,505
---------- ------------ ---------- -------- ---------- ----------
End of year............................ $2,827,916 $ 4,408,235 $1,307,466 $649,153 $1,836,242 $2,104,234
========== ============ ========== ======== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-27
<PAGE> 86
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALL PRO ALL PRO
ALL PRO LARGE ALL PRO LARGE SMALL SMALL
CAP GROWTH CAP VALUE CAP GROWTH CAP VALUE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment loss........................................ $ (259) $ (304) $ (314) $ (329)
Net realized loss on investments........................... (1,657) (6,212) (9,872) (9,805)
Net unrealized appreciation of investments during the
year..................................................... 31,368 21,256 49,117 22,620
-------- -------- -------- --------
Net increase in net assets from operations................. 29,452 14,740 38,931 12,486
-------- -------- -------- --------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................................ 54,913 56,634 38,819 36,602
Cost of insurance and administrative charges............... (5,966) (7,965) (3,250) (5,225)
Surrenders and forfeitures................................. (1) (8)
Transfers between investment portfolios.................... 144,527 149,070 178,029 212,599
-------- -------- -------- --------
Net increase in net assets derived from policy
transactions............................................. 193,473 197,731 213,598 243,976
-------- -------- -------- --------
Capital contribution from Providentmutual Life and Annuity
Company of America....................................... 25,000 25,000 25,000 25,000
-------- -------- -------- --------
Total increase in net assets............................... 247,925 237,471 277,529 281,462
NET ASSETS
Beginning of year........................................ -- -- -- --
-------- -------- -------- --------
End of year.............................................. $247,925 $237,471 $277,529 $281,462
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements
F-28
<PAGE> 87
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................... $ 33,741 $ (21,448) $ 82,762 $ 23,357 $ 31,986 $ 9,694
Net realized gain on investments................. 379,398 908,344 62,829 149,376 159,494 566,205
Net unrealized appreciation (depreciation) of
investments during the year.................... 388,042 1,877,802 (251,388) 108,083 54,245 1,456,238
---------- ----------- ---------- ---------- ---------- -----------
Net increase (decrease) in net assets from
operations..................................... 801,181 2,764,698 (105,797) 280,816 245,725 2,032,137
---------- ----------- ---------- ---------- ---------- -----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums...................... 2,791,625 2,817,681 644,433 991,712 538,144 4,725,165
Cost of insurance and administrative charges..... (683,360) (776,716) (141,578) (247,860) (128,200) (1,026,576)
Surrenders and forfeitures....................... (100,189) (148,661) (18,862) (43,350) (27,852) (153,976)
Net withdrawals due to policy loans.............. (25,809) (30,231) (12,378) (17,062) 11,088 (35,752)
Transfers between investment portfolios.......... 1,325,938 1,223,266 223,803 639,706 404,187 1,912,283
Withdrawals due to death benefits................ (9,104) (52,787) (1,121) (1,235) (4,122)
---------- ----------- ---------- ---------- ---------- -----------
Net increase in net assets derived from policy
transactions................................... 3,299,101 3,032,552 695,418 1,322,025 796,132 5,417,022
---------- ----------- ---------- ---------- ---------- -----------
Return of capital to Providentmutual Life and
Annuity Company of America..................... (30,000) (30,000)
---------- ----------- ---------- ---------- ---------- -----------
Total increase in net assets..................... 4,100,282 5,767,250 589,621 1,602,841 1,041,857 7,419,159
NET ASSETS
Beginning of year.............................. 5,549,225 5,552,399 1,258,364 1,835,860 1,257,078 4,935,868
---------- ----------- ---------- ---------- ---------- -----------
End of year.................................... $9,649,507 $11,319,649 $1,847,985 $3,438,701 $2,298,935 $12,355,027
========== =========== ========== ========== ========== ===========
</TABLE>
See accompanying notes to financial statements
F-29
<PAGE> 88
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER & NEUBERGER
INVESTMENT FIDELITY & BERMAN & BERMAN BERMAN LIMITED & BERMAN
GRADE BOND CONTRAFUND(R) BALANCED GROWTH MATURITY BOND PARTNERS
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)................ $ 29,096 $ (6,798) $ 7,039 $ (10,244) $ 30,950 $ (241)
Net realized gain (loss) on investments..... 7,716 169,629 65,864 325,833 373 (2,190)
Net unrealized appreciation (depreciation)
of investments during the year............ 35,552 840,390 (21,582) (105,731) (8,405) 18,863
---------- ---------- -------- ---------- -------- --------
Net increase in net assets from
operations................................ 72,364 1,003,221 51,321 209,858 22,918 16,432
---------- ---------- -------- ---------- -------- --------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................. 310,292 1,737,346 127,973 582,452 224,085 123,418
Cost of insurance and administrative
charges................................... (76,939) (364,105) (55,932) (156,359) (42,136) (8,687)
Surrenders and forfeitures.................. (8,154) (53,656) (8,030) (19,760) (1,602)
Net (withdrawals) repayments due to policy
loans..................................... (2,779) 3,715 (16,887) (18,679) (1,363) (101)
Transfers between investment portfolios..... 274,632 1,036,789 109,236 230,165 128,083 88,185
Withdrawals due to death benefits........... (2,854) (34,374)
---------- ---------- -------- ---------- -------- --------
Net increase in net assets derived from
policy transactions....................... 497,052 2,357,235 156,360 583,445 307,067 202,815
---------- ---------- -------- ---------- -------- --------
Capital contribution from Providentmutual
Life and Annuity Company of America....... 25,000
---------- ---------- -------- ---------- -------- --------
Total increase in net assets................ 569,416 3,360,456 207,681 793,303 329,985 244,247
NET ASSETS
Beginning of year......................... 654,754 2,126,511 363,494 1,217,185 528,343 --
---------- ---------- -------- ---------- -------- --------
End of year............................... $1,224,170 $5,486,967 $571,175 $2,010,488 $858,328 $244,247
========== ========== ======== ========== ======== ========
</TABLE>
See accompanying notes to financial statements
F-30
<PAGE> 89
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE VAN ECK ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING WORLDWIDE SMALL
APPRECIATION BOND HARD ASSETS MARKETS REAL ESTATE CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)................ $ (4,421) $ 123 $ (150) $ 880 $ (64) $ (13,957)
Net realized gain (loss) on investments..... (8,695) 7,111 3,385 (58,640) (5,674) 277,116
Net unrealized appreciation (depreciation)
of investments during the year............ (14,823) 57,630 (133,615) (258,276) 3,621 81,910
-------- -------- --------- --------- ------- ----------
Net increase (decrease) in net assets from
operations................................ (27,939) 64,864 (130,380) (316,036) (2,117) 345,069
-------- -------- --------- --------- ------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums................. 236,573 249,745 134,991 375,034 13,909 1,139,641
Cost of insurance and administrative
charges................................... (91,415) (44,347) (33,980) (98,968) (1,364) (248,405)
Surrenders and forfeitures.................. (22,461) (4,079) (4,253) (5,110) (30,009)
Net withdrawals due to policy loans......... (10,745) (1,174) (969) (2,809) (16,982)
Transfers between investment
portfolios................................ 79,336 141,529 (7,393) 259,476 37,997 531,504
Withdrawals due to death benefits........... (29,065)
-------- -------- --------- --------- ------- ----------
Net increase in net assets derived from
policy transactions....................... 191,288 341,674 88,396 527,623 50,542 1,346,684
-------- -------- --------- --------- ------- ----------
Capital contribution from Providentmutual
Life and Annuity Company of America....... 10,000 25,000
-------- -------- --------- --------- ------- ----------
Total increase in net assets................ 163,349 406,538 (41,984) 221,587 73,425 1,691,753
NET ASSETS
Beginning of year......................... 617,522 284,774 362,835 668,520 -- 1,461,832
-------- -------- --------- --------- ------- ----------
End of year............................... $780,871 $691,312 $ 320,851 $ 890,107 $73,425 $3,153,585
======== ======== ========= ========= ======= ==========
</TABLE>
See accompanying notes to financial statements
F-31
<PAGE> 90
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<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).............. $ 11,490 $ 90,908 $ 11,582 $ 3,500 $ (428) $ (1,597)
Net realized gain on investments.......... 72,524 4,094 4,157 29,677 34,195
Net unrealized appreciation of investments
during the year......................... 119,097 10,662 23,118 112,923 5,281
---------- ----------- -------- -------- ---------- ----------
Net increase in net assets from
operations.............................. 203,111 90,908 26,338 30,775 142,172 37,879
---------- ----------- -------- -------- ---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums............... 606,490 12,818,390 174,094 62,606 504,056 534,082
Cost of insurance and administrative
charges................................. (123,739) (377,001) (29,359) (18,265) (103,540) (94,480)
Surrenders and forfeitures................ (8,110) (2,037) (655) (561) (7,104) (7,124)
Net withdrawals due to policy loans....... (1,427) (2,750) (2,918) (647) (6,952) (2,905)
Transfers between investment portfolios... 392,712 (9,338,827) 290,953 207,288 267,938 418,275
Withdrawals due to death benefits......... (2,251) (880) (1,330) (1,025) (490)
---------- ----------- -------- -------- ---------- ----------
Net increase in net assets derived from
policy transactions..................... 863,675 3,096,895 430,785 250,421 653,373 847,358
---------- ----------- -------- -------- ---------- ----------
Total increase in net assets.............. 1,066,786 3,187,803 457,123 281,196 795,545 885,237
NET ASSETS
Beginning of year....................... 554,108 528,337 132,364 80,279 472,616 450,268
---------- ----------- -------- -------- ---------- ----------
End of year............................. $1,620,894 $ 3,716,140 $589,487 $361,475 $1,268,161 $1,335,505
========== =========== ======== ======== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-32
<PAGE> 91
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY
EQUITY- FIDELITY HIGH FIDELITY ASSET FIDELITY
INCOME GROWTH INCOME OVERSEAS MANAGER INDEX 500
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)..................... $ 14,139 $ (7,857) $ 25,041 $ 3,232 $ 20,998 $ (502)
Net realized gain on investments................. 243,561 105,152 13,779 66,453 71,908 116,408
Net unrealized appreciation (depreciation) of
investments during the year.................... 549,676 629,595 74,713 (31,365) 77,492 631,639
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets from operations....... 807,376 726,890 113,533 38,320 170,398 747,545
---------- ---------- ---------- ---------- ---------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums...................... 1,800,681 2,077,217 315,730 708,468 230,559 2,291,230
Cost of insurance and administrative charges..... (378,890) (507,915) (76,002) (144,645) (67,535) (452,765)
Surrenders and forfeitures....................... (26,461) (71,933) (6,335) (7,458) (5,894) (27,300)
Net withdrawals due to policy loans.............. (29,476) (25,572) (465) (12,515) (13,101) (34,119)
Transfers between investment portfolios.......... 1,407,893 1,003,643 537,410 688,760 201,574 935,324
Withdrawals due to death benefits................ (3,109) (3,873) (3,581)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets derived from policy
transactions................................... 2,770,638 2,471,567 770,338 1,232,610 345,603 2,708,789
---------- ---------- ---------- ---------- ---------- ----------
Total increase in net assets..................... 3,578,014 3,198,457 883,871 1,270,930 516,001 3,456,334
NET ASSETS
Beginning of year.............................. 1,971,211 2,353,942 374,493 564,930 741,077 1,479,534
---------- ---------- ---------- ---------- ---------- ----------
End of year.................................... $5,549,225 $5,552,399 $1,258,364 $1,835,860 $1,257,078 $4,935,868
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
F-33
<PAGE> 92
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIDELITY NEUBERGER NEUBERGER NEUBERGER &
INVESTMENT FIDELITY & BERMAN & BERMAN BERMAN LIMITED
GRADE BOND CONTRAFUND(R) BALANCED GROWTH MATURITY BOND
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)........................... $ 8,586 $ (4,202) $ 1,755 $ (5,067) $ 2,468
Net realized gain (loss) on investments................ 2,284 33,030 8,932 55,806 (214)
Net unrealized appreciation of investments during the
year................................................. 14,149 188,611 32,678 126,532 13,582
-------- ---------- -------- ---------- --------
Net increase in net assets from operations............. 25,019 217,439 43,365 177,271 15,836
-------- ---------- -------- ---------- --------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums............................ 250,638 899,768 108,720 437,297 147,394
Cost of insurance and administrative charges........... (33,229) (140,720) (35,701) (106,436) (17,164)
Surrenders and forfeitures............................. (4,629) (4,872) (1,492) (4,296) (843)
Net withdrawals due to policy loans.................... (2,142) (14,814) (191) (676) (580)
Transfers between investment portfolios................ 265,581 900,755 83,895 175,334 333,959
Withdrawals due to death benefits...................... (2,005)
-------- ---------- -------- ---------- --------
Net increase in net assets derived from policy
transactions......................................... 474,214 1,640,117 155,231 501,223 462,766
-------- ---------- -------- ---------- --------
Total increase in net assets........................... 499,233 1,857,556 198,596 678,494 478,602
NET ASSETS
Beginning of year.................................... 155,521 268,955 164,898 538,691 49,741
-------- ---------- -------- ---------- --------
End of year.......................................... $654,754 $2,126,511 $363,494 $1,217,185 $528,343
======== ========== ======== ========== ========
</TABLE>
See accompanying notes to financial statements
F-34
<PAGE> 93
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN VAN ECK
CENTURY VP VAN ECK VAN ECK WORLDWIDE ALGER AMERICAN
CAPITAL WORLDWIDE WORLDWIDE EMERGING SMALL
APPRECIATION BOND HARD ASSETS MARKETS CAPITALIZATION
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss)......................... $ (3,060) $ 2,294 $ 2,861 $ (2,111) $ (5,530)
Net realized gain (loss) on investments.............. (5,844) 483 15,927 12,776 28,910
Net unrealized appreciation (depreciation) of
investments during the year........................ (2,856) 5,566 (16,044) (170,771) 86,416
-------- -------- -------- --------- ----------
Net increase (decrease) in net assets from
operations......................................... (11,760) 8,343 2,744 (160,106) 109,796
-------- -------- -------- --------- ----------
FROM VARIABLE LIFE POLICY TRANSACTIONS
Policyholders' net premiums.......................... 302,126 134,179 131,149 362,026 708,739
Cost of insurance and administrative charges......... (80,091) (24,944) (29,372) (51,528) (131,231)
Surrenders and forfeitures........................... (4,824) (957) (2,265) (1,605) (3,435)
Net withdrawals due to policy loans.................. (694) (1,431) (341) (528) (13,587)
Transfers between investment portfolios.............. 63,153 71,029 111,374 441,995 424,465
-------- -------- -------- --------- ----------
Net increase in net assets derived from policy
transactions....................................... 279,670 177,876 210,545 750,360 984,951
-------- -------- -------- --------- ----------
Total increase in net assets......................... 267,910 186,219 213,289 590,254 1,094,747
NET ASSETS
Beginning of year.................................. 349,612 98,555 149,546 78,266 367,085
-------- -------- -------- --------- ----------
End of year........................................ $617,522 $284,774 $362,835 $ 668,520 $1,461,832
======== ======== ======== ========= ==========
</TABLE>
See accompanying notes to financial statements
F-35
<PAGE> 94
- --------------------------------------------------------------------------------
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 ("PLACA")
under the provisions of Delaware law and commenced operations on February 1,
1995. PLACA 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.
PLACA 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
twenty-five subaccounts: the Growth, Money Market, Bond, Managed, Aggressive
Growth, International, All Pro Large Cap Growth, All Pro Large Cap Value, All
Pro Small Cap Growth and All Pro Small Cap Value 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, Fidelity
Investment Grade Bond and Fidelity Contrafund(R) Subaccounts invest in the
corresponding portfolios of the Variable Insurance Products Fund II; Neuberger
Berman Limited Maturity Bond and Neuberger Berman Partners Subaccounts invest in
the corresponding portfolios of the Neuberger Berman Advisers Management Trust;
the Van Eck Worldwide Bond, Van Eck Worldwide Hard Assets, Van Eck Worldwide
Emerging Markets and Van Eck Worldwide Real Estate Subaccounts invest in the
corresponding portfolios of the Van Eck Worldwide Insurance Trust; and the Alger
American Small Capitalization Subaccount invests in the corresponding portfolio
of the Alger American Fund.
At the close of business on April 30, 1999, the Neuberger Berman Growth
Subaccount, Neuberger Berman Balanced Subaccount and American Century VP Capital
Appreciation Subaccount were terminated and the investments were transferred to
the Neuberger Berman Partners Subaccount, the Managed Subaccount and the All Pro
Large Cap Growth Subaccount, respectively.
Net premiums from in-force Policies are allocated to the Subaccounts in
accordance with policyholder 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 PLACA.
Transfers between investment portfolios include transfers between the
Subaccounts and the Guaranteed Account (not shown), which is part of PLACA's
General Account.
F-36
<PAGE> 95
- --------------------------------------------------------------------------------
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 PLACA. Under the provisions of the Policies, PLACA 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 and the reported amounts from operations and policy
transactions during the period. Actual results could differ from those
estimates.
F-37
<PAGE> 96
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS
At December 31, 1999, 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........................................ 206,160 $3,746,211 $3,904,672
Money Market Portfolio.................................. 7,210,373 $7,210,373 $7,210,373
Bond Portfolio.......................................... 125,221 $1,368,864 $1,324,837
Managed Portfolio....................................... 69,370 $1,189,142 $1,164,717
Aggressive Growth Portfolio............................. 107,070 $2,161,602 $2,352,333
International Portfolio................................. 200,685 $2,741,163 $3,347,428
All Pro Large Cap Growth Portfolio...................... 123,818 $1,604,703 $1,828,788
All Pro Large Cap Value Portfolio....................... 48,613 $490,336 $485,162
All Pro Small Cap Growth Portfolio...................... 55,414 $671,134 $1,043,448
All Pro Small Cap Value Portfolio....................... 75,736 $578,836 $573,321
Variable Insurance Products Fund:
Equity-Income Portfolio................................. 488,152 $11,552,482 $12,550,381
Growth Portfolio........................................ 349,360 $13,304,772 $19,190,345
High Income Portfolio................................... 216,006 $2,599,610 $2,443,033
Overseas Portfolio...................................... 241,307 $4,888,072 $6,621,461
Variable Insurance Products Fund II:
Asset Manager Portfolio................................. 179,860 $3,073,363 $3,357,990
Index 500 Portfolio..................................... 127,496 $16,718,458 $21,344,259
Investment Grade Bond Portfolio......................... 145,302 $1,793,506 $1,766,878
Contrafund(R) Portfolio................................. 352,994 $7,883,811 $10,289,770
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio......................... 82,429 $1,105,814 $1,091,364
Partners Portfolio...................................... 128,601 $2,543,668 $2,525,724
Van Eck Worldwide Insurance Trust:
Van Eck Worldwide Bond Portfolio........................ 49,491 $558,235 $529,057
Van Eck Worldwide Hard Assets Portfolio................. 52,737 $613,661 $577,999
Van Eck Worldwide Emerging Markets Portfolio............ 150,485 $1,370,637 $2,145,910
Van Eck Worldwide Real Estate Portfolio................. 16,705 $160,193 $152,847
Alger American Fund:
Alger American Small Capitalization Portfolio........... 104,156 $4,388,576 $5,744,229
</TABLE>
F-38
<PAGE> 97
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
During the years ended December 31, 1999, 1998 and 1997, transactions in
investment shares were as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
- -----------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO MONEY MARKET PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased............................... 73,102 73,135 50,220 8,932,793 10,866,458 11,393,078
Shares received from reinvestment of:
Dividends.................................... 512 1,893 1,003 268,224 197,496 88,801
Capital gain distributions................... 2,993 13,090 4,035
---------- ---------- -------- ----------- ----------- -----------
Total shares acquired.......................... 76,607 88,118 55,258 9,201,017 11,063,954 11,481,879
Total shares redeemed.......................... (20,708) (21,151) (2,578) (6,346,192) (9,925,488) (8,717,947)
---------- ---------- -------- ----------- ----------- -----------
Net increase in shares owned................... 55,899 66,967 52,680 2,854,825 1,138,466 2,763,932
Shares owned, beginning of year................ 150,261 83,294 30,614 4,355,548 3,217,082 453,150
---------- ---------- -------- ----------- ----------- -----------
Shares owned, end of year...................... 206,160 150,261 83,294 7,210,373 4,355,548 3,217,082
========== ========== ======== =========== =========== ===========
Cost of shares acquired........................ $1,459,551 $1,524,498 $986,013 $ 9,201,017 $11,063,954 $11,481,879
========== ========== ======== =========== =========== ===========
Cost of shares redeemed........................ $ 344,226 $ 341,507 $ 38,324 $ 6,346,192 $ 9,925,488 $ 8,717,947
========== ========== ======== =========== =========== ===========
</TABLE>
F-39
<PAGE> 98
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
- --------------------------------------------------------------------------------------------------------------------------
BOND PORTFOLIO MANAGED PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased......................................... 36,328 77,640 50,228 46,775 18,495 16,278
Shares received from reinvestment of:
Dividends.............................................. 1,653 4,610 1,233 286 832 282
Capital gain distributions............................. 1,299 8 1,951 1,087 44
-------- -------- -------- -------- -------- --------
Total shares acquired.................................... 39,280 82,258 51,461 49,012 20,414 16,604
Total shares redeemed.................................... (30,589) (19,415) (10,179) (16,359) (4,885) (884)
-------- -------- -------- -------- -------- --------
Net increase in shares owned............................. 8,691 62,843 41,282 32,653 15,529 15,720
Shares owned, beginning of year.......................... 116,530 53,687 12,405 36,717 21,188 5,468
-------- -------- -------- -------- -------- --------
Shares owned, end of year................................ 125,221 116,530 53,687 69,370 36,717 21,188
======== ======== ======== ======== ======== ========
Cost of shares acquired.................................. $419,905 $908,607 $552,874 $843,762 $346,281 $268,677
======== ======== ======== ======== ======== ========
Cost of shares redeemed.................................. $331,936 $204,339 $106,413 $265,196 $ 67,202 $ 10,599
======== ======== ======== ======== ======== ========
</TABLE>
F-40
<PAGE> 99
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
- --------------------------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased......................................... 25,961 31,265 38,091 60,220 56,397 64,862
Shares received from reinvestment of:
Dividends.............................................. 508 508 247 1,831 813 306
Capital gain distributions............................. 12,602 4,846 49 9,395 7,315 2,397
-------- -------- -------- -------- -------- --------
Total shares acquired.................................... 39,071 36,619 38,387 71,446 64,525 67,565
Total shares redeemed.................................... (15,809) (9,961) (6,756) (22,691) (10,722) (3,015)
-------- -------- -------- -------- -------- --------
Net increase in shares owned............................. 23,262 26,658 31,631 48,755 53,803 64,550
Shares owned, beginning of year.......................... 83,808 57,150 25,519 151,930 98,127 33,577
-------- -------- -------- -------- -------- --------
Shares owned, end of year................................ 107,070 83,808 57,150 200,685 151,930 98,127
======== ======== ======== ======== ======== ========
Cost of shares acquired.................................. $747,203 $753,159 $796,588 $993,410 $866,730 $916,201
======== ======== ======== ======== ======== ========
Cost of shares redeemed.................................. $288,626 $163,105 $113,966 $290,636 $134,336 $ 36,245
======== ======== ======== ======== ======== ========
</TABLE>
F-41
<PAGE> 100
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
- ---------------------------------------------------------------------------------------------------------
ALL PRO ALL PRO
LARGE CAP LARGE CAP
GROWTH VALUE
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares purchased............................................ 125,649 24,150 41,597 28,950
Shares received from reinvestment of:
Dividends................................................. 5 161
Capital gain distributions................................
---------- -------- -------- --------
Total shares acquired....................................... 125,654 24,150 41,758 28,950
Total shares redeemed....................................... (22,900) (3,086) (17,132) (4,963)
---------- -------- -------- --------
Net increase in shares owned................................ 102,754 21,064 24,626 23,987
Shares owned, beginning of year............................. 21,064 23,987
---------- -------- -------- --------
Shares owned, end of year................................... 123,818 21,064 48,613 23,987
========== ======== ======== ========
Cost of shares acquired..................................... $1,626,858 $248,497 $424,442 $265,246
========== ======== ======== ========
Cost of shares redeemed..................................... $ 238,712 $ 31,940 $150,321 $ 49,031
========== ======== ======== ========
</TABLE>
F-42
<PAGE> 101
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET STREET FUND, INC.
- -------------------------------------------------------------------------------------------------------
ALL PRO ALL PRO
SMALL CAP SMALL CAP
GROWTH VALUE
PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares purchased............................................ 47,453 32,753 52,030 43,816
Shares received from reinvestment of:
Dividends................................................. 73
Capital gain distributions................................
-------- -------- -------- --------
Total shares acquired....................................... 47,453 32,753 52,103 43,816
Total shares redeemed....................................... (20,358) (4,434) (10,483) (9,700)
-------- -------- -------- --------
Net increase in shares owned................................ 27,095 28,319 41,620 34,116
Shares owned, beginning of year............................. 28,319 34,116
-------- -------- -------- --------
Shares owned, end of year................................... 55,414 28,319 75,736 34,116
======== ======== ======== ========
Cost of shares acquired..................................... $601,240 $272,699 $396,338 $340,167
======== ======== ======== ========
Cost of shares redeemed..................................... $158,518 $ 44,287 $ 76,344 $ 81,325
======== ======== ======== ========
</TABLE>
F-43
<PAGE> 102
- --------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------
EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased................................ 127,157 153,199 135,989 82,042 94,179 76,083
Shares received from reinvestment of:
Dividends..................................... 6,224 3,495 1,879 495 887 536
Capital gain distributions.................... 13,759 12,437 9,447 31,095 23,197 2,400
---------- ---------- ---------- ---------- ---------- ----------
Total shares acquired........................... 147,140 169,131 147,315 113,632 118,263 79,019
Total shares redeemed........................... (38,591) (18,079) (12,497) (16,548) (15,647) (4,951)
---------- ---------- ---------- ---------- ---------- ----------
Net increase in shares owned.................... 108,549 151,052 134,818 97,084 102,616 74,068
Shares owned, beginning of year................. 379,603 228,551 93,733 252,276 149,660 75,592
---------- ---------- ---------- ---------- ---------- ----------
Shares owned, end of year....................... 488,152 379,603 228,551 349,360 252,276 149,660
========== ========== ========== ========== ========== ==========
Cost of shares acquired......................... $3,726,855 $4,057,867 $3,254,127 $5,084,590 $4,350,414 $2,711,400
========== ========== ========== ========== ========== ==========
Cost of shares redeemed......................... $ 746,130 $ 345,627 $ 225,789 $ 471,685 $ 460,966 $ 142,538
========== ========== ========== ========== ========== ==========
</TABLE>
F-44
<PAGE> 103
- --------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
HIGH INCOME PORTFOLIO OVERSEAS PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased................................... 66,264 69,235 69,137 96,724 81,679 70,577
Shares received from reinvestment of:
Dividends........................................ 17,034 7,523 2,488 2,832 2,130 605
Capital gain distributions....................... 636 4,781 307 4,567 6,278 2,403
-------- ---------- -------- ---------- ---------- ----------
Total shares acquired.............................. 83,934 81,539 71,932 104,123 90,087 73,585
Total shares redeemed.............................. (28,204) (13,926) (9,180) (34,322) (14,199) (7,953)
-------- ---------- -------- ---------- ---------- ----------
Net increase in shares owned....................... 55,730 67,613 62,752 69,801 75,888 65,632
Shares owned, beginning of year.................... 160,276 92,663 29,911 171,506 95,618 29,986
-------- ---------- -------- ---------- ---------- ----------
Shares owned, end of year.......................... 216,006 160,276 92,663 241,307 171,506 95,618
======== ========== ======== ========== ========== ==========
Cost of shares acquired............................ $934,435 $1,006,130 $916,751 $2,201,082 $1,741,880 $1,433,652
======== ========== ======== ========== ========== ==========
Cost of shares redeemed............................ $341,999 $ 165,121 $107,593 $ 630,868 $ 247,122 $ 131,357
======== ========== ======== ========== ========== ==========
</TABLE>
F-45
<PAGE> 104
- --------------------------------------------------------------------------------
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 II
- -----------------------------------------------------------------------------------------------------------------------------
ASSET MANAGER PORTFOLIO INDEX 500 PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased.................................. 58,391 63,645 23,488 48,111 53,123 28,249
Shares received from reinvestment of:
Dividends....................................... 4,685 2,657 1,757 944 555 204
Capital gain distributions...................... 5,934 7,972 4,410 641 1,285 414
---------- ---------- -------- ---------- ---------- ----------
Total shares acquired............................. 69,010 74,274 29,655 49,696 54,963 28,867
Total shares redeemed............................. (15,743) (17,480) (3,629) (9,669) (10,643) (2,318)
---------- ---------- -------- ---------- ---------- ----------
Net increase in shares owned...................... 53,267 56,794 26,026 40,027 44,320 26,549
Shares owned, beginning of year................... 126,593 69,799 43,773 87,469 43,149 16,600
---------- ---------- -------- ---------- ---------- ----------
Shares owned, end of year......................... 179,860 126,593 69,799 127,496 87,469 43,149
========== ========== ======== ========== ========== ==========
Cost of shares acquired........................... $1,204,348 $1,257,524 $494,496 $7,454,952 $6,814,303 $2,998,568
========== ========== ======== ========== ========== ==========
Cost of shares redeemed........................... $ 255,398 $ 269,912 $ 55,987 $ 873,045 $ 851,382 $ 173,873
========== ========== ======== ========== ========== ==========
</TABLE>
F-46
<PAGE> 105
- --------------------------------------------------------------------------------
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 II
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE CONTRAFUND(R)
BOND PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased................................... 85,128 43,614 43,904 136,907 123,430 95,855
Shares received from reinvestment of:
Dividends........................................ 4,150 2,904 866 1,179 817 175
Capital gain distributions....................... 1,302 344 8,647 6,008 464
---------- -------- -------- ---------- ---------- ----------
Total shares acquired.............................. 90,580 46,862 44,770 146,733 130,255 96,494
Total shares redeemed.............................. (39,735) (4,535) (5,346) (18,247) (12,392) (6,090)
---------- -------- -------- ---------- ---------- ----------
Net increase in shares owned....................... 50,845 42,327 39,424 128,486 117,863 90,404
Shares owned, beginning of year.................... 94,457 52,130 12,706 224,508 106,645 16,241
---------- -------- -------- ---------- ---------- ----------
Shares owned, end of year.......................... 145,302 94,457 52,130 352,994 224,508 106,645
========== ======== ======== ========== ========== ==========
Cost of shares acquired............................ $1,108,475 $586,720 $548,044 $3,738,001 $2,721,969 $1,758,817
========== ======== ======== ========== ========== ==========
Cost of shares redeemed............................ $ 483,575 $ 52,856 $ 62,960 $ 296,631 $ 201,903 $ 89,872
========== ======== ======== ========== ========== ==========
</TABLE>
F-47
<PAGE> 106
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- ---------------------------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO GROWTH PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased...................................... 1,894 19,377 11,617 3,434 29,928 19,122
Shares received from reinvestment of:
Dividends........................................... 628 673 207
Capital gain distributions.......................... 930 4,722 531 4,649 14,622 1,969
-------- -------- -------- ---------- ---------- --------
Total shares acquired................................. 3,452 24,772 12,355 8,083 44,550 21,091
Total shares redeemed................................. (38,408) (10,237) (2,292) (84,556) (7,932) (2,132)
-------- -------- -------- ---------- ---------- --------
Net (decrease) increase in shares owned............... (34,956) 14,535 10,063 (76,473) 36,618 18,959
Shares owned, beginning of year....................... 34,956 20,421 10,358 76,473 39,855 20,896
-------- -------- -------- ---------- ---------- --------
Shares owned, end of year............................. -- 34,956 20,421 -- 76,473 39,855
======== ======== ======== ========== ========== ========
Cost of shares acquired............................... $ 53,427 $390,678 $202,808 $ 193,400 $1,104,028 $605,607
======== ======== ======== ========== ========== ========
Cost of shares redeemed............................... $612,103 $161,415 $ 36,890 $2,171,599 $ 204,994 $ 53,645
======== ======== ======== ========== ========== ========
</TABLE>
F-48
<PAGE> 107
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- --------------------------------------------------------------------------------------------------------------------
LIMITED MATURITY PARTNERS
BOND PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares purchased............................................ 54,409 30,075 34,180 130,332 13,985
Shares received from reinvestment of:
Dividends................................................. 3,965 2,621 290 222
Capital gain distributions................................ 387
-------- -------- -------- ---------- --------
Total shares acquired....................................... 58,374 32,696 34,470 130,941 13,985
Total shares redeemed....................................... (38,053) (8,006) (592) (15,243) (1,082)
-------- -------- -------- ---------- --------
Net increase in shares owned................................ 20,321 24,690 33,878 115,698 12,903
Shares owned, beginning of year............................. 62,108 37,418 3,540 12,903
-------- -------- -------- ---------- --------
Shares owned, end of year................................... 82,429 62,108 37,418 128,601 12,903
======== ======== ======== ========== ========
Cost of shares acquired..................................... $775,612 $447,958 $473,413 $2,587,656 $247,264
======== ======== ======== ========== ========
Cost of shares redeemed..................................... $522,741 $109,568 $ 8,393 $ 269,372 $ 21,880
======== ======== ======== ========== ========
</TABLE>
F-49
<PAGE> 108
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN CENTURY
VARIABLE PORTFOLIOS, INC.
- --------------------------------------------------------------------------------------------
AMERICAN CENTURY VP
CAPITAL APPRECIATION PORTFOLIO
- --------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares purchased............................................ 4,498 33,759 35,982
Shares received from reinvestment of:
Dividends.................................................
Capital gain distributions................................ 3,550 1,032
-------- -------- --------
Total shares acquired....................................... 4,498 37,309 37,014
Total shares redeemed....................................... (91,069) (14,532) (7,362)
-------- -------- --------
Net (decrease) increase in shares owned..................... (86,571) 22,777 29,652
Shares owned, beginning of year............................. 86,571 63,794 34,142
-------- -------- --------
Shares owned, end of year................................... -- 86,571 63,794
======== ======== ========
Cost of shares acquired..................................... $ 40,967 $343,650 $360,144
======== ======== ========
Cost of shares redeemed..................................... $873,490 $165,478 $ 89,378
======== ======== ========
</TABLE>
F-50
<PAGE> 109
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK WORLDWIDE INSURANCE TRUST
- --------------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE VAN ECK WORLDWIDE
BOND PORTFOLIO HARD ASSETS PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares purchased......................................... 12,314 36,665 23,946 22,265 17,397 19,029
Shares received from reinvestment of:
Dividends.............................................. 2,315 302 329 545 154 263
Capital gain distributions............................. 1,034 3,792 194
-------- -------- -------- -------- -------- --------
Total shares acquired.................................... 15,663 36,967 24,275 22,810 21,343 19,486
Total shares redeemed.................................... (22,468) (6,583) (7,242) (4,948) (9,549) (5,349)
-------- -------- -------- -------- -------- --------
Net increase in shares owned............................. (6,805) 30,384 17,033 17,862 11,794 14,137
Shares owned, beginning of year.......................... 56,296 25,912 8,879 34,875 23,081 8,944
-------- -------- -------- -------- -------- --------
Shares owned, end of year................................ 49,491 56,296 25,912 52,737 34,875 23,081
======== ======== ======== ======== ======== ========
Cost of shares acquired.................................. $173,521 $419,483 $258,716 $234,961 $243,416 $309,179
======== ======== ======== ======== ======== ========
Cost of shares redeemed.................................. $241,074 $ 70,575 $ 78,063 $ 79,715 $151,785 $ 79,846
======== ======== ======== ======== ======== ========
</TABLE>
F-51
<PAGE> 110
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VAN ECK WORLDWIDE INSURANCE TRUST
- ----------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE VAN ECK WORLDWIDE
EMERGING MARKETS PORTFOLIO REAL ESTATE PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares purchased............................................ 64,480 75,726 58,300 11,666 11,645
Shares received from reinvestment of:
Dividends................................................. 605 30 167
Capital gain distributions................................ 538
-------- -------- -------- ---------- ----------
Total shares acquired....................................... 64,480 76,869 58,330 11,833 11,645
Total shares redeemed....................................... (39,010) (12,629) (3,821) (2,824) (3,949)
-------- -------- -------- ---------- ----------
Net increase in shares owned................................ 25,470 64,240 54,509 9,009 7,696
Shares owned, beginning of year............................. 125,015 60,775 6,266 7,696
-------- -------- -------- ---------- ----------
Shares owned, end of year................................... 150,485 125,015 60,775 16,705 7,696
======== ======== ======== ========== ==========
Cost of shares acquired..................................... $622,693 $649,297 $804,526 $ 115,470 $ 110,595
======== ======== ======== ========== ==========
Cost of shares redeemed..................................... $566,431 $169,434 $ 43,501 $ 25,081 $ 40,791
======== ======== ======== ========== ==========
</TABLE>
F-52
<PAGE> 111
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
3. INVESTMENTS, CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
- --------------------------------------------------------------------------------------------------
ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
- --------------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares purchased............................................ 31,023 37,591 26,913
Shares received from reinvestment of:
Dividends
Capital gain distributions................................ 11,270 7,022 790
---------- ---------- ----------
Total shares acquired....................................... 42,293 44,613 27,703
Total shares redeemed....................................... (9,858) (6,305) (3,263)
---------- ---------- ----------
Net increase in shares owned................................ 32,435 38,308 24,440
Shares owned, beginning of year............................. 71,721 33,413 8,973
---------- ---------- ----------
Shares owned, end of year................................... 104,156 71,721 33,413
========== ========== ==========
Cost of shares acquired..................................... $1,781,809 $1,870,715 $1,143,613
========== ========== ==========
Cost of shares redeemed..................................... $ 382,753 $ 260,872 $ 135,282
========== ========== ==========
</TABLE>
F-53
<PAGE> 112
- --------------------------------------------------------------------------------
The Providentmutual Variable Life Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
- --------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
PLACA makes certain deductions from premiums before amounts are allocated
to each Subaccount selected by the policyholder. The deductions may include (1)
state premium taxes, (2) sales charges and (3) Federal tax charges. Premiums
adjusted for these deductions are recorded as net premiums in the statement of
changes in net assets. 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 PLACA. The
charge is deducted at an annual rate of 0.65% -- 0.75% of the average daily net
assets of the Separate Account. This charge may be increased on a prospective
basis, 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 PLACA 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 twelve transfers by a policyholder
of amounts in the Subaccounts are free of charge. A fee of $25 is assessed for
each additional transfer. No transfer fees were incurred during the years ended
December 31, 1999, 1998 and 1997.
The Policies provide for an initial free-look period. If a policy is
cancelled within certain time constraints, the policyholder will receive a
refund equal to the policy account value plus reimbursements of certain
deductions previously 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 10-15 policy years
(depending on the policy), 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 10-15
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 10-15 years after such increase took effect. These charges
are recorded as administrative charges in the statements of changes in net
assets.
F-54
<PAGE> 113
PROVIDENTMUTUAL
LIFE AND ANNUITY COMPANY
OF AMERICA
(A WHOLLY-OWNED SUBSIDIARY OF PROVIDENT MUTUAL LIFE INSURANCE COMPANY)
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<PAGE> 114
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Providentmutual Life and Annuity Company of America
In our opinion, the accompanying statements of financial condition and the
related statements of operations, of equity and of cash flows present fairly, in
all material respects, the financial position of Providentmutual Life and
Annuity Company of America (a wholly-owned stock life insurance subsidiary of
Provident Mutual Life Insurance Company), at December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. 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 of these statements in accordance with auditing standards generally
accepted in the United States, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
February 7, 2000
F-56
<PAGE> 115
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY
OF AMERICA
STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at market (cost: 1999-$320,293;
1998-$352,107)........................................ $ 304,681 $ 359,442
Held to maturity, at amortized cost (market:
1999-$41,906; 1998-$57,419)........................... 42,263 54,671
Equity securities, at market (cost: 1999-$232;
1998-$1,278)........................................... 400 1,360
Mortgage loans............................................ 58,179 58,907
Real estate............................................... 1,794 484
Policy loans and premium notes............................ 11,168 8,454
Other invested assets..................................... 2,041 88
---------- ----------
Total investments.................................... 420,526 483,406
---------- ----------
Cash and cash equivalents................................... 6,010 5,581
Investment income due and accrued........................... 6,868 7,304
Deferred policy acquisition costs........................... 133,347 104,913
Reinsurance recoverable..................................... 3,515 3,054
Separate account assets..................................... 1,127,941 880,417
Other assets................................................ 1,179 1,312
---------- ----------
Total assets......................................... $1,699,386 $1,485,987
========== ==========
LIABILITIES
Policy liabilities:
Future policyholder benefits.............................. $ 482,673 $ 517,625
Other policy obligations.................................. 1,744 1,181
---------- ----------
Total policy liabilities............................. 484,417 518,806
---------- ----------
Payable to parent........................................... 917 --
Federal income taxes payable:
Current................................................... 2,676 6,281
Deferred.................................................. 1,246 2,474
Separate account liabilities................................ 1,124,803 877,713
Other liabilities........................................... 5,191 3,447
---------- ----------
Total liabilities.................................... 1,619,250 1,408,721
---------- ----------
COMMITMENTS AND CONTINGENCIES -- NOTE 10
EQUITY
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...................... 44,165 44,165
Retained earnings......................................... 37,306 28,346
Accumulated other comprehensive income:
Net unrealized (depreciation) appreciation on
securities............................................ (3,835) 2,255
---------- ----------
Total equity......................................... 80,136 77,266
---------- ----------
Total liabilities and equity......................... $1,699,386 $1,485,987
========== ==========
</TABLE>
See accompanying notes to financial statements
F-57
<PAGE> 116
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY
OF AMERICA
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
REVENUES
Premiums.................................................... $18,031 $13,269 $13,904
Policy and contract charges................................. 29,386 18,239 11,729
Net investment income....................................... 34,876 35,262 32,314
Other income................................................ 2,927 2,705 4,815
Net realized (losses) gains on investments.................. (1,887) 2,010 69
------- ------- -------
Total revenues............................................ 83,333 71,485 62,831
------- ------- -------
BENEFITS AND EXPENSES
Policy and contract benefits................................ 13,435 13,884 15,606
Change in future policyholder benefits...................... 32,415 24,791 19,254
Commissions and operating expenses.......................... 22,736 19,859 15,271
Policyholder dividends...................................... 1,090 958 773
------- ------- -------
Total benefits and expenses............................... 69,676 59,492 50,904
------- ------- -------
Income before income taxes............................. 13,657 11,993 11,927
Income tax expense:
Current................................................... 2,645 3,776 2,470
Deferred.................................................. 2,052 436 1,979
------- ------- -------
Total income tax expense............................... 4,697 4,212 4,449
------- ------- -------
Net Income........................................... $ 8,960 $ 7,781 $ 7,478
======= ======= =======
</TABLE>
See accompanying notes to financial statements
F-58
<PAGE> 117
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY
OF AMERICA
STATEMENTS OF EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET
CONTRIBUTED UNREALIZED
COMMON CAPITAL APPRECIATION
STOCK COMMON IN EXCESS RETAINED (DEPRECIATION) TOTAL
SHARES STOCK OF PAR EARNINGS ON SECURITIES EQUITY
------ ------ ----------- -------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997.......... 2,500 $2,500 $37,665 $13,087 $ 897 $54,149
-------
Comprehensive income
Net income..................... -- -- -- 7,478 -- 7,478
Other comprehensive income, net
of tax:
Change in unrealized
appreciation
(depreciation) on
securities................ -- -- -- -- 1,962 1,962
-------
Total comprehensive income........ 9,440
Capital contribution from
parent......................... -- -- 6,500 -- -- 6,500
----- ------ ------- ------- ------- -------
Balance at December 31, 1997........ 2,500 2,500 44,165 20,565 2,859 70,089
-------
Comprehensive income
Net income..................... -- -- -- 7,781 -- 7,781
Other comprehensive income, net
of tax:
Change in unrealized
appreciation
(depreciation) on
securities................ -- -- -- -- (604) (604)
-------
Total comprehensive income........ 7,177
----- ------ ------- ------- ------- -------
Balance at December 31, 1998........ 2,500 2,500 44,165 28,346 2,255 77,266
-------
Comprehensive income
Net income..................... -- -- -- 8,960 -- 8,960
Other comprehensive income, net
of tax:
Change in unrealized
appreciation
(depreciation) on
securities................ -- -- -- -- (6,090) (6,090)
-------
Total comprehensive income........ 2,870
----- ------ ------- ------- ------- -------
Balance at December 31, 1999........ 2,500 $2,500 $44,165 $37,306 $(3,835) $80,136
===== ====== ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements
F-59
<PAGE> 118
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY
OF AMERICA
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 8,960 $ 7,781 $ 7,478
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Interest credited to variable universal life and
investment products..................................... 24,461 21,927 15,076
Amortization of deferred policy acquisition costs......... 16,426 14,804 9,445
Capitalization of deferred policy acquisition costs....... (31,369) (35,985) (31,404)
Deferred Federal income taxes............................. 2,052 436 1,979
Depreciation, amortization and accretion.................. (371) 372 625
Net realized losses (gains) on investments................ 1,887 (2,010) (69)
Change in investment income due and accrued............... 436 (258) (437)
Change in reinsurance recoverable......................... (461) 71,620 5,672
Change in policy liabilities.............................. (894) (77,582) (12,255)
Change in other liabilities............................... 1,744 (3,444) 3,250
Change in current Federal income taxes payable............ (3,605) 2,353 (809)
Other, net................................................ 294 (2,236) (2,676)
--------- --------- ---------
Net cash provided by (used in) operating activities..... 19,560 (2,222) (4,125)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investments:
Available for sale securities............................. 27,345 21,681 21,382
Equity securities......................................... 652 370 100
Real estate............................................... -- 5,324 772
Other invested assets..................................... 566 248 333
Proceeds from maturities of investments:
Held to maturity securities............................... 13,801 10,128 19,184
Available for sale securities............................. 58,546 56,894 28,439
Mortgage loans............................................ 8,631 4,436 2,599
Purchases of investments:
Held to maturity securities............................... (1,080) (2,000) (2,029)
Available for sale securities............................. (55,525) (119,639) (72,520)
Equity securities......................................... -- (207) (609)
Mortgage loans............................................ (8,825) (17,166) (7,179)
Real estate............................................... (65) (195) (99)
Other invested assets..................................... (2,507) -- (302)
Contributions of separate account seed money................ -- (330) --
Withdrawals of separate account seed money.................. -- 265 --
Policy loans and premium notes, net......................... (2,714) (1,729) (373)
--------- --------- ---------
Net cash provided by (used in) investing activities..... 38,825 (41,920) (10,302)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Variable universal life and investment product deposits..... 212,196 302,071 232,307
Variable universal life and investment product
withdrawals............................................... (270,152) (252,348) (228,871)
Capital contribution from parent............................ -- -- 6,500
--------- --------- ---------
Net cash (used in) provided by financing activities..... (57,956) 49,723 9,936
--------- --------- ---------
Net change in cash and cash equivalents................. 429 5,581 (4,491)
Cash and cash equivalents, beginning of year................ 5,581 -- 4,491
--------- --------- ---------
Cash and cash equivalents, end of year...................... $ 6,010 $ 5,581 $ --
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for income taxes.................. $ 6,246 $ 1,434 $ 3,280
========= ========= =========
Foreclosure of mortgage loans............................... $ 1,245 $ 500 $ --
========= ========= =========
</TABLE>
See accompanying notes to financial statements
F-60
<PAGE> 119
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY
OF AMERICA
NOTES TO 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).
On October 13, 1998, the Board of Directors of Provident Mutual unanimously
approved and adopted a Plan of Conversion (Plan) to reorganize Provident Mutual
Life Insurance Company, utilizing a mutual holding company structure.
The Insurance Department of the Commonwealth of Pennsylvania reviewed the
Plan and rendered its Decision and Order approving the Plan, subject to certain
conditions, on November 6, 1998.
A Special Meeting of policyholders to consider and vote upon the Plan was
held on February 9, 1999. Approximately 90% of the voting policyholders approved
the Plan.
Subsequent to the Special Meeting, a group of dissident policyholders filed
a lawsuit to block the Plan. On February 11, 1999, a Philadelphia Common Pleas
Court judge issued an order granting a preliminary injunction blocking the Plan
until the Court conducted a hearing. Provident Mutual continued to provide
information to the Court at hearings held on March 16, 1999 and June 22, 1999.
On September 16, 1999, the judge issued a permanent injunction blocking the Plan
until certain additional disclosures were made.
On October 29, 1999, Provident Mutual announced that it was abandoning the
Plan due to practical barriers to completing all of the required steps before
the December 31, 1999 deadline mandated in the Pennsylvania Insurance
Department's order approving the Plan.
The Company sells life and annuity products principally through a personal
producing general agency (PPGA) and a brokerage sales force. The Company is
licensed to operate in 49 states and the District of Columbia, each of which has
regulatory oversight. Sales in 16 states accounted for 78% of the Company's
sales for the year ended December 31, 1999. 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, selected benefit elements and policy provisions are determined by
statutes and regulations in each of these states.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States (GAAP). Certain
prior year amounts have been reclassified to conform to the current year
presentation, including short-term investments reclassified as cash and cash
equivalents.
The Company prepares financial statements for filing with regulatory
authorities in conformity with the accounting practices prescribed or permitted
by the Insurance Department of the State of Delaware (SAP). Practices under SAP
vary from GAAP primarily with respect to the deferral and subsequent
amortization of policy acquisition costs, the valuation of policy reserves, the
accounting for deferred taxes, the inclusion of statutory asset valuation and
interest maintenance reserves and the establishment of investment valuation
allowances.
Amounts disclosed in the footnotes are denoted in thousands of dollars.
F-61
<PAGE> 120
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Statutory net income was $886, $1,702 and $1,792 for the years ended
December 31, 1999, 1998 and 1997, respectively. Statutory surplus was $44,161
and $44,730 as of December 31, 1999 and 1998, respectively.
The preparation of the accompanying financial statements required
management to make estimates and assumptions that affect the reported values of
assets and liabilities and the reported amounts of revenues and expenses. Actual
results could differ from those estimates.
The Company is subject to interest rate risk to the extent its investment
portfolio cash flows are not matched to its insurance liabilities. Management
believes it manages this risk through modeling of the cash flows under
reasonable scenarios.
INVESTED ASSETS
Fixed maturity securities (bonds) which may be sold are designated as
"available for sale" and are reported at market value. Unrealized
appreciation/depreciation on these securities is recorded directly in equity,
net of related Federal income taxes and amortization of deferred policy
acquisition costs. Fixed maturity securities that the Company has the intent and
ability to hold to maturity are designated as "held to maturity" and are
reported at amortized cost.
Equity securities (common and preferred stocks) are reported at market
value. Unrealized appreciation/depreciation on these securities is recorded
directly in equity, net of related Federal income taxes and amortization of
deferred policy acquisition costs.
Fixed maturity and equity securities that have experienced an other than
temporary decline in value are written down to fair value by a charge to
realized losses. This fair value becomes the new cost basis of the particular
security.
Mortgage loans are carried at unpaid principal balances, less impairment
reserves. For mortgage loans considered impaired, a specific reserve is
established. A general reserve is also established for probable losses arising
from the portfolio but not attributable to specific loans. Mortgage loans are
considered impaired when it is probable that the Company will be unable to
collect amounts due according to the contractual terms of the loan agreement.
Upon impairment, a reserve is established for the difference between the unpaid
principal of the mortgage loan and its fair value. Fair value is based on either
the present value of expected future cash flows discounted at the mortgage
loan's effective interest rate or the fair value of the underlying collateral.
Changes in the reserve are credited (charged) to operations. Reserves totaled
$740 and $1,064 at December 31, 1999 and 1998, respectively.
Policy loans are reported at unpaid principal balances.
Foreclosed real estate is carried at lower of cost or fair value and is
held for sale.
Other invested assets consist of limited partnerships carried at the lower
of cost or market value.
Cash and cash equivalents include cash and all highly liquid investments
with a maturity of three months or less when purchased, reduced by the amount of
outstanding checks.
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, but not for income generation or speculative
purposes. Derivatives utilized by the Company are long and short positions on
United States Treasury notes and bond futures and certain interest rate swaps.
The net interest effect of futures transactions is settled on a daily
basis. Cash paid or received is recorded daily, along with a receivable/payable,
to settle the futures contract prior to the contract termination. The
receivable/payable is carried until the contract is terminated and the remaining
balance is included in either net investment income or realized gain or loss.
Upon termination of a futures contract
F-62
<PAGE> 121
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
that is identified to a specific security, any gain or loss is deferred and
amortized to net investment income over the expected remaining life of the
hedged security. If the futures contract is not identified to a specific
security, any gain or loss on termination is reported as a realized gain or
loss.
Interest rate swaps are settled on the contract date. Cash paid or received
is reported as an adjustment to net investment income.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This Statement requires that all
derivatives be recorded at fair value in the statement of financial condition as
either assets or liabilities. The accounting for changes in the fair value of a
derivative depends on its intended use and its resulting designation. This
Statement is effective for fiscal years beginning after June 15, 1999. In June
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities -- Deferral of the Effective Date of SFAS No. 133", which
changed the effective date of SFAS No. 133 to fiscal years beginning after June
15, 2000. The Company plans to adopt the provisions of SFAS No. 133 effective
January 1, 2001. The Company is currently reviewing SFAS No. 133 and has not yet
determined its impact on the financial statements.
Effective January 1, 1999, the Company adopted Statement of Position (SOP)
No. 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments." SOP 97-3 provides guidance for determining measurement and
recognition of a liability or an asset for insurance-related assessments. The
adoption of this statement did not have a material effect on the results of
operations or the financial position of the Company.
BENEFIT RESERVES AND POLICYHOLDER CONTRACT DEPOSITS
Traditional Life Insurance Products
Traditional life insurance products include those contracts with fixed and
guaranteed premiums and benefits, and consist principally of whole life and term
insurance policies, limited-payment life insurance policies and certain
annuities with life contingencies. Most traditional life insurance policies are
participating. In addition to guaranteeing benefits, they pay dividends, as
declared annually by the Company based on its experience.
Reserves on traditional life insurance products are calculated by using the
net level premium method. For participating traditional life insurance policies,
reserve assumptions are based on mortality rates consistent with those
underlying the cash values and investment rates consistent with the Company's
dividend practices. For most policies, reserves are based on the 1958 or 1980
Commissioners' Standard Ordinary (CSO) mortality table at interest rates ranging
from 3.5% to 4.5%.
Variable Life and Investment-Type Products
Variable life products are flexible premium variable universal life.
Investment-type products consist primarily of single premium and flexible
premium annuity contracts.
Benefit reserves and policyholder contract deposits on these products are
determined following the retrospective deposit method and consist of policy
values that accrue to the benefit of the policyholder, before deduction of
surrender charges.
PREMIUMS, CHARGES AND BENEFITS
Traditional Life Insurance
Premiums for individual life policies are recognized when due.
Benefit claims (including an estimated provision for claims incurred but
not reported), benefit reserve changes, and expenses (except those deferred) are
charged to income as incurred.
F-63
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Variable Life and Investment-Type Products
Revenues for variable life and investment-type products consist of policy
charges for the cost of insurance, policy initiation, administration and
surrenders during the period. Premiums received and the accumulated value
portion of benefits paid are excluded from the amounts reported in the
statements of operations. Expenses include interest credited to policy account
balances and benefit payments made in excess of policy account balances. Many of
these policies are variable life or variable annuity policies, in which
investment performance credited to the account balance is based on the
investment performance of separate accounts chosen by the policyholder. For
other policies, the account balances were credited at interest rates which
ranged from 4.5% to 6.5% in 1999.
Deferred Policy Acquisition Costs
The costs that vary with and are directly related to the production of new
business have been deferred to the extent deemed recoverable. Such costs include
commissions and certain costs of underwriting, policy issue and marketing.
Deferred policy acquisition costs on traditional participating life
insurance policies are amortized in proportion to the present value of expected
gross margins. Gross margins include margins from mortality, investments and
expenses, net of policyholder dividends. Expected gross margins are redetermined
regularly, based on actual experience and current assumptions of mortality,
persistency, expenses, and investment experience. The average investment yields,
before realized capital gains and losses, in the calculation of expected gross
margins was 8.0% for 1999, 8.25% for 1998 and 8.0% for 1997.
Deferred policy acquisition costs for variable life and investment-type
products are amortized in relation to the incidence of expected gross profits,
including realized investment gains and losses, over the expected lives of the
policies.
Deferred policy acquisition costs are subject to recoverability testing at
the time of policy issuance and loss recognition testing at the end of each
accounting period. The effect on the amortization of deferred policy acquisition
costs of revisions in estimated experience is reflected in earnings in the
period such estimates are revised. In addition, the effect on the deferred
policy acquisition cost asset that would result from the realization of
unrealized gains (losses) is recognized through an offset to Other Comprehensive
Income as of the balance sheet date.
CAPITAL GAINS AND LOSSES
Realized capital gains and losses on sales of investments are based upon
specific identification of the investments sold. A realized capital loss is
recorded at the time a decline in the value of an investment is determined to be
other than temporary.
POLICYHOLDER DIVIDENDS
Annually, the Board of Directors declares the amount of dividends to be
paid to participating policyholders in the following calendar year. Dividends
are earned by the policyholders ratably over the policy year. Dividends are
included in the accompanying financial statements as a liability and as a charge
to operations.
REINSURANCE
Premiums, benefits and expenses are recorded net of experience refunds,
reserve adjustments and amounts assumed from or ceded to reinsurers, including
commission and expense allowances.
F-64
<PAGE> 123
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPARATE ACCOUNTS
Separate account assets and liabilities reflect segregated funds
administered and invested by the Company for the benefit of variable annuity
contractholders and variable life insurance policyholders.
The contractholders/policyholders bear the investment risk on separate
account assets except in instances where the Company guarantees a fixed return
and on the Company's seed money. The separate account assets are carried at fair
value.
FEDERAL INCOME TAXES
Deferred income tax assets and liabilities have been recorded for temporary
differences between the reported amounts of assets and liabilities in the
accompanying financial statements and those in the Company's income tax returns.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the fair values and carrying values of the
Company's financial instruments at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------ ------------------------
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities:
Available for sale.............. $304,681 $304,681 $359,442 $359,442
Held to maturity................ $41,906 $42,263 $57,419 $54,671
Equity securities................. $400 $400 $1,360 $1,360
Mortgage loans.................... $57,261 $58,179 $64,225 $58,907
LIABILITIES FOR INVESTMENT-TYPE
INSURANCE CONTRACTS
Supplementary contracts without
life contingencies.............. $7,407 $7,428 $7,479 $7,142
Individual annuities.............. $1,346,732 $1,384,023 $1,181,520 $1,215,896
</TABLE>
The underlying investment risk of the Company's variable life and variable
annuity contracts is assumed by the policyholder. 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 fair 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 Value 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.
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).
F-65
<PAGE> 124
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
MORTGAGE LOANS
Mortgage loans are 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.
POLICYHOLDER DIVIDENDS AND ACCUMULATIONS
The policyholder dividend and accumulation liabilities will ultimately be
settled in cash, applied toward 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.
3. MARKETABLE SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair value of investments in fixed maturity securities and equity
securities as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
------------------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
government corporations and agencies.......... $ 1,714 $ 1 $ 67 $ 1,648
Obligations of states and political
subdivisions.................................. 952 37 -- 989
Corporate securities............................ 290,080 751 15,499 275,332
Mortgage-backed securities...................... 27,547 155 990 26,712
-------- ------ ------- --------
Subtotal -- fixed maturities.................. 320,293 944 16,556 304,681
Equity securities............................... 232 171 3 400
-------- ------ ------- --------
Total......................................... $320,525 $1,115 $16,559 $305,081
======== ====== ======= ========
</TABLE>
F-66
<PAGE> 125
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
---------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
government corporations and agencies........... $ 4,165 $182 $ 23 $ 4,324
Corporate securities............................. 36,770 99 653 36,216
Mortgage-backed securities....................... 1,328 38 -- 1,366
------- ---- ---- -------
Total.......................................... $42,263 $319 $676 $41,906
======= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
AVAILABLE FOR SALE COST GAINS LOSSES VALUE
------------------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
government corporations and agencies.......... $ 562 $ 38 $ -- $ 600
Obligations of states and political
subdivisions.................................. 3,416 215 -- 3,631
Corporate securities............................ 317,068 9,330 3,340 323,058
Mortgage-backed securities...................... 31,061 1,121 29 32,153
-------- ------- ------ --------
Subtotal -- fixed maturities.................. 352,107 10,704 3,369 359,442
Equity securities............................... 1,278 495 413 1,360
-------- ------- ------ --------
Total......................................... $353,385 $11,199 $3,782 $360,802
======== ======= ====== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
HELD TO MATURITY COST GAINS LOSSES VALUE
---------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
government corporations and agencies........... $ 4,655 $ 594 $-- $ 5,249
Corporate securities............................. 46,618 1,849 1 48,466
Mortgage-backed securities....................... 3,398 306 -- 3,704
------- ------ --- -------
Total.......................................... $54,671 $2,749 $ 1 $57,419
======= ====== === =======
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1999, by contractual maturity, are as follows:
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
AVAILABLE FOR SALE COST FAIR VALUE
------------------ --------- ----------
<S> <C> <C>
Due in one year or.......................................... $ 13,041 $ 13,064
Due after one year through five years....................... 117,657 115,895
Due after five years through ten years...................... 106,214 98,939
Due after ten years......................................... 83,381 76,783
-------- --------
Total..................................................... $320,293 $304,681
======== ========
</TABLE>
F-67
<PAGE> 126
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
HELD TO MATURITY COST FAIR VALUE
---------------- --------- ----------
<S> <C> <C>
Due in one year or less..................................... $ 5,416 $ 5,413
Due after one year through five years....................... 19,961 19,773
Due after five years through ten years...................... 13,993 13,984
Due after ten years......................................... 2,893 2,736
------- --------
Total..................................................... $42,263 $ 41,906
======= ========
</TABLE>
Expected maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Mortgage-backed securities are included based on their
contractual maturity.
Realized (losses) gains on investments for the years ended December 31,
1999, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ -------
<S> <C> <C> <C>
Fixed maturities....................................... $(1,506) $ (292) $ 1,135
Equity securities...................................... (393) (273) (1,360)
Mortgage loans......................................... -- (194) 104
Real estate............................................ -- 2,735 133
Other invested assets.................................. 12 34 57
------- ------ -------
$(1,887) $2,010 $ 69
======= ====== =======
</TABLE>
Net unrealized (depreciation) appreciation on available for sale securities
as of December 31, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Net unrealized (depreciation) appreciation before
adjustments for the following:............................ $(15,444) $ 7,417
Amortization of deferred policy acquisition costs......... 9,545 (3,947)
Deferred Federal income taxes............................. 2,064 (1,215)
-------- -------
Net unrealized (depreciation) appreciation.................. $ (3,835) $ 2,255
======== =======
</TABLE>
F-68
<PAGE> 127
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net investment income, by type of investment, is as follows for the years
ending December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Gross investment income:
Fixed maturities:
Available for sale.................................. $25,413 $25,294 $22,559
Held to maturity.................................... 4,126 4,686 5,692
Equity securities..................................... 2 66 92
Mortgage loans........................................ 5,099 4,485 3,924
Real estate........................................... 183 523 591
Policy loans.......................................... 427 299 214
Cash and cash equivalents............................. 255 431 258
Other, net............................................ 119 781 9
------- ------- -------
35,624 36,565 33,339
Less investment expenses.............................. (748) (1,303) (1,025)
------- ------- -------
Net investment income................................. $34,876 $35,262 $32,314
======= ======= =======
</TABLE>
4. MORTGAGE LOANS
The carrying value of impaired loans was $0 and $2,363, which were net of
reserves of $0 and $474 as of December 31, 1999 and 1998, respectively.
A reconciliation of the reserve balance, including general reserves, for
mortgage loans for 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Balance at January 1........................................ $1,064 $1,170
Provision, net of recoveries................................ (324) 124
Releases due to foreclosures................................ -- (230)
------ ------
Balance at December 31...................................... $ 740 $1,064
====== ======
</TABLE>
The average recorded investment in impaired loans was $1,418 and $2,624
during 1999 and 1998, respectively. Interest income recognized on impaired loans
during 1999, 1998 and 1997 was $124, $237 and $284, respectively. All interest
income on impaired loans was recognized on the cash basis.
5. REAL ESTATE
Real estate totaled $1,794 and $484 as of December 31, 1999 and 1998,
respectively. Depreciation expense was $0, $116 and $113 for the years ended
December 31, 1999, 1998 and 1997, respectively.
F-69
<PAGE> 128
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. DEFERRED POLICY ACQUISITION COSTS
A reconciliation of the deferred policy acquisition cost (DAC) asset for
1999, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- -------
<S> <C> <C> <C>
Balance at January 1,............................... $104,913 $ 83,291 $62,520
Expenses deferred................................... 31,369 35,985 31,404
Amortization of DAC................................. (16,426) (14,804) (9,445)
Effect on DAC from unrealized losses (gains)........ 13,491 441 (1,188)
-------- -------- -------
Balance at December 31,............................. $133,347 $104,913 $83,291
======== ======== =======
</TABLE>
7. FEDERAL INCOME TAXES
The Company is included in a consolidated Federal income tax return with
Provident Mutual. The tax liability is accrued on a separate company basis,
adjusted for an allocation of an equity tax from Provident Mutual.
The provision for Federal income taxes from operations differs from the
normal relationship of Federal income tax to pretax income as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Federal income tax at statutory rate..................... $4,780 $4,198 $4,174
Current year equity tax................................ 817 664 900
True down of prior years' equity tax................... (900) (650) (625)
------ ------ ------
Provision for Federal income tax from operations......... $4,697 $4,212 $4,449
====== ====== ======
</TABLE>
Deferred income tax assets and liabilities reflect the income tax effects
of cumulative temporary differences between the reported values of assets and
liabilities for financial statement purposes and income tax return purposes.
Components of the Company's net deferred income tax liability are as follows at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
DEFERRED TAX LIABILITY
Deferred policy acquisition costs........................... $36,685 $32,648
Net unrealized gain on available for sale securities........ -- 1,215
------- -------
Total deferred tax liability.............................. 36,685 33,863
------- -------
DEFERRED TAX ASSET
Reserves.................................................... 32,505 30,671
Invested assets............................................. 422 353
Policyholder dividends...................................... 203 189
Net unrealized loss on available for sale securities........ 2,065 --
Other....................................................... 244 176
------- -------
Total deferred tax asset.................................. 35,439 31,389
------- -------
Net deferred tax liability.................................. $ 1,246 $ 2,474
======= =======
</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
policyholders designated "Policyholder Surplus" (the Account). The Tax Reform
Act of 1984 eliminated further additions to the Account after December 31,
F-70
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
The Company's Federal income tax returns have been audited through 1995.
All years through 1985 are closed. Years 1986 through 1995 have been audited and
are closed with the exception of several issues for which claims for refund have
been filed. Years 1996 and subsequent remain open. In the opinion of management,
adequate provision has been made for the possible effect of potential
assessments related to prior years' taxes.
8. REINSURANCE
In the normal course of business, the Company assumes risks from and cedes
certain parts of its risks to other insurance companies. The primary purpose of
ceded reinsurance is to limit losses from large exposures. For life insurance,
the Company retains no more than $1,500 on any single life.
Reinsurance contracts do not relieve the Company of its obligations to
policyholders. To the extent that reinsuring companies are later unable to meet
obligations under reinsurance agreements, the Company would be liable for these
obligations. The Company evaluates the financial condition of its reinsurers and
limits its exposure to any one reinsurer.
The tables below highlight 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, 1999
Life insurance in force..................... $3,304,015 $2,454,842 $25,319 $874,492
========== ========== ======= ========
Premiums.................................... $ 18,580 $ 639 $ 90 $ 18,031
========== ========== ======= ========
Future policyholder benefits................ $ 482,673 $ 3,515 $ 1,968 $481,126
========== ========== ======= ========
DECEMBER 31, 1998:
Life insurance in force..................... $2,763,532 $1,980,669 $34,968 $817,831
========== ========== ======= ========
Premiums.................................... $ 13,771 $ 666 $ 164 $ 13,269
========== ========== ======= ========
Future policyholder benefits................ $ 517,625 $ 3,054 $ 2,378 $516,949
========== ========== ======= ========
DECEMBER 31, 1997:
Life insurance in force..................... $2,153,084 $1,591,141 $50,233 $612,176
========== ========== ======= ========
Premiums.................................... $ 14,367 $ 614 $ 151 $ 13,904
========== ========== ======= ========
Future policyholder benefits................ $ 516,591 $ 74,674 $ 3,102 $445,019
========== ========== ======= ========
</TABLE>
On January 1, 1998, the Company terminated its reinsurance agreement with
Metropolitan Life Insurance Company (Metropolitan). Prior to 1998, the Company
had ceded 65 percent of the premiums and reserves related to its single premium
deferred annuity (SPDA) product to Metropolitan. The Company recaptured $71,995
in reserves and received cash totaling $70,140.
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. Pursuant to this agreement, the
Company has no reinsurance recoverables at December 31, 1999 and 1998. Deposits
ceded during 1999 and 1998 were $2,627 and $2,749, respectively.
F-71
<PAGE> 130
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Approximately $1,668,604 and $1,481,828 of the Company's life insurance in
force is ceded to Provident Mutual under two reinsurance agreements and a
modified coinsurance agreement at December 31, 1999 and 1998, respectively.
Premiums and deposits ceded were $4,146 and $4,103 during 1999 and 1998,
respectively. Reinsurance recoverables at December 31, 1999 and 1998 were $132
and $134, respectively.
9. RELATED PARTY TRANSACTIONS
Provident Mutual and its subsidiaries provide certain investment and
administrative services to the Company. Generally, fees for these services are
based on an allocation of costs upon either a specific identification basis or a
proportional cost allocation basis which management believes to be reasonable.
These costs include direct salaries and related benefits, including pension and
other postretirement benefits as well as overhead costs. These costs were
$15,941, $16,581 and $13,964 for 1999, 1998 and 1997, respectively.
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, 1999 and 1998
approximated $73,957 and $81,050, respectively.
10. 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 interests in
mortgage loans, marketable securities lending and interest rate futures
contracts. Those instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the statements of
financial condition.
At December 31, 1999, the Company had outstanding mortgage loan and limited
partnership commitments of approximately $3,768. The mortgage loan commitments,
which expire through December 2000, totaled $3,275 and were issued during 1999
at interest rates consistent with rates applicable on December 31, 1999. As a
result, the fair value of these commitments approximates the face amount.
Derivatives 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. The Company had no hedge activity in 1999. The
Company closed out hedge positions consisting of 226 treasury futures contracts
with a dollar value of $25,727 in 1998. The approximate net losses generated
from the hedge positions were $33 in 1998. There were no open hedge positions at
December 31, 1999 and 1998.
Periodically, the Company enters securities lending agreements to earn
additional investment income on its securities. The borrower must provide cash
collateral prior to or at the inception of the loan. There were no securities
lending positions at December 31, 1999 or 1998.
INVESTMENT PORTFOLIO CREDIT RISK
Bonds
The Company's bond investment portfolio is predominately comprised of
investment grade securities. At December 31, 1999 and 1998, approximately
$34,449 and $23,488, respectively, in debt security investments (9.5% and 5.8%,
respectively, of the total debt security portfolio) are considered "below
investment grade." During 1999, the Company increased its allocation of assets
to "below investment grade" securities. Securities are classified as "below
investment grade" primarily by utilizing rating criteria established by
independent bond rating agencies.
F-72
<PAGE> 131
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Debt security investments with a carrying value at December 31, 1999 of
$600 were non-income producing for the year ended December 31, 1999.
The Company had debt security investments in the financial services
industry at both December 31, 1999 and 1998 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
133% of the original loan value at the time the loan is made.
At December 31, 1999 and 1998, 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 no loans in any state where principal balances in the
aggregate exceeded 20% of the Company's equity.
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, which, in the
opinion of management and legal counsel, will not have a material effect on the
Company's financial position or its results of operations.
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 statements.
Guaranty fund assessments totaled $79, $109 and $236 in 1999, 1998 and 1997,
respectively. Of those amounts, $76, $56 and $117 in 1999, 1998 and 1997,
respectively, are creditable against future years' premium taxes.
F-73
<PAGE> 132
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. COMPREHENSIVE INCOME
The components of other comprehensive income are as follows:
<TABLE>
<CAPTION>
BEFORE TAX
TAX (EXPENSE) NET OF TAX
AMOUNT BENEFIT AMOUNT
---------- --------- ----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Unrealized (depreciation) appreciation on
securities.................................... $(11,256) $ 3,939 $(7,317)
Less: reclassification adjustment for losses
realized in net income........................ 1,887 (660) 1,227
-------- ------- -------
Net change in unrealized (depreciation)
appreciation on securities.................... $ (9,369) $ 3,279 $(6,090)
======== ======= =======
YEAR ENDED DECEMBER 31, 1998:
Unrealized appreciation (depreciation) on
securities.................................... $ 1,081 $ (378) $ 703
Less: reclassification adjustment for gains
realized in net income........................ (2,010) 703 (1,307)
-------- ------- -------
Net change in unrealized (depreciation)
appreciation on securities.................... $ (929) $ 325 $ (604)
======== ======= =======
YEAR ENDED DECEMBER 31, 1997:
Unrealized appreciation (depreciation) on
securities.................................... $ 3,088 $(1,081) $ 2,007
Less: reclassification adjustment for gains
realized in net income........................ (69) 24 (45)
-------- ------- -------
Net change in unrealized appreciation
(depreciation) on securities.................. $ 3,019 $(1,057) $ 1,962
======== ======= =======
</TABLE>
F-74
<PAGE> 133
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 Subaccounts. 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 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 or smoker 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 guaranteed Premiums
Expense Charge assumes a 2% Premium Tax Charge. However, certain states may
impose higher premium taxes. For those Policies, the Death Benefit, Policy
Account Value, and Net Cash Surrender Value would be lower since the guaranteed
Premium Expense Charge would be higher. 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 2.0%, 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 1.48% and 1.73%, respectively. This total charge is
based on an assumption that an Owner allocates the Policy values equally among
each Subaccount of the Separate Account.
These asset charges reflect an investment advisory fee of 0.67% which
represents an average of the fees incurred by the Portfolios during the most
recent fiscal year and expenses of 0.16% which is based on an average of the
actual expenses incurred by the Portfolios during the most recent fiscal year.
For certain Portfolios, certain expenses were reimbursed or fees waived during
1999. It is anticipated that expense reimbursement and fee waiver arrangements
will continue past the current year. Absent the expense reimbursement, the 1999
Total Annual Expenses would have been 1.21% for the Market Street Fund All Pro
Small Cap Value Portfolio, 0.57% for the VIP Fund Equity-Income Portfolio, 0.66%
for the VIP Fund Growth Portfolio, 0.91% for the VIP Fund Overseas Portfolio,
0.63% for the VIP II Fund Asset Manager Portfolio, 0.67% for the VIP II Fund
Contrafund(R) Portfolio, 1.17% for the Strong Mid Cap Growth Fund II, and 3.23%
for the Van Eck Worldwide Real Estate Portfolio. Similar expense reimbursement
and fee waiver arrangements were also in place for the other Portfolios and it
is anticipated that such arrangements will continue past the current year.
However, no expenses were reimbursed or fees waived during 1999 for these
Portfolios because the level of actual expenses and fees never exceeded the
thresholds at which the reimbursement and waiver arrangements would have become
operative. In the event that any expense reimbursement or fee waiver arrangement
is
A-1
<PAGE> 134
not continued in future years, the expenses incurred by the Portfolios will be
greater than otherwise would be the case.
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> 135
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 (NET RATE OF -1.73%) CURRENT (NET RATE OF -1.48%)
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 1,612 692 100,000 1,871 951 100,000
4 4,526 2,096 1,106 100,000 2,440 1,450 100,000
5 5,802 2,553 1,493 100,000 2,981 1,921 100,000
6 7,142 2,979 1,849 100,000 3,491 2,361 100,000
7 8,549 3,373 2,373 100,000 3,976 2,976 100,000
8 10,027 3,734 2,984 100,000 4,434 3,684 100,000
9 11,578 4,061 3,561 100,000 4,869 4,369 100,000
10 13,207 4,351 4,101 100,000 5,291 5,041 100,000
11 14,917 4,602 4,602 100,000 5,684 5,684 100,000
12 16,713 4,808 4,808 100,000 6,043 6,043 100,000
13 18,599 4,964 4,964 100,000 6,365 6,365 100,000
14 20,579 5,065 5,065 100,000 6,647 6,647 100,000
15 22,657 5,103 5,103 100,000 6,883 6,883 100,000
16 24,840 5,072 5,072 100,000 7,200 7,200 100,000
17 27,132 4,965 4,965 100,000 7,483 7,483 100,000
18 29,539 4,778 4,778 100,000 7,733 7,733 100,000
19 32,066 4,505 4,505 100,000 7,948 7,948 100,000
20 34,719 4,134 4,134 100,000 8,128 8,128 100,000
25 50,113 309 309 100,000 8,407 8,407 100,000
30 69,760 0 0 0 7,095 7,095 100,000
</TABLE>
- ---------------
* These values reflect investment results using guaranteed cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
** These values reflect investment results using current cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
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> 136
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 (NET RATE OF 4.17%) CURRENT (NET RATE OF 4.43%)
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 1,050 607 0 100,000 696 0 100,000
2 2,153 1,223 373 100,000 1,407 557 100,000
3 3,310 1,849 929 100,000 2,132 1,212 100,000
4 4,526 2,481 1,491 100,000 2,870 1,880 100,000
5 5,802 3,120 2,060 100,000 3,620 2,560 100,000
6 7,142 3,764 2,634 100,000 4,381 3,251 100,000
7 8,549 4,410 3,410 100,000 5,158 4,158 100,000
8 10,027 5,058 4,308 100,000 5,951 5,201 100,000
9 11,578 5,705 5,205 100,000 6,764 6,264 100,000
10 13,207 6,348 6,098 100,000 7,609 7,359 100,000
11 14,917 6,986 6,986 100,000 8,470 8,470 100,000
12 16,713 7,613 7,613 100,000 9,343 9,343 100,000
13 18,599 8,221 8,221 100,000 10,226 10,226 100,000
14 20,579 8,805 8,805 100,000 11,116 11,116 100,000
15 22,657 9,356 9,356 100,000 12,009 12,009 100,000
16 24,840 9,866 9,866 100,000 13,027 13,027 100,000
17 27,132 10,328 10,328 100,000 14,066 14,066 100,000
18 29,539 10,735 10,735 100,000 15,127 15,127 100,000
19 32,066 11,078 11,078 100,000 16,211 16,211 100,000
20 34,719 11,344 11,344 100,000 17,318 17,318 100,000
25 50,113 10,891 10,891 100,000 23,187 23,187 100,000
30 69,760 4,842 4,842 100,000 29,316 29,316 100,000
</TABLE>
- ---------------
* These values reflect investment results using guaranteed cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
** These values reflect investment results using current cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
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> 137
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 (NET RATE OF 10.06%) CURRENT (NET RATE OF 10.34%)
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 1,547 697 100,000
3 3,310 2,106 1,186 100,000 2,416 1,496 100,000
4 4,526 2,917 1,927 100,000 3,356 2,366 100,000
5 5,802 3,790 2,730 100,000 4,372 3,312 100,000
6 7,142 4,729 3,599 100,000 5,472 4,342 100,000
7 8,549 5,740 4,740 100,000 6,669 5,669 100,000
8 10,027 6,827 6,077 100,000 7,972 7,222 100,000
9 11,578 7,998 7,498 100,000 9,398 8,898 100,000
10 13,207 9,259 9,009 100,000 10,970 10,720 100,000
11 14,917 10,618 10,618 100,000 12,687 12,687 100,000
12 16,713 12,081 12,081 100,000 14,561 14,561 100,000
13 18,599 13,652 13,652 100,000 16,606 16,606 100,000
14 20,579 15,340 15,340 100,000 18,839 18,839 100,000
15 22,657 17,152 17,152 100,000 21,277 21,277 100,000
16 24,840 19,098 19,098 100,000 24,057 24,057 100,000
17 27,132 21,188 21,188 100,000 27,112 27,112 100,000
18 29,539 23,439 23,439 100,000 30,475 30,475 100,000
19 32,066 25,865 25,865 100,000 34,182 34,182 100,000
20 34,719 28,483 28,483 100,000 38,272 38,272 100,000
25 50,113 45,198 45,198 100,000 66,200 66,200 100,000
30 69,760 71,448 71,448 100,000 112,827 112,827 130,880
</TABLE>
- ---------------
* These values reflect investment results using guaranteed cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
** These values reflect investment results using current cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
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-5
<PAGE> 138
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 (NET RATE OF -1.73%) CURRENT (NET RATE OF -1.48%)
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 1,050 562 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 1,861 941 101,861
4 4,526 2,080 1,090 102,080 2,424 1,434 102,424
5 5,802 2,528 1,468 102,528 2,957 1,897 102,957
6 7,142 2,944 1,814 102,944 3,456 2,326 103,456
7 8,549 3,326 2,326 103,326 3,927 2,927 103,927
8 10,027 3,673 2,923 103,673 4,370 3,620 104,370
9 11,578 3,983 3,483 103,983 4,788 4,288 104,788
10 13,207 4,252 4,002 104,252 5,189 4,939 105,189
11 14,917 4,481 4,481 104,481 5,558 5,558 105,558
12 16,713 4,662 4,662 104,662 5,891 5,891 105,891
13 18,599 4,789 4,789 104,789 6,182 6,182 106,182
14 20,579 4,858 4,858 104,858 6,430 6,430 106,430
15 22,657 4,860 4,860 104,860 6,628 6,628 106,628
16 24,840 4,790 4,790 104,790 6,913 6,913 106,913
17 27,132 4,640 4,640 104,640 7,160 7,160 107,160
18 29,539 4,409 4,409 104,409 7,369 7,369 107,369
19 32,066 4,089 4,089 104,089 7,542 7,542 107,542
20 34,719 3,670 3,670 103,670 7,674 7,674 107,674
25 50,113 0 0 0 7,662 7,662 107,662
30 69,760 0 0 0 5,953 5,953 105,953
</TABLE>
- ---------------
* These values reflect investment results using guaranteed cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
** These values reflect investment results using current cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
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-6
<PAGE> 139
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 (NET RATE OF 4.17%) CURRENT (NET RATE OF 4.43%)
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 1,050 606 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 2,121 1,201 102,121
4 4,526 2,462 1,472 102,462 2,851 1,861 102,851
5 5,802 3,090 2,030 103,090 3,590 2,530 103,590
6 7,142 3,719 2,589 103,719 4,335 3,205 104,335
7 8,549 4,347 3,347 104,347 5,093 4,093 105,093
8 10,027 4,971 4,221 104,971 5,861 5,111 105,861
9 11,578 5,589 5,089 105,589 6,645 6,145 106,645
10 13,207 6,198 5,948 106,198 7,453 7,203 107,453
11 14,917 6,794 6,794 106,794 8,270 8,271 108,270
12 16,713 7,369 7,369 107,369 9,091 9,091 109,091
13 18,599 7,917 7,917 107,917 9,912 9,912 109,912
14 20,579 8,429 8,429 108,429 10,728 10,728 110,728
15 22,657 8,895 8,895 108,895 11,533 11,533 111,533
16 24,840 9,306 9,306 109,306 12,465 12,465 112,465
17 27,132 9,651 9,651 109,651 13,404 13,404 113,404
18 29,539 9,923 9,923 109,923 14,351 14,351 114,351
19 32,066 10,110 10,110 110,110 15,304 15,304 115,304
20 34,719 10,199 10,199 110,199 16,261 16,261 116,261
25 50,113 8,461 8,461 108,461 20,999 20,999 120,999
30 69,760 580 580 100,580 24,948 24,948 124,948
</TABLE>
- ---------------
* These values reflect investment results using guaranteed cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
** These values reflect investment results using current cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
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> 140
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 (NET RATE OF 10.06%) CURRENT (NET RATE OF 10.34%)
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 2,093 1,173 102,093 2,404 1,484 102,404
4 4,526 2,894 1,904 102,894 3,333 2,343 103,333
5 5,802 3,753 2,693 103,753 4,335 3,275 104,335
6 7,142 4,671 3,541 104,671 5,413 4,283 105,413
7 8,549 5,654 4,654 105,654 6,581 5,581 106,581
8 10,027 6,706 5,956 106,706 7,847 7,097 107,847
9 11,578 7,830 7,330 107,830 9,225 8,725 109,225
10 13,207 9,031 8,781 109,031 10,735 10,485 110,735
11 14,917 10,313 10,313 110,313 12,373 12,373 112,373
12 16,713 11,678 11,678 111,678 14,147 14,147 114,147
13 18,599 13,127 13,127 113,127 16,067 16,067 116,067
14 20,579 14,661 14,661 114,661 18,143 18,143 118,143
15 22,657 16,281 16,281 116,281 20,386 20,386 120,386
16 24,840 17,986 17,986 117,986 22,955 22,955 122,955
17 27,132 19,777 19,777 119,777 25,754 25,754 125,754
18 29,539 21,659 21,659 121,659 28,807 28,807 128,807
19 32,066 23,631 23,631 123,631 32,139 32,139 132,139
20 34,719 25,692 25,692 125,692 35,777 35,777 135,777
25 50,113 37,071 37,071 137,071 59,647 59,647 159,647
30 69,760 48,853 48,853 148,853 96,483 96,483 196,483
</TABLE>
- ---------------
* These values reflect investment results using guaranteed cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
** These values reflect investment results using current cost of insurance
rates, mortality and expense risk, premium expense and administrative
charges.
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-8
<PAGE> 141
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.
REPRESENTATION OF REASONABLENESS
Providentmutual Life and Annuity Company of America hereby represents that
the fees and charges deducted under the Policy, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred, and
the risks assumed by Providentmutual Life and Annuity Company of America.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of 138 pages.
The undertaking to file reports.
Rule 484 undertaking.
II-1
<PAGE> 142
Representations pursuant to Rule 6e-3(T).
The signatures.
The following exhibits:
<TABLE>
<S> <C> <C>
1.A.1.a. Resolution of the Board of Directors of Providentmutual Life
and Annuity Company of America authorizing establishment of
the Providentmutual Variable Life Separate Account(4)
1.A.1.b. Resolution of the Board of Directors of Providentmutual Life
and Annuity Company of America authorizing additional
Subaccounts of the Providentmutual Variable Life Separate
Account(4)
1.A.1.c. Resolution of the Board of Directors of Providentmutual Life
and Annuity Company of America authorizing additional
Subaccounts of the Providentmutual Variable Life Separate
Account(5)
1.A.2. None
1.A.3.a.i. Form of Underwriting Agreement among Providentmutual Life
and Annuity Company of America, PML Securities, Inc. and
Providentmutual Variable Life Separate Account(4)
1.A.3.b.i. Personal Producing General Agent's Agreement and
Supplement(4)
1.A.3.b.ii. Personal Producing Agent's Agreement and Supplement(4)
1.A.3.b.iii Producing General Agent's Agreement and Supplement(4)
1.A.3.c.i. Personal Producing General Agent's Commission Schedule(4)
1.A.3.c.ii. Personal Producing Agent's Commission Schedule(4)
1.A.3.c.iii Producing General Agent's Commission Schedule(4)
1.A.3.c.iv. Form of Selling Agreement between PML Securities, Inc. and
Broker/Dealers(4)
1.A.4. Inapplicable
1.A.5. Individual Flexible Premium Adjustable Variable Life
Insurance Policy (PLC134 & PLC134A)(4)
1.A.5.a. Convertible Term Life Rider (PLC308)(4)
1.A.5.e. Extension of Final Policy Date Rider (PLC822)(4)
1.A.5.f. Change of Insured Rider (PLC905)(4)
1.A.5.g. Disability Waiver Benefit Rider (PLC907)(4)
1.A.6.a. Charter of Providentmutual Life and Annuity Company of
America(1)
1.A.6.b. By-Laws of Providentmutual Life and Annuity Company of
America(1)
1.A.7. Inapplicable
1.A.8. Inapplicable
1.A.9. Inapplicable
1.A.10. Form of Application(5)
1.A.10.a. Supplemental Application for Flexible Premium(3)
1.A.10.b. Initial Allocation Selection(3)
2. See Exhibits 1.A.
3.A. Consent of James G. Potter, Jr., Esquire
3.B. Consent of Sutherland Asbill & Brennan LLP
4. Inapplicable
5. Inapplicable
6. Consent of Scott V. Carney, FSA, MAAA
7. Consent of PricewaterhouseCoopers, LLP
8. Description of Providentmutual Life and Annuity Company of
America's Issuance, Transfer and Redemption Procedures for
Policies(5)
9. Powers of Attorney(5)
10.A. Participation Agreement among Market Street Fund, Inc.,
Providentmutual Life and Annuity Company of America and PML
Securities, Inc.(1)
</TABLE>
II-2
<PAGE> 143
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<S> <C> <C>
10.B. Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors
Corporation and Providentmutual Life and Annuity Company of America(4)
10.C. Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors
Corporation and Providentmutual Life and Annuity Company of America(4)
10.D. Form of Fund Participation Agreement among Neuberger & Berman Advisers Management Trust,
Advisers Managers Trust and Providentmutual Life and Annuity Company of America(1)
10.E. Participation Agreement between TCI Portfolios, Inc. and Providentmutual Life and Annuity
Company of America(1)
10.F. Participation Agreement between Van Eck Investment Trust and Providentmutual Life and Annuity
Company of America(1)
10.G. Participation Agreement among The Alger American Fund, Providentmutual Life and Annuity
Company of America and Fred Alger and Company Incorporated(4)
10.H. Support Agreement between Provident Mutual Life Insurance Company and Providentmutual Life
and Annuity Company of America(1)
10.I. Form of Participation Agreement between Strong Opportunity Fund II, Inc., Strong Variable
Insurance Funds, Inc. and Providentmutual Life and Annuity Company of America(5)
27. Inapplicable
</TABLE>
- ---------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 5 filed on
May 1, 1998, File No. 33-65512.
(2) Incorporated herein by reference to Post-Effective Amendment No. 18 filed on
May 1, 1998, File No. 33-2625.
(3) Incorporated herein by reference to Post-Effective Amendment No. 11 filed on
May 1, 1998, File No. 33-42133.
(4) Incorporated herein by reference to Post-Effective Amendment No. 4 filed on
May 1, 1998, File No. 33-83138.
(5) Incorporated herein by reference to Post-Effective Amendment No. 2 filed on
April 24, 2000, File No. 333-67775.
II-3
<PAGE> 144
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
PROVIDENTMUTUAL VARIABLE LIFE SEPARATE ACCOUNT, CERTIFIES THAT IT MEETS THE
REQUIREMENTS OF SECURITIES ACT RULE 485(b) FOR EFFECTIVENESS OF THIS
REGISTRATION STATEMENT AND HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 6
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL
IN THE COUNTY OF NEW CASTLE, STATE OF DELAWARE, ON THE 24TH DAY OF APRIL, 2000.
PROVIDENTMUTUAL VARIABLE LIFE
SEPARATE ACCOUNT (Registrant)
By: PROVIDENTMUTUAL LIFE AND
ANNUITY COMPANY OF AMERICA
(DEPOSITOR)
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<S> <C>
Attest: /s/ JAMES G. POTTER, JR. By: /s/ ROBERT W. KLOSS
- --------------------------------------------- ---------------------------------------------
JAMES G. POTTER, JR. ROBERT W. KLOSS
President
PROVIDENTMUTUAL LIFE AND ANNUITY
Company of America (Depositor)
Attest: /s/ JAMES G. POTTER, JR. By: /s/ ROBERT W. KLOSS
- --------------------------------------------- ---------------------------------------------
JAMES G. POTTER, JR. ROBERT W. KLOSS
President
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PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT NO. 6 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED
BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON APRIL 24, 2000.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ ROBERT W. KLOSS Director and President (Principal Executive
- ------------------------------------------------ Officer)
ROBERT W. KLOSS
/s/ STEPHEN L. WHITE Vice President and Actuary (Principal Financial
- ------------------------------------------------ Officer)
STEPHEN L. WHITE
/s/ MICHAEL FUNK Financial Reporting Officer (Principal Accounting
- ------------------------------------------------ Officer)
MICHAEL FUNK
* Vice President and Actuary
- ------------------------------------------------
SCOTT V. CARNEY
* Director
- ------------------------------------------------
MARY LYNN FINELLI
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<PAGE> 145
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ JAMES G. POTTER, JR. Director, Secretary and Legal Officer
- ------------------------------------------------
JAMES G. POTTER, JR.
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<PAGE> 146
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<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
* Director
- ------------------------------------------------
JAMES D. KESTNER
* Director
- ------------------------------------------------
SARAH C. LANGE
* Director, Vice President and Actuary
- ------------------------------------------------
ALAN F. HINKLE
* Director and Vice President
- ------------------------------------------------
JOAN C. TUCKER
* Director
- ------------------------------------------------
MEHRAN ASSADI
* Director
- ------------------------------------------------
LINDA M. SPRINGER
* Treasurer
- ------------------------------------------------
ROSANNE GATTA
*By: /s/ JAMES G. POTTER, JR.
------------------------------------------
James G. Potter, Jr.
Attorney-in-fact pursuant to
Power of Attorney
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<PAGE> 147
EXHIBIT INDEX
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<CAPTION>
EXHIBITS
--------
<S> <C> <C>
3.A. Consent of James G. Potter, Jr., Esquire
3.B. Consent of Sutherland Asbill & Brennan LLP
6. Consent of Scott V. Carney, FSA, MAAA
7. Consent of PricewaterhouseCoopers, LLP
</TABLE>
<PAGE> 1
Exhibit 3.A.
[PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA LETTERHEAD]
April 24, 2000
Providentmutual Life and Annuity Company of America
300 Continental Drive
Newark, DE 19713
Directors:
I hereby consent to the reference to my name under the caption "Legal Matters"
in the Prospectus filed as part of the Post-Effective Amendment No. 6 of the
Registration Statement on Form S-6 (File No. 33-83138) for the Providentmutual
Variable Life Separate Account.
Sincerely,
/s/ James G. Potter, Jr.
- -------------------------------------
James G. Potter, Jr., Legal Officer
<PAGE> 1
Exhibit 3.B.
[Sutherland Asbill & Brennan LLP Letterhead]
April 24, 2000
Board of Directors
Providentmutual Life and Annuity Company of America
300 Continental Drive
Newark, DE 19173
Re: Providentmutual Life and Annuity Company of America
Providentmutual Variable Life Separate Account
File No. 33-83138
Directors:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of the
Post-Effective Amendment No. 6 of 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.
Sincerely,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ Stephen E. Roth
--------------------------------
Stephen E. Roth
<PAGE> 1
Exhibit 6.
[PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA LETTERHEAD]
April 24, 2000
Providentmutual Life and Annuity Company of America
300 Continental Drive
Newark, DE 19713
Directors:
I hereby consent to the reference to my name under the caption "Experts" in the
Prospectus filed as part of the Post-Effective Amendment No. 6 of the
Registration Statement on Form S-6 (File No. 33-83138) for the Providentmutual
Variable Life Separate Account.
Sincerely,
/s/ Scott V. Carney
- ----------------------------------
Scott V. Carney, FSA, MAAA Actuary
<PAGE> 1
Exhibit 7
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion, in this Post-Effective Amendment No. 6 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 7, 2000 on our audits of the financial
statements of Providentmutual Life and Annuity Company of America as of
December 31, 1999 and 1998 and for each of the three years in the period
ended December 31, 1999.
2. Our report dated February 23, 2000 on our audits of the financial
statements of the Providentmutual Variable Life Separate Account
(comprising twenty-eight subaccounts) as of December 31, 1999 and for
each of the three years in the period ended December 31, 1999.
We also consent to the reference to our Firm under the caption "Experts".
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
April 24, 2000
