<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2000.
REGISTRATION NO. 33-36073
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 13 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 14 [X]
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(Exact Name of Registrant)
Peoples Benefit Life Insurance Company
(Name of Depositor)
4333 Edgewood Road NE Cedar Rapids, Iowa 52499
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (319) 297-8121
Peoples Benefit Life Insurance Company
Gregory E. Miller-Breetz, Esquire
P.O. Box 32830
400 West Market Street
Louisville, KY 40232
(Name and Address of Agent for Service)
Copy to:
Michael Berenson, Esquire
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson St. N.W. Suite 400 E
Washington, DC 20007-0805
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] On April 30, 2000 pursuant to paragraph (b)(1)(v) of Rule 485.
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[_] On pursuant to paragraph (a)(1) of Rule 485.
[_] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
[_] On pursuant to paragraph (a)(2) of Rule 485.
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<PAGE>
PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B
(STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION
STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
<TABLE>
<CAPTION>
ITEM OF
FORM N-4 PROSPECTUS CAPTION
<C> <S> <C>
1. Cover Page........................ Cover Page
2. Definitions....................... Glossary
3. Synopsis.......................... Summary; Fee Table
4. Condensed Financial Information... Condensed Financial Information
5. General Description of Registrant,
Depositor, and Portfolio
Companies......................... Peoples Benefit Life Insurance
Company; Peoples Benefit Life
Insurance Company; Separate
Account IV; Vanguard Variable
Insurance Fund; Voting Rights
6. Deductions and Expenses........... Expenses; Taxes;
Vanguard Variable Insurance Fund
7. General Description of Variable
Annuity Contracts................. The Annuity Contract
8. Annuity Period.................... Annuity Payments
9. Death Benefit..................... Death Benefit
10. Purchases and Contract Value...... Application and Purchase
Payments; Accumulated Value
11. Redemptions....................... Access to Your Money
12. Taxes............................. Taxes
13. Legal Proceedings................. Legal Matters
14. Table of Contents for the
Statement of Additional
Information....................... Table of Contents for the
Vanguard Variable Annuity Plan
Contract Statement of Additional
Information
PART B
<CAPTION>
ITEM OF STATEMENT OF ADDITIONAL
FORM N-4 INFORMATION CAPTION
<C> <S> <C>
15. Cover Page........................ Cover Page
16. Table of Contents................. Table of Contents
17. General Information and History... The Company
18. Services.......................... Part A: Auditors; Safekeeping of
Account Assets; Distribution of
the Contract
19. Purchase of Securities Being
Offered........................... Distribution of the Contract
20. Underwriters...................... Distribution of the Contract
21. Calculation of Performance Data... Performance Information;
Additional Performance Measures
22. Annuity Payments.................. Computations of Variable Annuity
Income Payments
23. Financial Statements.............. Financial Statements
</TABLE>
<PAGE>
VANGUARD VARIABLE ANNUITY PLAN CONTRACT
Prospectus
April 30, 2000
Issued Through Peoples Benefit Life Insurance Company Separate Account IV By
Peoples Benefit Life Insurance Company
The Vanguard Variable Annuity Plan Contract (the "Contract") provides a means of
investing on a tax-deferred basis in thirteen portfolios of Vanguard Variable
Insurance Fund
MONEY MARKET PORTFOLIO
HIGH-GRADE BOND PORTFOLIO
HIGH YIELD BOND PORTFOLIO
SHORT-TERM CORPORATE PORTFOLIO
BALANCED PORTFOLIO
DIVERSIFIED VALUE PORTFOLIO
EQUITY INCOME PORTFOLIO
EQUITY INDEX PORTFOLIO
GROWTH PORTFOLIO
MID-CAP INDEX PORTFOLIO
REIT INDEX PORTFOLIO
SMALL COMPANY GROWTH PORTFOLIO
INTERNATIONAL PORTFOLIO
THE CONTRACT IS INTENDED FOR RETIREMENT SAVINGS OR OTHER LONG-TERM INVESTMENT
PURPOSES. YOU BEAR ALL INVESTMENT RISK (INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL), AND INVESTMENT RESULTS ARE NOT GUARANTEED. THE CONTRACT PROVIDES A
FREE LOOK PERIOD OF AT LEAST 10 DAYS (20 DAYS OR MORE IN SOME INSTANCES) DURING
WHICH THE CONTRACT MAY BE CANCELLED.
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WHY READING THIS PROSPECTUS IS IMPORTANT
This prospectus explains the Vanguard Variable Annuity Plan Contract. Reading
the Contract prospectus will help you decide whether the Contract is the right
investment for you. The Contract prospectus must be accompanied by a current
prospectus for Vanguard Variable Insurance Fund, which discusses in greater
depth the objectives, risks, and strategies of each portfolio of Vanguard
Variable Insurance Fund. Please read them both carefully before you invest and
keep them for future reference. A Statement of Additional Information for the
Contract prospectus has been filed with the Securities and Exchange Commission,
is incorporated by reference, and is available free by writing to the Vanguard
Variable Annuity Center, P.O. Box 1105, Valley Forge, PA 19482-1105 or by
calling 1-800-522-5555 on business days between 8 a.m. and 8 p.m. Eastern time.
The Table of Contents for the Statement of Additional Information is included at
the end of the Contract prospectus.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE CONTRACT IS AVAILABLE IN ALL STATES EXCEPT NEW YORK.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION WHERE IT
WOULD BE UNLAWFUL TO MAKE AN OFFERING LIKE THIS. NO ONE HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS ABOUT THIS OFFERING OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY ON ANY OTHER INFORMATION
OR REPRESENTATIONS.
<TABLE>
<CAPTION>
Contents
<S><C>
1 CROSS REFERENCE TO DEFINITIONS
2 SUMMARY
4 FEE TABLE
6 EXAMPLE
6 THE ANNUITY CONTRACT
7 ANNUITY PAYMENTS
9 PURCHASE
12 INVESTMENT OPTIONS
15 EXPENSES
16 TAXES
19 ACCESS TO YOUR MONEY
20 PERFORMANCE
20 DEATH BENEFIT
22 OTHER INFORMATION
25 TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL
INFORMATION
26 APPENDIX (CONDENSED
FINANCIAL INFORMATION)
</TABLE>
<PAGE>
1
CROSS REFERENCE TO DEFINITIONS
We have generally defined the technical terms associated with the Contract where
they are used in the prospectus. The following list shows where certain of the
more technical and more frequently used terms are defined in the prospectus. In
the text you can easily locate the defined word because it will appear in BOLD
type or its definition will be covered in a space on the page set aside
specifically for discussion of the term.
<TABLE>
<CAPTION>
<S> <C>
Accumulated Value 12
Accumulation Phase 7
Accumulation Unit 12
Accumulation Unit Value 12
Annuitant 20,21
Annuity Date 7
Annuity Payment Options 8
Beneficiary(ies) 20,21
Business Day 9
Contract 6
Contract Date 10
Contract Owner 22
Free Look Period 22
Income Phase 7
Initial Purchase Payment 9
Joint Annuitant 21
Net Purchase Payment 10
Non-Qualified Contract 6
Qualified Contract 10
Portfolios 12
Premium Tax 10
Purchase Payment 10
Tax Deferral 16
</TABLE>
<PAGE>
2
SUMMARY
The sections in this Summary provide you with a concise discussion of the major
topics covered in this prospectus. Each section of the Summary is discussed in
greater detail in the main body of the prospectus at corresponding section
headings. Please read the full prospectus carefully.
THE ANNUITY CONTRACT
The Vanguard Variable Annuity Plan Contract is a flexible-premium multi-funded
variable annuity offered by Peoples Benefit Life Insurance Company (the
"Company"). The Contract provides a means of investing on a tax-deferred basis
in thirteen portfolios of Vanguard Variable Insurance Fund ("Portfolios").
WHO SHOULD INVEST
The Contract is intended for long-term investors who want tax-deferred
accumulations of funds, generally for retirement but also for other long-term
purposes.
The Contract provides benefits in two distinct phases: accumulation and income.
THE ACCUMULATION PHASE
During the Accumulation Phase, you choose to allocate your investment in the
Contract among the thirteen Vanguard Portfolios available under the Contract.
You can contribute additional dollars to the Contract and you can take
withdrawals from the Contract during the Accumulation Phase. The value of your
investment depends on the investment performance of the Portfolios you choose.
Your earnings are generally not taxed during this phase unless you withdraw
them.
THE INCOME PHASE
During the Income Phase, you can receive regular annuity payments on a fixed or
variable basis and for various periods of time depending on your need for income
and the choices available under the Contract. See ANNUITY PAYMENTS, page 7, for
more information about Annuity Payment Options.
VANGUARD VARIABLE INSURANCE FUND
The Portfolios available for investment under the Contract are portfolios of
Vanguard Variable Insurance Fund (the "Fund"), an open-end diversified
investment company. The Fund is a member of The Vanguard Group of Investment
Companies, a family of more than 35 investment companies with more than 100
distinct investment portfolios holding assets worth more than $530 billion.
ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide range
of Annuity Payment Options. The Contract allows you to receive an income
guaranteed for as long as you live or until the second of two people dies. You
may also choose to receive a guaranteed number of payments over a number of
years. Most Annuity Payment Options are available on either a variable basis
(where the amount of the payment rises or falls depending on the investment
performance of the Portfolios you have chosen) or a fixed basis (where the
payment amount is guaranteed).
PURCHASE
You can buy the Contract with a minimum investment of $5,000 under most
circumstances. You can add $250 or more at any time during the Accumulation
Phase. The total of all your Purchase Payments in the Contract may not exceed
$1,000,000 without prior approval from the Company.
INVESTMENT OPTIONS
You can allocate your Purchase Payments to one or more of the following
Portfolios described in the Fund prospectus:
Managed by Vanguard's Fixed Income Group
Money Market Portfolio
High-Grade Bond Portfolio
Short-Term Corporate Portfolio
Managed by Vanguard's Core Management Group
Equity Index Portfolio
Mid-Cap Index Portfolio
REIT Index Portfolio
<PAGE>
3
Managed by Wellington Management Company, LLP
High Yield Bond Portfolio
Balanced Portfolio
Managed by Newell Associates
Equity Income Portfolio
Managed by Barrow, Hanley, Mewhinney & Strauss, Inc.
Diversified Value Portfolio
Managed by Lincoln Capital Management Company
Growth Portfolio
Managed by Granahan Investment Management, Inc.
Small Company Growth Portfolio
Managed by Schroder Investment Management North America Inc.
International Portfolio
YOU CAN MAKE OR LOSE MONEY IN ANY OF THESE PORTFOLIOS DEPENDING ON THEIR
INVESTMENT PERFORMANCE.
EXPENSES
There are no sales charges or sales loads associated with the Contract.
The Company will deduct a daily charge corresponding to an annual charge of
0.10% of the net asset value of the Separate Account as an Administrative
Expense Charge and an annual charge of 0.27% for the mortality and expense risks
assumed by the Company. For Contracts valued at less than $25,000, there is also
a $25 Annual Contract Maintenance Fee.
You will also pay Fund Operating Expenses, which currently range from 0.18% to
0.49% annually of the average daily value of the Portfolios.
TAXES
In general, you are not taxed on earnings on your investment in the Contract
until you withdraw them or receive Annuity Payments. Earnings are taxed as
ordinary income. During the Accumulation Phase, for tax purposes withdrawals are
taken from earnings first, then from your investment in the Contract. If you
receive money from the Contract before age 591/2, you may have to pay a 10%
federal penalty tax on the earnings portion received. During the Income Phase,
payments come partially from earnings, partially from your investment. You are
taxed only on the earnings portion of each Annuity Payment.
ACCESS TO YOUR MONEY
You can take money out of your Contract at any time during the Accumulation
Phase without incurring a withdrawal charge. Each withdrawal you make must be at
least $250. You may have to pay income tax and a tax penalty on any money you
take out.
PERFORMANCE
The investment performance of the Portfolios you choose directly affects the
value of your Contract. You bear all investment risk (including the possible
loss of principal), and investment results are not guaranteed.
From time to time, the Company may advertise the investment performance of the
Portfolios. In doing so, it will use standardized methods prescribed by the
Securities and Exchange Commission, as well as certain non-standardized methods.
Past performance does not indicate or predict future performance.
DEATH BENEFIT
If the Annuitant dies during the Accumulation Phase, the Beneficiary will
receive the Death Benefit. The Death Benefit is the greater of the then-current
Accumulated Value of the Contract or the sum of all Purchase Payments (less any
partial withdrawals and any applicable Premium Taxes). The Beneficiary may elect
to receive these amounts as a lump sum or as Annuity Payments.
Federal tax law requires that if a Contract Owner is a natural person and dies
before the Annuity Date, then the entire value of the Contract must be
distributed within five years of the date of death of the Contract Owner.
Special rules may apply to a surviving spouse. If the Contract Owner is not a
natural person, the death of the primary Annuitant triggers the same
distribution requirement.
<PAGE>
4
OTHER INFORMATION
FREE LOOK PERIOD
The Contract provides for a Free Look Period of at least 10 days after the
Contract Owner receives the Contract (20 or more days in some instances as
specified in your Contract) plus 5 days for mailing. If you cancel your Contract
during the Free Look Period, the Company will return the greater of the Purchase
Payments received under the Contract or the Accumulated Value of the Contract as
of the day the Company receives the Contract, except in Pennsylvania, where the
Contract Owner will receive the Accumulated Value whether or not it exceeds
Purchase Payments made under the Contract.
PEOPLES BENEFIT LIFE INSURANCE COMPANY
Peoples Benefit Life Insurance Company is a life insurance company incorporated
under Iowa law. It is principally engaged in offering life insurance and annuity
contracts.
PEOPLES BENEFIT LIFE INSURANCE COMPANY SEPARATE ACCOUNT IV
The Separate Account IV (the "Separate Account") is a unit investment trust
registered with the Securities and Exchange Commission and operating under Iowa
law. The Separate Account has thirteen Subaccounts, each of which invests solely
in a corresponding Portfolio of the Fund.
OTHER TOPICS
Additional information on the topics summarized above and on other topics not
summarized here can be found at OTHER INFORMATION, page 22.
INQUIRIES AND CONTRACT AND POLICYHOLDER INFORMATION
For more information about the Vanguard Variable Annuity Plan Contract, call
1-800-522-5555 or write:
REGULAR MAIL: OVERNIGHT OR CERTIFIED MAIL:
Vanguard Variable Annuity Center Vanguard Variable Annuity Center
P.O. Box 1105 100 Vanguard Boulevard
Valley Forge, PA 19482-1105 Malvern, PA 19355
If you have questions about your Contract, please telephone the Vanguard
Variable Annuity Center at 1-800-462-2391. Please have ready the Contract number
and the Contract Owner's name when you call. As Contract Owner, you will receive
periodic statements confirming any transactions that take place as well as
quarterly statements and an annual report.
FEE TABLE
The following Fee Table illustrates all expenses that you would incur as a
Contract Owner. The expenses and fees shown are for the Fund's 1999 fiscal year.
The purpose of this Fee Table is to assist you in understanding the various
costs and expenses that you would pay directly or indirectly as a purchaser of
the Contract. The Fee Table reflects all expenses for both the Separate Account
and the Fund. For a complete discussion of contract costs and expenses, see
EXPENSES, page 15.
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OWNER TRANSACTION EXPENSES SEPARATE ACCOUNT
- -------------------------------------------------------------------------------
Sales Load Imposed on Purchases None
Surrender Fees None
Exchange Fees None
Annual Contract Maintenance Fee* $25
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* Applies to Contracts valued at less than $25,000 at the time of initial
purchase and on the last Business Day of each calendar year.
- -------------------------------------------------------------------------------
ANNUAL SEPARATE ACCOUNT EXPENSES (as a percentage of average account value)
SEPARATE ACCOUNT
- -------------------------------------------------------------------------------
Mortality and Expense Risk Charge** 0.27%
Administrative Expense Charge 0.10
----------------
TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES 0.37%
- -------------------------------------------------------------------------------
** This charge is based on the combined net assets of the Separate Account and
Separate Account B of the Company's affiliate, AUSA Life Insurance Company,
Inc., in the Fund, according to the following schedule:
<PAGE>
5
NET ASSETS RATE FOR ALL ASSETS
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Up to $2.5 billion 0.30%
Over $2.5 billion and up to $5 billion 0.28
Over $5 billion 0.27
- --------------------------------------------------------------------------------
The charge is currently 0.27%. See EXPENSES, page 15, for more information.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES during the fiscal year ended September 30, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
HIGH- HIGH SHORT-
MONEY GRADE YIELD TERM DIVERSIFIED EQUITY
MARKET BOND BOND CORPORATE BALANCED VALUE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Management & Administrative
Expenses 0.15% 0.18% 0.20% 0.18% 0.19% 0.19% 0.21%
Investment Advisory Fees 0.01 0.01 0.06 0.01 0.08 0.13 0.10
12b-1 Distribution Fees None None None None None None None
Other Expenses
Distribution Costs 0.03 0.01 0.02 0.01 0.01 0.01 0.01
Miscellaneous Expenses 0.01 0.03 0.01 0.07 0.01 0.04 0.01
------------------------------------------------------------------------------------------
Total Other Expenses 0.04 0.04 0.03 0.08 0.02 0.05 0.02
------------------------------------------------------------------------------------------
TOTAL FUND OPERATING
EXPENSES 0.20% 0.23% 0.29% 0.27% 0.29% 0.37% 0.33%
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES
- ---------------------------------------------------------------------------------------------------------------------------------
Total Separate Account Expenses 0.37% 0.37% 0.37% 0.37% 0.37% 0.37% 0.37%
Total Fund Operating Expenses 0.20 0.23 0.29 0.27 0.29 0.37 0.33
------------------------------------------------------------------------------------------
GRAND TOTAL, SEPARATE
ACCOUNT AND FUND
OPERATING EXPENSES 0.57% 0.60% 0.66% 0.64% 0.66% 0.74% 0.70%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES during the fiscal year ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL
EQUITY MID-CAP REIT COMPANY
INDEX GROWTH INDEX INDEX GROWTH INTERNATIONAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management & Administrative Expenses 0.15% 0.18% 0.16% 0.08% 0.30% 0.25%
Investment Advisory Fees 0.01 0.15 0.03 0.07 0.16 0.13
12b-1 Distribution Fees None None None None None None
Other Expenses
Distribution Costs 0.01 0.01 0.01 0.01 0.01 0.01
Miscellaneous Expenses 0.01 0.01 0.04 0.11 0.02 0.07
------------------------------------------------------------------------------
Total Other Expenses 0.02 0.02 0.05 0.12 0.03 0.08
------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 0.18% 0.35% 0.24% 0.27% 0.49% 0.46%
- --------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES
- --------------------------------------------------------------------------------------------------------------------------
Total Separate Account Expenses 0.37% 0.37% 0.37% 0.37% 0.37% 0.37%
Total Fund Operating Expenses 0.18 0.35 0.24 0.27 0.49 0.46
------------------------------------------------------------------------------
GRAND TOTAL, SEPARATE ACCOUNT AND
FUND OPERATING EXPENSES 0.55% 0.72% 0.61% 0.64% 0.86% 0.83%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
AUTOMATED QUOTES
The Vanguard Tele-Account Service provides access to Accumulation Unit Values
(to six decimal places) and total returns for all Portfolios, and yield
information for the Money Market, High-Grade Bond, High Yield Bond, and the
Short-Term Corporate Portfolios of the Fund. Contract Owners may use this
service for 24-hour access to Portfolio information. To access the ser-
<PAGE>
6
vice you may call Tele-Account at 1-800-662-6273 (ON-BOARD) and follow the
step-by-step instructions, or speak with a Vanguard Variable Annuity Center
associate at 1-800-522-5555 to request a brochure that explains how to use the
service.
Vanguard's website also has Accumulation Unit Values (to six decimal places)
for all Portfolios. This service can be accessed from www.vanguard.com by
double-clicking on fund prices.
EXAMPLE
The following example illustrates the expenses that you would incur on a $1,000
purchase payment over various periods, assuming (1) a 5% annual rate of return
and (2) full surrender at the end of each period. The Contract imposes no
surrender fees of any kind. Your expenses are identical whether you continue the
Contract or withdraw the entire value of your Contract at the end of the
applicable period as a lump sum or under one of the Contract's Annuity Payment
Options.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Portfolio $6 $18 $32 $ 72
High-Grade Bond Portfolio 6 19 33 75
High Yield Bond Portfolio 7 21 37 83
Short-Term Corporate Portfolio 7 21 36 81
Balanced Portfolio 7 21 37 83
Diversified Value Portfolio 8 24 42 93
Equity Income Portfolio 7 23 40 88
Equity Index Portfolio 6 18 31 69
Growth Portfolio 7 23 40 90
Mid-Cap Index Portfolio 6 20 34 76
REIT Index Portfolio 7 21 36 81
Small Company Growth Portfolio 9 28 48 107
International Portfolio 9 27 47 103
------------------------------------------------------------------------
</TABLE>
The Annual Contract Maintenance Fee is reflected in this example as a
percentage equal to the total amount of fees collected during a year divided by
the total average net assets of the Portfolios during the same year. The fee is
assumed to remain the same in each year of the above periods. The fee is
prorated to reflect only the remaining portion of the calendar year of purchase.
Thereafter, the fee is deducted on the last Business Day of the year for the
following year, on a pro rata basis, from each of the Portfolios you have
chosen. For a complete discussion of Contract costs and expenses, see EXPENSES,
page 15.
YOU SHOULD NOT CONSIDER THIS EXAMPLE TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE
SHOWN, SUBJECT TO THE GUARANTEES IN THE CONTRACT.
CONDENSED FINANCIAL INFORMATION
Please note that the Appendix contains a history of accumulation unit values in
a table labeled "Condensed Financial Information."
THE ANNUITY CONTRACT
The Vanguard Variable Annuity Plan Contract is a flexible-premium multi-funded
variable annuity offered by Peoples Benefit Life Insurance Company (the
"Company"). The CONTRACT provides a means of investing on a tax-deferred basis
in various portfolios (the "Portfolios") offered by Vanguard Variable
Insurance Fund. You may purchase a Contract using after-tax dollars (a
NON-QUALIFIED CONTRACT), or you may purchase a Qualified Contract by "rolling
over" funds from another individual retirement annuity or from a qualified
plan.
WHO SHOULD INVEST
The Contract is intended for long-term investors who want tax-deferred
accumulation of funds, generally for retirement but also for other long-term
investment purposes. The tax-deferred feature of the Contract is most attractive
to investors in high federal and state marginal tax brackets who have exhausted
other avenues of tax deferral, such as pre-tax contributions to employer-
sponsored retirement or savings plans. The tax-deferred feature of the Contract
is unnecessary when the Contract is purchased to fund a qualified plan.
<PAGE>
7
ABOUT THE CONTRACT
The Vanguard Variable Annuity Plan Contract is a contract between you, the
Contract Owner, and the Company, the issuer of the Contract.
The Contract provides benefits in two distinct phases: accumulation and
income.
ACCUMULATION PHASE
The ACCUMULATION PHASE starts when you purchase your Contract and ends
immediately before the Annuity Date, when the Income Phase starts. During the
Accumulation Phase, you choose to allocate your investment in the Contract among
the thirteen available Portfolios. The Contract is a variable annuity because
the value of your investment in the Portfolios can go up or down depending on
the investment performance of the Portfolios you choose. The Contract is a
flexible-premium annuity because you can make additional investments of at least
$250 until the Income Phase begins. During this phase, you are generally not
taxed on earnings from amounts invested unless you withdraw them.
Other benefits available during the Accumulation Phase include the ability
to:
. Make exchanges among your Portfolio choices at no charge and without
current tax consequences. (See EXCHANGES AMONG THE PORTFOLIOS, page 13.)
. Withdraw all or part of your money with no surrender penalty charged by the
Company, although you may incur income taxes and a 10% penalty tax prior to
age 59 1/2. (See FULL AND PARTIAL WITHDRAWALS, page 19.)
INCOME PHASE
During the INCOME PHASE, you receive regular annuity payments. The amount of
these payments is based in part on the amount of money accumulated under your
Contract (its Accumulated Value) and the Annuity Payment Option you select. The
Annuity Payment Options are explained at ANNUITY PAYMENTS, below.
At your election, payments can be either variable or fixed. If variable,
the payments rise or fall depending on the investment performance of the
Portfolios you choose. If fixed, the payment amounts are guaranteed.
Annuity payments are available in a wide variety of options, including
payments over a specified period or for life (for either a single life or joint
lives), with or without a guaranteed number of payments.
THE SEPARATE ACCOUNT
When you purchase a Contract, your money is deposited into the Company's
Separate Account IV (the "Separate Account"). The Separate Account contains a
number of Subaccounts that invest exclusively in shares of the corresponding
Portfolios. The investment performance of each Subaccount is linked directly to
the investment performance of one of the Portfolios. Assets in the Separate
Account belong to the Company but are accounted for separately from the
Company's other assets and can be used only to satisfy its obligations to
Contract Owners.
VANGUARD VARIABLE INSURANCE FUND
The Portfolios available for investment under the Contract are portfolios of
Vanguard Variable Insurance Fund, an open-end diversified investment company
intended exclusively as an investment vehicle for variable annuity and variable
life insurance contracts offered by insurance companies. The Fund is a member of
The Vanguard Group of Investment Companies, a family of more than 35 investment
companies with more than 100 distinct investment portfolios holding assets worth
more than $530 billion. Through their jointly owned subsidiary, The Vanguard
Group, Inc., Vanguard Variable Insurance Fund and the other funds in the group
obtain at cost virtually all of their corporate management, administrative,
shareholder accounting, and distribution services.
ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide range
of Annuity Payment Options.
STARTING THE INCOME PHASE
As Contract Owner, you exercise control over when the Income Phase begins by
specifying an Annuity Date on the Application when you purchase the Contract.
The ANNUITY DATE is the date on which annuity payments begin and is always the
first day of the month you specify. You may also change the Annuity Date at any
time in writing, as long as the Annuitant or Joint Annuitant is living and the
Company receives the request at least 30 days before the then-scheduled Annuity
Date. Any Annuity Date you request must be at least 30 days from the day the
Company receives written notice of it. The latest possible Annuity Date the
Company will accept without prior approval is the first day of the month after
the Annuitant's 85th birthday.
<PAGE>
8
If you do not specify an Annuity Date, either on the Application or by
written request, your Annuity Date will be the first day of the month after ten
full years from the date of your Contract or the first day of the month after
the Annuitant's 65th birthday, whichever is later.
The Annuity Date for Qualified Contracts may also be controlled by
endorsements, the plan, or applicable law.
ANNUITY PAYMENT OPTIONS
The income you take from the Contract during the Income Phase can take several
different forms, depending on your particular needs. Except for the Designated
Period Annuity Option listed below, the Annuity Payment Options listed below are
available on either a variable basis or a fixed basis.
If available on a variable basis, the Annuity Payment Options provide
payments that, after the initial payment, will go up or down depending on the
investment performance of the Portfolios you choose.
If available on a fixed basis, the Annuity Payment Options provide payments
in an amount that does not change. If you choose a fixed Annuity Payment Option,
the Company will move your investment out of the Portfolios and into the general
account of the Company.
. LIFE ANNUITY--Monthly Annuity Payments are paid for the life of an
Annuitant, ending with the last payment before the Annuitant dies.
. JOINT AND LAST SURVIVOR ANNUITY--Monthly Annuity Payments are paid for as
long as at least one of two named Annuitants is living, ending with the
last payment before the surviving Annuitant dies.
. LIFE ANNUITY WITH PERIOD CERTAIN--Monthly Annuity Payments are paid for as
long as the Annuitant lives, with payments guaranteed to be made for a
period of at least 10 years, 15 years, or 20 years, as elected. If the
Annuitant dies before the period certain ends, the Company will make any
remaining payments to the Beneficiary.
. INSTALLMENT OR UNIT REFUND LIFE ANNUITY--Available as either a fixed
(Installment Refund) or variable (Unit Refund) Annuity Payment Option.
Monthly Annuity Payments are paid for the life of an Annuitant, with a
period certain determined by dividing the Accumulated Value by the first
Annuity Payment. If the Annuitant dies before the period certain ends, the
Company will make any remaining payments to the Beneficiary.
. DESIGNATED PERIOD ANNUITY--Available only on a fixed basis. Monthly Annuity
Payments are paid for a specified period, which may be from 10 to 30 years.
CALCULATING ANNUITY PAYMENTS
FIXED ANNUITY PAYMENTS. Each fixed Annuity Payment is guaranteed to be at least
the amount shown in the Contract's Annuity Tables corresponding to the Annuity
Payment Option selected.
VARIABLE ANNUITY PAYMENTS. To calculate variable Annuity Payments, the Company
determines the amount of the first variable Annuity Payment. The first variable
Annuity Payment will equal the amount shown in the applicable Annuity Table in
the Contract. This amount depends on the Accumulated Value of your Contract on
the Annuity Date, the sex and age of the Annuitant (and Joint Annuitant where
there is one), the Annuity Payment Option selected, and any applicable Premium
Taxes. Subsequent variable Annuity Payments depend on the investment experience
of the Portfolios chosen. If the actual net investment experience of the
Portfolios chosen exactly equals the Assumed Interest Rate of 4%, then the
variable Annuity Payments will not change in amount. If the actual net
investment experience of the Portfolios chosen is greater than the Assumed
Interest Rate of 4%, then the variable Annuity Payments will increase. On the
other hand, they will decrease if the actual experience is lower. The Statement
of Additional Information contains a more detailed description of the method of
calculating variable Annuity Payments.
IMPACT OF ANNUITANT'S AGE ON ANNUITY PAYMENTS. For either fixed or variable
Annuity Payments involving life income, the actual ages of the Annuitant and
Joint Annuitant will affect the amount of each payment. Since payments based on
the lives of older Annuitants and Joint Annuitants are expected to be fewer in
number, the amount of each Annuity Payment will be greater.
IMPACT OF ANNUITANT'S SEX ON ANNUITY PAYMENTS. For either fixed or variable
Annuity Payments involving life income, the sex of the Annuitant and Joint
Annuitant will affect the amount of each payment. Since payments based on the
lives of male Annuitants and Joint Annuitants are expected to be fewer in
number, in most states the amount of each Annuity Payment will be greater than
for female Annuitants and Joint Annuitants.
IMPACT OF LENGTH OF PAYMENT PERIODS ON ANNUITY PAYMENTS. The value of all
payments, both fixed and variable, will be greater for shorter guaranteed
periods than for longer guaranteed periods, and greater for single-life
annuities than for joint and survivor annuities, because they are expected to be
made for a shorter period.
<PAGE>
9
A FEW THINGS TO KEEP IN MIND REGARDING
ANNUITY PAYMENTS
. If an Annuity Payment Option is not selected, the Company will assume that
you chose the Life Annuity With Period Certain option (with 10 years of
payments guaranteed) on a variable basis.
. The minimum payment is $100 ($20 for Contracts issued to South Carolina,
Texas, and Massachusetts residents). If on the Annuity Date your
Accumulated Value is below $5,000 (or $2,000 for Contracts issued to South
Carolina, Texas, and Massachusetts residents), the Company reserves the
right to pay that amount to you in a lump sum.
. From time to time, the Company may require proof that the Annuitant, Joint
Annuitant, or Contract Owner is living.
. If someone has assigned ownership of a Contract to you, or if a non-natural
person (e.g., a corporation) owns a Contract, you may not start the Income
Phase of the Contract without the Company's consent.
. At the time the Company calculates your fixed Annuity Payments, the Company
may offer more favorable rates than those guaranteed in the Annuity Tables
found in the Contract.
. Once Annuity Payments begin, you may not select a different Annuity Payment
Option. Nor may you cancel an Annuity Payment Option after Annuity Payments
have begun.
. If you have selected a variable Annuity Payment Option, you may change the
Portfolios funding the variable Annuity Payments by written request or by
calling the Vanguard Variable Annuity Center at 1-800-462-2391. However,
because excessive exchanges can potentially disrupt the management of the
Portfolios and increase transaction costs, exchange activity is limited to
two substantive "round trips" through the Portfolios (except the Money
Market Portfolio) during any 12-month period. A "round trip" is a
redemption from a Portfolio followed by a purchase back into the Portfolio
within 30 days. Also, "round trip" covers transactions accomplished by any
combination of methods, including transactions conducted by check, wire, or
exchange to or from another Vanguard fund. "Substantive" means a dollar
amount that The Vanguard Group, Inc. determines, in its sole discretion,
could adversely affect the management of the Fund.
. You may select an Annuity Payment Option and allocate a portion of the
value of your Contract to a fixed version of that Annuity Payment Option
and a portion to a variable version of that Annuity Payment Option
(assuming the Annuity Payment Option is available on both a fixed and
variable basis). You may not select more than one Annuity Payment Option.
nIf you choose an Annuity Payment Option and the postal or other delivery
service is unable to deliver checks to the Payee's address of record, no
interest will accrue on amounts represented by uncashed Annuity Payment
checks. It is the Payee's responsibility to keep the Company informed of
the Payee's most current address of record.
. Variable Annuity Payments are calculated on the 10th Business Day prior to
the first day of the following month.
PURCHASE
APPLICATION AND ISSUANCE OF CONTRACTS
CONTRACT ISSUANCE. To invest in the Vanguard Variable Annuity Plan Contract, you
should send a completed Application and your INITIAL PURCHASE PAYMENT to the
Vanguard Variable Annuity Center. The Company will issue a Contract only if the
Annuitant and Joint Annuitant are 75 years of age or less.
If the Application is received in good order, the Company will issue the
Contract and will credit the Initial Purchase Payment within two Business Days
after receipt. A BUSINESS DAY is any day that the New York Stock Exchange is
open for trading.
If the Company cannot credit the Initial Purchase Payment because the
Application is incomplete, the Company will contact the applicant in writing,
explain the reason for the delay, and refund the Initial Purchase Payment within
five Business Days unless the applicant consents to the Company's retaining the
Initial Purchase Payment and crediting it as soon as the necessary requirements
are fulfilled.
In order to prevent lengthy processing delays caused by the clearing of
foreign checks, the Company will accept only those foreign checks that are drawn
in U.S. dollars and are issued by a foreign bank with a U.S. correspondent bank.
You may purchase a Qualified Contract only in connection with a "rollover"
of funds from another qualified plan or individual retirement annuity. Qualified
Contracts contain certain other restrictive provisions limiting the timing of
payments to and distributions from the Qualified Contract. (See QUALIFIED
INDIVIDUAL RETIREMENT ANNUITIES, page 18.)
<PAGE>
10
DEFINITION
QUALIFIED CONTRACT
When the term "Qualified Contract" is used in this prospectus we mean a
Contract that qualifies as an individual retirement annuity under Section
408(b) of the Internal Revenue Code. There are other types of qualified
annuity contracts defined under different Internal Revenue Code sections,
but we are not referring to those in this prospectus.
PURCHASE PAYMENTS
A PURCHASE PAYMENT is any amount you use to buy or add to the Contract. A
Purchase Payment may be reduced by any applicable Premium Tax or an initial
Annual Contract Maintenance Fee. In that case, the resulting amount is called a
NET PURCHASE PAYMENT.
A FEW THINGS TO KEEP IN MIND REGARDING
PURCHASE PAYMENTS
. The minimum Initial Purchase Payment for a Contract is $5,000.
. The Company will not accept third-party checks for Purchase Payments.
. You may make additional Purchase Payments at any time during the
Accumulation Phase and while the Annuitant or Joint Annuitant, if
applicable, is living. Additional Purchase Payments must be at least
$250.
. Additional Purchase Payments received before the close of the New York
Stock Exchange (usually 4 p.m. Eastern time) are credited to the
Contract's Accumulated Value as of the close of business that same
day.
. The minimum amount that you can allocate to any one Portfolio is
$1,000.
. The total of all Purchase Payments may not exceed $1,000,000 without
prior approval from the Company.
The date on which the Initial Purchase Payment is credited to the Contract
value is called the CONTRACT DATE.
DEFINITION
PREMIUM TAX
A Premium Tax is a regulatory tax some states assess on the Purchase
Payments made into a Contract. If the Company should have to pay any
Premium Tax, it will be deducted from each Purchase Payment or from the
Accumulated Value as the Company incurs the tax.
As of the date of this Prospectus, the following state assesses a Premium
Tax on all Initial and subsequent Purchase Payments:
QUALIFIED NON-QUALIFIED
--------- -------------
South Dakota 0.00% 1.25%
As of the date of this Prospectus, the following states assess a Premium
Tax against the Accumulated Value if the Contract Owner chooses an Annuity
Payment Option instead of receiving a lump sum distribution:
<TABLE>
<CAPTION>
QUALIFIED NON-QUALIFIED
--------- -------------
<S> <C> <C>
California 0.50% 2.35%
Maine 0.00 2.00
Nevada 0.00 3.50
West Virginia 1.00 1.00
Wyoming 0.00 1.00
</TABLE>
PURCHASING BY WIRE
MONEY SHOULD BE WIRED FIRST UNION NATIONAL BANK
TO: ABA 031201467
DEPOSIT ACCOUNT NUMBER 2014126521732
PEOPLES BENEFIT LIFE INSURANCE COMPANY and
THE VANGUARD GROUP, INC.
[YOUR CONTRACT NUMBER]
[YOUR CONTRACT REGISTRATION]
PLEASE CALL 1-800-462-2391 BEFORE WIRING.
<PAGE>
11
Please be sure your bank includes your Contract number to assure proper
receipt.
If you would like to wire your Initial Purchase Payment, you should
complete the Vanguard Variable Annuity Plan Application and mail it to the
Vanguard Variable Annuity Center, P.O. Box 1105, Valley Forge, PA 19482-1105,
prior to completing wire arrangements.
Note that the Company will accept Federal Funds wire purchase orders only
when the New York Stock Exchange and Custodian Bank are open for business.
ANNUITY EXPRESS/TM/
The Annuity Express service allows you to make additional Purchase Payments by
transferring funds automatically from your checking or statement savings account
(not passbook savings account) to one or more Portfolios on a monthly,
quarterly, semi-annual, or annual basis. You may add to existing Portfolios
provided you have a minimum balance of $1,000. The minimum automatic purchase is
$50; the maximum is $100,000.
SECTION 1035 EXCHANGES
Under Section 1035 of the Internal Revenue Code, you may exchange the assets of
an existing annuity contract or life insurance or endowment policy to the
Vanguard Variable Annuity Plan Contract without any current tax consequences. To
make a "1035 Exchange," complete a 1035 Exchange form and mail it along with
your signed and completed Application and your current contract, to the Vanguard
Variable Annuity Center.
To accommodate owners of Vanguard Variable Annuity Plan Contracts, under
certain conditions the Company will allow for the consolidation of two or more
Vanguard Variable Annuity Plan Contracts into one Contract. In order to provide
Contract Owners with consolidated account reporting, the Company will accept
these exchanges on a case-by-case basis. If applicable, you will be responsible
for only one Annual Contract Maintenance Fee. Under no circumstances will the
Company allow the exchange of an existing Vanguard Variable Annuity Plan
Contract for an identical new Vanguard Variable Annuity Plan Contract.
Because special rules and procedures apply to 1035 Exchanges, particularly
if the Contract being exchanged was issued prior to August 14, 1982, you should
consult a tax adviser before making a 1035 Exchange.
Please note that any outstanding loans you may have on a contract you wish
to exchange may create a current tax consequence. For this reason we encourage
you to settle any outstanding loans with your current insurance company before
initiating a 1035 Exchange into a Vanguard Variable Annuity Plan Contract.
ALLOCATION OF PURCHASE PAYMENTS
You specify on the Application what portion of your Purchase Payments you want
to be allocated among which Portfolios. You may allocate your Purchase Payments
to one or more Portfolios. All allocations you make must be in whole-number
percentages and must be at least 10% of your Contract's Accumulated Value and
$1,000. Your Initial Net Purchase Payment will be immediately allocated among
the Portfolios in the percentages you specified on your Application without
waiting for the Free Look Period to pass.
Should your investment goals change, you may change the allocation
percentages for additional Net Purchase Payments by sending written notice to
the Vanguard Variable Annuity Center. The change will take effect on the date
the Company receives your written notice. You may sign the appropriate section
of the Application to establish an option that allows you to give allocation
instructions by telephone. See TELEPHONE EXCHANGES, page 14.
<PAGE>
12
WHAT'S MY CONTRACT WORTH TODAY?
ACCUMULATED VALUE
The ACCUMULATED VALUE of your Contract is the value of all amounts
accumulated under the Contract during the Accumulation Phase (similar to
the current market value of a mutual fund account). When the Contract is
opened, the Accumulated Value is equal to your initial Net Purchase
Payment. On any Business Day thereafter, the Accumulated Value equals the
Accumulated Value from the previous Business Day.
plus:
. Any additional Net Purchase Payments credited
. Any increase in the Accumulated Value due to investment results of the
Portfolio(s) you selected
minus:
. Any decrease in the Accumulated Value due to investment results of the
Portfolio(s) you selected
. The daily Mortality and Expense Risk Charge
. The daily Administrative Expense Charge
. The Annual Contract Maintenance Fee, if applicable
. Any withdrawals
. Any Premium Taxes that occur during the Valuation Period.
The VALUATION PERIOD is any period between two successive Business Days
beginning at the close of business of the first Business Day and ending at
the close of business of the next Business Day. You should expect the
Accumulated Value of your Contract to change from Valuation Period to
Valuation Period, reflecting the investment experience of the Portfolios
you have selected as well as the daily deduction of charges.
An ACCUMULATION UNIT is a measure of your ownership interest in the
Contract during the Accumulation Phase. When you allocate your Net Purchase
Payments to a selected Portfolio, the Company will credit a certain number
of Accumulation Units to your Contract. The Company determines the number
of Accumulation Units it credits by dividing the dollar amount you have
allocated to a Portfolio by the ACCUMULATION UNIT VALUE for that Portfolio
as of the end of the Valuation Period in which the payment is received.
Each Portfolio has its own Accumulation Unit Value (similar to the share
price (net asset value) of a mutual fund). The Accumulation Unit Value
varies each Valuation Period with the net rate of return of the Portfolio.
The net rate of return reflects the performance of the Portfolio for the
Valuation Period and is net of asset charges to the Portfolio. Per
Portfolio, the Accumulated Value equals the number of Accumulation Units
multiplied by the Accumulation Unit Value for that Portfolio.
All dividends and capital gains earned will be reinvested and reflected in
the Accumulation Unit Value. Only in this way can these earnings remain
tax-deferred.
INVESTMENT OPTIONS
VANGUARD VARIABLE INSURANCE FUND
The Vanguard Variable Annuity Plan Contract offers you a means of investing in
thirteen PORTFOLIOS of Vanguard Variable Insurance Fund. A brief description of
each Portfolio is given below. For more detailed information regarding the
Portfolios, you should read the prospectus for Vanguard Variable Insurance Fund
that accompanies the Contract prospectus.
The general public may invest in the Portfolios of Vanguard Variable
Insurance Fund only through certain insurance contracts. The investment
objectives and policies of the Portfolios may be similar to those of publicly
available Vanguard funds or portfolios. You should not expect that the
investment results of any publicly available Vanguard funds or portfolios will
be comparable to those of the Portfolios.
. THE MONEY MARKET PORTFOLIO seeks to provide current income consistent with
the preservation of capital and liquidity. The Portfolio also seeks to
maintain a stable net asset value of $1 per share. The Portfolio invests
primarily in high-quality money market instruments issued by financial
institutions, non-financial corporations, the U.S. government, state and
municipal governments and their agencies or instrumentalities, as well as
repurchase agreements collateralized by such securities. The Portfolio also
invests in Eurodollar obligations (dollar-denominated obligations issued
outside the U.S. by foreign banks or foreign branches of domestic banks)
and Yankee obligations (dollar-denominated obligations issued in the U.S.
by foreign banks). An investment in the Portfolio is not insured or
guaranteed by the FDIC or any other government agency. Although the
Portfolio seeks to preserve the value of your investment at $1 per share,
it is possible to lose money by investing in the Portfolio. Vanguard's
Fixed Income Group serves as this Portfolio's investment adviser.
<PAGE>
13
. THE HIGH-GRADE BOND PORTFOLIO seeks to parallel the investment results of
the Lehman Brothers Aggregate Bond Index. The Portfolio invests primarily
in a diversified portfolio of U.S. government and corporate bonds and
mortgage-backed securities. Vanguard's Fixed Income Group serves as this
Portfolio's investment adviser.
. THE HIGH YIELD BOND PORTFOLIO seeks to provide a high level of current
income by investing in lower-rated debt securities, which may be regarded
as having speculative characteristics and are commonly referred to as "junk
bonds." Under normal circumstances, at least 80% of the Portfolio's assets
will be invested in high-yield corporate debt obligations rated at least B
by Moody's Investors Service, Inc. or Standard & Poor's Corporation or, if
unrated, of comparable quality as determined by the Portfolio's adviser,
Wellington Management Company.
. THE SHORT-TERM CORPORATE PORTFOLIO seeks to provide a high level of income
by investing primarily in high-quality, short-term bonds issued by
corporations. Vanguard's Fixed Income Group serves as this Portfolio's
investment adviser.
. THE BALANCED PORTFOLIO seeks the conservation of capital, while providing
moderate income, and moderate long-term growth of capital and income. The
Portfolio invests in a diversified portfolio of common stocks and bonds,
with common stocks expected to represent 60% to 70% of the Portfolio's
total assets and bonds to represent 30% to 40%. Wellington Management
Company serves as this Portfolio's investment adviser.
. THE DIVERSIFIED VALUE PORTFOLIO seeks to provide long-term growth of
capital and a moderate level of dividend income by investing primarily in
common stocks of large and medium-sized companies whose stocks the adviser
considers to be undervalued and out of favor with investors. Such "value"
stocks typically have above-average dividend yields and/or below-average
prices in relation to such financial measures as earnings, book value, and
cash flow. Barrow, Hanley, Mewhinney & Strauss, Inc. serves as this
Portfolio's investment adviser.
. THE EQUITY INCOME PORTFOLIO seeks to provide a high level of current income
by investing principally in dividend-paying equity securities. Newell
Associates serves as this Portfolio's investment adviser.
. THE EQUITY INDEX PORTFOLIO seeks to provide long-term growth of capital by
attempting to match the performance of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), which contains the stocks of 500 of the
largest domestic companies. Vanguard's Core Management Group serves as this
Portfolio's investment adviser.
. THE GROWTH PORTFOLIO seeks to provide long-term capital appreciation. The
Portfolio invests primarily in equity securities of seasoned U.S. companies
with above-average prospects for growth. Lincoln Capital Management Company
serves as this Portfolio's investment adviser.
. THE MID-CAP INDEX PORTFOLIO seeks to provide long-term growth of capital by
attempting to match the performance of the Standard & Poor's MidCap 400
Index ("S&P MidCap 400"), which is made up of stocks of medium-sized
companies. Vanguard's Core Management Group serves as this Portfolio's
investment adviser.
. THE REIT INDEX PORTFOLIO seeks to provide a high level of income and
moderate long-term growth of capital by investing in stocks of real estate
investment trusts ("REITs"), which own office buildings, hotels, shopping
centers, and other properties. The Portfolio seeks to match the performance
of the Morgan Stanley REIT Index, a benchmark of U.S. REITs. Vanguard's
Core Management Group serves as this Portfolio's investment adviser.
. THE SMALL COMPANY GROWTH PORTFOLIO seeks to provide long-term growth in
capital by investing primarily in equity securities of small companies
deemed to have favorable prospects for growth. These securities are
primarily common stocks but may also include securities convertible into
common stock. Granahan Investment Management serves as this Portfolio's
investment adviser.
. THE INTERNATIONAL PORTFOLIO seeks to provide long-term capital
appreciation. The Portfolio invests primarily in equity securities of
companies based outside the United States. Schroder Investment Management
North America Inc. serves as this Portfolio's investment adviser.
THERE IS NO ASSURANCE THAT A PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
Additional information regarding the investment objectives and policies of
the Portfolios and the investment advisory services can be found in the current
Fund prospectus accompanying this prospectus.
EXCHANGES AMONG THE PORTFOLIOS
Should your investment goals change, you may exchange money among the Portfolios
of the Fund at no cost, subject to the following conditions:
. You may make requests for exchanges in writing or by telephone. The Company
will process requests it receives prior to the close of regular trading on
the New York Stock Exchange (generally 4 p.m. Eastern time) at the close of
business that same day. Requests received after the close of the New York
Stock Exchange are processed the next Business Day.
. The minimum amount you may exchange from a Portfolio is $250 (unless the
Accumulated Value in a Portfolio is less than $250).
. The $1,000 minimum balance requirement per Portfolio must be satisfied at
all times.
. The Company does not charge a fee for exchanges among the Portfolios.
<PAGE>
14
LIMITATIONS ON
EXCHANGES
Because excessive exchanges can disrupt management of the Fund and increase
the Fund's costs for all Contract Owners, the Fund limits exchanges as
follows:
. You may make no more than TWO SUBSTANTIVE "ROUND TRIPS" THROUGH A
PORTFOLIO (not including the Money Market Portfolio) during any
12-month period.
. The Fund and the Company may refuse an exchange at any time, for any
reason.
. The Company may revoke a Contract Owner's telephone exchange privilege
at any time, for any reason.
A "round trip" is a redemption from a Portfolio followed by a purchase back
into the Portfolio within 30 days. Also, "round trip" covers transactions
accomplished by any combination of methods, including transactions
conducted by check, wire, or exchange to or from another Vanguard fund.
"Substantive" means a dollar amount that The Vanguard Group, Inc.
determines, in its sole discretion, could adversely affect the management
of the Fund.
AUTOMATIC EXCHANGE SERVICE
With the Automatic Exchange Service you can move money automatically among the
Portfolios of the Fund. You can exchange fixed dollar amounts or percentages of
your Portfolio balance into the other Portfolios offered under the Contract on
either a monthly, quarterly, semiannual, or annual basis (provided the $1,000
minimum balance requirement has been met in the Portfolios to which you are
moving money).
The minimum amount you may exchange is $250.
A CLOSER LOOK AT
DOLLAR-COST AVERAGING
Using the Automatic Exchange Service, you can establish exchanges at
regular intervals in a plan of investing often referred to as "dollar-cost
averaging," moving money, for example, from the Money Market Portfolio into
a stock or bond Portfolio. The main objective of Dollar-Cost Averaging is
to shield your investment from short-term price fluctuations. Since the
same dollar amount is transferred to other Portfolios each month, more
Accumulation Units are credited to a Portfolio if the value per
Accumulation Unit is low, while fewer Accumulation Units are credited if
the value per Accumulation Unit is high. Therefore, it is possible to
achieve a lower average cost per Accumulation Unit over the long term if
the Accumulation Unit Value declines over that period. This plan of
investing allows investors to take advantage of market fluctuations but
does not assure a profit or protect against a loss in declining markets.
To take advantage of the Automatic Exchange Service, complete a Vanguard
Variable Annuity Plan Automatic Exchange Service Application Form or send a
letter of instruction to the Vanguard Variable Annuity Center.
You may change the amount to be transferred or cancel this service at any
time in writing or by telephone if you have telephone authorization on your
Contract. This service cannot be used to establish a new Portfolio, and will not
go into effect until the Free Look Period has expired.
TELEPHONE EXCHANGES
You may establish the telephone exchange privilege on your Contract by
completing the appropriate section of the Application or by sending a letter
authorizing the Company to take exchange instructions over the telephone. The
Company, the Fund, and The Vanguard Group, Inc. shall not be responsible for the
authenticity of exchange instructions received by telephone. We will take
reasonable steps to confirm that instructions communicated by telephone are
genuine. Before we act on any telephoned instruction, we will ask the caller for
his or her Contract number and Social Security number. This information will be
verified against the Contract Owner's records and all transactions performed
will be verified with the Contract Owner through a written confirmation
statement. We will record all calls. The Company, the Fund, and The Vanguard
Group, Inc. shall not be liable for any loss, cost, or expense for action on
telephone instructions believed to be genuine in accordance with these
procedures. We will make every effort to maintain the exchange privilege.
However, the Company and the Fund reserve the right to revise or terminate its
provisions, limit the amount of any exchange, or reject any exchange, as deemed
necessary, at any time.
<PAGE>
15
EXPENSES
A CLOSER LOOK AT
THE COSTS OF INVESTING IN A VARIABLE ANNUITY
Costs are an important consideration in choosing a variable annuity. That's
because you, as a contract owner, pay the costs of operating underlying
mutual funds, plus any transaction costs associated with the fund's buying
and selling of securities, as well as the costs associated with the annuity
contract itself. These combined costs can have a significant effect on the
investment performance of the annuity contract. Even seemingly small
differences in mutual fund and annuity contract expenses can, over time,
have a dramatic effect on performance.
The projected expenses for the Vanguard Variable Annuity Plan Contract are
substantially below the costs of other variable annuity contracts. For example,
on a $25,000 Contract the average expense ratio of other variable annuity
contracts was 2.11% as of December 31, 1999, compared to 0.68% for the Vanguard
Variable Annuity Plan Contract as of the date of this prospectus. (Source for
competitors' data: Morningstar Principia Pro for VA/L Subaccounts, December
1999.)
SUMMARY OF COSTS OF INVESTING
IN THE VANGUARD VARIABLE ANNUITY PLAN CONTRACT
. No sales load or sales charge
. No charge to make full or partial withdrawals
. No fee to exchange money among the Portfolios
. $25 Annual Contract Maintenance Fee on Contracts valued at less than
$25,000
. Annual Mortality and Expense Risk Charge: 0.27%
. Annual Administrative Expense Charge: 0.10%
. Fees and expenses paid by the Portfolios which ranged from 0.18% to
0.49% in the fiscal year ended September 30, 1999
A fuller explanation of the expenses you would pay under the Contract
follows.
MORTALITY AND EXPENSE RISK CHARGE
The Company charges a fee as compensation for bearing certain mortality and
expense risks under the Contract. The annual charge is assessed daily based on
the combined net assets of the Separate Account and Separate Account B of the
Company's affiliate, AUSA Life Insurance Company, Inc., in the Fund, according
to the following schedule:
NET ASSETS RATE FOR ALL ASSETS
------------------------------------------------------------------------
Up to $2.5 billion 0.30%
Over $2.5 billion and up to $5 billion 0.28
Over $5 billion 0.27
------------------------------------------------------------------------
The charge is currently 0.27%.
------------------------------------------------------------------------
The mortality and expense risk rates described above cannot be increased.
If the charge is more than sufficient to cover actual costs or assumed risks,
any excess will be added to the Company's surplus. If the charges collected
under the Contract are not enough to cover actual costs or assumed risks, then
the Company will bear the loss.
A CLOSER LOOK AT
THE MORTALITY AND EXPENSE RISK CHARGE
The Company assumes mortality risk in two ways. First, where Contract
Owners elect an Annuity Payment Option under which the Company guarantees a
number of payments over a life or joint lives, the Company assumes the risk
of making monthly annuity payments regardless of how long all Annuitants
may live. Second, the Company assumes mortality risk in guaranteeing a
minimum Death Benefit in the event the Annuitant dies during the
Accumulation Phase.
The expense risk the Company assumes is that the charges for administrative
expenses, which are guaranteed not to increase beyond the rates shown for
the life of the Contract, may not be great enough to cover the actual costs
of issuing and administering the Contract.
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16
ADMINISTRATIVE EXPENSE CHARGE
The Company assesses each Contract an annual ADMINISTRATIVE EXPENSE CHARGE to
cover the cost of issuing and administering each Contract and of maintaining the
Separate Account. The Administrative Expense Charge is assessed daily at a rate
equal to 0.10% annually of the net asset value of the Separate Account.
ANNUAL CONTRACT MAINTENANCE FEE
In certain situations, the Company charges an ANNUAL CONTRACT MAINTENANCE FEE of
$25. The fee is to reimburse the Company for the costs it expects over the life
of the Contract for maintaining each Contract and the Separate Account.
The Company charges the fee if:
. Your Initial Purchase Payment is less than $25,000. In that case, your
Initial Purchase Payment is reduced by a pro rated amount of the $25 fee to
reflect the remaining portion of the calendar year of purchase.
. The Accumulated Value of your Contract is less than $25,000 on the last
Business Day of any year. In that case, the fee will be deducted on the
last Business Day of the year for the following year.
The fee is deducted proportionately from each of the Portfolios you have
selected.
FUND OPERATING EXPENSES
The value of the assets in the Separate Account will reflect the fees and
expenses paid by Vanguard Variable Insurance Fund. A complete description of
these expenses is found in the "Fee Table" section of this prospectus and in
the "Management of the Fund" section of the Fund's Statement of Additional
Information.
TAXES
INTRODUCTION
The following discussion of annuity taxation is general in nature and is based
on the Company's understanding of the treatment of annuity contracts under
current federal income tax law, particularly Section 72 of the Internal Revenue
Code and various Treasury Regulations and Internal Revenue Service
interpretations dealing with Section 72. The discussion does not touch upon
state or local taxes. It is not tax advice. You should consult with a qualified
tax adviser about your particular situation to ensure that your purchase of a
Contract results in the tax treatment you desire. Additional discussion of tax
matters is included in the Statement of Additional Information.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL
Special rules in the Internal Revenue Code for annuity taxation exist today. In
general, those rules provide that you are not currently taxed on increases in
value under a Contract until you take some form of withdrawal or distribution
from it. However, it is important to note that, under certain circumstances, you
might not get the advantage of tax deferral, meaning that the increase in value
would be subject to current federal income tax. (See ANNUITY CONTRACTS OWNED BY
NONNATURAL PERSONS, page 18, and DIVERSIFICATION STANDARDS, page 18.)
A CLOSER LOOK AT
TAX DEFERRAL
Tax deferral means no current tax on earnings in your Contract. The amount
you would have paid in income taxes can be left in the Contract and earn
money for you.
One tradeoff of tax deferral is that there are certain restrictions on your
ability to access your money, including penalty taxes for early
withdrawals. This is one reason why a variable annuity is intended as a
long-term investment.
Another tradeoff is that, when funds are withdrawn, they are taxed at
ordinary income rates instead of capital gains rates, which apply to
certain other sorts of investments.
TAXATION OF FULL AND PARTIAL WITHDRAWALS
If you make a full or partial withdrawal (including a Systematic Withdrawal)
from a Non-Qualified Contract during the Accumulation Phase, you as Contract
Owner will be taxed at ordinary income rates on earnings you withdraw at that
time. For purposes of this rule, withdrawals are taken first from earnings on
the Contract and then from the money you invested in the Contract. This
"investment in the contract" can generally be described as the cost of the
Contract, and it generally includes all Purchase Payments minus any amounts you
have already received under the Contract that represented the return of invested
money. Also for purposes of this rule, a pledge or assignment of a Contract is
treated as a partial withdrawal from a Contract. (If you are contemplating using
your Contract as collateral for a loan, you may be asked to pledge or assign
it.)
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17
TAXATION OF ANNUITY PAYMENTS
When you take Annuity Payments in the Income Phase of a Non-Qualified Contract,
for tax purposes each payment is deemed to return to you a portion of your
investment in the Contract. Since with a Non-Qualified Contract you have already
paid taxes on those amounts (the Contract was funded with after-tax dollars),
you will not be taxed again on your investment--only on your earnings.
For fixed Annuity Payments from a Non-Qualified Contract, in general, the
Company calculates the taxable portion of each payment using a formula known as
the "exclusion ratio." This formula establishes the ratio that the investment in
the Contract bears to the total expected amount of Annuity Payments for the term
of the Contract. The Company then applies that ratio to each payment to
determine the non-taxable portion of the payment. The remaining portion of each
payment is taxable at ordinary income tax rates.
For variable Annuity Payments from a Non-Qualified Contract, in general,
the Company calculates the taxable portion of each payment using a formula that
establishes a specific dollar amount of each payment that is not taxed. To find
the dollar amount, the Company divides the investment in the Contract by the
total number of expected periodic payments. The remaining portion of each
payment is taxable at ordinary income tax rates.
Once your investment in the Contract has been returned, the balance of the
Annuity Payments represent earnings only and therefore are fully taxable.
TAXATION OF WITHDRAWALS AND DISTRIBUTIONS FROM QUALIFIED CONTRACTS
Generally, the entire amount distributed from a Qualified Contract is taxable to
the Contract Owner. In the case of Qualified Contracts with after-tax
contributions, you may exclude the portion of each withdrawal or Annuity Payment
constituting a return of after-tax contributions. Once all of your after-tax
contributions have been returned to you on a non-taxable basis, subsequent
withdrawals or annuity payments are fully taxable as ordinary income. Since the
Company has no knowledge of the amount of after-tax contributions you have made,
you will need to make this computation in the preparation of your federal income
tax return.
TAX WITHHOLDING
Federal tax law requires that the Company withhold federal income taxes on all
distributions unless the recipient elects not to have any amounts withheld and
properly notifies the Company of that election. In certain situations, the
Company will withhold taxes on distributions to non-resident aliens at a flat
30% rate unless an exemption from withholding applies under an applicable tax
treaty.
PENALTY TAXES ON CERTAIN EARLY WITHDRAWALS
The Internal Revenue Code provides for a penalty tax in connection with certain
withdrawals or distributions that are includible in income. The penalty amount
is 10% of the amount includible in income that is received under an annuity.
However, there are exceptions to the penalty tax. For instance, it does not
apply to withdrawals: (i) made after the taxpayer reaches age 591/2 (ii) made on
or after the death of the Contract Owner or, where the Contract Owner is not an
individual, on or after the death of the primary Annuitant (who is defined as
the individual the events in whose life are of primary importance in affecting
the timing and payment under the Contracts); (iii) attributable to the
disability of the taxpayer which occurred after the purchase of the Contract (as
defined in the Internal Revenue Code); (iv) that are part of a series of
substantially equal periodic payments made at least annually for the life (or
life expectancy) of the taxpayer, or joint lives (or joint life expectancies) of
the taxpayer and his or her beneficiary; (v) from a Qualified Contract (note,
however, that other penalties may apply); (vi) under an immediate annuity
contract (as defined in the Internal Revenue Code); (vii) that can be traced to
an investment in the Contract prior to August 14, 1982; or (viii) under a
Contract that an employer purchases on termination of certain types of qualified
plans and that the employer holds until the employee separates from service.
If the penalty tax does not apply to a withdrawal as a result of the
application of item (iv) above, and the series of payments is subsequently
modified (for some reason other than death or disability), the tax for the year
in which the modification occurs will be increased by an amount (as determined
under Treasury Regulations) equal to the penalty tax that would have been
imposed but for item (iv) above, plus interest for the deferral period. The
foregoing rule applies if the modification takes place (a) before the close of
the period that is five years from the date of the first payment and after the
taxpayer attains age59 1/2, or (b) before the taxpayer reaches age59 1/2.
Because the Company cannot predict whether the payments will be substantially
equal, the Company will report such withdrawals to the Internal Revenue Service
as early withdrawals with no known exception.
For Qualified Contracts, other tax penalties may apply to certain
distributions as well as to certain contributions and other transactions.
The penalty tax may not apply to distributions from Qualified Contracts
issued under Section 408(b) of the Internal Revenue Code that you use to pay
qualified higher education expenses, the acquisition costs (up to $10,000)
involved in the purchase of a principal residence by a first-time homebuyer, or
a distribution made on account of an Internal Revenue Service levy. Because the
Company cannot verify that such an early withdrawal is for qualified higher
education expenses or
<PAGE>
18
a first home purchase, the Company will report such withdrawals to the Internal
Revenue Service as early withdrawals with no known exception.
ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS
Where a non-natural person (for example, a corporation) holds a Contract, that
Contract is generally not treated as an annuity contract for federal income tax
purposes, and the income on that Contract (generally the increase in the net
Accumulated Value less the payments) is considered taxable income each year.
This rule does not apply where the non-natural person is only a nominal owner
such as a trust or other entity acting as an agent for a natural person. The
rule also does not apply where the estate of a decedent acquires a Contract,
where an employer purchases a Contract on behalf of an employee upon termination
of a qualified plan, or to an immediate annuity (as defined in the Internal
Revenue Code).
MULTIPLE-CONTRACTS RULE
All non-qualified annuity contracts issued by the same company (or affiliate) to
the same Contract Owner during any calendar year are to be aggregated and
treated as one contract for purposes of determining the amount includible in the
taxpayer's gross income. Thus, any amount received under any Contract prior to
the Contract's Annuity Date, such as a partial withdrawal, will be taxable (and
possibly subject to the 10% federal penalty tax) to the extent of the combined
income in all such contracts. The Treasury Department has specific authority to
issue regulations that prevent the avoidance of the multiple-contracts rules
through the serial purchase of annuity contracts or otherwise. In addition,
there may be other situations in which the Treasury Department may conclude that
it would be appropriate to aggregate two or more Contracts purchased by the same
Contract Owner. Accordingly, a Contract Owner should consult a tax adviser
before purchasing more than one Contract or other annuity contracts. (The
aggregation rules do not apply to immediate annuities (as defined in the
Internal Revenue Code).)
TRANSFERS OF ANNUITY CONTRACTS
Any transfer of a Non-Qualified Contract during the Accumulation Phase for less
than full and adequate consideration will generally trigger income tax (and
possibly the 10% federal penalty tax) on the gain in the Contract to the
Contract Owner at the time of such transfer. The transferee's investment in the
Contract will be increased by any amount included in the Contract Owner's
income. This provision, however, does not apply to transfers between spouses or
former spouses incident to a divorce that are governed by Internal Revenue Code
Section 1041(a).
ASSIGNMENTS OF ANNUITY CONTRACTS
A transfer of ownership in a Contract, a collateral assignment, or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant, or
beneficiary that this prospectus does not discuss. A Contract Owner considering
such a transfer or assignment of a Contract should contact a tax adviser about
the potential tax effects of such a transaction.
DIVERSIFICATION STANDARDS
To comply with certain regulations under Internal Revenue Code Section 817(h),
after a start-up period, each Subaccount of the Separate Account will be
required to diversify its investments in accordance with certain diversification
standards. A "look-through" rule applies that suggests that each Subaccount of
the Separate Account will be tested for compliance with the diversification
standards by looking through to the assets of the Portfolios in which each
Subaccount invests.
In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance on the extent to which Contract Owners may direct their investments to
particular subaccounts of a separate account. It is possible that regulations or
revenue rulings may be issued in this area at some time in the future. It is not
clear, at this time, what these regulations or rulings would provide. It is
possible that when the regulations or rulings are issued, the Contract may need
to be modified in order to remain in compliance. For these reasons, the Company
reserves the right to modify the Contract, as necessary, to maintain the
tax-deferred status of the Contract.
We intend to comply with the diversification regulations to assure that the
Contract continues to be treated as an annuity contract for federal income tax
purposes.
QUALIFIED INDIVIDUAL RETIREMENT ANNUITIES
Generally, you may purchase Qualified Contracts only in connection with a
"rollover" of funds from another individual retirement annuity (IRA) or
qualified plan. Qualified Contracts must contain special provisions and are
subject to limitations on contributions and the timing of when distributions can
and must be made. Tax penalties may apply to contributions greater than
specified limits, loans, reassignments, distributions that do not meet specified
requirements, or in other circumstances. Anyone desiring to purchase a Qualified
Contract should consult a personal tax adviser.
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19
ACCESS TO YOUR MONEY
The value of your Contract can be accessed during the Accumulation Phase:
. By making a full or partial withdrawal.
. By electing an Annuity Payment Option.
. By your Beneficiary in the form of a Death Benefit.
FULL AND PARTIAL WITHDRAWALS
You may withdraw all or part of your money at any time during the Accumulation
Phase of your Contract without a Company charge, provided the Annuitant or Joint
Annuitant is still living. All partial withdrawals must be for at least $250.
On the date the Company receives your request for a full withdrawal, the
amount payable is the Accumulated Value.
On the date the Company receives your request for a partial withdrawal, the
Accumulated Value will be reduced by the amount of the partial withdrawal.
BECAUSE YOU ASSUME THE INVESTMENT RISK UNDER THE CONTRACT, THE TOTAL AMOUNT
PAID UPON A FULL WITHDRAWAL OF THE CONTRACT MAY BE MORE OR LESS THAN THE TOTAL
PURCHASE PAYMENTS MADE (TAKING PRIOR WITHDRAWALS INTO ACCOUNT).
To make a withdrawal, send your written request to the Vanguard Variable
Annuity Center. Your written request should include your Contract number, Social
Security number, the amount you wish to withdraw, how you want that amount
allocated among the various Portfolios, the signature of all Contract Owners,
and your federal tax withholding election.
SYSTEMATIC WITHDRAWALS
You may elect to have a specified dollar amount or a percentage of the balance
withdrawn from your Contract's Accumulated Value on a monthly, quarterly,
semiannual, or annual basis. The Company requires a Contract balance of at least
$10,000 and a Portfolio balance of at least $1,000 in order to establish the
systematic withdrawal program for your Contract. The minimum amount for each
Systematic Withdrawal is $250.
You may elect this option by completing the Vanguard Variable Annuity Plan
Systematic Withdrawal Program Application Form. The Form must be signed by all
Contract Owners and must be signature-guaranteed if you are directing the
withdrawal payments to an address other than the Contract address.
The Company must receive your Form at least 30 days before the date you
want systematic withdrawals to begin. The Company will process each Systematic
Withdrawal on the date and at the frequency you specified in your Systematic
Withdrawal Program Application Form.
You may change the amount to be withdrawn and the percentage or the
frequency of distributions by telephone. Any other changes you make, including a
change in the destination of the check or your election to cancel this option,
must be made in writing, and should include signatures of all Contract Owners.
MINIMUM BALANCE REQUIREMENTS
The minimum required balance in any Portfolio is $1,000. If an exchange or
withdrawal would reduce the balance in a Portfolio to less than $1,000, the
Company will transfer the remaining balance to the other Portfolios under the
Contract on a pro rata basis. If the entire value of the Contract falls below
$1,000, the Company may notify you that the Accumulated Value of your Contract
is below the minimum balance requirement. In that case, you will be given 60
days to make an Additional Purchase Payment before your Contract is liquidated.
The Company would then promptly pay proceeds to the Contract Owner. The proceeds
would be taxed as a withdrawal from the Contract. Full withdrawal will result in
an automatic termination of the Contract.
PAYMENT OF FULL OR PARTIAL WITHDRAWAL PROCEEDS
The Company will pay cash withdrawals within seven days after receipt of your
written request for withdrawal except in one of the following situations, in
which the Company may delay the payment beyond seven days:
. The New York Stock Exchange is closed on a day that is not a weekend or a
holiday, or trading on the New York Stock Exchange is otherwise restricted.
. An emergency exists as defined by the Securities and Exchange Commission
(the "SEC"), or the SEC requires that trading be restricted.
. The SEC permits a delay for your protection as a Contract Owner.
. The payment is derived from premiums paid by check, in which case the
Company may delay payment until the check has cleared your bank, which may
take up to ten calendar days.
TAXATION OF
WITHDRAWALS
For important information on the tax consequences of withdrawals, see
TAXATION OF FULL AND PARTIAL WITHDRAWALS, page 16, and PENALTY TAXES ON
CERTAIN EARLY WITHDRAWALS, page 17.
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20
TAX WITHHOLDING ON WITHDRAWALS
If you do not provide the Company with a written request not to have federal
income taxes withheld when you request a full or partial withdrawal, federal tax
law requires the Company to withhold federal income taxes from the taxable
portion of any withdrawal and send that amount to the federal government. In
that case, we will withhold at a rate of 10%.
PERFORMANCE
STANDARDIZED PERFORMANCE
From time to time, the Company may advertise the yield and total return
investment performance of a Portfolio for various periods, including
quarter-to-date, year-to-date, one-year, five-year, and since inception. The
Company will calculate advertised yields and total returns according to
standardized methods prescribed by the SEC, so that all charges and expenses
attributable to the Contract will be included. Including these fees has the
effect of decreasing the advertised performance of a Portfolio, so that a
Portfolio's investment performance will not be directly comparable to that of an
ordinary mutual fund.
NON-STANDARDIZED PERFORMANCE
The Company may also advertise total return or other performance data in
non-standardized formats that do not reflect the Annual Contract Maintenance
Fee.
NOT INDICATIONS OF FUTURE PERFORMANCE
The performance measures discussed above are not intended to indicate or predict
future performance.
STATEMENT OF ADDITIONAL INFORMATION
Please refer to the Statement of Additional Information for a description of the
method used to calculate a Portfolio's yield and total return and a list of the
indexes and other benchmarks used in evaluating a Portfolio's performance.
DEATH BENEFIT
IN GENERAL
If the Annuitant dies during the Accumulation Phase, the Beneficiary will
receive the Death Benefit. The Death Benefit is either the then-current
Accumulated Value of the Contract or the sum of all Purchase Payments (minus any
partial withdrawals and any applicable Premium Taxes)--whichever is greater. The
Beneficiary may elect to receive these amounts as a lump sum or as Annuity
Payments.
Federal tax law requires that if a Contract Owner is a natural person and
dies before the Annuity Date, then the entire value of the Contract must be
distributed within five years of the date of death of the Contract Owner. If the
Contract Owner is not a natural person, the death of the primary Annuitant
triggers the same distribution requirement. Special rules may apply to a
surviving spouse.
DEATH OF THE ANNUITANT DURING THE ACCUMULATION PHASE
If the ANNUITANT dies during the Accumulation Phase, the BENEFICIARY will be
entitled to the Death Benefit. When we receive Due Proof of Death of the
Annuitant, we will calculate the Death Benefit. The Beneficiary can choose to
receive the amount payable in a lump-sum cash benefit or under one of the
Annuity Payment Options. The Contract Owner can choose an Annuity Payment Option
for the Beneficiary before the Annuitant's death. However, if the Contract Owner
does not make such a choice and the Company has not already paid a cash benefit,
the Beneficiary may choose a payment option after the Annuitant's death.
Paid as a lump sum, the Death Benefit is the greater of:
(1) The Accumulated Value on the date we receive Due Proof of Death; or
(2) The amount of all Purchase Payments made to date minus the amount of all
partial withdrawals and Premium Taxes, if any.
Paid under one of the Annuity Payment Options, the Death Benefit will be
based on the greater of:
(1) The Accumulated Value ten Business Days prior to the Annuity Date elected
by the Beneficiary and approved by the Company; or
(2) The amount of all Purchase Payments minus the amount of all partial
withdrawals and Premium Taxes, if any.
DEFINITION
DUE PROOF OF DEATH
When the term "Due Proof of Death" is used in this prospectus we mean any
of the following:
. A certified death certificate
. A certified decree of a court of competent jurisdiction as to the
finding of death
. A written statement by a medical doctor who attended the deceased
. Any other proof satisfactory to the Company
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21
DEATH OF THE ANNUITANT DURING THE INCOME PHASE
The Death Benefit, if any, payable if the ANNUITANT dies during the Income Phase
depends on the Annuity Payment Option selected. Upon the Annuitant's death, the
Company will pay the Death Benefit, if any, to the BENEFICIARY under the Annuity
Payment Option in effect. For instance, if the Life Annuity With Period Certain
option has been elected, and if the Annuitant dies during the Income Phase, then
any unpaid payments certain will be paid to the Beneficiary.
A WORD ABOUT
JOINT ANNUITANTS
The Contract permits you as Contract Owner to name a Joint Annuitant. This
can have different effects depending on whether the Contract is in the
Accumulation Phase or the Income Phase.
During the Accumulation Phase, the Death Benefit is payable only after the
death of both the Annuitant and the Joint Annuitant.
During the Income Phase, it will not matter that you have named a Joint
Annuitant unless you have chosen an Annuity Payment Option, such as the
Joint and Last Survivor Annuity option, that pays over the life of more
than one person. Therefore, if you have chosen an Annuity Payment Option
that provides income over the life of someone other than the person named
as Joint Annuitant, the Joint Annuitant's death during the Income Phase
will have no effect on the benefits due under the Contract.
DESIGNATION OF A BENEFICIARY
The Contract Owner may select one or more BENEFICIARIES and name them on the
Application. Thereafter, while the Annuitant or Joint Annuitant is living, the
Contract Owner may change the Beneficiary by written notice. The change will
take effect as of the date the Contract Owner signs the notice, but it will not
affect any payment made or any other action taken before the Company
acknowledges the notice. The Contract Owner may also make the designation of
Beneficiary irrevocable by sending written notice to the Company and obtaining
approval from the Company. Changes in the Beneficiary may then be made only with
the consent of the designated irrevocable Beneficiary.
If the Annuitant dies during the Accumulation Period, the following will
apply unless the Contract Owner has made other provisions:
. If there is more than one Beneficiary, each will share in the Death Benefit
equally.
. If one or two or more Beneficiaries have already died, the Company will pay
that share of the Death Benefit equally to the survivor(s).
. If no Beneficiary is living, the Company will pay the proceeds to the
Contract Owner.
. If a Beneficiary dies at the same time as the Annuitant, the Company will
pay the proceeds as though the Beneficiary had died first. If a Beneficiary
dies within 15 days after the Annuitant's death and before the Company
receives due proof of the Annuitant's death, the Company will pay proceeds
as though the Beneficiary had died first.
If a Beneficiary who is receiving Annuity Payments dies, the Company will
pay any remaining Payments Certain to that Beneficiary's named Beneficiary(ies)
when due. If no Beneficiary survives the Annuitant, the right to any amount
payable will pass to the Contract Owner. If the Contract Owner is not living at
this time, this right will pass to his or her estate.
DEATH OF THE CONTRACT OWNER
DEATH OF THE CONTRACT OWNER DURING THE ACCUMULATION PHASE. With two exceptions,
federal tax law requires that when either the Contract Owner or the Joint Owner
(if any) dies during the Accumulation Phase, the Company must pay out the entire
value of the Contract within five years of the date of death. First exception:
If the entire value is to be distributed to the Owner's Designated Beneficiary,
he or she may elect to have it paid under an Annuity Payment Option over his or
her life or over a period certain no longer than his or her life expectancy as
long as the payments begin within one year of the Contract Owner's death. Second
exception: If the Owner's Designated Beneficiary is the spouse of the Contract
Owner (or Joint Owner), the spouse may elect to continue the Contract in his or
her name as Contract Owner indefinitely and to continue deferring tax on the
accrued and future income under the Contract. ("Owner's Designated
Beneficiary" means the natural person whom the Contract Owner names as a
beneficiary and who becomes the Contract Owner upon the Contract Owner's death.)
If the Contract Owner and the Annuitant are the same person, then upon that
person's death the Beneficiary is entitled to the Death Benefit. In this regard,
see DEATH OF THE ANNUITANT DURING THE ACCUMULATION PHASE, page 20.
DEATH OF THE CONTRACT OWNER DURING THE INCOME PHASE. Federal tax law requires
that when either the Contract Owner or the Joint Owner (if any) dies during the
Income Phase, the Company must pay the remaining portions of the value of the
Contract at least as rapidly as under the method of distribution being used on
the date of death.
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22
NON-NATURAL PERSON AS CONTRACT OWNER. Where the Contract Owner is not a natural
person (for example, is a corporation), the death of the "primary Annuitant"
is treated as the death of the Contract Owner for purposes of federal tax law.
(The Internal Revenue Code defines a "primary Annuitant" as the individual who
is of primary importance in affecting the timing or the amount of payout under
the Contract.) In addition, where the Contract Owner is not a natural person, a
change in the identity of the "primary Annuitant" is also treated as the death
of the Contract Owner for purposes of federal tax law.
PAYMENT OF LUMP-SUM DEATH BENEFITS
The Company will pay lump-sum Death Benefits within seven days after the
election to take a lump sum becomes effective except in one of the following
situations, in which the Company may delay the payment beyond seven days:
. The New York Stock Exchange is closed on a day that is not a weekend or a
holiday, or trading on the New York Stock Exchange is otherwise restricted.
. An emergency exists as defined by the SEC, or the SEC requires that trading
be restricted.
. The SEC permits a delay for your protection as a Contract Owner.
. The payment is derived from premiums paid by check, in which case the
Company may delay payment until the check has cleared your bank, which may
take up to ten calendar days.
OTHER INFORMATION
PEOPLES BENEFIT LIFE INSURANCE COMPANY (THE "COMPANY," "WE," "US,"
"OUR")
Peoples Benefit Life Insurance Company is an Iowa stock life insurance company
incorporated on August 6, 1920, with offices at 4333 Edgewood Road NE, Cedar
Rapids, Iowa 52499. It is principally engaged in offering life insurance and
annuity contracts, and is licensed in 49 states, the District of Columbia, and
Puerto Rico.
As of December 31, 1999, the Company had statutory-basis assets of
approximately $13.2 billion. It is a wholly owned indirect subsidiary of AEGON
USA, Inc., which conducts substantially all of its operations through subsidiary
companies engaged in the insurance business or in providing non-insurance
financial services. AEGON N.V. of The Netherlands indirectly owns all of the
stock of AEGON USA, Inc. AEGON N.V., a holding company, conducts its business
through subsidiary companies engaged primarily in the insurance business.
PEOPLES BENEFIT LIFE INSURANCE COMPANY SEPARATE ACCOUNT IV
Established by the Company on July 16, 1990, the Separate Account operates under
Iowa law.
The Separate Account is a unit investment trust registered with the SEC
under the Investment Company Act of 1940 (the "1940 Act"). Such registration
does not signify that the SEC supervises the management or the investment
practices or policies of the Separate Account.
The Company owns the assets of the Separate Account, and the obligations
under the Contract are obligations of the Company. These assets are held
separately from the other assets of the Company and are not chargeable with
liabilities incurred in any other business operation of the Company (except to
the extent that assets in the Separate Account exceed the reserves and other
liabilities of the Separate Account). The Company will always keep assets in the
Separate Account with a value at least equal to the total Accumulated Value
under the Contracts. Income, gains, and losses incurred on the assets in the
Separate Account, whether or not realized, are credited to or charged against
the Separate Account without regard to other income, gains, or losses of the
Company. Therefore, the investment performance of the Separate Account is
entirely independent of the investment performance of the Company's general
account assets or any other separate account the Company maintains.
The Separate Account has thirteen Subaccounts, each of which invests solely
in a corresponding Portfolio of the Fund. Additional Subaccounts may be
established at the Company's discretion. The Separate Account meets the
definition of a "separate account" under Rule 0-1(e)(1) of the 1940 Act.
CONTRACT OWNER ("YOU," "YOUR")
The Contract Owner is the person or persons designated as the Contract Owner in
the Application to participate in the Contract. The term shall also include any
person named as Joint Owner. A Joint Owner shares ownership in all respects with
the Owner. The Owner has the right to assign ownership to a person or party
other than himself.
PAYEE
The Payee is the Contract Owner, Annuitant, Beneficiary, or any other person,
estate, or legal entity to whom benefits are to be paid.
<PAGE>
23
FREE LOOK PERIOD
The Contract provides for a Free Look Period of at least 10 days after the
Contract Owner receives the Contract (20 or more days in some instances as
specified in your Contract) plus 5 days for mailing. The Contract Owner may
cancel the Contract during the Free Look Period by returning it to the Vanguard
Variable Annuity Center, P.O. Box 1105, Valley Forge, PA 19482-1105. Upon
cancellation, the Contract is treated as void from the Contract Date and the
Contract Owner will receive the greater of the Purchase Payments made under the
Contract or the Accumulated Value of the Contract as of the day the Contract is
received by the Company, except in Pennsylvania, where the Contract Owner will
receive the Accumulated Value plus fees and charges deducted from Purchase
Payments whether or not this amount exceeds Purchase Payments made under the
Contract.
Withdrawals are not permitted during the Free Look Period.
ADMINISTRATIVE SERVICES
Administrative services are provided by The Vanguard Group, Inc., Vanguard
Variable Annuity Center, 100 Vanguard Boulevard, Malvern, PA 19355.
DISTRIBUTOR OF THE CONTRACTS
The Vanguard Group, Inc., through its wholly owned subsidiary, Vanguard
Marketing Corporation, is the principal distributor of the Contract. During the
fiscal year ended September 30, 1999, each Portfolio incurred distribution and
marketing expenses representing 0.01% (0.02% for the Money Market Portfolio and
0% for the Short-Term Corporate, Diversified Value, Mid-Cap Index, and REIT
Index Portfolios) of each Portfolio's average net assets. These expenses are
guaranteed not to exceed 0.20% of each Portfolio's average month-end net assets.
A complete description of the services provided by Vanguard Marketing
Corporation is found in the "Management of the Fund" section in the Fund's
Statement of Additional Information. The principal business address for The
Vanguard Group, Inc. is 100 Vanguard Boulevard, Malvern, PA 19355.
VOTING RIGHTS
The Fund does not hold regular meetings of shareholders. The Trustees of the
Fund may call special meetings of shareholders as the 1940 Act or other
applicable law may require. To the extent required by law, the Company will vote
the Portfolio shares held in the Separate Account at shareholder meetings of the
Fund in accordance with instructions received from persons having voting
interests in the corresponding Portfolio. The Company will vote Fund shares as
to which no timely instructions are received and those shares held by the
Company as to which Contract Owners have no beneficial interest in proportion to
the voting instructions that are received with respect to all Contracts
participating in that Portfolio. Voting instructions to abstain on any item to
be voted upon will be applied on a pro rata basis to reduce the votes eligible
to be cast.
Prior to the Annuity Date, the Contract Owner holds a voting interest in
each Portfolio to which the Accumulated Value is allocated. The number of votes
which are available to a Contract Owner will be determined by dividing the
Accumulated Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Date, the person receiving
Annuity Payments under any variable Annuity Payment Option has the voting
interest. The number of votes after the Annuity Date will be determined by
dividing the reserve for such Contract allocated to the Portfolio by the net
asset value per share of the corresponding Portfolio. After the Annuity Date,
the votes attributable to a Contract decrease as the reserves allocated to the
Portfolio decrease. In determining the number of votes, fractional shares will
be recognized.
The number of votes of the Portfolio that are available will be determined
as of the date established by that Portfolio for determining shareholders
eligible to vote at the meeting of the Fund. Voting instructions will be
solicited by written communication prior to such meeting in accordance with
procedures established by the Fund.
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make certain
changes. The Company reserves the right to eliminate the shares of any of the
Portfolios and to substitute shares of another Portfolio of the Fund or of
another registered open-end management investment company, if the shares of the
Portfolios are no longer available for investment or if, in the Company's
judgment, investment in any Portfolio would be inappropriate in view of the
purposes of the Separate Account. To the extent the 1940 Act requires,
substitutions of shares attributable to a Contract Owner's interest in a
Portfolio will not be made until SEC approval has been obtained and the Contract
Owner has been notified of the change.
The Company may establish new Portfolios when marketing, tax, investment,
or other conditions so warrant. The Company will make any new Portfolios
available to existing Contract Owners on a basis the Company will determine. The
Company may also eliminate one or more Portfolios if marketing, tax, investment,
or other conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make whatever changes in the Contracts may be necessary
or appropriate to reflect such substitution or change. Furthermore, if deemed to
be in the best interests of persons having voting rights under the Contracts,
the Company may operate the Separate Account as a management company under the
1940 Act or any other form permitted by law, may deregister the Separate Account
under
<PAGE>
24
the 1940 Act in the event such registration is no longer required, or may
combine the Separate Account with one or more other separate accounts.
FINANCIAL STATEMENTS
The audited statutory-basis financial statements of the Company and the audited
financial statements of the subaccounts of the Separate Account which are
available for investment by Vanguard Variable Annuity Plan Contract Owners (as
well as the Independent Auditors' Reports on them) are contained in the
Statement of Additional Information.
AUDITORS
Ernst & Young LLP serves as independent auditors for the Company and the
subaccounts of the Separate Account which are available for investment by
Vanguard Variable Annuity Plan Contract Owners and audits their financial
statements annually.
LEGAL MATTERS
The law firm of Jorden Burt Boros Cicchetti Berenson & Johnson LLP, of
Washington, D.C., has provided legal advice concerning the issue and sale of the
Contract under the applicable federal securities laws. On behalf of the Company,
Gregory E. Miller-Breetz, Esquire, has passed upon all matters of Iowa law
pertaining to the validity of the Contract and the Company's right to issue the
Contract.
<PAGE>
25
Table of Contents for the Vanguard Variable Annuity Plan Contract Statement of
Additional Information
Contents
B-2 THE CONTRACT
B-2 Computation of Variable Annuity Income Payments
B-3 Exchanges
B-3 Joint Annuitant
B-3 GENERAL MATTERS
B-3 Non-Participating
B-3 Misstatement of Age or Sex
B-3 Assignment
B-4 Annuity Data
B-4 Annual Report
B-4 Incontestability
B-4 Ownership
B-4 DISTRIBUTION OF THE CONTRACT
B-4 PERFORMANCE INFORMATION
B-4 Subaccount Inception Dates
B-5 Money Market Subaccount Yields
B-5 30-Day Yield for Non-Money Market Subaccounts
B-6 Standardized Average Annual Total Return
B-8 ADDITIONAL PERFORMANCE MEASURES
B-8 Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return
B-9 Non-Standardized Total Return Year-to-Date
B-10 Non-Standardized One Year Return
B-10 SAFEKEEPING OF ACCOUNT ASSETS
B-10 CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS
B-11 THE COMPANY
B-11 TAXES
B-11 STATE REGULATION OF THE COMPANY
B-12 RECORDS AND REPORTS
B-12 LEGAL PROCEEDINGS
B-12 OTHER INFORMATION
B-12 FINANCIAL STATEMENTS
<PAGE>
26
APPENDIX
CONDENSED FINANCIAL INFORMATION
The Accumulation Unit Values and the number of Accumulation Units outstanding
for each Subaccount are as follows:
<TABLE>
<CAPTION>
For the period April 29, 1991 through December 31, 1999
- ----------------------------------------------------------------------------------------------------------
HIGH- HIGH SHORT-
MONEY GRADE YIELD TERM DIVERSIFIED EQUITY
MARKET BOND BOND CORPORATE BALANCED VALUE INCOME
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date* 1.000 10.000 10.000 10.000 10.000 10.000 10.000
12/31/1991 1.032 11.027 -- -- 10.802 -- --
12/31/1992 1.064 11.656 -- -- 11.514 -- --
12/31/1993 1.091 12.695 -- -- 12.961 -- 10.488
12/31/1994 1.130 12.290 -- -- 12.815 -- 10.304
12/31/1995 1.191 14.437 -- -- 16.885 -- 14.239
12/31/1996 1.250 14.882 10.871 -- 19.532 -- 16.820
12/31/1997 1.314 16.219 12.135 -- 23.946 -- 22.503
12/31/1998 1.381 17.546 12.576 -- 26.729 -- 26.365
12/31/1999 1.447 17.343 12.892 10.180 27.774 8.662 25.617
Number of units outstanding as of:
12/31/1991 32,495 2,122 -- -- 3,395 -- --
12/31/1992 75,564 4,417 -- -- 8,682 -- --
12/31/1993 109,190 6,592 -- -- 16,164 -- 6,411
12/31/1994 154,415 6,589 -- -- 16,429 -- 6,089
12/31/1995 183,867 8,684 -- -- 17,021 -- 7,355
12/31/1996 246,219 9,395 3,042 -- 17,307 -- 9,260
12/31/1997 282,813 12,403 7,810 -- 19,528 -- 13,361
12/31/1998 387,603 18,252 10,817 -- 21,507 -- 15,409
12/31/1999 456,736 17,857 10,721 3,165 20,007 3,397 14,334
(UNITS ARE SHOWN IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
For the period April 29, 1991 through December 31, 1999
- ---------------------------------------------------------------------------------------------------------------
SMALL
EQUITY MID-CAP REIT COMPANY
INDEX GROWTH INDEX INDEX GROWTH INTERNATIONAL
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date* 10.000 10.000 10.000 10.000 10.000 10.000
12/31/1991 11.275 -- -- -- -- --
12/31/1992 12.039 -- -- -- -- --
12/31/1993 13.144 10.569 -- -- -- --
12/31/1994 13.224 10.964 -- -- -- 10.128
12/31/1995 18.073 15.089 -- -- -- 11.678
12/31/1996 22.098 19.057 -- -- 9.725 13.319
12/31/1997 29.301 24.034 -- -- 10.970 13.708
12/31/1998 37.565 33.697 -- -- 11.792 16.226
12/31/1999 45.300 41.101 12.454 9.738 18.957 20.265
Number of units outstanding as of:
12/31/1991 2,311 -- -- -- -- --
12/31/1992 9,645 -- -- -- -- --
12/31/1993 12,971 4,879 -- -- -- --
12/31/1994 13,676 8,004 -- -- -- 6,818
12/31/1995 16,292 11,857 -- -- -- 8,146
12/31/1996 19,360 15,744 -- -- 5,362 12,435
12/31/1997 28,886 18,975 -- -- 11,350 14,597
12/31/1998 28,884 23,656 -- -- 11,841 14,564
12/31/1999 33,247 26,900 5,746 2,281 14,077 15,970
(UNITS ARE SHOWN IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Date of commencement of operations for the High-Grade Bond and Equity Index
Subaccounts was April 29, 1991, for the Money Market Subaccount was May 2,
1991, for the Balanced Subaccount was May 23, 1991, for the Equity Income
and Growth Subaccounts was June 7, 1993, for the International Subaccount
was June 3, 1994, for the High Yield Bond and Small Company Growth
Subaccounts was June 3, 1996, and for the Short Term Corporate, Diversified
Value, Mid-Cap Index, and REIT Index Subaccounts was February 8, 1999.
<PAGE>
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT IV
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
VANGUARD VARIABLE ANNUITY PLAN CONTRACT
OFFERED BY
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(AN IOWA STOCK COMPANY)
ADMINISTRATIVE OFFICES
4333 EDGEWOOD ROAD NE
CEDAR RAPIDS, IOWA 52499
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Vanguard Variable Annuity Plan Contract (the
"Contract") offered by Peoples Benefit Life Insurance Company (the "Company").
You may obtain a copy of the Prospectus dated April 30, 2000 by calling
800-522-5555, or writing to Vanguard Variable Annuity Center, P.O. Box 1105,
Valley Forge, PA 19482-1105. Terms used in the current Prospectus for the
Contract are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
April 30, 2000
TABLE OF CONTENTS PAGE
- ------------------------------------------------------------------------- ----
THE CONTRACT B-2
Computation of Variable Annuity Income Payments B-2
Exchanges B-3
Joint Annuitant B-3
GENERAL MATTERS B-3
Non-Participating B-3
Misstatement of Age or Sex B-3
Assignment B-3
Annuity Data B-4
Annual Report B-4
Incontestability B-4
Ownership B-4
DISTRIBUTION OF THE CONTRACT B-4
PERFORMANCE INFORMATION B-4
Subaccount Inception Dates B-4
Money Market Subaccount Yields B-5
30-Day Yield for Non-Money Market Subaccounts B-5
Standardized Average Annual Total Return B-6
ADDITIONAL PERFORMANCE MEASURES B-8
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return B-8
Non-Standardized Total Return Year-to-Date B-9
Non-Standardized One Year Return B-10
SAFEKEEPING OF ACCOUNT ASSETS B-10
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS B-10
THE COMPANY B-11
TAXES B-11
STATE REGULATION OF THE COMPANY B-11
RECORDS AND REPORTS B-12
LEGAL PROCEEDINGS B-12
OTHER INFORMATION B-12
FINANCIAL STATEMENTS B-12
B-1
<PAGE>
THE CONTRACT
In order to supplement the description in the Prospectus, the following
provides additional information about the Contract which may be of interest to
Contract Owners.
Computation of Variable Annuity Income Payments
Variable Annuity Income Payments are computed as follows. First, the
Accumulated Value (or the portion of the Accumulated Value used to provide
variable payments) is applied under the Annuity Table contained in the Contract
corresponding to the Annuity Option elected by the Contract Owner and based on
an assumed interest rate of 4%. This will produce a dollar amount which is the
first monthly payment.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an exchange of Annuity Units (as set forth
below) is made. After the first Annuity Payment, the dollar amount of each
subsequent Annuity Payment is equal to the number of Annuity Units multiplied by
the Annuity Unit value for the Subaccount ten Business Days before the due date
of the Annuity Payment.
The Annuity Unit value for each Subaccount was initially established at $10.00
on the day money was first deposited in that Subaccount. The Annuity Unit value
for any subsequent Business Day is equal to (a) times (b) times (c), where:
(a) the Annuity Unit value for the immediately preceding Business Day;
(b) the Net Investment Factor for the day;
(c) the investment result adjustment factor (0.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in determining the
Annuity Payment amounts.
The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:
(a) any increase or decrease in the value of the Subaccount due to investment
results;
(b) a daily charge for the mortality and expense risks assumed by the Company
corresponding to an annual rate according to the following schedule:
Rate For
Net Assets* All Assets
----------- ----------
Up to $2.5 Billion .............................................0.30%
Over $2.5 Billion and Up To $5 Billion .........................0.28%
Over $5 Billion ................................................0.27%
*Based on combined net assets of the Separate Account and Separate Account B
of AUSA Life Insurance Company, Inc.
(c) a daily charge for the cost of administering the Contract corresponding to
an annual charge of 0.10%.
(d) an annual charge of $25 for maintenance of Contracts valued at less than
$25,000 at time of initial purchase and on the last business day of each
year.
The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year; except that in
Massachusetts and Montana, the Annuity Tables contained in the Contract are
based on a 60% female/40% male blending of the above, for all annuitants of
either gender.
B-2
<PAGE>
Exchanges
After the Annuity Date, if a Variable Annuity Option has been chosen, the
Contract Owner may, by making written request or by calling the Vanguard
Variable Annuity Center, exchange the current value of the existing Subaccount
to Annuity Units of any other Subaccount then available. The request for the
exchange must be received, however, at least 10 Business Days prior to the first
payment date on which the exchange is to take effect. This exchange shall result
in the same dollar amount of Annuity Payment on the date of exchange. The
Contract Owner is limited to two substantive exchanges (at least 30 days apart)
from a Portfolio (except the Money Market Portfolio) in any Contract Year, and
the value of the Annuity Units exchanged must provide a monthly Annuity Payment
of at least $100 at the time of the exchange. "Substantive" means a dollar
amount that The Vanguard Group, Inc. determines, in its sole discretion, could
adversely affect management of the Fund.
Exchanges will be made using the Annuity Unit value for the Subaccounts on the
date the request for exchange is received by the Company. On the exchange date,
the Company will establish a value for the current Subaccount by multiplying the
Annuity Unit value by the number of Annuity Units in the existing Subaccount,
and compute the number of Annuity Units for the new Subaccount by dividing the
Annuity Unit value of the new Subaccount into the value previously calculated
for the existing Subaccount.
Joint Annuitant
The Contract Owner may, in the Contract Application or by written request at
least 30 days prior to the Annuity Date, name a Joint Annuitant. Such Joint
Annuitant must meet the Company's underwriting requirements. If approved by the
Company, the Joint Annuitant shall be named on the Contract Schedule or added by
endorsement. An Annuitant or Joint Annuitant may not be replaced.
The Annuity Date shall be determined based on the date of birth of the
Annuitant. If the Annuitant or Joint Annuitant dies prior to the Annuity Date,
the survivor shall be the sole Annuitant. Another Joint Annuitant may not be
designated. Payment to a Beneficiary shall not be made until the death of the
surviving Annuitant.
GENERAL MATTERS
Non-Participating
The Contracts are non-participating. No dividends are payable and the
Contracts will not share in the profits or surplus earnings of the Company.
Misstatement of Age or Sex
Depending on the state of issue of a Contract, the Company may require proof
of age and/or sex before making Annuity Payments. If the Annuitant's stated
age, sex or both in the Contract are incorrect, the Company will change the
Annuity Benefits payable to those which the Purchase Payments would have
purchased for the correct age and sex. In the case of correction of the stated
age or sex after payments have commenced, the Company will: (1) in the case of
underpayment, pay the full amount due with the next payment; or (2) in the case
of overpayment, deduct the amount due from one or more future payments.
Assignment
Any Nonqualified Contract may be assigned by the Contract Owner prior to the
Annuity Date and during the Annuitant's lifetime. The Company is not responsible
for the validity of any assignment. No assignment will be recognized until the
Company receives written notice thereof. The interest of any Beneficiary which
the assignor has the right to change shall be subordinate to the interest of an
assignee. Any amount paid to the assignee shall be paid in one sum,
notwithstanding any settlement agreement in effect at the time assignment was
executed. The Company shall not be liable as to any payment or other settlement
made by the Company before receipt of written notice.
B-3
<PAGE>
Annuity Data
The Company will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to the Company.
Annual Report
Once each Contract Year, the Company will send the Contract Owner an annual
report of the current Accumulated Value allocated to each Subaccount; and any
Purchase Payments, charges, exchanges or withdrawals during the year. This
report will also give the Contract Owner any other information required by law
or regulation. The Contract Owner may ask for a report like this at any time.
Incontestability
This Contract is incontestable from the Contract Date, subject to the
"Misstatement of Age or Sex" or "Misstatement of Age" provision.
Ownership
The Owner of the Contract on the Contract Date is the Annuitant, unless
otherwise specified in the Application. The Owner may specify a new Owner by
written notice at any time thereafter. The term Owner also includes any person
named as a Joint Owner. A Joint Owner shares ownership in all respects with the
Owner. During the Annuitant's lifetime all rights and privileges under this
Contract may be exercised solely by the Owner. Upon the death of the Owner(s),
Ownership is retained by the surviving Joint Owner or passes to the Owner's
Designated Beneficiary, if one has been designated by the Owner. If no Owner's
Designated Beneficiary is designated or if no Owner's Designated Beneficiary is
living, the Owner's Designated Beneficiary is the Owner's estate. From time to
time the Company may require proof that the Owner is still living.
DISTRIBUTION OF THE CONTRACT
The Vanguard Group, Inc., through its wholly owned subsidiary, Vanguard
Marketing Corporation, is the principal distributor of the Contract. During the
fiscal year ended September 30, 1999, each Portfolio incurred distribution and
marketing expenses representing 0.01% (0.02% for the Money Market Portfolio and
0% for the Short-Term Corporate, Diversified Value, Mid-Cap Index, and REIT
Index Portfolios) of each Portfolio's average net assets. These expenses are
guaranteed not to exceed 0.20% of each Portfolio's average month-end net assets.
A complete description of the services provided by Vanguard Marketing
Corporation is found in the "Management of the Fund" section in the Fund's
Statement of Additional Information. The principal business address for The
Vanguard Group, Inc. is 100 Vanguard Boulevard, Malvern, PA 19355.
PERFORMANCE INFORMATION
Performance information for the Subaccounts, including the yield and effective
yield of the Money Market Subaccount, the yield of the remaining Subaccounts,
and the total return of all Subaccounts, may appear in reports or promotional
literature to current or prospective Contract Owners.
Subaccount Inception Dates
Where applicable, the following Subaccount inception dates are used in the
calculation of performance figures: April 29, 1991 for the Equity Index
Subaccount and the High-Grade Bond Subaccount; May 2, 1991 for the Money Market
Subaccount; May 23, 1991 for the Balanced Subaccount; June 7, 1993 for the
Equity Income Subaccount and the Growth Subaccount; June 3, 1994 for the
International Subaccount; June 3, 1996 for the High Yield Bond Subaccount and
the Small Company Growth Subaccount; February 8, 1999 for the Diversified Value
Subaccount and the Short-Term Corporate Subaccount; and February 9, 1999 for the
Mid-Cap Index Subaccount and the REIT Index Subaccount.
B-4
<PAGE>
The underlying series of Vanguard Variable Insurance Fund in which the Mid-Cap
Index Subaccount and the REIT Index Subaccount invest commenced operations on
February 8, 1999 (and sold shares to these subaccounts on that day), but they
held all of their assets in money market instruments until February 9, 1999,
when performance measurement begins.
Money Market Subaccount Yields
Current yield for the Money Market Subaccount will be based on the change in
the value of a hypothetical investment (exclusive of capital changes) over a
particular 7-day period, less a pro-rata share of Subaccount expenses accrued
over that period (the "base-period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
Calculation of "effective yield" begins with the same "base period return"
used in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Yield = [(Base Period Return +1)365/7] -1
The yield of the Money Market Subaccount for the 7-day period ended December
31, 1999, was 5.38%.
30-Day Yield for Non-Money Market Subaccounts
Quotations of yield for the remaining Subaccounts will be based on all
investment income per Unit earned during a particular 30-day period, less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of a Unit on the last
day of the period, according to the following formula:
YIELD = 2[(a - b + 1)6 -1]
-----
c x d
Where:
[a] equals the net investment income earned during the period by the Series
attributable to shares owned by a Subaccount
[b] equals the expenses accrued for the period (net of reimbursements)
[c] equals the average daily number of Units outstanding during the period
[d] equals the maximum offering price per Accumulation Unit on the last day
of the period
Yield on the Subaccount is earned from the increase in net asset value of shares
of the Series in which the Subaccount invests and from dividends declared and
paid by the Series, which are automatically reinvested in shares of the Series.
The yield of each Subaccount for the 30-day period ended December 31, 1999, is
set forth below. Yields are calculated daily for each Subaccount. Premiums and
discounts on asset-backed securities are not amortized.
High-Grade Bond Subaccount ...........................6.50%
High Yield Bond Subaccount ...........................9.28%
Short-Term Corporate Subaccount ......................6.53%
Balanced Subaccount ..................................3.60%
Diversified Value Subaccount .........................2.33%
Equity Income Subaccount .............................2.19%
Equity Index Subaccount ..............................0.63%
Growth Subaccount ....................................0.00%
Mid-Cap Index Subaccount .............................0.53%
REIT Index Subaccount ................................---
Small Company Growth Subaccount ......................0.17%
International Subaccount .............................---
B-5
<PAGE>
Standardized Average Annual Total Return
When advertising performance of the Subaccounts, the Company will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of all applicable sales loads or sales
charges, the Annual Contract Maintenance Fee and all other Portfolio, Separate
Account and Contract level charges except Premium Taxes, if any. In calculating
performance information, the Annual Contract Maintenance Fee is reflected as a
percentage equal to the total amount of fees collected during a year divided by
the total average net assets of the Portfolios during the same year. The fee is
assumed to remain the same in each year of the applicable period. The fee is
prorated to reflect only the remaining portion of the calendar year of purchase.
Thereafter, the fee is deducted on the last business day of the year for the
following year, on a pro rata basis, from each of the Portfolios you have
chosen.
Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a Contract over a period of one, three, five and 10 years (or, if
less, up to the life of the Subaccount) and year-to-date, six months to date,
month-to-date, and quarter-to-date, calculated pursuant to the formula:
P(1 + T)n = ERV
Where:
(1) [P] equals a hypothetical Initial Purchase Payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000 Purchase
Payment made at the beginning of the period (or fractional portion
thereof)
The following tables show the average annual total return for the Subaccounts
for the period beginning at the inception of each Subaccount and ending on
December 31, 1999.
<TABLE>
<CAPTION>
Since
Year Year Ended Subaccount
<S> <C> <C> <C> <C> <C> <C>
1 year 3 years 5 years to date 12/31/99 Inception*
------ ------- ------- ------- -------- ----------
Money Market Subaccount......................................... 4.79% 4.99% 5.04% 4.79% 4.79% 4.32%
High-Grade Bond Subaccount...................................... -1.17% 5.22% 7.11% -1.17% -1.17% 6.51%
High Yield Bond Subaccount...................................... 2.51% 5.84% --- 2.51% 2.51% 7.35%
Short-Term Corporate Subaccount................................. --- --- --- --- --- 1.79%
Balanced Subaccount............................................. 3.90% 12.44% 16.71% 3.90% 3.90% 12.56%
Diversified Value Subaccount.................................... --- --- --- --- --- -13.39%
Equity Income Subaccount........................................ -2.85% 15.04% 19.96% -2.85% -2.85% 15.37%
Equity Index Subaccount......................................... 20.57% 27.02% 27.90% 20.57% 20.57% 18.98%
Growth Subaccount............................................... 21.96% 29.19% 30.23% 21.96% 21.96% 23.98%
Mid-Cap Index Subaccount........................................ --- --- --- --- --- 24.53%
REIT Index Subaccount........................................... --- --- --- --- --- -2.63%
Small Company Growth Subaccount................................. 60.75% 24.90% --- 60.75% 60.75% 19.57%
International Subaccount........................................ 24.88% 15.00% 14.86% 24.88% 24.88% 13.47%
</TABLE>
- -------------
*Refer to "Subaccount Inception Dates" under the "PERFORMANCE INFORMATION"
section of this Statement of Additional Information.
B-6
<PAGE>
<TABLE>
<CAPTION>
Month- Quarter- 6 Months-
to-date to-date to-date
------- ------- ---------
<S> <C> <C> <C>
Money Market Subaccount............................................................. 0.45% 1.30% 2.50%
High-Grade Bond Subaccount.......................................................... -0.48% -0.12% 0.44%
High Yield Bond Subaccount.......................................................... 0.90% 2.66% 1.50%
Short-Term Corporate Subaccount..................................................... 0.19% 0.90% 1.71%
Balanced Subaccount................................................................. 0.84% 2.31% -3.14%
Diversified Value Subaccount........................................................ -4.77% -6.70% -22.31%
Equity Income Subaccount............................................................ -4.08% -0.96% -9.55%
Equity Index Subaccount............................................................. 5.93% 14.85% 7.58%
Growth Subaccount................................................................... 7.07% 20.03% 14.12%
Mid-Cap Index Subaccount............................................................ 5.89% 17.22% 7.44%
REIT Index Subaccount............................................................... 2.93% -0.86% -8.75%
Small Company Growth Subaccount..................................................... 24.71% 47.13% 46.49%
International Subaccount............................................................ 10.64% 21.00% 20.74%
</TABLE>
All total return figures reflect the deduction of the administrative charge,
and the mortality and expense risk charge. The SEC requires that an assumption
be made that the Contract Owner surrenders the entire Contract at the end of the
1-, 5- and 10-year periods (or, if less, up to the life of the Subaccount) for
which performance is required to be calculated.
Performance information for a Subaccount may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, or other indices that measure performance of a pertinent
group of securities so that investors may compare a Subaccount's results with
those of a group of securities widely regarded by investors as representative of
the securities markets in general; (ii) other groups of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely-used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank such investment companies on overall performance or other criteria; and
(iii) the Consumer Price Index (measure for inflation) to assess the real rate
of return from an investment in the Contract. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for any Subaccount reflects only the performance of a
hypothetical Contract under which Accumulation Value is allocated to a
Subaccount during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the portfolio of the
Fund in which the Subaccount invests, and the market conditions during the given
time period, and should not be considered as a representation of what may be
achieved in the future.
Reports and marketing materials may, from time to time, include information
concerning the rating of Peoples Benefit Life Insurance Company as determined by
A.M. Best, Moody's, Standard & Poor's or other recognized rating services.
Reports and promotional literature may also contain other information including
(i) the ranking of any Subaccount derived from rankings of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services or by other rating services, companies, publications, or other persons
who rank separate accounts or other investment products on overall performance
or other criteria, and (ii) the effect of tax deferred compounding on a
Subaccount's investment returns, or returns in general, which may be illustrated
by graphs, charts, or otherwise, and which may include a comparison, at various
points in time, of the return from an investment in a Contract (or returns in
general) on a tax-deferred basis (assuming one or more tax rates) with the
return on a taxable basis.
B-7
<PAGE>
ADDITIONAL PERFORMANCE MEASURES
Non-Standardized Cumulative Total Return and Non-Standardized Average Annual
Total Return
The Company may show Non-Standardized Cumulative Total Return (i.e., the
percentage change in the value of an Accumulation Unit) for one or more
Subaccounts with respect to one or more periods. The Company may also show Non-
Standardized Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Value) with respect to one or more periods. For one year and
periods less than one year, the Non- Standardized Cumulative Total Return and
the Non-Standardized Average Annual Total Return are effective annual rates of
return and are equal. For periods greater than one year, the Non-Standardized
Average Annual Total Return is the effective annual compounded rate of return
for the periods stated. Because the value of an Accumulation Unit reflects the
Separate Account and Portfolio expenses (see Fee Table in the Prospectus), the
Non-Standardized Cumulative Total Return and Non-Standardized Average Annual
Total Return also reflect these expenses. However, these percentages do not
reflect the Annual Contract Maintenance Fee or Premium Taxes (if any), which, if
included, would reduce the percentages reported by the Company.
Non-Standardized Cumulative Total Return
For Period Ending 12/31/99
<TABLE>
<CAPTION>
Since
Month- Quarter- 6 Month- One Subaccount
to-date to-date to-date Year Inception*
-------- --------- -------- ------ -----------
<S> <C> <C> <C> <C> <C>
Money Market Subaccount.. 0.45% 1.30% 2.50% 4.80% 44.72%
High-Grade Bond
Subaccount.............. -0.48% -0.11% 0.45% -1.16% 73.43%
High Yield Bond
Subaccount.............. 0.90% 2.66% 1.51% 2.52% 28.92%
Short-Term Corporate
Subaccount.............. 0.19% 0.90% 1.71% --- 1.80%
Balanced Subaccount...... 0.84% 2.31% -3.13% 3.91% 177.74%
Diversified Value
Subaccount.............. -4.77% -6.70% -22.30% --- -13.38%
Equity Income Subaccount. -4.08% -0.96% -9.54% -2.84% 156.17%
Equity Index Subaccount.. 5.93% 14.86% 7.58% 20.58% 352.98%
Growth Subaccount........ 7.07% 20.03% 14.12% 21.97% 311.01%
Mid-Cap Index Subaccount. 5.89% 17.22% 7.45% --- 24.54%
REIT Index Subaccount.... 2.93% -0.86% -8.74% --- -2.62%
Small Company Growth
Subaccount.............. 24.71% 47.14% 46.50% 60.76% 89.57%
International Subaccount. 10.65% 21.00% 20.74% 24.89% 102.65%
</TABLE>
_____________
*Refer to "Subaccount Inception Dates" under the "PERFORMANCE INFORMATION"
section of this Statement of Additional Information.
B-8
<PAGE>
Non-Standardized Average Annual Total Returns
For Period Ending 12/31/99
<TABLE>
<CAPTION>
Since
Subaccount
One Year Three Year Five Year Inception*
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Money Market Subaccount..... 4.80% 5.01% 5.06% 4.36%
High-Grade Bond Subaccount.. -1.16% 5.23% 7.13% 6.55%
High Yield Bond Subaccount.. 2.52% 5.85% --- 7.36%
Short-Term Corporate
Subaccount................. --- --- --- 1.80%
Balanced Subaccount......... 3.91% 12.45% 16.73% 12.60%
Diversified Value Subaccount --- --- --- -13.38%
Equity Income Subaccount.... -2.84% 15.05% 19.98% 15.40%
Equity Index Subaccount..... 20.58% 27.03% 27.92% 19.02%
Growth Subaccount........... 21.97% 29.20% 30.25% 24.01%
Mid-Cap Index Subaccount.... --- --- --- 24.54%
REIT Index Subaccount....... --- --- --- -2.62%
Small Company Growth
Subaccount................. 60.76% 24.92% --- 19.58%
International Subaccount.... 24.89% 15.02% 14.88% 13.50%
</TABLE>
_____________
*Refer to "Subaccount Inception Dates" under the "PERFORMANCE INFORMATION"
section of this Statement of Additional Information.
Non-Standardized Total Return Year-to-Date
The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more Subaccounts with
respect to one or more non-standardized base periods commencing at the beginning
of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These percentages
reflect a deduction for the Separate Account and Portfolio expenses, but do not
include the Annual Contract Maintenance Fee or Premium Taxes (if any), which, if
included, would reduce the percentages reported by the Company.
Total Return YTD
as of 12/31/99
--------------
Money Market Subaccount 4.80%
High-Grade Bond Subaccount -1.16%
High Yield Bond Subaccount 2.52%
Short-Term Corporate Subaccount ---
Balanced Subaccount 3.91%
Diversified Value Subaccount ---
Equity Income Subaccount -2.84%
Equity Index Subaccount 20.58%
Growth Subaccount 21.97%
Mid-Cap Index Subaccount ---
REIT Index Subaccount ---
Small Company Growth Subaccount 60.76%
International Subaccount 24.89%
B-9
<PAGE>
Non Standardized One Year Return
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods commencing
at the beginning of a calendar year (or date of inception, if during the
relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the percentage change in actual Accumulation Unit Values during
the relevant period. These percentages reflect a deduction for the Separate
Account and Portfolio expenses, but do not include the Annual Contract
Maintenance Fee or Premium Taxes (if any), which if included would reduce the
percentages reported by the Company.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Money Market Subaccount.......... 4.80% 5.11% 5.10% 4.97% 5.34%
High-Grade Bond Subaccount....... -1.16% 8.18% 8.98% 3.08% 17.47%
High Yield Bond Subaccount....... 2.52% 3.63% 11.63% --- ---
Short-Term Corporate Subaccount.. --- --- --- --- ---
Balanced Subaccount.............. 3.91% 11.62% 22.60% 15.68% 31.76%
Diversified Value Subaccount..... --- --- --- --- ---
Equity Income Subaccount......... -2.84% 17.16% 33.78% 18.13% 38.19%
Equity Index Subaccount.......... 20.58% 28.21% 32.59% 22.27% 36.67%
Growth Subaccount................ 21.97% 40.20% 26.12% 26.29% 37.62%
Mid-Cap Index Subaccount......... --- --- --- --- ---
REIT Index Subaccount............ --- --- --- --- ---
Small Company Growth Subaccount.. 60.76% 7.49% 12.80% --- ---
International Subaccount......... 24.98% 18.36% 2.92% 14.05% 15.31%
1994 1993 1992
----- ----- -----
Money Market Subaccount.......... 3.66% 2.47% 3.10%
High-Grade Bond Subaccount....... -3.19% 8.92% 5.70%
High Yield Bond Subaccount....... --- --- ---
Short-Term Corporate Subaccount.. --- --- ---
Balanced Subaccount.............. -1.13% 12.56% 6.59%
Diversified Value Subaccount..... --- --- ---
Equity Income Subaccount......... -1.76% --- ---
Equity Index Subaccount.......... 0.61% 9.18% 6.77%
Growth Subaccount................ 3.74% --- ---
Mid-Cap Index Subaccount......... --- --- ---
REIT Index Subaccount............ --- --- ---
Small Company Growth Subaccount.. --- --- ---
International Subaccount......... --- --- ---
</TABLE>
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Company. The assets are
kept physically segregated and held separate and apart from the Company's
general account assets. Records are maintained of all purchases and redemptions
of eligible Portfolio shares held by each of the Subaccounts.
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS
The Portfolios may be made available to registered separate accounts offering
variable annuity and variable life products of the Company or other insurance
companies. Although the Company believes it is unlikely, a material conflict
could arise between the interests of the Separate Account and one or more of the
other participating separate accounts. In the event a material conflict does
exist, the affected insurance companies agree to take any necessary steps,
including removing their separate accounts from the Fund if required by law, to
resolve the matter.
B-10
<PAGE>
THE COMPANY
The Company is a direct subsidiary of Monumental Life Insurance Company,
Capital Liberty, L.P., and Commonwealth General Corporation, which,
respectively, have 76.3%, 20%, and 3.7% interests in the Company. Monumental
Life Insurance Company is a direct subsidiary of Capital General Development
Corporation and First AUSA Life Insurance Company, which, respectively, have
73.23% and 26.77% interests in Monumental Life Insurance Company. Monumental
Life Insurance Company and Commonwealth General Corporation have, respectively,
99% and 1% interests in Capital Liberty, L.P. Commonwealth General Corporation
is a wholly owned subsidiary of Transamerica Holding Company. Capital General
Development Corporation is a wholly owned subsidiary of Commonwealth General
Corporation. First AUSA Life Insurance Company is a wholly owned subsidiary of
Transamerica Holding Company. Transamerica Holding Company is a wholly owned
subsidiary of AEGON USA, Inc.
The Company is a wholly owned indirect subsidiary of AEGON USA, Inc., which in
turn is wholly owned by AEGON U.S. Holding Corporation, a wholly owned
subsidiary of AEGON International N.V. AEGON International N.V. is a wholly
owned subsidiary of AEGON N.V. Vereniging AEGON (a Netherlands membership
association) has a 53.16% interest in AEGON N.V.
The Company was formerly known as National Home Life Assurance Company, until
July 1, 1995, when it changed its name to Providian Life and Health Insurance
Company. On October 1, 1998, it changed its name to Peoples Benefit Life
Insurance Company.
TAXES
The Company is taxed as a life insurance company under Part I of Subchapter L
of the Internal Revenue Code. Since the Separate Account is not a separate
entity from the Company and its operations form a part of the Company, the
Separate Account will not be taxed separately as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. Investment income and
realized capital gains on the assets of the Separate Account are reinvested and
taken into account in determining the Accumulated Value. Under existing federal
income tax law, the Separate Account's investment income, including realized net
capital gains, is not taxed to the Company. The Company reserves the right to
make a deduction for taxes should they be imposed with respect to such items in
the future.
Under present laws, the Company will incur state or local taxes in several
states. If there is a change in state or local tax laws, the Company may make
charges for such taxes. At present time, the Company does not charge the
Contract Owner for these other taxes. If there is a change in state or local
tax laws, charges for such taxes may be made. The Company does not expect to
incur any federal income tax liability attributable to investment income or
capital gains retained as part of the reserves under the Contracts. Based upon
these expectations, no charge is currently being made to the Separate Account
for corporate federal income taxes that may be attributable to the Separate
Account.
The Company will periodically review the question of a charge to the Separate
Account for corporate federal income taxes related to the Separate Account. Such
a charge may be made in future years for any federal income taxes the Company
incurs. This might become necessary if the Company ultimately determines that
its tax treatment is not what it currently believes it to be, if there are
changes in the federal income tax treatment of annuities at the corporate level,
or if there is a change in the Company's tax status. If the Company should incur
federal income taxes attributable to investment income or capital gains retained
as part of the reserves under the Contracts, the Accumulated Value of the
Contract would be correspondingly adjusted by any provision or charge for such
taxes.
STATE REGULATION OF THE COMPANY
The Company is a stock life insurance company organized under the laws of
Iowa, and is subject to regulation by the Iowa Insurance Division. An annual
statement in a prescribed form is filed with Iowa Insurance Division on or
before March 1 of each year covering the operations and reporting on the
financial condition of the Company as of December 31 of the preceding calendar
year. Periodically, the Iowa Insurance Division examines the financial
condition of the Company, including the liabilities and reserves of the Separate
Account
B-11
<PAGE>
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained
by the Company or by its administrator, The Vanguard Group, Inc. As presently
required by the Investment Company Act of 1940 and regulations promulgated
thereunder, the Company will mail to all Contract Owners at their last known
address of record, at least semiannually, reports containing such information as
may be required under that Act or by any other applicable law or regulation.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. The Company is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The audited financial statements of the subaccounts of the Separate Account
which are available for investment by Vanguard Variable Annuity Plan Contract
Owners as of December 31, 1999, including the Report of Independent Auditors
thereon, are included in this Statement of Additional Information.
The audited statutory-basis financial statements of the Company as of December
31, 1999 and 1998 and for each of the three years in the period ended December
31, 1999, including the Report of Independent Auditors thereon, which are also
included in this Statement of Additional Information, should be distinguished
from the financial statements of subaccounts of the Separate Account which are
available for investment by Vanguard Variable Annuity Plan Contract Owners and
should be considered only as bearing on the ability of the Company to meet its
obligations under the Contracts. They should not be considered as bearing on the
investment performance of the assets held in the Separate Account.
B-12
<PAGE>
Financial Statements
Peoples Benefit Life Insurance
Company Separate Account IV -
Vanguard Variable Annuity Plan
Year ended December 31, 1999
with Report of Independent Auditors
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Financial Statements
Year ended December 31, 1999
Contents
Report of Independent Auditors.................................................1
Financial Statements
Balance Sheets.................................................................2
Statements of Operations.......................................................4
Statements of Changes in Contract Owners' Equity...............................6
Notes to Financial Statements.................................................11
<PAGE>
Report of Independent Auditors
The Board of Directors and Contract Owners
of the Vanguard Variable Annuity Plan,
Peoples Benefit Life Insurance Company
We have audited the accompanying balance sheets of Peoples Benefit Life
Insurance Company Separate Account IV (comprised of the Money Market, High-Grade
Bond, Balanced, Equity Index, Growth, Equity Income, International, High Yield
Bond, Small Company Growth, Mid-Cap Index, Short-Term Corporate, Diversified
Value, and REIT Index subaccounts), which are available for investment by
contract owners of the Vanguard Variable Annuity Plan, as of December 31, 1999,
and the related statements of operations for the period then ended as indicated
thereon and changes in contract owners' equity for the periods indicated
thereon. These financial statements are the responsibility of the Separate
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of mutual fund shares owned as of December 31,
1999, by correspondence with the mutual fund's transfer agent. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts of Peoples Benefit Life Insurance Company Separate Account IV which
are available for investment by contract owners of the Vanguard Variable Annuity
Plan at December 31, 1999, and the results of their operations for the period
then ended as indicated thereon and changes in their contract owners' equity for
the periods indicated thereon in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Des Moines, Iowa
January 28, 2000
1
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Balance Sheets
December 31, 1999
<TABLE>
<CAPTION>
Money High-Grade
Market Bond Balanced Equity Index Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Cash $ 274 $ - $ - $ - $ -
Investments in mutual funds, at current
market value:
Vanguard Variable Insurance Fund:
Money Market Portfolio 660,967,126 - - - -
High-Grade Bond Portfolio - 309,698,881 - - -
Balanced Portfolio - - 555,677,305 - -
Equity Index Portfolio - - - 1,506,020,219 -
Growth Portfolio - - - - 1,105,641,323
Equity Income Portfolio - - - - -
International Portfolio - - - - -
High Yield Bond Portfolio - - - - -
Small Company Growth Portfolio - - - - -
Mid-Cap Index Portfolio - - - - -
Short-Term Corporate Portfolio - - - - -
Diversified Value Portfolio - - - - -
REIT Index Portfolio - - - - -
--------------------------------------------------------------------------------------
Total investments in mutual funds 660,967,126 309,698,881 555,677,305 1,506,020,219 1,105,641,323
--------------------------------------------------------------------------------------
Total assets $660,967,400 $309,698,881 $555,677,305 $1,506,020,219 $1,105,641,323
======================================================================================
Liabilities and contract owners'
equity
Liabilities:
Contract terminations payable $ - $ 4,305 $ 424 $ 1,450 $ 149
--------------------------------------------------------------------------------------
Total liabilities - 4,305 424 1,450 149
Contract owners' equity:
Deferred annuity contracts terminable
by owners 660,967,400 309,694,576 555,676,881 1,506,018,769 1,105,641,174
--------------------------------------------------------------------------------------
Total liabilities and contract owners'
equity $660,967,400 $309,698,881 $555,677,305 $1,506,020,219 $1,105,641,323
======================================================================================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
Small
Equity High Yield Company Mid-Cap
Income International Bond Growth Index
Subaccount Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets $ - $ - $ - $ - $ -
Cash
Investments in mutual funds, at current
market value:
Vanguard Variable Insurance Fund:
Money Market Portfolio - - - - -
High-Grade Bond Portfolio - - - - -
Balanced Portfolio - - - - -
Equity Index Portfolio - - - - -
Growth Portfolio - - - - -
Equity Income Portfolio 367,208,732 - - - -
International Portfolio - 323,630,324 - - -
High Yield Bond Portfolio - - 138,222,342 - -
Small Company Growth Portfolio - - - 266,858,866 -
Mid-Cap Index Portfolio - - - - 71,555,163
Short-Term Corporate Portfolio - - - - -
Diversified Value Portfolio - - - - -
REIT Index Portfolio - - - - -
-----------------------------------------------------------------------------------
Total investments in mutual funds 367,208,732 323,630,324 138,222,342 266,858,866 71,555,163
-----------------------------------------------------------------------------------
Total assets $367,208,732 $323,630,324 $138,222,342 $266,858,866 $71,555,163
===================================================================================
Liabilities and contract owners'
equity
Liabilities:
Contract terminations payable $ 264 $ 31 $ 524 $ 805 $ 140
-----------------------------------------------------------------------------------
Total liabilities 264 31 524 805 140
Contract owners' equity:
Deferred annuity contracts terminable
by owners 367,208,468 323,630,293 138,221,818 266,858,061 71,555,023
-----------------------------------------------------------------------------------
Total liabilities and contract owners'
equity $367,208,732 $323,630,324 $138,222,342 $266,858,866 $71,555,163
===================================================================================
<CAPTION>
Short-Term Diversified
Corporate Value REIT Index
Subaccount Subaccount Subaccount
---------------------------------------------
<S> <C> <C> <C>
Assets $ - $ - $ -
Cash
Investments in mutual funds, at current
market value:
Vanguard Variable Insurance Fund:
Money Market Portfolio - - -
High-Grade Bond Portfolio - - -
Balanced Portfolio - - -
Equity Index Portfolio - - -
Growth Portfolio - - -
Equity Income Portfolio - - -
International Portfolio - - -
High Yield Bond Portfolio - - -
Small Company Growth Portfolio - - -
Mid-Cap Index Portfolio - - -
Short-Term Corporate Portfolio 32,220,236 - -
Diversified Value Portfolio - 29,425,170 -
REIT Index Portfolio - - 22,215,398
---------------------------------------------
Total investments in mutual funds 32,220,236 29,425,170 22,215,398
---------------------------------------------
Total assets $32,220,236 $29,425,170 $22,215,398
=============================================
Liabilities and contract owners'
equity
Liabilities:
Contract terminations payable $ 182 $ 77 $ 20
---------------------------------------------
Total liabilities 182 77 20
Contract owners' equity:
Deferred annuity contracts terminable
by owners 32,220,054 29,425,093 22,215,378
---------------------------------------------
Total liabilities and contract owners'
equity $32,220,236 $29,425,170 $22,215,398
=============================================
</TABLE>
3
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Statements of Operations
Year ended December 31, 1999, except as noted
<TABLE>
<CAPTION>
Money High-Grade
Market Bond Balanced Equity Index Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income (loss)
Income:
Dividends $ 30,676,566 $19,863,596 $46,827,277 $ 27,081,322 $ 51,989,560
Expenses:
Administrative, mortality and expense
risk charge 2,284,049 1,208,021 2,200,223 4,848,246 3,475,245
------------------------------------------------------------------------------------
Net investment income (loss) 28,392,517 18,655,575 44,627,054 22,233,076 48,514,315
Net realized and unrealized capital gain
(loss) from investments
Net realized capital gain (loss) from sales
of investments:
Proceeds from sales 106,930,520 48,156,894 64,331,956 31,378,121 48,813,316
Cost of investments sold 106,930,520 48,279,353 53,009,882 17,794,453 30,083,654
------------------------------------------------------------------------------------
Net realized capital gain (loss) from sales
of investments - (122,459) 11,322,074 13,583,668 18,729,662
Net change in unrealized appreciation/
depreciation of investments:
Beginning of the period - 8,220,017 84,859,749 388,424,078 252,061,642
End of the period - (13,986,899) 50,801,127 596,626,485 376,763,094
------------------------------------------------------------------------------------
Net change in unrealized appreciation/
depreciation of investments - (22,206,916) (34,058,622) 208,202,407 124,701,452
------------------------------------------------------------------------------------
Net realized and unrealized capital gain
(loss) from investments - (22,329,375) (22,736,548) 221,786,075 143,431,114
------------------------------------------------------------------------------------
Increase (decrease) from operations $ 28,392,517 $ (3,673,800) $21,890,506 $244,019,151 $191,945,429
====================================================================================
</TABLE>
See accompanying notes.
(1) Commencement of operations, February 8, 1999.
4
<PAGE>
<TABLE>
<CAPTION>
Small Company
Equity Income High Yield Growth
Subaccount International Bond Subaccount
Subaccount Subaccount
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income (loss)
Income:
Dividends $ 12,594,043 $10,957,410 $12,090,281 $ 854,301
Expenses:
Administrative, mortality and expense
risk charge 1,559,987 954,607 535,987 576,655
-------------------------------------------------------------------
Net investment income (loss) 11,034,056 10,002,803 11,554,294 277,646
Net realized and unrealized capital gain
(loss) from investments
Net realized capital gain (loss) from sales
of investments:
Proceeds from sales 59,165,457 25,165,158 31,195,462 22,995,522
Cost of investments sold 43,684,179 20,798,903 33,357,242 21,552,623
-------------------------------------------------------------------
Net realized capital gain (loss) from sales
of investments 15,481,278 4,366,255 (2,161,780) 1,442,899
Net change in unrealized appreciation/
depreciation of investments:
Beginning of the period 101,632,122 35,896,546 (4,094,014) 13,502,378
End of the period 63,792,185 83,304,710 (10,166,889) 102,425,500
-------------------------------------------------------------------
Net change in unrealized appreciation/
depreciation of investments (37,839,937) 47,408,164 (6,072,875) 88,923,122
-------------------------------------------------------------------
Net realized and unrealized capital gain
(loss) from investments (22,358,659) 51,774,419 (8,234,655) 90,366,021
-------------------------------------------------------------------
Increase (decrease) from operations $(11,324,603) $61,777,222 $ 3,319,639 $90,643,667
===================================================================
<CAPTION>
Mid-Cap Index Short-Term Diversified
Subaccount (1) Corporate Value REIT Index
Subaccount Subaccount (1) Subaccount
(1) (1)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income (loss)
Income:
Dividends $1,257,340 $1,128,334 $ 498,662 $ -
Expenses:
Administrative, mortality and expense
risk charge 132,239 71,884 110,638 54,245
-------------------------------------------------------------------
Net investment income (loss) 1,125,101 1,056,450 388,024 (54,245)
Net realized and unrealized capital gain
(loss) from investments
Net realized capital gain (loss) from sales
of investments:
Proceeds from sales 1,126,165 3,193,670 14,516,337 1,950,205
Cost of investments sold 1,017,866 3,258,889 15,828,075 1,983,929
-------------------------------------------------------------------
Net realized capital gain (loss) from sales
of investments 108,299 (65,219) (1,311,738) (33,724)
Net change in unrealized appreciation/
depreciation of investments:
Beginning of the period - - - -
End of the period 7,205,750 (503,645) (7,832,162) (908,614)
-------------------------------------------------------------------
Net change in unrealized appreciation/
depreciation of investments 7,205,750 (503,645) (7,832,162) (908,614)
-------------------------------------------------------------------
Net realized and unrealized capital gain
(loss) from investments 7,314,049 (568,864) (9,143,900) (942,338)
-------------------------------------------------------------------
Increase (decrease) from operations $8,439,150 $ 487,586 $ (8,755,876) $ (996,583)
===================================================================
</TABLE>
5
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Statements of Changes in Contract Owners' Equity
Years ended December 31, 1999 and 1998, except as noted
<TABLE>
<CAPTION>
Money Market Subaccount High-Grade Bond Subaccount
----------------------------------- ----------------------------------
1999 1998 1999 1998
----------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 28,392,517 $ 23,123,698 $ 18,655,575 $ 15,102,539
Net realized capital gain (loss) - - (122,459) 1,184,139
Net change in unrealized
appreciation/depreciation of
investments - - (22,206,916) 3,035,097
----------------------------------- ----------------------------------
Increase (decrease) from
operations 28,392,517 23,123,698 (3,673,800) 19,321,775
Contract transactions:
Net contract purchase payments 242,500,329 542,070,659 43,607,289 23,801,304
Transfer payments from (to)
other subaccounts or general
account (72,193,810) (360,922,340) (36,777,353) 83,833,768
Contract terminations,
withdrawals and other
deductions (72,963,789) (40,567,808) (13,722,088) (7,863,358)
----------------------------------- ----------------------------------
Increase (decrease) from contract
transactions 97,342,730 140,580,511 (6,892,152) 99,771,714
----------------------------------- ----------------------------------
Net increase (decrease) in contract
owners' equity 125,735,247 163,704,209 (10,565,952) 119,093,489
Contract owners' equity:
Beginning of the period 535,232,153 371,527,944 320,260,528 201,167,039
----------------------------------- ----------------------------------
End of the period $660,967,400 $535,232,153 $309,694,576 $320,260,528
=================================== ==================================
</TABLE>
See accompanying notes.
(1) Commencement of operations, February 8, 1999.
6
<PAGE>
<TABLE>
<CAPTION>
Balanced Subaccount Equity Index Subaccount
------------------------------------ -------------------------------------
1999 1998 1999 1998
------------------------------------ -------------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 44,627,054 $ 54,290,645 $ 22,233,076 $ 12,666,476
Net realized capital gain (loss) 11,322,074 15,060,913 13,583,668 44,755,906
Net change in unrealized
appreciation/depreciation of
investments (34,058,622) (12,875,543) 208,202,407 164,644,095
------------------------------------ -------------------------------------
Increase (decrease) from
operations 21,890,506 56,476,015 244,019,151 222,066,477
Contract transactions:
Net contract purchase payments 55,949,817 34,390,774 161,500,993 68,344,382
Transfer payments from (to)
other subaccounts or general
account (70,729,641) 32,132,098 70,467,436 91,359,082
Contract terminations,
withdrawals and other
deductions (26,287,059) (15,764,441) (54,986,421) (25,941,516)
------------------------------------ -------------------------------------
Increase (decrease) from contract
transactions (41,066,883) 50,758,431 176,982,008 133,761,948
------------------------------------ -------------------------------------
Net increase (decrease) in contract
owners' equity (19,176,377) 107,234,446 421,001,159 355,828,425
Contract owners' equity:
Beginning of the period 574,853,258 467,618,812 1,085,017,610 729,189,185
------------------------------------ -------------------------------------
End of the period $555,676,881 $574,853,258 $1,506,018,769 $1,085,017,610
==================================== =====================================
<CAPTION>
Growth Subaccount
------------------------------------
1999 1998
------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) $ 48,514,315 $ 38,721,561
Net realized capital gain (loss) 18,729,662 25,057,114
Net change in unrealized
appreciation/depreciation of
investments 124,701,452 137,524,677
------------------------------------
Increase (decrease) from
operations 191,945,429 201,303,352
Contract transactions:
Net contract purchase payments 114,447,793 47,679,438
Transfer payments from (to)
other subaccounts or general
account 49,500,989 106,624,819
Contract terminations,
withdrawals and other
deductions (47,409,967) (14,500,631)
------------------------------------
Increase (decrease) from contract
transactions 116,538,815 139,803,626
------------------------------------
Net increase (decrease) in contract
owners' equity 308,484,244 341,106,978
Contract owners' equity:
Beginning of the period 797,156,930 456,049,952
------------------------------------
End of the period $1,105,641,174 $797,156,930
====================================
</TABLE>
7
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Equity Income Subaccount International Subaccount
---------------------------------- ----------------------------------
1999 1998 1999 1998
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 11,034,056 $ 9,296,054 $ 10,002,803 $ 2,227,566
Net realized capital gain (loss) 15,481,278 18,292,781 4,366,255 6,751,341
Net change in unrealized
appreciation/depreciation of
investments (37,839,937) 28,459,344 47,408,164 25,252,750
---------------------------------- ----------------------------------
Increase (decrease) from
operations (11,324,603) 56,048,179 61,777,222 34,231,657
Contract transactions:
Net contract purchase payments 50,573,106 32,156,785 26,385,990 11,473,115
Transfer payments from (to)
other subaccounts or general
account (63,458,331) 27,844,294 7,518,460 (3,257,020)
Contract terminations,
withdrawals and other
deductions (14,844,242) (10,442,192) (8,358,128) (6,238,121)
---------------------------------- ----------------------------------
Increase (decrease) from contract
transactions (27,729,467) 49,558,887 25,546,322 1,977,974
---------------------------------- ----------------------------------
Net increase (decrease) in contract
owners' equity (39,054,070) 105,607,066 87,323,544 36,209,631
Contract owners' equity:
Beginning of the period 406,262,538 300,655,472 236,306,749 200,097,118
---------------------------------- ----------------------------------
End of the period $367,208,468 $406,262,538 $323,630,293 $236,306,749
================================== ==================================
</TABLE>
See accompanying notes.
(1) Commencement of operations, February 8, 1999.
8
<PAGE>
<TABLE>
<CAPTION>
Small Company
High Yield Bond Subaccount Growth Subaccount
---------------------------------- ----------------------------------
1999 1998 1999 1998
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 11,554,294 $ 10,253,085 $ 277,646 $ 314,962
Net realized capital gain (loss) (2,161,780) (316,390) 1,442,899 2,117,876
Net change in unrealized
appreciation/depreciation of
investments (6,072,875) (6,006,789) 88,923,122 7,655,810
---------------------------------- ----------------------------------
Increase (decrease) from
operations 3,319,639 3,929,906 90,643,667 10,088,648
Contract transactions:
Net contract purchase payments 26,655,624 16,980,800 21,467,829 11,402,033
Transfer payments from (to)
other subaccounts or general
account (22,354,634) 25,729,756 23,746,251 (3,184,344)
Contract terminations,
withdrawals and other
deductions (5,434,993) (5,378,034) (8,622,599) (3,190,059)
---------------------------------- ----------------------------------
Increase (decrease) from contract
transactions (1,134,003) 37,332,522 36,591,481 5,027,630
---------------------------------- ----------------------------------
Net increase (decrease) in contract
owners' equity 2,185,636 41,262,428 127,235,148 15,116,278
Contract owners' equity:
Beginning of the period 136,036,182 94,773,754 139,622,913 124,506,635
---------------------------------- ----------------------------------
End of the period $138,221,818 $136,036,182 $266,858,061 $139,622,913
================================== ==================================
<CAPTION>
Mid-Cap Short-Term
Index Corporate
Subaccount (1) Subaccount (1)
------------------ ------------------
1999 1999
------------------ ------------------
<S> <C> <C>
Operations:
Net investment income (loss) $ 1,125,101 $ 1,056,450
Net realized capital gain (loss) 108,299 (65,219)
Net change in unrealized
appreciation/depreciation of
investments 7,205,750 (503,645)
------------------ ------------------
Increase (decrease) from
operations 8,439,150 487,586
Contract transactions:
Net contract purchase payments 16,525,650 10,329,332
Transfer payments from (to)
other subaccounts or general
account 48,879,994 22,305,462
Contract terminations,
withdrawals and other
deductions (2,289,771) (902,326)
------------------ ------------------
Increase (decrease) from contract
transactions 63,115,873 31,732,468
------------------ ------------------
Net increase (decrease) in contract
owners' equity 71,555,023 32,220,054
Contract owners' equity:
Beginning of the period - -
------------------ ------------------
End of the period $71,555,023 $32,220,054
================== ==================
</TABLE>
9
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Diversified Value REIT Index
Subaccount (1) Subaccount (1)
------------------ ------------------
1999 1999
------------------ ------------------
<S> <C> <C>
Operations:
Net investment income (loss) $ 388,024 $ (54,245)
Net realized capital gain (loss) (1,311,738) (33,724)
Net change in unrealized appreciation/depreciation of
investments (7,832,162) (908,614)
------------------ ------------------
Increase (decrease) from operations (8,755,876) (996,583)
Contract transactions:
Net contract purchase payments 12,938,084 7,084,977
Transfer payments from (to) other subaccounts or
general account 26,955,600 16,380,852
Contract terminations, withdrawals and other deductions (1,712,715) (253,868)
------------------ ------------------
Increase (decrease) from contract transactions 38,180,969 23,211,961
------------------ ------------------
Net increase (decrease) in contract owners' equity 29,425,093 22,215,378
Contract owners' equity:
Beginning of the period - -
------------------ ------------------
End of the period $29,425,093 $22,215,378
================== ==================
</TABLE>
See accompanying notes.
(1) Commencement of operations, February 8, 1999.
10
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Notes to Financial Statements
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Organization of the Account
Peoples Benefit Life Insurance Company Separate Account IV (the "Mutual Fund
Account") is a segregated investment account of Peoples Benefit Life Insurance
Company ("PBL"), an indirect wholly-owned subsidiary of AEGON N.V., a holding
company organized under the laws of The Netherlands.
The Mutual Fund Account is registered with the Securities and Exchange
Commission as a Unit Investment Trust pursuant to provisions of the Investment
Company Act of 1940. The Mutual Fund Account consists of thirteen investment
subaccounts which invest exclusively in shares of a corresponding portfolio of
the Vanguard Variable Insurance Fund (the "Series Fund"), an open-end
diversified investment company offered by The Vanguard Group, Inc. ("Vanguard").
Activity in these thirteen investment subaccounts is available to contract
owners of the Vanguard Variable Annuity Plan.
Investments
Net purchase payments received by the Mutual Fund Account for the Vanguard
Variable Annuity Plan are invested in the portfolios of the Series Fund, as
selected by the contract owner. Investments are stated at the closing net asset
values per share on December 31, 1999.
Prior to August 11, 1998, realized capital gains and losses from the sale of
shares in the Series Fund were determined on the basis of average cost.
Subsequent to this date, such gains or losses are determined on the first-in,
first-out basis. This change was implemented by establishing the average cost of
the portfolio as of August 11, 1998 as the opening cost for purposes of the
first-in, first-out basis. This change had no effect on "net realized and
unrealized capital gain (loss) from investments" and "increase (decrease) from
operations" as reported in the Statements of Operations. Investment transactions
are accounted for on the trade date (date the order to buy or sell is executed)
and dividend income is recorded on the ex-dividend date. Unrealized gains or
losses from the investments in the Series Fund are credited or charged to
contract owners' equity.
Dividend Income
Dividends received from the Series Fund investments are reinvested to purchase
additional mutual fund shares.
11
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Notes to Financial Statements (continued)
2. Investments
A summary of the mutual fund investments at December 31, 1999 follows:
<TABLE>
<CAPTION>
Number of Net Asset Market
Shares Held Value Per Share Value Cost
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Portfolio 660,967,126.040 $ 1.0000 $ 660,967,126 $660,967,126
High-Grade Bond Portfolio 30,448,607.898 10.1712 309,698,881 323,685,780
Balanced Portfolio 33,949,211.858 16.3679 555,677,305 504,876,178
Equity Index Portfolio 39,476,283.582 38.1500 1,506,020,219 909,393,734
Growth Portfolio 33,581,826.017 32.9238 1,105,641,323 728,878,229
Equity Income Portfolio 18,103,993.533 20.2833 367,208,732 303,416,547
International Portfolio 17,900,798.391 18.0791 323,630,324 240,325,614
High Yield Bond Portfolio 14,478,698.343 9.5466 138,222,342 148,389,231
Small Company Growth Portfolio 14,150,362.988 18.8588 266,858,866 164,433,366
Mid-Cap Index Portfolio 5,857,303.532 12.2164 71,555,163 64,349,413
Short-Term Corporate Portfolio 3,322,153.295 9.6986 32,220,236 32,723,881
Diversified Value Portfolio 3,429,786.791 8.5793 29,425,170 37,257,332
REIT Index Portfolio 2,273,814.838 9.7701 22,215,398 23,124,012
<CAPTION>
The aggregate cost of purchases and proceeds from sales of investments were as follows:
Period ended December 31
1999 1998
------------------------------------ ------------------------------------
Purchases Sales Purchases Sales
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Money Market Portfolio $232,665,769 $106,930,520 $719,035,239 $555,355,663
High-Grade Bond Portfolio 59,925,010 48,156,894 160,527,243 45,540,624
Balanced Portfolio 67,892,625 64,331,956 172,632,133 67,893,164
Equity Index Portfolio 230,595,313 31,378,121 284,877,412 138,859,248
Growth Portfolio 213,866,973 48,813,316 265,614,053 87,266,560
Equity Income Portfolio 42,470,854 59,165,457 135,800,139 76,789,213
International Portfolio 60,714,029 25,165,158 68,265,654 64,121,640
High Yield Bond Portfolio 41,616,926 31,195,462 99,817,385 52,235,877
Small Company Growth Portfolio 59,864,183 22,995,522 55,499,343 50,203,869
Mid-Cap Index Portfolio 65,367,279 1,126,165 - -
Short-Term Corporate Portfolio 35,982,770 3,193,670 - -
Diversified Value Portfolio 53,085,407 14,516,337 - -
REIT Index Portfolio 25,107,941 1,950,205 - -
</TABLE>
12
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account IV - Vanguard Variable Annuity Plan
Notes to Financial Statements (continued)
3. Contract Owners' Equity
A summary of deferred annuity contracts terminable by owners at December 31,
1999 follows:
<TABLE>
<CAPTION>
Accumulation Units Accumulation Total Contract
Subaccount Owned Unit Value Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market 456,735,733.043 $ 1.447155 $ 660,967,400
High-Grade Bond 17,857,411.850 17.342635 309,694,576
Balanced 20,007,332.173 27.773662 555,676,881
Equity Index 33,247,149.433 45.297681 1,506,018,769
Growth 26,900,326.838 41.101403 1,105,641,174
Equity Income 14,334,351.883 25.617375 367,208,468
International 15,970,027.562 20.264855 323,630,293
High Yield Bond 10,721,176.823 12.892411 138,221,818
Small Company Growth 14,077,389.438 18.956502 266,858,061
Mid-Cap Index Portfolio 5,745,554.657 12.453980 71,555,023
Short-Term Corporate Portfolio 3,165,139.516 10.179663 32,220,054
Diversified Value Portfolio 3,396,909.083 8.662314 29,425,093
REIT Index Portfolio 2,281,379.500 9.737695 22,215,378
<CAPTION>
A summary of changes in contract owners' account units follows:
Money High-Grade
Market Bond Balanced
Subaccount Subaccount Subaccount
------------------------------------------------
<S> <C> <C> <C>
Units outstanding at January 1, 1998 282,813,139 12,403,399 19,528,182
Units purchased 492,838,407 5,239,781 3,659,787
Units redeemed and transferred (388,048,484) 609,308 (1,680,962)
------------------------------------------------
Units outstanding at December 31, 1998 387,603,062 18,252,488 21,507,007
Units purchased 172,106,887 2,509,166 2,027,638
Units redeemed and transferred (102,974,216) (2,904,242) (3,527,313)
------------------------------------------------
Units outstanding at December 31, 1999 456,735,733 17,857,412 20,007,332
================================================
</TABLE>
13
<PAGE>
Financial Statements - Statutory Basis
Peoples Benefit Life Insurance Company
Years ended December 31, 1999, 1998 and 1997
with Report of Independent Auditors
<PAGE>
Peoples Benefit Life Insurance Company
Financial Statements - Statutory Basis
Years ended December 31, 1999, 1998 and 1997
Contents
Report of Independent Auditors............................................1
Audited Financial Statements
Balance Sheets - Statutory Basis..........................................3
Statements of Operations - Statutory Basis................................5
Statements of Changes in Capital and Surplus - Statutory Basis............6
Statements of Cash Flow - Statutory Basis.................................7
Notes to Financial Statements - Statutory Basis...........................8
<PAGE>
Report of Independent Auditors
The Board of Directors
Peoples Benefit Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Peoples
Benefit Life Insurance Company, an indirect wholly-owned subsidiary of AEGON
N.V., as of December 31, 1999 and 1998, and the related statutory-basis
statements of operations, changes in capital and surplus, and cash flow for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, of the State of
Iowa, which practices differ from generally accepted accounting principles. The
variances between such practices and generally accepted accounting principles
also are described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Peoples Benefit Life Insurance Company at December 31, 1999 and 1998, or the
results of its operations or its cash flow for each of the three years in the
period ended December 31, 1999.
1
<PAGE>
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Peoples Benefit Life
Insurance Company at December 31, 1999 and 1998, and the results of its
operations and its cash flow for each of the three years in the period ended
December 31, 1999, in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, of the State of
Iowa.
/s/ Ernst & Young LLP
Des Moines, Iowa
February 18, 2000
2
<PAGE>
Peoples Benefit Life Insurance Company
Balance Sheets - Statutory Basis
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31
1999 1998
-------------------------------
<S> <C> <C>
Admitted assets
Cash and invested assets:
Cash and short-term investments $ 174,117 $ 193,367
Bonds 3,219,493 4,299,430
Stocks:
Preferred 160,990 91,609
Common (cost: 1999 - $180,645; 1998 - $37,955) 201,185 38,092
Common stocks sold, but not yet purchased [cost:
1999 - $(137,497); 1998 - $(80,447)] (147,374) (83,727)
Affiliated entity (cost: 1999 - $202,606; 1998 - $202,606)
515,075 457,011
Mortgage loans on real estate 1,933,540 2,041,729
Real estate 7,605 3,980
Policy loans 159,161 154,703
Other invested assets 316,696 268,783
-------------------------------
Total cash and invested assets 6,540,488 7,464,977
Premiums deferred and uncollected 45,553 44,117
Accrued investment income 64,418 79,705
Receivable from affiliates 42,290 72,156
Federal income taxes recoverable 2,709 12,157
Other assets 20,577 54,432
Separate account assets 6,505,330 4,915,961
-----------------------------------
Total admitted assets $13,221,365 $12,643,505
===================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
December 31
1999 1998
-----------------------------
<S> <C> <C>
Liabilities and capital and surplus
Liabilities:
Aggregate reserves for policies and contracts:
Life $ 1,099,807 $ 1,120,051
Annuity 2,840,176 3,126,053
Accident and health 79,058 81,793
Policy and contract claim reserves:
Life 27,588 30,445
Accident and health 33,522 29,556
Policyholder contract deposits 1,224,174 1,740,041
Other policyholders' funds 514,060 524,254
Remittances and items not allocated 6,814 11,644
Asset valuation reserve 163,728 134,828
Interest maintenance reserve 10,502 16,131
Short-term notes payable to affiliates 104,500 102,293
Payable for securities - 116,191
Other liabilities 84,459 68,767
Transfers to separate accounts due or accrued (3,781) 3,215
Payable to affiliates - 79,952
Separate account liabilities 6,505,330 4,884,819
-----------------------------
Total liabilities 12,689,937 12,070,033
Commitments and contingencies (Note 9)
Capital and surplus:
Common stock, $11 par value, 1,145,000 shares authorized, issued
and outstanding 12,595 12,595
Preferred stock, $11 par value, $240 liquidation value, 2,290,000
shares authorized, issued and outstanding 25,190 25,190
Paid-in surplus 2,583 2,583
Unassigned surplus 491,060 533,104
-----------------------------
Total capital and surplus 531,428 573,472
-----------------------------
Total liabilities and capital and surplus $13,221,365 $12,643,505
=============================
</TABLE>
See accompanying notes.
4
<PAGE>
Peoples Benefit Life Insurance Company
Statements of Operations - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
----------------------------------------------
<S> <C> <C> <C>
Revenues:
Premiums and other considerations, net of reinsurance:
Life $ 171,343 $ 165,442 $ 169,292
Annuity 1,358,289 1,584,173 1,232,283
Accident and health 132,842 133,490 144,713
Net investment income 451,064 512,102 559,656
Amortization of interest maintenance reserve 8,274 7,046 6,333
Commissions and expense allowances on reinsurance
ceded 5,474 4,542 2,323
Separate account fee income 23,824 19,494 -
Other 3,659 (9,666) 7,770
----------------------------------------------
2,154,769 2,416,623 2,122,370
Benefits and expenses:
Benefits paid or provided for:
Life benefits 189,648 207,521 112,403
Surrender benefits 1,453,339 1,338,387 1,120,236
Accident and health benefits 75,768 75,372 79,576
Other benefits 95,045 89,301 162,215
Increase (decrease) in aggregate reserves for policies
and contracts:
Life (14,358) (27,717) (16,974)
Annuity (285,876) (210,997) (141,304)
Accident and health (2,734) (2,347) (4,169)
Other (524,156) 32,453 (96,839)
----------------------------------------------
986,676 1,501,973 1,215,144
Insurance expenses:
Commissions 34,986 46,200 54,554
General insurance expenses 97,381 75,102 106,666
Taxes, licenses and fees 8,705 8,037 10,036
Net transfers to separate accounts 889,687 652,622 599,633
Other expenses 15,249 199 559
----------------------------------------------
1,046,008 782,160 771,448
----------------------------------------------
2,032,684 2,284,133 1,986,592
----------------------------------------------
Gain from operations before federal income tax expense and
net realized capital gains on investments 122,085 132,490 135,778
Federal income tax expense 37,277 32,960 54,615
----------------------------------------------
Gain from operations before net realized capital gains on
investments 84,808 99,530 81,163
Net realized capital gains on investments (net of related
federal income taxes and amounts transferred to interest
maintenance reserve) 4,230 27,621 24,702
----------------------------------------------
Net income $ 89,038 $ 127,151 $ 105,865
==============================================
</TABLE>
5
<PAGE>
See accompanying notes.
6
<PAGE>
Peoples Benefit Life Insurance Company
Statements of Changes in Capital and Surplus - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Total
Common Preferred Paid-in Unassigned Capital and
Stock Stock Surplus Surplus Surplus
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $12,595 $25,190 $2,583 $564,943 $605,311
Net income - - - 105,865 105,865
Change in net unrealized capital
gains/losses - - - 45,907 45,907
Change in non-admitted assets - - - 341 341
Change in asset valuation reserve - - - (12,296) (12,296)
Change in surplus in separate accounts - - - 424 424
Dividends to stockholders - - - (120,000) (120,000)
Prior year federal income tax adjustment
- - - 4,719 4,719
-----------------------------------------------------------------------------
Balance at December 31, 1997 12,595 25,190 2,583 589,903 630,271
Net income - - - 127,151 127,151
Change in net unrealized capital
gains/losses - - - (15,584) (15,584)
Change in non-admitted assets - - - 9,324 9,324
Change in liability for reinsurance in
unauthorized companies - - - (27) (27)
Change in asset valuation reserve - - - (25,363) (25,363)
Change in surplus in separate accounts - - - 3,581 3,581
Dividends to stockholders - - - (160,000) (160,000)
Tax benefits on stock options exercised - - - 4,119 4,119
-----------------------------------------------------------------------------
Balance at December 31, 1998 12,595 25,190 2,583 533,104 573,472
Net income - - - 89,038 89,038
Change in net unrealized capital
gains/losses - - - 44,119 44,119
Change in non-admitted assets - - - 8,328 8,328
Change in liability for reinsurance in
unauthorized companies - - - 19 19
Change in asset valuation reserve - - - (28,900) (28,900)
Change in surplus in separate accounts - - - (3,854) (3,854)
Dividends to stockholders - - - (160,000) (160,000)
Tax benefits on stock options exercised - - - 5,629 5,629
Other - - - 3,577 3,577
-----------------------------------------------------------------------------
Balance at December 31, 1999 $12,595 $25,190 $2,583 $491,060 $531,428
=============================================================================
</TABLE>
See accompanying notes.
7
<PAGE>
Peoples Benefit Life Insurance Company
Statements of Cash Flow - Statutory Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
----------------------------------------------
<S> <C> <C> <C>
Operating activities
Premiums and other considerations, net of reinsurance $1,700,093 $1,884,760 $1,557,727
Net investment income 469,515 529,718 544,108
Life claims (192,568) (198,317) (108,112)
Surrender benefits and other fund withdrawals (1,453,339) (1,338,387) (1,120,708)
Disability benefits under accident and health policies (71,800) (73,604) (77,681)
Other benefits to policyholders (94,512) (89,304) (161,602)
Commissions, other expenses and other taxes (139,867) (136,417) (171,155)
Net transfers to separate accounts (865,863) (633,128) (602,788)
Federal income taxes, excluding tax on capital gains (22,200) (40,998) (53,792)
Other, net (145,568) 78,339 (59,738)
----------------------------------------------
Net cash used in operating activities (816,109) (17,338) (253,741)
Investing activities
Proceeds from investments sold, matured or repaid:
Bonds and preferred stocks 2,402,706 2,370,321 4,006,319
Common stocks 369,991 275,513 259,925
Mortgage loans on real estate 368,121 732,217 648,588
Real estate 3,645 7,733 8,784
Policy loans, net - 727 2,744
Other 19,222 51,375 136,271
----------------------------------------------
3,163,685 3,437,886 5,062,631
Cost of investments acquired:
Bonds and preferred stocks (1,411,300) (2,316,926) (4,114,568)
Common stocks (490,887) (293,534) (249,597)
Mortgage loans on real estate (265,166) (485,488) (385,022)
Real estate (7,572) - -
Policy loans, net (4,458) - -
Other (29,650) (118,648) (34,263)
----------------------------------------------
(2,209,033) (3,214,596) (4,783,450)
----------------------------------------------
Net cash provided by investing activities 954,652 223,290 279,181
Financing activities
Issuance of short-term intercompany notes payable, net 2,207 102,293 -
Dividends paid to stockholders (160,000) (160,000) (120,000)
Other - - (23)
----------------------------------------------
Net cash used in financing activities (157,793) (57,707) (120,023)
----------------------------------------------
Increase (decrease) in cash and short-term investments (19,250) 148,245 (94,583)
Cash and short-term investments at beginning of year 193,367 45,122 139,705
----------------------------------------------
Cash and short-term investments at end of year $ 174,117 $ 193,367 $ 45,122
==============================================
</TABLE>
See accompanying notes.
8
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis
(Dollars in thousands)
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Organization
Peoples Benefit Life Insurance Company (the "Company") is a stock life and
health insurance company. Prior to June 10, 1997, the Company was an indirect
wholly-owned subsidiary of Providian Corporation ("Providian"). On June 10,
1997, Providian's insurance operations, including the operations of the Company,
were merged with an indirect wholly-owned subsidiary of AEGON N.V., a holding
company organized under the laws of The Netherlands. Providian was the surviving
corporation in the merger. Effective October 15, 1997, Providian's name was
changed to Commonwealth General Corporation ("Commonwealth"). Effective January
1, 1998, ownership of Commonwealth was transferred to AEGON USA, Inc. ("AEGON"),
an indirect wholly-owned subsidiary of AEGON N.V.
The Company is directly owned by Monumental Life Insurance Company 76%, Capital
Liberty Limited Partnership ("CLLP") 20%, and Commonwealth 4%. The Company
wholly owns an insurance subsidiary, Veterans Life Insurance Company ("VLIC").
On December 31, 1999, the Company was redomiciled from Missouri to Iowa.
Nature of Operations
The Company sells and services life and accident and health insurance products,
primarily utilizing direct response methods, such as television, telephone, mail
and third-party programs to reach low to middle-income households nationwide.
The Company also sells and services group and individual accumulation products,
primarily utilizing brokers, fund managers, financial planners, stock brokerage
firms and a mutual fund.
Basis of Presentation
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Significant estimates and assumptions are utilized in the calculation of
aggregate policy reserves, policy and contract claim reserves, guaranty fund
assessment accruals and valuation allowances on investments. It is reasonably
possible that actual experience could differ from the estimates and assumptions
utilized which could have a material impact on the financial statements.
9
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
The accompanying financial statements have been prepared on the basis of
accounting practices prescribed or permitted by the Insurance Division,
Department of Commerce, of the State of Iowa ("Insurance Department"), which
practices differ in some respects from generally accepted accounting principles.
The more significant of these differences are as follows: (a) bonds are
generally reported at amortized cost rather than segregating the portfolio into
held-to-maturity (reported at amortized cost), available-for-sale (reported at
fair value), and trading (reported at fair value) classifications; (b) common
stocks sold but not yet purchased are reported as liabilities for GAAP purposes;
(c) acquisition costs of acquiring new business are charged to current
operations as incurred rather than deferred and amortized over the life of the
policies; (d) policy reserves on traditional life products are based on
statutory mortality rates and interest which may differ from reserves based on
reasonable assumptions of expected mortality, interest, and withdrawals which
include a provision for possible unfavorable deviation from such assumptions;
(e) certain separate accounts provide policyholders with a guaranteed return;
these separate accounts are included in the general account assets and
liabilities for GAAP purposes due to the nature of the guaranteed return; (f)
policy reserves on certain investment products use discounting methodologies
based on statutory interest rates rather than full account values; (g)
reinsurance amounts are netted against the corresponding asset or liability
rather than shown as gross amounts on the balance sheet; (h) deferred income
taxes are not provided for the difference between the financial statement and
income tax bases of assets and liabilities; (i) net realized gains or losses
attributed to changes in the level of interest rates in the market are deferred
and amortized over the remaining life of the bond or mortgage loan, rather than
recognized as gains or losses in the statement of operations when the sale is
completed; (j) potential declines in the estimated realizable value of
investments are provided for through the establishment of a formula-determined
statutory investment reserve (reported as a liability), changes to which are
charged directly to surplus, rather than through recognition in the statement of
operations for declines in value, when such declines are judged to be other than
temporary; (k) certain assets designated as "non-admitted assets" have been
charged to surplus rather than being reported as assets; (l) revenues for
universal life and investment products consist of premiums received rather than
policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed; (m)
pension expense is recorded as amounts are paid; (n) stock options settled in
cash are recorded as expense of the Company's indirect parent rather than
charged to current operations; (o) adjustments to federal income taxes of prior
years are charged or credited directly to unassigned surplus, rather than
reported as a component of expense in the statement of operations; (p) a
liability is established for "unauthorized reinsurers" and changes in this
liability are charged or credited directly to unassigned surplus; and (q) the
financial statements of wholly-owned affiliates are not consolidated with those
of the Company. The effects of these variances have not been determined by the
Company but are presumed to be material.
10
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
In 1998, the National Association of Insurance Commissioners ("NAIC") adopted
codified statutory accounting principles ("Codification") effective January 1,
2001. Codification will likely change, to some extent, prescribed statutory
accounting practices and may result in changes to the accounting practices that
the Company uses to prepare its statutory-basis financial statements.
Codification will require adoption by the various states before it becomes the
prescribed statutory basis of accounting for insurance companies domesticated
within those states. Accordingly, before Codification becomes effective for the
Company, the State of Iowa must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis results
to the Insurance Department. At this time, it is unclear whether the State of
Iowa will adopt Codification. However, based on current guidance, management
believes that the impact of Codification will not be material to the Company's
statutory-basis financial statements.
Cash and Short-Term Investments
For purposes of the statements of cash flow, the Company considers all highly
liquid investments with remaining maturities of one year or less when purchased
to be short-term investments.
Investments
Investments in bonds (except those to which the Securities Valuation Office of
the NAIC has ascribed a value), mortgage loans on real estate and short-term
investments are reported at cost adjusted for amortization of premiums and
accrual of discounts. Amortization is computed using methods which result in a
level yield over the expected life of the security. The Company reviews its
prepayment assumptions on mortgage and other asset-backed securities at regular
intervals and adjusts amortization rates retrospectively when such assumptions
are changed due to experience and/or expected future patterns. Investments in
preferred stocks in good standing are reported at cost. Investments in preferred
stocks not in good standing are reported at the lower of cost or market. Common
stocks of unaffiliated companies, which include shares of mutual funds, are
carried at market. Common stocks sold but not yet purchased are carried at
market as a contra asset. Common stock of the Company's affiliated insurance
subsidiary is recorded at the equity in statutory-basis net assets. Real estate
is reported at cost less allowances for depreciation. Depreciation is computed
principally by the straight-line method. Policy loans are reported at unpaid
principal. Other invested assets consist principally of investments in various
limited partnerships and are recorded at equity in underlying net assets.
Derivative financial instruments, consisting primarily of interest rate swap
agreements, including basis swaps, and futures, are valued consistently with the
hedged item. Hedges of fixed income assets and/or liabilities are valued at
amortized cost. Hedges of items carried at fair value are valued at fair value.
Derivatives which cease to be effective hedges are valued at fair value. Other
"admitted assets" are valued, principally at cost, as required or permitted by
Iowa Insurance Laws.
11
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Common stocks sold but not yet purchased represents obligations of the Company
to deliver specified securities at contracted prices, thereby creating a
liability to purchase the securities at prevailing market prices. Accordingly,
these transactions result in off-balance sheet risk as the Company's ultimate
obligation to satisfy the sale of securities sold but not yet purchased may
exceed the current amount recognized in the financial statements. The Insurance
Division, Department of Commerce, of the State of Iowa has approved the
Company's accounting for common stocks sold but not yet purchased as a permitted
practice.
Realized capital gains and losses are determined on the basis of specific
identification and are recorded net of related federal income taxes. The Asset
Valuation Reserve ("AVR") is established by the Company to provide for potential
losses in the event of default by issuers of certain invested assets. These
amounts are determined using a formula prescribed by the NAIC and are reported
as a liability. The formula for the AVR provides for a corresponding adjustment
for realized gains and losses. Under a formula prescribed by the NAIC, the
Company defers, in the Interest Maintenance Reserve ("IMR"), the portion of
realized gains and losses on sales of fixed income investments, principally
bonds and mortgage loans, attributable to changes in the general level of
interest rates and amortizes those deferrals over the remaining period to
maturity of the security.
Interest income is recognized on an accrual basis. The Company does not accrue
income on bonds in default, mortgage loans on real estate in default and/or
foreclosure or which are delinquent more than twelve months, or on real estate
where rent is in arrears for more than three months. Further, income is not
accrued when collection is uncertain. During 1999, 1998 and 1997, the Company
excluded investment income due and accrued of $1,992, $1,503 and $308,
respectively, with respect to such practices.
The Company uses interest rate swaps as part of its overall interest rate risk
management strategy for certain life insurance and annuity products. The Company
entered into several interest rate swap contracts to modify the interest rate
characteristics of the underlying liabilities. The net interest effect of such
swap transactions is reported as an adjustment of interest income from the
hedged items as incurred.
Aggregate Policy Reserves
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables based on
statutorily specified interest rates and valuation methods that will provide, in
the aggregate, reserves that are greater than or equal to the minimum required
by law.
12
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
The aggregate policy reserves for life insurance policies are based principally
upon the 1941, 1958 and 1980 Commissioners' Standard Ordinary Mortality and
American Experience Mortality Tables. The reserves are calculated using interest
rates ranging from 2.00 to 6.00 percent and are computed principally on the Net
Level Premium Valuation and the Commissioners' Reserve Valuation Methods.
Reserves for universal life policies are based on account balances adjusted for
the Commissioners' Reserve Valuation Method.
Deferred annuity reserves are calculated according to the Commissioners' Annuity
Reserve Valuation Method including excess interest reserves to cover situations
where the future interest guarantees plus the decrease in surrender charges are
in excess of the maximum valuation rates of interest. Reserves for immediate
annuities and supplementary contracts with and without life contingencies are
equal to the present value of future payments assuming interest rates ranging
from 2.50 to 11.25 percent and mortality rates, where appropriate, from a
variety of tables.
Accident and health policy reserves are equal to the greater of the gross
unearned premiums or any required midterminal reserves plus net unearned
premiums and the present value of amounts not yet due on both reported and
unreported claims.
Policy and Contract Claim Reserves
Claim reserves represent the estimated accrued liability for claims reported to
the Company and claims incurred but not yet reported through the statement date.
These reserves are estimated using either individual case-basis valuations or
statistical analysis techniques. These estimates are subject to the effects of
trends in claim severity and frequency. The estimates are continually reviewed
and adjusted as necessary as experience develops or new information becomes
available.
Policyholder Contract Deposits
Policyholder contract deposits are comprised primarily of guaranteed investment
contracts (GICs). The GICs consist of three types. One type is guaranteed as to
principal along with interest guarantees based upon predetermined indices. The
second type guarantees principal and interest but also includes a penalty if the
contract is surrendered early. The third type guarantees principal and interest
and is non-surrenderable before the fixed maturity date. Policy reserves on the
GICs are determined following the retrospective deposit method and consist of
contract values that accrue to the benefit of the policyholder.
13
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
1. Organization and Summary of Significant Accounting Policies (continued)
Separate Accounts
Assets held in trust for purchases of variable annuity contracts and the
Company's corresponding obligation to the contract owners are shown separately
in the balance sheets. The assets in the separate accounts are valued at market.
Income and gains and losses with respect to the assets in the separate accounts
accrue to the benefit of the contract owners and, accordingly, the operations of
the separate accounts are not included in the accompanying financial statements.
The Company received variable contract premiums of $1,266,608, $858,751 and
$784,931 in 1999, 1998 and 1997, respectively. All variable account contracts
are subject to discretionary withdrawal by the policyholder at the market value
of the underlying assets less the current surrender charge.
Certain separate account assets and liabilities reported in the accompanying
financial statements contain contractual guarantees. Guaranteed separate
accounts represent funds invested by the Company for the benefit of individual
contract holders who are guaranteed certain returns as specified in the
contracts. Separate account asset performance different than guaranteed
requirements is either transferred to or received from the general account and
reported in the statements of operations.
Stock Option Plan
AEGON N.V. sponsors a stock option plan for eligible employees of the Company.
Under this plan, certain employees have indicated a preference to immediately
sell shares received as a result of their exercise of the stock options; in
these situations, AEGON N.V. has settled such options in cash rather than
issuing stock to these employees. These cash settlements are paid by the
Company, and AEGON N.V. subsequently reimburses the Company for such payments.
Under statutory accounting principles, the Company does not record any expense
related to this plan, as the expense is recognized by AEGON N.V. However, the
Company is allowed to record a deduction in the consolidated tax return filed by
the Company and certain affiliates. The tax benefit of this deduction has been
credited directly to surplus.
Reclassifications
Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.
14
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
statutory-basis balance sheet, for which it is practicable to estimate that
value. SFAS No. 119, Disclosures about Derivative Financial Instruments and Fair
Value of Financial Instruments, requires additional disclosure about
derivatives. In cases where quoted market prices are not available, fair values
are based on estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 and No. 119 exclude certain financial instruments and
all nonfinancial instruments from their disclosure requirements and allow
companies to forego the disclosures when those estimates can only be made at
excessive cost. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the balance
sheet for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturity securities (including
redeemable preferred stocks) are based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair values are
estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality,
and maturity of the investments. The fair values for equity securities are
based on quoted market prices.
Mortgage loans and policy loans: The fair values for mortgage loans are
estimated utilizing discounted cash flow analyses, using interest rates
reflective of current market conditions and the risk characteristics of the
loans. The fair value of policy loans is assumed to equal their carrying
amount.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted cash flow
calculations, based on interest rates currently being offered for similar
contracts with maturities consistent with those remaining for the contracts
being valued.
Interest rate swaps and forward-rate agreements: Estimated fair value of
interest rate swaps and forward-rate agreements are based on pricing models
or formulas using current assumptions.
15
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
2. Fair Values of Financial Instruments (continued)
Short-term notes payable to affiliates: The fair values for short-term notes
to affiliates are assumed to equal their carrying amount.
Fair values for the Company's insurance contracts other than investment
contracts are not required to be disclosed. However, the fair values 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 following sets forth a comparison of the fair values and carrying amounts of
the Company's financial instruments subject to the provisions of SFAS No. 107
and No. 119:
<TABLE>
<CAPTION>
December 31
1999 1998
------------------------------ ------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Admitted assets
Cash and short-term investments
$ 174,117 $ 174,117 $ 193,367 $ 193,367
Bonds 3,219,493 3,087,002 4,299,430 4,439,611
Preferred stocks 160,990 158,736 91,609 98,346
Common stocks 53,811 53,811 (45,635) (45,635)
Mortgage loans on real estate 1,933,540 1,895,672 2,041,729 2,100,897
Policy loans 159,161 159,161 154,703 154,703
Separate account assets 6,505,330 6,505,330 4,915,961 4,915,961
Liabilities
Investment contract liabilities 3,283,269 3,245,239 5,385,785 5,334,953
Separate account liabilities 6,414,824 6,264,434 4,863,189 4,673,802
Short-term notes payable to
affiliates 104,500 104,500 102,293 102,293
Interest rate swaps (212) (2,789) - 7,022
Forwards (71) (71) - -
</TABLE>
16
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments
Statutory-basis financial information of the Company's wholly-owned insurance
subsidiary, Veterans Life Insurance Company, is summarized as follows:
<TABLE>
<CAPTION>
December 31
1999 1998
------------------------------
<S> <C> <C>
Summary statutory-basis balance sheets
Cash and invested assets $715,766 $657,263
Other assets 38,247 41,843
------------------------------
Total admitted assets $754,013 $699,106
==============================
Insurance reserves $192,021 $188,532
Other liabilities 46,917 53,563
Capital and surplus 515,075 457,011
------------------------------
Total liabilities and capital and surplus $754,013 $699,106
==============================
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Summary statutory-basis statements of income
Revenues $145,549 $152,851 $148,332
Expenses and taxes 102,850 113,042 117,414
---------------------------------------------
Net income $ 42,699 $ 39,809 $ 30,918
=============================================
</TABLE>
The carrying amounts and estimated fair values of investments in debt securities
were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Amount Gains Losses Value
------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1999
Bonds:
United States Government and agencies $ 166,209 $ 481 $ 10,690 $ 156,000
State, municipal and other government 53,453 624 985 53,092
Public utilities 202,180 820 12,594 190,406
Industrial and miscellaneous 1,950,758 23,903 114,196 1,860,465
Mortgage and other asset-backed securities 846,893 10,679 30,533 827,039
------------------------------------------------------
3,219,493 36,507 168,998 3,087,002
Preferred stocks 160,990 19,387 21,641 158,736
------------------------------------------------------
$3,380,483 $55,894 $190,639 $3,245,738
======================================================
</TABLE>
17
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Carrying Unrealized Unrealized Fair
Amount Gains Losses Value
------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1998
Bonds:
United States Government and agencies $ 219,751 $ 6,985 $ 593 $ 226,143
State, municipal and other government 78,160 1,745 3,223 76,682
Public utilities 269,117 11,187 848 279,456
Industrial and miscellaneous 2,546,799 174,695 49,392 2,672,102
Mortgage and other asset-backed
securities 1,185,603 16,435 16,810 1,185,228
------------------------------------------------------
4,299,430 211,047 70,866 4,439,611
Preferred stocks 91,609 8,327 1,590 98,346
------------------------------------------------------
$4,391,039 $219,374 $72,456 $4,537,957
======================================================
</TABLE>
The carrying amounts and estimated fair values of bonds at December 31, 1999, by
contractual maturity, are shown below. 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.
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
------------------------------
<S> <C> <C>
Due in one year or less $ 206,420 $ 204,137
Due after one year through five years 530,266 520,558
Due after five years through ten years 335,659 329,617
Due after ten years through fifteen years 282,985 281,635
Due after fifteen years through twenty years 227,857 207,142
Due after twenty years 789,413 716,874
------------------------------
2,372,600 2,259,963
Mortgage and other asset-backed securities 846,893 827,039
------------------------------
$3,219,493 $3,087,002
==============================
</TABLE>
18
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
A detail of net investment income is presented below:
<TABLE>
Year ended December 31
1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
Interest on bonds and notes $291,841 $337,793 $331,084
Dividends on equity investments (120) 3,824 3,267
Interest on mortgage loans 151,329 161,897 196,584
Rental income on real estate 128 327 -
Interest on policy loans 7,508 4,645 7,322
Other investment income 24,274 28,830 37,576
---------------------------------------
Gross investment income 474,960 537,316 575,833
Less investment expenses 23,896 25,214 16,177
---------------------------------------
Net investment income $451,064 $512,102 $559,656
=======================================
</TABLE>
Proceeds from sales and maturities of debt securities and related gross realized
gains and losses were as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Proceeds $2,402,706 $2,370,321 $4,006,319
===============================================
Gross realized gains $ 87,770 $ 67,577 $ 43,227
Gross realized losses (60,911) (22,015) (29,488)
-----------------------------------------------
Net realized gains $ 26,859 $ 45,562 $ 13,739
===============================================
</TABLE>
At December 31, 1999, investments with an aggregate carrying amount of
$5,452,647 were on deposit with regulatory authorities or were restrictively
held in bank custodial accounts for the benefit of such regulatory authorities
as required by statute.
19
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
Realized investment gains (losses) and changes in unrealized gains (losses) for
investments are summarized below:
<TABLE>
<CAPTION>
Realized
-------------------------------------
Year ended December 31
1999 1998 1997
-------------------------------------
<S> <C> <C> <C>
Debt securities $26,859 $45,562 $13,739
Short-term investments (58) 127 -
Equity securities (35,221) 6,098 16,694
Mortgage loans on real estate 2,352 6,921 (1,121)
Real estate (301) (243) 1,604
Other invested assets 26,414 16,592 13,385
-------------------------------------
20,045 75,057 44,301
Federal income tax effect (13,170) (17,257) (9,506)
Transfer to interest maintenance reserve (2,645) (30,179) (10,093)
-------------------------------------
Net realized gains $ 4,230 $27,621 $24,702
=====================================
<CAPTION>
Change in Unrealized
--------------------------------------
Year ended December 31
1999 1998 1997
--------------------------------------
<S> <C> <C> <C>
Bonds $(15,291) $ (78) $ -
Preferred stocks (5,657) (10,690) 228
Common stocks 71,870 760 44,033
Mortgage loans (6,724) (5,553) 1,658
Other invested assets (79) (23) (12)
--------------------------------------
Change in unrealized $ 44,119 $(15,584) $45,907
======================================
</TABLE>
Gross unrealized gains and gross unrealized losses on common stocks were as
follows:
December 31
1999 1998
--------------------------
Unrealized gains $356,813 $265,902
Unrealized losses (33,681) (14,640)
--------------------------
Net unrealized gains $323,132 $251,262
==========================
20
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
During 1999, the Company issued mortgage loans with interest rates ranging from
5.5% to 9.05%. The maximum percentage of any one mortgage loan to the value of
the underlying real estate at origination was 90%. Mortgage loans with a
carrying value of $1,289 were non-income producing for the previous twelve
months. Accrued interest of $163 related to these mortgage loans was excluded
from investment income. The Company requires all mortgaged properties to carry
fire insurance equal to the value of the underlying property.
During 1999 and 1998, mortgage loans of $7,567 and $3,410, respectively, were
foreclosed and transferred to real estate. At December 31, 1999 and 1998, the
Company held a mortgage loan loss reserve in the asset valuation reserve of
$26,509 and $22,530, respectively. The mortgage loan portfolio is diversified by
geographic region and specific collateral property type as follows:
<TABLE>
<CAPTION>
Geographic Distribution Property Type Distribution
--------------------------------------------------- --------------------------------------------------
December 31 December 31
1999 1998 1999 1998
------------------- -------------------
<S> <C> <C> <C> <C> <C>
Pacific 26% 24% Office 26% 20%
South Atlantic 18 18 Residential 24 28
Middle Atlantic 18 16 Apartment 16 17
E. North Central 17 18 Retail 16 15
W. South Central 6 7 Agricultural 9 7
Mountain 3 6 Industrial 7 7
W. North Central 4 4 Hotel/Motel 2 2
E. South Central 5 4 Other -- 4
New England 3 3
</TABLE>
At December 31, 1999, the Company had no investments (excluding U. S. Government
guaranteed or insured issues) which individually represented more than ten
percent of capital and surplus and the asset valuation reserve.
The Company utilizes a variety of off-balance sheet financial instruments as
part of its efforts to hedge and manage fluctuations in the market value of its
investment portfolio attributable to changes in general interest rate levels and
to manage duration mismatch of assets and liabilities. Those instruments include
interest rate exchange agreements (swaps), options and futures contracts, and
all involve elements of credit and market risks in excess of the amounts
recognized in the accompanying financial statements at a given point in time.
The contract or notional amounts of those instruments reflect the extent of
involvement in the various types of financial instruments.
21
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
The Company's exposure to credit risk is the risk of loss from a counterparty
failing to perform according to the terms of the contract. That exposure
includes settlement risk (i.e., the risk that the counterparty defaults after
the Company has delivered funds or securities under terms of the contract) that
would result in an accounting loss and replacement cost risk (i.e., the cost to
replace the contract at current market rates should the counterparty default
prior to settlement date). Credit loss exposure resulting from nonperformance by
a counterparty for commitments to extend credit is represented by the
contractual amounts of the instruments.
At December 31, 1999 and 1998, the Company's outstanding financial instruments
with on and off-balance sheet risks, shown in notional amounts, are summarized
as follows:
Notional Amount
1999 1998
-------------------------
Derivative securities:
Interest rate swaps:
Receive fixed - pay floating $405,100 $592,600
Receive floating - pay floating 574,282 84,763
Receive floating - pay fixed 174,345 208,746
Forwards 334,200 --
The Company may enter into futures contracts to hedge against changes in market
conditions. Initial margin deposits are made by cash deposits or segregation of
specific securities as may be required by the exchange on which the transaction
was conducted. Pursuant to the contracts, the Company agrees to receive from or
pay to the broker, an amount of cash equal to the daily fluctuation in the value
of the contract. Such receipts or payments are known as "variation margin" and
are recorded by the account as a variation margin receivable or payable on
futures contracts. During the period the futures contracts are open, daily
changes in the values of the contracts are recognized as realized gains or
losses. When the contracts are closed, the account recognizes a realized gain or
loss equal to the difference between the proceeds from, or cost of, the closing
transaction and the Company's cost basis in the contract. The Company recognized
net realized gains from futures contracts in the amount of $9,713, $10,385 and
$12,211 for the years ended December 31, 1999, 1998 and 1997, respectively.
22
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
3. Investments (continued)
Open futures contracts at December 31, 1999 and 1998 were as follows:
Opening Year-End
Number of Contract Market Market
Contracts Type Value Value
---------------------------------------------------------------------------
December 31, 1999:
S&P 500 $69,832 $72,726
196 March 2000 Futures
December 31, 1998:
254 S&P 500 $78,196 $82,203
March 1999 Futures
The Company's use of futures contracts may expose the Company to certain risks.
Risks include the possibility of an illiquid market and the change in the value
of the contracts may not correlate with changes in the value of the securities
being hedged. Unexpected adverse price movements could cause the Company's
hedging strategy to be unsuccessful and result in losses.
4. Reinsurance
The Company reinsures portions of risk on certain insurance policies which
exceed its established limits, thereby providing a greater diversification of
risk and minimizing exposure on larger risks. The Company remains contingently
liable with respect to any insurance ceded, and this would become an actual
liability in the event that the assuming insurance company became unable to meet
its obligation under the reinsurance treaty.
Premiums earned reflect the following reinsurance assumed and ceded amounts:
Year ended December 31
1999 1998 1997
-----------------------------------------------
Direct premiums $1,559,509 $1,618,574 $1,248,961
Reinsurance assumed 119,418 274,237 299,608
Reinsurance ceded (16,453) (9,706) (2,281)
-----------------------------------------------
Net premiums earned $1,662,474 $1,883,105 $1,546,288
===============================================
23
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
4. Reinsurance (continued)
The Company received reinsurance recoveries in the amount of $14,100, $3,102 and
$994 during 1999, 1998 and 1997, respectively. At December 31, 1999 and 1998,
estimated amounts recoverable from reinsurers that have been deducted from
policy and contract claim reserves totaled $1,007 and $903 respectively. The
aggregate reserves for policies and contracts were reduced for reserve credits
for reinsurance ceded at December 31, 1999 and 1998 of $22,003 and $12,542,
respectively.
5. Income Taxes
For federal income tax purposes, the Company joins in a consolidated income tax
return filing with certain affiliated companies. Under the terms of a
tax-sharing agreement between the Company and its affiliates, the Company
computes federal income tax expense as if it were filing a separate income tax
return, except that tax credits and net operating loss carryforwards are
determined on the basis of the consolidated group. Additionally, the alternative
minimum tax is computed for the consolidated group and the resulting tax, if
any, is allocated back to the separate companies on the basis of the separate
companies' alternative minimum taxable income.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to gain from operations before federal income
taxes and net realized capital gains primarily due to differences in the
statutory and tax treatment of deferred policy acquisition costs, dividend
received deduction, and differences in policy and contract liabilities, as well
as the under (over) accrual of the prior year tax provision and low income
housing credits.
Federal income tax expense differs from the amount computed by applying the
statutory federal income tax rate to net realized capital gains on investments
due to differences in book and tax asset bases at the time certain investments
are sold.
Prior to 1984, as provided for under the Life Insurance Company Tax Act of 1959,
a portion of statutory income was not subject to current taxation but was
accumulated for income tax purposes in a memorandum account referred to as the
policyholders' surplus account. No federal income taxes have been provided for
in the financial statements on income deferred in the policyholders' surplus
account ($17,425 at December 31, 1999). To the extent dividends are paid from
the amount accumulated in the policyholders' surplus account, net earnings would
be reduced by the amount of tax required to be paid. Should the entire amount in
the policyholders' surplus account become taxable, the tax thereon computed at
current rates would amount to approximately $6,099.
24
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
5. Income Taxes (continued)
Included in the statements of changes in capital and surplus are certain
adjustments increasing surplus by $4,719 at December 31, 1997, relating to tax
accrual adjustments applicable to prior tax years.
The Company's federal income tax returns have been examined and closing
agreements have been executed with the Internal Revenue Service through 1992. An
examination is underway for years 1993 through 1997.
6. Policy and Contract Attributes
Participating life insurance policies are issued by the Company which entitle
policyholders to a share in the earnings of the participating policies, provided
that a dividend distribution, which is determined annually based on mortality
and persistency experience of the participating policies, is authorized by the
Company. Participating insurance constituted approximately 11% and 12% of
ordinary life insurance in force at December 31, 1999 and 1998, respectively.
A portion of the Company's policy reserves and other policyholders' funds
(including separate account liabilities) relates to liabilities established on a
variety of the Company's products that are not subject to significant mortality
or morbidity risk; however, there may be certain restrictions placed upon the
amount of funds that can be withdrawn without penalty. The amount of reserves on
these products, by withdrawal characteristics, is summarized as follows:
<TABLE>
December 31
1999 1998
-------------------------- --------------------------
Percent Percent
Amount of Total Amount of Total
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Subject to discretionary withdrawal with
market value adjustment $ 1,177,190 10% $ 1,401,397 13%
Subject to discretionary withdrawal at
book value less surrender charge 74,069 1 310,839 3
Subject to discretionary withdrawal at
market value 6,287,475 57 4,697,903 46
Subject to discretionary withdrawal at
book value (minimal or no charges or
adjustments) 1,391,793 13 1,400,914 14
Not subject to discretionary withdrawal
provision 2,127,949 19 2,422,628 24
-------------------------- --------------------------
11,058,476 100% 10,233,681 100%
Less reinsurance ceded 9,791 5,614
------------- -------------
Total policy reserves on annuities and
deposit fund liabilities $11,048,685 $10,228,067
============= =============
</TABLE>
25
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to be
received between the policy's paid-through date to the policy's next anniversary
date. At December 31, 1999 and 1998, these assets (which are reported as
premiums deferred and uncollected) and the amounts of the related gross premiums
and loadings, are as follows:
<TABLE>
<CAPTION>
Gross Loading Net
------------------------------------------
<S> <C> <C> <C>
December 31, 1999
Life and annuity:
Ordinary direct first year business $ 2,245 $ 1,525 $ 720
Ordinary direct renewal business 19,812 5,939 13,873
Group life direct business 36,054 9,824 26,230
Reinsurance ceded (301) -- (301)
------------------------------------------
Total life and annuity 57,810 17,288 40,522
Accident and health:
Direct 2,727 -- 2,727
Reinsurance assumed 2,418 -- 2,418
Reinsurance ceded (114) -- (114)
------------------------------------------
Total accident and health 5,031 -- 5,031
------------------------------------------
$62,841 $17,288 $45,553
==========================================
December 31, 1998
Life and annuity:
Ordinary direct first year business $ 3,243 $ 1,565 $ 1,678
Ordinary direct renewal business 17,913 6,154 11,759
Group life direct business 40,548 11,816 28,732
Reinsurance ceded (182) -- (182)
------------------------------------------
Total life and annuity 61,522 19,535 41,987
Accident and health:
Direct 1,485 -- 1,485
Reinsurance assumed 751 -- 751
Reinsurance ceded (106) -- (106)
------------------------------------------
Total accident and health 2,130 2,130
------------------------------------------
$63,652 $19,535 $44,117
==========================================
</TABLE>
At December 31, 1999 and 1998, the Company had insurance in force aggregating
$60,234 and $60,859, respectively, in which the gross premiums are less than the
net premiums required by the standard valuation standards established by the
Iowa Department of Insurance. The Company established policy reserves of $415
and $495 to cover these deficiencies at December 31, 1999 and 1998,
respectively.
26
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
Separate accounts held by the Company represent funds held for individual
policyholders. The assets in the separate accounts, carried at estimated fair
value, consist of common stocks, mortgage loans, long-term bonds and cash.
During 1997, the Company made a capital contribution of $26,362 to the separate
accounts. At December 31, 1998, the fair value of this capital contribution was
$31,142, which is included in the separate account assets but is excluded from
the corresponding liabilities. During 1999, this capital contribution plus
earnings and unrealized gains thereon was withdrawn by the Company.
Information regarding the separate accounts of the Company is as follows:
<TABLE>
<CAPTION>
Nonindexed
Guaranteed Guaranteed Less
Indexed Than 4% Nonguaranteed Total
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premiums, deposits and other
considerations for the year ended
December 31, 1999 $51,684 $ 193 $1,214,731 $1,266,608
==================================================================
Reserves for separate accounts as of
December 31, 1999 $59,254 $127,349 $6,311,851 $6,498,454
==================================================================
Reserves by withdrawal characteristics
as of December 31, 1999:
With market value adjustment $59,254 $127,349 $ 382,840 $ 569,443
At market value -- -- 5,929,011 5,929,011
------------------------------------------------------------------
Total $59,254 $127,349 $6,311,851 $6,498,454
==================================================================
Premiums, deposits and other
considerations for the year ended
December 31, 1998 $ -- $ 189 $ 858,562 $ 858,751
==================================================================
Reserves for separate accounts as of
December 31, 1998 $ -- $143,533 $4,719,656 $4,863,189
==================================================================
Reserves by withdrawal characteristics
as of December 31, 1998:
With market value adjustment $143,533 $ -- $ 143,533
At market value $ -- -- 4,719,656 4,719,656
==================================================================
Total $ -- $143,533 $4,719,656 $4,863,189
==================================================================
</TABLE>
27
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
6. Policy and Contract Attributes (continued)
<TABLE>
<CAPTION>
Nonindexed
Guaranteed Guaranteed More
Indexed Than 4% Nonguaranteed Total
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premiums, deposits and other
considerations for the year ended
December 31, 1997 $ -- $ 3,481 $ 781,075 $ 784,556
=====================================================================
Reserves for separate accounts as of
December 31, 1997 $ -- $166,241 $3,376,067 $3,542,308
=====================================================================
Reserves by withdrawal characteristics
as of December 31, 1997:
With market value adjustment $ -- $166,241 $ -- $ 166,241
At market value -- -- 3,376,067 3,376,067
---------------------------------------------------------------------
Total $ -- $166,241 $3,376,067 $3,542,308
=====================================================================
</TABLE>
A reconciliation of the amounts transferred to and from the Company's separate
accounts is presented below:
<TABLE>
Year ended December 31
1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
Transfers as reported in the Summary of
Operations of separate accounts
annual statement:
Transfers to separate accounts $1,266,608 $858,751 $784,931
Transfers from separate accounts (384,653) (218,416) (189,627)
--------------------------------------------
Net transfers to separate accounts 881,955 640,335 595,304
Reconciling adjustments:
Fees paid to external fund manager -- -- 2,311
Other transfers to modified separate account 7,732 12,287 2,018
--------------------------------------------
7,732 12,287 4,329
--------------------------------------------
Transfers as reported in the Summary of Operations of
the Company's Life,
Accident & Health Annual Statement $ 889,687 $ 652,622 $599,633
============================================
</TABLE>
28
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
7. Dividend Restrictions
The Company is subject to limitations, imposed by the State of Iowa, on the
payment of dividends to its stockholders. Generally, dividends during any year
may not be paid, without prior regulatory approval, in excess of the greater of
(1) 10 percent of the Company's statutory capital and surplus as of the
preceding December 31, or (2) the Company's statutory net income before net
realized capital gains on investments for the preceding year. Subject to
availability of unassigned surplus at the time of such dividend, the maximum
payment which may be made in 2000, without prior regulatory approval, is
$84,808.
The Company paid dividends to its stockholders of $160,000, $160,000 and
$120,000 in 1999, 1998 and 1997, respectively.
8. Related Party Transactions
The Company shares certain offices, employees and general expenses with
affiliated companies.
The Company receives data processing, investment advisory and management,
marketing and administration services from certain affiliates. During 1999 and
1998, the Company paid $38,750 and $1,390, respectively, for these services,
which approximates their costs to the affiliates. Prior to 1998, the Company
entered into agreements with its affiliates whereby the Company performed
administrative services, management support services, and marketing services for
its affiliates. The Company, as compensation, received $63,000 in 1997 from
affiliates which approximated the cost to provide such services. Such amounts
are classified as reductions of general insurance and other expenses in the
accompanying statements of operations. These agreements are no longer in place.
Payable to affiliates and intercompany borrowings bear interest at the
thirty-day commercial paper rate of 5.63% at December 31, 1999. During 1999 and
1998, the Company received net interest of $3,123 and $309, respectively, from
affiliates. Interest received in 1997 related to similar intercompany
transactions was not significant to the Company.
At December 31, 1999, the Company has a $104,500 short-term note payable to
affiliates. Interest on these notes accrues at rates ranging from 5.30% to
5.90%.
The Company participates in various benefit plans sponsored by AEGON and the
related costs allocated to the Company are not significant.
29
<PAGE>
Peoples Benefit Life Insurance Company
Notes to Financial Statements - Statutory Basis (continued)
(Dollars in thousands)
8. Related Party Transactions (continued)
The Company has 2,290,000 shares of redeemable preferred stock outstanding, all
of which are owned by CLLP. The preferred stock has a par value of $11 per share
and a liquidation value of $240 per share. CLLP is entitled to receive a
cumulative dividend equal to 8-1/2 percent per annum of the liquidation value of
the preferred stock. The Company may redeem all or any portion of the preferred
stock at the liquidation value commencing December 18, 2000.
9. Commitments and Contingencies
The Company is a party to legal proceedings incidental to its business. Although
such litigation sometimes includes substantial demands for compensatory and
punitive damages, in addition to contract liability, it is management's opinion,
after consultation with counsel and a review of available facts, that damages
arising from such demands will not be material to the Company's financial
position.
The Company is subject to insurance guaranty laws in the states in which it
writes business. These laws provide for assessments against insurance companies
for the benefit of policyholders and claimants in the event of insolvency of
other insurance companies. Assessments are charged to operations when received
by the Company except where right of offset against other taxes paid is allowed
by law; amounts available for future offsets are recorded as an asset on the
Company's balance sheet. Potential future obligations for unknown insolvencies
are not determinable by the Company. The future obligation has been based on the
most recent information available from the National Organization of Life and
Health Insurance Guaranty Associations. The Company has established a reserve of
$13,770 and $12,062 and an offsetting premium tax benefit of $4,884 and $4,604
at December 31, 1999 and 1998, respectively, for its estimated share of future
guaranty fund assessments related to several major insurer insolvencies.
30
<PAGE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
Part A None
Part B Financial Statements of Subaccounts of Peoples Benefit Life Insurance
Company Separate Account IV (formerly Providian Life and Health
Insurance Company Separate Account IV) which are available for
investment by Vanguard Variable Annuity Plan Contract Owners as of
December 31, 1999 and for each of the two years in the period ended
December 31, 1999 with Report of Independent Auditors.
Statutory-basis financial statements of Peoples Benefit Life Insurance
Company as of December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999 with Report of Independent
Auditors.
Part C None
(B) EXHIBITS
(1) Resolution of the Board of Directors of National Home Life Assurance
Company ("National Home") authorizing establishment of the Separate Ac-
count./4/
(2) Not Applicable.
(3) Not Applicable.
(4) Form of variable annuity contract/5/
(5) Form of application/5/
(6) (a) Articles of Incorporation of National Home/1/
(b) Amendment to Articles of Incorporation of National Home/2/
(c) Amended and Restated Articles of Incorporation of National Home/3/
(7) Not applicable.
(8) (a) Participation Agreement for the Vanguard Variable Insurance Fund/6/
(b) First Amendment to Participation, Market Consulting and Administra-
tion Agreement/7/
(c) Administration Service Agent/8/
(9) (a) Opinion and Consent of Counsel/9/
(b) Consent of Counsel/9/
(10) Consent of Independent Auditors/9/
(11) No financial statements are omitted from item 23.
(12) Not applicable.
(13) Performance computation/7/
(14) Not applicable.
- --------
/1/ Incorporated by reference from the initial Registration Statement of the
Providian Life & Health Insurance Company Separate Account II, File No. 33-
7033.
/2/ Incorporated by reference from Post-Effective Amendment No. 3 to the Regis-
tration Statement of Providian Life & Health Insurance Company Separate Ac-
count II, File No. 33-7033.
/3/ Incorporated by reference from Post-Effective Amendment No. 5 to the Regis-
tration Statement of the Providian Life & Health Insurance Company Separate
Account II, File No. 33-7033.
/4/ Incorporated by reference from the initial Registration Statement of the
Providian Life & Health Insurance Company Separate Account IV, File No. 33-
36073.
/5/ Incorporated by reference from Pre-Effective Amendment No. 1 to the Regis-
tration Statement of the Providian Life & Health Insurance Company Separate
Account IV, File No. 33-36073.
/6/ Incorporated by reference from Post-Effective Amendment No. 1 to the Regis-
tration Statement of Providian Life & Health Insurance Company Separate Ac-
count IV, File No. 33-36073.
/7/ Incorporated by reference from Post-Effective Amendment No. 6 to Registra-
tion Statement of Providian Life & Health Insurance Company Separate Account
IV, File No. 33-36073.
/8/ Incorporated by reference from Post-Effective Amendment No. 11 to
Registration Statement of Providian Life & Health Insurance Company Separate
Account IV, File No. 33-36073, filed April 30, 1998.
/9/ Filed herewith.
C-1
<PAGE>
Item 25. Directors and Officers of Depositor
<TABLE>
<CAPTION>
Positions and Offices with Depositor Name and Principal Business Address*
- ------------------------------------ ------------------------------------
<S> <C>
President Bart Herbert, Jr.
Senior Vice President Edward A. Biemer
Senior Vice President Thomas P. Bowie
Senior Vice President G. Douglas Mangum, Jr.
Executive Vice President William L. Busler
Treasurer Martha A. McConnell
Vice President Brian Alford
Vice President & Assistant Treasurer Nathan C. Anguiano
Vice President & Division General Counsel Frank A. Camp
Vice President Brenda K. Clancy
Vice President Michele M. Coan
Vice President Jane A. Coyne
Vice President Karen H. Fleming
Vice President Carolyn M. Johnson
Vice President Michael F. Lane
Vice President John A. Mazzuca
Vice President Daniel C. Mohwinkel
Vice President Maureen E. Nielsen
Vice President Larry N. Norman
Vice President G. Eric O'Brien
Vice President Daniel H. Odum
Vice President Douglas A. Sarcia
Vice President Gary H. Scott
Vice President Brian A. Smith
Vice President Colleen M. Tobiason
Vice President William A. Waldie, Jr.
Vice President Michael A. Wapp
Vice President & Actuary Ronald L. Ziegler
Assistant Vice President Janice Boehmler
Assistant Vice President & Qualified Actuary Michael A. Cioffi
Assistant Vice President Kimberly A. Cushing
Assistant Vice President Mary Ellen Fahringer
Assistant Vice President JoAnn Herndon
Assistant Vice President Patricia A. Lukacs
Assistant Vice President William R. Maurer
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Assistant Vice President Robert E. Payne
Assistant Vice President Teresa L. Stolba
Assistant Vice President Harvey Waite
Assistant Treasurer Cliford W. Flenniken
Assistant Controller Paul J. Lukacs
Assistant Controller Joseph C. Noone
Second Vice President Amy E. Anders
Second Vice President George E. Claiborne, Jr.
Second Vice President Cindy L. Chanley
Second Vice President Marvin A. Johnson
Second Vice President Anne M. Spaes
Second Vice President/Investments David L. Blankenship
Second Vice President/Investments C. Ray Brewer
Second Vice President/Investments Kirk W. Buese
Second Vice President/Investments Joel L. Coleman
Second Vice President/Investments William S. Cook
Second Vice President/Investments Deborah A. Dias
Second Vice President/Investments Lee W. Eastland
Second Vice President/Investments Donald E. Flynn
Second Vice President/Investments Eric B. Goodman
Second Vice President/Investments M. Josette Goulet
Second Vice President/Investments James Grant
Second Vice President/Investments David R. Halfpap
Second Vice President/Investments Robert L. Hansen
Second Vice President/Investments Donna L. Heitzman
Second Vice President/Investments David W. Hopewell
Second Vice President/Investments Frederick B. Howard
Second Vice President/Investments Claudia Jackson
Second Vice President/Investments Jon D. Kettering
Second Vice President/Investments Tim Kuussalo
Second Vice President/Investments James D. MacKinnon
Second Vice President/Investments Kathleen B. Madden
Second Vice President/Investments Jeffrey T. McGlaun
Second Vice President/Investments Paul D. Mier
Second Vice President/Investments Thomas L. Nordstrom
Second Vice President/Investments Ralph M. O'Brien
Second Vice President/Investments Douglas H. Owen, Jr.
Second Vice President/Investments Dennis Roland
Second Vice President/Investments James D. Ross
Second Vice President/Investments J. Alan Schork
Second Vice President/Investments Lindsay Schumacher
Second Vice President/Investments Michael B. Shaffer
Second Vice President/Investments Clifford Sheets
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C>
Second Vice President/Investments Michael B. Simpson
Second Vice President/Investments Jon L. Skaggs
Second Vice President/Investments Elizabeth A. Smedley
Second Vice President/Investments Michael S. Smith
Second Vice President/Investments Anne M. Spaes
Second Vice President/Investments Donna J. Spalding
Second Vice President/Investments Bradley L. Stofferahn
Second Vice President/Investments Randall K. Waddell
Second Vice President/Investments Marcia Weiland
Second Vice President/Investments Tammy C. Wetterer
Second Vice President/Special Markets Kim A. Bivins
Second Vice President/Special Markets Gregory M. Curry
Second Vice President/Special Markets Lisa L. Patterson
Second Vice President/Special Markets Rhonda L. Pritchett
Second Vice President/Special Markets Thomas E. Walsh
Second Vice President/Special Markets Harvey Willis
Assistant Secretary Colleen S. Lyons
Assistant Secretary Mary L. Schaefer
Assistant Secretary Gregory E. Miller - Breetz
Assistant Secretary R. Michael Slaven
Assistant Secretary Craig D. Vermie
Advertising Compliance Officer Nancy E. Partington
Product Compliance Officer James T. Bradley
DIRECTORS:
David G. Rekoski Douglas A. Sarcia
Bart Herbert, Jr. Brian A. Smith
G. Douglas Mangum, Jr. Craig D. Vermie
Larry N. Norman
Brenda K. Clancy
</TABLE>
*The business address of each director and officer of Providian Life and Health
Insurance Company is 20 Moores Road, Frazer, Pennsylvania 19355; 400 West Market
Street, Louisville, Kentucky 40202 or 4333 Edgewood Road NE, Cedar Rapids, Iowa
52499.
C-4
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
The Depositor, Peoples Benefit Life Insurance Company ("Peoples Benefit") is
indirectly wholly owned by AEGON USA, Inc. The Registrant is a segregated asset
account of Peoples Benefit.
The following chart indicates the persons controlled by or under common con-
trol with Peoples Benefit.
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
AEGON N.V. Netherlands 53.16% of Vereniging Holding company
AEGON Netherlands
Membership Association
Groninger Financieringen B.V. Netherlands 100% AEGON N.V. Holding company
AEGON Netherland N.V. Netherlands 100% AEGON N.V. Holding company
AEGON Nevak Holding B.V. Netherlands 100% AEGON N.V. Holding company
AEGON International N.V. Netherlands 100% AEGON N.V. Holding company
Voting Trust Trustees: Delaware Voting Trust
K.J. Storm
Donald J. Shepard H.B.
Van Wijk Dennis Hersch
AEGON U.S. Holding Corporation Delaware 100% Voting Trust Holding company
Short Hills Management Company New Jersey 100% AEGON U.S. Holding company
Holding Corporation
CORPA Reinsurance Company New York 100% AEGON U.S. Holding company
Holding Corporation
AEGON Management Company Indiana 100% AEGON U.S. Holding company
Holding Corporation
RCC North America Inc. Delaware 100% AEGON U.S. Holding company
Holding Corporation
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding company
Holding Corporation
Transamerica Holding Company Delaware 100% AEGON USA, Inc. Holding Company
AEGON Funding Corp. Delaware 100% Transamerica Issue debt securities-net
Holding Company proceeds used to make
loans to affiliates
First AUSA Life Insurance Maryland 100% AEGON USA, Inc. Insurance holding company
Company
AUSA Life Insurance New York 82.33% First AUSA Life Insurance
Company, Inc. Insurance Company
17.67% Veterans Life
Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Ins. Co. Insurance
Company of America
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Life Investors Alliance, LLC Delaware 100% LIICA Purchase, own, and hold the
equity interest of other
entities
Great American Insurance Iowa 100% LIICA Marketing
Agency, Inc.
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
PFL Life Insurance Company Iowa 100% First AUSA Life Ins. Co. Insurance
AEGON Financial Services Minnesota 100% PFL Life Insurance Co. Marketing
Group, Inc.
AEGON Assignment Corporation Kentucky 100% AEGON Financial Administrator of structured
of Kentucky Services Group, Inc. settlements
AEGON Assignment Corporation Illinois 100% AEGON Financial Administrator of structured
Services Group, Inc. settlements
Southwest Equity Life Ins. Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Iowa Fidelity Life Insurance Co. Arizona 100% of Common Voting Stock Insurance
First AUSA Life Ins. Co.
Western Reserve Life Assurance Ohio 100% First AUSA Life Ins. Co. Insurance
Co. of Ohio
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Inc. Florida 100% Western Reserve Life Provides administration for
Assurance Co. of Ohio affiliated mutual fund
WRL Investment Florida 100% Western Reserve Life Registered investment advisor
Management, Inc. Assurance Co. of Ohio
ISI Insurance Agency, Inc. California 100% Western Reserve Life Insurance agency
And Subsidiaries Assurance Co. of Ohio
ISI Insurance Agency Alabama 100% ISI Insurance Agency, Inc. Insurance Agency
of Alabama, Inc.
ISI Insurance Agency Ohio 100% ISI Insurance Agency, Inc. Insurance agency
of Ohio, Inc.
ISI Insurance Agency Massachusetts 100% ISI Insurance Agency Inc. Insurance Agency
of Massachusetts, Inc.
ISI Insurance Agency Texas 100% ISI Insurance Agency, Inc. Insurance agency
of Texas, Inc.
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
ISI Insurance Agency Hawaii 100% ISI Insurance Insurance agency
of Hawaii, Inc. Agency, Inc.
ISI Insurance Agency New Mexico 100% ISI Insurance Insurance agency
New Mexico, Inc. Agency, Inc.
AEGON Equity Group, Inc. Florida 100% Western Reserve Life Insurance Agency
Assurance Co. of Ohio
Monumental General Casualty Co. Maryland 100% First AUSA Life Ins. Co. Insurance
United Financial Services, Inc. Maryland 100% First AUSA Life Ins. Co. General agency
Bankers Financial Life Ins. Co. Arizona 100% First AUSA Life Ins. Co. Insurance
The Whitestone Corporation Maryland 100% First AUSA Life Ins. Co. Insurance agency
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Monumental General Life Puerto Rico 51% First AUSA Life Insurance
Insurance Company of Insurance Company
Puerto Rico 49% Baldrich & Associates
of Puerto Rico
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Insurance Maryland 100% AUSA Holding Co. Holding company
Group, Inc.
Trip Mate Insurance Agency, Inc. Kansas 100% Monumental General Sale/admin. of travel
Insurance Group, Inc. insurance
Monumental General Maryland 100% Monumental General Provides management srvcs.
Administrators, Inc. Insurance Group, Inc. to unaffiliated third party
administrator
Executive Management and Maryland 100% Monumental General Provides actuarial consulting
Consultant Services, Inc. Administrators, Inc. services
Monumental General Mass Maryland 100% Monumental General Marketing arm for sale of
Marketing, Inc. Insurance Group, Inc. mass marketed insurance
coverages
AUSA Financial Markets, Inc. Iowa 100% AUSA Holding Co. Marketing
Transamerica Capital, Inc. California 100% AUSA Holding Co. Broker/Dealer
Endeavor Management Company California 100% AUSA Holding Co. Investment Management
Universal Benefits Corporation Iowa 100% AUSA Holding Co. Third party administrator
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Trust Co. Iowa 100% AUSA Holding Co. Trust company
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial counseling
for employees and agents of
affiliated companies
ADB Corporation Delaware 100% Money Services, Inc. Special purpose limited
Liability company
ORBA Insurance Services, Inc. California 10.56% Money Services, Inc. Insurance agency
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Inc. Insurance agency
Zahorik Texas, Inc. Texas 100% Zahorik Company, Inc. Insurance agency
Long, Miller & Associates, L.L.C. California 33-1/3% AUSA Holding Co. Insurance agency
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment advisor
Services, Inc.
InterSecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
Associated Mariner Financial Michigan 100% InterSecurities, Inc. Holding co./management
Group, Inc. services
Associated Mariner Ins. Agency Massachusetts 100% Associated Mariner Insurance agency
of Massachusetts, Inc. Agency, Inc.
Associated Mariner Agency Ohio 100% Associated Mariner Insurance agency
Ohio, Inc. Agency, Inc.
Associated Mariner Agency Texas 100% Associated Mariner Insurance agency
Texas, Inc. Agency, Inc.
Idex Investor Services, Inc. Florida 100% AUSA Holding Co. Shareholder services
Idex Management, Inc. Delaware 100% AUSA Holding Co. Investment advisor
IDEX Mutual Funds Massachusetts Various Mutual fund
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment advisor
Advisors, Inc.
Diversified Investors Securities Delaware 100% Diversified Investment Broker-Dealer
Corp. Advisors, Inc.
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
George Beram & Company, Inc. Massachusetts 100% Diversified Investment Employee benefit and
Advisors, Inc. actuarial consulting
AEGON USA Securities, Inc. Iowa 100% AUSA Holding Co. Broker-Dealer (De-registered)
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Resources, Inc. Insurance agency
Canadian Dealer Network Inc.
Weiner Agency, Inc. Maryland 100% Creditor Resources, Inc. Insurance agency
AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.
AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment services
AEGON USA Real Estate Delaware 100% AEGON USA Realty Real estate and mortgage
Services, Inc. Advisors, Inc. holding company
QSC Holding, Inc. Delaware 100% AEGON USA Realty Real estate and financial
Advisors, Inc. software production and sales
LRA, Inc. Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Associates, Inc. Delaware 100% AEGON USA Realty Real estate counseling
Advisors, Inc.
Landauer Realty Associates, Inc. Texas 100% Landauer Associates, Inc. Real estate counseling
Realty Information Systems, Inc. Iowa 100% AEGON USA Realty Information Systems for
Advisors, Inc. real estate investment
management
USP Real Estate Investment Trust Iowa 12.89% First AUSA Life Ins. Co. Real estate investment trust
13.11% PFL Life Ins. Co.
4.86% Bankers United Life
Assurance Co.
RCC Properties Limited Iowa AEGON USA Realty Advisors, Limited Partnership
Partnership Inc. is General Partner and 5%
owner.
Commonwealth General Delaware 100% AEGON USA, Inc. Holding company
Corporation ("CGC")
AFSG Securities Corporation Pennsylvania 100% CGC Broker-Dealer
Benefit Plans, Inc. Delaware 100% CGC TPA for Peoples Security Life
Insurance Company
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Capital 200 Block Corporation Delaware 100% CGC Real estate holdings
Capital Real Estate Delaware 100% CGC Furniture and equipment
Development Corporation lessor
Commonwealth General. Kentucky 100% CGC Administrator of structured
Assignment Corporation settlements
Diversified Financial Products Inc. Delaware 100% CGC Provider of investment,
marketing and admin. services
to ins. cos.
Monumental Agency Group, Inc. Kentucky 100% CGC Provider of srvcs. to ins. cos.
PB Investment Advisors, Inc. Delaware 100% CGC Registered investment advisor
(de-registered)
Southlife, Inc. Tennessee 100% CGC Investment subsidiary
Commonwealth General LLC Turks & 100% CGC Special-purpose subsidiary
Caicos Islands
Ampac Insurance Agency, Inc. Pennsylvania 100% CGC Provider of management
(EIN 23-1720755) support services
Compass Rose Development Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Corporation Agency, Inc.
Financial Planning Services, Inc. Dist. Columbia 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Frazer Association Illinois 100% Ampac Insurance TPA license-holder
Consultants, Inc. Agency, Inc.
National Home Life Corporation Pennsylvania 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
Valley Forge Associates, Inc. Pennsylvania 100% Ampac Insurance Furniture & equipment lessor
Agency, Inc.
Veterans Benefits Plans, Inc. Pennsylvania 100% Ampac Insurance Administrator of group
Agency, Inc. insurance programs
Veterans Insurance Services, Inc. Delaware 100% Ampac Insurance Special-purpose subsidiary
Agency, Inc.
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Academy Insurance Group, Inc. Delaware 100% CGC Holding company
Academy Life Insurance Co. Missouri 100% Academy Insurance Insurance company
Group, Inc.
Pension Life Insurance New Jersey 100% Academy Life Insurance company
Company of America Insurance Company
FED Financial, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Development Corp. Inc. Kansas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy Insurance General agent
Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose subsidiary
Insurance Agency, Inc. Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Ampac, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
Ampac Insurance Agency, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
(EIN 23-2364438) Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Fin. Group, Inc. Special-purpose subsidiary
Military Associates, Inc. Pennsylvania 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose subsidiary
Group, Inc.
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin. services
Services, Inc. Group, Inc.
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Unicom Administrative Germany 100% Unicom Administrative Provider of admin. services
Services, GmbH Services, Inc.
Capital General Development Delaware 100% CGC Holding company
Corporation
Monumental Life Maryland 73.23% Capital General Insurance company
Insurance Company Development Company
26.77% First AUSA Life
Insurance Company
AEGON Special Markets Maryland 100% Monumental Life Marketing company
Group, Inc. Insurance Company
Peoples Benefit Life Missouri 3.7% CGC Insurance company
Insurance Company 20.0% Capital Liberty, L.P.
76.3% Monumental Life
Insurance Company
Veterans Life Insurance Co. Illinois 100% Peoples Benefit Insurance company
Life Insurance Company
Peoples Benefit Services, Inc. Pennsylvania 100% Veterans Life Ins. Co. Special-purpose subsidiary
Coverna Direct Insurance Maryland 100% Peoples Benefit Insurance agency
Insurance Services, Inc. Life Insurance Company
Ammest Realty Corporation Texas 100% Monumental Life Special purpose subsidiary
Insurance Company
JMH Operating Company, Inc. Mississippi 100% Monumental Life Real estate holdings
Insurance Company
Capital Liberty, L.P. Delaware 99.0% Monumental Life Holding Company
Insurance Company
1.0% CGC
Transamerica Corporation Delaware 100% AEGON NV Major interest in insurance
and finance
Transamerica Pacific Insurance Hawaii 100% Transamerica Corp. Life insurance
Company, Ltd.
TREIC Enterprises, Inc. Delaware 100% Transamerica Corp. Investments
ARC Reinsurance Corporation Hawaii 100% Transamerica Corp. Property & Casualty Ins.
Transamerica Management, Inc. Delaware 100% ARC Reinsurance Corp. Asset management
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Inter-America Corporation California 100% Transamerica Corp. Insurance Broker
Pyramid Insurance Company, Ltd. Hawaii 100% Transamerica Corp. Property & Casualty Ins.
Pacific Cable Ltd. Bmda. 100% Pyramid Ins. Co., Ltd. Sold 25% of TC Cable, Inc.
stock in 1998
Transamerica Business Tech Corp. Delaware 100% Transamerica Corp. Telecommunications and
data processing
Transamerica CBO I, Inc. Delaware 100% Transamerica Corp. Owns and manages a pool of
high-yield bonds
Transamerica Corporation (Oregon) Oregon 100% Transamerica Corp. Name holding only-Inactive
Transamerica Finance Corp. Delaware 100% Transamerica Corp. Commercial & Consumer
Lending & equip. leasing
TA Leasing Holding Co., Inc. Delaware 100% Transamerica Fin. Corp. Holding company
Trans Ocean Ltd. Delaware 100% TA Leasing Hldg Co. Inc. Holding company
Trans Ocean Container Corp. Delaware 100% Trans Ocean Ltd. Intermodal Leasing
("TOCC")
SpaceWise Inc. Delaware 100% TOCC Intermodal leasing
Trans Ocean Container
Finance Corp. Delaware 100% TOCC Intermodal leasing
Trans Ocean Leasing
Deutschland GmbH Germany 100% TOCC Intermodal leasing
Trans Ocean Leasing PTY Ltd. Austria 100% TOCC Intermodal leasing
Trans Ocean Management S.A. Switzerland 100% TOCC Intermodal leasing
Trans Ocean Regional
Corporate Holdings California 100% TOCC Holding company
Trans Ocean Tank Services Corp. Delaware 100% TOCC Intermodal leasing
Transamerica Leasing Inc. Delaware 100% TA Leasing Holding Co. Leases & Services intermodal
equipment
Transamerica Leasing Holdings Delaware 100% Transamerica Leasing Inc. Holding Company
Inc. ("TLHI")
Greybox Logistics Services Inc. Delaware 100% TLHI Intermodal Leasing
</TABLE>
C-13
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Greybox L.L.C. Delaware 100% TLHI Intermodal freight container
interchange facilitation service
Transamerica Trailer France 100% Greybox L.L.C. Leasing
Leasing S.N.C.
Greybox Services Limited U.K. 100% TLHI Intermodal Leasing
Intermodal Equipment, Inc. Delaware 100% TLHI Intermodal leasing
Transamerica Leasing N.V. Belg. 100% Intermodal Equipment Inc.
Transamerica Leasing SRL Italy 100% Intermodal Equipment Inc.
Transamerica Distribution Delaware 100% TLHI Provided door-to-door services
Services, Inc. for the domestic
transportation of temperature-
sensitive products
Transamerica Leasing Belg. 100% TLHI Leasing
Coordination Center
Transamerica Leasing do Braz. 100% TLHI Container Leasing
Brasil Ltda.
Transamerica Leasing GmbH Germany 100% TLHI Leasing
Transamerica Leasing Limited U.K. 100% TLHI Leasing
ICS Terminals (UK) Limited U.K. 100% Transamerica. Leasing
Leasing Limited
Transamerica Leasing Pty. Ltd. Australia 100% TLHI Leasing
Transamerica Leasing (Canada) Inc. Canada 100% TLHI Leasing
Transamerica Leasing (HK) Ltd. H.K. 100% TLHI Leasing
Transamerica Leasing S. Africa 100% TLHI Intermodal leasing
(Proprietary) Limited
Transamerica Tank Container Australia 100% TLHI The Australian (domestic)
Leasing Pty. Limited leasing of tank containers
Transamerica Trailer Holdings I Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Holdings II, Inc. Delaware 100% TLHI Holding company
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Transamerica Trailer Holdings III, Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Leasing AB Swed. 100% TLHI Leasing
Transamerica Trailer Leasing AG Switzerland 100% TLHI Leasing
Transamerica Trailer Leasing A/S Denmark 100% TLHI Leasing
Transamerica Trailer Leasing GmbH Germany 100% TLHI Leasing
Transamerica Trailer Leasing Belgium 100% TLHI Leasing
(Belgium) N.V.
Transamerica Trailer Leasing Netherlands 100% TLHI Leasing
(Netherlands) B.V.
Transamerica Trailer Spain S.A. Spain 100% TLHI Leasing
Transamerica Transport Inc. New Jersey 100% TLHI Dormant
Transamerica Commercial Delaware 100% Transamerica Fin. Corp. Holding company for
Finance Corporation, I ("TCFCI") Commercial/consumer finance
subsidiaries
Transamerica Equipment Financial Delaware 100% TCFCI
Services Corporation
BWAC Credit Corporation Delaware 100% TCFCI
BWAC International Corporation Delaware 100% TCFCI
BWAC Twelve, Inc. Delaware 100% TCFCI Holding company for premium
finance subsidiaries
TIFCO Lending Corporation Illinois 100% BWAC Twelve, Inc. General financing & other
services in the US &
elsewhere
Transamerica Insurance Finance Maryland 100% BWAC Twelve, Inc. Provides insurance premium
Corporation ("TIFC") financing in the US with the
exception of CA and HI
Transamerica Insurance Finance Maryland 100% TIFC Provides Insurance premium
Company (Europe) financing in California
Transamerica Insurance Finance California 100% TIFC Disability ins. & holding co.
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Corporation, California for various insurance
subsidiaries of Transamerica
Corporation
Transamerica Insurance Finance ON 100% TIFC Provides ins. premium
Corporation, Canada financing in Canada
Transamerica Business Credit Delaware 100% TCFCI Provides asset based lending
Corporation ("TBCC") leasing & equip. financing
Transamerica Mezzanine Delaware 100% TBCC Holds investments in several
Financing, Inc. joint ventures/partnerships
Transamerica Business Advisory Grp. Delaware 100% TBCC
Bay Capital Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Coast Funding Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Transamerica Small Business Delaware 100% TBCC
Capital, Inc. ("TSBC")
Emergent Business Capital Delaware 100% TSBC
Holdings, Inc.
Gulf Capital Corporation Delaware 100% TBCC Special purpose company for
the purchase of real estate tax
liens
Direct Capital Equity Investment, Inc. Delaware 100% TBCC Small business loans
TA Air East, Corp Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air I, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air II, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air III, Corp. Delaware 100% TBCC special purpose corp. which
hold an ownership interest
or leases aircraft
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
TA Air IV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air V, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air VI, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air VII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft
TA Air VIII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft
TA Air IX, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air X, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XI, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XIII, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XIV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
TA Air XV, Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest
or leases aircraft
</TABLE>
C-17
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
TA Marine I Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases barges or ships
TA Marine II Corp. Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases barges or ships
TBC I, Inc. Delaware 100% TBCC Special purpose corp.
TBC II, Inc. Delaware 100% TBCC Special purpose corp.
TBC III, Inc. Delaware 100% TBCC Special purpose corp.
TBC IV, Inc. Delaware 100% TBCC Special purpose corp.
TBC V, Inc. Delaware 100% TBCC Special purpose corp.
TBC VI, Inc. Delaware 100% TBCC Special purpose corp.
TBC Tax I, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax II, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax III, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax IV, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax V, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VI, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VII, Inc. Delaware 100% TBCC Special purpose co. for the
purchase or real estate tax lien
TBC Tax VIII, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
TBC Tax IX, Inc. Delaware 100% TBCC Special purpose co. for the
purchase of real estate tax lien
</TABLE>
C-18
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
The Plain Company Delaware 100% TBCC Special purpose corp. which
hold an ownership interest or
leases aircraft.
Transamerica Distribution Delaware 100% TCFCI Holding corp. for inventory,
Finance Corporation ("TDFC") comm. Leasing, retail finance
comm. Recovery service and
accounts
Transamerica Accounts Holding Corp. Delaware 100% TDFC
Transamerica Commercial Delaware 100% TDFC Wholesale floor plan for
Finance Corporation ("TCFC") appliances, electronics,
computers, office equip. and
marine equipment.
Transamerica Acquisition Canada 100% TCFC Holding company
Corporation, Canada
Transamerica Distribution Finance Delaware 100% TCFC
Corporation - Overseas, Inc.
("TDFCO")
TDF Mauritius Limited Mauritius 100% TDFCO Mauritius holding company
of our Indian Joint Venture
Inventory Funding Trust Delaware 100% TCFC
Inventory Funding Company, LLC Delaware 100% Inventory Funding Trust
TCF Asset Management Corporation Colorado 100% TCFC A depository for foreclosed
real and personal property
Transamerica Joint Ventures, Inc. Delaware 100% TCFC To enter into general partner-
ships for the ownership of
comm. & finance business
Transamerica Inventory Delaware 100% TDFC Holding co. for inventory
Finance Corporation ("TIFC") finance subsidiaries
Transamerica GmbH, Inc. Delaware 100% TIFC Commercial lending in
Germany
Transamerica Fincieringsmaatschappij
B.V. Netherlands 100% Trans. GmbH, Inc. Commercial lending in
Europe
</TABLE>
C-19
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
BWAC Seventeen, Inc. Delaware 100% TIFC Holding co. for principal
Canadian operation, Trans-
America Comm. Finance
Corp, Canada
Transamerica Commercial ON 100% BWAC Seventeen, Inc. Shell corp.- Dormant
Finance Canada, Limited
Transamerica Commercial Canada 100% BWAC Seventeen, Inc. Commercial finance
Finance Corporation, Canada
BWAC Twenty-One, Inc. Delaware 100% TIFC Holding co. for United
Kingdom operation, Trans-
America Comm. Finance
Limited
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Commercial lending in the
Finance Limited ("TCFL") United Kingdom.
Whirlpool Financial Corporation 100% TCFL Inactive commercial finance
Polska Spzoo Company in Poland
Transamerica Commercial U.K. 100% BWAC Twenty-One Inc. Holding Company
Holdings Limited
Transamerica Commercial Finance U.K. 100% Trans. Commercial
Limited Holdings Limited
Transamerica Commercial Finance France 100% BWAC Twenty-One Inc. Carries out factoring trans-
France S.A. actions in France & abroad
Transamerica GmbH Inc. Delaware 100% BWAC Twenty-One Inc. Holding co. for Transamerica
Financieringsmaatschappij
B.V.
Transamerica Retail Financial Delaware 100% TIFC Provides retail financing
Services Corporation ("TRFSC")
Transamerica Bank, NA Delaware 100% TRFSC Bank (Credit Cards)
Transamerica Consumer Finance Delaware 100% TRFSC Consumer finance holding
Holding Company ("TCFHC") company
Transamerica Mortgage Company Delaware 100% TCFHC Consumer mortgages
Transamerica Consumer Mortgage Delaware 100% TCFHC Securitization company
Receivables Company
Metropolitan Mortgage Company Florida 100% TCFHC Consumer mortgages
</TABLE>
C-20
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Easy Yes Mortgage, Inc. Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Easy Yes Mortgage, Inc. Georgia 100% Metropolitan Mtg. Co. No active business/Name
holding only
First Florida Appraisal Services, Inc. Georgia 100% Metropolitan Mtg. Co. Appraisal and inspection
services
First Georgia Appraisal Services, Inc. Georgia 100% First FL App. Srvc, Inc. Appraisal services
Freedom Tax Services, Inc. Florida 100% Metropolitan Mtg. Co. Property tax information
services
J.J. & W. Advertising, Inc. Florida 100% Metropolitan Mtg. Co. Advertising and marketing
services
J.J. & W. Realty Corporation Florida 100% Metropolitan Mtg. Co. To hold problem REO
properties
Liberty Mortgage Company of Florida 100% Metropolitan Mtg. Co. No active business/Name
Ft. Myers, Inc. holding only
Metropolis Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Perfect Mortgage Company Florida 100% Metropolitan Mtg. Co. No active business/Name
holding only
Transamerica Vendor Financial Srvc. Delaware 100% TDFC Provides commercial lease
Transamerica Distribution Finance 100% TCFCI
Corporation de Mexico ("TDFCM")
TDF de Mexico Mexico 100% TDFCM
Transamerica Corporate Services 100% TDFCM
De Mexico
Transamerica Home Loan California 100% TFC Consumer mortgages
Transamerica Lending Company Delaware 100% TFC Consumer lending
Transamerica Financial Products, Inc. California 100% Transamerica Corp. Service investments
Transamerica Insurance Corporation California 100% Transamerica Corp. Provides insurance premium
of California ("TICC") financing in California
</TABLE>
C-21
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Arbor Life Insurance Company Arizona 100% TICC Life insurance, disability
insurance
Plaza Insurance Sales Inc. California 100% TICC Casualty insurance placement
Transamerica Advisors, Inc. California 100% TICC Retail sale of investment
advisory services
Transamerica Annuity Services Corp. New Mexico 100% TICC Performs services required for
structured settlements
Transamerica Financial Resources, Inc. Delaware 100% TICC Retail sale of securities
products
Financial Resources Insurance Texas 100% Transamerica Fin. Res. Retail sale of securities
Agency of Texas products
TBK Insurance Agency of Ohio, Inc. Ohio 100% Transamerica Fin. Res. Variable insurance contract
sales in state of Ohio
Transamerica Financial Resources Alabama 100% Transamerica Fin. Res. Insurance agent & broker
Agency of Alabama, Inc.
Transamerica Financial Resources Ins. Massachusetts 100% Transamerica Fin. Res. Insurance agent & broker
Agency of Massachusetts, Inc.
Transamerica International Insurance Delaware 100% TICC Holding & administering
Services, Inc. ("TIIS") foreign operations
Home Loans and Finance Ltd. U.K. 100% TIIS Inactive
Transamerica Occidental Life California 100% TICC Licensed in all forms of life
Insurance Company ("TOLIC") insurance, accident and
sickness insurance
NEF Investment Company California 100% TOLIC Real estate development
Transamerica Life Insurance and N. Carolina 100%TOLIC Writes life and pension ins.
Annuity Company ("TLIAC") originally incorporated in CA
April 14, 1966
Transamerica Assurance Company Missouri 100% TLIAC Life and disability insurance
Gemini Investments, Inc. Delaware 100% TLIAC Investment subsidiary
Transamerica Life Insurance Company Canada 100% TOLIC Sells individual life insurance
of Canada & investment products in all
provinces and territories of
Canada
</TABLE>
C-22
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Transamerica Life Insurance Company New York 100% TOLIC Licensed in NY to market life
of New York insurance, annuities and health
insurance
Transamerica South Park Delaware 100% TOLIC Provide market analysis of
Resources, Inc. certain undeveloped land
holdings held by TOLIC
Transamerica Variable Insurance Maryland 100% TOLIC Mutual Fund
Fund, Inc.
USA Administration Services, Inc. Kansas 100% TOLIC Third party administrator
Transamerica Products. Inc. California 100% TICC Parent co. of various
subsidiary corp. which are
formed to be co-general
partners of proprietary limited
Transamerica Securities Sales Corp. Maryland 100% Transamerica Prod. Inc. Retail sale of the variable life
ins. and variable annuity
products of the Transamerica
life companies
Transamerica Service Company Delaware 100% Transamerica Prod. Inc. Passive loss tax service for
Lloyd's U.S. names
Transamerica Intellitech, Inc. Delaware 100% TICC Real estate information and
technology services
Transamerica International Delaware 100% TICC Investments
Holdings, Inc.
Transamerica Investment Services, Inc. Delaware 100% TICC Investment adviser
Transamerica Income Shares, Inc. Maryland 100% Trans. Invest. Srvc. Inc. Transamerica investment
services
Transamerica LP Holdings Corp. Delaware 100% TICC Limited partnership
Investment
(initial limited partner of
Transamerica Delaware, L.P.)
Transamerica Real Estate Tax Service N/A 100% TICC Real estate tax reporting and
(A Division of Transamerica Corp) processing services
Transamerica Realty Services, Inc. Delaware 100% TICC Responsible for real estate
investments for Transamerica
</TABLE>
C-23
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of Percent of Voting
Name Incorporation Securities Owned Business
- ---- ------------- ---------------- --------
<S> <C> <C> <C>
Bankers Mortgage Company of CA California 100% Transamerica Realty Srv. Holds bank account and owns
certain residual investments in
certain French real estate
projects which are managed
special purpose company for
the purchase of real estate tax
liens.
Pyramid Investment Corporation Delaware 100% Transamerica Realty Srv. Owns office buildings in San
Francisco and other properties
The Gilwell Company California 100% Transamerica Realty Srv. Ground lessee of 517
Washington Street,
San Francisco
Transamerica Affordable Housing, Inc. California 100% Transamerica Realty Srv. Owns general partnership
interests in low-income
housing tax credit
partnerships
Transamerica Minerals Company California 100% Transamerica Realty Srv. Owner and lessor of oil and
gas properties
Transamerica Oakmont Corporation California 100% Transamerica Realty Srv. General partner in
Transamerica/Oakmont
Retirement Associates
Transamerica Senior Properties, Inc. Delaware 100% TICC Owns congregate care and
assisted living retirement
Properties
Transamerica Senior Living, Inc. Delaware 100% Trans. Sr. Prop. Inc. Manages congregate care and
assisted living retirement
properties.
</TABLE>
C-24
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 1, 2000 there were 55,717 owners of Contracts.
ITEM 28. INDEMNIFICATION
Item 28 is incorporated by reference from the Post-Effective Amendment No. 6
to the Registration Statement of the National Home Life Assurance Company Sep-
arate Account II, File No. 33-7037.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) None.
(b) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the physical possession of The Continuum Company, Inc., Kansas City, Mis-
souri and The Vanguard Group, Inc., Valley Forge, Pennsylvania.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS
(a) Peoples Benefit Life Insurance Company represents that the fees and charges
deducted under the contracts in this registration statement, in the aggregate,
are reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by Peoples Benefit Life Insurance Company.
C-25
<PAGE>
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Peoples Benefit Life Insurance Company Separate Account V,
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this amended Registration Statement and has caused this amended
Registration Statement to be signed on its behalf in the County of Jefferson and
Commonwealth of Kentucky on the 28th day of April, 2000.
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V (REGISTRANT)
By: Peoples Benefit Life Insurance Company
BART HERBERT, JR.
By: ___________________________________________
Bart Herbert, Jr., President
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(DEPOSITOR)
BART HERBERT, JR.
By: ___________________________________________
Bart Herbert, Jr., President
*By: /s/ Gregory E. Miller-Breetz
------------------------------
Gregory E. Miller-Breetz
Attorney-in-fact
<PAGE>
As required by the Securities Act of 1933, this amended Registration
Statement has been duly signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
DAVID G. REKOSKI Director and Senior Vice President April 28, 2000
- ---------------------------
David G. Rekoski
G. DOUGLAS MANGUM, JR.* Director and Senior Vice President April 28, 2000
- ---------------------------
G. Douglas Mangum, Jr.
MARTHA A. McCONNELL* Treasurer (Chief Accounting Officer) April 28, 2000
- ---------------------------
Martha A. McConnell
DOUGLAS A. SARCIA* Director and Vice President April 28, 2000
- ---------------------------
Douglas A. Sarcia
BRIAN A. SMITH* Director and Senior Vice President April 28, 2000
- ---------------------------
Brian A. Smith
BART HERBERT, JR.* Director and President April 28, 2000
- ---------------------------
Bart Herbert, Jr.
CRAIG D. VERMIE* Director April 28, 2000
- ---------------------------
Craig D. Vermie
LARRY N. NORMAN* Director and Vice President April 28, 2000
- ---------------------------
Larry N. Norman
BRENDA K. CLANCY* Director and Vice President April 28, 2000
- ---------------------------
Brenda K. Clancy
*By: /s/ Gregory E. Miller - Breetz
------------------------------
Gregory E. Miller - Breetz
Attorney-in-fact
</TABLE>
<PAGE>
SEPARATE ACCOUNT IV
VANGUARD VARIABLE ANNUITY PLAN CONTRACT
INDEX TO EXHIBITS
EXHIBIT 9(a) OPINION AND CONSENT OF COUNSEL
EXHIBIT 9(b) CONSENT OF COUNSEL
EXHIBIT 10 CONSENT OF INDEPENDENT AUDITORS
<PAGE>
EXHIBIT 9(A)
April 28, 2000
PEOPLES BENEFIT LIFE INSURANCE COMPANY
Home Office
4333 Edgewood Rd. NE
Cedar Rapids, Iowa 52499
RE: PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT IV--OPINION AND CONSENT
To Whom It May Concern:
This opinion and consent is furnished in connection with the filing of Post-
Effective Amendment No. 13 (the "Amendment") to the Registration Statement on
Form N-4, File No. 33-36073 (the "Registration Statement") under the Securities
Act of 1933, as amended (the "Act"), of Peoples Benefit Life Insurance Company
Separate Account IV ("Separate Account IV"). Separate Account IV receives and
invests premiums allocated to it under a flexible premium multi-funded annuity
contract (the "Annuity Contract"). The Annuity Contract is offered in the manner
described in the prospectus contained in the Registration Statement (the
"Prospectus").
In my capacity as legal adviser to Peoples Benefit Life Insurance Company, I
hereby confirm the establishment of Separate Account IV pursuant to the
provisions of Section 508A.1 of the Iowa Code. In addition, I have made such
examination of the law in addition to consultation with outside counsel and have
examined such corporate records and such other documents as I consider
appropriate as a basis for the opinion hereinafter expressed. On the basis of
such examination, it is my professional opinion that:
1. Peoples Benefit Life Insurance Company is a corporation duly organized
and validly existing under the laws of the State of Iowa.
2. Separate Account IV is an account established and maintained by Peoples
Benefit Life Insurance Company pursuant to the laws of the State of Iowa,
under which income, capital gains and capital losses incurred on the assets of
Separate Account IV are credited to or charged against the assets of Separate
Account IV, without regard to the income, capital gains or capital losses
arising out of any other business which Peoples Benefit Life Insurance
Company may conduct.
3. Assets allocated to Separate Account IV will be owned by Peoples Benefit
Life Insurance Company. The assets in Separate Account IV attributable to the
Annuity Contract generally are not chargeable with liabilities arising out of
any other business which Peoples Benefit Life Insurance Company may conduct.
The assets of Separate Account IV are available to cover the general
liabilities of Peoples Benefit Life Insurance Company only to the extent that
the assets of Separate Account IV exceed the liabilities arising under the
Annuity Contracts.
4. The Annuity Contracts have been duly authorized by Peoples Benefit Life
Insurance Company and, when sold in jurisdictions authorizing such sales, in
accordance with the Registration Statement, will constitute validly issued
and binding obligations of Peoples Benefit Life Insurance Company in
accordance with their terms.
<PAGE>
Peoples Benefit Life Insurance Company
5. Owners of the Annuity Contracts as such, will not be subject to any de-
ductions, charges or assessments imposed by Peoples Benefit Life Insurance
Company other than those provided in the Annuity Contract.
I hereby consent to the use of this opinion as an exhibit to the Amendment and
to the reference to my name under the heading "Legal Matters" in the Prospec-
tus.
Very truly yours,
/s/ Gregory E. Miller-Breetz
Gregory E. Miller-Breetz
Assistant General Counsel
<PAGE>
EXHIBIT 9(b)
JORDEN BURT BOROS CICCKETTI BERENSON & JOHNSON LLP
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400-EAST
WASHINGTON, D.C. 20007-0805
(202) 965-8100
TELECOPIER (202) 965-8104
April 28, 2000
PEOPLES BENEFIT LIFE INSURANCE COMPANY
20 MOORES ROAD
FRAZER, PENNSYLVANIA 19355
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus contained in Post-Effective Amendment No. 13 to the
Registration Statement on Form N-4 (file No. 33-36073) filed by Peoples Benefit
Life Insurance Company and Peoples Benefit Life Insurance Company Separate
Account IV with the Securities and Exchange Commission under the Securities Act
of 1933 and the Investment Company Act of 1940.
Very truly yours,
/s/ Jorden Burt Boros Ciccketti Berenson & Johnson LLP
Jorden Burt Boros Ciccketti Berenson & Johnson LLP
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Financial
Statements" in the Prospectus and Statement of Additional Information and
"Auditors" in the Prospectus, and to the use of our reports (1) dated January
28, 2000, with respect to the financial statements of the subaccounts of Peoples
Benefit Life Insurance Company Separate Account IV, which are available for
investment by the Vanguard Variable Annuity Plan, and (2) February 18, 2000 with
respect to the statutory-basis financial statements of Peoples' Benefit Life
Insurance Company in Post-Effective Amendment No. 13 to the Registration
Statement (Form N-4 No. 33-36073) and related Prospectus of the Vanguard
Variable Annuity Plan.
/s/ Ernst & Young LLP
Des Moines, Iowa
April 24, 2000
