<PAGE>
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As Filed With The Securities And Exchange Commission On December 1, 2000
Registration No. 33-80958
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 14
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25
PEOPLES BENEFIT LIFE INSURANCE COMPANY SEPARATE ACCOUNT V
(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
Brenda Sneed, Esquire
PEOPLES BENEFIT LIFE INSURANCE COMPANY
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
(Name and Address of Agent for Service)
Copies to:
Michael Berenson, Esquire
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W., Suite 400 East
Washington, D.C. 20007-0805
Approximate Date of Proposed Offering:
As soon as practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
[_] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] On December 1, 2000, pursuant to paragraph (b) of Rule 485.
[_] 60 Days after filing pursuant to paragraph (a)(1) of Rule 485.
[_] On _______________, pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
THE ADVISOR'S EDGE
VARIABLE ANNUITY
Issued Through
Peoples Benefit Life Insurance Company
Separate Account V
By
Peoples Benefit Life Insurance Company
Prospectus
December 1, 2000
The Advisor's Edge Variable Annuity (the "Policy") provides a means of
investing on a tax-deferred basis in 35 portfolios of underlying mutual funds
(the "Portfolios") and a fixed account which offers interest at rates that are
guaranteed by Peoples Benefit Life Insurance Company. The Policy is an
individual variable annuity policy and is intended for retirement savings or
other long-term investment purposes. For investments in the Subaccounts, you
bear all investment risk (including the possible loss of principal), and
investment results are not guaranteed. The Policy provides a Right to Cancel
period of at least 20 days (30 days or more in some instances) during which the
Policy may be cancelled.
Before investing you should carefully read this prospectus and the accompanying
prospectuses for the Portfolios of the underlying mutual funds. These
prospectuses give you important information about the Policy and the
Portfolios, including the objectives, risks, and strategies of the Portfolios.
A Statement of Additional Information for the Policy prospectus has been filed
with the Securities and Exchange Commission, is incorporated by reference, and
is available free by calling our Administrative Offices at 800-866-6007. The
Table of Contents of the Statement of Additional Information is included at the
end of this prospectus.
The Policy is not available in all states.
This prospectus does not constitute an offering in any jurisdiction where it
would be unlawful to make an offering like this. We have not authorized anyone
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.
Neither the Securities and Exchange Commission nor any state securities
regulator 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 PORTFOLIOS
Alliance Variable Products Series Fund, Inc.
Alliance Growth
Alliance Premier Growth
Alliance Technology
DFA Investment Dimensions Group, Inc.
DFA Small Value
DFA Large Value
DFA International Value
DFA International Small
DFA Short-Term Fixed
DFA Global Bond
The Dreyfus Socially Responsible Growth Fund, Inc.
Endeavor Series Trust
Dreyfus Small Cap Value
Endeavor Enhanced Index
T. Rowe Price International Stock
The Federated Insurance Series
Federated American Leaders
Federated High Income Bond
Federated Prime Money
Federated U.S. Government Securities
Federated Utility
The Montgomery Funds III
Montgomery Growth
Montgomery Emerging Markets
Seligman Portfolios, Inc.
Seligman Capital
Seligman Communications and Information
Seligman Global Technology
SteinRoe Variable Investment Trust
Stein Roe Small Company Growth
Strong Variable Insurance Funds, Inc.
Strong International Stock
Strong Schafer Value
Transamerica Variable Insurance Fund, Inc.
Transamerica VIF Growth
Wanger Advisors Trust
Wanger U.S. Small Cap Advisor
Wanger International Small Cap Advisor
Warburg Pincus Trust
Warburg Pincus International Equity
Warburg Pincus Small Company Growth
WRL Series Fund, Inc.
WRL Alger Aggressive Growth
WRL J.P. Morgan Real Estate Securities
WRL Janus Growth
WRL LKCM Strategic Total Return
<PAGE>
Contents
<TABLE>
<C> <S>
1 Cross Reference to Definitions
2 Summary
7 Fee Table
10 Example
12 The Annuity Policy
13 Annuity Payments
17 Purchase
20 Investment Options
25 Expenses
</TABLE>
<TABLE>
<S> <C>
26 Taxes
29 Access to Your Money
32 Performance
34 Death Benefit
37 Other Information
40 Table of Contents of Statement of Additional
Information
A-1 Appendix A (Condensed Financial Information)
</TABLE>
CROSS REFERENCE TO DEFINITIONS
We have generally defined the technical terms associated with the Policy 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>
<S> <C>
Accumulation Phase.......................................................... 12
Adjusted Policy Value....................................................... 26
Annuitant................................................................... 34
Annuity Commencement Date................................................... 12
Annuity Payment Options..................................................... 13
Business Day................................................................ 15
Cash Value.................................................................. 26
Excess Interest Adjustment.................................................. 27
Guaranteed Period Options................................................... 11
Income Phase................................................................ 12
Initial Premium Payment..................................................... 15
Net Premium Payment......................................................... 16
Policy...................................................................... 11
Policy Anniversary.......................................................... 16
Policy Date................................................................. 16
Policy Owner................................................................ 34
Policy Value................................................................ 26
Policy Year................................................................. 16
Portfolios.................................................................. 18
Premium Payment............................................................. 16
Qualified Policy............................................................ 16
Right to Cancel Period...................................................... 34
Tax Deferral................................................................ 23
</TABLE>
1
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SUMMARY
The numbered 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 numbered headings. Please read the full prospectus carefully.
1. THE ANNUITY POLICY
The Advisor's Edge Variable Annuity
Advisor's Edge is a flexible-premium multi-funded variable annuity offered by
Peoples Benefit Life Insurance Company ("Peoples Benefit"). The Policy
provides a means of investing on a tax-deferred basis in thirty-five
Portfolios of the underlying funds and a fixed account offered by Peoples
Benefit.
Who Should Invest
The Policy is intended for long-term investors who want tax-deferred
accumulations of funds, generally for retirement but also for other long-term
purposes.
The Policy provides benefits in two distinct phases: accumulation and income.
The Accumulation Phase
During the Accumulation Phase, you choose to allocate your investment in the
Policy among the thirty-five Portfolios and the fixed account available under
the Policy. You can contribute additional amounts to the Policy and you can
take withdrawals from the Policy during the Accumulation Phase. The value of
your investment depends on the investment performance of the Portfolios of the
underlying funds that 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 Policy. See ANNUITY PAYMENTS, page
12, for more information about Annuity Payment Options.
2. ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide
range of Annuity Payment Options. The Policy 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 of the underlying funds you have chosen) or a
fixed basis (where the payment is guaranteed).
3. PURCHASE
You can buy the Policy with a minimum investment of $10,000 for Non-Qualified
Policies and $1,000 for Qualified Policies. You can add $500 or more to Non-
Qualified Policies and $25 or more to Qualified Policies at any time during
the Accumulation Phase. Your Policy may not exceed $1,000,000 in total Premium
Payments without our prior approval.
2
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4. INVESTMENT OPTIONS
When you purchase the Policy, your Premium Payments are deposited into the
Peoples Benefit Life Insurance Company Separate Account V (the "Separate
Account"). The Separate Account contains a number of Subaccounts that invest
exclusively in shares of the corresponding Portfolios of the underlying mutual
funds (the "Subaccounts"). 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 Peoples Benefit, but are accounted for
separately from the Company's other assets and can be used only to satisfy its
obligations to the Policy Owners.
You can allocate your Premium Payments to one or more Subaccounts that invest
exclusively in shares of the following Portfolios described in the twelve
Funds' prospectuses and to the fixed account. The fixed account offers an
interest rate that Peoples Benefit guarantees.
The Portfolios
Alliance Variable Products Series Fund, Inc.
Advised by Alliance Capital Management L.P.
Alliance Growth Portfolio
Alliance Premier Growth Portfolio
Alliance Technology Portfolio
DFA Investment Dimensions Group, Inc.
Advised by Dimensional Fund Advisors, Inc.
VA Small Value Portfolio ("DFA Small Value Portfolio")
VA Large Value Portfolio ("DFA Large Value Portfolio")
VA International Value Portfolio ("DFA International Value Portfolio")
VA International Small Portfolio ("DFA International Small Portfolio")
VA Short-Term Fixed Portfolio ("DFA Short-Term Fixed Portfolio")
VA Global Bond Portfolio ("DFA Global Bond Portfolio")
The Dreyfus Socially Responsible Growth Fund, Inc.
Advised by The Dreyfus Corporation
Endeavor Series Trust
Advised by Endeavor Management Co.
Dreyfus Small Cap Value Portfolio
Endeavor Enhanced Index Portfolio
T. Rowe Price International Stock Portfolio
The Federated Insurance Series
Advised by Federated Investment Management Company
Federated American Leaders Fund II ("Federated American Leaders
Portfolio")
Federated High Income Bond Fund II ("Federated High Income Bond
Portfolio")
Federated Prime Money Fund II ("Federated Prime Money Portfolio")
Federated Fund for U.S. Government Securities II ("Federated U.S.
Government Securities Portfolio")
Federated Utility Fund II ("Federated Utility Portfolio")
The Montgomery Funds III
Advised by Montgomery Asset Management, LLC
Montgomery Variable Series: Growth Fund ("Montgomery Growth Portfolio")
Montgomery Variable Series: Emerging Markets Fund ("Montgomery Emerging
Markets Portfolio")
3
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Seligman Portfolios, Inc.
Advised by J. & W. Seligman & Co. Incorporated
Seligman Capital Portfolio
Seligman Communications and Information Portfolio
Seligman Global Technology Portfolio
SteinRoe Variable Investment Trust
Advised by Stein Roe & Farnham Incorporated
Stein Roe Small Company Growth Fund, Variable Series, formerly Stein Roe
Special Venture Fund ("Stein Roe Small Company Growth Portfolio")
Strong Variable Insurance Funds, Inc.
Advised by Strong Capital Management, Inc.
Strong International Stock Fund II ("Strong International Stock
Portfolio")
Strong Schafer Value Fund II ("Strong Schafer Value Portfolio")
Transamerica Variable Insurance Fund, Inc.
Advised by Transamerica Investment Management, LLC.
Transamerica VIF Growth Portfolio
Wanger Advisors Trust
Advised by Wanger Asset Management, L.P.
Wanger U.S. Small Cap Advisor ("Wanger U.S. Small Cap Advisor Portfolio")
Wanger International Small Cap Advisor ("Wanger International Small Cap
Advisor Portfolio")
Warburg Pincus Trust
Advised by Credit Suisse Asset Management
Warburg Pincus International Equity Portfolio
Warburg Pincus Small Company Growth Portfolio
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
Aggressive Growth Portfolio ("WRL Alger Aggressive Growth Portfolio")
Real Estate Securities Portfolio ("WRL J.P. Morgan Real Estate Securities
Portfolio")
Growth Portfolio ("WRL Janus Growth Portfolio")
Strategic Total Return Portfolio ("WRL LKCM Strategic Total Return
Portfolio")
You can make or lose money in any of the Subaccounts that invest in these
Portfolios depending on their investment performance.
5. EXPENSES
No sales load is deducted from Premium Payments.
No surrender charge applies to withdrawals. Full surrenders, partial
withdrawals, and transfers from a Guaranteed Period Option of the fixed
account may be subject to an Excess Interest Adjustment, which may increase or
decrease the amount you receive. This adjustment may also apply to amounts
applied to an Annuity Payment Option from a Guaranteed Period Option of the
fixed account.
Peoples Benefit will deduct mortality and expense risk fees and administrative
charges at an annual rate of either 0.75%, 0.65% or 0.60% per year from the
assets in each Subaccount (depending on the death benefit you select).
4
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On each Policy Anniversary and at the time of surrender during any Policy Year
before the Annuity Commencement Date, we reserve the right to assess a service
charge of up to $30 for policy administration expenses. The Service Charge
will not be deducted on a Policy Anniversary or at the time of surrender if,
at either of these times, (1) the sum of all Premium Payments less the sum of
all withdrawals taken is at least $50,000; (2) the Policy Value equals or
exceeds $50,000 or (3) the Policy is a Qualified Policy.
You will also pay certain expenses associated with the operation of the
Portfolios of the underlying funds.
6. TAXES
In general, you are not taxed on earnings on your investment in the Policy
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 Policy. For
Annuity Payments, payments come partially from earnings and partially from
your investment. You are taxed only on the earnings portion of each Annuity
Payment. If you receive money from the Policy before age 59 1/2, you may have
to pay a 10% penalty tax on the earnings portion received.
7. ACCESS TO YOUR MONEY
You can take money out of your Policy at any time during the Accumulation
Phase. Each withdrawal you make must be at least $500. If you have a Policy
Value in the fixed account, you may take up to 10% free of Excess Interest
Adjustments. Amounts withdrawn in excess of the 10% free amount, may be
subject to Excess Interest Adjustments.
You may have to pay income tax and a tax penalty on any money you take out.
8. PERFORMANCE
The investment performance of the Subaccounts you choose directly affects the
value of your Policy. For investments in the Subaccounts, you bear all
investment risk (including the possible loss of principal), and investment
results are not guaranteed.
From time to time, Peoples Benefit may advertise the investment performance of
the Subaccounts. In doing so, it will use standardized methods prescribed by
the Securities and Exchange Commission ("SEC"), as well as certain non-
standardized methods.
Past performance does not indicate or predict future performance.
9. DEATH BENEFIT
If you are both the owner and the annuitant and you die before the Income
Phase begins, then your beneficiary will receive a death benefit.
Naming different persons as owner and annuitant can affect whether the death
benefit is payable and to whom amounts will be paid. Use care when naming
owners, annuitants and beneficiaries, and consult your agent if you have
questions.
You may choose one of the following guaranteed minimum death benefits:
. Return of Premium--available if the owner or annuitant is age 0 to 85 on
the Policy Date
. 6 Year Step-Up To Age 81--available if the owner or annuitant is age 0 to
75 on the Policy Date
. Double Enhanced Death Benefit--available if the owner or annuitant is age 0
to 79 on the Policy Date
5
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If the guaranteed minimum death benefit is not available because of the age of
the owner or annuitant, the death benefit will be the greater of the Policy
Value or the Cash Value as of the date of death.
If the owner is not the annuitant, no death benefit is paid if the owner dies.
10. OTHER INFORMATION
Additional Features
This Policy has additional features that might interest you. These features
are not available in all states and may not be suitable for your particular
situation. These include the following:
. You can arrange to have money automatically sent to you monthly, quarterly,
semi-annually or annually while your Policy is in the Accumulation Phase.
This feature is referred to as the "systematic payout option." Amounts you
receive may be included in your gross income, and in certain circumstances,
may be subject to penalty taxes.
. Under certain medically related circumstances, we will allow you to
surrender or partially withdraw your Policy Value without an Excess
Interest Adjustment. This feature is called the "Nursing Care and Terminal
Condition Withdrawal Option."
. Under certain unemployment circumstances, you may withdraw all or a portion
of the Policy Value free of Excess Interest Adjustments. This feature is
called the "Unemployment Waiver."
. You may make transfers and/or change the allocation of additional Premium
Payments by telephone.
. You can arrange to have a certain amount of money (at least $500)
automatically transferred from the fixed account or the Federated Prime
Money Portfolio either monthly or quarterly, into your choice of
Subaccounts. This feature is called "Dollar Cost Averaging."
Right to Cancel Period
The Policy provides for a Right to Cancel Period of 20 days (30 or more days
in some instances as specified in your Policy) plus a 5-day period to allow
for mail delivery. To cancel your investment, please return your Policy to us
or to the agent from whom you purchased the Policy.
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 policies.
Peoples Benefit Life Insurance Company Separate Account V
The Separate Account is a unit investment trust registered with the SEC and
operating under Iowa law. The Separate Account has thirty-five Subaccounts
dedicated to the Policy, each of which invests solely in a corresponding
Portfolio of the underlying Funds.
Other topics
Additional information on the topics summarized above and on other topics not
summarized here can be found at OTHER INFORMATION, page 37.
11. INQUIRIES AND POLICY AND POLICYHOLDER INFORMATION
For more information about the Advisor's Edge variable annuity, call or write:
Peoples Benefit Life Insurance Company, Variable Annuity Department, 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499, 800-866-6007.
6
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If you have questions about your Policy, please telephone our Administrative
Offices at 800-866-6007 between the hours of 8 a.m. and 6 p.m. Eastern time.
Please have ready the Policy number and the Policy Owner's name when you call.
As Policy Owner, you will receive periodic statements confirming any
transactions that take place as well as quarterly and annual statements.
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that
may be assessed) that you would incur as a Policy Owner. The purpose of this
table is to assist you in understanding the various costs and expenses that
you would bear directly or indirectly as a purchaser of the Policy. The fee
table reflects all expenses for both the Separate Account and the Funds. For a
complete discussion of Policy costs and expenses, see EXPENSES, page 25.
<TABLE>
<S> <C>
Policy Owner Transaction Expenses
Sales Load Imposed on Premiums....................................... None
Contingent Deferred Sales Load (surrender charge).................... None
Exchange Fees........................................................ $10/1/
Annual Policy Service Charge......................................... $30/2/
Separate Account Annual Expenses (as a percentage of assets in the
Separate Account)
Mortality and Expense Risk Fee....................................... 0.60%
Administrative Charge................................................ 0.15%
----
Total Annual Separate Account Expenses............................... 0.75%/3/
</TABLE>
/1/ Peoples Benefit does not currently charge a fee for transfers among the
Subaccounts, although it reserves the right to charge a $10 fee for each
Transfer in excess of 12 per Policy Year.
/2/ Peoples Benefit does not currently charge an Annual Policy Service Charge,
but reserves the right to assess a service charge up to $30 for policy
administration expenses. If the Company assesses a Service Charge, it will
not be deducted on a Policy if (1) the sum of all Premium Payments less
the sum of all withdrawals taken is at least $50,000; (2) the Policy Value
equals or exceeds $50,000, or (3) the Policy is a Qualified Policy.
/3/ Total Annual Separate Account Expenses shown (0.75%) applies to the Double
Enhanced Death Benefit option. This reflects a fee that is 0.10% and 0.15%
per year higher than the 0.65% and 0.60% corresponding fees for the 6 Year
Step-Up Death Benefit and Return of Premium Death Benefit options,
respectively.
7
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Portfolio Annual Expenses
Except as indicated, the figures below are based on expenses for fiscal year
1999 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement limitation, if applicable).
<TABLE>
<CAPTION>
Management Total
and Rule Portfolio
Advisory Other 12b-1 Annual
Expenses Expenses Fee Expenses
---------- -------- ----- ---------
<S> <C> <C> <C> <C>
Alliance Growth Portfolio................ 0.75% 0.12% 0.25% 1.12%
Alliance Premier Growth Portfolio........ 1.00% 0.04% 0.25% 1.29%
Alliance Technology Portfolio/8/ ........ 0.86% 0.09% 0.25% 1.20%
DFA Small Value Portfolio................ 0.50% 0.17% -- 0.67%
DFA Large Value Portfolio................ 0.25% 0.18% -- 0.43%
DFA International Value Portfolio........ 0.40% 0.25% -- 0.65%
DFA International Small Portfolio........ 0.50% 0.29% -- 0.79%
DFA Short-Term Fixed Portfolio........... 0.25% 0.15% -- 0.40%
DFA Global Bond Portfolio................ 0.25% 0.24% -- 0.49%
Dreyfus Small Cap Value Portfolio/1/ .... 0.80% 0.10% 0.32% 1.22%
Dreyfus Socially Responsible Growth
Fund.................................... 0.75% 0.04% -- 0.79%
Endeavor Enhanced Index Portfolio........ 0.75% 0.03% -- 0.78%
Federated American Leaders Portfolio..... 0.75% 0.13% -- 0.88%
Federated High Income Bond Portfolio..... 0.60% 0.19% -- 0.79%
Federated Prime Money Portfolio.......... 0.50% 0.23% -- 0.73%
Federated U.S. Government Securities
Portfolio............................... 0.60% 0.24% -- 0.84%
Federated Utility Portfolio.............. 0.75% 0.19% -- 0.94%
Montgomery Growth Portfolio/2/ .......... 0.52% 0.73% -- 1.25%
Montgomery Emerging Markets Portfolio.... 1.25% 0.37% -- 1.62%
Seligman Capital Portfolio/9/ ........... 0.40% 0.19% 0.25% 0.84%
Seligman Communication and Information
Portfolio/9/ ........................... 0.75% 0.11% 0.25% 1.11%
Seligman Global Technology Portfolio/9/,
/10/ ................................... 1.00% 0.40% 0.15% 1.55%
Stein Roe Small Company Growth
Portfolio............................... 0.65% 0.02% -- 0.67%
Strong International Stock Portfolio..... 1.00% 0.16% -- 1.16%
Strong Schafer Value Portfolio........... 1.00% 0.20% -- 1.20%
Transamerica VIF Growth Portfolio/7/ .... 0.70% 0.15% -- 0.85%
T. Rowe Price International Stock
Portfolio/3/ ........................... 0.90% 0.10% -- 1.00%
Wanger U.S. Small Cap Advisor Portfolio.. 0.96% 0.06% -- 1.02%
Wanger International Small Cap Advisor
Portfolio............................... 1.25% 0.24% -- 1.49%
Warburg Pincus International Equity
Portfolio/4/ ........................... 1.00% 0.32% -- 1.32%
Warburg Pincus Small Company Growth
Portfolio/4/ ........................... 0.90% 0.24% -- 1.14%
WRL Alger Aggressive Growth Portfolio.... 0.80% 0.09% -- 0.89%
WRL J.P. Morgan Real Estate Securities
Portfolio/5/ ........................... 0.80% 0.20% -- 1.00%
WRL Janus Global/6/ ..................... 0.80% 0.12% -- 0.92%
WRL Janus Growth Portfolio/6/ ........... 0.80% 0.05% -- 0.85%
WRL LKCM Strategic Total Return
Portfolio............................... 0.80% 0.06% -- 0.86%
</TABLE>
/1/For the Dreyfus Small Cap Portfolio, the Management and Advisory Expenses
were 0.80% and Other Expenses before reimbursements were 0.10%. Therefore,
Total Portfolio Annual Expenses before reimbursements (reduced by custodial
offset arrangements) for the period ended December 31, 1999 were 0.90%. The
Board of Trustees of Endeavor Series Trust has authorized an arrangement
whereby, subject to best price and execution, executing brokers will share
commissions with the Trust's affiliated broker. Under supervision of the
Trustees, the affiliated broker will use the "recaptured commission" to
promote marketing of the Trust's shares. The staff
8
<PAGE>
of the SEC believes that, through the use of these recaptured commissions,
the Trust is indirectly paying for distribution expenses and that such
amounts must be shown as 12b-1 fees in the above table. The use of
recaptured commission to promote the sale of the Trust's shares involves no
additional costs to the Trust or any Policy Owner. Endeavor Series Trust,
on the basis of advice of counsel, does not believe that recaptured
brokerage commissions should be treated as 12b-1 fees. For more information
on the Trust's Brokerage Enhancement Plan, see the Trust's prospectus
accompanying this prospectus.
/2/A 1.0% reimbursement was applied to the management fees. Absent the
reimbursement, the Management and Advisory Expenses, Other Expenses, and
Total Portfolio Annual Expenses would have been 1.52%, 0.73%, and 2.25%
respectively.
/3/For the T. Rowe Price International Stock Portfolio, the Management and
Advisory Expenses were 0.90% and Other Expenses were 0.01%. Therefore,
Total Portfolio Annual Expenses (reduced by custodial offset arrangements)
for the period ended December 31, 1999 were 0.91%.
/4/Management and Advisory Expenses, Other Expenses, and Total Portfolio
Annual Expenses are based on actual expenses for the fiscal year ending
December 31, 1999. Management and Advisory Expenses were 1.00% for the
Warburg Pincus International Equity and 0.90% for the Warburg Pincus Small
Company Growth Portfolios. Other Expenses equaled 0.33% and 0.25%,
respectively, so that the Total Portfolio Annual Expenses were 1.33% for
the Warburg Pincus International Equity and 1.15% Warburg Pincus Small
Company Growth Portfolios. This includes transfer agency offsets that
reduced the fees by 0.01% each.
/5/WRL Investment Management, Inc. ("WRL Management") has undertaken, until at
least April 30, 2001, to pay expenses on behalf of the portfolios of the
WRL Fund to the extent normal operating expenses of the portfolio exceed a
stated percentage of each portfolios average daily net assets. In 1999, WRL
Management reimbursed WRL J. P. Morgan Real Estate Securities Portfolio in
the amount of $51,924. Without such reimbursement, the total annual
expenses during 1999 for this portfolio would have been 2.69%.
/6/For WRL Janus Growth, WRL Management previously waived 0.025% of its
advisory fee for the first $3 billion of the portfolio's average daily net
assets (net fee: 0.775%); and 0.05% for the portfolio's average daily net
assets above $3 billion (net fee: 0.75%). For WRL Janus Global, WRL
Management currently waives 0.025% of its advisory fee on portfolio average
daily net assets over $2 billion (net fee: 0.775%). The waivers for WRL
Janus Growth and WRL Janus Global were voluntary and were terminated on
June 25, 2000.
/7/For the Transamerica VIF Growth Portfolio, the Management and Advisory
Expenses before waivers were 0.75% and Other Expenses before reimbursements
were 0.15%. Therefore, Total Portfolio Annual Expenses before waivers and
Other Expenses before reimbursements (reduced by custodial offset
arrangements) for the period ended December 31, 1999 were 0.90%.
/8/For the fiscal year ended December 31, 1999, the Adviser waived and/or
reimbursed certain fees and expenses to maintain a total expense ratio of
1.20%. Absent such waivers and/or reimbursement, Management and Advisory
Expenses, Other Expenses and Rule 12b-1 Fees would have been 1.00%, 0.18%,
and 0.25%, respectively.
/9/Class 2 shares of the Seligman Portfolio were first offered on May 1, 2000.
Expense figures shown for Rule 12b-1 Fees are estimated for the fiscal year
2000.
/10/J. & W. Seligman & Co. Incorporated, the Manager, has agreed to reimburse
other expenses which exceed 0.40% per annum of average net assets of
Seligman Global Technology Portfolio. Without such reimbursement, other
expenses for 1999 would have been 0.41%.
9
<PAGE>
EXAMPLE
The following example illustrates the expenses that you would incur on a
$1,000 Premium Payment over various periods, assuming (1) a 5% annual rate of
return and (2) full surrender at the end of each period. The examples assume
that current fee waivers and expense reimbursement arrangements for the funds
continue for the periods shown. As noted in the Fee Table, the Policy imposes
no surrender or withdrawal charges of any kind. Your expenses are identical
whether you continue the Policy or withdraw the entire value of your Policy at
the end of the applicable period as a lump sum or under one of the Policy's
Annuity Payment Options. The expenses reflect different mortality and expense
risk fees depending on which death benefit you select:
A = Double Enhance Death Benefit Option (0.60%)
B = Return of Premium Death Benefit Option (0.45%)
C = 6 Year Step-Up To Age 81 Death Benefit Option (0.50%)
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Alliance Growth Portfolio............................ A 19 59 101 219
B 17 54 93 203
C 18 56 96 208
Alliance Premier Growth Portfolio.................... A 21 64 110 237
B 19 59 102 221
C 20 61 105 226
Alliance Technology Portfolio........................ A 20 61 105 227
B 18 57 97 212
C 19 58 100 217
DFA Small Value Portfolio............................ A 14 45 78 170
B 13 40 70 153
C 13 42 72 159
DFA Large Value Portfolio............................ A 12 37 65 143
B 11 33 57 126
C 11 34 60 132
DFA International Value Portfolio.................... A 14 44 77 168
B 13 40 69 151
C 13 41 71 157
DFA International Small Portfolio.................... A 16 49 84 183
B 14 44 76 167
C 15 46 79 172
DFA Short-Term Fixed Portfolio....................... A 12 37 63 140
B 10 32 55 122
C 11 33 58 128
DFA Global Bond Portfolio............................ A 13 39 68 150
B 11 35 60 133
C 12 36 63 139
Dreyfus Small Cap Value Portfolio.................... A 20 62 106 230
B 18 57 99 214
C 19 59 101 219
Dreyfus Socially Responsible Growth Fund............. A 16 49 84 183
B 14 44 76 167
C 15 46 79 172
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Endeavor Enhanced Index Portfolio................... A 16 48 83 182
B 14 44 76 166
C 15 45 78 171
Federated American Leaders Portfolio................ A 17 51 89 193
B 15 47 81 177
C 16 48 83 182
Federated High Income Bond Portfolio................ A 16 49 84 183
B 14 44 76 167
C 15 48 79 172
Federated Prime Money Portfolio..................... A 15 47 81 177
B 14 42 73 160
C 14 44 76 166
Federated U.S. Government Securities Portfolio...... A 16 50 87 189
B 15 46 79 172
C 15 47 81 718
Federated Utility Portfolio......................... A 17 53 92 200
B 16 49 84 183
C 16 50 87 189
Montgomery Growth Portfolio......................... A 20 63 108 233
B 19 58 100 217
C 19 60 103 222
Montgomery Emerging Markets Portfolio............... A 24 74 127 271
B 23 69 119 255
C 23 71 122 261
Seligman Capital Portfolio.......................... A 16 50 87 189
B 15 46 79 172
C 15 47 81 178
Seligman Communications and Information Portfolio... A 19 58 101 218
B 17 54 93 202
C 18 55 95 207
Seligman Global Technology Portfolio................ A 23 72 123 264
B 22 67 115 248
C 22 69 118 253
Stein Roe Small Company Growth Portfolio............ A 14 45 78 170
B 13 40 70 153
C 13 42 72 159
Strong International Stock Portfolio................ A 19 60 103 223
B 18 55 95 207
C 18 57 98 213
Strong Schafer Value Portfolio...................... A 20 61 105 227
B 18 57 97 212
C 19 58 100 217
Transamerica VIF Growth Portfolio................... A 16 51 87 190
B 15 46 79 174
C 15 47 82 179
T. Rowe Price International Stock Portfolio......... A 18 55 95 206
B 16 51 87 190
C 17 52 90 195
Wanger U.S. Small Cap Advisor Portfolio............. A 18 56 96 208
B 16 51 88 192
C 17 53 91 198
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
1 3 5 10
Year Years Years Years
---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Wanger International Small Cap Advisor Portfolio.... A 23 70 120 257
B 21 65 112 242
C 22 67 115 247
Warburg Pincus International Equity Portfolio....... A 21 65 111 240
B 20 60 104 224
C 20 62 106 230
Warburg Pincus Small Company Growth Portfolio....... A 19 59 102 221
B 18 55 94 205
C 18 56 97 211
WRL Alger Aggressive Growth Portfolio............... A 17 52 90 197
B 15 48 82 180
C 16 49 85 186
WRL J.P. Morgan Real Estate Securities Portfolio.... A 18 55 95 206
B 16 51 87 190
C 17 52 90 195
WRL Janus Global Portfolio.......................... A 17 54 92 201
B 16 49 84 185
C 16 51 87 190
WRL Janus Growth Portfolio.......................... A 16 50 86 188
B 15 45 78 171
C 15 47 81 177
WRL LKCM Strategic Total Return Portfolio........... A 16 51 88 191
B 15 46 80 175
C 15 48 82 180
</TABLE>
You should not consider this example to be a representation of past or future
expenses or performance. Actual expenses may be higher than those shown,
subject to the guarantees in the Policy.
CONDENSED FINANCIAL INFORMATION
Please note that Appendix A contains a history of accumulation unit values in
a table labeled "Condensed Financial Information."
1. THE ANNUITY POLICY
The Advisor's Edge variable annuity is a flexible-premium multi-funded
variable annuity offered by Peoples Benefit. The Policy provides a means of
investing on a tax-deferred basis in thirty-five Portfolios of the underlying
mutual funds (the "Portfolios") and a fixed account. The fixed account offers
interest rates that Peoples Benefit guarantees will not decrease during the
selected guaranteed period. There may be a different interest rate for each
different guaranteed period that you select. The Guaranteed Period Options are
the various interest rate periods for the fixed account which Peoples Benefit
may offer and into which Premium Payments may be paid or amounts transferred.
Who Should Invest
The Policy 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 Policy 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 Policy is unnecessary when the Policy is purchased to fund a qualified
plan.
12
<PAGE>
About the Policy
The Advisor's Edge variable annuity is a policy between you, the Policy Owner,
and Peoples Benefit, the issuer of the Policy.
The Policy provides benefits in two distinct phases: accumulation and income.
Accumulation Phase
The Accumulation Phase starts when you purchase your Policy and ends
immediately before the Annuity Commencement Date, when the Income Phase
starts. During the Accumulation Phase, you choose to allocate your investment
in the Policy among the thirty-five available Portfolios and the fixed
account. The Policy is a variable annuity because the value of your investment
in the Subaccounts can go up or down depending on the investment performance
of the Subaccounts you choose. The Policy is a flexible-premium annuity
because you can make additional investments of at least $500 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 transfers among your Subaccount choices at no charge and without
current tax consequences. (See Transfers Among the Subaccounts and the
Fixed Account, page 22.)
. Withdraw all or part of your money with no surrender penalty charged by
Peoples Benefit, although you may incur income taxes and a 10% penalty tax.
(See Full and Partial Withdrawals, page 30.)
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
Policy and the Annuity Payment Option you select. The Annuity Payment Options
are explained at ANNUITY PAYMENTS, page 13.
At your election, payments can be either variable or fixed. If variable, the
payments rise or fall depending on the investment performance of the
Subaccounts 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 Policy, money you have allocated to the Subaccounts is
deposited into Peoples Benefit's Separate Account V. 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 Peoples Benefit but are accounted for
separately from Peoples Benefit's other assets and can be used only to satisfy
its obligations to Policy Owners.
2. ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide
range of Annuity Payment Options.
Starting the Income Phase
As Policy Owner, you exercise control over when the Income Phase begins by
specifying an Annuity Commencement Date on the customer order form when you
purchase the Policy. The Annuity
13
<PAGE>
Commencement Date is the date on which annuity payments begin. You may also
change the Annuity Commencement Date at any time in writing, as long as the
Annuitant or Joint Annuitant is living and Peoples Benefit receives the
request at least 30 days before the then-scheduled Annuity Commencement Date.
Any Annuity Commencement Date you request must be at least 30 days from the
day Peoples Benefit receives written notice of it. This date may be any date
at least thirty days after the Policy Date and may not be later than the last
day of the Policy month starting after the Annuitant attains age 85, except as
expressly allowed by Peoples Benefit. In no event will this date be later than
the last day of the month following the month in which the Annuitant attains
age 95.
The Annuity Commencement Date for Qualified Policies may also be controlled by
endorsements, the plan, or applicable law.
Annuity Payment Options
The Policy provides five Annuity Payment Options that are described below. You
may choose any combination of Annuity Payment Options. Peoples Benefit will
use your Adjusted Policy Value to provide these annuity payments. The Adjusted
Policy Value is the Policy Value increased or decreased by any applicable
Excess Interest Adjustment. If the Adjusted Policy Value on the Annuity
Commencement Date is less than $2,000, Peoples Benefit reserves the right to
pay it in one lump sum in lieu of applying it under an Annuity Payment Option.
You can receive annuity payments monthly, quarterly, semi-annually, or
annually. (Peoples Benefit reserves the right to change the frequency if
payments would be less than $50.)
Unless you choose to receive variable payments under Annuity Payment Options
3-V or 5-V, the amount of each payment will be set on the Annuity Commencement
Date and will not change. You may, however, choose to receive variable
payments under Annuity Payment Options 3-V and 5-V. The dollar amount of the
first variable payment will be determined in accordance with the annuity
payment rates set forth in the applicable table contained in your Policy. The
dollar amount of additional variable payments will vary based on the
investment performance of the Subaccount(s). The dollar amount of each
variable payment after the first may increase, decrease, or remain constant.
If the actual investment performance exactly matched the assumed investment
return of 5% at all times, the amount of each variable annuity payment would
remain equal. If actual investment performance exceeds the assumed investment
return, the amount of the variable annuity payments would increase.
Conversely, if actual investment performance is lower than the assumed
investment return, the amount of the variable annuity payments would decrease.
A charge for Premium Taxes and an Excess Interest Adjustment may be made when
annuity payments begin.
The Annuity Payment Options are explained below. Options 1, 2, and 4 are fixed
only. Options 3 and 5 can be fixed or variable.
. Payment Option 1 - Interest Payments. We will pay the interest on the
amount we use to provide annuity payments in equal payments, or this amount
may be left to accumulate for a period of time to which you and Peoples
Benefit agree. You and Peoples Benefit will agree on withdrawal rights when
you elect this option.
. Payment Option 2 - Income for a Specified Period. We will make level
payments only for a fixed period you choose. No funds will remain at the
end.
. Payment Option 3 - Life Income. You may choose between:
Fixed Payments
. No Period Certain - We will make level payments only during the annuitant's
lifetime.
. 10 Years Certain - We will make level payments for the longer of the
annuitant's lifetime or ten years.
14
<PAGE>
. Guaranteed Return of Policy Proceeds - We will make level payments for the
longer of the annuitant's lifetime or until the total dollar amount of
payments we make to you equals the amount applied to this option.
Variable Payments
. No Period Certain - Payments will be made only during the lifetime of the
annuitant.
. 10 Years Certain - Payments will be made for the longer of the annuitant's
lifetime or ten years.
. Payment Option 4 - Income of a Specified Amount. Payments are made for any
specified amount until the amount applied to this option, with interest, is
exhausted. This will be a series of level payments followed by a smaller
final payment.
. Payment Option 5 - Joint and Survivor Annuity. You may choose between:
Fixed Payments
. Payments are made during the joint lifetime of the annuitant and a joint
annuitant of your selection. Payments will be made as long as either person
is living.
Variable Payments
. Payments are made during the joint lifetime of the annuitant and a joint
annuitant of your selection. Payments will be made as long as either person
is living.
Other annuity payment options may be arranged by agreement with Peoples
Benefit. Certain annuity payment options may not be available in all states.
NOTE CAREFULLY:
IF:
. you choose Life Income with No Period Certain or a Joint and Survivor
Annuity; and
. the annuitant(s) dies before the due date of the second (third, fourth,
etc.) annuity payment;
THEN:
. we may make only one (two, three, etc.) annuity payments.
IF:
. you choose Income for a Specified Period, Life Income with 10 years
Certain, Life Income with Guaranteed Return of Policy Proceeds, or Income
of a Specified Amount; and
. the person receiving payments dies prior to the end of the guaranteed
period;
THEN:
. the remaining guaranteed payments will be continued to that person's
beneficiary, or their present value may be paid in a single sum.
We will not pay interest on amounts represented by uncashed annuity payment
checks if the postal or other delivery service is unable to deliver checks to
the payee's address of record. The person receiving payments is responsible
for keeping Peoples Benefit informed of their current address.
Calculating Annuity Payments
Fixed Annuity Payments. Each fixed Annuity Payment is guaranteed to be at
least the amount shown in the Policy's Annuity Tables corresponding to the
Annuity Payment Option selected.
15
<PAGE>
Variable Annuity Payments. To calculate variable Annuity Payments, Peoples
Benefit 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 Policy. This amount depends on the value of your Policy on the
Annuity Commencement 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.
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.
A Few Things to Keep in Mind Regarding Annuity Payments
. If an Annuity Payment Option is not selected, Peoples Benefit will assume
that you chose the Payment Option 3--Life Income (with 10 years of
payments guaranteed). Any amounts in a Subaccount immediately before the
Income Phase begins will be applied under a variable Annuity Payment
Option based on the performance of that Subaccount.
. Peoples Benefit reserves the right to change the frequency if payments
would be less than $50. If on the Annuity Commencement Date, the Adjusted
Policy Value is less than $2,000, Peoples Benefit reserves the right to
pay it in one lump sum in lieu of applying it under an annuity payment
option.
. From time to time, Peoples Benefit may require proof that the Annuitant,
Joint Annuitant, or Policy Owner is living.
. If someone has assigned ownership of a Policy to you, or if a non-natural
person (e.g., a corporation) owns a Policy, you may not start the Income
Phase of the Policy without Peoples Benefit's consent.
. At the time Peoples Benefit calculates your fixed Annuity Payments,
Peoples Benefit may offer more favorable rates than those guaranteed in
the Annuity Tables found in the Policy.
. 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 Subaccount funding the variable Annuity Payments by written request
or by calling 800-866-6007.
. You may select an Annuity Payment Option and allocate a portion of the
value of your Policy 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.
. If 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 Peoples Benefit informed
of the Payee's most current address of record.
16
<PAGE>
3. PURCHASE
Customer Order Form and Issuance of Policies
To invest in the Advisor's Edge variable annuity, you should send a completed
customer order form and your Initial Premium Payment to the address indicated
on the customer order form. If you wish to make a personal delivery by hand or
courier to Peoples Benefit of your completed customer order form and Initial
Premium Payment (rather than through the mail), do so at our Administrative
Offices, 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499. Peoples Benefit
will issue a Policy only if the Annuitant and Joint Annuitant are 85 years of
age or less.
If the customer order form and any other required documents are received in
good order, Peoples Benefit will issue the Policy and will credit the Initial
Premium Payment within two Business Days after receipt. (A Business Day is any
day that the New York Stock Exchange is open for trading.) Along with the
Policy, Peoples Benefit will also send a Policy acknowledgment form, which you
should complete, sign, and return in accordance with its instructions. Please
note that until Peoples Benefit receives the acknowledgment form signed by the
Owner and any Joint Owner, the Owner and any Joint Owner must obtain a
signature guarantee on their written signed request in order to exercise any
rights under the Policy.
If Peoples Benefit cannot credit the Initial Premium Payment because the
customer order form or other required documentation is incomplete, Peoples
Benefit will contact the applicant in writing, explain the reason for the
delay, and refund the Initial Premium Payment within five Business Days unless
the applicant consents to Peoples Benefit's retaining the Initial Premium
Payment and crediting it as soon as the necessary requirements are fulfilled.
In addition to Non-Qualified Policies, Peoples Benefit also offers the
Advisor's Edge as a Qualified Policy. Note that Qualified Policies contain
certain other restrictive provisions limiting the timing of payments to and
distributions from the Qualified Policy. (See QUALIFIED INDIVIDUAL RETIREMENT
ANNUITIES, page 26.)
DEFINITION
Qualified Policy
When the term "Qualified Policy" is used in this prospectus we mean a Policy
that qualifies as an individual retirement annuity under either Section
403(b), 408(b), or 408A of the Internal Revenue Code.
17
<PAGE>
Premium Payments
A Premium Payment is any amount you use to buy or add to the Policy. A Premium
Payment may be reduced by any applicable premium tax. In that case, the
resulting amount is called a Net Premium Payment. The initial Net Premium
Payment is credited to the Policy within two business days of receipt of the
Premium Payment, customer order form and other required documents.
A Few Things to Keep in Mind Regarding Premium Payments
. The minimum Initial Premium Payment for a Non-Qualified Policy is
$10,000.
. The minimum Initial Premium Payment for a Qualified Policy is $1,000 (or
$50 if by payroll deduction).
. You may make additional Premium Payments at any time during the
Accumulation Phase and while the Annuitant or Joint Annuitant, if
applicable, is living. Additional Premium Payments must be at least $500
for Non-Qualified Policies. Additional Premium Payments must be at least
$25 for Qualified Policies.
. Additional Premium Payments received before the close of the New York
Stock Exchange (usually 4:00 p.m. Eastern time) are credited to the
Policy as of the close of business that same day.
. The total of all Premium Payments may not exceed $1,000,000 without our
prior approval.
. Your Initial Net Premium Payment will be immediately invested among the
Subaccounts selected in your customer order form. See Allocation of
Premium Payments, page 17, for more information.
The date on which the Policy is issued is called the Policy Date. A Policy
Anniversary is any anniversary of the Policy Date. A Policy Year is a period
of twelve months starting with the Policy Date or any Policy Anniversary.
DEFINITION
Premium Tax
A Premium Tax is a regulatory tax some states assess on the Premium Payments
made into a Policy. If we should have to pay any Premium Tax, we will deduct
it from the Policy Value on the Annuity Commencement Date, date of death, or
date of full Surrender.
As of the date of this Prospectus, the following state assesses a Premium
Tax on all initial and subsequent Premium Payments:
<TABLE>
<CAPTION>
Non-
Qualified Qualified
--------- ---------
<S> <C> <C>
South Dakota......................................... 0.00% 1.25%
</TABLE>
As of the date of this Prospectus, the following states assess a Premium Tax
against the Adjusted Policy Value if the Owner chooses an Annuity Payment
Option instead of receiving a lump sum distribution:
<TABLE>
<CAPTION>
Non-
Qualified 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>
18
<PAGE>
Purchasing by Wire
For wiring instructions, please contact our Administrative Office at 800-866-
6007.
Allocation of Premium Payments
You specify on the customer order form what portion of your Premium Payments
you want to be allocated among which Subaccounts and which Guaranteed Period
Options. You may allocate your Premium Payments to one or more Subaccounts or
to any of the Guaranteed Period Options. All allocations you make to the
Subaccounts must be in whole-number percentages totaling 100%.
Should your investment goals change, you may change the allocation percentages
for additional Net Premium Payments by sending written notice to or by calling
Peoples Benefit. Requests for Transfers received before the close of the New
York Stock Exchange (generally 4 p.m. Eastern time) are processed as of that
day. Requests received after the close of the New York Stock Exchange are
processed the next Business Day.
WHAT'S MY POLICY WORTH TODAY?
Policy Value
The Policy Value of your Policy is the value of all amounts accumulated
under the Policy during the Accumulation Phase (similar to the current
market value of a mutual fund account). When the Policy is opened, the
Policy Value is equal to your Initial Net Premium Payment. On any Business
Day thereafter, the Policy Value equals the Policy Value from the previous
Business Day,
plus -
. any additional Net Premium Payments credited
. any increase in the Policy Value due to investment results of the
Subaccount(s) you selected and the interest credited to the Guaranteed
Period Options
. Positive Excess Interest Adjustment, if applicable
minus -
. any decrease in the Policy Value due to investment results of the
Subaccount(s) you selected
. the daily Mortality and Expense Risk Fee
. the daily Administrative Expense Charge
. the Annual Policy Service Charge, if applicable
. any withdrawals
. any charges for Transfers made after the first twelve in a Policy Year
. Negative Excess Interest Adjustment, if applicable
. 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 Policy Value of your Policy to change from Valuation
Period to Valuation Period, reflecting the investment experience of the
Subaccounts you have selected as well as the daily deduction of charges.
An Accumulation Unit is a measure of your ownership interest in the Policy
during the Accumulation Phase. When you allocate your Net Premium Payments to
a selected Subaccount, Peoples Benefit will
19
<PAGE>
credit a certain number of Accumulation Units to your Policy. Peoples Benefit
determines the number of Accumulation Units it credits by dividing the dollar
amount you have allocated to a Subaccount by the Accumulation Unit Value for
that Subaccount as of the end of the Valuation Period in which the payment is
received. Each Subaccount 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 Subaccount.
The net rate of return reflects the performance of the Subaccount for the
Valuation Period and is net of asset charges to the Subaccount. Per
Subaccount, the Policy Value equals the number of Accumulation Units
multiplied by the Accumulation Unit Value for that Subaccount.
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.
4. INVESTMENT OPTIONS
The Advisor's Edge variable annuity offers you a means of investing in thirty-
five Portfolios offered by twelve different investment companies (each
investment company a "Fund") and a fixed account. The companies that provide
investment advice and administrative services for the underlying fund
Portfolios offered through this Policy are listed below. More detailed
information, including an explanation of the Portfolio's investment
objectives, may be found in the current prospectuses for the underlying funds,
which are attached to this prospectus. You should read the prospectuses for
the underlying funds carefully before you invest. For information about the
fixed account and the Guaranteed Period Options, see The Fixed Account, page
19.
The general public may invest in the Portfolios only through certain insurance
policies and qualified plans. The investment objectives and policies of the
Portfolios may be similar to those of certain publicly available funds or
portfolios. However, you should not expect that the investment results of any
publicly available funds or portfolios will be comparable to those of the
Portfolios.
The Policy was not designed for professional market timing organizations or
other persons that use programmed, large, or frequent transfers. The use of
such exchanges may be disruptive to an underlying fund portfolio. The Company
reserves the right to reject any Premium Payment or exchange request from any
person, if, in the Company's judgment, an underlying fund portfolio would be
unable to invest effectively in accordance with its investment objectives and
policies or would otherwise be potentially adversely affected or if an
underlying portfolio would reject the Company's purchase order.
Alliance Variable Products Series Fund, Inc.
Advised by Alliance Capital Management L.P.
Alliance Growth Portfolio
Alliance Premier Growth Portfolio
Alliance Technology Portfolio
DFA Investment Dimensions Group, Inc.
Advised by Dimensional Fund Advisors, Inc.
DFA Small Value Portfolio
DFA Large Value Portfolio
DFA International Value Portfolio
DFA International Small Portfolio
DFA Short-Term Fixed Portfolio
DFA Global Bond Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Advised by The Dreyfus Corporation
20
<PAGE>
Endeavor Series Trust
Advised by Endeavor Management Co.
Dreyfus Small Cap Value Portfolio
Endeavor Enhanced Index Portfolio
T. Rowe Price International Stock Portfolio
The Federated Insurance Series
Advised by Federated Investment Management Company
Federated American Leaders Portfolio
Federated High Income Bond Portfolio
Federated Prime Money Portfolio
Federated U.S. Government Securities Portfolio
Federated Utility Portfolio
The Montgomery Funds III
Advised by Montgomery Asset Management, LLC
Montgomery Growth Portfolio
Montgomery Emerging Markets Portfolio
Seligman Portfolios, Inc.
Advised by J. & W. Seligman & Co.
Seligman Capital Portfolio
Seligman Communications and Information Portfolio
Seligman Global Technology Portfolio
SteinRoe Variable Investment Trust
Advised by Stein Roe & Farnham Incorporated
Stein Roe Small Company Growth Portfolio
Strong Variable Insurance Funds, Inc.
Advised by Strong Capital Management, Inc.
Strong International Stock Portfolio
Strong Schafer Value Portfolio
Transamerica Variable Insurance Fund, Inc.
Advised by Transamerica Investment Management, LLC
Transamerica VIF Growth Portfolio
Wanger Advisors Trust
Advised by Wanger Asset Management, L.P.
Wanger U.S. Small Cap Advisor Portfolio
Wanger International Small Cap Advisor Portfolio
Warburg Pincus Trust
Advised by Credit Suisse Asset Management
Warburg Pincus International Equity Portfolio
Warburg Pincus Small Company Growth Portfolio
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
WRL Alger Aggressive Growth Portfolio
WRL J.P. Morgan Real Estate Securities Portfolio
WRL Janus Growth Portfolio
WRL LKCM Strategic Total Return Portfolio
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The following Subaccount is only available to Owner's who held an investment
in this Subaccount on September 1, 2000. However, if you withdraw all of your
money from this Subaccount after September 1, 2000, you may not reinvest your
money into this Subaccount.
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
WRL Janus Global Portfolio
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, total expenses, and charges
can be found in the current prospectuses for the corresponding Funds. The
investment advisors to some of the Funds may compensate Peoples Benefit for
providing administrative services in connection with some of the Portfolios.
Such compensation will be paid from the assets of the investment advisors.
The Fixed Account
Premium Payments allocated and amounts transferred to the fixed account become
part of Peoples Benefit's general account. Interests in the general account
have not been registered under the Securities Act of 1933, nor is the general
account registered as an investment company under the 1940 Act. Accordingly,
neither the general account nor any interests therein are generally subject to
the provisions of the 1933 and 1940 Acts. Peoples Benefit has been advised
that the staff of the SEC has not reviewed the disclosures in this prospectus
which relate to the fixed account.
We guarantee that the interest credited to the fixed account will not be less
than 3% per year. At the end of the Guaranteed Period Option you selected, the
value in the Guaranteed Period Option will automatically be transferred into a
new Guaranteed Period Option of the same length (or the next shorter period if
the same period is no longer offered) at the current interest rate for that
period. You can transfer to another investment choice by giving us notice
within 30 days before the end of the expiring guaranteed period.
Surrenders or partial withdrawals from a Guaranteed Period Option of the fixed
account are subject to an Excess Interest Adjustment. This adjustment may
increase or decrease the amount of interest credited to your Policy. The
Excess Interest Adjustment will not decrease the interest credited to your
Policy below 3% per year, however. You bear the risk that we will not credit
interest greater than 3% per year. We determine credited rates, which are
guaranteed for at least one year, in our sole discretion.
If you select the fixed account, your money will be placed with Peoples
Benefit's other general assets. The amount of money you are able to accumulate
in the fixed account during the Accumulation Phase depends upon the total
interest credited. The amount of annuity payments you receive during the
income phase from the fixed portion of your Policy will remain level for the
entire income phase.
Transfers Among the Subaccounts and the Fixed Account
Should your investment goals change, you may make unlimited transfers of money
among the Subaccounts at no cost, subject to the following conditions:
. You may make requests for transfers in writing or by telephone. Peoples
Benefit will process requests it receives before the close of the New York
Stock Exchange (generally 4:00 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.
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. The minimum amount you may transfer from a Subaccount is $500 (unless the
Policy Value in a Subaccount is less than $500).
Peoples Benefit does not currently charge a fee for transfers among the
Subaccounts, although it reserves the right to charge a $10 fee for
Transfers in excess of 12 per Policy Year.
. Transfers out of a Guaranteed Period Option of the fixed account are
limited to the following:
Within 30 days prior to the end of the guaranteed period you must notify
us that you wish to transfer the amount in that Guaranteed Period Option
to another investment choice. No Excess Interest Adjustment will apply.
Transfers of amounts equal to interest credited. This may affect your
overall interest-crediting rate, because transfers are deemed to come
from the oldest Premium Payment first.
Other than at the end of a guaranteed period, transfers of amounts from
the Guaranteed Period Option (in excess of interest credited), are
subject to an Excess Interest Adjustment. If the adjustment is negative,
then the maximum amount you can transfer is 25% of the amount in that
Guaranteed Period Option, less any previous transfers during the current
Policy Year. If the adjustment is positive, then we do not limit the
amount that you can transfer.
Transfers of the Guaranteed Period Option amounts equal to interest
credited must be at least $50.
. There are no transfers permitted out of the Dollar Cost Averaging Fixed
Account Option except through the dollar cost averaging program.
Telephone Transactions
You may establish the telephone transfer privilege on your Policy by
completing the appropriate section of the Policy acknowledgment form you will
receive with your Policy or by completing a separate telephone authorization
form at a later date. You may also authorize a third party to initiate
transactions by telephone by completing a third party authorization form or
the appropriate section of the Policy acknowledgment form.
Peoples Benefit will take reasonable steps to confirm that instructions
communicated by telephone are genuine. Before we act on any request, we will
ask the caller for his or her Policy number and Social Security Number. In
addition, we will take reasonable steps to confirm that instructions
communicated by telephone from a third party are genuine. The third party
caller will be asked for his or her name, company affiliation (if
appropriate), the Policy number to which he or she is referring, and the
Social Security number of the Policy Owner. This information will be verified
with the Policy Owner's records prior to processing a transaction, and all
transactions performed will be verified with the Policy Owner through a
written confirmation statement. We will record all calls. Neither the Company
nor the Funds shall be liable for any loss, cost, or expense for action on
telephone instructions that are believed to be genuine in accordance with
these procedures.
Asset Rebalancing
During the Accumulation Phase, you may instruct us to make automatic transfers
of amounts among the Subaccounts in order to maintain a desired allocation of
Policy Value among those Subaccounts. We will "rebalance" monthly, quarterly,
semi-annually, or annually, beginning on the date you select. You must select
the percentage of the Policy Value you desire in each of the various
Subaccounts offered (totaling 100%). Rebalancing can be started, stopped, or
changed at any time, except that rebalancing will not be available when
Dollar-Cost Averaging is in effect or when any other transfer is requested.
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Dollar Cost Averaging Program
During the Accumulation Phase, you may instruct us to automatically transfer
money from the Dollar Cost Averaging Fixed Account Option or the Federated
Prime Money Portfolio into any other Subaccounts. There is no charge for this
program.
Complete and clear instructions must be received before a dollar cost
averaging program will begin. The instructions must include:
. the Subaccounts into which money from the Dollar Cost Averaging Fixed
Account (or other subaccount(s) used for dollar cost averaging) is to be
transferred; and
. either the dollar amount to transfer monthly or quarterly (each transfer
must be at least $500) or the number of transfers (minimum of 6 monthly or
4 quarterly and maximum of 24 monthly or 8 quarterly).
Transfers must begin within 30 days. We will make the transfers on the 28th
day of the applicable month. You may change your allocations at anytime.
Only one dollar cost averaging program can run at one time. This means that
any addition to a dollar cost averaging program must change either the length
of the program or the dollar amount of the transfers. New instructions must be
received each time there is an addition to a dollar cost averaging program.
Any amount in the Dollar Cost Averaging Fixed Account (or other subaccount(s)
used for dollar cost averaging) for which we have not received complete and
clear instructions will remain in the Dollar Cost Averaging Fixed Account (or
other such subaccount) until we receive the instructions. If we have not
received complete and clear instructions within 30 days, the interest credited
in the Dollar Cost Averaging Fixed Account may be adjusted downward, but not
below the guaranteed effective annual interest rate of 3%.
We may credit different interest rates for dollar cost averaging programs of
varying time periods. If you discontinue the dollar cost averaging program
before its completion, then the interest credited on amounts in the Dollar
Cost Averaging Fixed Account may be adjusted downward, but not below the
minimum guaranteed effective annual interest rate of 3%.
A CLOSER LOOK AT
Dollar-Cost Averaging
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 Subaccounts each month, more Accumulation Units are
credited to a Subaccount 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.
5. EXPENSES
There are charges and expenses associated with the Policy that reduce the
return on your investment in the Policy.
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Excess Interest Adjustment
Withdrawals of Cash Value from the fixed account may be subject to an Excess
Interest Adjustment. This adjustment could retroactively reduce (or increase)
the interest credited in the fixed account to the guaranteed minimum of 3% per
year. See "Excess Interest Adjustment" in Section 7 of this prospectus.
Mortality and Expense Risk Fee
Peoples Benefit charges a fee as compensation for bearing certain mortality
and expense risks under the Policy. The annual charge is assessed daily based
on the net assets of the Separate Account. The annual Mortality and Expense
Risk Fee is dependent on the death benefit option you select on the customer
order form. For the Return of Premium Death Benefit Option the mortality and
expense risk fee is at an annual rate of 0.45%. For the 6 Year Step-Up Death
Benefit Option the mortality and expense risk fee is at an annual rate of
0.50%. For the Double Enhanced Death Benefit Option the mortality and expense
risk fee is at an annual rate of 0.60%.
We guarantee that this annual charge will not increase. If the charge is more
than sufficient to cover actual costs or assumed risks, any excess will be
added to Peoples Benefit's surplus. If the charges collected under the Policy
are not enough to cover actual costs or assumed risks, then Peoples Benefit
will bear the loss.
A CLOSER LOOK AT
The Mortality and Expense Risk Fee
Peoples Benefit assumes mortality risk in two ways. First, where Policy
Owners elect an Annuity Payment Option under which Peoples Benefit
guarantees a number of payments over a life or joint lives, Peoples Benefit
assumes the risk of making monthly annuity payments regardless of how long
all Annuitants may live. Second, Peoples Benefit assumes mortality risk in
guaranteeing a minimum Death Benefit in the event the Annuitant dies during
the Accumulation Phase.
The expense risk that Peoples Benefit assumes is that the charges for
administrative expenses, which are guaranteed not to increase beyond the
rates shown for the life of the Policy, may not be great enough to cover the
actual costs of issuing and administering the Policy.
Administrative Expense Charge
Peoples Benefit assesses each Policy an annual Administrative Expense Charge
to cover the cost of issuing and administering each Policy and of maintaining
the Separate Account. The Administrative Expense Charge is assessed daily at a
rate equal to 0.15% annually of the net asset value of the Separate Account.
Transfer Fee
You are allowed to make 12 free transfers per year before the Annuity
Commencement Date. If you make more than 12 transfers per year, we reserve the
right to charge $10 for each additional transfer. Premium Payments, asset
rebalancing and dollar cost averaging tranfers are not considered transfers.
All transfer requests made at the same time are treated as a single request.
Portfolio Expenses
The value of the assets in the Separate Account will reflect the fees and
expenses paid by the Portfolios. A complete description of these expenses is
found in the "Fee Table" section of this prospectus and in each Fund's
prospectus and Statement of Additional Information.
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6. TAXES
INTRODUCTION
The following discussion of annuity taxation is general in nature and is based
on Peoples Benefit's understanding of the treatment of annuity policies 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 Policy 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 Policy 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 POLICIES
OWNED BY NON-NATURAL PERSONS, page 25, and DIVERSIFICATION STANDARDS, page
26.)
A CLOSER LOOK AT
Tax Deferral
Tax deferral means no current tax on earnings in your Policy. The amount you
would have paid in income taxes can be left in the Policy 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 Payout
Option) from a Non-Qualified Policy during the Accumulation Phase, you as
Policy 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 Policy and then from the money you invested in the Policy.
This "investment in the Policy" can generally be described as the cost of the
Policy, and it generally includes all Premium Payments minus any amounts you
have already received under the Policy that represented the return of invested
money. Also for purposes of this rule, a pledge or assignment of a Policy is
treated as a partial withdrawal from a Policy. (If you are contemplating using
your Policy as collateral for a loan, you may be asked to pledge or assign
it.)
Taxation of Annuity Payments
When you take Annuity Payments in the Income Phase of a Non-Qualified Policy,
for tax purposes each payment is deemed to return to you a portion of your
investment in the Policy. Since with a Non-
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Qualified Policy you have already paid taxes on those amounts (the Policy 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 Policy, in general, Peoples
Benefit 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 Policy bears to the total expected amount of Annuity
Payments for the term of the Policy. Peoples Benefit 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 Policy, in general, Peoples
Benefit 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, Peoples Benefit divides the investment in the Policy
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 Policy has been returned, the balance of the
Annuity Payments represent earnings only and therefore are fully taxable.
Taxation of Withdrawals and Distributions From Qualified Policies
Generally, the entire amount distributed from a Qualified Policy is taxable to
the Policy Owner. In the case of Qualified Policies 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 Peoples Benefit 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 Peoples Benefit withhold federal income taxes on
all distributions unless the recipient elects not to have any amounts withheld
and properly notifies Peoples Benefit of that election. In certain situations,
Peoples Benefit 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 the deferred annuity. However, there are exceptions to the penalty tax.
For instance, it does not apply to withdrawals: (i) made after the taxpayer
reaches age 59 1/2; (ii) made on or after the death of the Policy Owner or,
where the Policy 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
Policies); (iii) attributable to the disability of the taxpayer which occurred
after the purchase of the Policy (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 Policy (note, however, that other penalties may apply);
(vi) under an immediate annuity policy (as defined in the Internal Revenue
Code); (vii) that can be traced to an investment in the Policy prior to August
14, 1982; or (viii) under a Policy that an employer purchases on termination
of certain types of qualified plans and that the employer holds until the
employee separates from service.
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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 age 59 1/2, or (b) before the taxpayer reaches
age 59 1/2.
For Qualified Policies, 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 Policies issued
under Section 408(b) or 408A 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.
ANNUITY POLICIES OWNED BY NON-NATURAL PERSONS
Where a non-natural person (for example, a corporation) holds a Policy, that
Policy is generally not treated as an annuity policy for federal income tax
purposes, and the income on that Policy (generally the increase in the net
Policy 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 Policy, where an
employer purchases a Policy on behalf of an employee upon termination of a
qualified plan, or to an immediate annuity (as defined in the Internal Revenue
Code).
MULTIPLE-POLICIES RULE
All non-qualified annuity policies issued by the same company (or affiliate)
to the same Policy Owner during any calendar year are to be aggregated and
treated as one policy for purposes of determining the amount includible in the
taxpayer's gross income. Thus, any amount received under any Policy prior to
the Policy's Annuity Commencement 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 policies. The Treasury Department has specific
authority to issue regulations that prevent the avoidance of the multiple-
policies rules through the serial purchase of annuity policies 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 Policies
purchased by the same Policy Owner. Accordingly, a Policy Owner should consult
a tax adviser before purchasing more than one Policy or other annuity
policies. (The aggregation rules do not apply to immediate annuities (as
defined in the Internal Revenue Code).)
TRANSFERS OF ANNUITY POLICIES
Any transfer of a Non-Qualified Policy 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 Policy to the Policy
Owner at the time of such transfer. The transferee's investment in the Policy
will be increased by any amount included in the Policy 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 POLICIES
A transfer of ownership in a Policy, a collateral assignment, or the
designation of an Annuitant or other beneficiary who is not also the Policy
Owner may result in tax consequences to the Policy Owner,
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Annuitant, or beneficiary that this prospectus does not discuss. A Policy
Owner considering such a transfer or assignment of a Policy 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 Policy 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 Policy may
need to be modified in order to remain in compliance. For these reasons,
Peoples Benefit reserves the right to modify the Policy, as necessary, to
maintain the tax-deferred status of the Policy.
We intend to comply with the diversification regulations to assure that the
Policy continues to be treated as an annuity policy for federal income tax
purposes.
QUALIFIED INDIVIDUAL RETIREMENT ANNUITIES
Qualified Policies 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 Policy should
consult a personal tax adviser.
403(b) Policies
Peoples Benefit will offer Policies in connection with retirement plans
adopted by public school systems and certain tax-exempt organizations for
their employees under Section 403(b) of the Internal Revenue Code. More
detailed information on 403(b) Policies may be found in the Statement of
Additional Information.
7. ACCESS TO YOUR MONEY
The value of your Policy 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
. by taking systematic payouts
On or before the Annuity Commencement Date, the Policy Value is equal to the
owner's:
. Premium Payments; minus
. partial withdrawals (including the net effect of any applicable Excess
Interest Adjustments on such withdrawals); plus
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. interest credited in the fixed account; plus or minus
. accumulated gains or losses in the separate account; minus
. service charges, rider fees, Premium Taxes, and transfer fees, if any.
On or before the Annuity Commencement Date, the Cash Value is equal to the
Adjusted Policy Value. The Adjusted Policy Value is the Policy Value increased
or decreased by any Excess Interest Adjustment.
Full and Partial Withdrawals
You may withdraw all or part of your money at any time during the Accumulation
Phase of your Policy. All partial withdrawals must be for at least $500.
On the date Peoples Benefit receives your request for a full withdrawal, the
amount payable is the Cash Value. You will receive:
. the value of your Policy; plus or minus
. any Excess Interest Adjustment; minus
. any applicable Premium Taxes and service charges
To make a withdrawal, send your written request on the appropriate Peoples
Benefit form to our Administrative Offices.
Because you assume the investment risk for amounts allocated to the
Portfolios under the Policy, the total amount paid upon a full withdrawal of
the Policy may be more or less than the total Premium Payments made (taking
prior withdrawals into account).
Excess Interest Adjustment
Money that you withdraw from a Guaranteed Period Option of the fixed account
before the end of its guaranteed period (the number of years you specified the
money would remain in the Guaranteed Period Option) may be subject to an
Excess Interest Adjustment. At the time you request a withdrawal, if interest
rates set by Peoples Benefit have risen since the date of the initial
guarantee, the Excess Interest Adjustment will result in a lower Cash Value on
surrender. However, if interest rates have fallen since the date of the
initial guarantee, the Excess Interest Adjustment will result in a higher Cash
Value on surrender.
Generally, all withdrawals from a Guaranteed Payment Option in excess of 10%
of your cumulative Premium Payment is subject to an Excess Interest
Adjustment. Beginning in the first Policy Year you can withdraw up to 10% of
your cumulative Premium Payments each Policy Year, in one or more withdrawals,
without an Excess Interest Adjustment. This is referred to as the "free
percentage."
There will be no Excess Interest Adjustment on any of the following:
. lump sum withdrawals of the free percentage available;
. nursing care and terminal condition withdrawals
. unemployment withdrawals;
. withdrawals to satisfy the minimum distribution requirements; and
. Systematic Payout Option payments, which do not exceed 10% of your
cumulative Premium Payments divided by the number of payouts made per year.
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Please note that under these circumstances you will not receive a higher Cash
Value if interest rates have fallen nor will you receive a lower Cash Value if
interest rates have risen.
Systematic Payout Option
You may elect to have a specified dollar amount provided to you from the
portion of your Policy's value allocated to the Portfolios on a monthly,
quarterly, semi-annual, or annual basis. The minimum amount for each
Systematic Payout is $50. If payments are from the fixed account, then they
cannot exceed the free percentage divided by the number of payments per year.
Monthly and quarterly payments must be made by electronic funds transfer
directly to your checking or savings account. There is no charge for this
benefit.
You may elect this option by completing a Systematic Payout Option Request
Form.
Peoples Benefit must receive your Form at least 30 days before the date you
want Systematic Payouts to begin. Peoples Benefit will process each Systematic
Payout on the date and at the frequency you specified in your Systematic
Payout Option Application Form. The start date for Systematic Payouts must be
between the first and the twenty-eighth day of the month. You may discontinue
the Systematic Payout Option at any time by notifying us in writing at least
30 days prior to your next scheduled withdrawal date.
We reserve the right to discontinue offering this option upon 30 days' notice,
and we also reserve the right to charge a fee for the option.
Payment of Full or Partial Withdrawal Proceeds
Peoples Benefit will pay cash withdrawals within seven days after receipt of
your written request for withdrawal except in one of the following situations,
in which Peoples Benefit 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 Policy Owner
. the payment is derived from premiums paid by check, in which case Peoples
Benefit may delay payment until the check has cleared your bank
Taxation of Withdrawals
For important information on the tax consequences of withdrawals, see
Taxation of Full and Partial Withdrawals, page 23, and Penalty Taxes on
Certain Early Withdrawals, page 24.
Tax Withholding on Withdrawals
If you do not provide Peoples Benefit with a written request not to have
federal income taxes withheld when you request a full or partial withdrawal,
federal tax law requires Peoples Benefit to withhold federal income taxes from
the taxable portion of any withdrawal and send that amount to the federal
government.
Nursing Care and Terminal Condition
No Excess Interest Adjustment will apply if you or your spouse has been:
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. Confined in a hospital or nursing facility for 30 days in a row; or
. Diagnosed with a terminal condition (usually a life expectancy of 12 months
or less).
This benefit is also available to the annuitant or annuitant's spouse if the
owner is not a natural person.
You may exercise this benefit at any time (during the Accumulation Phase) and
there is no charge for this benefit.
This benefit may not be available in all states. See the Policy or endorsement
for details and conditions.
Unemployment Waiver
No Excess Interest Adjustment will apply to withdrawals if you or your spouse
is unemployed. In order to qualify, you (or your spouse, which is applicable)
must have been:
. employed full time for at least two years prior to becoming unemployed; and
. employed full time on the Policy Date; and
. unemployed for at least 60 days in a row at the time of the withdrawal; and
. must have a minimum Cash Value at the time of withdrawal of $5,000
You must provide written proof from your State's Department of Labor, which
verifies that you qualify for and are receiving unemployment benefits at the
time of withdrawal.
You may exercise this benefit at any time (during the Accumulation Phase) and
there is no charge for this benefit.
This benefit is also available to the annuitant or annuitant's spouse if the
owner is not a natural person. This benefit may not be available in all
states. See the Policy for details.
8. PERFORMANCE
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the Federated Prime Money Subaccount, the yield of the
other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Policy Owners.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed 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.
Standardized Average Annual Total Return
When advertising performance of the Subaccounts, Peoples Benefit will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the SEC, 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 Standardized Average Annual
Total Return 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 charges, including the Annual Policy Service Charge and all
other Portfolio, Separate Account and Policy level charges except Premium
Taxes, if any.
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<PAGE>
ADDITIONAL PERFORMANCE MEASURES
Non-Standardized Cumulative Total Return and Non-Standardized Average Annual
Total Return
Peoples Benefit 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. Peoples Benefit may also show
Non-Standardized Average Annual Total Return (i.e., the average annual change
in Accumulation Unit Values) with respect to one or more periods. For 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"), the Non-Standardized
Cumulative Total Return and Non-Standardized Average Annual Total Return also
reflect these expenses. These returns do not reflect the Annual Policy Service
Charge, any sales loads or Premium Taxes (if any), which, if included, would
reduce the percentages reported.
Non-Standardized Total Return Year-To-Date
Peoples Benefit 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
returns reflect a deduction for the Separate Account and Portfolio expenses,
but do not include the Annual Policy Service Charge, any sales loads or
Premium Taxes (if any), which, if included, would reduce the percentages
reported by Peoples Benefit.
Non-Standardized One Year Return
Peoples Benefit 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 Portfolio
inception, if during the relevant year) and ending at the end of such calendar
year. One Year Return figures reflect the historical performance of the
Subaccounts as if the Policy were in existence before its inception date
(which it was not). After the Policy's inception date, the figures reflect the
percentage change in actual Accumulation Unit Values during the relevant
period. These returns reflect a deduction for the Separate Account and
Portfolio expenses, but do not include the Annual Policy Service Charge, any
sales loads or Premium Taxes (if any), which, if included, would reduce the
percentage reported by Peoples Benefit.
Non-Standardized Adjusted Historical Cumulative Return and Non-Standardized
Adjusted Historical Average Annual Total Return
Peoples Benefit may show Non-Standardized Adjusted Historical Cumulative
Return and Non-Standardized Adjusted Historical Average Annual Total Return,
calculated on the basis of the historical performance of the Portfolios, and
may assume the Policy was in existence prior to its inception date (which it
was not). After the Policy's inception date, the calculations will reflect
actual Accumulation Unit Values. These returns are based on specified premium
patterns which produce the resulting Policy Values. These returns reflect a
deduction for the Separate Account expenses and Portfolio expenses. These
returns do not include the Annual Policy Service Charge, any sales loads or
Premium Taxes (if any) which, if included, would reduce the percentages
reported.
The Non-Standardized Adjusted Historical Cumulative Return for a Subaccount is
the effective annual rate of return that would have produced the ending Policy
Value of the stated one-year period.
33
<PAGE>
The Non-Standardized Adjusted Historical Average Annual Total Return for a
Subaccount is the effective annual compounded rate of return that would have
produced the ending Policy Value over the stated period had the performance
remained constant throughout.
YIELD AND EFFECTIVE YIELD
Peoples Benefit may also show yield and effective yield figures for the
Subaccount investing in shares of the Federated Prime Money Portfolio. "Yield"
refers to the income generated by an investment in the Federated Prime Money
Portfolio over a seven-day period, which is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Federated Prime Money
Portfolio is assumed to be reinvested. Therefore, the effective yield will be
slightly higher than the yield because of the compounding effect of this
assumed reinvestment. These figures do not reflect the Annual Policy Service
Charge, any sales loads or Premium Taxes (if any) which, if included, would
reduce the yields reported.
From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than the Subaccount
that invests in the Federated Prime Money Portfolio for which Peoples Benefit
advertises yield, Peoples Benefit shall furnish a yield quotation referring to
the Subaccount computed in the following manner: the net investment income per
Accumulation Unit earned during a recent one month period divided by the
Accumulation Unit Value on the last day of the period.
Please refer to the Statement of Additional Information for a description of
the method used to calculate a Subaccount's yield and total return, and a list
of the indexes and other benchmarks used in evaluating a Subaccount's
performance.
The performance measures discussed above reflect results of the Subaccounts
and are not intended to indicate or predict future performance. For more
detailed information, see the Statement of Additional Information.
Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service that ranks mutual funds and other investment companies by
overall performance, investment objectives, and assets. Performance may also
be tracked by other ratings services, companies, publications, or persons who
rank separate accounts or other investment products on overall performance or
other criteria. Performance figures will be calculated in accordance with
standardized methods established by each reporting service.
9. DEATH BENEFIT
Peoples Benefit will pay a death benefit to your beneficiary, under certain
circumstances, if the Annuitant dies before the Annuity Commencement Date and
the Annuitant was also the Policy Owner. (If the Annuitant was not an owner, a
death benefit may or may not be paid. See below.) The beneficiary may choose
an Annuity Payment Option, or may choose to receive a lump sum.
When We Pay a Death Benefit
Before the Annuity Commencement Date
We will pay a death benefit to your beneficiary IF:
.you are both the Annuitant and an owner of the Policy; and
34
<PAGE>
.you die before the Annuity Commencement Date.
If the only beneficiary is your surviving spouse, then he or she may elect to
continue the Policy as the new annuitant and owner, instead of receiving the
death benefit.
We will also pay a death benefit to your beneficiary IF:
.you are not the Annuitant; and
.the Annuitant dies before the Annuity Commencement Date; and
.you specifically requested that the death benefit be paid upon the
Annuitant's death.
Distribution requirements apply to the Policy Value upon the death of any
owner. These requirements are detailed in the Statement of Additional
Information.
After the Annuity Commencement Date
The death benefit payable, if any, on or after the Annuity Commencement Date
depends on the Annuity Payment Option selected.
IF:
. you are not the Annuitant; and
. you die on or after the Annuity Commencement Date; and
. the entire interest in the Policy has not been paid to you;
THEN:
. the remaining portion of such interest in the Policy will be distributed at
least as rapidly as under the method of distribution being used as of the
date of your death.
When We Do Not Pay A Death Benefit
No death benefit is paid in the following cases:
IF:
. you are not the Annuitant; and
. the Annuitant dies prior to the Annuity Commencement Date; and
. you did not specifically request that the death benefit be paid upon the
Annuitant's death;
THEN:
. you will become the new Annuitant and the Policy will continue.
IF:
. you are not the Annuitant; and
. you die prior to the Annuity Commencement Date;
THEN:
. the new owner (unless it is your spouse) must generally surrender the
Policy within five years of your death for the Policy Value increased or
decreased by an Excess Interest Adjustment (if applicable).
Note carefully. If the Policy Owner does not name an Owner's designated
beneficiary, the Policy Owner's estate will become the new owner. If no
probate estate is opened (because, for example, the Policy Owner has precluded
the opening of a probate estate by means of a trust or other instrument),
35
<PAGE>
and Peoples Benefit has not received written notice of the trust as a
successor owner signed prior to the Policy Owner's death, then that trust may
not exercise ownership rights to the Policy. It may be necessary to open a
probate estate in order to exercise ownership rights to the Policy if no
Owner's designated beneficiary is named in the written notice received by
Peoples Benefit.
Amount of Death Benefit
Death benefit provisions may differ from state to state. The death benefit may
be paid as lump sum or as annuity payments. The death benefit will be the
greater of:
. Policy Value on the date we receive the required information; or
. Cash Value on the date we receive the required information (this will be
more than the Policy Value if there is a positive Excess Interest
Adjustment); or
. Guaranteed Minimum Death Benefit, if any (discussed below).
Guaranteed Minimum Death Benefit Options
On the Policy customer order form, you generally may choose one of the three
Guaranteed Minimum Death Benefit Options listed below. After the Policy is
issued, you cannot make an election and the death benefit cannot be changed.
If the Guaranteed Minimum Death Benefit is not available because of the age of
the Policy Owner or Annuitant, the death benefit will be the greater of the
Policy Value or Cash Value as of the date of death.
A. Return of Premium Death Benefit
The Return of Premium Death Benefit is:
. the total Premium Payments;
. less any adjusted partial withdrawals (discussed below) as of the date of
death.
. available if the Policy Owner or Annuitant is age 0 to 85 on the Policy
Date.
The Return of Premium Death Benefit is not available if the Policy Owner or
Annuitant is 85 or older on the Policy Date.
B. 6 Year Step-Up To Age 81 Death Benefit
The 6 Year Step-Up Death Benefit is:
. the higher of the initial premium or the Adjusted Policy Value on the 6th,
12th, 18th, etc., Policy Anniversary prior to the earlier date of death or
the Annuitant's 81st birthday;
. plus premiums paid
. less partial withdrawals subsequent to the date of the 6th anniversary with
the largest Policy Value.
. available if the Policy Owner or Annuitant is age 0 to 75 on the Policy
Date.
C. Double Enhanced Death Benefit
The Double Enhance Death Benefit is the greater of (1) or (2) where:
(1) is a 5% Annually Compounding Death Benefit, equal to the Cumulative
Premium Payments, minus Adjusted Partial Withdrawals, plus interest
accumulated at 5% per annum from the payment or withdrawal date to the
earlier of the Annuitant's date of death or the Annuitant's 81st birthday;
and
(2) is a Step-Up Death Benefit, equal to the largest Policy Value on the
Policy Date or on any Policy Anniversary prior to the earlier of the
Annuitant's date of death or the Annuitant's 81st birthday,
36
<PAGE>
plus any Premium Payments since the date of the Policy Anniversary with the
largest Policy Value, minus any Adjusted Partial Withdrawals since the date
of the Policy Anniversary with the largest Policy Value.
The Double Enhanced Death Benefit is available if the Policy Owner or
Annuitant is 0 to 79 on the Policy Date.
Adjusted Partial Withdrawal
When you request a partial withdrawal, your Guaranteed Minimum Death Benefit
will be reduced by an amount called the Adjusted Partial Withdrawal. Under
certain circumstances, the adjusted partial withdrawal may be more than the
amount of your withdrawal request. It is also possible that if a death benefit
is paid after you have made a partial withdrawal, then the total amount paid
could be less than the total Premium Payments. We have included a detailed
explanation of this adjustment in the Statement of Additional Information.
10. OTHER INFORMATION
Peoples Benefit Life Insurance Company ("Peoples Benefit," "We," "Us," "Our")
Peoples Benefit Life Insurance Company is an Iowa stock life insurance company
incorporated on August 6, 1920, with Administrative Offices at 4333 Edgewood
Road, N.E., Cedar Rapids, Iowa 52499. It is principally engaged in offering
life insurance and annuity policies, and is licensed in 49 states, the
District of Columbia, and Puerto Rico.
As of December 31, 1999, Peoples Benefit 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 is a member of the Insurance Marketplace Standards Association
("IMSA"). IMSA is an independent, voluntary organization of life insurance
companies. It promotes high ethical standards in the sales and advertising of
individual life insurance and annuity products. Companies must undergo a
rigorous self- and independent assessment of their practices to become a
member of IMSA. The IMSA logo in our sales literature shows our ongoing
commitment to these standards.
Peoples Benefit Life Insurance Company Separate Account V
The Separate Account was established by Peoples Benefit on February 1, 1992,
and operates under Iowa law.
The Separate Account is a unit investment trust registered with the SEC under
the 1940 Act. Such registration does not signify that the SEC supervises the
management or the investment practices or policies of the Separate Account.
Peoples Benefit owns the assets of the Separate Account, and the obligations
under the Policy are obligations of Peoples Benefit. These assets are held
separately from the other assets of Peoples Benefit and are not chargeable
with liabilities incurred in any other business operation of Peoples Benefit
(except to the extent that assets in the Separate Account exceed the reserves
and other liabilities of the Separate Account). Peoples Benefit will always
keep assets in the Separate Account with a value at least equal to the total
Policy Value under the Policies. Income, gains, and losses incurred on the
assets in the Separate Account, whether or not realized, are credited to or
charged
37
<PAGE>
against the Separate Account without regard to other income, gains, or losses
of Peoples Benefit. Therefore, the investment performance of the Separate
Account is entirely independent of the investment performance of Peoples
Benefit's general account assets or any other separate account Peoples Benefit
maintains.
The Separate Account has thirty-five Subaccounts dedicated to the Policy, each
of which invests solely in a corresponding Portfolio of the underlying Funds.
Additional Subaccounts may be established at Peoples Benefit's discretion. The
Separate Account meets the definition of a "separate account" under Section
2(a)(37) of the 1940 Act.
Policy Owner ("You," "Your")
The Policy Owner is the person or persons designated as the Policy Owner in
the customer order form to participate in the Policy. 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.
Annuitant
The person during whose life any annuity payments involving life contingencies
will continue.
Payee
The Payee is the Policy Owner, Annuitant, beneficiary, or any other person,
estate, or legal entity to whom benefits are to be paid.
Right to Cancel Period
The period during which the Policy Owner may cancel the Policy can be canceled
and treated as void from the Policy Date. The period ranges in length from 20
to 30 days (or more in some cases), as specified in your Policy.
Voting Rights
The underlying Funds do not hold regular meetings of shareholders. The
directors/trustees of the Funds may call special meetings of shareholders as
the 1940 Act or other applicable law may require. To the extent required by
law, Peoples Benefit will vote the Portfolio shares held in the Separate
Account at shareholder meetings of the Funds in accordance with instructions
received from persons having voting interests in the corresponding Subaccount.
Peoples Benefit will vote Fund shares as to which no timely instructions are
received and those shares held by Peoples Benefit as to which Policy Owners
have no beneficial interest in proportion to the voting instructions that are
received with respect to all Policies 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 Commencement Date, the Policy Owner holds a voting
interest in each Portfolio to which the Policy Value is allocated. The number
of votes which are available to a Policy Owner will be determined by dividing
the Policy Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Commencement Date, the person
receiving Annuity Payments under any variable Annuity Payment Option has the
voting interest. The number of votes after the Annuity Commencement Date will
be determined by dividing the reserve for such Policy allocated to the
Portfolio by the net asset value per share of the corresponding Portfolio.
After the Annuity Commencement Date, the votes attributable to a Policy
decrease as the reserves allocated to the Portfolio decrease. In determining
the number of votes, fractional shares will be recognized.
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<PAGE>
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
Peoples Benefit retains the right, subject to any applicable law, to make
certain changes. Peoples Benefit reserves the right to eliminate the shares of
any of the Portfolios and to substitute shares of another Portfolio of the
Funds or of another registered open-end management investment company, if the
shares of the Portfolios are no longer available for investment or if, in
Peoples Benefit'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 Policy Owner's interest in
a Portfolio will not be made until SEC approval has been obtained and the
Policy Owner has been notified of the change.
Peoples Benefit may establish new Portfolios when marketing, tax, investment,
or other conditions so warrant. Peoples Benefit will make any new Portfolios
available to existing Policy Owners on a basis Peoples Benefit will determine.
Peoples Benefit 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, Peoples Benefit may, by
appropriate endorsement, make whatever changes in the Policies may be
necessary or appropriate to reflect such substitution or change. Furthermore,
if deemed to be in the best interests of persons having voting rights under
the Policies, Peoples Benefit 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 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 Peoples Benefit and the
audited financial statements of certain Subaccounts of the Separate Account
which are available for investment by Advisor's Edge Policy 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 Peoples Benefit and
certain Subaccounts of the Separate Account which are available for investment
by Advisor's Edge Policy 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 Policy under the applicable federal securities laws. On behalf of Peoples
Benefit, Brenda Sneed, Esquire, has passed upon all matters of Iowa law
pertaining to the validity of the Policy and Peoples Benefit's right to issue
the Policy.
39
<PAGE>
TABLE OF CONTENTS FOR THE ADVISOR'S EDGE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
GLOSSARY OF TERMS......................................................... 3
THE POLICY - GENERAL PROVISIONS........................................... 5
Owner................................................................... 5
Entire Policy........................................................... 5
Non-Participating....................................................... 5
Misstatement of Age or Sex.............................................. 6
Assignment.............................................................. 6
Addition, Deletion or Substitution of Investments....................... 6
Excess Interest Adjustment.............................................. 6
Computation of Variable Annuity Income Payments......................... 7
Exchanges............................................................... 8
PERFORMANCE INFORMATION................................................... 8
Money Market Subaccount Yields.......................................... 9
30-Day Yield for Non-Money Market Subaccounts........................... 10
Standardized Average Annual Total Return for Subaccounts................ 10
ADDITIONAL PERFORMANCE MEASURES........................................... 12
Non-Standardized Cumulative Total Return................................ 12
Non-Standardized Average Annual Total Return............................ 12
Non-Standardized Total Return Year-to-Date.............................. 14
Non-Standardized One Year Return........................................ 15
Non-Standardized Adjusted Historical Cumulative Return and Non-
Standardized Adjusted Historical Average Annual Total Return........... 16
Individual Computer Generated Illustrations............................. 27
PERFORMANCE COMPARISONS................................................... 28
SAFEKEEPING OF ACCOUNT ASSETS............................................. 30
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS........................ 30
PEOPLES BENEFIT LIFE INSURANCE COMPANY.................................... 30
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 30
Tax Status of the Policy................................................ 31
Distribution Requirements............................................... 31
Diversification Requirements............................................ 31
Owner Control........................................................... 31
Withholding............................................................. 32
Qualified Policies...................................................... 32
Individual Retirement Annuities......................................... 32
Roth Individual Retirement Annuities (Roth IRA)......................... 33
Section 403(b) Plans.................................................... 33
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans............ 33
Deferred Compensation Plans............................................. 34
Non-Natural Persons..................................................... 34
TAXATION OF PEOPLES BENEFIT............................................... 35
STATE REGULATION OF PEOPLES BENEFIT....................................... 35
RECORDS AND REPORTS....................................................... 35
DISTRIBUTION OF THE POLICIES.............................................. 35
LEGAL PROCEEDINGS......................................................... 35
OTHER INFORMATION......................................................... 35
FINANCIAL STATEMENTS...................................................... 36
</TABLE>
40
<PAGE>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
(For the period January 1, 1994 through December 31, 1999)
<TABLE>
<CAPTION>
Alliance DFA DFA
Alliance Premier Alliance DFA Small DFA Large International International
Growth Growth Technology Value Value Value Small
-------------- ----------- ---------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*........... N/A N/A N/A 10.000 10.000 10.000 10.000
12/31/94.............. N/A N/A N/A N/A N/A N/A N/A
12/31/95.............. N/A N/A N/A 9.948 12.034 10.524 10.145
12/31/96.............. N/A N/A N/A 12.063 14.165 11.214 10.106
12/31/97.............. N/A N/A N/A 15.633 18.187 10.893 7.708
12/31/98.............. N/A N/A N/A 14.506 20.013 12.092 8.054
12/31/99.............. N/A N/A N/A 15.832 20.831 14.660 9.484
Number of units Outstanding as of
12/31/94.............. N/A N/A N/A N/A N/A N/A N/A
12/31/95.............. N/A N/A N/A 163,078 358,553 271,242 188,597
12/31/96.............. N/A N/A N/A 711,634 983,458 983,425 617,388
12/31/97.............. N/A N/A N/A 864,489 1,062,867 1,228,043 869,388
12/31/98.............. N/A N/A N/A 746,000 859,894 1,023,764 825,132
12/31/99.............. N/A N/A N/A 764,208 942,056 1,072,798 784,305
<CAPTION>
Dreyfus Socially Endeavor Federated
DFA Short- DFA Global Responsible Dreyfus Small Enhanced TRP American
Term Fixed Bond Growth Cap Value Index International Leaders
-------------- ----------- ---------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*........... 10.000 10.000 N/A 10.000 10.000 10.000 10.000
12/31/94.............. N/A N/A N/A N/A N/A N/A N/A
12/31/95.............. 10.104 11.300 N/A N/A N/A N/A 12.676
12/31/96.............. 10.560 12.235 N/A N/A N/A N/A 15.311
12/31/97.............. 11.089 13.103 N/A 9.284 10.002 9.191 20.130
12/31/98.............. 11.620 14.091 N/A 9.024 13.057 10.541 23.524
12/31/99.............. 12.039 14.565 N/A 11.600 15.328 13.862 24.931
Number of units Outstanding as of
12/31/94.............. N/A N/A N/A N/A N/A N/A N/A
12/31/95.............. 101,709 152,950 N/A N/A N/A N/A 10,179
12/31/96.............. 821,351 317,470 N/A N/A N/A N/A 67,853
12/31/97.............. 862,087 346,747 N/A 585 34,587 24,827 181,634
12/31/98.............. 752,441 368,039 N/A 317,784 272,747 145,782 255,419
12/31/99.............. 1,002,680 518,872 N/A 201,694 434,242 366,345 327,212
<CAPTION>
Federated Montgomery
Federated High Federated U.S. Gov't Federated Montgomery Emerging Seligman
Income Bond Prime Money Securities Utility Growth Markets Capital
-------------- ----------- ---------------- ------------- ---------- ------------- -------------
<S> <C> <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 N/A
12/31/94.............. N/A 10.026 N/A N/A N/A N/A N/A
12/31/95.............. 10.257 10.473 10.567 11.354 N/A N/A N/A
12/31/96.............. 11.648 10.900 10.940 12.584 12.649 10.616 N/A
12/31/97.............. 13.174 11.365 11.801 15.833 16.157 10.486 N/A
12/31/98.............. 13.442 11.835 12.623 17.924 16.523 6.508 N/A
12/31/99.............. 13.663 12.304 12.466 18.110 19.829 10.658 N/A
Number of units outstanding as of
12/31/94.............. N/A 70,223 N/A N/A N/A N/A N/A
12/31/95.............. 6,320 363,418 7,159 2,024 N/A N/A N/A
12/31/96.............. 146,709 512,275 117,323 24,080 28,618 135,913 N/A
12/31/97.............. 424,673 312,343 249,634 20,024 76,471 252,354 N/A
12/31/98.............. 532,325 651,890 422,127 74,288 68,852 301,041 N/A
12/31/99.............. 589,780 952,527 547,797 97,673 89,026 227,382 N/A
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
Seligman
Communications Seligman Stein Roe Strong Strong Wanger Wanger Int'l
and Global Small Co. Int'l Schafer U.S. Small Small Cap
Information Technology Growth Stock Value Cap Advisor Advisor
-------------- ---------- ------------ ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*............ N/A N/A 10.000 10.000 10.000 10.000 10.000
12/31/94............... N/A N/A N/A N/A N/A N/A N/A
12/31/95............... N/A N/A N/A N/A N/A 9.665 10.913
12/31/96............... N/A N/A N/A N/A N/A 14.076 14.312
12/31/97............... N/A N/A 11.571 8.384 10.067 18.098 14.011
12/31/98............... N/A N/A 9.507 7.931 10.220 19.542 16.194
12/31/99............... N/A N/A 13.988 14.752 9.863 24.283 36.429
Number of units outstanding as of
12/31/94............... N/A N/A N/A N/A N/A N/A N/A
12/31/95............... N/A N/A N/A N/A N/A 21,864 4,237
12/31/96............... N/A N/A N/A N/A N/A 110,551 80,108
12/31/97............... N/A N/A 7,407 7,004 20,688 275,517 149,792
12/31/98............... N/A N/A 11,989 17,678 61,989 181,215 193,817
12/31/99............... N/A N/A 12,554 57,878 53,258 164,471 182,333
<CAPTION>
Warburg WRL J.P.
Pincus Warburg WRL Alger Morgan Real
Transamerica Int'l Pincus Small Aggressive Estate WRL Janus WRL Janus
VIF Growth Equity Co. Growth Growth Securities Global Growth
-------------- ---------- ------------ ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*............ N/A 10.000 10.000 10.000 10.000 10.000 10.000
12/31/94............... N/A N/A N/A N/A N/A N/A N/A
12/31/95............... N/A N/A N/A N/A N/A N/A N/A
12/31/96............... N/A N/A N/A N/A N/A N/A N/A
12/31/97............... N/A 9.601 13.183 N/A N/A N/A N/A
12/31/98............... N/A 10.049 12.724 N/A N/A N/A N/A
12/31/99............... N/A 15.319 21.375 14.961 8.998 15.620 13.662
Number of units outstanding as of
12/31/94............... N/A N/A N/A N/A N/A N/A N/A
12/31/95............... N/A N/A N/A N/A N/A N/A N/A
12/31/96............... N/A N/A N/A N/A N/A N/A N/A
12/31/97............... N/A 106,212 48,791 N/A N/A N/A N/A
12/31/98............... N/A 230,381 89,528 N/A N/A N/A N/A
12/31/99............... N/A 141,359 275,865 64,889 54,834 155,589 239,345
<CAPTION>
WRL LKCM
Strategic
Total Return
--------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*............ 10.000
12/31/94............... N/A
12/31/95............... N/A
12/31/96............... N/A
12/31/97............... N/A
12/31/98............... N/A
12/31/99............... 10.592
Number of units outstanding as of
12/31/94............... N/A
12/31/95............... N/A
12/31/96............... N/A
12/31/97............... N/A
12/31/98............... N/A
12/31/99............... 14,628
</TABLE>
* Date of commencement of operations for the Subaccounts was as follows:
10/6/95 for DFA Small Value; 1/18/95 for DFA Large Value; 10/3/95 for DFA
International Value; 10/6/95 for DFA International Small; 10/9/95 for DFA
Short-Term Fixed; 1/18/95 for DFA Global Bond; 10/13/97 for Dreyfus Small
Cap Value, Endeavor Enhanced Index and T. Rowe Price International; 3/10/95
for Federated American Leaders; 9/18/95 for Federated High Income; 12/7/94
for Federated Prime
A-2
<PAGE>
Money; 6/28/95 for Federated U.S. Government Securities; 7/20/95 for
Federated Utility; 2/12/96 for Montgomery Growth; 2/5/96 for Montgomery
Emerging Markets; 10/13/97 for Strong Schafer Value; 9/20/95 for Wanger U.S.
Small Cap Advisor; 9/18/95 for Wanger International Small Cap Advisor;
3/31/97 for Stein Roe Small Company Growth, Strong International Stock,
Warburg Pincus International Equity and Warburg Pincus Small Company Growth;
and 5/3/99 for WRL Alger Aggressive Growth; WRL J.P. Morgan Real Estate
Securities; WRL Janus Global; WRL Janus Growth; and WRL LKCM Strategic Total
Return. As of December 31, 1999, the following Subaccounts had not commenced
operations: Alliance Growth, Alliance Premier Growth, Alliance Technology,
Dreyfus Socially Responsible Growth, Seligman Capital, Seligman
Communications and Information, Seligman Global Technology and Transamerica
VIF Growth.
A-3
<PAGE>
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENT OF ADDITIONAL INFORMATION
for the
ADVISOR'S EDGE VARIABLE ANNUITY
Offered by
Peoples Benefit Life Insurance Company
(An Iowa Stock Company)
Home Office
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Advisor's Edge variable annuity policy (the "Policy")
offered by Peoples Benefit Life Insurance Company (the "Company" or "Peoples
Benefit"). You may obtain a copy of the Prospectus dated December 1, 2000, by
calling 800-866-6007 or by writing to our Administrative Offices, at 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52499. Terms used in the current
Prospectus for the Policy are incorporated in this Statement of Additional
Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
December 1, 2000
1
<PAGE>
TABLE OF CONTENTS
Page Number
-----------
GLOSSARY OF TERMS 3
THE POLICY - GENERAL PROVISIONS 5
Owner 5
Entire Policy 5
Non-Participating 5
Misstatement of Age or Sex 6
Assignment 6
Addition, Deletion or Substitution of Investments 6
Excess Interest Adjustment 6
Computation of Variable Annuity Income Payments 7
Exchanges 8
PERFORMANCE INFORMATION 8
Money Market Subaccount Yields 9
30-Day Yield for Non-Money Market Subaccounts 10
Standardized Average Annual Total Return for Subaccounts 10
ADDITIONAL PERFORMANCE MEASURES 12
Non-Standardized Cumulative Total Return 12
Non-Standardized Average Annual Total Return 12
Non-Standardized Total Return Year-to-Date 14
Non-Standardized One Year Return 15
Non-Standardized Adjusted Historical Cumulative
Return and Non-Standardized 16
Adjusted Historical Average Annual Total Return
Individualized Computer Generated Illustrations 27
PERFORMANCE COMPARISONS 28
SAFEKEEPING OF ACCOUNT ASSETS 30
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS 30
PEOPLES BENEFIT LIFE INSURANCE COMPANY 30
CERTAIN FEDERAL INCOME TAX CONSEQUENCES 30
Tax Status of the Policy 31
Distribution Requirements 31
Diversification Requirements 31
Owner Control 31
Withholding 32
Qualified Policies 32
Individual Retirement Annuities 32
Roth Individual Retirement Annuities (Roth IRA) 33
Section 403(b) Plans 33
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plan 33
Deferred Compensation Plans 34
Non-Natural Persons 34
TAXATION OF PEOPLES BENEFIT 35
STATE REGULATION OF PEOPLES BENEFIT 35
RECORDS AND REPORTS 35
DISTRIBUTION OF THE POLICIES 35
LEGAL PROCEEDINGS 35
OTHER INFORMATION 35
FINANCIAL STATEMENTS 36
2
<PAGE>
GLOSSARY OF TERMS
Accumulation Unit - An accounting unit of measure used in calculating the policy
value in the separate account before the annuity commencement date.
Adjusted Policy Value - An amount equal to the policy value increased or
decreased by any excess interest adjustments.
Administrative and Service Office - Financial Markets Division - Variable
Annuity Department, Peoples Benefit Life Insurance Company, 4333 Edgewood Road,
N.E., Cedar Rapids, Iowa 52499.
Annuitant - The person during whose life, annuity payments involving life
contingencies will continue.
Annuity Commencement Date - The date upon which annuity payments are to
commence. This date may be any date at least thirty days after the policy date
and may not be later than the last day of the policy month starting after the
annuitant attains age 85, except expressly allowed by Peoples Benefit.
Annuity Payment Option - A method of receiving a stream of annuity payments
selected by the owner.
Annuity Unit - An accounting unit of measure used in the calculation of the
amount of the second and each subsequent variable annuity payment.
Beneficiary - The person who has the right to the death benefit set forth in the
policy.
Business Day - A day when the New York Stock Exchange is open for business.
Cash Value - The policy value increased or decreased by an excess interest
adjustment, less the annual service charge, and less any applicable premium
taxes and any rider fees.
Code - The Internal Revenue Code of 1986, as amended.
Enrollment form - A written application, order form, or any other information
received electronically or otherwise upon which the policy is issued and/or is
reflected on the data or specifications page.
Excess Interest Adjustment - A positive or negative adjustment to amounts
withdrawn upon partial withdrawals, full surrenders or transfers from the
guaranteed period options, or to amounts applied to annuity payment options. The
adjustment reflects changes in the interest rates declared by Peoples Benefit
since the date any payment was received by, or an amount was transferred to, the
guaranteed period option. The excess interest adjustment can either decrease or
increase the amount to be received by the owner upon full surrender or
commencement of annuity payments, depending upon whether there has been an
increase or decrease in interest rates, respectively.
Fixed Account - One or more investment choices under the policy that are part of
Peoples Benefit general assets and which are not in the separate account.
Guaranteed Period Options - The various guaranteed interest rate periods of the
fixed account, which Peoples Benefit may offer, into which purchase payments may
be paid or amounts may be transferred.
Nonqualified Policy - A policy other than a qualified policy.
Owner - The individual or entity that owns an individual policy.
Policy - The individual policy.
3
<PAGE>
Policy Value - On or before the annuity commencement date, the policy value is
equal to the owner's:
. Purchase Payments; minus
. Partial withdrawals (including any applicable excess interest adjustments
on such withdrawals); plus
. Interest credited in the fixed account; plus or minus
. Accumulated gains or losses in the separate account; minus
. Services charges, premium taxes, rider fees, and transfer fees, if any.
Policy Year - A policy year begins on the date in which the policy becomes
effective and on each anniversary thereof.
Purchase Payment - An amount paid to Peoples Benefit by the owner or on the
owner's behalf as consideration for the benefits provided by the policy.
Qualified Policy - A policy issued in connection with retirement plans that
qualify for special federal income tax treatment under the Code.
Separate Account - Peoples Benefit Life Insurance Company Separate Account V, a
separate account established and registered as a unit investment trust under the
Investment Company Act of 1940, as amended (the "1940 Act"), to which Purchase
Payments under the policies may be allocated.
Service Charge - An annual charge on each policy anniversary (and a charge at
the time of surrender during any policy year) for policy maintenance and related
administrative expenses.
Subaccount - subdivision within the separate account, the assets of which are
invested in specified portfolios of the underlying funds.
Successor Owner - A person appointed by the owner to succeed to ownership of the
policy in the event of the death of the owner who is not the annuitant before
the annuity commencement date.
Valuation Period - The period of time from one determination of accumulation
unit values and annuity unit values to the next subsequent determination of
values. Such determination shall be made on each business day.
Variable Annuity Payments - Payments made pursuant to an annuity payment option
which fluctuate as to dollar amount or payment term in relation to the
investment performance of the specified subaccounts within the separate account.
Written Notice or Written Request - Written notice, signed by the owner, that
gives Peoples Benefit the information it requires and is received at the
administrative and service office. For some transactions, Peoples Benefit may
accept an electronic notice such as telephone instructions. Such electronic
notice must meet the requirements Peoples Benefit establishes for such notices.
4
<PAGE>
THE POLICY - GENERAL PROVISIONS
OWNER
The Policy shall belong to the owner upon issuance of the Policy after
completion of an enrollment form and delivery of the initial purchase payment.
While the annuitant is living, the owner may: (1) assign the Policy; (2)
surrender the policy; (3) amend or modify the Policy with the consent of Peoples
Benefit; (4) receive annuity payments or name a payee to receive the payments;
and (5) exercise, receive and enjoy every other right and benefit contained in
the policy. The exercise of these rights may be subject to the consent of any
assignee or irrevocable beneficiary, and of your spouse in a community or
marital property state.
Unless Peoples Benefit has been notified of a community or marital property
interest in the policy, it will rely on its good faith belief that no such
interest exists and will assume no responsibility for inquiry.
A successor owner can be named in the enrollment form, information provided in
lieu thereof, or in a written notice. The successor owner will become the new
owner upon your death, if you predecease the annuitant. If no successor owner
survives you and you predecease the annuitant, your estate will become the
owner.
Note Carefully. If the owner does not name a contingent owner, the owner's
--------------
estate will become the new owner. If no probate estate is opened because the
owner has precluded the opening of a probate estate by means of a trust or other
instrument, unless Peoples Benefit has received written notice of the trust as a
successor owner signed prior to the owner's death, that trust may not exercise
ownership rights to the policy. It may be necessary to open a probate estate in
order to exercise ownership rights to the policy if no contingent owner is named
in a written notice received by Peoples Benefit.
The owner may change the ownership of the policy in a written notice. When the
change takes effect, all rights of ownership in the policy will pass to the new
owner. A change of ownership may have tax consequences.
When there is a change of owner or successor owner, the change will not be
effective until it is recorded in our records. Once recorded, it will take
effect as of the date the owner signs the written notice, subject to any payment
Peoples Benefit has made or action Peoples Benefit has taken before recording
the change. Changing the owner or naming a new successor owner cancels any prior
choice of successor owner, but does not change the designation of the
beneficiary or the annuitant.
If ownership is transferred (except to the owner's spouse) because the owner
dies before the annuitant, the cash value generally must be distributed to the
successor owner within five years of the owner's death, or payments must be made
for a period certain or for the successor owner's lifetime so long as any period
certain does not exceed that successor owner's life expectancy, if the first
payment begins within one year of your death.
ENTIRE POLICY
The policy, any endorsements thereon, the enrollment form, or information
provided in lieu thereof constitute the entire Policy between Peoples Benefit
and the owner. All statements in the enrollment form are representations and not
warranties. No statement will cause the policy to be void or to be used in
defense of a claim unless contained in the enrollment form or information
provided in lieu thereof. No registered representative has authority to change
or waive any provision of the policy.
NON-PARTICIPATING
The Policies are non-participating. No dividends are payable and the Policies
will not share in the profits or surplus earnings of Peoples Benefit.
5
<PAGE>
MISSTATEMENT OF AGE OR SEX
Peoples Benefit may require proof of age and sex before making Annuity Payments.
If the Annuitant's stated age, sex or both in the Policy are incorrect, Peoples
Benefit will change the annuity benefits payable to those benefits which the
Purchase Payments would have purchased for the correct age and sex. In the case
of correction of the stated age and/or sex after payments have commenced,
Peoples Benefit will: (1) in the case of underpayment, pay the full amount due
with the next payment; and (2) in the case of overpayment, deduct the amount due
from one or more future payments.
ASSIGNMENT
Any Non-Qualified Policy may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. Peoples Benefit is not responsible for the
validity of any assignment. No assignment will be recognized until Peoples
Benefit receives the appropriate Peoples Benefit form notifying Peoples Benefit
of such assignment. 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. Peoples Benefit shall
not be liable as to any payment or other settlement made by Peoples Benefit
before receipt of the appropriate Peoples Benefit form.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Peoples Benefit cannot and does not guarantee that any of the subaccounts will
always be available for purchase payments, allocations or transfers. Peoples
Benefit retains the right, subject to any applicable law, to make certain
changes in the separate account and its investments. Peoples Benefit reserves
the right to eliminate the shares of any portfolio held by a subaccount and to
substitute shares of another portfolio of the underlying funds, or of another
registered open-end management investment company for the shares of any
portfolio, if the shares of the portfolio are no longer available for investment
or if, in the judgment of Peoples Benefit, investment in any portfolio would be
inappropriate in view of the purposes of the separate account. To the extent
required by the 1940 Act, substitutions of shares attributable to your interest
in a subaccount will not be made without prior notice to you and the prior
approval of the Securities and Exchange Commission ("SEC"). Nothing contained
herein shall prevent the separate account from purchasing other securities for
other series or classes of variable annuities, or from effecting an exchange
between series or classes of variable annuities on the basis of your requests.
New subaccounts may be established when, in the sole discretion of Peoples
Benefit, marketing, tax, investment or other conditions warrant. Any new
subaccounts may be made available to existing owners on a basis to be determined
by Peoples Benefit. Each additional subaccount will purchase shares in a mutual
fund portfolio or other investment vehicle. Peoples Benefit may also eliminate
one or more subaccounts if, in its sole discretion, marketing, tax, investment
or other conditions warrant such change. In the event any subaccount is
eliminated, Peoples Benefit will notify you and request reallocation of the
amounts invested in the eliminated subaccount. If no such reallocation is
provided by you, Peoples Benefit will reinvest the amounts in the subaccount
that invests in the Federated Prime Money Portfolio (or in a similar portfolio
of money market instruments), in another subaccount, or in the fixed account, if
appropriate.
In the event of any such substitution or change, Peoples Benefit may, by
appropriate endorsement, make such changes in the policy as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to be
in the best interests of persons having voting rights under the policies, the
separate account may be (i) operated as a management company under the 1940 Act
or any other form permitted by law, (ii) deregistered under the 1940 Act in the
event such registration is no longer required or (iii) combined with one or more
other separate accounts. To the extent permitted by applicable law, Peoples
Benefit also may transfer the assets of the separate account associated with the
policies to another account or accounts.
EXCESS INTEREST ADJUSTMENT
Money that you withdraw from, transfer out of, or apply to an annuity payment
option from a guaranteed period option of the fixed account before the end of
its guaranteed period (the number of years you specified the money would remain
in the guaranteed period option, may be subject to any excess interest
adjustment. At the time you request a withdrawal, if the interest rates Peoples
Benefits sets have risen since the date of the initial guarantee, the excess
6
<PAGE>
interest adjustment will result in a lower policy value. However, if interest
rates have fallen since the date of the initial guarantee, the excess interest
adjustment will result in a higher policy value.
Excess interest adjustments will not reduce the adjusted policy value for a
guaranteed period option below the purchase payments and transfers to that
guaranteed period option, less any prior partial withdrawals and transfers from
the guaranteed period option, plus interest at the policy's minimum guaranteed
effect annual interest rate of 3%. This is referred to as the excess interest
adjustment floor.
The formula that will be used to determine the excess interest adjustment
("EIA") is:
EIA = S* (G-C)* (M/12)
Where
S = the gross amount being surrendered, withdrawn, transferred or applied
to a Payment Option that is subject to the EIA.
G = the guaranteed interest rate applicable to S.
C = the current guaranteed interest rate then being offered on new purchase
payments for the next longer Guaranteed Period than "M". If this form, or
such a Guaranteed Period is no longer offered, "C" will be the U.S.
Treasury rate for the next longer maturity (in whole years) than "M" on the
25th day of the previous calendar month, plus up to 2%.
M = the number of months remaining in the Guaranteed Period for S, rounded
up to the next higher whole number of months.
No cap on positive EIA adjustment. Floor on negative EIA is effective on
full surrender.
On full surrender, each Guaranteed Period Option's ("GPO") contribution to
the adjusted Policy Value will never fall below the sum of purchase
payments, less any prior withdrawals and transfers from that GPO, plus
interest at the 3% guaranteed effective annual interest rate.
Some states may not allow an EIA.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
In order to supplement the description in the Prospectus and Appendixes A and B
thereto, the following provides additional information about the Policy which
may be of interest to Policy Owners.
The amounts shown in the Annuity Tables contained in your Policy represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
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 Tables contained in your Policy
corresponding to the Annuity Payment Option elected by the Policy 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.
7
<PAGE>
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date 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 (.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 assessed at an annual rate of 1.25% for the
mortality and expense risks assumed by Peoples Benefit;
(c) = a daily charge for the cost of administering the Policy
corresponding to an annual charge of .15% of the value of the
Subaccount.
The Annuity Tables contained in the Policy 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 Policy are based
on a 60% female/40% male blending of the above for all annuitants of either
gender.
EXCHANGES
After the Annuity Date you may, by making a written request, exchange the
current value of an existing subaccount to Annuity Units of any other
subaccount(s) then available. The written request for an exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the exchange is to take effect. An exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of exchange (the
"Exchange Date"). Each year you may make an unlimited number of free exchanges
between Subaccounts. We reserve the right to charge a $15 fee in the future for
exchanges in excess of twelve per Policy Year.
Exchanges will be made using the Annuity Unit Value for the subaccounts on the
date the written request for exchange is received. On the Exchange Date, Peoples
Benefit will establish a value for the current subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing subaccounts
and compute the number of Annuity Units for the new subaccounts by dividing the
Annuity Unit Value of the new subaccounts into the value previously calculated
for the existing subaccounts.
PERFORMANCE INFORMATION
Performance information for the subaccounts including the yield and effective
yield of the Federated Prime Money 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 Policy Owners.
Until October 1995, the DFA Large Value Portfolio (formerly DFA Global Value
Portfolio) invested its assets in both U.S. and international securities.
Depending on the period presented, total return and performance information
presented for the DFA Large Value Portfolio may reflect the performance of the
Portfolio when it invested in the stocks of both U.S. and international
companies. Total return and performance information for the DFA Large Value
Portfolio which includes the period prior to October 1995 should not be
considered indicative of the Portfolio's future performance.
8
<PAGE>
Where applicable, the following Subaccount inception dates are used in the
calculation of performance figures. 10/6/95 for the DFA Small Value and
International Small Value Portfolios; 1/18/95 for the DFA Large Value and DFA
Global Bond Portfolios; 10/3/95 for the DFA International; 10/9/95 for DFA
Short-Term Fixed Portfolios; 3/10/95 for the Federated American Leaders
Portfolio; 7/20/95 for the Federated Utility Portfolio; 12/7/94 for the
Federated Prime Money Portfolio; 6/28/95 for the Federated U.S. Government
Securities Portfolio; 9/18/95 for the Federated High Income Bond Portfolio;
2/12/96 for the Montgomery Growth Portfolio; 2/5/96 for the Montgomery Emerging
Markets Portfolio; 9/20/95 for the Wanger U.S. Small Cap Portfolio; 9/18/95 for
the Wanger International Small Cap Portfolio; 3/31/97 for Stein Roe Small
Company Growth Portfolio; 3/31/97 for Strong International Stock Portfolio;
3/31/97 for Warburg Pincus International Equity Portfolio; 3/31/97 for Warburg
Pincus Small Company Growth Portfolio; 10/13/97 for Strong Schafer Value
Portfolio; 10/31/97 for T. Rowe Price International Stock Portfolio; 10/31/97
for Dreyfus Small Cap Value Portfolio; 10/13/97 for Endeavor Enhanced Index
Portfolio; and 5/3/99 for the WRL Alger Aggressive Growth, WRL J.P. Morgan Real
Estate Securities, WRL Janus Global, WRL Janus Growth, and WRL LKCM Strategic
Total Return Portfolios. As of the date of this Statement of Additional
Information, the Alliance Growth, Alliance Premier Growth, Alliance Technology,
Dreyfus Socially Responsible Growth, Seligman Capital, Seligman Communications
and Information, Seligman Global Technology and Transamerica VIF Growth
Subaccounts had not commenced operation.
Where applicable, the following Fund inception dates are used in the calculation
of performance figures: 6/1/99 for Alliance Growth Portfolio, 7/14/99 for
Alliance Premier Growth Portfolio, 9/22/99 for Alliance Technology Portfolio,
9/29/95 for the DFA Small Value and International Small Value Portfolios;
1/12/95 for the DFA Large Value and DFA Global Bond Portfolios; 9/29/95 for the
DFA International; 9/29/95 for DFA Short-Term Fixed Portfolios; 10/7/93 for
Dreyfus Socially Responsible Growth Fund, 11/18/94 for Federated Prime Money
Portfolio; 2/10/94 for Federated American Leaders Portfolio; 2/10/94 for
Federated Utility Portfolio; 3/28/94 for Federated U.S. Government Securities
Portfolio; 3/1/94 for Federated High Income Bond Portfolio; 2/9/96 for
Montgomery Growth Portfolio; 2/2/96 for Montgomery Emerging Markets Portfolio;
5/3/95 for Wanger U.S. Small Cap Advisor Portfolio and Wanger International
Small Cap Advisor Portfolio; 10/20/95 for Strong International Stock Portfolio;
6/30/95 for Warburg Pincus International Equity Portfolio and Warburg Pincus
Small Company Growth Portfolio; 10/10/97 for Strong Schafer Value Portfolio;
4/8/91 for T. Rowe Price International Stock Portfolio; 5/4/93 for Dreyfus Small
Cap Value Portfolio; 5/1/97 for Endeavor Enhanced Index Portfolio; 6/21/88 for
Seligman Capital Portfolio, 10/11/94 for Seligman Communication and Information
Portfolio, 5/1/96 for Seligman Global Technology, 2/26/69 for Transamerica VIF
Growth Portfolio, 3/1/94 for WRL Alger Aggressive Growth Portfolio; 5/1/98 for
WRL J.P. Morgan Real Estate Securities Portfolio; 12/3/92 for WRL Janus Global
Portfolio; 10/2/86 for WRL Janus Growth Portfolio; and 3/1/93 for WRL LKCM
Strategic Total Return Portfolio.
MONEY MARKET SUBACCOUNT YIELDS
Current yield for the Federated Prime Money 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 current yields of the Money Market Subaccount for the 7-day period ended
December 31, 1999 was 4.48% for the 6 Year Step-Up Death Benefit Option, 4.54%
for the Return of Premium Death Benefit Option; and 4.39% for the Double
Enhanced Death Benefit Option. The effective yield of the Money Market
Subaccount for the period ended December 31, 1999 was 4.59% for the 6 Year
Step-Up Death Benefit Option, 4.64% for the Return of Premium Death Benefit
Option, and 4.49% for the Double Enhanced Death Benefit Option.
9
<PAGE>
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]
---
cd
Where:
[a] equals the net investment income earned during the period by the
Portfolio attributable to shares owned by a subaccount;
[b] equals the expenses accrued for the period (net of reimbursement);
[c] equals the average daily number of Units outstanding during the
period; and
[d] equals the maximum offering price per Accumulation Unit on the last
day of the period.
Yield on a subaccount is earned from the increase in net asset value of shares
of the Portfolio in which the subaccount invests and from dividends declared and
paid by the Portfolio, which are automatically reinvested in shares of the
Portfolio.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS
When advertising performance of the subaccounts, Peoples Benefit 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 (including the
contingent deferred sales load), the Annual Policy Fee and all other Portfolio,
Separate Account and Policy level charges except Premium Taxes, if any.
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 Policy over a period of one, five and ten years (or, if less, up
to the life of the Subaccount), 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; and
(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 table show the Standardized Average Annual Total Return for the
subaccounts for the period beginning at the inception of each subaccount and
ending on December 31, 1999.
10
<PAGE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 0.75%)
Since
Subaccount
Subaccount 1 Year Inception
---------- ------ ----------
Alliance Growth................................ N/A N/A
Alliance Premier Growth........................ N/A N/A
Alliance Technology............................ N/A N/A
Dreyfus Small Cap Value........................ 28.41% 6.80%
Dreyfus Socially Responsible Growth............ N/A N/A
DFA Small Value................................ 9.01% 11.32%
DFA Large Value................................ 3.97% 15.83%
DFA International Value........................ 21.09% 9.30%
DFA International Small........................ 17.62% -1.36%
DFA Short-Term Fixed........................... 3.48% 4.36%
DFA Global Bond................................ 3.24% 7.76%
Endeavor Enhanced Index........................ 17.26% 21.11%
Federated American Leaders..................... 5.85% 20.76%
Federated High Income Bond..................... 1.52% 7.42%
Federated Prime Money.......................... 3.82% 4.05%
Federated US Gov't Securities.................. -1.36% 4.88%
Federated Utility.............................. 0.91% 14.14%
Montgomery Emerg Mkt........................... 63.57% 1.52%
Montgomery Growth.............................. 19.87% 19.13%
Seligman Capital............................... N/A N/A
Seligman Communications and Information........ N/A N/A
Seligman Global Technology..................... N/A N/A
Stein Roe Small Company Growth................. 46.97% 12.83%
Strong Int'l Stock............................. 85.80% 15.03%
Strong Schafer Value........................... -3.61% -0.74%
Transamerica VIF Growth........................ N/A N/A
T. Rowe Price Int'l............................ 31.35% 15.74%
Wanger Int'l Small Cap......................... 124.72% 35.04%
Wanger US Small Cap............................ 24.12% 22.88%
Warburg Pincus Int'l Equity.................... 52.27% 16.62%
Warburg Pincus Small Co Growth................. 67.81% 31.62%
WRL Alger Agg Growth........................... N/A 49.50%
WRL Janus Global............................... N/A 56.09%
WRL Janus Growth............................... N/A 36.52%
WRL JP Morgan Real Est......................... N/A -10.09%
WRL LKCM Strategic Tot Rtn..................... N/A 5.84%
11
<PAGE>
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN
Peoples Benefit 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. Peoples Benefit 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, 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 Policy Fee, any
sales loads or Premium Taxes (if any), which, if included, would reduce the
percentages reported by Peoples Benefit.
NON-STANDARDIZED CUMULATIVE TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 0.75%)
Since
Subaccount
Subaccount 1 Year Inception
---------- ------ ----------
Alliance Growth................................. N/A N/A
Alliance Premier Growth......................... N/A N/A
Alliance Technology............................. N/A N/A
Dreyfus Small Cap Value......................... 28.43% 15.74%
Dreyfus Socially Responsible Growth............. N/A N/A
DFA Small Value................................. 9.03% 57.66%
DFA Large Value................................. 3.99% 107.30%
DFA International Value......................... 21.11% 45.98%
DFA International Small......................... 17.64% -5.56%
DFA Short-Term Fixed............................ 3.50% 19.88%
DFA Global Bond................................. 3.26% 44.93%
Endeavor Enhanced Index......................... 17.28% 52.95%
Federated American Leaders...................... 5.88% 148.13%
Federated High Income Bond...................... 1.54% 36.05%
Federated Prime Money........................... 3.84% 22.40%
Federated US Gov't Securities................... -1.34% 24.10%
Federated Utility............................... 0.94% 80.31%
Montgomery Emerg Mkt............................ 63.59% 6.16%
Montgomery Growth............................... 19.89% 97.53%
Seligman Capital................................ N/A N/A
Seligman Communications and Information......... N/A N/A
Seligman Global Technology...................... N/A N/A
Stein Roe Small Company Growth.................. 46.99% 39.50%
Strong Int'l Stock.............................. 85.82% 47.12%
Strong Schafer Value............................ -3.59% -1.59%
Transamerica VIF Growth......................... N/A N/A
T. Rowe Price Int'l............................. 31.37% 38.32%
Wanger Int'l Small Cap.......................... 124.75% 262.77%
Wanger US Small Cap............................. 24.14% 141.81%
12
<PAGE>
Warburg Pincus Int'l Equity..................... 52.29% 52.77%
Warburg Pincus Small Co Growth.................. 67.83% 113.18%
WRL Alger Agg Growth............................ N/A 49.51%
WRL Janus Global................................ N/A 56.11%
WRL Janus Growth................................ N/A 36.53%
WRL JP Morgan Real Est.......................... N/A -10.08%
WRL LKCM Strategic Tot Rtn...................... N/A 5.85%
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 0.75%)
Since
Subaccount
Subaccount 1 Year Inception
---------- ------ ----------
Alliance Growth................................. N/A N/A
Alliance Premier Growth......................... N/A N/A
Alliance Technology............................. N/A N/A
Dreyfus Small Cap Value......................... 28.43% 6.82%
Dreyfus Socially Responsible Growth............. N/A N/A
DFA Small Value................................. 9.03% 11.34%
DFA Large Value................................. 3.99% 15.85%
DFA International Value......................... 21.11% 9.32%
DFA International Small......................... 17.64% -1.34%
DFA Short-Term Fixed............................ 3.50% 4.38%
DFA Global Bond................................. 3.26% 7.78%
Endeavor Enhanced Index......................... 17.28% 21.13%
Federated American Leaders...................... 5.88% 20.78%
Federated High Income Bond...................... 1.54% 7.44%
Federated Prime Money........................... 3.84% 4.07%
Federated US Gov't Securities................... -1.34% 4.90%
Federated Utility............................... 0.94% 14.16%
Montgomery Emerg Mkt............................ 63.59% 1.54%
Montgomery Growth............................... 19.89% 19.15%
Seligman Capital................................ N/A N/A
Seligman Communications and Information......... N/A N/A
Seligman Global Technology...................... N/A N/A
Stein Roe Small Company Growth.................. 46.99% 12.85%
Strong Int'l Stock.............................. 85.82% 15.05%
Strong Schafer Value............................ -3.59% -0.72%
Transamerica VIF Growth......................... N/A N/A
T. Rowe Price Int'l............................. 31.37% 15.76%
Wanger Int'l Small Cap.......................... 124.75% 35.06%
Wanger US Small Cap............................. 24.14% 22.90%
Warburg Pincus Int'l Equity..................... 52.29% 16.64%
Warburg Pincus Small Co Growth.................. 67.83% 31.64%
WRL Alger Agg Growth............................ N/A 49.51%
WRL Janus Global................................ N/A 56.11%
WRL Janus Growth................................ N/A 36.53%
WRL JP Morgan Real Est.......................... N/A -10.08%
WRL LKCM Strategic Tot Rtn...................... N/A 5.85%
13
<PAGE>
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
Peoples Benefit 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 Policy Fee, any sales loads or Premium Taxes (if any), which,
if included, would reduce the percentages reported by Peoples Benefit.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 0.75%)
Total Return
YTD as of
Subaccount 12/31/99
---------- --------
Alliance Growth...................................................... N/A
Alliance Premier Growth.............................................. N/A
Alliance Technology.................................................. N/A
Dreyfus Small Cap Value.............................................. 28.43%
Dreyfus Socially Responsible Growth.................................. N/A
DFA Small Value...................................................... 9.03%
DFA Large Value...................................................... 3.99%
DFA International Value.............................................. 21.11%
DFA International Small.............................................. 17.64%
DFA Short-Term Fixed................................................. 3.50%
DFA Global Bond...................................................... 3.26%
Endeavor Enhanced Index.............................................. 17.28%
Federated American Leaders........................................... 5.88%
Federated High Income Bond........................................... 1.54%
Federated Prime Money................................................ 3.84%
Federated US Gov't Securities........................................ -1.34%
Federated Utility.................................................... 0.94%
Montgomery Emerg Mkt................................................. 63.59%
Montgomery Growth.................................................... 19.89%
Seligman Capital..................................................... N/A
Seligman Communications and Information.............................. N/A
Seligman Global Technology........................................... N/A
Stein Roe Small Company Growth....................................... 46.99%
Strong Int'l Stock................................................... 85.82%
Strong Schafer Value................................................. -3.59%
Transamerica VIF Growth.............................................. N/A
T. Rowe Price Int'l.................................................. 31.37%
Wanger Int'l Small Cap............................................... 124.75%
Wanger US Small Cap.................................................. 24.14%
Warburg Pincus Int'l Equity.......................................... 52.29%
Warburg Pincus Small Co Growth....................................... 67.83%
WRL Alger Agg Growth................................................. N/A
WRL Janus Global..................................................... N/A
WRL Janus Growth..................................................... N/A
WRL JP Morgan Real Est............................................... N/A
WRL LKCM Strategic Tot Rtn........................................... N/A
14
<PAGE>
NON-STANDARDIZED ONE YEAR RETURN
Peoples Benefit 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 Portfolio inception, if during
the relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the historical performance of the Portfolios as if the Policy
were in existence before its inception date (which it was not). After the
Policy's inception date, the 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 Policy Fee, any sales loads or Premium Taxes (if any), which, if
included, would reduce the percentages reported by Peoples Benefit.
NON-STANDARDIZED ONE YEAR RETURN
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 0.75%)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Alliance Growth................................. N/A N/A N/A N/A N/A
Alliance Premier Growth......................... N/A N/A N/A N/A N/A
Alliance Technology............................. N/A N/A N/A N/A N/A
Dreyfus Small Cap Value......................... 28.43% -2.91% 24.64% 24.70% 13.21%
Dreyfus Socially Responsible Growth............. 29.13% 28.43% 27.49% 20.34% 33.58%
DFA Small Value................................. 9.03% -7.31% 29.48% 21.14% N/A
DFA Large Value................................. 3.99% 9.93% 28.27% 17.60% N/A
DFA International Value......................... 21.11% 10.90% -2.96% 6.31% N/A
DFA International Small......................... 17.64% 6.96% -25.64% -0.49% N/A
DFA Short-Term Fixed............................ 3.50% 4.69% 4.90% 4.41% N/A
DFA Global Bond................................. 3.26% 7.43% 6.98% 8.16% N/A
Endeavor Enhanced Index......................... 17.28% 30.41% N/A N/A N/A
Federated American Leaders...................... 5.88% 16.75% 31.35% 20.66% 33.89%
Federated High Income Bond...................... 1.54% 1.93% 12.98% 13.46% 17.83%
Federated Prime Money........................... 3.84% 4.03% 4.16% 3.97% 4.36%
Federated US Gov't Securities................... -1.34% 6.86% 7.77% 3.42% 7.43%
Federated Utility............................... 0.94% 13.10% 25.69% 10.73% 23.76%
Montgomery Emerg Mkt............................ 63.59% -38.00% -1.32% N/A N/A
Montgomery Growth............................... 19.89% 2.16% 27.61% N/A N/A
Seligman Capital................................ 52.22% 21.29% 20.41% 13.66% 26.24%
Seligman Communications and Information......... 84.49% 35.48% 21.32% 8.00% 37.54%
Seligman Global Technology...................... 117.27% 35.80% 18.64% N/A N/A
Stein Roe Small Company Growth.................. 46.99% 17.92% N/A N/A N/A
Strong Int'l Stock.............................. 85.82% -5.49% -14.17% 9.56% N/A
Strong Schafer Value............................ -3.59% 1.40% N/A N/A N/A
Transamerica VIF Growth......................... 31.37% 14.58% 1.85% 14.38% 9.55%
T. Rowe Price Int'l............................. 31.37% 14.58% 1.85% 14.38% 9.55%
Wanger Int'l Small Cap.......................... 124.75% 15.46% -2.20% 31.02% N/A
Wanger US Small Cap............................. 24.14% 7.87% 28.45% 45.49% N/A
Warburg Pincus Int'l Equity..................... 52.29% 4.56% -2.99% 9.21% N/A
Warburg Pincus Small Co Growth.................. 67.83% -3.58% 14.78% 13.06% N/A
WRL Alger Agg Growth............................ 67.78% 47.61% 23.00% 9.62% 37.01%
WRL Janus Global................................ 69.84% 29.06% 17.88% 26.80% 22.16%
WRL Janus Growth................................ 58.50% 63.29% 16.68% 17.09% 46.05%
WRL JP Morgan Real Est.......................... -4.54% N/A N/A N/A N/A
WRL LKCM Strategic Tot Rtn...................... 11.24% 8.80% 20.87% 14.14% 23.74%
</TABLE>
15
<PAGE>
NON-STANDARDIZED ADJUSTED HISTORICAL CUMULATIVE RETURN AND NON-STANDARDIZED
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURN
Peoples Benefit may show Non-Standardized Adjusted Historical Cumulative Return
and Non-Standardized Adjusted Historical Average Annual Total Return, calculated
on the basis of the historical performance of the Portfolios (calculated
beginning from the end of the year of inception for each Portfolio) and may
assume the Policy was in existence prior to its inception date (which it was
not). After the Policy's inception date, the calculations will reflect actual
Accumulation Unit Values. These returns are based on specified purchase payment
patterns which produce the resulting Accumulated Values. They reflect a
deduction for the Separate Account expenses and Portfolio expenses. However,
they do not include the Annual Policy Fee, any sales loads or Premium Taxes (if
any), which, if included, would reduce the percentages reported.
The Non-Standardized Adjusted Historical Cumulative Return for a subaccount is
the effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period.
The Non-Standardized Adjusted Historical Average Annual Total Return for a
subaccount is the effective annual compounded rate of return that would have
produced the ending Accumulated Value over the stated period had the performance
remained constant throughout.
ADJUSTED HISTORICAL CUMULATIVE RETURNS FOR PERIODS ENDING 12/31/99
(BASED ON SINGLE INITIAL PURCHASE)
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 0.75%)
Total
Since Fund
Inception
1 Year 3 Year Year-End
------ ------ ---------
Alliance Growth.......................... N/A N/A 24.48%
Alliance Premier Growth.................. N/A N/A 12.72%
Alliance Technology...................... N/A N/A 42.21%
Dreyfus Small Cap Value.................. 28.43% 55.42% 137.94%
Dreyfus Socially Responsible Growth...... 29.13% 111.44% 266.91%
DFA Small Value.......................... 9.03% 30.86% 55.74%
DFA Large Value.......................... 3.99% 46.62% 107.06%
DFA International Value.................. 21.11% 30.34% 45.97%
DFA International Small.................. 17.64% -6.43% -6.23%
DFA Short-Term Fixed..................... 3.50% 13.66% 20.00%
DFA Global Bond.......................... 3.26% 18.68% 44.73%
Endeavor Enhanced Index.................. 17.28% N/A 87.05%
Federated American Leaders............... 5.88% 62.36% 158.74%
Federated High Income Bond............... 1.54% 16.94% 49.74%
Federated Prime Money.................... 3.84% 12.52% 22.52%
Federated US Gov't Securities............ -1.34% 13.61% 28.66%
Federated Utility........................ 0.94% 43.49% 88.79%
Montgomery Emerg Mkt..................... 63.59% 0.09% 5.09%
Montgomery Growth........................ 19.89% 56.30% 97.72%
Seligman Capital......................... 52.22% 122.32% 523.67%
Seligman Communication and Information... 84.49% 203.25% 369.51%
Seligman Global Technology...............117.27% 250.06% 259.46%
Strong Int'l Stock....................... 85.82% 50.74% 69.22%
16
<PAGE>
Strong Schafer Value..................... -3.59% N/A -1.59%
Transamerica VIF Growth.................. 36.78% 182.94% 3468.84%
T. Rowe Price Int'l...................... 31.37% 53.31% 111.71%
Wanger Int'l Small Cap...................124.75% 153.79% 352.96%
Wanger US Small Cap...................... 24.14% 72.00% 189.61%
Warburg Pincus Int'l Equity.............. 52.29% 54.59% 80.41%
Warburg Pincus Small Co Growth........... 67.83% 85.74% 161.76%
WRL Alger Agg Growth..................... 67.78% 204.61% 348.93%
WRL Janus Global......................... 69.84% 158.38% 442.25%
WRL Janus Growth......................... 58.50% 201.97% 1382.77%
WRL JP Morgan Real Est................... -4.54% N/A -19.16%
WRL LKCM Strategic Tot Rtn............... 11.24% 46.29% 130.08%
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
(BASED ON SINGLE INITIAL PURCHASE)
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 0.75%)
Total
Since Fund
Inception
1 Year 3 Year Year-End
------ ------ ---------
Alliance Growth......................... N/A N/A 24.48%
Alliance Premier Growth................. N/A N/A 12.72%
Alliance Technology..................... N/A N/A 42.21%
Dreyfus Small Cap Value................. 28.43% 15.83% 13.89%
Dreyfus Socially Responsible Growth..... 29.13% 28.35% 23.18%
DFA Small Value......................... 9.03% 9.38% 10.97%
DFA Large Value......................... 3.99% 13.61% 15.77%
DFA International Value................. 21.11% 9.23% 9.29%
DFA International Small................. 17.64% -2.19% -1.50%
DFA Short-Term Fixed.................... 3.50% 4.36% 4.38%
DFA Global Bond......................... 3.26% 5.88% 7.72%
Endeavor Enhanced Index................. 17.28% N/A 26.45%
Federated American Leaders.............. 5.88% 17.53% 17.51%
Federated High Income Bond.............. 1.54% 5.36% 7.16%
Federated Prime Money................... 3.84% 4.01% 4.05%
Federated US Gov't Securities........... -1.34% 4.35% 4.47%
Federated Utility....................... 0.94% 12.79% 11.39%
Montgomery Emerg Mkt.................... 63.59% 0.03% 1.28%
Montgomery Growth....................... 19.89% 16.05% 19.14%
Seligman Capital........................ 52.22% 30.51% 17.20%
Seligman Communications and Information. 84.49% 44.74% 34.45%
Seligman Global Technology..............117.27% 51.84% 41.73%
Strong Int'l Stock...................... 85.82% 14.66% 13.34%
Strong Schafer Value.................... -3.59% N/A -0.72%
Transamerica VIF Global................. 36.78% 41.44% 20.59%
T. Rowe Price Int'l..................... 31.37% 15.31% 8.96%
Wanger Int'l Small Cap..................124.75% 36.40% 38.23%
Wanger US Small Cap..................... 24.14% 19.82% 25.60%
Warburg Pincus Int'l Equity............. 52.29% 15.60% 13.99%
Warburg Pincus Small Co Growth.......... 67.83% 22.92% 23.80%
17
<PAGE>
WRL Alger Agg Growth.................... 67.78% 44.96% 29.33%
WRL Janus Global........................ 69.84% 37.22% 26.97%
WRL Janus Growth........................ 58.50% 44.54% 22.56%
WRL JP Morgan Real Est.................. -4.54% N/A -11.97%
WRL LKCM Strategic Tot Rtn.............. 11.24% 13.52% 12.96%
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in the
Portfolios based on monthly reinvestment of dividends over a specific period of
time.
HYPOTHETICAL ILLUSTRATIONS
<TABLE>
<CAPTION>
DFA Small Value
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 60,630 21.26% 21.26% 21.26% 12/31/1996 $ 4,000 $ 4,425 21.26% 21.26%
12/31/1997 $ 50,000 $ 78,578 29.60% 25.36% 57.16% 12/31/1997 $ 6,000 $ 7,735 29.60% 26.57%
12/31/1998 $ 50,000 $ 72,910 -7.21% 13.40% 45.82% 12/31/1998 $ 8,000 $ 9,177 -7.21% 9.23%
</TABLE>
<TABLE>
<CAPTION>
DFA Large Value
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 58,858 17.72% 17.72% 17.72% 12/31/1996 $ 4,000 $ 4,354 17.72% 17.72%
12/31/1997 $ 50,000 $ 75,568 28.39% 22.94% 51.14% 12/31/1997 $ 6,000 $ 7,591 28.39% 24.51%
12/31/1998 $ 50,000 $ 83,153 10.04% 18.48% 66.31% 12/31/1998 $ 8,000 $ 10,352 10.04% 17.48%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
DFA International Value
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 53,206 6.41% 6.41% 6.41% 12/31/1996 $ 4,000 $ 4,128 6.41% 6.41%
12/31/1997 $ 50,000 $ 51,681 -2.86% 1.67% 3.36% 12/31/1997 $ 6,000 $ 6,010 -2.86% 0.17%
12/31/1998 $ 50,000 $ 57,372 11.01% 4.69% 14.74% 12/31/1998 $ 8,000 $ 8,672 11.01% 5.40%
</TABLE>
<TABLE>
<CAPTION>
DFA International Small
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 49,804 -0.39% -0.39% -0.39% 12/31/1996 $ 4,000 $ 3,992 -0.39% -0.39%
12/31/1997 $ 50,000 $ 37,073 -25.56% -13.89% -25.85% 12/31/1997 $ 6,000 $ 4,972 -25.56% -18.25%
12/31/1998 $ 50,000 $ 39,693 7.07% -7.41% -20.61% 12/31/1998 $ 8,000 $ 7,323 7.07% -5.87%
</TABLE>
<TABLE>
<CAPTION>
DFA Short-Term Fixed
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 12/31/1995 $ 2,000 $ 2,000
12/31/1996 $ 50,000 $ 52,256 4.51% 4.51% 4.51% 12/31/1996 $ 4,000 $ 4,090 4.51% 4.51%
12/31/1997 $ 50,000 $ 54,871 5.00% 4.76% 9.74% 12/31/1997 $ 6,000 $ 6,295 5.00% 4.84%
12/31/1998 $ 50,000 $ 57,503 4.80% 4.77% 15.01% 12/31/1998 $ 8,000 $ 8,597 4.80% 4.82%
</TABLE>
19
<PAGE>
DFA Global Bond
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 54,135 8.27% 8.27% 8.27% 12/31/1996 $ 4,000 $ 4,165 8.27% 8.27%
12/31/1997 $ 50,000 $ 57,974 7.09% 7.68% 15.95% 12/31/1997 $ 6,000 $ 6,461 7.09% 7.49%
12/31/1998 $ 50,000 $ 62,346 7.54% 7.63% 24.69% 12/31/1998 $ 8,000 $ 8,948 7.54% 7.52%
</TABLE>
Dreyfus Small Cap Value
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1993
December 31, 1993 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1993 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1993 $ 2,000 $ 2,000 N/A N/A
12/31/1994 $ 50,000 $ 48,787 -2.43% -2.43% -2.43% 12/31/1994 $ 4,000 $ 3,951 -2.43% -2.43%
12/31/1995 $ 50,000 $ 55,284 13.32% 5.15% 10.57% 12/31/1995 $ 6,000 $ 6,478 13.32% 7.76%
12/31/1996 $ 50,000 $ 69,010 24.83% 11.34% 38.02% 12/31/1996 $ 8,000 $ 10,086 24.83% 15.68%
12/31/1997 $ 50,000 $ 86,098 24.76% 14.55% 72.20% 12/31/1997 $ 10,000 $ 14,583 24.76% 18.97%
12/31/1998 $ 50,000 $ 83,679 -2.81% 10.85% 67.36% 12/31/1998 $ 12,000 $ 16,174 -2.81% 11.86%
</TABLE>
Endeavor Enhanced Index
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1997
December 31, 1997 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1997 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1997 $ 2,000 $ 2,000 N/A N/A
12/31/1998 $ 50,000 $ 65,269 30.54% 30.54% 30.54% 12/31/1998 $ 4,000 $ 4,611 30.54% 30.54%
</TABLE>
20
<PAGE>
T. Rowe Price International
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1991
December 31, 1991 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1991 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1991 $ 2,000 $ 2,000 N/A N/A
12/31/1992 $ 50,000 $ 47,882 -4.24% -4.24% -4.24% 12/31/1992 $ 4,000 $ 3,915 -4.24% -4.24%
12/31/1993 $ 50,000 $ 56,367 17.72% 6.18% 12.73% 12/31/1993 $ 6,000 $ 6,609 17.72% 9.83%
12/31/1994 $ 50,000 $ 52,825 -6.29% 1.85% 5.65% 12/31/1994 $ 8,000 $ 8,194 -6.29% 1.60%
12/31/1995 $ 50,000 $ 57,925 9.66% 3.75% 15.85% 12/31/1995 $ 10,000 $ 10,985 9.66% 4.70%
12/31/1996 $ 50,000 $ 66,320 14.49% 5.81% 32.64% 12/31/1996 $ 12,000 $ 14,577 14.49% 7.74%
12/31/1997 $ 50,000 $ 67,614 1.95% 5.16% 35.23% 12/31/1997 $ 14,000 $ 16,861 1.95% 6.14%
12/31/1998 $ 50,000 $ 77,550 14.69% 6.47% 55.10% 12/31/1998 $ 16,000 $ 21,339 14.69% 8.09%
</TABLE>
Federated American Leaders Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 67,009 34.02% 34.02% 34.02% 12/31/1995 $ 4,000 $ 4,680 34.02% 34.02%
12/31/1996 $ 50,000 $ 80,936 20.78% 27.23% 61.87% 12/31/1996 $ 6,000 $ 7,653 20.78% 25.40%
12/31/1997 $ 50,000 $ 106,414 31.48% 28.63% 112.83% 12/31/1997 $ 8,000 $ 12,062 31.48% 28.18%
12/31/1998 $ 50,000 $ 124,356 16.86% 25.58% 148.71% 12/31/1998 $ 10,000 $ 16,096 16.86% 24.00%
</TABLE>
Federated High Income Bond Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 58,975 17.95% 17.95% 17.95% 12/31/1995 $ 4,000 $ 4,359 17.95% 17.95%
12/31/1996 $ 50,000 $ 66,977 13.57% 15.74% 33.95% 12/31/1996 $ 6,000 $ 6,950 13.57% 15.08%
12/31/1997 $ 50,000 $ 75,747 13.09% 14.85% 51.49% 12/31/1997 $ 8,000 $ 9,861 13.09% 14.13%
12/31/1998 $ 50,000 $ 77,288 2.03% 11.50% 54.58% 12/31/1998 $ 10,000 $ 12,061 2.03% 9.38%
</TABLE>
21
<PAGE>
Federated Prime Money Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 52,232 4.46% 4.46% 4.46% 12/31/1995 $ 4,000 $ 4,089 4.46% 4.46%
12/31/1996 $ 50,000 $ 54,361 4.08% 4.27% 8.72% 12/31/1996 $ 6,000 $ 6,256 4.08% 4.21%
12/31/1997 $ 50,000 $ 56,679 4.26% 4.27% 13.36% 12/31/1997 $ 8,000 $ 8,523 4.26% 4.24%
12/31/1998 $ 50,000 $ 59,022 4.13% 4.23% 18.04% 12/31/1998 $ 10,000 $ 10,875 4.13% 4.20%
</TABLE>
Federated U.S. Government Securities
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 53,766 7.53% 7.53% 7.53% 12/31/1995 $ 4,000 $ 4,151 7.53% 7.53%
12/31/1996 $ 50,000 $ 55,660 3.52% 5.51% 11.32% 12/31/1996 $ 6,000 $ 6,297 3.52% 4.87%
12/31/1997 $ 50,000 $ 60,044 7.88% 6.29% 20.09% 12/31/1997 $ 8,000 $ 8,793 7.88% 6.33%
12/31/1998 $ 50,000 $ 64,224 6.96% 6.46% 28.45% 12/31/1998 $ 10,000 $ 11,405 6.96% 6.58%
</TABLE>
Federated Utility Portfolio
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 61,942 23.88% 23.88% 23.88% 12/31/1995 $ 4,000 $ 4,478 23.88% 23.88%
12/31/1996 $ 50,000 $ 68,654 10.84% 17.18% 37.31% 12/31/1996 $ 6,000 $ 6,963 10.84% 15.27%
12/31/1997 $ 50,000 $ 86,377 25.81% 19.99% 72.75% 12/31/1997 $ 8,000 $ 10,760 25.81% 20.16%
12/31/1998 $ 50,000 $ 97,789 13.21% 18.26% 95.58% 12/31/1998 $ 10,000 $ 14,182 13.21% 17.55%
</TABLE>
22
<PAGE>
Montgomery Growth
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1996
December 31, 1996 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1996 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1996 $ 2,000 $ 2,000 N/A N/A
12/31/1997 $ 50,000 $ 63,869 27.74% 27.74% 27.74% 12/31/1997 $ 4,000 $ 4,555 27.74% 27.74%
12/31/1998 $ 50,000 $ 65,314 2.26% 14.29% 30.63% 12/31/1998 $ 6,000 $ 6,658 2.26% 10.59%
</TABLE>
Montgomery Emerging Markets
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1996
December 31, 1996 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1996 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1996 $ 2,000 $ 2,000 N/A N/A
12/31/1997 $ 50,000 $ 49,388 -1.22% -1.22% -1.22% 12/31/1997 $ 4,000 $ 3,976 -1.22% -1.22%
12/31/1998 $ 50,000 $ 30,653 -37.93% -21.70% -38.69% 12/31/1998 $ 6,000 $ 4,467 -37.93% -28.19%
</TABLE>
Strong International Stock
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 54,835 9.67% 9.67% 9.67% 12/31/1996 $ 4,000 $ 4,193 9.67% 9.67%
12/31/1997 $ 50,000 $ 47,115 -14.08% -2.93% -5.77% 12/31/1997 $ 6,000 $ 5,603 -14.08% -6.77%
12/31/1998 $ 50,000 $ 44,574 -5.39% -3.76% -10.85% 12/31/1998 $ 8,000 $ 7,301 -5.39% -6.07%
</TABLE>
23
<PAGE>
Strong Schafer Value
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1997
December 31, 1997 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1997 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1997 $ 2,000 $ 2,000 N/A N/A
12/31/1998 $ 50,000 $ 50,751 1.50% 1.50% 1.50% 12/31/1998 $ 4,000 $ 4,030 1.50% 1.50%
</TABLE>
Wanger U.S. Small Cap Advisor
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 72,815 45.63% 45.63% 45.63% 12/31/1996 $ 4,000 $ 4,913 45.63% 45.63%
12/31/1997 $ 50,000 $ 93,621 28.57% 36.84% 87.24% 12/31/1997 $ 6,000 $ 8,316 28.57% 34.61%
12/31/1998 $ 50,000 $ 101,093 7.98% 26.45% 102.19% 12/31/1998 $ 8,000 $ 10,980 7.98% 21.57%
</TABLE>
Wanger International Small Cap Advisor
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 65,573 31.15% 31.15% 31.15% 12/31/1996 $ 4,000 $ 4,623 31.15% 31.15%
12/31/1997 $ 50,000 $ 64,197 -2.10% 13.31% 28.39% 12/31/1997 $ 6,000 $ 6,526 -2.10% 8.52%
12/31/1998 $ 50,000 $ 74,195 15.58% 14.06% 48.39% 12/31/1998 $ 8,000 $ 9,542 15.58% 11.88%
</TABLE>
24
<PAGE>
Warburg Pincus International Equity
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 54,661 9.32% 9.32% 9.32% 12/31/1996 $ 4,000 $ 4,186 9.32% 9.32%
12/31/1997 $ 50,000 $ 53,081 -2.89% 3.04% 6.16% 12/31/1997 $ 6,000 $ 6,065 -2.89% 1.09%
12/31/1998 $ 50,000 $ 55,558 4.67% 3.58% 11.12% 12/31/1998 $ 8,000 $ 8,348 4.67% 2.85%
</TABLE>
Warburg Pincus Small Company Growth
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 56,588 13.18% 13.18% 13.18% 12/31/1996 $ 4,000 $ 4,264 13.18% 13.18%
12/31/1997 $ 50,000 $ 65,015 14.89% 14.03% 30.03% 12/31/1997 $ 6,000 $ 6,898 14.89% 14.29%
12/31/1998 $ 50,000 $ 62,752 -3.48% 7.87% 25.50% 12/31/1998 $ 8,000 $ 8,658 -3.48% 5.30%
</TABLE>
WRL Alger Aggressive Growth
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 68,574 37.15% 37.15% 37.15% 12/31/1995 $ 4,000 $ 4,743 37.15% 37.15%
12/31/1996 $ 50,000 $ 75,249 9.73% 22.68% 50.50% 12/31/1996 $ 6,000 $ 7,205 9.73% 18.89%
12/31/1997 $ 50,000 $ 92,647 23.12% 22.83% 85.29% 12/31/1997 $ 8,000 $ 10,870 23.12% 20.87%
12/31/1998 $ 50,000 $ 136,885 47.75% 28.63% 173.77% 12/31/1998 $ 10,000 $ 18,061 47.75% 29.93%
</TABLE>
25
<PAGE>
WRL J.P. Morgan Real Estate Securities
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1998
December 31, 1998 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1998 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1998 $ 2,000 $ 2,000 N/A N/A
</TABLE>
WRL Janus Global
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1992
December 31, 1992 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1992 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1992 $ 2,000 $ 2,000 N/A N/A
12/31/1993 $ 50,000 $ 67,100 34.20% 34.20% 34.20% 12/31/1993 $ 4,000 $ 4,684 34.20% 34.20%
12/31/1994 $ 50,000 $ 66,835 -0.40% 15.62% 33.67% 12/31/1994 $ 6,000 $ 6,665 -0.40% 10.71%
12/31/1995 $ 50,000 $ 81,724 22.28% 17.79% 63.45% 12/31/1995 $ 8,000 $ 10,150 22.28% 16.12%
12/31/1996 $ 50,000 $ 103,726 26.92% 20.01% 107.45% 12/31/1996 $ 10,000 $ 14,883 26.92% 20.00%
12/31/1997 $ 50,000 $ 122,389 17.99% 19.61% 144.78% 12/31/1997 $ 12,000 $ 19,561 17.99% 19.40%
12/31/1998 $ 50,000 $ 158,110 29.19% 21.15% 216.22% 12/31/1998 $ 14,000 $ 27,270 29.19% 21.75%
</TABLE>
26
<PAGE>
WRL Janus Growth
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1986
December 31, 1986 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1986 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1986 $ 2,000 $ 2,000 N/A N/A
12/31/1987 $ 50,000 $ 55,090 10.18% 10.18% 10.18% 12/31/1987 $ 4,000 $ 4,204 10.18% 10.18%
12/31/1988 $ 50,000 $ 64,931 17.86% 13.96% 29.86% 12/31/1988 $ 6,000 $ 6,954 17.86% 15.14%
12/31/1989 $ 50,000 $ 94,873 46.11% 23.80% 89.75% 12/31/1989 $ 8,000 $ 12,161 46.11% 28.77%
12/31/1990 $ 50,000 $ 94,050 -0.87% 17.11% 88.10% 12/31/1990 $ 10,000 $ 14,056 -0.87% 17.10%
12/31/1991 $ 50,000 $ 149,350 58.80% 24.46% 198.70% 12/31/1991 $ 12,000 $ 24,321 58.80% 28.08%
12/31/1992 $ 50,000 $ 151,857 1.68% 20.34% 203.71% 12/31/1992 $ 14,000 $ 26,729 1.68% 21.10%
12/31/1993 $ 50,000 $ 156,890 3.31% 17.75% 213.78% 12/31/1993 $ 16,000 $ 29,615 3.31% 17.06%
12/31/1994 $ 50,000 $ 142,916 -8.91% 14.03% 185.83% 12/31/1994 $ 18,000 $ 28,977 -8.91% 11.54%
12/31/1995 $ 50,000 $ 208,939 46.20% 17.22% 317.88% 12/31/1995 $ 20,000 $ 44,364 46.20% 16.81%
12/31/1996 $ 50,000 $ 244,887 17.21% 17.22% 389.77% 12/31/1996 $ 22,000 $ 53,996 17.21% 16.87%
12/31/1997 $ 50,000 $ 286,009 16.79% 17.18% 472.02% 12/31/1997 $ 24,000 $ 65,063 16.79% 16.86%
12/31/1998 $ 50,000 $ 467,470 63.45% 20.48% 834.94% 12/31/1998 $ 26,000 $ 108,344 63.45% 21.59%
</TABLE>
WRL LKCM Strategic Total Return
<TABLE>
<CAPTION>
$2,000 Purchase
$50,000 Single Purchase Payment Made Payment Made December 31, 1993
December 31, 1993 and Yearly December 31st Thereafter
----------------------------------------- --------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1993 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1993 $ 2,000 $ 2,000 N/A N/A
12/31/1994 $ 50,000 $ 49,411 -1.18% -1.18% -1.18% 12/31/1994 $ 4,000 $ 3,976 -1.18% -1.18%
12/31/1995 $ 50,000 $ 61,203 23.86% 10.64% 22.41% 12/31/1995 $ 6,000 $ 6,925 23.86% 14.70%
12/31/1996 $ 50,000 $ 69,930 14.26% 11.83% 39.86% 12/31/1996 $ 8,000 $ 9,913 14.26% 14.49%
12/31/1997 $ 50,000 $ 84,668 21.08% 14.07% 69.34% 12/31/1997 $ 10,000 $ 14,002 21.08% 16.90%
12/31/1998 $ 50,000 $ 92,231 8.93% 13.03% 84.46% 12/31/1998 $ 12,000 $ 17,253 8.93% 14.42%
</TABLE>
Individualized Computer Generated Illustrations
Peoples Benefit may from time to time use computer-based software available
through Morningstar, CDA/Wiesnberger and/or other firms to provide registered
representatives and existing and/or potential owners of Policies with
individualized hypothetical performance illustrations for some or all of the
Portfolios. Such illustrations may include, without limitation, graphs, bar
charts and other types of formats presenting the following information: (i) the
historical results of a hypothetical investment in a single Portfolio; (ii) the
historical fluctuation of the value of a single Portfolio (actual and
hypothetical); (iii) the historical results of a hypothetical investment in more
than one Portfolio; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Portfolios; (v) the
historical performance of two or more market indices in comparison to a single
Portfolio or a group of Portfolios; (vi) a market risk/reward scatter chart
showing the historical risk/reward relationship of one or more mutual funds or
27
<PAGE>
Portfolios to one or more indices and a broad category of similar anonymous
variable annuity subaccounts; and (vii) Portfolio data sheets showing various
information about one or more Portfolios (such as information concerning total
return for various periods, fees and expenses, standard deviation, alpha and
beta, investment objective, inception date and net assets).
PERFORMANCE COMPARISONS
Performance information for any subaccount reflects only the performance of a
hypothetical Policy 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 in which the subaccount
invests, and the market conditions during the given 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, Inc. as
determined by one or more of the ratings services listed below, 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 person 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 Policy (or returns in general) on a tax-deferred basis (assuming
one or more tax rates) with the return on a taxable basis.
Each subaccount's performance depends on, among other things, the performance of
the underlying Portfolio which, in turn, depends upon such variables as:
. quality of underlying investments;
. average maturity of underlying investments;
. type of instruments in which the Portfolio is invested;
. changes in interest rates and market value of underlying investments;
. changes in Portfolio expenses; and
. the relative amount of the Portfolio's cash flow.
From time to time, we may advertise the performance of the subaccounts and the
underlying Portfolios as compared to similar funds or portfolios using certain
indexes, reporting services and financial publications, and we may advertise
rankings or ratings issued by certain services and/or other institutions. These
may include, but are not limited to, the following:
. Dow Jones Industrial Average ("DJIA"), an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.
. Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, which can be used to compare
to the total returns of funds whose portfolios are invested primarily
in common stocks. In addition, the Standard & Poor's index assumes
reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated into the Standard & Poor's figures.
28
<PAGE>
. Lipper Analytical Services, Inc., a reporting service that ranks funds
in various fund categories by making comparative calculations using
total return. Total return assumes the reinvestment of all income
dividends and capital gains distributions, if any. From time to time,
we may quote the Portfolios' Lipper rankings in various fund
categories in advertising and sales literature.
. Bank Rate Monitor National Index, Miami Beach, Florida, a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of
the largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution, and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
. Shearson Lehman Government/Corporate (Total) Index, an index comprised
of approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed-rate, non-convertible
domestic bonds of companies in industry, public utilities and finance.
The average maturity of these bonds approximates nine years. Tracked
by Shearson Lehman, Inc., the index calculates total returns for one
month, three month, twelve month, and ten year periods and
year-to-date.
. Shearson Lehman Government/Corporate (Long-Term) Index, an index
composed of the same types of issues as defined above. However, the
average maturity of the bonds included in this index approximates 22
years.
. Shearson Lehman Government Index, an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government,
or any agency thereof, or any quasi-federal corporation and of
corporate debt guaranteed by the U.S. government. Only notes and bonds
with a minimum outstanding principal of $1 million and a minimum
maturity of one year are included.
. Morningstar, Inc., an independent rating service that publishes the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
. Money, a monthly magazine that regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Fund will quote its Money
ranking in advertising and sales literature.
. Standard & Poor's Utility Index, an unmanaged index of common stocks
from forty different utilities. This index indicates daily changes in
the price of the stocks. The index also provides figures for changes
in price from the beginning of the year to date, and for a twelve
month period.
. Dow Jones Utility Index, an unmanaged index comprised of fifteen
utility stocks that tracks changes in price daily and over a six month
period. The index also provides the highs and lows for each of the
past five years.
. The Consumer Price Index, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such companies.
Unmanaged indexes may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
29
<PAGE>
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by Peoples Benefit. The assets
are kept physically segregated and held separate and apart from Peoples
Benefit's general account assets. The general account contains all of the assets
of Peoples Benefit. Records are maintained of all purchases and redemptions of
eligible Portfolio shares held by each of the subaccounts and the general
account.
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 Peoples Benefit or other
insurance companies. Although Peoples Benefit 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. See the Fund's prospectus for more
information.
PEOPLES BENEFIT
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.
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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary does not constitute tax advice. It is a general discussion
of certain of the expected federal income tax consequences of investment in and
distributions with respect to a policy, based on the Code, as amended, proposed
and final Treasury Regulations thereunder, judicial authority, and current
administrative rulings and practice. This summary discusses only certain federal
income tax consequences to "United States Persons," and does not discuss state,
local, or foreign tax consequences. United States Persons means citizens or
residents of the United States, domestic corporations, domestic partnerships and
trusts or estates that are subject to United States federal income tax
regardless of the source of their income.
30
<PAGE>
TAX STATUS OF THE POLICY
The following discussion is based on the assumption that the policy qualifies as
an annuity contract for federal income tax purposes.
DISTRIBUTION REQUIREMENTS
The Code requires that nonqualified policies contain specific provisions for
distribution of policy proceeds upon the death of any owner. In order to be
treated as an annuity contract for federal income tax purposes, the Code
requires that such policies provide that if any owner dies on or after the
annuity commencement date and before the entire interest in the policy has been
distributed, the remaining portion most be distributed at least as rapidly as
under the method in effect on such owner's death. If any owner dies before the
annuity commencement date, the entire interest in the policy must generally be
distributed within 5 years after such owner's date of death or be used to
purchase an immediate annuity under which payments will begin within one year of
such owner's death and will be made for the life of the beneficiary or for a
period not extending beyond the life expectancy of the "designated beneficiary"
as defined in section 72(s) of the Code. However, if upon such owner's death
prior to the annuity commencement date, such owner's surviving spouse becomes
the sole new owner, then the policy may be continued with the surviving spouse
as the new owner. Under the policy, the beneficiary is the designated
beneficiary of an owner/annuitant and the successor owner is the designated
beneficiary of an owner who is not the annuitant. If any owner is not a natural
person, then for purposes of these distribution requirements, the primary
annuitant shall be treated as an owner and any death or change of such primary
annuitant shall be treated as an owner and any death or change of such primary
annuitant shall be treated as the death of an owner. The nonqualified policies
contain provisions intended to comply with these requirements of the Code. No
regulations interpreting these requirements of the Code have yet been issued and
thus no assurance can be given that the provisions contained in the policy
satisfy all such Code requirements. The provisions contained in the policy will
be reviewed and modified if necessary to assure that they comply with the Code
requirements when clarified by regulation or otherwise.
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code provides that in order for a variable contract which
is based on a segregated asset account to qualify as an annuity contract under
the Code, the investments made by such account must be "adequately diversified"
in accordance with Treasury regulations. The Treasury regulations issued under
Section 817(h) (Treas. Reg. ss.1.817-5) apply a diversification requirement to
each of the subaccounts. The separate account, through its underlying funds and
their portfolios, intends to comply with the diversification requirements of the
Treasury regulations. Peoples Benefit has entered into agreements with each
underlying fund company which requires the portfolios to be operated in
compliance with the Treasury regulations.
OWNER CONTROL
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their contracts. In those circumstances, income and
gains from the separate account assets would be includable in the variable
annuity contract owner's gross income. Several years ago, the IRS stated in
published rulings that a variable annuity contract owner will be considered the
owner of separate account assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets.
More recently, the Treasury Department announced in connection with the issuance
of regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor (i.e.,
you), rather than the insurance company, to be treated as the owner of the
assets in the account." This announcement also stated that guidance would be
issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the contract are similar to, but different in certain
respects from those described by the IRS in rulings in which it was determined
that contract owners were not owners of separate account assets. For example,
you have the choice of one or more subaccounts in which to allocate purchase
payments and policy values, and may be
31
<PAGE>
able to transfer among these accounts more frequently than in such rulings.
These differences could result in you being treated as the owner of the assets
of the separate account. In addition, Peoples Benefit does not know what
standards will be set forth, if any, in the regulation or rulings that the
Treasury Department has stated it expects to issue. Peoples Benefit therefore
reserves the right to modify the policies as necessary to attempt to prevent you
from being considered the owner of a pro rata share of the assets of the
separate account.
WITHHOLDING
The portion of any distribution under a policy that is includable in gross
income will be subject to federal income tax withholding unless the recipient of
such distribution elects not to have federal income tax withheld. Election forms
will be provided at the time distributions are requested to be made. The
withholding rate varies according to the type of distribution and the owner's
tax status. For qualified policies, "eligible rollover distributions" from
Section 401(a) plans, Section 403(a) annuities, and Section 403(b) tax-sheltered
annuities are subject to mandatory federal income tax withholding of 20%. An
eligible rollover distribution is the taxable portion of any distribution from
such a plan, except certain distributions such as distributions required by the
Code or distributions in a specified annuity form. The 20% withholding does not
apply, however, if the owner chooses a "direct rollover" from the plan to
another tax-qualified plan or IRA. Different withholding requirements may apply
in the case of non-United States persons.
QUALIFIED POLICIES
The qualified policy is designed for use with several types of tax-qualified
retirement plans. The tax rules applicable to participants and beneficiaries in
tax-qualified retirement plans. The tax rules applicable to participants and
beneficiaries in tax-qualified retirement plans vary according to the type of
plan and the terms and conditions of the plan. Special favorable tax treatment
may be available for certain types of contributions and distributions. Adverse
tax consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions); distributions
that do not conform to specified commencement and minimum distribution rules;
and in other specified circumstances. Some retirement plans are subject to
distribution and other requirements that are not incorporated into the policies
or our administration procedures. Owners, participants and beneficiaries are
responsible for determining that contributions, distributions and other
transactions with respect to the policies comply with applicable law.
For qualified plans under Section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year in which the owner (or plan participant reaches age 70 1/2.
Each owner is responsible for requesting distributions under the policy that
satisfy applicable tax rules.
Peoples Benefit makes no attempt to provide more than general information about
use of the policy with the various types of retirement plans. Purchasers of a
policy for use with any retirement plan should consult their legal counsel and
tax adviser regarding the suitability of the policy.
INDIVIDUAL RETIREMENT ANNUITIES
In order to qualify as a traditional individual retirement annuity under Section
408(b) of the Code, a policy must contain certain provisions: (i) the owner must
be the annuitant; (ii) the policy generally is not transferable by the owner,
e.g., the owner may not designate a new owner, designate a contingent owner or
assign the policy as collateral security; (iii) the total Purchase Payments for
any calendar year may not exceed $2,000, except in the case of a rollover amount
or contribution under Section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the
Code; (iv) annuity payments or withdrawals must begin no later than April 1 of
the calendar year following the calendar year in which the annuitant attains age
70 1/2; (v) an annuity payment option with a period certain that will guarantee
annuity payments beyond the life expectancy of the annuitant and the beneficiary
may not be selected; and certain payments of death benefits must be made in the
event the annuitant dies prior to the distribution of the policy value. Policies
intended to qualify as traditional individual retirement annuities under Section
408(b) of the Code contain such provisions. Amounts in the IRA (other than
nondeductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% penalty tax.
32
<PAGE>
No part of the funds for an individual retirement account (including a Roth IRA)
or annuity should be invested in a life insurance contract, but the regulations
thereunder allow such funds to be invested in an annuity contract that provides
a death benefit that equals the greater of the purchase payments paid or the
cash value for the contract. The policy provides an enhanced death benefit that
could exceed the amount of such a permissible death benefit, but it is unclear
to what extent such an enhanced death benefit could disqualify the policy as an
IRA. The Internal Revenue Service has not reviewed the policy for qualification
as an IRA, and has not addressed in a ruling of general applicability whether an
enhanced death benefit provision, such as the provision in the policy, comports
with IRA qualification requirements.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA)
The Roth IRA, under Section 408A of the Code, contains many of the same
provisions as a traditional IRA. However, there are some differences. First, the
contributions are not deductible and must be made in cash or as a rollover or
transfer from another Roth IRA or other IRA. A rollover from or conversion of an
IRA to a Roth IRA may be subject to tax and other special rules may apply to the
rollover or conversion and to distributions attributable thereto. You should
consult a tax adviser before combining any converted amounts with any other Roth
IRA contributions, including any other conversion amounts from other tax years.
The Roth IRA is available to individuals with earned income and whose modified
adjusted gross income is under $110,000 for single filers, $160,000 for married
filing jointly, and $10,000 for married filing separately. The amount per
individual that may be contributed to all IRAs (Roth and traditional) is $2,000.
Secondly, the distributions are taxed differently. The Roth IRA offers tax-free
distributions when made 5 tax years after the first contribution to any Roth IRA
of the individual and made after attaining age 59 1/2, to pay for qualified
first time homebuyer expenses (lifetime maximum of $10,000) or due to death or
disability. All other distributions are subject to income tax when made from
earnings and may be subject to a premature withdrawal penalty tax unless an
exception applies. Unlike the traditional IRA, there are no minimum required
distributions during the owner's lifetime; however, required distributions at
death are generally the same.
SECTION 403(b) PLANS
Under Section 403(b) of the Code, payments made by public school systems and
certain tax exempt organizations to purchase policies for their employees are
excludable from the gross income of the employee, subject to certain
limitations. However, such payments may be subject to FICA (Social Security)
taxes. The policies include a death benefit that in some cases may exceed the
greater of the purchase payments or the policy value. The death benefit could be
characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity under section 403(b). Because the death benefit may exceed
this limitation, employers using the policies in connection with such plans
should consult their tax adviser. Additionally, in accordance with the
requirements of the Code, Section 403(b) annuities generally may not permit
distribution of (i) elective contributions made in years beginning after
December 31, 1988, and (ii) earnings on those contributions and (iii) earnings
on amounts attributed to elective contributions held as of the end of the last
year beginning before January 1, 1989. Distributions of such amounts will be
allowed only upon the death of the employee, on or after attainment of age 59
1/2, separation from service, disability, or financial hardship, except that
income attributable to elective contributions may not be distributed in the case
of hardship.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of retirement plans for employees and self-employed individuals to
establish qualified plans for themselves and their employees. Such retirement
plans may permit the purchase of the policies to accumulate retirement savings.
Adverse tax consequences to the plan, the participant or both may result if the
policy is assigned or transferred to any individual as a means to provide
benefit payments. The policies include a death benefit that in some cases may
exceed the greater of the purchase payments or the policy value. The death
benefit could be characterized as an incidental benefit, the amount of which is
limited in a pension or profit sharing plan. Because the death benefit may
exceed this limitation, employers using the policies in connection with such
plans should consult their tax adviser.
33
<PAGE>
DEFERRED COMPENSATION PLANS
Section 457 of the Code, while not actually providing for a qualified plan as
that term is normally used, provides for certain deferred compensation plans
with respect to service for state governments, political sub-divisions,
agencies, instrumentality and certain affiliates of such entities, and tax
exempt organizations. The policies can be used with such plans. Under such plans
a participant may specify the form of investment in which his or her
participation will be made. For non-governmental Section 457 plans, all such
investments, however are owned by, and are subject to, the claims of the general
creditors of the sponsoring employer. Depending on the terms of the particular
plan, a non-government employer may be entitled to draw on deferred amounts for
purposes unrelated to its Section 457 plan obligations. In general, all amounts
received under a Section 457 plan are taxable and are subject to federal income
tax withholding as wages.
NON-NATURAL PERSONS
Pursuant to Section 72(u) of the Code, an annuity contract held by a taxpayer
other than a natural person generally will not be treated as an annuity contract
under the Code; accordingly, an owner who is not a natural person will recognize
as ordinary income for a taxable year the excess of (i) the sum of the policy
value as of the close of the taxable year and all previous distributions under
the policy over (ii) the sum of the Purchase Payments paid for the taxable year
and any prior taxable year and the amounts includable in gross income for any
prior taxable year with respect to the policy. For these purposes, the policy
value at the year-end may have to be increased by any positive excess interest
adjustment, which could result from a full surrender at such time. There is
however, no definitive guidance on the proper tax treatment of excess interest
adjustments, and the owner should contact a competent tax adviser with respect
to the potential tax consequences of an excess interest adjustment.
Notwithstanding the preceding sentences in this paragraph, Section 72(u) of the
Code does not apply to (i) a policy where the nominal owner is not a natural
person but the beneficial owner is a natural person, (ii) a policy acquired by
the estate of a decedent by reason of such decedent's death, (iii) a qualified
policy (other than one qualified under Section 457) or (iv) a single-payment
annuity where the annuity commencement date is no later than one year from the
date of the single Purchase Payment; instead, such policies are taxed as
described above under the heading "Taxation of Annuities."
TAXATION OF PEOPLES BENEFIT
Peoples Benefit 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 Peoples Benefit and its operations form a part of Peoples Benefit,
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 Peoples Benefit. Peoples Benefit reserves the
right to make a deduction for taxes should they be imposed with respect to such
items in the future.
Under present laws, Peoples Benefit will incur state or local taxes in several
states. At the present, Peoples Benefit does not charge the Contract Owner for
these taxes. If there is a change in state or local tax laws, Peoples Benefit
may make charges for such taxes. Peoples Benefit 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.
Peoples Benefit 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
Peoples Benefit incurs. This might become necessary if Peoples Benefit
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 Peoples Benefit's tax status.
If Peoples Benefit should incur federal income taxes attributable to investment
income or capital gains retained as part of the reserves under the Policies, the
Accumulated Value of the Policy would be correspondingly adjusted by any
provision or charge for such taxes.
34
<PAGE>
STATE REGULATION OF PEOPLES BENEFIT
Peoples Benefit is a stock life insurance company organized under the laws of
Iowa, and is subject to regulation by the Iowa State Department of Insurance. An
annual statement is filed with the Iowa Commissioner of Insurance on or before
March 1st of each year covering the operations and reporting on the financial
condition of Peoples Benefit as of December 31st of the preceding calendar year.
Periodically, the Iowa Commissioner of Insurance examines the financial
condition of Peoples Benefit, including the liabilities and reserves of the
Separate Account.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained by
Peoples Benefit. As presently required by the Investment Company Act of 1940 and
regulations promulgated thereunder, Peoples Benefit will mail to all Policy
Owners at their last known address of record, at least semi-annually, reports
containing such information as may be required under that Act or by any other
applicable law or regulation. Policy Owners will also receive confirmation of
each financial transaction and any other reports required by law or regulation.
DISTRIBUTION OF THE POLICIES
AFSG Securities Corporation ("AFSG"), formerly Providian Securities Corporation,
the principal underwriter of the Policy, is ultimately a wholly-owned subsidiary
of AEGON N.V. AFSG is registered with the SEC under the Securities Exchange Act
of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Commissions and expense allowance payments not to
exceed, in the aggregate, 6.75% of Purchase Payments may be paid to entities
which sell the Policy. Additional payments may be made for other services not
directly related to the sale of the Policy.
The Policy is offered to the public through brokers licensed under the federal
securities laws and state insurance laws that have entered into agreements with
AFSG. The offering of the Policy is continuous and AFSG does not anticipate
discontinuing the offering of the Policy. However, AFSG does reserve the right
to discontinue the offering of the Policy.
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. Peoples Benefit 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
Policy 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 Policy 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.
35
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements of certain subaccounts of the Separate Account
which are available for investment by Advisor's Edge Contract Owners as of
December 31, 1999, and for each of the two years in the period then ended,
including the Report of Independent Auditors thereon, are included in this
Statement of Additional Information.
The audited statutory-basis financial statements of Peoples Benefit as of
December 31, 1999, and 1998, and for each of the three years in the period ended
December 31, 1999, including the Reports of Independent Auditors thereon, are
included in this Statement of Additional Information. They should be
distinguished from the financial statements of the subaccounts of the Separate
Account which are available for investment by Advisor's Edge Contract Owners and
should be considered only as bearing on the ability of Peoples Benefit 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.
36
<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>
Financial Statements
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge
Variable Annuity
Year ended December 31, 1999
with Report of Independent Auditors
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Financial Statements
Year ended December 31, 1999
Contents
Report of Independent Auditors................................................1
Financial Statements
Balance Sheets................................................................2
Statements of Operations.....................................................12
Statements of Changes in Contract Owners' Equity.............................17
Notes to Financial Statements................................................27
<PAGE>
Report of Independent Auditors
The Board of Directors and Contract Owners
of the Advisor's Edge Variable Annuity,
Peoples Benefit Life Insurance Company
We have audited the accompanying balance sheets of certain subaccounts of
Peoples Benefit Life Insurance Company Separate Account V (comprised of the DFA
Small Value, DFA Large Value, DFA International Value, DFA International Small,
DFA Short-Term Fixed, DFA Global Bond, Federated American Leaders Fund II,
Federated Utility Fund II, Federated Prime Money Fund II, Federated High Income
Bond Fund II, Federated Fund for U.S. Government Securities II, Wanger U.S.
Small Cap Advisor, Wanger International Small Cap Advisor, Montgomery Growth,
Montgomery Emerging Markets, Stong International Stock Fund II, Strong Schafer
Value Fund II, T. Rowe Price International Stock, Dreyfus Small Cap Value,
Endeavor Enhanced Inedex, Stein Roe Special Venture Fund Variable Series,
Warburg Pincus International Equity, Warburg Pincus Small Company Growth, WRL
Janus Growth, WRL Janus Global, WRL LKCM Strategic Total Return, WRL Alger
Aggressive Growth, and WRL J.P. Morgan Real Estate Securities subaccounts),
which are available for investment by contract owners of the Advisor's Edge
Variable Annuity, 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 funds' transfer agents. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 V which
are available for investment by contract owners of the Advisor's Edge Variable
Annuity 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 V - Advisor's Edge Variable Annuity
Balance Sheets
December 31, 1999
<TABLE>
<CAPTION>
DFA DFA
DFA Small DFA Large International International
Value Value Value Small
Subaccount Subaccount Subaccount Subaccount
------------- ------------- --------------- --------------
Assets
<S> <C> <C> <C> <C>
Cash $ 2 $ 2 $ 2 $ 1
Investments in mutual funds, at current market
value:
DFA Investment Dimensions Group, Inc.:
DFA Small Value Portfolio 12,098,908 - - -
DFA Large Value Portfolio - 19,624,375 - -
DFA International Value Portfolio - - 15,726,719 -
DFA International Small Portfolio - - - 7,438,563
DFA Short-Term Fixed Portfolio - - - -
DFA Global Bond Portfolio - - - -
The Federated Insurance Series:
Federated American Leaders
Fund II - - - -
Federated Utility Fund II - - - -
Federated Prime Money Fund II - - - -
Federated High Income Bond Fund II - - - -
Federated Fund for U. S. Government
Securities II - - - -
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor - - - -
Wanger International Small Cap Advisor - - - -
The Montgomery Funds III:
Montgomery Growth Portfolio - - - -
Montgomery Emerging Markets Portfolio - - - -
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II - - - -
Strong Schafer Value Fund II - - - -
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio - - - -
Dreyfus Small Cap Value Portfolio - - - -
Endeavor Enhanced Index Portfolio - - - -
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Federated
Federated Federated Fund for
American Federated Federated High Income U. S. Wanger
DFA Short-Term DFA Global Leaders Utility Prime Money Bond Government U. S. Small
Fixed Bond Fund II Fund II Fund II Fund II Securities Cap Advisor
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount II Subaccount Subaccount
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2 $ 1 $ 206 $ - $ 8 $ 142 $ 7 $ -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
12,071,174 - - - - - - -
- 7,557,182 - - - - - -
- - 8,157,588 - - - - -
- - - 1,768,896 - - - -
- - - - 11,720,307 - - -
- - - - - 8,057,926 - -
- - - - - - 6,828,901 -
- - - - - - - 3,993,842
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
</TABLE>
3
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
DFA DFA
DFA Small DFA Large International International
Value Value Value Small
Subaccount Subaccount Subaccount Subaccount
------------- -------------- --------------- --------------
Assets (continued)
Investments in mutual funds, at current market
value (continued):
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable
<S> <C> <C> <C> <C>
Series $ - $ - $ - $ _
Warburg Pincus Trust:
Warburg Pincus International Equity - - - -
Portfolio
Warburg Pincus Small Company Growth
Portfolio - - - -
WRL Series Fund, Inc.:
WRL Janus Growth Portfolio - - - -
WRL Janus Global Portfolio - - - -
WRL LKCM Strategic Total Return Portfolio - - - -
WRL Alger Aggressive Growth Portfolio - - - -
WRL J. P. Morgan Real Estate Securities
Portfolio - - - -
------------- -------------- --------------- --------------
Total investments in mutual funds 12,098,908 19,624,375 15,726,719 7,438,563
------------- -------------- --------------- --------------
Total assets $12,098,910 $19,624,377 $15,726,721 $7,438,564
============= ============== =============== ==============
Liabilities and contract owners' equity
Liabilities:
Contract terminations payable $ $ $ $
- - - -
------------- -------------- --------------- --------------
Total liabilities - - - -
Contract owners' equity:
Deferred annuity contracts terminable by owners 12,098,910 19,624,377 15,726,721 7,438,564
------------- -------------- --------------- --------------
Total liabilities and contract owners' equity $12,098,910 $19,624,377 $15,726,721 $7,438,564
============= ============== =============== ==============
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
Federated
Federated Federated Fund for
American Federated Federated High Income U. S. Wanger
DFA Short-Term DFA Global Leaders Utility Prime Money Bond Government U. S. Small
Fixed Bond Fund II Fund II Fund II Fund II Securities Cap Advisor
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount II Subaccount Subaccount
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ - $ - $ - $ -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
- - - - - - - -
---------------- ------------- ------------- -------------- ------------- ------------- -------------- --------------
12,071,174 7,557,182 8,157,588 1,768,896 11,720,307 8,057,926 6,828,901 3,993,842
---------------- ------------- ------------- -------------- ------------- ------------- -------------- --------------
$12,071,176 $7,557,183 $8,157,794 $1,768,896 $11,720,315 $8,058,068 $6,828,908 $3,993,842
================ ============= ============= ============== ============= ============= ============== ==============
$ $ $ $ $ $ $ $
- - - 7 - - - 46
---------------------------------------------------------------------------------------------------------------------
- - - 7 - - - 46
12,071,176 7,557,183 8,157,794 1,768,889 11,720,315 8,058,068 6,828,908 3,993,796
---------------------------------------------------------------------------------------------------------------------
$12,071,176 $7,557,183 $8,157,794 $1,768,896 $11,720,315 $8,058,068 $6,828,908 $3,993,842
=====================================================================================================================
</TABLE>
5
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
Wanger Strong Strong
International Montgomery International Schafer
Small Cap Montgomery Emerging Stock Value
Advisor Growth Markets Fund II Fund II
Subaccount Subaccount Subaccount Subaccount Subaccount
-------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets (continued)
Cash $ - $ - $ - $ - $ -
Investments in mutual funds, at
current market value:
DFA Investment Dimensions Group,
Inc.:
DFA Small Value Portfolio - - - - -
DFA Large Value Portfolio - - - - -
DFA International Value Portfolio - - - - -
DFA International Small Portfolio - - - - -
DFA Short-Term Fixed Portfolio - - - - -
DFA Global Bond Portfolio - - - - -
The Federated Insurance Series:
Federated American Leaders
Fund II - - - - -
Federated Utility Fund II - - - - -
Federated Prime Money Fund II - - - - -
Federated High Income Bond Fund
II - - - - -
Federated Fund for U. S.
Government Securities II - - - - -
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor - - - - -
Wanger International Small Cap
Advisor 6,642,249 - - - -
The Montgomery Funds III:
Montgomery Growth Portfolio - 1,765,306 - - -
Montgomery Emerging Markets
Portfolio - - 2,423,370 - -
Strong Variable Insurance Funds,
Inc.:
Strong International Stock Fund
II - - - 853,826 -
Strong Schafer Value Fund II - - - - 525,283
Endeavor Series Trust:
T. Rowe Price International
Stock Portfolio - - - - -
Dreyfus Small Cap Value Portfolio - - - - -
Endeavor Enhanced Index Portfolio - - - - -
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Warburg Warburg
Endeavor Stein Roe Pincus Pincus Small
T. Rowe Price Dreyfus Small Enhanced Special Venture International Company
International Cap Value Index Fund Variable Equity Growth
Stock Subaccount Subaccount Subaccount Series Subaccount Subaccount Subaccount
------------------ ---------------- -------------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ - $ - $ - $ - $ - $ -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
5,078,345 - - - - -
- 2,339,676 - - - -
- - 6,656,089 - - -
</TABLE>
7
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
Wanger Strong Strong
International Montgomery International Schafer
Small Cap Montgomery Emerging Stock Value
Advisor Growth Markets Fund II Fund II
Subaccount Subaccount Subaccount Subaccount Subaccount
--------------- -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Assets (continued)
Investments in mutual funds, at current
market value (continued):
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund,
Variable Series $ - $ - $ - $ - $ -
Warburg Pincus Trust:
Warburg Pincus International Equity
Portfolio - - - - -
Warburg Pincus Small Company Growth
Portfolio - - - - -
WRL Series Fund, Inc.:
WRL Janus Growth Portfolio - - - - -
WRL Janus Global Portfolio - - - - -
WRLK LKCM Strategic Total Return
Portfolio - - - - -
WRL Alger Aggressive Growth Portfolio - - - - -
WRL J. P. Morgan Real Estate
Securities Portfolio - - - - -
--------------- -------------- -------------- --------------- -------------
Total investments in mutual funds 6,642,249 1,765,306 2,423,370 853,826 525,283
--------------- -------------- -------------- --------------- -------------
Total assets $6,642,249 $1,765,306 $2,423,370 $853,826 $525,283
=============== ============== ============== =============== =============
Liabilities and contract owners' equity
Liabilities:
Contract terminations payable $ $ $ $ 8 $
74 13 19 6
--------------- -------------- -------------- --------------- -------------
Total liabilities 74 13 19 8 6
Contract owners' equity:
Deferred annuity contracts terminable by
owners 6,642,175 1,765,293 2,423,351 853,818 525,277
--------------- -------------- -------------- --------------- -------------
Total liabilities and contract owners'
equity $6,642,249 $1,765,306 $2,423,370 $853,826 $525,283
=============== ============== ============== =============== =============
</TABLE>
See accompanying notes.
8
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Warburg Warburg
T. Rowe Price Endeavor Special Venture Pincus Pincus Small
International Dreyfus Small Enhanced Fund Variable International Company
Stock Cap Value Index Series Equity Growth
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------------- ---------------- -------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C> <C>
$ - $ - $ - $175,606 $ - $ -
- - - - 2,165,506 -
- - - - - 5,896,657
- - - - - -
- - - - - -
- - - - - -
- - - - - -
- - - - - -
------------------- ---------------- -------------- ------------------ ---------------- ---------------
5,078,345 2,339,676 6,656,089 175,606 2,165,506 5,896,657
------------------- ---------------- -------------- ------------------ ---------------- ---------------
$5,078,345 $2,339,676 $6,656,089 $175,606 $2,165,506 $5,896,657
=================== ================ ============== ================== ================ ===============
$ 33 $ 24 $ $ 1 $ 14 $
1 23
------------------- ---------------- -------------- ------------------ ---------------- ---------------
33 24 1 1 14 23
5,078,312 2,339,652 6,656,088 175,605 2,165,492 5,896,634
------------------- ---------------- -------------- ------------------ ---------------- ---------------
$5,078,345 $2,339,676 $6,656,089 $175,606 $2,165,506 $5,896,657
=================== ================ ============== ================== ================ ===============
</TABLE>
9
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
WRL J. P.
WRL LKCM WRL Alger Morgan Real
WRL Janus WRL Janus Strategic Aggressive Estate
Growth Global Total Return Growth Securities
Subaccount Subaccount Subaccount Subaccount Subaccount
-------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets (continued)
Cash $ 6 $ 2 $ - $ - $ -
Investments in mutual funds, at
current market value:
DFA Investment Dimensions Group,
Inc.:
DFA Small Value Portfolio - - - - -
DFA Large Value Portfolio - - - - -
DFA International Value Portfolio - - - - -
DFA International Small Portfolio - - - - -
DFA Short-Term Fixed Portfolio - - - - -
DFA Global Bond Portfolio - - - - -
The Federated Insurance Series:
Federated American Leaders
Fund II - - - - -
Federated Utility Fund II - - - - -
Federated Prime Money Fund II - - - - -
Federated High Income Bond Fund
II - - - - -
Federated Fund for U. S.
Government Securities II - - - - -
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor - - - - -
Wanger International Small Cap
Advisor - - - - -
The Montgomery Funds III:
Montgomery Growth Portfolio - - - - -
Montgomery Emerging Markets
Portfolio - - - - -
Strong Variable Insurance Funds,
Inc.:
Strong International Stock Fund - - - - -
II
Strong Schafer Value Fund II - - - - -
Endeavor Series Trust:
T. Rowe Price International
Stock Portfolio - - - - -
Dreyfus Small Cap Value Portfolio
- - - - -
Endeavor Enhanced Index Portfolio
- - - - -
</TABLE>
10
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
WRL J. P.
WRL LKCM WRL Alger Morgan Real
WRL Janus WRL Janus Strategic Aggressive Estate
Growth Global Total Return Growth Securities
Subaccount Subaccount Subaccount Subaccount Subaccount
--------------- -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Assets (continued)
Investments in mutual funds, at current
market value (continued):
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund,
Variable Series $ - $ - $ - $ - $ -
Warburg Pincus Trust:
Warburg Pincus International Equity
Portfolio - - - - -
Warburg Pincus Small Company Growth
Portfolio - - - - -
WRL Series Fund, Inc.:
WRL Janus Growth Portfolio 3,269,952 - - - -
WRL Janus Global Portfolio - 2,430,348 - - -
WRLK LKCM Strategic Total Return
Portfolio - - 154,943 - -
WRL Alger Aggressive Growth Portfolio - - - 970,789 -
WRL J. P. Morgan Real Estate
Securities Portfolio - - - - 493,409
--------------- -------------- -------------- --------------- -------------
Total investments in mutual funds 3,269,952 2,430,348 154,943 970,789 493,409
--------------- -------------- -------------- --------------- -------------
Total assets $3,269,958 $2,430,350 $154,943 $970,789 $493,409
=============== ============== ============== =============== =============
Liabilities and contract owners' equity Liabilities:
Contract terminations payable $ $ $ $ 2
- - 1 1
--------------- -------------- -------------- --------------- -------------
Total liabilities - - 1 2 1
Contract owners' equity:
Deferred annuity contracts terminable by
owners 3,269,958 2,430,350 154,942 970,787 493,408
--------------- -------------- -------------- --------------- -------------
Total liabilities and contract owners' equity $3,269,958 $2,430,350 $154,943 $970,789 $493,409
=============== ============== ============== =============== =============
</TABLE>
See accompanying notes.
11
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Statements of Operations
Year ended December 31, 1999, except as noted
<TABLE>
<CAPTION>
DFA DFA
DFA Small DFA Large International International
Value Value Value Small
Subaccount Subaccount Subaccount Subaccount
------------- -------------- --------------- --------------
Net investment income (loss) Income:
<S> <C> <C> <C> <C>
Dividends $2,203,537 $3,714,247 $1,296,534 $ 251,826
Expenses:
Administrative, mortality and expense risk
charges 72,369 119,884 87,592 45,873
------------- -------------- --------------- --------------
Net investment income (loss) 2,131,168 3,594,363 1,208,942 205,953
Net realized and unrealized capital gain (loss) from
investments
Net realized capital gain (loss) from sales of
investments:
Proceeds from sales 4,099,417 4,763,934 3,978,500 2,465,534
Cost of investments sold 4,118,585 3,956,561 3,654,864 2,994,675
------------- -------------- --------------- --------------
Net realized capital gain (loss) from sales of
investments (19,168) 807,373 323,636 (529,141)
Net change in unrealized
appreciation/depreciation of investments:
Beginning of the period (118,992) 2,157,682 108,296 (1,955,049)
End of the period (1,300,463) (1,705,378) 1,049,875 (585,879)
------------- -------------- --------------- --------------
Net change in unrealized
appreciation/depreciation of investments (1,181,471) (3,863,060) 941,579 1,369,170
------------- -------------- --------------- --------------
Net realized and unrealized capital gain (loss)
from investments (1,200,639) (3,055,687) 1,265,215 840,029
------------- -------------- --------------- --------------
Increase (decrease) from operations $ 930,529 $ 538,676 $2,474,157 $1,045,982
============= ============== =============== ==============
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
12
<PAGE>
<TABLE>
<CAPTION>
Federated
Federated Federated Fund for
American Federated Prime Federated U. S. Wanger
DFA Short- DFA Global Leaders Utility Money High Income Government U. S. Small
Term Fixed Bond Fund II Fund II Fund II Bond Fund II Securities II Cap Advisor
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------------- ------------- ------------- -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 524,603 $ 416,355 $ 646,745 $ 92,084 $ 402,961 $ 601,167 $ 268,785 $ 323,296
62,406 39,832 50,332 10,431 59,347 51,000 43,090 23,921
---------------- ------------- ------------- -------------- -------------- --------------- -------------- --------------
462,197 376,523 596,413 81,653 343,614 550,167 225,695 299,375
2,995,682 1,865,172 2,964,715 442,973 45,176,066 2,852,936 1,966,826 5,420,586
2,939,382 1,828,054 2,649,796 412,727 45,176,066 2,824,838 1,934,273 5,166,621
---------------- ------------- ------------- -------------- -------------- --------------- -------------- --------------
56,300 37,118 314,919 30,246 - 28,098 32,553 253,965
6,266 12,693 698,724 111,682 - 307,436 184,873 409,747
(183,102) (210,291) 115,060 23,962 - (162,942 (149,668) 607,609
---------------- ------------- ------------- -------------- -------------- --------------- -------------- --------------
(189,368) (222,984) (583,664) (87,720) - (470,378) (334,541) 197,862
---------------- ------------- ------------- -------------- -------------- --------------- -------------- --------------
(133,068) (185,866) (268,745) (57,474) - (442,280) (301,988) 451,827
---------------- ------------- ------------- -------------- -------------- --------------- -------------- --------------
$ 329,129 $ 190,657 $ 327,668 $ 24,179 $ 343,614 $ 107,887 $ (76,293) $ 751,202
================ ============= ============= ============== ============== =============== ============== ==============
</TABLE>
13
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Statements of Operations (continued)
<TABLE>
<CAPTION>
Wanger Strong Strong
International Montgomery International Schafer
Small Cap Montgomery Emerging Stock Value
Advisor Growth Markets Fund II Fund II
Subaccount Subaccount Subaccount Subaccount Subaccount
-------------- --------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Net investment income (loss)
Income:
Dividends $ 53,478 $ 14,495 $ 236 $ 335 $ 39,767
Expenses:
Administrative, mortality and
expense risk charges 26,265 8,293 14,720 1,863 4,393
-------------- --------------- -------------- -------------- ---------------
Net investment income (loss) 27,213 6,202 (14,484) (1,528) 35,374
Net realized and unrealized
capital gain (loss) from
investments
Net realized capital gain (loss) from
sales of investments:
Proceeds from sales 4,742,397 1,205,105 2,866,336 1,189,539 538,079
Cost of investments sold 3,486,714 1,030,062 3,153,391 1,103,863 539,166
-------------- --------------- -------------- -------------- ---------------
Net realized capital gain (loss)
from sales of investments 1,255,683 175,043 (287,055) 85,676 (1,087)
Net change in unrealized
appreciation/depreciation of
investments:
Beginning of the period 193,410 56,866 (823,817) 4,479 8,736
End of the period 2,602,515 158,305 526,959 235,886 (46,666)
-------------- --------------- -------------- -------------- ---------------
Net change in unrealized
appreciation/depreciation of
investments 2,409,105 101,439 1,350,776 231,407 (55,402)
-------------- --------------- -------------- -------------- ---------------
Net realized and unrealized capital
gain (loss) from investments 3,664,788 276,482 1,063,721 317,083 (56,489)
-------------- --------------- -------------- -------------- ---------------
Increase (decrease) from operations $3,692,001 $ 282,684 $1,049,237 $ 315,555 $ (21,115)
============== =============== ============== ============== ===============
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
14
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Warburg Warburg
T. Rowe Price Endeavor Special Venture Pincus Pincus
International Dreyfus Small Enhanced Fund Variable International Small Company
Stock Cap Value Index Series Equity Growth
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------------ ---------------- -------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 30,756 $ 321,266 $ 220,316 $ - $ 18,751 $ 151,083
15,047 16,354 34,281 748 16,924 14,051
------------------ ---------------- -------------- ------------------ ---------------- -----------------
15,709 304,912 186,035 (748) 1,827 137,032
2,630,878 4,033,562 7,894,317 80,215 8,098,642 8,384,558
2,483,499 3,593,374 7,694,278 89,484 7,589,716 7,807,076
------------------ ---------------- -------------- ------------------ ---------------- -----------------
147,379 440,188 200,039 (9,269) 508,926 577,482
48,700 336,080 130,956 (11,012) 32,137 103,897
908,771 253,281 527,947 51,901 412,990 1,659,503
------------------ ---------------- -------------- ------------------ ---------------- -----------------
860,071 (82,799) 396,991 62,913 380,853 1,555,606
------------------ ---------------- -------------- ------------------ ---------------- -----------------
1,007,450 357,389 597,030 53,644 889,779 2,133,088
------------------ ---------------- -------------- ------------------ ---------------- -----------------
$1,023,159 $ 662,301 $ 783,065 $52,896 $ 891,606 $2,270,120
================== ================ ============== ================== ================ =================
</TABLE>
15
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Statements of Operations (continued)
<TABLE>
<CAPTION>
WRL J. P.
WRL LKCM WRL Alger Morgan Real
WRL Janus WRL Janus Strategic Aggressive Estate
Growth Global Total Return Growth Securities
Subaccount (1) Subaccount (1) Subaccount (1) Subaccount (1) Subaccount (1)
---------------- ----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Net investment income (loss)
Income:
Dividends $ 458,267 $121,042 $9,080 $ 86,801 $ 1,625
Expenses:
Administrative, mortality and
expense risk charges 4,372 2,478 241 1,828 1,703
---------------- ----------------- ---------------- ----------------- -----------------
Net investment income (loss) 453,895 118,564 8,839 84,973 (78)
Net realized and unrealized
capital gain (loss) from
investments
Net realized capital gain (loss)
from sales of investments:
Proceeds from sales 1,022,795 258,195 7,255 2,305,507 283,534
Cost of investments sold 857,341 224,240 7,640 2,160,365 299,743
---------------- ----------------- ---------------- ----------------- -----------------
Net realized capital gain (loss)
from sales of investments 165,454 33,955 (385) 145,142 (16,209)
Net change in unrealized
appreciation/depreciation
of investments:
Beginning of the period - - - - -
End of the period (57,358) 339,537 (721) 138,301 (21,136)
---------------- ----------------- ---------------- ----------------- -----------------
Net change in unrealized
appreciation/depreciation of
investments (57,358) 339,537 (721) 138,301 (21,136)
---------------- ----------------- ---------------- ----------------- -----------------
Net realized and unrealized
capital gain (loss) from
investments 108,096 373,492 (1,106) 283,443 (37,345)
---------------- ----------------- ---------------- ----------------- -----------------
Increase (decrease) from operations $ 561,991 $492,056 $7,733 $ 368,416 $ (37,423)
================ ================= ================ ================= =================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
16
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity
Years ended December 31, 1999 and 1998, except as noted
<TABLE>
<CAPTION>
DFA Small Value
Subaccount
----------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Operations:
Net investment income (loss) $ 2,131,168 $ 850,241
Net realized capital gain (loss) (19,168) 483,175
Net change in unrealized appreciation/depreciation of investments (1,181,471) (2,145,040)
-------------- -------------
Increase (decrease) from operations 930,529 (811,624)
Contract transactions:
Net contract purchase payments 1,600,879 175,212
Transfer payments from (to) other subaccounts or general account 421,575 (791,035)
Contract terminations, withdrawals and other deductions (1,675,374) (1,266,157)
-------------- -------------
Increase (decrease) from contract transactions 347,080 (1,881,980)
-------------- -------------
Net increase (decrease) in contract owners' equity 1,277,609 (2,693,604)
Contract owners' equity:
Beginning of the period 10,821,301 13,514,905
-------------- -------------
End of the period $12,098,910 $10,821,301
============== =============
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
17
<PAGE>
<TABLE>
<CAPTION>
DFA Large Value DFA International DFA International DFA Short-Term
Subaccount Value Subaccount Small Subaccount Fixed Subaccount
------------------------------ ---------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---------------- ------------- -------------- ------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,594,363 $ 1,246,452 $ 1,208,942 $ 737,044 $ 205,953 $ 493,187 $ 462,197 $ 365,977
807,373 1,135,827 323,636 316,374 (529,141) (366,673) 56,300 6,016
(3,863,060) (486,233) 941,579 420,817 1,369,170 195,553 (189,368) 7,513
---------------- ------------- -------------- ------------- ------------- ------------ ------------- ------------
538,676 1,896,046 2,474,157 1,474,235 1,045,982 322,067 329,129 379,506
2,621,620 344,009 1,730,786 307,393 1,103,082 172,894 1,665,680 53,000
2,354,329 (1,606,278) 1,491,651 (1,301,885) (178,183) 345,973 2,973,421 (107,740)
(3,099,104) (2,755,463) (2,349,510) (1,476,957) (1,178,045) (896,449) (1,640,579) (1,140,495)
---------------- ------------- -------------- ------------- ------------- ------------ ------------- ------------
1,876,845 (4,017,732) 872,927 (2,471,449) (253,146) (377,582) 2,998,522 (1,195,235)
---------------- ------------- -------------- ------------- ------------- ------------ ------------- ------------
2,415,521 (2,121,686) 3,347,084 (997,214) 792,836 (55,515) 3,327,651 (815,729)
17,208,856 19,330,542 12,379,637 13,376,851 6,645,728 6,701,243 8,743,525 9,559,254
---------------- ------------- -------------- ------------- ------------- ------------ ------------- ------------
$19,624,377 $17,208,856 $15,726,721 $12,379,637 $7,438,564 $6,645,728 $12,071,176 $8,743,525
================ ============= ============== ============= ============= ============ ============= ============
</TABLE>
18
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Federated American Leaders
DFA Global Bond Subaccount Fund II Subaccount
---------------------------- ----------------------------
1999 1998 1999 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 376,523 $ 83,067 $ 596,413 $ 260,940
Net realized capital gain (loss) 37,118 (30,831) 314,919 167,418
Net change in unrealized appreciation/
depreciation of investments (222,984) 303,964 (583,664) 329,153
---------------------------- ----------------------------
Increase (decrease) from operations 190,657 356,200 327,668 757,511
Contract transactions:
Net contract purchase payments 1,266,405 121,522 1,859,152 1,645,371
Transfer payments from (to) other
subaccounts or general account 1,586,017 458,027 1,243,171 402,441
Contract terminations, withdrawals and other
deductions (671,848) (293,098) (1,280,744) (453,099)
---------------------------- ----------------------------
Increase (decrease) from contract transactions 2,180,574 286,451 1,821,579 1,594,713
---------------------------- ----------------------------
Net increase (decrease) in contract owners'
equity 2,371,231 642,651 2,149,247 2,352,224
Contract owners' equity:
Beginning of the period 5,185,952 4,543,301 6,008,547 3,656,323
---------------------------- ----------------------------
End of the period $7,557,183 $5,185,952 $8,157,794 $6,008,547
============================ ============================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
19
<PAGE>
<TABLE>
<CAPTION>
Federated High Federated Fund for
Federated Utility Federated Prime Income Bond U. S. Government
Fund II Subaccount Money Fund II Subaccount Fund II Subaccount Securities II Subaccount
------------------------------ ---------------------------- -------------------------- -------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------------------------ ---------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 81,653 $ 16,731 $ 343,614 $ 210,075 $ 550,167 $ 130,553 $ 225,695 $ 27,899
30,246 54,239 - - 28,098 (54,928) 32,553 168,473
(87,720) 66,301 - - (470,378) 26,226 (334,541) 85,594
------------------------------ ---------------------------- -------------------------- -------------------------
24,179 137,271 343,614 210,075 107,887 101,851 (76,293) 281,966
284,203 638,778 19,805,995 9,381,446 1,221,369 2,147,115 832,973 1,536,923
289,043 259,386 (11,955,395) (4,060,311) 763,749 152,827 1,785,376 928,368
(160,094) (20,907) (4,189,023) (1,365,961) (1,190,323) (840,936) (1,041,560) (364,814)
------------------------------ ---------------------------- -------------------------- -------------------------
413,152 877,257 3,661,577 3,955,174 794,795 1,459,006 1,576,789 2,100,477
------------------------------ ---------------------------- -------------------------- -------------------------
437,331 1,014,528 4,005,191 4,165,249 902,682 1,560,857 1,500,496 2,382,443
1,331,558 317,030 7,715,124 3,549,875 7,155,386 5,594,529 5,328,412 2,945,969
------------------------------ ---------------------------- -------------------------- -------------------------
$1,768,889 $1,331,558 $11,720,315 $7,715,124 $8,058,068 $7,155,386 $6,828,908 $5,328,412
============================== ============================ ========================== =========================
</TABLE>
20
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Wanger U. S. Small Wanger International Small
Cap Advisor Subaccount Cap Advisor Subaccount
---------------------------- ----------------------------
1999 1998 1999 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 299,375 $ 223,275 $ 27,213 $ 13,265
Net realized capital gain (loss) 253,965 (568,125) 1,255,683 139,728
Net change in unrealized appreciation/
depreciation of investments 197,862 321,134 2,409,105 307,701
---------------------------- ----------------------------
Increase (decrease) from operations 751,202 (23,716) 3,692,001 460,694
Contract transactions:
Net contract purchase payments 317,091 522,241 446,270 746,308
Transfer payments from (to) other
subaccounts or general account (65,765) (1,625,694) (106,658) 125,553
Contract terminations, withdrawals and other
deductions (550,032) (317,744) (528,044) (292,741)
---------------------------- ----------------------------
Increase (decrease) from contract transactions (298,706) (1,421,197) (188,432) 579,120
---------------------------- ----------------------------
Net increase (decrease) in contract owners'
equity 452,496 (1,444,913) 3,503,569 1,039,814
Contract owners' equity:
Beginning of the period 3,541,300 4,986,213 3,138,606 2,098,792
---------------------------- ----------------------------
End of the period $3,993,796 $3,541,300 $6,642,175 $3,138,606
============================ ============================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
21
<PAGE>
<TABLE>
<CAPTION>
Montgomery Strong International Strong Schafer
Montgomery Growth Subaccount Emerging Markets Subaccount Stock Fund II Subaccount Value Fund II Subaccount
------------------------------ ---------------------------- -------------------------- -------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------------------------ ---------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 6,202 $ 1,840 $ (14,484) $ (11,406) $ (1,528) $ 486 $ 35,374 $ (883)
175,043 28,025 (287,055) (661,808) 85,676 (12,005) (1,087) (111)
101,439 8,962 1,350,776 (463,611) 231,407 12,058 (55,402) 4,788
------------------------------ ---------------------------- -------------------------- -------------------------
282,684 38,827 1,049,237 (1,136,825) 315,555 539 (21,115) 3,794
614,882 238,717 387,353 924,121 129,402 37,483 170,200 121,860
(142,254) (227,901) (431,580) 163,760 332,606 55,323 (238,589) 301,820
(127,636) (147,587) (540,954) (638,018) (63,955) (11,855) (18,748) (2,213)
------------------------------ ---------------------------- -------------------------- -------------------------
344,992 (136,771) (585,181) 449,863 398,053 80,951 (87,137) 421,467
------------------------------ ---------------------------- -------------------------- -------------------------
627,676 (97,944) 464,056 (686,962) 713,608 81,490 (108,252) 425,261
1,137,617 1,235,561 1,959,295 2,646,257 140,210 58,720 633,529 208,268
------------------------------ ---------------------------- -------------------------- -------------------------
$1,765,293 $1,137,617 $2,423,351 $1,959,295 $853,818 $140,210 $525,277 $633,529
============================== ============================ ========================== =========================
</TABLE>
22
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
T. Rowe Price
International Stock Dreyfus Small Cap
Subaccount Value Subaccount
---------------------------- ----------------------------
1999 1998 1999 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 15,709 $ 3,749 $ 304,912 $ 53,643
Net realized capital gain (loss) 147,379 (6,285) 440,188 (130,805)
Net change in unrealized appreciation/
depreciation of investments 860,071 47,388 (82,799) 336,094
---------------------------- ----------------------------
Increase (decrease) from operations 1,023,159 44,852 662,301 258,932
Contract transactions:
Net contract purchase payments 651,523 127,661 443,730 490,702
Transfer payments from (to) other
subaccounts or general account 1,996,543 1,183,837 (1,452,940) 2,127,411
Contract terminations, withdrawals and other
deductions (129,671) (47,780) (180,966) (14,953)
---------------------------- ----------------------------
Increase (decrease) from contract transactions 2,518,395 1,263,718 (1,190,176) 2,603,160
---------------------------- ----------------------------
Net increase (decrease) in contract owners'
equity 3,541,554 1,308,570 (527,875) 2,862,092
Contract owners' equity:
Beginning of the period 1,536,758 228,188 2,867,527 5,435
---------------------------- ----------------------------
End of the period $5,078,312 $1,536,758 $2,339,652 $2,867,527
============================ ============================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
23
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Special Venture Warburg Pincus
Endeavor Enhanced Fund Variable Series International Equity Warburg Pincus Small
Index Subaccount Subaccount Subaccount Company Growth Subaccount
------------------------------ ---------------------------- -------------------------- ---------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------------------------ ---------------------------- -------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 186,035 $ (5,919) $ (748) $ 8,796 $ 1,827 $ 6,608 $ 137,032 $ (6,177)
200,039 288,582 (9,269) (10,254) 508,926 (141,027) 577,482 (45,912)
396,991 126,691 62,913 (6,661) 380,853 225,561 1,555,606 108,108
------------------------------ ---------------------------- -------------------------- ---------------------------
783,065 409,354 52,896 (8,119) 891,606 91,142 2,270,120 56,019
1,148,305 627,414 18,310 27,441 554,996 862,847 275,291 330,169
1,795,564 2,262,128 40,388 29,220 (1,308,134) 470,774 2,423,778 183,590
(632,039) (83,646) (49,972) (20,269) (288,105) (129,391) (211,722) (73,829)
------------------------------ ---------------------------- -------------------------- ---------------------------
2,311,830 2,805,896 8,726 36,392 (1,041,243) 1,204,230 2,487,347 439,930
------------------------------ ---------------------------- -------------------------- ---------------------------
3,094,895 3,215,250 61,622 28,273 (149,637) 1,295,372 4,757,467 495,949
3,561,193 345,943 113,983 85,710 2,315,129 1,019,757 1,139,167 643,218
------------------------------ ---------------------------- -------------------------- ---------------------------
$6,656,088 $3,561,193 $175,605 $113,983 $2,165,492 $2,315,129 $5,896,634 $1,139,167
============================== ============================ ========================== ===========================
</TABLE>
24
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
WRL Janus WRL Janus
Growth Global
Subaccount Account
---------------- --------------
1999 (1) 1999 (1)
---------------- --------------
<S> <C> <C>
Operations:
Net investment income (loss) $ 453,895 $ 118,564
Net realized capital gain (loss) 165,454 33,955
Net change in unrealized appreciation/ depreciation of investments (57,358) 339,537
---------------- --------------
Increase (decrease) from operations 561,991 492,056
Contract transactions:
Net contract purchase payments 1,218,869 803,389
Transfer payments from (to) other subaccounts or general account 1,495,771 1,233,187
Contract terminations, withdrawals and other deductions (6,673) (98,282)
---------------- --------------
Increase (decrease) from contract transactions 2,707,967 1,938,294
---------------- --------------
Net increase (decrease) in contract owners' equity 3,269,958 2,430,350
Contract owners' equity:
Beginning of the period - -
---------------- --------------
End of the period $3,269,958 $2,430,350
================ ==============
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
25
<PAGE>
WRL LKCM WRL Alger WRL J. P. Morgan
Strategic Total Aggressive Real Estate
Return Growth Securities
Subaccount Subaccount Subaccount
------------------- ----------------- -------------------
1999 (1) 1999 (1) 1999 (1)
------------------- ----------------- -------------------
$ 8,839 $ 84,973 $ (78)
(385) 145,142 (16,209)
(721) 138,301 (21,136)
------------------- ----------------- -------------------
7,733 368,416 (37,423)
59,740 145,256 34,905
88,518 504,696 585,591
(1,049) (47,581) (89,665)
------------------- ----------------- -------------------
147,209 602,371 530,831
------------------- ----------------- -------------------
154,942 970,787 493,408
- - -
------------------- ----------------- -------------------
$154,942 $970,787 $493,408
=================== ================= ===================
26
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
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 V (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 registered 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 forty-seven investment
subaccounts, six of which are invested in specified portfolios of the DFA
Investment Dimensions Group, five of which are invested in specified portfolios
of the Federated Insurance Series, two of which are invested in specified
portfolios of the Wanger Advisor's Trust, two of which are invested in specified
portfolios of the Montgomery Funds III, two of which are invested in specified
portfolios of the Strong Variable Insurance Funds, Inc., three of which are
invested in specified portfolios of the Endeavor Series Trust, one of which is
invested in the Stein Roe Special Venture Fund, Variable Series of the Stein Roe
Variable Investment Trust, two of which are invested in specified portfolios of
the Warburg Pincus Trust, and five of which are invested in specified portfolios
of the WRL Series Fund, Inc. (each a "Series Fund" and collectively "the Series
Funds"). Activity in these twenty-eight subaccounts is available to contract
owners of the Advisor's Edge Variable Annuity. Activity in these twenty-eight
subaccounts (with the exception of the portfolios of the DFA Investment
Dimensions Group) is also available to contract owners of the Advisor's Edge
Select Variable Annuity, also offered by PBL. Activity in the Federated Prime
Money Fund II Portfolio of the Federated Insurance Series is also available to
contract owners of the Dimensional Variable Annuity, also offered by PBL. The
amounts reported herein represent the activity related to contract owners of the
Advisor's Edge Variable Annuity only. The remaining nineteen subaccounts (not
included herein), are available to contract owners of the Prism Variable
Annuity, Dimensional Variable Annuity, Marquee Variable Annuity, and Personal
Manager Variable Annuity also issued by PBL.
For the period March 1997 through April 1999, the portfolios of the DFA
Investment Dimensions Group, Inc. were not available to new contract owners
within the Mutual Fund Account. Existing contract owners could continue to
allocate purchase payments or transfers to these subaccounts. Effective May 1,
1999, the portfolios of the DFA Investment Dimensions Group, Inc. were again
made available for investment to contract owners of the Advisor's Edge Variable
Annuity.
27
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Investments
Net purchase payments received by the Mutual Fund Account are invested in the
portfolios of the Series Funds, as selected by the contract owner. Investments
are stated at the closing net asset values per share as of December 31, 1999.
Prior to July 17, 1998, realized capital gains and losses from the sale of
shares in the Series Funds 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 July 17, 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 investments in the mutual funds are
credited or charged to contract owners' equity.
Dividend Income
Dividends received from the Series Funds investments are reinvested to purchase
additional mutual fund shares.
2. Investments
A summary of the mutual fund investments at December 31, 1999 follows:
<TABLE>
<CAPTION>
Net Asset
Number of Value Per Market
Share Held Share Value Cost
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
DFA Investment Dimensions Group, Inc.:
DFA Small Value Portfolio 1,118,198.565 $10.82 $12,098,908 $13,399,371
DFA Large Value Portfolio 1,503,783.541 13.05 19,624,375 21,329,753
DFA International Value Portfolio 1,278,595.045 12.30 15,726,719 14,676,844
DFA International Small Value Portfolio 912,707.145 8.15 7,438,563 8,024,442
DFA Short-Term Fixed Portfolio 1,208,325.726 9.99 12,071,174 12,254,276
DFA Global Bond Portfolio 746,019.949 10.13 7,557,182 7,767,473
</TABLE>
28
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
2. Investments (continued)
<TABLE>
<CAPTION>
Net Asset
Number of Value Per Market
Shares Held Share Value Cost
-------------------------------------------------------------------
The Federated Insurance Series:
<S> <C> <C> <C> <C>
Federated American Leaders Fund II 391,814.986 $20.82 $ 8,157,588 $ 8,042,528
Federated Utility Fund II 123,268.028 14.35 1,768,896 1,744,934
Federated Prime Money Fund II 11,720,306.504 1.00 11,720,307 11,720,307
Federated High Income Bond Fund II 786,906.814 10.24 8,057,926 8,220,868
Federated Fund for U. S. Government
Securities II 646,676.247 10.56 6,828,901 6,978,569
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor 160,524.185 24.88 3,993,842 3,386,233
Wanger International Small Cap Advisor 152,100.971 43.67 6,642,249 4,039,734
The Montgomery Funds III:
Montgomery Growth Portfolio 95,992.696 18.39 1,765,306 1,607,001
Montgomery Emerging Markets Portfolio 223,146.454 10.86 2,423,370 1,896,411
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II 52,157.949 16.37 853,826 617,940
Strong Schafer Value Fund II 57,596.804 9.12 525,283 571,949
Endeavor Series Trust:
T. Rowe Price International Stock
Portfolio 243,215.778 20.88 5,078,345 4,169,574
Dreyfus Small Cap Value Portfolio 141,712.666 16.51 2,339,676 2,086,395
Endeavor Enhanced Index Portfolio 366,524.750 18.16 6,656,089 6,128,142
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable
Series 8,706.297 20.17 175,606 123,705
Warburg Pincus Trust:
Warburg Pincus International Equity
Portfolio 129,671.046 16.70 2,165,506 1,752,516
Warburg Pincus Small Company Growth
Portfolio 225,063.253 26.20 5,896,657 4,237,154
WRL Series Fund, Inc.
WRL Janus Growth Portfolio 41,924.574 77.996065 3,269,952 3,327,310
WRL Janus Global Portfolio 64,876.326 37.461242 2,430,348 2,090,811
WRL LKCM Strategic Total Return Portfolio
9,197.200 16.846756 154,943 155,664
WRL Alger Aggressive Growth Portfolio 29,174.655 33.275092 970,789 832,488
WRL J. P. Morgan Real Estate Securities
Portfolio 61,245.968 8.056186 493,409 514,545
</TABLE>
29
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
2. Investments (continued)
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
Period ended December 31
1999 1998
-------------------------------- -------------------------------
Purchases Sales Purchases Sales
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
DFA Investment Dimensions Group, Inc.:
DFA Small Value Portfolio $ 6,577,669 $ 4,099,417 $ 2,493,979$ $ 3,525,724
DFA Large Value Portfolio 10,235,174 4,763,934 3,155,007 5,926,321
DFA International Value Portfolio 6,060,367 3,978,500 2,497,864 4,232,269
DFA International Small Value Portfolio 2,418,342 2,465,534 2,186,489 2,071,693
DFA Short-Term Fixed Portfolio 6,456,405 2,995,682 1,698,165 2,527,429
DFA Global Bond Portfolio 4,422,318 1,865,172 2,071,694 1,702,226
The Federated Insurance Series:
Federated American Leaders Fund II 5,382,483 2,964,715 3,779,368 1,923,697
Federated Utility Fund II 937,784 442,973 1,417,764 523,775
Federated Prime Money Fund II 49,204,976 45,176,066 38,234,126 34,092,074
Federated High Income Bond Fund II 4,197,753 2,852,936 4,799,982 3,210,420
Federated Fund for U. S. Government Securities II 3,769,283 1,966,826 5,273,362 3,144,966
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor 5,421,256 5,420,586 8,374,518 9,572,395
Wanger International Small Cap Advisor 4,581,216 4,742,397 4,754,667 4,162,246
The Montgomery Funds III:
Montgomery Growth Portfolio 1,556,301 1,205,105 665,430 800,350
Montgomery Emerging Markets Portfolio 2,266,689 2,866,336 1,928,969 1,490,511
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II 1,586,072 1,189,539 339,159 257,722
Strong Schafer Value Fund II 486,312 538,079 520,796 100,202
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio 5,165,015 2,630,878 2,029,927 762,460
Dreyfus Small Cap Value Portfolio 3,148,281 4,033,562 3,557,217 900,373
Endeavor Enhanced Index Portfolio 10,392,189 7,894,317 17,001,709 14,201,738
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable Series 88,193 80,215 106,581 61,392
</TABLE>
30
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
2. Investments (continued)
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
Period ended December 31
1999 1998
-------------------------------- -------------------------------
Purchases Sales Purchases Sales
-------------------------------- -------------------------------
Warburg Pincus Trust:
Warburg Pincus International Equity
<S> <C> <C> <C> <C>
Portfolio $ 7,059,189 $ 8,098,642 $16,877,522 $15,666,633
Warburg Pincus Small Company Growth
Portfolio 11,008,944 8,384,558 5,740,232 5,306,463
WRL Series Fund, Inc.:
WRL Janus Growth Portfolio 4,184,651 1,022,795 - -
WRL Janus Global Portfolio 2,315,051 258,195 - -
WRL LKCM Strategic Total Return
Portfolio 163,304 7,255 - -
WRL Alger Aggressive Growth Portfolio
2,992,853 2,305,507 - -
WRL J. P. Morgan Real Estate
Securities Portfolio 814,288 283,534 - -
</TABLE>
3. Contract Owners' Equity
A summary of deferred annuity contracts terminable by owners at December 31,
1999 follows:
<TABLE>
<CAPTION>
Accumulation Accumulation Total Contract
Subaccount Units Owned Unit Value Value
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DFA Small Value 764,207.526 $15.831969 $12,098,910
DFA Large Value 942,056.209 20.831429 19,624,377
DFA International Value 1,072,797.521 14.659543 15,726,721
DFA International Small 784,304.777 9.484277 7,438,564
DFA Short-Term Fixed 1,002,679.967 12.038912 12,071,176
DFA Global Bond 518,871.517 14.564652 7,557,183
Federated American Leaders Fund II 327,212.289 24.931196 8,157,794
</TABLE>
31
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Accumulation Accumulation Total Contract
Subaccount Units Owned Unit Value Value
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federated Utility Fund II 97,673.221 $18.110281 $ 1,768,889
Federated Prime Money Fund II 952,527.274 12.304440 11,720,315
Federated High Income Bond Fund II 589,779.595 13.662847 8,058,068
Federated Fund for U. S. Government Securities II 547,796.972 12.466130 6,828,908
Wanger U. S. Small Cap Advisor 164,471.163 24.282652 3,993,796
Wanger International Small Cap Advisor 182,333.434 36.428730 6,642,175
Montgomery Growth 89,026.184 19.828924 1,765,293
Montgomery Emerging Markets 227,382.388 10.657600 2,423,351
Strong International Stock Fund II 57,878.417 14.751926 853,818
Strong Schafer Value Fund II 53,257.548 9.862967 525,277
T. Rowe Price International Stock 366,344.476 13.862122 5,078,312
Dreyfus Small Cap Value 201,694.351 11.599986 2,339,652
Endeavor Enhanced Index 434,242.139 15.328057 6,656,088
Stein Roe Special Venture Fund, Variable Series 12,553.593 13.988443 175,605
Warburg Pincus International Equity 141,359.133 15.319078 2,165,492
Warburg Pincus Small Company Growth 275,865.079 21.375064 5,896,634
WRL Janus Growth 239,344.901 13.662117 3,269,958
WRL Janus Global 155,589.085 15.620310 2,430,350
WRL LKCM Strategic Total Return 14,628.276 10.591918 154,942
WRL Alger Aggressive Growth 64,888.809 14.960783 970,787
WRL J. P. Morgan Real Estate Securities 54,833.900 8.998235 493,408
</TABLE>
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
DFA DFA DFA
DFA Small DFA Large International International Short-Term
Value Value Value Small Fixed
Subaccount Subaccount Subaccount Subaccount Subaccount
-------------- -------------- ---------------- --------------- ---------------
Units outstanding at January 1,
<S> <C> <C> <C> <C> <C>
1998 864,489 1,062,866 1,228,043 869,387 862,087
Units purchased 66,565 61,649 115,582 183,225 64,628
Units redeemed and transferred (185,054) (264,621) (319,861) (227,480) (174,274)
-------------- -------------- ---------------- --------------- ---------------
Units outstanding at December 31,
1998 746,000 859,894 1,023,764 825,132 752,441
Units purchased 119,020 138,618 135,865 123,457 174,670
Units redeemed and transferred (100,812) (56,456) (86,831) (164,284) 75,569
-------------- -------------- ---------------- --------------- ---------------
Units outstanding at December 31,
1999 764,208 942,056 1,072,798 784,305 1,002,680
============== ============== ================ =============== ===============
</TABLE>
32
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Federated Federated Federated High
DFA Global American Federated Prime Money Income Bond
Bond Leaders Fund Utility Fund Fund II Fund II
Subaccount II Subaccount II Subaccount Subaccount Subaccount
--------------- ---------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1,
1998 346,747 181,633 20,024 312,344 424,673
Units purchased 54,992 100,753 53,174 1,414,081 273,938
Units redeemed and transferred (33,700) (26,967) 1,090 (1,074,535) (166,286)
--------------- ---------------- -------------- --------------- ----------------
Units outstanding at December 31,
1998 368,039 255,419 74,288 651,890 532,325
Units purchased 97,792 80,211 18,721 2,007,570 92,312
Units redeemed and transferred 53,041 (8,418) 4,664 (1,706,933) (34,857)
--------------- ---------------- -------------- --------------- ----------------
Units outstanding at December 31,
1999 518,872 327,212 97,673 952,527 589,780
=============== ================ ============== =============== ================
</TABLE>
<TABLE>
<CAPTION>
Federated
Fund for Wanger Wanger
U. S. U. S. Small International Montgomery
Government Cap Small Cap Montgomery Emerging
Securities II Advisor Advisor Growth Markets
Subaccount Subaccount Subaccount Subaccount Subaccount
--------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1,
1998 249,634 275,517 149,792 76,471 252,354
Units purchased 210,246 236,478 194,815 28,913 171,406
Units redeemed and transferred (37,753) (330,780) (150,790) (36,532) (122,719)
--------------- --------------- --------------- --------------- ----------------
Units outstanding at December 31,
1998 422,127 181,215 193,817 68,852 301,041
Units purchased 72,214 16,350 27,713 33,792 62,994
Units redeemed and transferred 53,456 (33,094) (39,197) (13,618) (136,653)
--------------- --------------- --------------- --------------- ----------------
Units outstanding at December 31,
1999 547,797 164,471 182,333 89,026 227,382
=============== =============== =============== =============== ================
</TABLE>
33
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Strong
International Strong T. Rowe Price Endeavor
Stock Schafer Value International Dreyfus Small Enhanced
Fund II Fund II Stock Cap Value Index
Subaccount Subaccount Subaccount Subaccount Subaccount
---------------- ---------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Units outstanding at January 1,
1998 7,004 20,688 24,827 585 34,586
Units purchased 14,655 45,966 106,407 166,105 416,707
Units redeemed and transferred (3,981) (4,665) 14,548 151,094 (178,546)
---------------- ---------------- --------------- --------------- --------------
Units outstanding at December 31,
1998 17,678 61,989 145,782 317,784 272,747
Units purchased 15,592 16,273 69,221 54,774 85,687
Units redeemed and transferred 24,608 (25,004) 151,341 (170,864) 75,808
---------------- ---------------- --------------- --------------- --------------
Units outstanding at December 31,
1999 57,878 53,258 366,344 201,694 434,242
================ ================ =============== =============== ==============
</TABLE>
<TABLE>
<CAPTION>
Stein Roe
Special
Venture Warburg
Fund, Pincus Warburg Pincus
Variable International Small Company WRL Janus
Series Equity Growth Growth
Subaccount Subaccount Subaccount Subaccount
-------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Units outstanding at January 1, 1998 7,407 106,212 48,792 -
Units purchased 4,523 328,299 163,976 -
Units redeemed and transferred 59 (204,130) (123,240) -
-------------- --------------- ---------------- ---------------
Units outstanding at December 31, 1998 11,989 230,381 89,528 -
Units purchased 1,811 59,246 23,063 124,826
Units redeemed and transferred (1,246) (148,268) 163,274 114,519
-------------- --------------- ---------------- ---------------
Units outstanding at December 31, 1999 12,554 141,359 275,865 239,345
============== =============== ================ ===============
</TABLE>
34
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
WRL J. P.
WRL LKCM WRL Alger Morgan Real
WRL Janus Strategic Aggressive Estate
Global Total Return Growth Securities
Subaccount Subaccount Subaccount Subaccount
-------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Units outstanding at January 1, 1998 - - - -
Units purchased - - - -
Units redeemed and transferred - - - -
-------------- ---------------- --------------- ----------------
Units outstanding at December 31, 1998 - - - -
Units purchased 68,665 6,125 14,428 3,690
Units redeemed and transferred 86,924 8,503 50,461 51,144
-------------- ---------------- --------------- ----------------
Units outstanding at December 31, 1999 155,589 14,628 64,889 54,834
============== ================ =============== ================
</TABLE>
4. Administrative, Mortality and Expense Risk Charges
An annual charge is deducted from the unit values of the subaccounts of the
Mutual Fund Account for PBL's assumption of certain mortality and expense risks
incurred in connection with the contract. The charge is assessed daily based on
the net asset value of the Mutual Fund Account. The effective annual rate for
this charge was .50%.
An administrative charge equal to .15% annually is deducted from the unit values
of the subaccounts of the Mutual Fund Account. This charge is assessed daily by
PBL. PBL also deducts an annual policy fee of $30 per contract. The annual
policy fee is deducted proportionately from the subaccounts' accumulated value.
These deductions represent reimbursement for the costs expected to be incurred
over the life of the contract for issuing and maintaining each contract and the
Mutual Fund Account.
5. Taxes
Operations of the Mutual Fund Account form a part of PBL, which is taxed as a
life insurance company under Subchapter L of the Internal Revenue Code of 1986,
as amended (the "Code"). The operations of the Mutual Fund Account are accounted
for separately from other operations of PBL for purposes of federal income
taxation. The Mutual Fund Account is not separately taxable as a regulated
investment company under Subchapter M of the Code and is not otherwise taxable
as an entity separate from PBL. Under existing federal income tax laws, the
income of the Mutual Fund Account, to the extent applied to increase reserves
under the variable annuity contracts, is not taxable to PBL.
35
<PAGE>
THE ADVISOR'S EDGE SELECT
VARIABLE ANNUITY
Issued Through
Peoples Benefit Life Insurance Company
Separate Account V
By
Peoples Benefit Life Insurance Company
Prospectus
December 1, 2000
The Advisor's Edge Select Variable Annuity (the "Policy") provides a means of
investing on a tax-deferred basis in 29 portfolios of underlying mutual funds
(the "Portfolios") and a fixed account which offers interest at rates that are
guaranteed by Peoples Benefit Life Insurance Company. The Policy is an
individual variable annuity policy and is intended for retirement savings or
other long-term investment purposes. For investments in the Subaccounts, you
bear all investment risk (including the possible loss of principal), and
investment results are not guaranteed. The Policy provides a Right to Cancel
period of at least 20 days (30 days or more in some instances) during which the
Policy may be cancelled.
Before investing you should carefully read this prospectus and the accompanying
prospectuses for the Portfolios of the underlying mutual funds. These
prospectuses give you important information about the Policy and the
Portfolios, including the objectives, risks, and strategies of the Portfolios.
A Statement of Additional Information for the Policy prospectus has been filed
with the Securities and Exchange Commission, is incorporated by reference, and
is available free by calling our Administrative Offices at 800-866-6007. The
Table of Contents of the Statement of Additional Information is included at the
end of this prospectus.
The Policy is not available in all states.
This prospectus does not constitute an offering in any jurisdiction where it
would be unlawful to make an offering like this. We have not authorized anyone
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.
Neither the Securities and Exchange Commission nor any state securities
regulator 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 PORTFOLIOS
Alliance Variable Products Series Fund, Inc.
Alliance Growth
Alliance Premier Growth
Alliance Technology
The Dreyfus Socially Responsible Growth Fund, Inc.
Endeavor Series Trust
Dreyfus Small Cap Value
Endeavor Enhanced Index
T. Rowe Price International Stock
The Federated Insurance Series
Federated American Leaders
Federated High Income Bond
Federated Prime Money
Federated U.S. Government Securities
Federated Utility
The Montgomery Funds III
Montgomery Growth
Montgomery Emerging Markets
Seligman Portfolios, Inc.
Seligman Capital
Seligman Communications and Information
Seligman Global Technology
SteinRoe Variable Investment Trust
Stein Roe Small Company Growth
Strong Variable Insurance Funds, Inc.
Strong International Stock
Strong Schafer Value
Transamerica Variable Insurance Fund, Inc.
Transamerica VIF Growth
Wanger Advisors Trust
Wanger U.S. Small Cap Advisor
Wanger International Small Cap Advisor
Warburg Pincus Trust
Warburg Pincus International Equity
Warburg Pincus Small Company Growth
WRL Series Fund, Inc.
WRL Alger Aggressive Growth
WRL J.P. Morgan Real Estate Securities
WRL Janus Growth
WRL LKCM Strategic Total Return
<PAGE>
Contents
2 Cross Reference to Definitions 26 Taxes
3 Summary 30 Access to Your Money
8 Fee Table 33 Performance
11 Example 35 Death Benefit
13 The Annuity Policy 38 Other Information
14 Annuity Payments 41 Table of Contents of Statement of
Additional Information
17 Purchase
A-1 Appendix A (Condensed Financial
20 Investment Options Information)
25 Expenses
CROSS REFERENCE TO DEFINITIONS
We have generally defined the technical terms associated with the Policy 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>
<S> <C>
Accumulation Phase.......................................................... 13
Adjusted Policy Value....................................................... 30
Annuitant................................................................... 39
Annuity Commencement Date................................................... 14
Annuity Payment Options..................................................... 14
Business Day................................................................ 17
Cash Value.................................................................. 30
Excess Interest Adjustment.................................................. 31
Guaranteed Period Options................................................... 13
Income Phase................................................................ 13
Initial Premium Payment..................................................... 17
Net Premium Payment......................................................... 18
Policy...................................................................... 13
Policy Anniversary.......................................................... 18
Policy Date................................................................. 18
Policy Owner................................................................ 39
Policy Value................................................................ 20
Policy Year................................................................. 18
Portfolios.................................................................. 20
Premium Payment............................................................. 18
Qualified Policy............................................................ 18
Right to Cancel Period...................................................... 39
Tax Deferral................................................................ 27
</TABLE>
2
<PAGE>
SUMMARY
The numbered 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 numbered headings. Please read the full prospectus carefully.
1. THE ANNUITY POLICY
The Advisor's Edge Select Variable Annuity
Advisor's Edge Select is a flexible-premium multi-funded variable annuity
offered by Peoples Benefit Life Insurance Company ("Peoples Benefit"). The
Policy provides a means of investing on a tax-deferred basis in twenty-nine
Portfolios of the underlying funds and a fixed account offered by Peoples
Benefit.
Who Should Invest
The Policy is intended for long-term investors who want tax-deferred
accumulations of funds, generally for retirement but also for other long-term
purposes.
The Policy provides benefits in two distinct phases: accumulation and income.
The Accumulation Phase
During the Accumulation Phase, you choose to allocate your investment in the
Policy among the twenty-nine Portfolios and the fixed account available under
the Policy. You can contribute additional amounts to the Policy and you can
take withdrawals from the Policy during the Accumulation Phase. The value of
your investment depends on the investment performance of the Portfolios of the
underlying funds that 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 Policy. See ANNUITY PAYMENTS, page
12, for more information about Annuity Payment Options.
2. ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide
range of Annuity Payment Options. The Policy 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 of the underlying funds you have chosen) or a
fixed basis (where the payment is guaranteed).
3. PURCHASE
You can buy the Policy with a minimum investment of $10,000 for Non-Qualified
Policies and $1,000 for Qualified Policies. You can add $500 or more to Non-
Qualified Policies and $25 or more to Qualified Policies at any time during
the Accumulation Phase. Your Policy may not exceed $1,000,000 in total Premium
Payments without our prior approval.
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4. INVESTMENT OPTIONS
When you purchase the Policy, your Premium Payments are deposited into the
Peoples Benefit Life Insurance Company Separate Account V (the "Separate
Account"). The Separate Account contains a number of Subaccounts that invest
exclusively in shares of the corresponding Portfolios of the underlying mutual
funds (the "Subaccounts"). 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 Peoples Benefit, but are accounted for
separately from the Company's other assets and can be used only to satisfy its
obligations to the Policy Owners.
You can allocate your Premium Payments to one or more Subaccounts that invest
exclusively in shares of the following Portfolios described in the twelve
Funds' prospectuses and to the fixed account. The fixed account offers an
interest rate that Peoples Benefit guarantees.
The Portfolios
Alliance Variable Products Series Fund, Inc.
Advised by Alliance Capital Management L.P.
Alliance Growth Portfolio
Alliance Premier Growth Portfolio
Alliance Technology Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Advised by The Dreyfus Corporation
Endeavor Series Trust
Advised by Endeavor Management Co.
Dreyfus Small Cap Value Portfolio
Endeavor Enhanced Index Portfolio
T. Rowe Price International Stock Portfolio
The Federated Insurance Series
Advised by Federated Investment Management Company
Federated American Leaders Fund II ("Federated American Leaders
Portfolio")
Federated High Income Bond Fund II ("Federated High Income Bond
Portfolio")
Federated Prime Money Fund II ("Federated Prime Money Portfolio")
Federated Utility Fund II ("Federated Utility Portfolio")
Federated Fund for U.S. Government Securities II ("Federated U.S.
Government Securities Portfolio")
The Montgomery Funds III
Advised by Montgomery Asset Management, LLC
Montgomery Variable Series: Growth Fund ("Montgomery Growth Portfolio")
Montgomery Variable Series: Emerging Markets Fund ("Montgomery Emerging
Markets Portfolio")
Seligman Portfolios, Inc.
Advised by J. & W. Seligman & Co. Incorporated
Seligman Capital Portfolio
Seligman Communications and Information Portfolio
Seligman Global Technology Portfolio
4
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SteinRoe Variable Investment Trust
Advised by Stein Roe & Farnham Incorporated
Stein Roe Small Company Growth Fund, Variable Series, formerly Stein Roe
Special Venture Fund ("Stein Roe Small Company Growth Portfolio")
Strong Variable Insurance Funds, Inc.
Advised by Strong Capital Management, Inc.
Strong International Stock Fund II ("Strong International Stock
Portfolio")
Strong Schafer Value Fund II ("Strong Schafer Value Portfolio")
Transamerica Variable Insurance Fund, Inc.
Advised by Transamerica Investment Management, LLC.
Transamerica VIF Growth Portfolio
Wanger Advisors Trust
Advised by Wanger Asset Management, L.P.
Wanger U.S. Small Cap Advisor ("Wanger U.S. Small Cap Advisor Portfolio")
Wanger International Small Cap Advisor ("Wanger International Small Cap
Advisor Portfolio")
Warburg Pincus Trust
Advised by Credit Suisse Asset Management
Warburg Pincus International Equity Portfolio
Warburg Pincus Small Company Growth Portfolio
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
Aggressive Growth Portfolio ("WRL Alger Aggressive Growth Portfolio")
Real Estate Securities Portfolio ("WRL J.P. Morgan Real Estate Securities
Portfolio")
Growth Portfolio ("WRL Janus Growth Portfolio")
Strategic Total Return Portfolio ("WRL LKCM Strategic Total Return
Portfolio")
You can make or lose money in any of the Subaccounts that invest in these
Portfolios depending on their investment performance.
5. EXPENSES
No sales load is deducted from Premium Payments.
No surrender charge applies to withdrawals. Full surrenders, partial
withdrawals, and transfers from a Guaranteed Period Option of the fixed
account may be subject to an Excess Interest Adjustment, which may increase or
decrease the amount you receive. This adjustment may also apply to amounts
applied to an Annuity Payment Option from a Guaranteed Period Option of the
fixed account.
Peoples Benefit will deduct mortality and expense risk fees and administrative
charges at an annual rate of either 1.45%, 1.50% or 1.60% per year from the
assets in each Subaccount (depending on the death benefit you select).
On each Policy Anniversary and at the time of surrender during any Policy Year
before the Annuity Commencement Date, we reserve the right to assess a service
charge of up to $30 for policy administration expenses. The Service Charge
will not be deducted on a Policy Anniversary or at the time of surrender if,
at either of these times, (1) the sum of all Premium Payments less the sum of
all
5
<PAGE>
withdrawals taken is at least $50,000; (2) the Policy Value equals or exceeds
$50,000, or (3) the Policy is a Qualified Policy.
You will also pay certain expenses associated with the operation of the
Portfolios of the underlying funds.
6. TAXES
In general, you are not taxed on earnings on your investment in the Policy
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 Policy. For
Annuity Payments, payments come partially from earnings and partially from
your investment. You are taxed only on the earnings portion of each Annuity
Payment. If you receive money from the Policy before age 59 1/2, you may have
to pay a 10% penalty tax on the earnings portion received.
7. ACCESS TO YOUR MONEY
You can take money out of your Policy at any time during the Accumulation
Phase. Each withdrawal you make must be at least $500. If you have a Policy
Value in the fixed account, you may take up to 10% free of Excess Interest
Adjustments. Amounts withdrawn in excess of the 10% free amount, may be
subject to Excess Interest Adjustments.
You may have to pay income tax and a tax penalty on any money you take out.
8. PERFORMANCE
The investment performance of the Subaccounts you choose directly affects the
value of your Policy. For investments in the Subaccounts, you bear all
investment risk (including the possible loss of principal), and investment
results are not guaranteed.
From time to time, Peoples Benefit may advertise the investment performance of
the Subaccounts. In doing so, it will use standardized methods prescribed by
the Securities and Exchange Commission ("SEC"), as well as certain non-
standardized methods.
Past performance does not indicate or predict future performance.
9. DEATH BENEFIT
If you are both the owner and the annuitant and you die before the Income
Phase begins, then your beneficiary will receive a death benefit.
Naming different persons as owner and annuitant can affect whether the death
benefit is payable and to whom amounts will be paid. Use care when naming
owners, annuitants and beneficiaries, and consult your agent if you have
questions.
You may choose one of the following guaranteed minimum death benefits:
. Return of Premium - available if the owner or annuitant is age 0 to 85 on
the Policy Date
. 6 Year Step-Up To Age 81 - available if the owner or annuitant is age 0 to
75 on the Policy Date
. Double Enhanced Death Benefit - available if the owner or annuitant is age
0 to 79 on the Policy Date
If the guaranteed minimum death benefit is not available because of the age of
the owner or annuitant, the death benefit will be the greater of the Policy
Value or the Cash Value as of the date of death.
If the owner is not the annuitant, no death benefit is paid if the owner dies.
6
<PAGE>
10. OTHER INFORMATION
Additional Features
This Policy has additional features that might interest you. These features
are not available in all states and may not be suitable for your particular
situation. These include the following:
. You can arrange to have money automatically sent to you monthly, quarterly,
semi-annually or annually while your Policy is in the Accumulation Phase.
This feature is referred to as the "systematic payout option." Amounts you
receive may be included in your gross income, and in certain circumstances,
may be subject to penalty taxes.
. Under certain medically related circumstances, we will allow you to
surrender or partially withdraw your Policy Value without an Excess
Interest Adjustment. This feature is called the "Nursing Care and Terminal
Condition Withdrawal Option."
. Under certain unemployment circumstances, you may withdraw all or a portion
of the Policy Value free of Excess Interest Adjustments. This feature is
called the "Unemployment Waiver."
. You may make transfers and/or change the allocation of additional Premium
Payments by telephone.
. You can arrange to have a certain amount of money (at least $500)
automatically transferred from the fixed account or the Federated Prime
Money Portfolio either monthly or quarterly, into your choice of
Subaccounts. This feature is called "Dollar Cost Averaging."
Right to Cancel Period
The Policy provides for a Right to Cancel Period of 20 days (30 or more days
in some instances as specified in your Policy) plus a 5-day period to allow
for mail delivery. To cancel your investment, please return your Policy to us
or to the agent from whom you purchased the Policy.
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 policies.
Peoples Benefit Life Insurance Company Separate Account V
The Separate Account is a unit investment trust registered with the SEC and
operating under Iowa law. The Separate Account has twenty-nine Subaccounts
dedicated to the Policy, each of which invests solely in a corresponding
Portfolio of the underlying Funds.
Other topics
Additional information on the topics summarized above and on other topics not
summarized here can be found at OTHER INFORMATION, page 33.
11. INQUIRIES AND POLICY AND POLICYHOLDER INFORMATION
For more information about the Advisor's Edge Select variable annuity, call or
write: Peoples Benefit Life Insurance Company, Variable Annuity Department,
4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499, 800-866-6007.
If you have questions about your Policy, please telephone our Administrative
Offices at 800-866-6007 between the hours of 8 a.m. and 6 p.m. Eastern time.
Please have ready the Policy number and the Policy Owner's name when you call.
As Policy Owner, you will receive periodic statements confirming any
transactions that take place as well as quarterly and annual statements.
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FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that
may be assessed) that you would incur as a Policy Owner. The purpose of this
table is to assist you in understanding the various costs and expenses that
you would bear directly or indirectly as a purchaser of the Policy. The fee
table reflects all expenses for both the Separate Account and the Funds. For a
complete discussion of Policy costs and expenses, see EXPENSES, page 22.
<TABLE>
<S> <C>
Policy Owner Transaction Expenses
Sales Load Imposed on Premiums................................. None
Contingent Deferred Sales Load (surrender charge).............. None
Exchange Fees.................................................. $10(/1/)
Annual Policy Service Charge................................... $30(/2/)
Separate Account Annual Expenses (as a percentage of assets in
the Separate Account)
Mortality and Expense Risk Fee................................. 1.45%
Administrative Charge.......................................... 0.15%
--------
Total Annual Separate Account Expenses......................... 1.60%(/3/)
</TABLE>
(/1/)Peoples Benefit does not currently charge a fee for transfers among the
Subaccounts, although it reserves the right to charge a $10 fee for each
Transfer in excess of 12 per Policy Year.
(/2/)Peoples Benefit does not currently charge an Annual Policy Service
Charge, but reserves the right to assess a service charge up to $30 for
policy administration expenses. If the Company assesses a Service Charge,
it will not be deducted on a Policy if (1) the sum of all Premium
Payments less the sum of all withdrawals taken is at least $50,000; (2)
the Policy Value equals or exceeds $50,000, or (3) the Policy is a
Qualified Policy.
(/3/)Total Annual Separate Account Expenses shown (1.45%) applies to the
Double Enhanced Death Benefit option. This reflects a fee that is 0. 10%
and 0.15% per year higher than the 1.35% and 1.30% corresponding fees for
the 6 Year Step-Up Death Benefit and Return of Premium Death Benefit
options, respectively.
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Portfolio Annual Expenses
Except as indicated, the figures below are based on expenses for fiscal year
1999 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement limitation, if applicable).
<TABLE>
<CAPTION>
Rule
Management and Other 12b-1 Total Portfolio
Advisory Expenses Expenses Fee Annual Expenses
----------------- -------- ----- ---------------
<S> <C> <C> <C> <C>
Alliance Growth Portfolio... 0.75% 0.12% 0.25% 1.12%
Alliance Premier Growth
Portfolio.................. 1.00% 0.04% 0.25% 1.29%
Alliance Technology
Portfolio/8/ .............. 0.86% 0.09% 0.25% 1.20%
Dreyfus Small Cap Value
Portfolio/1/ .............. 0.80% 0.10% 0.32% 1.22%
Dreyfus Socially Responsible
Growth Fund................ 0.75% 0.04% -- 0.79%
Endeavor Enhanced Index
Portfolio.................. 0.75% 0.03% -- 0.78%
Federated American Leaders
Portfolio.................. 0.75% 0.13% -- 0.88%
Federated High Income Bond
Portfolio.................. 0.60% 0.19% -- 0.79%
Federated Prime Money
Portfolio.................. 0.50% 0.23% -- 0.73%
Federated U.S. Government
Securities Portfolio....... 0.60% 0.24% -- 0.84%
Federated Utility
Portfolio.................. 0.75% 0.19% -- 0.94%
Montgomery Growth
Portfolio/2/ .............. 0.52% 0.73% -- 1.25%
Montgomery Emerging Markets
Portfolio.................. 1.25% 0.37% -- 1.62%
Seligman Capital
Portfolio/9/ .............. 0.40% 0.19% 0.25% 0.84%
Seligman Communication and
Information Portfolio/9/ .. 0.75% 0.11% 0.25% 1.11%
Seligman Global Technology
Portfolio/9/ /10/ ......... 1.00% 0.40% 0.15% 1.55%
Stein Roe Small Company
Growth Portfolio........... 0.65% 0.02% -- 0.67%
Strong International Stock
Portfolio.................. 1.00% 0.16% -- 1.16%
Strong Schafer Value
Portfolio.................. 1.00% 0.20% -- 1.20%
Transamerica VIF Growth
Portfolio/7/ .............. 0.70% 0.15% -- 0.85%
T. Rowe Price International
Stock Portfolio/3/ ........ 0.90% 0.10% -- 1.00%
Wanger U.S. Small Cap
Advisor Portfolio.......... 0.96% 0.06% -- 1.02%
Wanger International Small
Cap Advisor Portfolio...... 1.25% 0.24% -- 1.49%
Warburg Pincus International
Equity Portfolio/4/ ....... 1.00% 0.32% -- 1.32%
Warburg Pincus Small Company
Growth Portfolio/4/ ....... 0.90% 0.24% -- 1.14%
WRL Alger Aggressive Growth
Portfolio.................. 0.80% 0.09% -- 0.89%
WRL J.P. Morgan Real Estate
Securities Portfolio/5/ ... 0.80% 0.20% -- 1.00%
WRL Janus Global/6/ ........ 0.80% 0.12% -- 0.92%
WRL Janus Growth
Portfolio/6/ .............. 0.80% 0.05% -- 0.85%
WRL LKCM Strategic Total
Return Portfolio... 0.80% 0.06% -- 0.86%
</TABLE>
/1/For the Dreyfus Small Cap Portfolio, the Management and Advisory Expenses
were 0.80% and Other Expenses before reimbursements were 0.10%. Therefore,
Total Portfolio Annual Expenses before reimbursements (reduced by custodial
offset arrangements) for the period ended December 31, 1999 were 0.90%. The
Board of Trustees of Endeavor Series Trust has authorized an arrangement
whereby, subject to best price and execution, executing brokers will share
commissions with the Trust's affiliated broker. Under supervision of the
Trustees, the affiliated broker will use the "recaptured commission" to
promote marketing of the Trust's shares. The staff of the SEC believes
that, through the use of these recaptured commissions, the Trust is
indirectly paying for distribution expenses and that such amounts must be
shown as 12b-1 fees in the above table. The use of recaptured commission to
promote the sale of the Trust's shares involves no additional costs to the
Trust or any Policy Owner. Endeavor Series Trust, on the basis of advice of
counsel, does not believe that recaptured brokerage commissions should be
treated as 12b-1 fees. For more information on the Trust's Brokerage
Enhancement Plan, see the Trust's prospectus accompanying this prospectus.
9
<PAGE>
/2/A 1.0% reimbursement was applied to the management fees. Absent the
reimbursement, the Management and Advisory Expenses, Other Expenses, and
Total Portfolio Annual Expenses would have been 1.52%, 0.73%, and 2.25%
respectively.
/3/For the T. Rowe Price International Stock Portfolio, the Management and
Advisory Expenses were 0.90% and Other Expenses were 0.01%. Therefore,
Total Portfolio Annual Expenses (reduced by custodial offset arrangements)
for the period ended December 31, 1999 were 0.91%.
/4/Management and Advisory Expenses, Other Expenses, and Total Portfolio
Annual Expenses are based on actual expenses for the fiscal year ending
December 31, 1999. Management and Advisory Expenses were 1.00% for the
Warburg Pincus International Equity and 0.90% for the Warburg Pincus Small
Company Growth portfolios. Other Expenses equaled 0.33% and 0.25%,
respectively, so that the Total Portfolio Annual Expenses were 1.33% for
the Warburg Pincus International Equity and 1.15% Warburg Pincus Small
Company Growth portfolios. This includes transfer agency offsets that
reduced the fees by 0.01% each.
/5/WRL Management, Inc. ("WRL Management") has undertaken, until at least
April 30, 2001, to pay expenses on behalf of the portfolios of the WRL Fund
to the extent normal operating expenses of the portfolio exceed a stated
percentage of each portfolios average daily net assets. In 1999, WRL
Management reimbursed WRL J. P. Morgan Real Estate Securities Portfolio in
the amount of $51,924. Without such reimbursement, the total annual
expenses during 1999 for this portfolio would have been 2.69%.
/6/For WRL Janus Growth, WRL Management previously waived 0.025% of its
advisory fee for the first $3 billion of the portfolio's average daily net
assets (net fee: 0.775%); and 0.05% for the portfolio's average daily net
assets above $3 billion (net fee: 0.75%). For WRL Janus Global, WRL
Management currently waives 0.025% of its advisory fee on portfolio average
daily net assets over $2 billion (net fee: 0.775%). The waivers for WRL
Janus Growth and WRL Janus Global were voluntary and were terminated on
June 25, 2000.
/7/For the Transamerica VIF Growth Portfolio, the Management and Advisory
Expenses before waivers were 0.75% and Other Expenses before reimbursements
were 0.15%. Therefore, Total Portfolio Annual Expenses before waivers and
Other Expenses before reimbursements (reduced by custodial offset
arrangements) for the period ended December 31, 1999 were 0.90%.
/8/For the fiscal year ended December 31, 1999, the Adviser waived and/or
reimbursed certain fees and expenses to maintain a total expense ratio of
1.20%. Absent such waivers and/or reimbursement, Management and Advisory
Expenses, Other Expenses and Rule 12b-1 Fees would have been 1.00%, 0.18%,
and 0.25%, respectively.
/9/Class 2 shares of each Seligman Portfolio were first offered on May 1,
2000. Expense figures shown for Rule 12b-1 Fees are estimated for the
fiscal year 2000.
/10/J. & W. Seligman & Co. Incorporated, the Manager, has agreed to reimburse
other expenses which exceed 0.40% per annum of average net assets of
Seligman Global Technology Portfolio. Without such reimbursement, other
expenses for 1999 would have been 0.41%.
10
<PAGE>
EXAMPLE
The following example illustrates the expenses that you would incur on a
$1,000 Premium Payment over various periods, assuming (1) a 5% annual rate of
return and (2) full surrender at the end of each period. The examples assume
that current fee waivers and expense reimbursement arrangements for the funds
continue for the periods shown. As noted in the Fee Table, the Policy imposes
no surrender or withdrawal charges of any kind. Your expenses are identical
whether you continue the Policy or withdraw the entire value of your Policy at
the end of the applicable period as a lump sum or under one of the Policy's
Annuity Payment Options.
A = Double Enhance Death Benefit Option (1.45%)
B = Return of Premium Death Benefit Option (1.30%)
C = 6 Year Step-Up To Age 81 Death Benefit Option (1.35%)
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Alliance Growth Portfolio................. A 28 84 144 305
B 26 80 137 290
C 27 81 139 295
Alliance Premier Growth Portfolio......... A 29 89 152 321
B 28 85 145 307
C 28 87 147 312
Alliance Technology Portfolio............. A 28 87 148 313
B 27 82 141 298
C 27 84 143 303
Dreyfus Small Cap Value Portfolio......... A 29 87 149 315
B 27 83 141 300
C 28 84 144 305
Dreyfus Socially Responsible Growth Fund.. A 24 75 128 273
B 23 70 120 257
C 23 72 123 263
Endeavor Enhanced Index Portfolio......... A 24 74 127 272
B 23 70 119 256
C 23 71 122 262
Federated American Leaders Portfolio...... A 25 77 132 282
B 24 73 125 267
C 24 74 127 272
Federated High Income Bond Portfolio...... A 24 75 128 273
B 23 70 120 257
C 23 72 123 263
Federated Prime Money Portfolio........... A 24 73 125 267
B 22 68 117 251
C 23 70 119 256
Federated U.S. Government Securities
Portfolio................................ A 25 76 130 278
B 23 72 123 263
C 24 73 125 268
Federated Utility Portfolio............... A 26 79 135 288
B 24 75 128 273
C 25 76 130 278
Montgomery Growth Portfolio............... A 29 88 150 318
B 27 84 143 303
C 28 85 145 308
Montgomery Emerging Markets Portfolio..... A 32 99 168 352
B 31 95 161 338
C 31 96 164 343
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Seligman Capital Portfolio................ A 25 76 130 278
B 23 72 123 263
C 24 73 125 268
Seligman Communications and Information
Portfolio................................ A 27 84 143 304
B 26 80 136 290
C 26 81 139 294
Seligman Global Technology Portfolio...... A 32 97 165 346
B 30 93 158 332
C 31 94 160 336
Stein Roe Small Company Growth Portfolio.. A 23 71 122 261
B 22 66 114 245
C 22 68 116 250
Strong International Stock Portfolio...... A 28 86 146 309
B 26 81 139 294
C 27 83 141 299
Strong Schafer Value Portfolio............ A 28 87 148 313
B 27 82 141 298
C 27 84 143 303
Transamerica VIF Growth Portfolio......... A 25 76 131 279
B 23 72 123 264
C 24 73 126 269
T. Rowe Price International Stock
Portfolio................................ A 26 81 138 293
B 25 76 131 279
C 25 78 133 284
Wanger U.S. Small Cap Advisor Portfolio... A 27 81 139 295
B 25 77 132 281
C 26 78 134 286
Wanger International Small Cap Advisor
Portfolio................................ A 31 95 162 340
B 30 91 155 326
C 30 92 157 331
Warburg Pincus International Equity
Portfolio................................ A 30 90 154 324
B 28 86 146 310
C 29 87 149 315
Warburg Pincus Small Company Growth
Portfolio................................ A 28 85 145 307
B 26 81 138 292
C 27 82 140 297
WRL Alger Aggressive Growth Portfolio..... A 25 78 134 285
B 24 74 126 270
C 24 75 129 275
WRL J.P. Morgan Real Estate Securities
Portfolio................................ A 26 81 138 293
B 25 76 131 279
C 25 78 133 284
WRL Janus Global Portfolio................ A 26 79 136 289
B 24 75 128 274
C 25 76 131 279
WRL Janus Growth Portfolio................ A 25 76 130 277
B 23 71 122 262
C 24 73 125 267
WRL LKCM Strategic Total Return
Portfolio................................ A 25 77 131 280
B 23 72 124 265
</TABLE>
You should not consider this example to be a representation of past or future
expenses or performance. Actual expenses may be higher than those shown,
subject to the guarantees in the Policy.
12
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CONDENSED FINANCIAL INFORMATION
Please note that Appendix A contains a history of accumulation unit values in
a table labeled "Condensed Financial Information."
1. THE ANNUITY POLICY
The Advisor's Edge Select variable annuity is a flexible-premium multi-funded
variable annuity offered by Peoples Benefit. The Policy provides a means of
investing on a tax-deferred basis in twenty-nine Portfolios of the underlying
mutual funds (the "Portfolios") and a fixed account. The fixed account offers
interest rates that Peoples Benefit guarantees will not decrease during the
selected guaranteed period. There may be a different interest rate for each
different guaranteed period that you select. The Guaranteed Period Options are
the various interest rate periods for the fixed account which Peoples Benefit
may offer and into which Premium Payments may be paid or amounts transferred.
Who Should Invest
The Policy 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 Policy 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 Policy is unnecessary when the Policy is purchased to fund a qualified
plan.
About the Policy
The Advisor's Edge Select variable annuity is a policy between you, the Policy
Owner, and Peoples Benefit, the issuer of the Policy.
The Policy provides benefits in two distinct phases: accumulation and income.
Accumulation Phase
The Accumulation Phase starts when you purchase your Policy and ends
immediately before the Annuity Commencement Date, when the Income Phase
starts. During the Accumulation Phase, you choose to allocate your investment
in the Policy among the twenty-nine available Portfolios and the fixed
account. The Policy is a variable annuity because the value of your investment
in the Subaccounts can go up or down depending on the investment performance
of the Subaccounts you choose. The Policy is a flexible-premium annuity
because you can make additional investments of at least $500 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 transfers among your Subaccount choices at no charge and without
current tax consequences. (See Transfers Among the Subaccounts and the
Fixed Account, page 23.)
. Withdraw all or part of your money with no surrender penalty charged by
Peoples Benefit, although you may incur income taxes and a 10% penalty tax.
(See Full and Partial Withdrawals, page 30.)
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
Policy and the Annuity Payment Option you select. The Annuity Payment Options
are explained at ANNUITY PAYMENTS, page 14.
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At your election, payments can be either variable or fixed. If variable, the
payments rise or fall depending on the investment performance of the
Subaccounts 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 Policy, money you have allocated to the Subaccounts is
deposited into Peoples Benefit's Separate Account V. 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 Peoples Benefit but are accounted for
separately from Peoples Benefit's other assets and can be used only to satisfy
its obligations to Policy Owners.
2. ANNUITY PAYMENTS
During the Income Phase, you receive regular annuity payments under a wide
range of Annuity Payment Options.
Starting the Income Phase
As Policy Owner, you exercise control over when the Income Phase begins by
specifying an Annuity Commencement Date on the customer order form when you
purchase the Policy. The Annuity Commencement Date is the date on which
annuity payments begin. You may also change the Annuity Commencement Date at
any time in writing, as long as the Annuitant or Joint Annuitant is living and
Peoples Benefit receives the request at least 30 days before the then-
scheduled Annuity Commencement Date. Any Annuity Commencement Date you request
must be at least 30 days from the day Peoples Benefit receives written notice
of it. This date may be any date at least thirty days after the Policy Date
and may not be later than the last day of the Policy month starting after the
Annuitant attains age 85, except as expressly allowed by Peoples Benefit. In
no event will this date be later than the last day of the month following the
month in which the Annuitant attains age 95.
The Annuity Commencement Date for Qualified Policies may also be controlled by
endorsements, the plan, or applicable law.
Annuity Payment Options
The Policy provides five Annuity Payment Options that are described below. You
may choose any combination of Annuity Payment Options. Peoples Benefit will
use your Adjusted Policy Value to provide these annuity payments. The Adjusted
Policy Value is the Policy Value increased or decreased by any applicable
Excess Interest Adjustment. If the Adjusted Policy Value on the Annuity
Commencement Date is less than $2,000, Peoples Benefit reserves the right to
pay it in one lump sum in lieu of applying it under an Annuity Payment Option.
You can receive annuity payments monthly, quarterly, semi-annually, or
annually. (Peoples Benefit reserves the right to change the frequency if
payments would be less than $50.)
Unless you choose to receive variable payments under Annuity Payment Options
3-V or 5-V, the amount of each payment will be set on the Annuity Commencement
Date and will not change. You may, however, choose to receive variable
payments under Annuity Payment Options 3-V and 5-V. The dollar amount of the
first variable payment will be determined in accordance with the annuity
payment rates set forth in the applicable table contained in your Policy. The
dollar amount of additional variable
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payments will vary based on the investment performance of the Subaccount(s).
The dollar amount of each variable payment after the first may increase,
decrease, or remain constant. If the actual investment performance exactly
matched the assumed investment return of 5% at all times, the amount of each
variable annuity payment would remain equal. If actual investment performance
exceeds the assumed investment return, the amount of the variable annuity
payments would increase. Conversely, if actual investment performance is lower
than the assumed investment return, the amount of the variable annuity
payments would decrease.
A charge for Premium Taxes and an Excess Interest Adjustment may be made when
annuity payments begin.
The Annuity Payment Options are explained below. Options 1, 2, and 4 are fixed
only. Options 3 and 5 can be fixed or variable.
. Payment Option 1 - Interest Payments. We will pay the interest on the
amount we use to provide annuity payments in equal payments, or this amount
may be left to accumulate for a period of time to which you and Peoples
Benefit agree. You and Peoples Benefit will agree on withdrawal rights when
you elect this option.
. Payment Option 2 - Income for a Specified Period. We will make level
payments only for a fixed period you choose. No funds will remain at the
end.
. Payment Option 3 - Life Income. You may choose between:
Fixed Payments
. No Period Certain - We will make level payments only during the
annuitant's lifetime.
. 10 Years Certain - We will make level payments for the longer of the
annuitant's lifetime or ten years.
. Guaranteed Return of Policy Proceeds - We will make level payments for
the longer of the annuitant's lifetime or until the total dollar amount
of payments we make to you equals the amount applied to this option.
Variable Payments
. No Period Certain - Payments will be made only during the lifetime of
the annuitant.
. 10 Years Certain - Payments will be made for the longer of the
annuitant's lifetime or ten years.
. Payment Option 4 - Income of a Specified Amount. Payments are made for any
specified amount until the amount applied to this option, with interest, is
exhausted. This will be a series of level payments followed by a smaller
final payment.
. Payment Option 5 - Joint and Survivor Annuity. You may choose between:
Fixed Payments
. Payments are made during the joint lifetime of the annuitant and a joint
annuitant of your selection. Payments will be made as long as either
person is living.
Variable Payments
. Payments are made during the joint lifetime of the annuitant and a joint
annuitant of your selection. Payments will be made as long as either
person is living.
Other annuity payment options may be arranged by agreement with Peoples
Benefit. Certain annuity payment options may not be available in all states.
NOTE CAREFULLY:
IF:
. you choose Life Income with No Period Certain or a Joint and Survivor
Annuity; and
. the annuitant(s) dies before the due date of the second (third, fourth,
etc.) annuity payment;
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THEN:
. we may make only one (two, three, etc.) annuity payments.
IF:
. you choose Income for a Specified Period, Life Income with 10 years
Certain, Life Income with Guaranteed Return of Policy Proceeds, or Income
of a Specified Amount; and
. the person receiving payments dies prior to the end of the guaranteed
period;
THEN:
. the remaining guaranteed payments will be continued to that person's
beneficiary, or their present value may be paid in a single sum.
We will not pay interest on amounts represented by uncashed annuity payment
checks if the postal or other delivery service is unable to deliver checks to
the payee's address of record. The person receiving payments is responsible
for keeping Peoples Benefit informed of their current address.
Calculating Annuity Payments
Fixed Annuity Payments. Each fixed Annuity Payment is guaranteed to be at
least the amount shown in the Policy's Annuity Tables corresponding to the
Annuity Payment Option selected.
Variable Annuity Payments. To calculate variable Annuity Payments, Peoples
Benefit 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 Policy. This amount depends on the value of your Policy on the
Annuity Commencement 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.
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.
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A Few Things to Keep in Mind Regarding Annuity Payments
. If an Annuity Payment Option is not selected, Peoples Benefit will assume
that you chose the Payment Option 3 - Life Income (with 10 years of
payments guaranteed). Any amounts in a Subaccount immediately before the
Income Phase begins will be applied under a variable Annuity Payment
Option based on the performance of that Subaccount.
. Peoples Benefit reserves the right to change the frequency if payments
would be less than $50. If on the Annuity Commencement Date, the Adjusted
Policy Value is less than $2,000, Peoples Benefit reserves the right to
pay it in one lump sum in lieu of applying it under an annuity payment
option.
. From time to time, Peoples Benefit may require proof that the Annuitant,
Joint Annuitant, or Policy Owner is living.
. If someone has assigned ownership of a Policy to you, or if a non-natural
person (e.g., a corporation) owns a Policy, you may not start the Income
Phase of the Policy without Peoples Benefit's consent.
. At the time Peoples Benefit calculates your fixed Annuity Payments,
Peoples Benefit may offer more favorable rates than those guaranteed in
the Annuity Tables found in the Policy.
. 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 Subaccount funding the variable Annuity Payments by written request
or by calling 800-866-6007.
. You may select an Annuity Payment Option and allocate a portion of the
value of your Policy 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.
. If 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 Peoples Benefit informed
of the Payee's most current address of record.
3. PURCHASE
Customer Order Form and Issuance of Policies
To invest in the Advisor's Edge Select variable annuity, you should send a
completed customer order form and your Initial Premium Payment to the address
indicated on the customer order form. If you wish to make a personal delivery
by hand or courier to Peoples Benefit of your completed customer order form
and Initial Premium Payment (rather than through the mail), do so at our
Administrative Offices, 4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499.
Peoples Benefit will issue a Policy only if the Annuitant and Joint Annuitant
are 85 years of age or less.
If the customer order form and any other required documents are received in
good order, Peoples Benefit will issue the Policy and will credit the Initial
Premium Payment within two Business Days after receipt. (A Business Day is any
day that the New York Stock Exchange is open for trading.) Along with the
Policy, Peoples Benefit will also send a Policy acknowledgment form, which you
should complete, sign, and return in accordance with its instructions. Please
note that until Peoples Benefit receives the acknowledgment form signed by the
Owner and any Joint Owner, the Owner and any Joint Owner must obtain a
signature guarantee on their written signed request in order to exercise any
rights under the Policy.
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If Peoples Benefit cannot credit the Initial Premium Payment because the
customer order form or other required documentation is incomplete, Peoples
Benefit will contact the applicant in writing, explain the reason for the
delay, and refund the Initial Premium Payment within five Business Days unless
the applicant consents to Peoples Benefit's retaining the Initial Premium
Payment and crediting it as soon as the necessary requirements are fulfilled.
In addition to Non-Qualified Policies, Peoples Benefit also offers the
Advisor's Edge Select as a Qualified Policy. Note that Qualified Policies
contain certain other restrictive provisions limiting the timing of payments
to and distributions from the Qualified Policy. (See QUALIFIED INDIVIDUAL
RETIREMENT ANNUITIES, page 30.)
DEFINITION
Qualified Policy
When the term "Qualified Policy" is used in this prospectus we mean a Policy
that qualifies as an individual retirement annuity under either Section
403(b), 408(b), or 408A of the Internal Revenue Code.
Premium Payments
A Premium Payment is any amount you use to buy or add to the Policy. A Premium
Payment may be reduced by any applicable Premium Tax. In that case, the
resulting amount is called a Net Premium Payment. The initial Net Premium
Payment is credited to the Policy within two business days of receipt of the
Premium Payment, customer order form and other required documents.
A Few Things to Keep in Mind Regarding Premium Payments
. The minimum Initial Premium Payment for a Non-Qualified Policy is
$10,000.
. The minimum Initial Premium Payment for a Qualified Policy is $1,000 (or
$50 if by payroll deduction).
. You may make additional Premium Payments at any time during the
Accumulation Phase and while the Annuitant or Joint Annuitant, if
applicable, is living. Additional Premium Payments must be at least $500
for Non-Qualified Policies. Additional Premium Payments must be at least
$25 for Qualified Policies.
. Additional Premium Payments received before the close of the New York
Stock Exchange (usually 4:00 p.m. Eastern time) are credited to the
Policy as of the close of business that same day.
. The total of all Premium Payments may not exceed $1,000,000 without our
prior approval.
. Your Initial Net Premium Payment will be immediately invested among the
Subaccounts selected in your customer order form. See Allocation of
Premium Payments, page 19, for more information.
The date on which the Policy is issued is called the Policy Date. A Policy
Anniversary is any anniversary of the Policy Date. A Policy Year is a period
of twelve months starting with the Policy Date or any Policy Anniversary.
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DEFINITION
Premium Tax
A Premium Tax is a regulatory tax some states assess on the Premium Payments
made into a Policy. If we should have to pay any Premium Tax, we will deduct
it from the Policy Value on the Annuity Commencement Date, date of death, or
date of full surrender.
As of the date of this Prospectus, the following state assesses a Premium
Tax on all initial and subsequent Purchase Payments:
<TABLE>
<CAPTION>
Qualified Non-Qualified
--------- -------------
<S> <C> <C>
South Dakota..................................... 0.00% 1.25%
</TABLE>
As of the date of this Prospectus, the following states assess a Premium Tax
against the Adjusted Policy Value if the 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
For wiring instructions, please contact our Administrative Office at 800-866-
6007.
Allocation of Premium Payments
You specify on the customer order form what portion of your Premium Payments
you want to be allocated among which Subaccounts and which Guaranteed Period
Options. You may allocate your Premium Payments to one or more Subaccounts or
to any of the Guaranteed Period Options. All allocations you make to the
Subaccounts must be in whole-number percentages totaling 100%.
Should your investment goals change, you may change the allocation percentages
for additional Net Premium Payments by sending written notice to or by calling
Peoples Benefit. Requests for Transfers received before the close of the New
York Stock Exchange (generally 4 p.m. Eastern time) are processed as of that
day. Requests received after the close of the New York Stock Exchange are
processed the next Business Day.
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WHAT'S MY POLICY WORTH TODAY?
Policy Value
The Policy Value of your Policy is the value of all amounts accumulated
under the Policy during the Accumulation Phase (similar to the current
market value of a mutual fund account). When the Policy is opened, the
Policy Value is equal to your Initial Net Premium Payment. On any Business
Day thereafter, the Policy Value equals the Policy Value from the previous
Business Day,
plus -
. any additional Net Premium Payments credited
. any increase in the Policy Value due to investment results of the
Subaccount(s) you selected and the interest credited to the Guaranteed
Period Options
. Positive Excess Interest Adjustment, if applicable
minus -
. any decrease in the Policy Value due to investment results of the
Subaccount(s) you selected
. the daily Mortality and Expense Risk Fee
. the daily Administrative Expense Charge
. the Annual Policy Service Charge, if applicable
. any withdrawals
. any charges for Transfers made after the first twelve in a Policy Year
. Negative Excess Interest Adjustment, if applicable
. 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 Policy Value of your Policy to change from Valuation
Period to Valuation Period, reflecting the investment experience of the
Subaccounts you have selected as well as the daily deduction of charges.
An Accumulation Unit is a measure of your ownership interest in the Policy
during the Accumulation Phase. When you allocate your Net Premium Payments
to a selected Subaccount, Peoples Benefit will credit a certain number of
Accumulation Units to your Policy. Peoples Benefit determines the number of
Accumulation Units it credits by dividing the dollar amount you have
allocated to a Subaccount by the Accumulation Unit Value for that Subaccount
as of the end of the Valuation Period in which the payment is received. Each
Subaccount 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 Subaccount. The net rate
of return reflects the performance of the Subaccount for the Valuation
Period and is net of asset charges to the Subaccount. Per Subaccount, the
Policy Value equals the number of Accumulation Units multiplied by the
Accumulation Unit Value for that Subaccount.
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.
4. INVESTMENT OPTIONS
The Advisor's Edge Select variable annuity offers you a means of investing in
twenty-nine Portfolios offered by twelve different investment companies (each
investment company a "Fund") and a fixed
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account. The companies that provide investment advice and administrative
services for the underlying fund Portfolios offered through this Policy are
listed below. More detailed information, including an explanation of the
Portfolio's investment objectives, may be found in the current prospectuses
for the underlying funds, which are attached to this prospectus. You should
read the prospectuses for the underlying funds carefully before you invest.
For information about the fixed account and the Guaranteed Period Options, see
The Fixed Account, page 22.
The general public may invest in the Portfolios only through certain insurance
policies and qualified plans. The investment objectives and policies of the
Portfolios may be similar to those of certain publicly available funds or
portfolios. However, you should not expect that the investment results of any
publicly available funds or portfolios will be comparable to those of the
Portfolios.
The Policy was not designed for professional market timing organizations or
other persons that use programmed, large, or frequent transfers. The use of
such exchanges may be disruptive to an underlying fund portfolio. The Company
reserves the right to reject any Premium Payment or exchange request from any
person, if, in the Company's judgment, an underlying fund portfolio would be
unable to invest effectively in accordance with its investment objectives and
policies or would otherwise be potentially adversely affected or if an
underlying portfolio would reject the Company's purchase order.
Alliance Variable Products Series Fund, Inc.
Advised by Alliance Capital Management L.P.
Alliance Growth Portfolio
Alliance Premier Growth Portfolio
Alliance Technology Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Advised by The Dreyfus Corporation
Endeavor Series Trust
Advised by Endeavor Management Co.
Dreyfus Small Cap Value Portfolio
Endeavor Enhanced Index Portfolio
T. Rowe Price International Stock Portfolio
The Federated Insurance Series
Advised by Federated Investment Management Company
Federated American Leaders Portfolio
Federated High Income Bond Portfolio
Federated Prime Money Portfolio
Federated U.S. Government Securities Portfolio
Federated Utility Portfolio
The Montgomery Funds III
Advised by Montgomery Asset Management, LLC
Montgomery Growth Portfolio
Montgomery Emerging Markets Portfolio
Seligman Portfolios, Inc.
Advised by J. & W. Seligman & Co.
Seligman Capital Portfolio
Seligman Communications and Information Portfolio
Seligman Global Technology Portfolio
21
<PAGE>
SteinRoe Variable Investment Trust
Advised by Stein Roe & Farnham Incorporated
Stein Roe Small Company Growth Portfolio
Strong Variable Insurance Funds, Inc.
Advised by Strong Capital Management, Inc.
Strong International Stock Portfolio
Strong Schafer Value Portfolio
Transamerica Variable Insurance Fund, Inc.
Advised by Transamerica Investment Management, LLC
Transamerica VIF Growth Portfolio
Wanger Advisors Trust
Advised by Wanger Asset Management, L.P.
Wanger U.S. Small Cap Advisor Portfolio
Wanger International Small Cap Advisor Portfolio
Warburg Pincus Trust
Advised by Credit Suisse Asset Management
Warburg Pincus International Equity Portfolio
Warburg Pincus Small Company Growth Portfolio
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
WRL Alger Aggressive Growth Portfolio
WRL J.P. Morgan Real Estate Securities Portfolio
WRL Janus Growth Portfolio
WRL LKCM Strategic Total Return Portfolio
The following Subaccount is only available to Owner's who held an investment
in this Subaccount on September 1, 2000. However, if you withdraw all of your
money from this Subaccount after September 1, 2000, you may not reinvest your
money into this Subaccount.
WRL Series Fund, Inc.
Advised by WRL Investment Management, Inc.
WRL Janus Global Portfolio
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, total expenses, and charges
can be found in the current prospectuses for the corresponding Funds. The
investment advisors to some of the Funds may compensate Peoples Benefit for
providing administrative services in connection with some of the Portfolios.
Such compensation will be paid from the assets of the investment advisors.
The Fixed Account
Premium Payments allocated and amounts transferred to the fixed account become
part of Peoples Benefit's general account. Interests in the general account
have not been registered under the Securities Act of 1933, nor is the general
account registered as an investment company under the 1940 Act. Accordingly,
neither the general account nor any interests therein
22
<PAGE>
are generally subject to the provisions of the 1933 and 1940 Acts. Peoples
Benefit has been advised that the staff of the SEC has not reviewed the
disclosures in this prospectus which relate to the fixed account.
We guarantee that the interest credited to the fixed account will not be less
than 3% per year. At the end of the Guaranteed Period Option you selected, the
value in the Guaranteed Period Option will automatically be transferred into a
new Guaranteed Period Option of the same length (or the next shorter period if
the same period is no longer offered) at the current interest rate for that
period. You can transfer to another investment choice by giving us notice
within 30 days before the end of the expiring guaranteed period.
Surrenders or partial withdrawals from a Guaranteed Period Option of the fixed
account are subject to an Excess Interest Adjustment. This adjustment may
increase or decrease the amount of interest credited to your policy. The
Excess Interest Adjustment will not decrease the interest credited to your
Policy below 3% per year, however. You bear the risk that we will not credit
interest greater than 3% per year. We determine credited rates, which are
guaranteed for at least one year, in our sole discretion.
If you select the fixed account, your money will be placed with Peoples
Benefit's other general assets. The amount of money you are able to accumulate
in the fixed account during the Accumulation Phase depends upon the total
interest credited. The amount of annuity payments you receive during the
income phase from the fixed portion of your Policy will remain level for the
entire income phase.
Transfers Among the Subaccounts and the Fixed Account
Should your investment goals change, you may make unlimited transfers of money
among the Subaccounts at no cost, subject to the following conditions:
. You may make requests for transfers in writing or by telephone. Peoples
Benefit will process requests it receives before the close of the New York
Stock Exchange (generally 4:00 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 transfer from a Subaccount is $500 (unless the
Policy Value in a Subaccount is less than $500).
. Peoples Benefit does not currently charge a fee for transfers among the
Subaccounts, although it reserves the right to charge a $10 fee for
Transfers in excess of 12 per Policy Year.
. Transfers out of a Guaranteed Period Option of the fixed account are
limited to the following:
-- Within 30 days prior to the end of the guaranteed period you must notify
us that you wish to transfer the amount in that Guaranteed Period Option
to another investment choice. No Excess Interest Adjustment will apply.
-- Transfers of amounts equal to interest credited. This may affect your
overall interest-crediting rate, because transfers are deemed to come
from the oldest Premium Payment first.
-- Other than at the end of a guaranteed period, transfers of amounts from
the Guaranteed Period Option (in excess of interest credited), are
subject to an Excess Interest Adjustment. If the adjustment is negative,
then the maximum amount you can transfer is 25% of the amount in that
Guaranteed Period Option, less any previous transfers during the current
Policy Year. If the adjustment is positive, then we do not limit the
amount that you can transfer.
-- Transfers of the Guaranteed Period Option amounts equal to interest
credited must be at least $50.
. There are no transfers permitted out of the Dollar Cost Averaging Fixed
Account Option except through the Dollar Cost Averaging Program.
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<PAGE>
Telephone Transactions
You may establish the telephone transfer privilege on your Policy by
completing the appropriate section of the Policy acknowledgment form you will
receive with your Policy or by completing a separate telephone authorization
form at a later date. You may also authorize a third party to initiate
transactions by telephone by completing a third party authorization form or
the appropriate section of the Policy acknowledgment form.
Peoples Benefit will take reasonable steps to confirm that instructions
communicated by telephone are genuine. Before we act on any request, we will
ask the caller for his or her Policy number and Social Security Number. In
addition, we will take reasonable steps to confirm that instructions
communicated by telephone from a third party are genuine. The third party
caller will be asked for his or her name, company affiliation (if
appropriate), the Policy number to which he or she is referring, and the
Social Security number of the Policy Owner. This information will be verified
with the Policy Owner's records prior to processing a transaction, and all
transactions performed will be verified with the Policy Owner through a
written confirmation statement. We will record all calls. Neither the Company
nor the Funds shall be liable for any loss, cost, or expense for action on
telephone instructions that are believed to be genuine in accordance with
these procedures.
Asset Rebalancing
During the Accumulation Phase, you may instruct us to make automatic transfers
of amounts among the Subaccounts in order to maintain a desired allocation of
Policy Value among those Subaccounts. We will "rebalance" monthly, quarterly,
semi-annually, or annually, beginning on the date you select. You must select
the percentage of the Policy Value you desire in each of the various
Subaccounts offered (totaling 100%). Rebalancing can be started, stopped, or
changed at any time, except that rebalancing will not be available when
Dollar-Cost Averaging is in effect or when any other transfer is requested.
Dollar Cost Averaging Program
During the Accumulation Phase, you may instruct us to automatically transfer
money from the Dollar Cost Averaging Fixed Account Option or the Federated
Prime Money Portfolio into any other Subaccounts. There is no charge for this
program.
Complete and clear instructions must be received before a dollar cost
averaging program will begin. The instructions must include:
. the Subaccounts into which money from the Dollar Cost Averaging Fixed
Account (or other subaccount(s) used for dollar cost averaging) is to be
transferred; and
. either the dollar amount to transfer monthly or quarterly (each transfer
must be at least $500) or the number of transfers (minimum of 6 monthly or
4 quarterly and maximum of 24 monthly or 8 quarterly).
Transfers must begin within 30 days. We will make the transfers on the 28th
day of the applicable month. You may change your allocations at anytime.
Only one dollar cost averaging program can run at one time. This means that
any addition to a dollar cost averaging program must change either the length
of the program or the dollar amount of the transfers. New instructions must be
received each time there is an addition to a dollar cost averaging program.
Any amount in the Dollar Cost Averaging Fixed Account (or other subaccount(s)
used for dollar cost averaging) for which we have not received complete and
clear instructions will remain in the Dollar Cost Averaging Fixed Account (or
other such subaccount) until we receive the instructions. If we have not
received complete and clear instructions within 30 days, the interest credited
in the Dollar Cost
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Averaging Fixed Account may be adjusted downward, but not below the guaranteed
effective annual interest rate of 3%.
We may credit different interest rates for dollar cost averaging programs of
varying time periods. If you discontinue the dollar cost averaging program
before its completion, then the interest credited on amounts in the Dollar
Cost Averaging Fixed Account may be adjusted downward, but not below the
minimum guaranteed effective annual interest rate of 3%.
A CLOSER LOOK AT
Dollar-Cost Averaging
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 Subaccounts each month, more Accumulation Units are
credited to a Subaccount 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.
5. EXPENSES
There are charges and expenses associated with the Policy that reduce the
return on your investment in the Policy.
Excess Interest Adjustment
Withdrawals of Cash Value from the fixed account may be subject to an Excess
Interest Adjustment. This adjustment could retroactively reduce (or increase)
the interest credited in the fixed account to the guaranteed minimum of 3% per
year. See "Excess Interest Adjustment" in Section 7 of this prospectus.
Mortality and Expense Risk Fee
Peoples Benefit charges a fee as compensation for bearing certain mortality
and expense risks under the Policy. The annual charge is assessed daily based
on the net assets of the Separate Account. The annual Mortality and Expense
Risk Fee is dependent on the death benefit option you select on the customer
order form. For the Return of Premium Death Benefit Option the mortality and
expense risk fee is at an annual rate of 1.30%. For the 6 Year Step-Up Death
Benefit Option the mortality and expense risk fee is at an annual rate of
1.35%. For the Double Enhanced Death Benefit Option the mortality and expense
risk fee is at an annual rate of 1.45%.
We guarantee that this annual charge will not increase. If the charge is more
than sufficient to cover actual costs or assumed risks, any excess will be
added to Peoples Benefit's surplus. If the charges collected under the Policy
are not enough to cover actual costs or assumed risks, then Peoples Benefit
will bear the loss.
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A CLOSER LOOK AT
The Mortality and Expense Risk Fee
Peoples Benefit assumes mortality risk in two ways. First, where Policy
Owners elect an Annuity Payment Option under which Peoples Benefit
guarantees a number of payments over a life or joint lives, Peoples Benefit
assumes the risk of making monthly annuity payments regardless of how long
all Annuitants may live. Second, Peoples Benefit assumes mortality risk in
guaranteeing a minimum Death Benefit in the event the Annuitant dies during
the Accumulation Phase.
The expense risk that Peoples Benefit assumes is that the charges for
administrative expenses, which are guaranteed not to increase beyond the
rates shown for the life of the Policy, may not be great enough to cover the
actual costs of issuing and administering the Policy.
Administrative Expense Charge
Peoples Benefit assesses each Policy an annual Administrative Expense Charge
to cover the cost of issuing and administering each Policy and of maintaining
the Separate Account. The Administrative Expense Charge is assessed daily at a
rate equal to 0.15% annually of the net asset value of the Separate Account.
Transfer Fee
You are allowed to make 12 free transfers per year before the Annuity
Commencement Date. If you make more than 12 transfers per year, we reserve the
right to charge $10 for each additional transfer. Premium Payments, asset
rebalancing and dollar cost averaging tranfers are not considered transfers.
All transfer requests made at the same time are treated as a single request.
Portfolio Expenses
The value of the assets in the Separate Account will reflect the fees and
expenses paid by the Portfolios. A complete description of these expenses is
found in the "Fee Table" section of this prospectus and in each Fund's
prospectus and Statement of Additional Information.
6. TAXES
INTRODUCTION
The following discussion of annuity taxation is general in nature and is based
on Peoples Benefit's understanding of the treatment of annuity policies 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 Policy 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 Policy until you take some form
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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 POLICIES OWNED BY NON-NATURAL PERSONS, page 25, and
DIVERSIFICATION STANDARDS, page 29.)
A CLOSER LOOK AT
Tax Deferral
Tax deferral means no current tax on earnings in your Policy. The amount you
would have paid in income taxes can be left in the Policy 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 Payout
Option) from a Non-Qualified Policy during the Accumulation Phase, you as
Policy 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 Policy and then from the money you invested in the Policy.
This "investment in the Policy" can generally be described as the cost of the
Policy, and it generally includes all Premium Payments minus any amounts you
have already received under the Policy that represented the return of invested
money. Also for purposes of this rule, a pledge or assignment of a Policy is
treated as a partial withdrawal from a Policy. (If you are contemplating using
your Policy as collateral for a loan, you may be asked to pledge or assign
it.)
Taxation of Annuity Payments
When you take Annuity Payments in the Income Phase of a Non-Qualified Policy,
for tax purposes each payment is deemed to return to you a portion of your
investment in the Policy. Since with a Non-Qualified Policy you have already
paid taxes on those amounts (the Policy 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 Policy, in general, Peoples
Benefit 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 Policy bears to the total expected amount of Annuity
Payments for the term of the Policy. Peoples Benefit 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 Policy, in general, Peoples
Benefit 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, Peoples Benefit divides the investment in the Policy
by the total number of expected periodic payments. The remaining portion of
each payment is taxable at ordinary income tax rates.
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Once your investment in the Policy has been returned, the balance of the
Annuity Payments represent earnings only and therefore are fully taxable.
Taxation of Withdrawals and Distributions From Qualified Policies
Generally, the entire amount distributed from a Qualified Policy is taxable to
the Policy Owner. In the case of Qualified Policies 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 Peoples Benefit 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 Peoples Benefit withhold federal income taxes on
all distributions unless the recipient elects not to have any amounts withheld
and properly notifies Peoples Benefit of that election. In certain situations,
Peoples Benefit 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 the deferred annuity. However, there are exceptions to the penalty tax.
For instance, it does not apply to withdrawals: (i) made after the taxpayer
reaches age 59; (ii) made on or after the death of the Policy Owner or, where
the Policy 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 Policies);
(iii) attributable to the disability of the taxpayer which occurred after the
purchase of the Policy (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 Policy (note, however, that other penalties may apply); (vi) under
an immediate annuity policy (as defined in the Internal Revenue Code); (vii)
that can be traced to an investment in the Policy prior to August 14, 1982; or
(viii) under a Policy 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 age 59 1/2, or (b) before the taxpayer reaches
age 59 1/2.
For Qualified Policies, 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 Policies issued
under Section 408(b) or 408A 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.
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ANNUITY POLICIES OWNED BY NON-NATURAL PERSONS
Where a non-natural person (for example, a corporation) holds a Policy, that
Policy is generally not treated as an annuity policy for federal income tax
purposes, and the income on that Policy (generally the increase in the net
Policy 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 Policy, where an
employer purchases a Policy on behalf of an employee upon termination of a
qualified plan, or to an immediate annuity (as defined in the Internal Revenue
Code).
MULTIPLE-POLICIES RULE
All non-qualified annuity policies issued by the same company (or affiliate)
to the same Policy Owner during any calendar year are to be aggregated and
treated as one policy for purposes of determining the amount includible in the
taxpayer's gross income. Thus, any amount received under any Policy prior to
the Policy's Annuity Commencement 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 policies. The Treasury Department has specific
authority to issue regulations that prevent the avoidance of the multiple-
policies rules through the serial purchase of annuity policies 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 Policies
purchased by the same Policy Owner. Accordingly, a Policy Owner should consult
a tax adviser before purchasing more than one Policy or other annuity
policies. (The aggregation rules do not apply to immediate annuities (as
defined in the Internal Revenue Code).)
TRANSFERS OF ANNUITY POLICIES
Any transfer of a Non-Qualified Policy 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 Policy to the Policy
Owner at the time of such transfer. The transferee's investment in the Policy
will be increased by any amount included in the Policy 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 POLICIES
A transfer of ownership in a Policy, a collateral assignment, or the
designation of an Annuitant or other beneficiary who is not also the Policy
Owner may result in tax consequences to the Policy Owner, Annuitant, or
beneficiary that this prospectus does not discuss. A Policy Owner considering
such a transfer or assignment of a Policy 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 Policy
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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 Policy may need to be modified in order
to remain in compliance. For these reasons, Peoples Benefit reserves the right
to modify the Policy, as necessary, to maintain the tax-deferred status of the
Policy.
We intend to comply with the diversification regulations to assure that the
Policy continues to be treated as an annuity policy for federal income tax
purposes.
QUALIFIED INDIVIDUAL RETIREMENT ANNUITIES
Qualified Policies 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 Policy should
consult a personal tax adviser.
403(b) Policies
Peoples Benefit will offer Policies in connection with retirement plans
adopted by public school systems and certain tax-exempt organizations for
their employees under Section 403(b) of the Internal Revenue Code. More
detailed information on 403(b) Policies may be found in the Statement of
Additional Information.
7. ACCESS TO YOUR MONEY
The value of your Policy 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
. by taking systematic payouts
On or before the Annuity Commencement Date, the Policy Value is equal to the
owner's:
. Premium Payments; minus
. partial withdrawals (including the net effect of any applicable Excess
Interest Adjustments on such withdrawals); plus
. interest credited in the fixed account; plus or minus
. accumulated gains or losses in the separate account; minus
. service charges, rider fees, Premium Taxes, and transfer fees, if any.
On or before the Annuity Commencement Date, the Cash Value is equal to the
Adjusted Policy Value. The Adjusted Policy Value is the Policy Value increased
or decreased by any Excess Interest Adjustment.
Full and Partial Withdrawals
You may withdraw all or part of your money at any time during the Accumulation
Phase of your Policy. All partial withdrawals must be for at least $500.
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On the date Peoples Benefit receives your request for a full withdrawal, the
amount payable is the Cash Value. You will receive:
.the value of your Policy; plus or minus
.any Excess Interest Adjustment; minus
.any applicable premium taxes and service charges
To make a withdrawal, send your written request on the appropriate Peoples
Benefit form to our Administrative Offices.
Because you assume the investment risk for amounts allocated to the
Portfolios under the Policy, the total amount paid upon a full withdrawal of
the Policy may be more or less than the total Premium Payments made (taking
prior withdrawals into account).
Excess Interest Adjustment
Money that you withdraw from a Guaranteed Period Option of the fixed account
before the end of its guaranteed period (the number of years you specified the
money would remain in the Guaranteed Period Option) may be subject to an
Excess Interest Adjustment. At the time you request a withdrawal, if interest
rates set by Peoples Benefit have risen since the date of the initial
guarantee, the Excess Interest Adjustment will result in a lower Cash Value on
surrender. However, if interest rates have fallen since the date of the
initial guarantee, the Excess Interest Adjustment will result in a higher Cash
Value on surrender.
Excess Interest Adjustment
Money that you withdraw from a Guaranteed Period Option of the fixed account
before the end of its guaranteed period (the number of years you specified the
money would remain in the Guaranteed Period Option) may be subject to an
Excess Interest Adjustment. At the time you request a withdrawal, if interest
rates set by Peoples Benefit have risen since the date of the initial
guarantee, the Excess Interest Adjustment will result in a lower Cash Value on
surrender. However, if interest rates have fallen since the date of the
initial guarantee, the Excess Interest Adjustment will result in a higher Cash
Value on surrender.
Generally, all withdrawals from a Guaranteed Payment Option in excess of 10%
of your cumulative Premium Payment is subject to an Excess Interest
Adjustment. Beginning in the first Policy Year you can withdraw up to 10% of
your cumulative Premium Payments each Policy Year, in one or more withdrawals,
without an Excess Interest Adjustment. This is referred to as the "free
percentage."
There will be no Excess Interest Adjustment on any of the following:
. lump sum withdrawals of the free percentage available;
. nursing care and terminal condition withdrawals
. unemployment withdrawals;
. withdrawals to satisfy the minimum distribution requirements; and
. Systematic Payout Option payments, which do not exceed 10% of your
cumulative Premium Payments divided by the number of payouts made per year.
Please note that under these circumstances you will not receive a higher Cash
Value if interest rates have fallen nor will you receive a lower Cash Value if
interest rates have risen.
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Systematic Payout Option
You may elect to have a specified dollar amount provided to you from the
portion of your Policy's value allocated to the Portfolios on a monthly,
quarterly, semi-annual, or annual basis. The minimum amount for each
Systematic Payout is $50. If payments are from the fixed account, then they
cannot exceed the free percentage divided by the number of payments per year.
Monthly and quarterly payments must be made by electronic funds transfer
directly to your checking or savings account. There is no charge for this
benefit.
You may elect this option by completing a Systematic Payout Option Request
Form.
Peoples Benefit must receive your Form at least 30 days before the date you
want Systematic Payouts to begin. Peoples Benefit will process each Systematic
Payout on the date and at the frequency you specified in your Systematic
Payout Option Application Form. The start date for Systematic Payouts must be
between the first and the twenty-eighth day of the month. You may discontinue
the Systematic Payout Option at any time by notifying us in writing at least
30 days prior to your next scheduled withdrawal date.
We reserve the right to discontinue offering this option upon 30 days' notice,
and we also reserve the right to charge a fee for the option.
Payment of Full or Partial Withdrawal Proceeds
Peoples Benefit will pay cash withdrawals within seven days after receipt of
your written request for withdrawal except in one of the following situations,
in which Peoples Benefit 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 Policy Owner
. the payment is derived from premiums paid by check, in which case Peoples
Benefit may delay payment until the check has cleared your bank
Taxation of Withdrawals
For important information on the tax consequences of withdrawals, see
Taxation of Full and Partial Withdrawals, page 27, and Penalty Taxes on
Certain Early Withdrawals, page 28.
Tax Withholding on Withdrawals
If you do not provide Peoples Benefit with a written request not to have
federal income taxes withheld when you request a full or partial withdrawal,
federal tax law requires Peoples Benefit to withhold federal income taxes from
the taxable portion of any withdrawal and send that amount to the federal
government.
Nursing Care and Terminal Condition
No Excess Interest Adjustment will apply if you or your spouse has been:
. Confined in a hospital or nursing facility for 30 days in a row; or
. Diagnosed with a terminal condition (usually a life expectancy of 12 months
or less).
This benefit is also available to the annuitant or annuitant's spouse if the
owner is not a natural person.
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You may exercise this benefit at any time (during the Accumulation Phase) and
there is no charge for this benefit.
This benefit may not be available in all states. See the Policy or endorsement
for details and conditions.
Unemployment Waiver
No Excess Interest Adjustment will apply to withdrawals if you or your spouse
is unemployed. In order to qualify, you (or your spouse, which is applicable)
must have been:
. employed full time for at least two years prior to becoming unemployed; and
. employed full time on the Policy Date; and
. unemployed for at least 60 days in a row at the time of the withdrawal; and
. must have a minimum Cash Value at the time of withdrawal of $5,000
You must provide written proof from your State's Department of Labor, which
verifies that you qualify for and are receiving unemployment benefits at the
time of withdrawal.
You may exercise this benefit at any time (during the Accumulation Phase) and
there is no charge for this benefit.
This benefit is also available to the annuitant or annuitant's spouse if the
owner is not a natural person. This benefit may not be available in all
states. See the Policy for details.
8. PERFORMANCE
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the Federated Prime Money Subaccount, the yield of the
other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Policy Owners.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed 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.
Standardized Average Annual Total Return
When advertising performance of the Subaccounts, Peoples Benefit will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the SEC, 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 Standardized Average Annual
Total Return 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 charges, including the Annual Policy Service Charge and all
other Portfolio, Separate Account and Policy level charges except Premium
Taxes, if any.
ADDITIONAL PERFORMANCE MEASURES
Non-Standardized Cumulative Total Return and Non-Standardized Average Annual
Total Return
Peoples Benefit 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.
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Peoples Benefit may also show Non-Standardized Average Annual Total Return
(i.e., the average annual change in Accumulation Unit Values) with respect to
one or more periods. For 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"), the Non-Standardized Cumulative Total Return and Non-
Standardized Average Annual Total Return also reflect these expenses. These
returns do not reflect the Annual Policy Service Charge, any sales loads or
Premium Taxes (if any), which, if included, would reduce the percentages
reported.
Non-Standardized Total Return Year-To-Date
Peoples Benefit 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
returns reflect a deduction for the Separate Account and Portfolio expenses,
but do not include the Annual Policy Service Charge, any sales loads or
Premium Taxes (if any), which, if included, would reduce the percentages
reported by Peoples Benefit.
Non-Standardized One Year Return
Peoples Benefit 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 Portfolio
inception, if during the relevant year) and ending at the end of such calendar
year. One Year Return figures reflect the historical performance of the
Subaccounts as if the Policy were in existence before its inception date
(which it was not). After the Policy's inception date, the figures reflect the
percentage change in actual Accumulation Unit Values during the relevant
period. These returns reflect a deduction for the Separate Account and
Portfolio expenses, but do not include the Annual Policy Service Charge, any
sales loads or Premium Taxes (if any), which, if included, would reduce the
percentage reported by Peoples Benefit.
Non-Standardized Adjusted Historical Cumulative Return and Non-Standardized
Adjusted Historical Average Annual Total Return
Peoples Benefit may show Non-Standardized Adjusted Historical Cumulative
Return and Non-Standardized Adjusted Historical Average Annual Total Return,
calculated on the basis of the historical performance of the Portfolios, and
may assume the Policy was in existence prior to its inception date (which it
was not). After the Policy's inception date, the calculations will reflect
actual Accumulation Unit Values. These returns are based on specified premium
patterns which produce the resulting Policy Values. These returns reflect a
deduction for the Separate Account expenses and Portfolio expenses. These
returns do not include the Annual Policy Service Charge, any sales loads or
Premium Taxes (if any) which, if included, would reduce the percentages
reported.
The Non-Standardized Adjusted Historical Cumulative Return for a Subaccount is
the effective annual rate of return that would have produced the ending Policy
Value of the stated one-year period.
The Non-Standardized Adjusted Historical Average Annual Total Return for a
Subaccount is the effective annual compounded rate of return that would have
produced the ending Policy Value over the stated period had the performance
remained constant throughout.
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YIELD AND EFFECTIVE YIELD
Peoples Benefit may also show yield and effective yield figures for the
Subaccount investing in shares of the Federated Prime Money Portfolio. "Yield"
refers to the income generated by an investment in the Federated Prime Money
Portfolio over a seven-day period, which is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Federated Prime Money
Portfolio is assumed to be reinvested. Therefore, the effective yield will be
slightly higher than the yield because of the compounding effect of this
assumed reinvestment. These figures do not reflect the Annual Policy Service
Charge, any sales loads or Premium Taxes (if any) which, if included, would
reduce the yields reported.
From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than the Subaccount
that invests in the Federated Prime Money Portfolio for which Peoples Benefit
advertises yield, Peoples Benefit shall furnish a yield quotation referring to
the Subaccount computed in the following manner: the net investment income per
Accumulation Unit earned during a recent one month period divided by the
Accumulation Unit Value on the last day of the period.
Please refer to the Statement of Additional Information for a description of
the method used to calculate a Subaccount's yield and total return, and a list
of the indexes and other benchmarks used in evaluating a Subaccount's
performance.
The performance measures discussed above reflect results of the Subaccounts
and are not intended to indicate or predict future performance. For more
detailed information, see the Statement of Additional Information.
Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service that ranks mutual funds and other investment companies by
overall performance, investment objectives, and assets. Performance may also
be tracked by other ratings services, companies, publications, or persons who
rank separate accounts or other investment products on overall performance or
other criteria. Performance figures will be calculated in accordance with
standardized methods established by each reporting service.
9. DEATH BENEFIT
Peoples Benefit will pay a death benefit to your beneficiary, under certain
circumstances, if the Annuitant dies before the Annuity Commencement Date and
the Annuitant was also the Policy Owner. (If the Annuitant was not an owner, a
death benefit may or may not be paid. See below.) The beneficiary may choose
an Annuity Payment Option, or may choose to receive a lump sum.
When We Pay a Death Benefit
Before the Annuity Commencement Date
We will pay a death benefit to your beneficiary IF:
. you are both the Annuitant and an owner of the Policy; and
. you die before the Annuity Commencement Date.
If the only beneficiary is your surviving spouse, then he or she may elect to
continue the Policy as the new annuitant and owner, instead of receiving the
death benefit.
35
<PAGE>
We will also pay a death benefit to your beneficiary IF:
. you are not the Annuitant; and
. the Annuitant dies before the Annuity Commencement Date; and
. you specifically requested that the death benefit be paid upon the
Annuitant's death.
Distribution requirements apply to the Policy Value upon the death of any
owner. These requirements are detailed in the Statement of Additional
Information.
After the Annuity Commencement Date
The death benefit payable, if any, on or after the Annuity Commencement Date
depends on the Annuity Payment Option selected.
IF:
. you are not the Annuitant; and
. you die on or after the Annuity Commencement Date; and
. the entire interest in the Policy has not been paid to you;
THEN:
. the remaining portion of such interest in the Policy will be distributed at
least as rapidly as under the method of distribution being used as of the
date of your death.
When We Do Not Pay A Death Benefit
No death benefit is paid in the following cases:
IF:
. you are not the Annuitant; and
. the Annuitant dies prior to the Annuity Commencement Date; and
. you did not specifically request that the death benefit be paid upon the
Annuitant's death;
THEN:
. you will become the new Annuitant and the Policy will continue.
IF:
. you are not the Annuitant; and
. you die prior to the Annuity Commencement Date;
THEN:
. the new owner (unless it is your spouse) must generally surrender the
Policy within five years of your death for the Policy Value increased or
decreased by an Excess Interest Adjustment (if applicable).
Note carefully. If the Policy Owner does not name an Owner's designated
beneficiary, the Policy Owner's estate will become the new owner. If no
probate estate is opened (because, for example, the Policy Owner has precluded
the opening of a probate estate by means of a trust or other instrument), and
Peoples Benefit has not received written notice of the trust as a successor
owner signed prior to the Policy Owner's death, then that trust may not
exercise ownership rights to the Policy. It may be necessary to open a probate
estate in order to exercise ownership rights to the Policy if no Owner's
designated beneficiary is named in the written notice received by Peoples
Benefit.
36
<PAGE>
Amount of Death Benefit
Death benefit provisions may differ from state to state. The death benefit may
be paid as lump sum or as annuity payments. The death benefit will be the
greater of:
. Policy Value on the date we receive the required information; or
. Cash Value on the date we receive the required information (this will be
more than the Policy Value if there is a positive Excess Interest
Adjustment); or
. Guaranteed Minimum Death Benefit, if any (discussed below).
Guaranteed Minimum Death Benefit Options
On the Policy customer order form, you generally may choose one of the three
Guaranteed Minimum Death Benefit Options listed below. After the Policy is
issued, you cannot make an election and the death benefit cannot be changed.
If the Guaranteed Minimum Death Benefit is not available because of the age of
the Policy Owner or Annuitant, the death benefit will be the greater of the
Policy Value or Cash Value as of the date of death.
A. Return of Premium Death Benefit
The Return of Premium Death Benefit is:
. the total Premium Payments;
. less any adjusted partial withdrawals (discussed below) as of the date
of death.
. available if the Policy Owner or Annuitant is age 0 to 85 on the Policy
Date.
The Return of Premium Death Benefit is not available if the Policy Owner or
Annuitant is 85 or older on the Policy Date.
B. 6 Year Step-Up To Age 81 Death Benefit
The 6 Year Step-Up Death Benefit is:
. the higher of the initial premium or the Adjusted Policy Value on the
6th, 12th, 18th, etc., Policy Anniversary prior to the earlier date of
death or the Annuitant's 81st birthday;
. plus premiums paid
. less partial withdrawals subsequent to the date of the 6th anniversary
with the largest Policy Value.
. available if the Policy Owner or Annuitant is age 0 to 75 on the Policy
Date.
C. Double Enhanced Death Benefit
The Double Enhance Death Benefit is the greater of (1) or (2) where:
(1) is a 5% Annually Compounding Death Benefit, equal to the Cumulative
Premium Payments, minus Adjusted Partial Withdrawals, plus interest
accumulated at 5% per annum from the payment or withdrawal date to the
earlier of the Annuitant's date of death or the Annuitant's 81st
birthday; and
(2) is a Step-Up Death Benefit, equal to the largest Policy Value on the
Policy Date or on any Policy Anniversary prior to the earlier of the
Annuitant's date of death or the Annuitant's 81st
37
<PAGE>
birthday, plus any Premium Payments since the date of the Policy
Anniversary with the largest Policy Value, minus any Adjusted Partial
Withdrawals since the date of the Policy Anniversary with the largest
Policy Value.
The Double Enhanced Death Benefit is available if the Policy Owner or
Annuitant is 0 to 79 on the Policy Date.
Adjusted Partial Withdrawal
When you request a partial withdrawal, your Guaranteed Minimum Death Benefit
will be reduced by an amount called the Adjusted Partial Withdrawal. Under
certain circumstances, the adjusted partial withdrawal may be more than the
amount of your withdrawal request. It is also possible that if a death benefit
is paid after you have made a partial withdrawal, then the total amount paid
could be less than the total Premium Payments. We have included a detailed
explanation of this adjustment in the Statement of Additional Information.
10. OTHER INFORMATION
Peoples Benefit Life Insurance Company ("Peoples Benefit," "We," "Us," "Our")
Peoples Benefit Life Insurance Company is an Iowa stock life insurance company
incorporated on August 6, 1920, with Administrative Offices at 4333 Edgewood
Road, N.E., Cedar Rapids, Iowa 52499. It is principally engaged in offering
life insurance and annuity policies, and is licensed in 49 states, the
District of Columbia, and Puerto Rico.
As of December 31, 1999, Peoples Benefit 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 is a member of the Insurance Marketplace Standards Association
("IMSA"). IMSA is an independent, voluntary organization of life insurance
companies. It promotes high ethical standards in the sales and advertising of
individual life insurance and annuity products. Companies must undergo a
rigorous self- and independent assessment of their practices to become a
member of IMSA. The IMSA logo in our sales literature shows our ongoing
commitment to these standards.
Peoples Benefit Life Insurance Company Separate Account V
The Separate Account was established by Peoples Benefit on February 1, 1992,
and operates under Iowa law.
The Separate Account is a unit investment trust registered with the SEC under
the 1940 Act. Such registration does not signify that the SEC supervises the
management or the investment practices or policies of the Separate Account.
Peoples Benefit owns the assets of the Separate Account, and the obligations
under the Policy are obligations of Peoples Benefit. These assets are held
separately from the other assets of Peoples Benefit and are not chargeable
with liabilities incurred in any other business operation of Peoples Benefit
(except to the extent that assets in the Separate Account exceed the reserves
and other liabilities of the Separate Account). Peoples Benefit will always
keep assets in the Separate Account with a value at least equal to the total
Policy Value under the Policies. Income, gains, and losses
38
<PAGE>
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 Peoples Benefit. Therefore, the investment
performance of the Separate Account is entirely independent of the investment
performance of Peoples Benefit's general account assets or any other separate
account Peoples Benefit maintains.
The Separate Account has twenty-nine Subaccounts dedicated to the Policy, each
of which invests solely in a corresponding Portfolio of the underlying Funds.
Additional Subaccounts may be established at Peoples Benefit's discretion. The
Separate Account meets the definition of a "separate account" under Section
2(a)(37) of the 1940 Act.
Policy Owner ("You," "Your")
The Policy Owner is the person or persons designated as the Policy Owner in
the customer order form to participate in the Policy. 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.
Annuitant
The person during whose life any annuity payments involving life contingencies
will continue.
Payee
The Payee is the Policy Owner, Annuitant, beneficiary, or any other person,
estate, or legal entity to whom benefits are to be paid.
Right to Cancel Period
The period during which the Policy Owner may cancel the Policy can be canceled
and treated as void from the Policy Date. The period ranges in length from 20
to 30 days (or more in some cases), as specified in your Policy.
Voting Rights
The underlying Funds do not hold regular meetings of shareholders. The
directors/trustees of the Funds may call special meetings of shareholders as
the 1940 Act or other applicable law may require. To the extent required by
law, Peoples Benefit will vote the Portfolio shares held in the Separate
Account at shareholder meetings of the Funds in accordance with instructions
received from persons having voting interests in the corresponding Subaccount.
Peoples Benefit will vote Fund shares as to which no timely instructions are
received and those shares held by Peoples Benefit as to which Policy Owners
have no beneficial interest in proportion to the voting instructions that are
received with respect to all Policies 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 Commencement Date, the Policy Owner holds a voting
interest in each Portfolio to which the Policy Value is allocated. The number
of votes which are available to a Policy Owner will be determined by dividing
the Policy Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Commencement Date, the person
receiving Annuity Payments under any variable Annuity Payment Option has the
voting interest. The number of votes after the Annuity Commencement Date will
be determined by dividing the reserve for such Policy allocated to the
Portfolio by the net asset value per share of the corresponding Portfolio.
After the Annuity Commencement Date, the votes attributable to a Policy
decrease as the reserves allocated to the Portfolio decrease. In determining
the number of votes, fractional shares will be recognized.
39
<PAGE>
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
Peoples Benefit retains the right, subject to any applicable law, to make
certain changes. Peoples Benefit reserves the right to eliminate the shares of
any of the Portfolios and to substitute shares of another Portfolio of the
Funds or of another registered open-end management investment company, if the
shares of the Portfolios are no longer available for investment or if, in
Peoples Benefit'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 Policy Owner's interest in
a Portfolio will not be made until SEC approval has been obtained and the
Policy Owner has been notified of the change.
Peoples Benefit may establish new Portfolios when marketing, tax, investment,
or other conditions so warrant. Peoples Benefit will make any new Portfolios
available to existing Policy Owners on a basis Peoples Benefit will determine.
Peoples Benefit 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, Peoples Benefit may, by
appropriate endorsement, make whatever changes in the Policies may be
necessary or appropriate to reflect such substitution or change. Furthermore,
if deemed to be in the best interests of persons having voting rights under
the Policies, Peoples Benefit 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 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 Peoples Benefit and the
audited financial statements of certain Subaccounts of the Separate Account
which are available for investment by Advisor's Edge Select Policy 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 Peoples Benefit and
certain Subaccounts of the Separate Account which are available for investment
by Advisor's Edge Select Policy 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 Policy under the applicable federal securities laws. On behalf of Peoples
Benefit, Brenda Sneed, Esquire, has passed upon all matters of Iowa law
pertaining to the validity of the Policy and Peoples Benefit's right to issue
the Policy.
40
<PAGE>
TABLE OF CONTENTS FOR THE ADVISOR'S EDGE SELECT VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
GLOSSARY OF TERMS......................................................... 3
THE POLICY--GENERAL PROVISIONS............................................ 5
Owner................................................................... 5
Entire Policy........................................................... 5
Non-Participating....................................................... 5
Misstatement of Age or Sex.............................................. 6
Assignment.............................................................. 6
Addition, Deletion or Substitution of Investments....................... 6
Excess Interest Adjustment.............................................. 6
Computation of Variable Annuity Income Payments......................... 7
Exchanges............................................................... 8
PERFORMANCE INFORMATION................................................... 8
Money Market Subaccount Yields.......................................... 9
30-Day Yield for Non-Money Market Subaccounts........................... 9
Standardized Average Annual Total Return for Subaccounts................ 10
ADDITIONAL PERFORMANCE MEASURES........................................... 11
Non-Standardized Cumulative Total Return................................ 11
Non-Standardized Average Annual Total Return............................ 11
Non-Standardized Total Return Year-to-Date.............................. 13
Non-Standardized One Year Return........................................ 14
Non-Standardized Adjusted Historical Cumulative Return and Non-
Standardized Adjusted Historical Average Annual Total Return........... 15
Individual Computer Generated Illustrations............................. 23
PERFORMANCE COMPARISONS................................................... 24
SAFEKEEPING OF ACCOUNT ASSETS............................................. 26
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS........................ 26
PEOPLES BENEFIT LIFE INSURANCE COMPANY.................................... 26
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................... 26
Tax Status of the Policy................................................ 27
Distribution Requirements............................................... 27
Diversification Requirements............................................ 27
Owner Control........................................................... 27
Withholding............................................................. 28
Qualified Policies...................................................... 28
Individual Retirement Annuities......................................... 28
Roth Individual Retirement Annuities (Roth IRA)......................... 29
Section 403(b) Plans.................................................... 29
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans............ 29
Deferred Compensation Plans............................................. 30
Non-Natural Persons..................................................... 30
TAXATION OF PEOPLES BENEFIT............................................... 30
STATE REGULATION OF PEOPLES BENEFIT....................................... 31
RECORDS AND REPORTS....................................................... 31
DISTRIBUTION OF THE POLICIES.............................................. 31
LEGAL PROCEEDINGS......................................................... 31
OTHER INFORMATION......................................................... 31
FINANCIAL STATEMENTS...................................................... 32
</TABLE>
41
<PAGE>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
(For the period January 1, 1994 through December 31, 1999)
<TABLE>
<CAPTION>
Dreyfus Socially Dreyfus Endeavor
Alliance Alliance Alliance Responsible Small Cap Enhanced TRP
Growth Premier Growth Technology Growth Value Index International
--------- --------------- ---------- ---------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*............ N/A N/A N/A N/A 1.000 1.000 1.000
12/31/98............... N/A N/A N/A N/A 1.192 1.154 1.102
12/31/99............... N/A N/A N/A N/A 1.520 1.343 1.437
Number of units Outstanding as of
12/31/98............... N/A N/A N/A N/A 1,000 1,000 1,000
12/31/99............... N/A N/A N/A N/A 541,435 1,662,595 1,139,793
<CAPTION>
Federated Federated Montgomery
American Federated High Prime Federated U.S. Federated Montgomery Emerging
Leaders Income Bond Money Gov't Securities Utility Growth Markets
--------- --------------- ---------- ---------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*............ 1.000 1.000 1.000 1.000 1.000 1.000 1.000
12/31/98............... 1.096 1.056 1.005 1.007 1.062 1.115 1.055
12/31/99............... 1.512 1.065 1.036 0.986 1.064 1.327 1.714
Number of units Outstanding as of
12/31/98............... 1,000 1,000 449,266 1,000 1,000 1,000 1,000
12/31/99............... 1,288,094 327,458 13,680,189 1,512,032 166,796 694,679 19,596
<CAPTION>
Seligman Seligman Strong Strong Wanger U.S.
Seligman Communications Global Stein Roe Small Int'l Schafer Small Cap
Capital and Information Technology Co. Growth Stock Value Advisor
--------- --------------- ---------- ---------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*............ N/A N/A N/A 1.000 1.000 1.000 1.000
12/31/98............... N/A N/A N/A 1.097 1.146 1.185 1.114
12/31/99............... N/A N/A N/A 1.601 2.114 1.134 1.373
Number of units outstanding as of
12/31/98............... N/A N/A N/A 1,000 1,000 1,000 1,000
12/31/99............... N/A N/A N/A 17,443 11,722 246,470 549,766
<CAPTION>
WRL J.P.
Wanger Warburg Morgan
Int'l Pincus WRL Alger Real
Small Cap Transamerica Int'l Warburg Pincus Aggressive Estate WRL Janus
Advisor VIF Growth Equity Small Co. Growth Growth Securities Global
--------- --------------- ---------- ---------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*............ 1.000 N/A 1.000 1.000 1.000 1.000 1.000
12/31/98............... 1.159 N/A 1.078 1.169 N/A N/A N/A
12/31/99............... 2.584 N/A 1.630 1.947 1.488 0.895 1.553
Number of units outstanding as of
12/31/98............... 1,000 N/A 1,000 1,000 N/A N/A N/A
12/31/99............... 305,860 N/A 17,503 14,585 246,122 2,881 575,729
<CAPTION>
WRL LKCM
WRL Janus Strategic Total
Growth Return
--------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value as of:
Start Date*............ 1.000 1.000
12/31/98............... N/A N/A
12/31/99............... 1.359 1.053
Number of units outstanding as of
12/31/98............... N/A N/A
12/31/99............... 676,855 280,925
</TABLE>
* Date of commencement of operations for the Subaccounts was as follows:
10/26/98 for all Subaccounts except the WRL Alger Aggressive Growth, WRL
J.P. Morgan Real Estate Securities, WRL Janus Global, WRL Janus Growth, and
WRL LKCM Strategic Total Return Subaccounts, which was 5/3/99. As of
December 31, 1999, the following Subaccounts had not commenced operations:
Alliance Growth, Alliance Premier Growth, Alliance Technology, Dreyfus
Socially Responsible Growth, Seligman Capital, Seligman Communications and
Information, Seligman Global Technology and Transamerica VIF Growth.
A-1
<PAGE>
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENT OF ADDITIONAL INFORMATION
for the
ADVISOR'S EDGE SELECT VARIABLE ANNUITY
Offered by
Peoples Benefit Life Insurance Company
(An Iowa Stock Company)
Home Office
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Advisor's Edge Select variable annuity policy (the
"Policy") offered by Peoples Benefit Life Insurance Company (the "Company" or
"Peoples Benefit"). You may obtain a copy of the Prospectus dated December 1,
2000, by calling 800-866-6007 or by writing to our Administrative Offices, at
4333 Edgewood Road, N.E., Cedar Rapids, Iowa 52499. Terms used in the current
Prospectus for the Policy are incorporated in this Statement of Additional
Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
December 1, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
GLOSSARY OF TERMS 3
THE POLICY - GENERAL PROVISIONS 5
Owner 5
Entire Policy 5
Non-Participating 5
Misstatement of Age or Sex 6
Assignment 6
Addition, Deletion or Substitution of Investments 6
Excess Interest Adjustment 6
Computation of Variable Annuity Income Payments 7
Exchanges 8
PERFORMANCE INFORMATION 8
Money Market Subaccount Yields 9
30-Day Yield for Non-Money Market Subaccounts 9
Standardized Average Annual Total Return for Subaccounts 10
ADDITIONAL PERFORMANCE MEASURES 11
Non-Standardized Cumulative Total Return 11
Non-Standardized Average Annual Total Return 11
Non-Standardized Total Return Year-to-Date 13
Non-Standardized One Year Return 14
Non-Standardized Adjusted Historical Cumulative Return and Non-Standardized 15
Adjusted Historical Average Annual Total Return
Individualized Computer Generated Illustrations 23
PERFORMANCE COMPARISONS 24
SAFEKEEPING OF ACCOUNT ASSETS 26
CONFLICTS OF INTEREST WITH OTHER SEPARATE ACCOUNTS 26
PEOPLES BENEFIT LIFE INSURANCE COMPANY 26
CERTAIN FEDERAL INCOME TAX CONSEQUENCES 26
Tax Status of the Policy 27
Distribution Requirements 27
Diversification Requirements 27
Owner Control 27
Withholding 28
Qualified Policies 28
Individual Retirement Annuities 28
Roth Individual Retirement Annuities (Roth IRA) 29
Section 403(b) Plans 29
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans 29
Deferred Compensation Plans 30
Non-Natural Persons 30
TAXATION OF PEOPLES BENEFIT 30
STATE REGULATION OF PEOPLES BENEFIT 31
RECORDS AND REPORTS 31
DISTRIBUTION OF THE POLICIES 31
LEGAL PROCEEDINGS 31
OTHER INFORMATION 31
FINANCIAL STATEMENTS 32
</TABLE>
2
<PAGE>
GLOSSARY OF TERMS
Accumulation Unit - An accounting unit of measure used in calculating the policy
value in the separate account before the annuity commencement date.
Adjusted Policy Value - An amount equal to the policy value increased or
decreased by any excess interest adjustments.
Administrative and Service Office - Financial Markets Division - Variable
Annuity Department, Peoples Benefit Life Insurance Company, 4333 Edgewood Road,
N.E., Cedar Rapids, Iowa 52499.
Annuitant - The person during whose life, annuity payments involving life
contingencies will continue.
Annuity Commencement Date - The date upon which annuity payments are to
commence. This date may be any date at least thirty days after the policy date
and may not be later than the last day of the policy month starting after the
annuitant attains age 85, except expressly allowed by Peoples Benefit.
Annuity Payment Option - A method of receiving a stream of annuity payments
selected by the owner.
Annuity Unit - An accounting unit of measure used in the calculation of the
amount of the second and each subsequent variable annuity payment.
Beneficiary - The person who has the right to the death benefit set forth in the
policy.
Business Day - A day when the New York Stock Exchange is open for business.
Cash Value - The policy value increased or decreased by an excess interest
adjustment, less the annual service charge, and less any applicable premium
taxes and any rider fees.
Code - The Internal Revenue Code of 1986, as amended.
Enrollment form - A written application, order form, or any other information
received electronically or otherwise upon which the policy is issued and/or is
reflected on the data or specifications page.
Excess Interest Adjustment - A positive or negative adjustment to amounts
withdrawn upon partial withdrawals, full surrenders or transfers from the
guaranteed period options, or to amounts applied to annuity payment options. The
adjustment reflects changes in the interest rates declared by Peoples Benefit
since the date any payment was received by, or an amount was transferred to, the
guaranteed period option. The excess interest adjustment can either decrease or
increase the amount to be received by the owner upon full surrender or
commencement of annuity payments, depending upon whether there has been an
increase or decrease in interest rates, respectively.
Fixed Account - One or more investment choices under the policy that are part of
Peoples Benefit general assets and which are not in the separate account.
Guaranteed Period Options - The various guaranteed interest rate periods of the
fixed account, which Peoples Benefit may offer, into which purchase payments may
be paid or amounts may be transferred.
Nonqualified Policy - A policy other than a qualified policy.
Owner - The individual or entity that owns an individual policy.
Policy - The individual policy.
3
<PAGE>
Policy Value - On or before the annuity commencement date, the policy value is
equal to the owner's:
. Purchase Payments; minus
. Partial withdrawals (including any applicable excess interest adjustments
on such withdrawals); plus
. Interest credited in the fixed account; plus or minus
. Accumulated gains or losses in the separate account; minus
. Services charges, premium taxes, rider fees, and transfer fees, if any.
Policy Year - A policy year begins on the date in which the policy becomes
effective and on each anniversary thereof.
Purchase Payment - An amount paid to Peoples Benefit by the owner or on the
owner's behalf as consideration for the benefits provided by the policy.
Qualified Policy - A policy issued in connection with retirement plans that
qualify for special federal income tax treatment under the Code.
Separate Account - Peoples Benefit Life Insurance Company Separate Account V, a
separate account established and registered as a unit investment trust under the
Investment Company Act of 1940, as amended (the "1940 Act"), to which Purchase
Payments under the policies may be allocated.
Service Charge - An annual charge on each policy anniversary (and a charge at
the time of surrender during any policy year) for policy maintenance and related
administrative expenses.
Subaccount - subdivision within the separate account, the assets of which are
invested in specified portfolios of the underlying funds.
Successor Owner - A person appointed by the owner to succeed to ownership of the
policy in the event of the death of the owner who is not the annuitant before
the annuity commencement date.
Valuation Period - The period of time from one determination of accumulation
unit values and annuity unit values to the next subsequent determination of
values. Such determination shall be made on each business day.
Variable Annuity Payments - Payments made pursuant to an annuity payment option
which fluctuate as to dollar amount or payment term in relation to the
investment performance of the specified subaccounts within the separate account.
Written Notice or Written Request - Written notice, signed by the owner, that
gives Peoples Benefit the information it requires and is received at the
administrative and service office. For some transactions, Peoples Benefit may
accept an electronic notice such as telephone instructions. Such electronic
notice must meet the requirements Peoples Benefit establishes for such notices.
4
<PAGE>
THE POLICY - GENERAL PROVISIONS
OWNER
The Policy shall belong to the owner upon issuance of the Policy after
completion of an enrollment form and delivery of the initial purchase payment.
While the annuitant is living, the owner may: (1) assign the Policy; (2)
surrender the policy; (3) amend or modify the Policy with the consent of Peoples
Benefit; (4) receive annuity payments or name a payee to receive the payments;
and (5) exercise, receive and enjoy every other right and benefit contained in
the policy. The exercise of these rights may be subject to the consent of any
assignee or irrevocable beneficiary, and of your spouse in a community or
marital property state.
Unless Peoples Benefit has been notified of a community or marital property
interest in the policy, it will rely on its good faith belief that no such
interest exists and will assume no responsibility for inquiry.
A successor owner can be named in the enrollment form, information provided in
lieu thereof, or in a written notice. The successor owner will become the new
owner upon your death, if you predecease the annuitant. If no successor owner
survives you and you predecease the annuitant, your estate will become the
owner.
Note Carefully. If the owner does not name a contingent owner, the owner's
--------------
estate will become the new owner. If no probate estate is opened because the
owner has precluded the opening of a probate estate by means of a trust or other
instrument, unless Peoples Benefit has received written notice of the trust as a
successor owner signed prior to the owner's death, that trust may not exercise
ownership rights to the policy. It may be necessary to open a probate estate in
order to exercise ownership rights to the policy if no contingent owner is named
in a written notice received by Peoples Benefit.
The owner may change the ownership of the policy in a written notice. When the
change takes effect, all rights of ownership in the policy will pass to the new
owner. A change of ownership may have tax consequences.
When there is a change of owner or successor owner, the change will not be
effective until it is recorded in our records. Once recorded, it will take
effect as of the date the owner signs the written notice, subject to any payment
Peoples Benefit has made or action Peoples Benefit has taken before recording
the change. Changing the owner or naming a new successor owner cancels any prior
choice of successor owner, but does not change the designation of the
beneficiary or the annuitant.
If ownership is transferred (except to the owner's spouse) because the owner
dies before the annuitant, the cash value generally must be distributed to the
successor owner within five years of the owner's death, or payments must be made
for a period certain or for the successor owner's lifetime so long as any period
certain does not exceed that successor owner's life expectancy, if the first
payment begins within one year of your death.
ENTIRE POLICY
The policy, any endorsements thereon, the enrollment form, or information
provided in lieu thereof constitute the entire Policy between Peoples Benefit
and the owner. All statements in the enrollment form are representations and not
warranties. No statement will cause the policy to be void or to be used in
defense of a claim unless contained in the enrollment form or information
provided in lieu thereof. No registered representative has authority to change
or waive any provision of the policy.
NON-PARTICIPATING
The Policies are non-participating. No dividends are payable and the Policies
will not share in the profits or surplus earnings of Peoples Benefit.
5
<PAGE>
MISSTATEMENT OF AGE OR SEX
Peoples Benefit may require proof of age and sex before making Annuity Payments.
If the Annuitant's stated age, sex or both in the Policy are incorrect, Peoples
Benefit will change the annuity benefits payable to those benefits which the
Purchase Payments would have purchased for the correct age and sex. In the case
of correction of the stated age and/or sex after payments have commenced,
Peoples Benefit will: (1) in the case of underpayment, pay the full amount due
with the next payment; and (2) in the case of overpayment, deduct the amount due
from one or more future payments.
ASSIGNMENT
Any Non-Qualified Policy may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. Peoples Benefit is not responsible for the
validity of any assignment. No assignment will be recognized until Peoples
Benefit receives the appropriate Peoples Benefit form notifying Peoples Benefit
of such assignment. 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. Peoples Benefit shall
not be liable as to any payment or other settlement made by Peoples Benefit
before receipt of the appropriate Peoples Benefit form.
ADDITION, DELETION OR SUBSTITUTUION OF INVESTMENTS
Peoples Benefit cannot and does not guarantee that any of the subaccounts will
always be available for purchase payments, allocations or transfers. Peoples
Benefit retains the right, subject to any applicable law, to make certain
changes in the separate account and its investments. Peoples Benefit reserves
the right to eliminate the shares of any portfolio held by a subaccount and to
substitute shares of another portfolio of the underlying funds, or of another
registered open-end management investment company for the shares of any
portfolio, if the shares of the portfolio are no longer available for investment
or if, in the judgment of Peoples Benefit, investment in any portfolio would be
inappropriate in view of the purposes of the separate account. To the extent
required by the 1940 Act, substitutions of shares attributable to your interest
in a subaccount will not be made without prior notice to you and the prior
approval of the Securities and Exchange Commission ("SEC"). Nothing contained
herein shall prevent the separate account from purchasing other securities for
other series or classes of variable annuities, or from effecting an exchange
between series or classes of variable annuities on the basis of your requests.
New subaccounts may be established when, in the sole discretion of Peoples
Benefit, marketing, tax, investment or other conditions warrant. Any new
subaccounts may be made available to existing owners on a basis to be determined
by Peoples Benefit. Each additional subaccount will purchase shares in a mutual
fund portfolio or other investment vehicle. Peoples Benefit may also eliminate
one or more subaccounts if, in its sole discretion, marketing, tax, investment
or other conditions warrant such change. In the event any subaccount is
eliminated, Peoples Benefit will notify you and request reallocation of the
amounts invested in the eliminated subaccount. If no such reallocation is
provided by you, Peoples Benefit will reinvest the amounts in the subaccount
that invests in the Federated Prime Money Portfolio (or in a similar portfolio
of money market instruments), in another subaccount, or in the fixed account, if
appropriate.
In the event of any such substitution or change, Peoples Benefit may, by
appropriate endorsement, make such changes in the policy as may be necessary or
appropriate to reflect such substitution or change. Furthermore, if deemed to be
in the best interests of persons having voting rights under the policies, the
separate account may be (i) operated as a management company under the 1940 Act
or any other form permitted by law, (ii) deregistered under the 1940 Act in the
event such registration is no longer required or (iii) combined with one or more
other separate accounts. To the extent permitted by applicable law, Peoples
Benefit also may transfer the assets of the separate account associated with the
policies to another account or accounts.
EXCESS INTEREST ADJUSTMENT
Money that you withdraw from, transfer out of, or apply to an annuity payment
option from a guaranteed period option of the fixed account before the end of
its guaranteed period (the number of years you specified the money would remain
in the guaranteed period option, may be subject to any excess interest
adjustment. At the time you request a withdrawal, if the interest rates Peoples
Benefits sets have risen since the date of the initial guarantee, the excess
6
<PAGE>
interest adjustment will result in a lower policy value. However, if interest
rates have fallen since the date of the initial guarantee, the excess interest
adjustment will result in a higher policy value.
Excess interest adjustments will not reduce the adjusted policy value for a
guaranteed period option below the purchase payments and transfers to that
guaranteed period option, less any prior partial withdrawals and transfers from
the guaranteed period option, plus interest at the policy's minimum guaranteed
effect annual interest rate of 3%. This is referred to as the excess interest
adjustment floor.
The formula that will be used to determine the excess interest adjustment
("EIA") is:
EIA = S* (G-C)* (M/12)
Where
S = the gross amount being surrendered, withdrawn, transferred or applied
to a Payment Option that is subject to the EIA.
G = the guaranteed interest rate applicable to S.
C = the current guaranteed interest rate then being offered on new purchase
payments for the next longer Guaranteed Period than "M". If this form, or
such a Guaranteed Period is no longer offered, "C" will be the U.S.
Treasury rate for the next longer maturity (in whole years) than "M" on the
25th day of the previous calendar month, plus up to 2%.
M = the number of months remaining in the Guaranteed Period for S, rounded
up to the next higher whole number of months.
No cap on positive EIA adjustment. Floor on negative EIA is effective on
full surrender.
On full surrender, each Guaranteed Period Option's ("GPO") contribution to
the adjusted Policy Value will never fall below the sum of purchase
payments, less any prior withdrawals and transfers from that GPO, plus
interest at the 3% guaranteed effective annual interest rate.
Some states may not allow an EIA.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
In order to supplement the description in the Prospectus and Appendixes A and B
thereto, the following provides additional information about the Policy which
may be of interest to Policy Owners.
The amounts shown in the Annuity Tables contained in your Policy represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
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 Tables contained in your Policy
corresponding to the Annuity Payment Option elected by the Policy 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.
7
<PAGE>
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date 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 (.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 assessed at an annual rate of 1.25% for the mortality
and expense risks assumed by Peoples Benefit;
(c) = a daily charge for the cost of administering the Policy corresponding
to an annual charge of .15% of the value of the Subaccount.
The Annuity Tables contained in the Policy 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 Policy are based
on a 60% female/40% male blending of the above for all annuitants of either
gender.
EXCHANGES
After the Annuity Date you may, by making a written request, exchange the
current value of an existing subaccount to Annuity Units of any other
subaccount(s) then available. The written request for an exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the exchange is to take effect. An exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of exchange (the
"Exchange Date"). Each year you may make an unlimited number of free exchanges
between Subaccounts. We reserve the right to charge a $15 fee in the future for
exchanges in excess of twelve per Policy Year.
Exchanges will be made using the Annuity Unit Value for the subaccounts on the
date the written request for exchange is received. On the Exchange Date, Peoples
Benefit will establish a value for the current subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing subaccounts
and compute the number of Annuity Units for the new subaccounts by dividing the
Annuity Unit Value of the new subaccounts into the value previously calculated
for the existing subaccounts.
PERFORMANCE INFORMATION
Performance information for the subaccounts including the yield and effective
yield of the Federated Prime Money 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 Policy Owners.
Where applicable, the following subaccount inception date is used in the
calculation of performance figures: 10/26/98 for all subaccounts except the WLR
Alger Aggressive Growth, WRL J.P. Morgan Real Estate Securities, WRL Janus
Global, WRL Janus Growth, and WRL LKCM Strategic Total Return Subaccounts, which
have an inception date of 5/3/99. As of the date of this Statement of Additional
Information, the Alliance Growth, Alliance Premier Growth, Alliance Technology,
Dreyfus Socially Responsible Growth, Seligman Capital, Seligman Communications
and Information, Seligman Global Technology and Transamerica VIF Growth
Subaccounts had not commenced operation.
Where applicable, the following Fund inception dates are used in the calculation
of performance figures: 6/1/99 for Alliance Growth Portfolio, 7/14/99 for
Alliance Premier Growth Portfolio, 9/22/99
8
<PAGE>
for Alliance Technology Portfolio, 10/7/93 for Dreyfus Socially Responsible
Growth Fund, 11/18/94 for Federated Prime Money Portfolio; 2/10/94 for Federated
American Leaders Portfolio and Federated Utility Portfolio; 3/28/94 for
Federated U.S. Government Securities Portfolio; 3/1/94 for Federated High Income
Bond Portfolio; 2/9/96 for Montgomery Growth Portfolio; 2/2/96 for Montgomery
Emerging Markets Portfolio; 5/3/95 for Wanger U.S. Small Cap Advisor Portfolio
and Wanger International Small Cap Advisor Portfolio; 10/20/95 for Strong
International Stock Portfolio; 6/30/95 for Warburg Pincus International Equity
Portfolio and Warburg Pincus Small Company Growth Portfolio; 10/10/97 for Strong
Schafer Value Portfolio; 4/8/91 for T. Rowe Price International Stock Portfolio;
5/4/93 for Dreyfus Small Cap Value Portfolio; 5/1/97 for Endeavor Enhanced Index
Portfolio; 6/21/88 for Seligman Capital Portfolio, 10/4/94 for Seligman
Communication and Information Portfolio, 5/1/96 for Seligman Global Technology,
2/26/69 for Transamerica VIF Growth Portfolio, 3/1/94 for WRL Alger Aggressive
Growth Portfolio; 5/1/98 for WRL J.P. Morgan Real Estate Securities Portfolio;
12/3/92 for WRL Janus Global Portfolio; 10/2/86 for WRL Janus Growth Portfolio;
and 3/1/93 for WRL LKCM Strategic Total Return Portfolio.
MONEY MARKET SUBACCOUNT YIELDS
Current yield for the Federated Prime Money 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 current yields of the Money Market Subaccount for the 7-day period ended
December 31, 1999 was 3.67% for the 6 Year Step-Up Death Benefit Option, 3.72%
for the Return of Premium Death Benefit Option; and 3.57% for the Double
Enhanced Death Benefit Option. The effective yield of the Money Market
Subaccount for the period ended December 31, 1999 was 3.73% for the 6 Year
Step-Up Death Benefit Option, 3.78% for the Return of Premium Death Benefit
Option, and 3.63% for the Double Enhanced Death Benefit Option.
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]
---
cd
Where:
[a] equals the net investment income earned during the period by the
Portfolio attributable to shares owned by a subaccount;
[b] equals the expenses accrued for the period (net of reimbursement);
[c] equals the average daily number of Units outstanding during the
period; and
[d] equals the maximum offering price per Accumulation Unit on the last
day of the period.
Yield on a subaccount is earned from the increase in net asset value of shares
of the Portfolio in which the subaccount invests and from dividends declared and
paid by the Portfolio, which are automatically reinvested in shares of the
Portfolio.
9
<PAGE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS
When advertising performance of the subaccounts, Peoples Benefit 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 (including the
contingent deferred sales load), the Annual Policy Fee and all other Portfolio,
Separate Account and Policy level charges except Premium Taxes, if any.
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 Policy over a period of one, five and ten years (or, if less, up
to the life of the Subaccount), 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; and
(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 table show the Standardized Average Annual Total Return for the
subaccounts for the period beginning at the inception of each subaccount and
ending on December 31, 1999.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 1.60%)
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount 1 Year Inception
---------- ------ ----------
<S> <C> <C>
Alliance Growth................................................................. N/A N/A
Alliance Premier Growth......................................................... N/A N/A
Alliance Technology............................................................. N/A N/A
Dreyfus Small Cap Value......................................................... 27.35% 42.39%
Dreyfus Socially Responsible Growth............................................. N/A N/A
Endeavor Enhanced Index......................................................... 16.30% 28.25%
Federated American Leaders...................................................... 4.99% 12.59%
Federated High Income Bond...................................................... 0.69% 5.35%
Federated Prime Money........................................................... 2.99% 2.95%
Federated US Gov't Securities................................................... -2.17% -1.25%
Federated Utility............................................................... 0.09% 5.29%
Montgomery Emerg Mkt............................................................ 62.23% 57.65%
Montgomery Growth............................................................... 18.89% 26.96%
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Seligman Capital................................................................ N/A N/A
Seligman Communications and Information......................................... N/A N/A
Seligman Global Technology...................................................... N/A N/A
Stein Roe Small Company Growth.................................................. 45.76% 48.82%
Strong Int'l Stock.............................................................. 84.27% 88.33%
Strong Schafer Value............................................................ -4.40% 11.13%
Transamerica VIF Growth......................................................... N/A N/A
T. Rowe Price Int'l............................................................. 30.27% 35.82%
Wanger Int'l Small Cap.......................................................... 122.87% 123.26%
Wanger US Small Cap............................................................. 23.10% 30.68%
Warburg Pincus Int'l Equity..................................................... 51.02% 51.12%
Warburg Pincus Small Co Growth.................................................. 66.42% 75.66%
WRL Alger Agg Growth............................................................ N/A 48.68%
WRL Janus Global................................................................ N/A 55.24%
WRL Janus Growth................................................................ N/A 35.78%
WRL JP Morgan Real Est.......................................................... N/A -10.58%
WRL LKCM Strategic Tot Rtn...................................................... N/A 5.26%
</TABLE>
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN
Peoples Benefit 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. Peoples Benefit 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, 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 Policy Fee, any
sales loads or Premium Taxes (if any), which, if included, would reduce the
percentages reported by Peoples Benefit.
NON-STANDARDIZED CUMULATIVE TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 1.60%)
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount 1 Year Inception
---------- ------ ----------
<S> <C> <C>
Alliance Growth................................................................. N/A N/A
Alliance Premier Growth......................................................... N/A N/A
Alliance Technology............................................................. N/A N/A
Dreyfus Small Cap Value......................................................... 27.35% 51.79%
Dreyfus Socially Responsible Growth............................................. N/A N/A
Federated American Leaders...................................................... 4.99% 15.03%
Federated High Income Bond...................................................... 0.69% 6.34%
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Federated Prime Money........................................................... 2.99% 3.49%
Federated US Gov't Securities................................................... -2.17% -1.48%
Federated Utility............................................................... 0.09% 6.28%
Montgomery Emerg Mkt............................................................ 62.23% 71.18%
Montgomery Growth............................................................... 18.89% 32.56%
Seligman Capital................................................................ N/A N/A
Seligman Communications and Information......................................... N/A N/A
Seligman Global Technology...................................................... N/A N/A
Stein Roe Small Company Growth.................................................. 45.76% 59.91%
Strong Int'l Stock.............................................................. 84.27% 111.17%
Strong Schafer Value............................................................ -4.40% 13.27%
Transamerica VIF Growth......................................................... N/A N/A
T. Rowe Price Int'l............................................................. 30.27% 43.56%
Wanger Int'l Small Cap.......................................................... 122.87% 158.16%
Wanger US Small Cap............................................................. 23.10% 37.15%
Warburg Pincus Int'l Equity..................................................... 51.02% 62.83%
Warburg Pincus Small Co Growth.................................................. 66.42% 94.50%
WRL Alger Agg Growth............................................................ N/A 48.68%
WRL Janus Global................................................................ N/A 55.24%
WRL Janus Growth................................................................ N/A 35.78%
WRL JP Morgan Real Est.......................................................... N/A -10.58%
WRL LKCM Strategic Tot Rtn...................................................... N/A 5.26%
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDING DECEMBER 31, 1999
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 1.60%)
<TABLE>
<CAPTION>
Since
Subaccount
Subaccount 1 Year Inception
---------- ------ ----------
<S> <C> <C>
Alliance Growth................................................................. N/A N/A
Alliance Premier Growth......................................................... N/A N/A
Alliance Technology............................................................. N/A N/A
Dreyfus Small Cap Value......................................................... 27.35% 42.39%
Dreyfus Socially Responsible Growth............................................. N/A N/A
Endeavor Enhanced Index......................................................... 16.30% 28.25%
Federated American Leaders...................................................... 4.99% 12.59%
Federated High Income Bond...................................................... 0.69% 5.35%
Federated Prime Money........................................................... 2.99% 2.95%
Federated US Gov't Securities................................................... -2.17% -1.25%
Federated Utility............................................................... 0.09% 5.29%
Montgomery Emerg Mkt............................................................ 62.23% 57.65%
Montgomery Growth............................................................... 18.89% 26.96%
Seligman Capital................................................................ N/A N/A
Seligman Communications and Information......................................... N/A N/A
Seligman Global Technology...................................................... N/A N/A
Stein Roe Small Company Growth.................................................. 45.76% 48.82%
Strong Int'l Stock.............................................................. 84.27% 88.33%
Strong Schafer Value............................................................ -4.40% 11.13%
Transamerica VIF Growth......................................................... N/A N/A
T. Rowe Price Int'l............................................................. 30.27% 35.82%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Wanger Int'l Small Cap.......................................................... 122.87% 123.26%
Wanger US Small Cap............................................................. 23.10% 30.68%
Warburg Pincus Int'l Equity..................................................... 51.02% 51.12%
Warburg Pincus Small Co Growth.................................................. 66.42% 75.66%
WRL Alger Agg Growth............................................................ N/A 48.68%
WRL Janus Global................................................................ N/A 55.24%
WRL Janus Growth................................................................ N/A 35.78%
WRL JP Morgan Real Est.......................................................... N/A -10.58%
WRL LKCM Strategic Tot Rtn...................................................... N/A 5.26%
</TABLE>
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
Peoples Benefit 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 Policy Fee, any sales loads or Premium Taxes (if any), which,
if included, would reduce the percentages reported by Peoples Benefit.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 1.60%)
<TABLE>
<CAPTION>
Total
Return
YTD as of
Subaccount 12/31/99
---------- --------
<S> <C>
Alliance Growth................................................................. N/A
Alliance Premier Growth......................................................... N/A
Alliance Technology............................................................. N/A
Dreyfus Small Cap Value......................................................... 27.35%
Dreyfus Socially Responsible Growth............................................. N/A
Endeavor Enhanced Index......................................................... 16.30%
Federated American Leaders...................................................... 4.99%
Federated High Income Bond...................................................... 0.69%
Federated Prime Money........................................................... 2.99%
Federated US Gov't Securities................................................... -2.17%
Federated Utility............................................................... 0.09%
Montgomery Emerg Mkt............................................................ 62.23%
Montgomery Growth............................................................... 18.89%
Seligman Capital................................................................ N/A
Seligman Communications and Information......................................... N/A
Seligman Global Technology...................................................... N/A
Stein Roe Small Company Growth.................................................. 45.76%
Strong Int'l Stock.............................................................. 84.27%
Strong Schafer Value............................................................ -4.40%
Transamerica VIF Growth......................................................... N/A
T. Rowe Price Int'l............................................................. 30.27%
Wanger Int'l Small Cap.......................................................... 122.87%
Wanger US Small Cap............................................................. 23.10%
Warburg Pincus Int'l Equity..................................................... 51.02%
Warburg Pincus Small Co Growth.................................................. 66.42%
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
WRL Alger Agg Growth............................................................ N/A
WRL Janus Global................................................................ N/A
WRL Janus Growth................................................................ N/A
WRL JP Morgan Real Est.......................................................... N/A
WRL LKCM Strategic Tot Rtn...................................................... N/A
</TABLE>
NON-STANDARDIZED ONE YEAR RETURN
Peoples Benefit 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 Portfolio inception, if during
the relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the historical performance of the Portfolios as if the Policy
were in existence before its inception date (which it was not). After the
Policy's inception date, the 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 Policy Fee, any sales loads or Premium Taxes (if any), which, if
included, would reduce the percentages reported by Peoples Benefit.
NON-STANDARDIZED ONE YEAR RETURN
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Alliance Growth.................................. N/A N/A N/A N/A N/A
Alliance Premier Growth.......................... N/A N/A N/A N/A N/A
Alliance Technology.............................. N/A N/A N/A N/A N/A
Dreyfus Small Cap Value.......................... 27.35% -3.76% 23.60% 23.66% 12.26%
Dreyfus Socially Responsible Growth.............. 28.06% 27.36% 26.43% 19.33% 32.47%
Endeavor Enhanced Index.......................... 16.30% 29.32% N/A N/A N/A
Federated American Leaders....................... 4.99% 15.76% 30.28% 19.67% 31.63%
Federated High Income Bond....................... 0.69% 1.07% 12.04% 12.51% 18.50%
Federated Prime Money............................ 2.99% 3.22% 3.27% 3.09% 3.53%
Federated US Gov't Securities.................... -2.17% 5.96% 6.86% 2.55% 7.05%
Federated Utility................................ 0.09% 12.15% 24.66% 9.80% 22.24%
Montgomery Emerg Mkt............................. 62.23% -38.56% -2.18% N/A N/A
Montgomery Growth................................ 18.89% 1.27% 26.57% N/A N/A
Seligman Capital................................. 50.98% 20.27% 19.41% 12.71% 25.19%
Seligman Communications and Information.......... 83.01% 34.36% 20.31% 7.09% 36.40%
Seligman Global Technology....................... 115.54% 34.67% 17.65% N/A N/A
Stein Roe Small Company Growth................... 45.76% N/A N/A N/A N/A
Strong Int'l Stock............................... 84.27% -6.31% -14.91% 8.64% N/A
Strong Schafer Value............................. -4.40% 0.53% N/A N/A N/A
Transamerica VIF Growth.......................... 35.65% 41.06% 44.24% 25.81% 51.13%
T. Rowe Price Int'l.............................. 30.27% 13.61% 0.98% 13.42% 8.63%
Wanger Int'l Small Cap........................... 122.87% 14.48% -3.03% 29.95% N/A
Wanger US Small Cap.............................. 23.10% 6.95% 27.40% 44.32% N/A
Warburg Pincus Int'l Equity...................... 51.02% 3.67% -3.92% 8.29% N/A
Warburg Pincus Small Co Growth................... 66.42% -4.42% 13.83% 12.11% N/A
WRL Alger Agg Growth............................. 66.38% 46.39% 21.98% 8.70% 35.88%
WRL Janus Global................................. 68.43% 27.99% 16.89% 25.74% 21.14%
WRL Janus Growth................................. 57.18% 61.96% 15.70% 16.11% 44.86%
WRL JP Morgan Real Est........................... -5.40% N/A N/A N/A N/A
WRL LKCM Strategic Tot Rtn....................... 10.31% 7.88% 19.87% 13.19% 22.71%
</TABLE>
14
<PAGE>
NON-STANDARDIZED ADJUSTED HISTORICAL CUMULATIVE RETURN AND NON-STANDARDIZED
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURN
Peoples Benefit may show Non-Standardized Adjusted Historical Cumulative Return
and Non-Standardized Adjusted Historical Average Annual Total Return, calculated
on the basis of the historical performance of the Portfolios (calculated
beginning from the end of the year of inception for each Portfolio) and may
assume the Policy was in existence prior to its inception date (which it was
not). After the Policy's inception date, the calculations will reflect actual
Accumulation Unit Values. These returns are based on specified purchase payment
patterns which produce the resulting Accumulated Values. They reflect a
deduction for the Separate Account expenses and Portfolio expenses. However,
they do not include the Annual Policy Fee, any sales loads or Premium Taxes (if
any), which, if included, would reduce the percentages reported.
The Non-Standardized Adjusted Historical Cumulative Return for a subaccount is
the effective annual rate of return that would have produced the ending
Accumulated Value of the stated one-year period.
The Non-Standardized Adjusted Historical Average Annual Total Return for a
subaccount is the effective annual compounded rate of return that would have
produced the ending Accumulated Value over the stated period had the performance
remained constant throughout.
ADJUSTED HISTORICAL CUMULATIVE RETURNS FOR PERIODS ENDING 12/31/99
(BASED ON SINGLE INITIAL PURCHASE)
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 1.60%)
<TABLE>
<CAPTION>
Total
Since Fund
1 Year 3 Year Inception Year-End
------ ------ ------------------
<S> <C> <C> <C>
Alliance Growth............................................ N/A N/A 25.10%
Alliance Premier Growth.................................... N/A N/A 13.28%
Alliance Technology........................................ N/A N/A 42.92%
Dreyfus Small Cap Value.................................... 27.35% 51.48% 124.87%
Dreyfus Socially Responsible Growth........................ 28.06% 106.21% 268.73%
Endeavor Enhanced Index.................................... 16.30% N/A 82.92%
Federated American Leaders................................. 4.995 58.34% 144.20%
Federated High Income Bond................................. 0.69% 14.02% 44.57%
Federated Prime Money...................................... 2.99% 9.78% 17.56%
Federated US Govt' Securities.............................. -2.17% 10.78% 23.17%
Federated Utility.......................................... 0.09% 39.93% 78.98%
Montgomery Emerg Mkt....................................... 62.23% -2.51% 2.62%
Montgomery Growth.......................................... 18.89% 52.40% 91.20%
Seligman Capital........................................... 50.98% 116.82% 466.05%
Seligman Communication and Information..................... 83.01% 195.81% 349.39%
Seligman Global Technology................................. 115.54% 241.52% 251.44%
Strong Int'l Stock ........................................ 84.27% 46.89% 63.24%
Strong Schafer Value....................................... -4.40% N/A -5.01%
Transamerica VIF Growth.................................... 35.65% 175.99% 3486.54%
T. Rowe Price Int'l........................................ 30.27% 49.46% 96.61%
Wanger Int'l Small Cap..................................... 122.87% 147.42% 328.04%
Wanger US Small Cap........................................ 23.10% 67.73% 177.89%
Warburg Pincus Int'l Equity................................ 51.02% 50.42% 73.45%
Warburg Pincus Small Co Growth............................. 66.42% 81.06% 151.98%
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
WRL Alger Agg Growth....................................... 66.38% 197.09% 327.52%
WRL Janus Global........................................... 68.43% 151.98% 411.04%
WRL Janus Growth........................................... 57.18% 194.53% 1226.85%
WRL JP Morgan Real Est..................................... -5.40% N/A -20.30%
WRL LKCM Strategic Tot Rtn................................. 10.31% 42.64% 117.21%
</TABLE>
ADJUSTED HISTORICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
(BASED ON SINGLE INITIAL PURCHASE)
DOUBLE ENHANCED DEATH BENEFIT OPTION
(TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES: 1.60%)
<TABLE>
<CAPTION>
Total
Since Fund
1 Year 3 Year Inception Year-End
------ ------ ------------------
<S> <C> <C> <C>
Alliance Growth............................................ N/A N/A 25.10%
Alliance Premier Growth.................................... N/A N/A 13.28%
Alliance Technology........................................ N/A N/A 42.92%
Dreyfus Small Cap Value.................................... 27.35% 14.85% 12.93%
Dreyfus Socially Responsible Growth........................ 28.06% 27.28% 23.28%
Endeavor Enhanced Index.................................... 16.30% N/A 25.40%
Federated American Leaders................................. 4.99% 16.55% 16.37%
Federated High Income Bond................................. 0.69% 4.47% 6.52%
Federated Prime Money...................................... 2.99% 3.16% 3.21%
Federated US Govt' Securities.............................. -2.17% 3.47% 3.68%
Federated Utility.......................................... 0.09% 11.85% 10.39%
Montgomery Emerg Mkt....................................... 62.23% -0.84% 0.66%
Montgomery Growth.......................................... 18.89% 15.08% 18.11%
Seligman Capital........................................... 50.98% 29.43% 16.22%
Seligman Communications and Information.................... 83.01% 43.55% 33.19%
Seligman Global Technology................................. 115.54% 50.59% 40.86%
Strong Int'l Stock ........................................ 84.27% 13.68% 12.38%
Strong Schafer Value....................................... -4.40% N/A -2.28%
Transamerica VIF Global.................................... 35.65% 40.27% 20.62%
T. Rowe Price Int'l........................................ 30.27% 14.33% 8.04%
Wanger Int'l Small Cap..................................... 122.87% 35.25% 36.57%
Wanger US Small Cap........................................ 23.10% 18.81% 24.49%
Warburg Pincus Int'l Equity................................ 51.02% 14.58% 13.00%
Warburg Pincus Small Co Growth............................. 66.42% 21.88% 22.76%
WRL Alger Agg Growth....................................... 66.38% 43.76% 28.25%
WRL Janus Global........................................... 68.43% 36.08% 25.91%
WRL Janus Growth........................................... 57.18% 43.34% 21.54%
WRL JP Morgan Real Est..................................... -5.40% N/A -12.71%
WRL LKCM Strategic Tot Rtn................................. 10.31% 12.57% 12.01%
</TABLE>
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in the
Portfolios based on monthly reinvestment of dividends over a specific period of
time.
16
<PAGE>
HYPOTHETICAL ILLUSTRATIONS
Endeavor Enhanced Index
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1997
December 31, 1997 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1997 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1997 $ 2,000 $ 2,000 N/A N/A
12/31/1998 $ 50,000 $ 64,725 29.45% 29.45% 29.45% 12/31/1998 $ 4,000 $ 4,589 29.45% 29.45%
</TABLE>
T. Rowe Price International
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1991
December 31, 1991 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1991 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1991 $ 2,000 $ 2,000 N/A N/A
12/31/1992 $ 50,000 $ 47,474 -5.05% -5.05% -5.05% 12/31/1992 $ 4,000 $ 3,899 -5.05% -5.05%
12/31/1993 $ 50,000 $ 55,420 16.74% 5.28% 10.84% 12/31/1993 $ 6,000 $ 6,552 16.74% 8.93%
12/31/1994 $ 50,000 $ 51,495 -7.08% 0.99% 2.99% 12/31/1994 $ 8,000 $ 8,088 -7.08% 0.73%
12/31/1995 $ 50,000 $ 55,992 8.73% 2.87% 11.98% 12/31/1995 $ 10,000 $ 10,794 8.73% 3.82%
12/31/1996 $ 50,000 $ 63,568 13.53% 4.92% 27.14% 12/31/1996 $ 12,000 $ 14,254 13.53% 6.85%
12/31/1997 $ 50,000 $ 64,257 1.08% 4.27% 28.51% 12/31/1997 $ 14,000 $ 16,409 1.08% 5.25%
12/31/1998 $ 50,000 $ 73,077 13.73% 5.57% 46.15% 12/31/1998 $ 16,000 $ 20,661 13.73% 7.19%
</TABLE>
Federated American Leaders Portfolio
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 65,881 31.76% 31.76% 31.76% 12/31/1995 $ 4,000 $ 4,635 31.76% 31.76%
12/31/1996 $ 50,000 $ 78,918 19.79% 25.63% 57.84% 12/31/1996 $ 6,000 $ 7,553 19.79% 23.96%
12/31/1997 $ 50,000 $ 102,915 30.41% 27.20% 105.83% 12/31/1997 $ 8,000 $ 11,849 30.41% 26.92%
12/31/1998 $ 50,000 $ 119,254 15.88% 24.27% 138.51% 12/31/1998 $ 10,000 $ 15,730 15.88% 22.82%
</TABLE>
17
<PAGE>
Federated High Income Bond Portfolio
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 59,307 18.61% 18.61% 18.61% 12/31/1995 $ 4,000 $ 4,372 18.61% 18.61%
12/31/1996 $ 50,000 $ 66,794 12.63% 15.58% 33.59% 12/31/1996 $ 6,000 $ 6,924 12.63% 14.69%
12/31/1997 $ 50,000 $ 74,912 12.15% 14.43% 49.82% 12/31/1997 $ 8,000 $ 9,766 12.15% 13.47%
12/31/1998 $ 50,000 $ 75,787 1.17% 10.96% 51.57% 12/31/1998 $ 10,000 $ 11,880 1.17% 8.62%
</TABLE>
Federated Prime Money Portfolio
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 51,816 3.63% 3.63% 3.63% 12/31/1995 $ 4,000 $ 4,073 3.63% 3.63%
12/31/1996 $ 50,000 $ 53,469 3.19% 3.41% 6.94% 12/31/1996 $ 6,000 $ 6,203 3.19% 3.34%
12/31/1997 $ 50,000 $ 55,273 3.37% 3.40% 10.55% 12/31/1997 $ 8,000 $ 8,412 3.37% 3.36%
12/31/1998 $ 50,000 $ 57,107 3.32% 3.38% 14.21% 12/31/1998 $ 10,000 $ 10,691 3.32% 3.34%
</TABLE>
Federated U.S. Government Securities
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 53,579 7.16% 7.16% 7.16% 12/31/1995 $ 4,000 $ 4,143 7.16% 7.16%
12/31/1996 $ 50,000 $ 55,001 2.65% 4.88% 10.00% 12/31/1996 $ 6,000 $ 6,253 2.65% 4.16%
12/31/1997 $ 50,000 $ 58,835 6.97% 5.57% 17.67% 12/31/1997 $ 8,000 $ 8,689 6.97% 5.53%
12/31/1998 $ 50,000 $ 62,403 6.07% 5.70% 24.81% 12/31/1998 $ 10,000 $ 11,216 6.07% 5.74%
</TABLE>
18
<PAGE>
Federated Utility Portfolio
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 61,182 22.36% 22.36% 22.36% 12/31/1995 $ 4,000 $ 4,447 22.36% 22.36%
12/31/1996 $ 50,000 $ 67,247 9.91% 15.97% 34.49% 12/31/1996 $ 6,000 $ 6,888 9.91% 14.14%
12/31/1997 $ 50,000 $ 83,914 24.78% 18.84% 67.83% 12/31/1997 $ 8,000 $ 10,595 24.78% 19.08%
12/31/1998 $ 50,000 $ 94,203 12.26% 17.16% 88.41% 12/31/1998 $ 10,000 $ 13,894 12.26% 16.51%
</TABLE>
Montgomery Growth
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1996
December 31, 1996 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1996 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1996 $ 2,000 $ 2,000 N/A N/A
12/31/1997 $ 50,000 $ 63,349 26.70% 26.70% 26.70% 12/31/1997 $ 4,000 $ 4,534 26.70% 26.70%
12/31/1998 $ 50,000 $ 64,221 1.38% 13.33% 28.44% 12/31/1998 $ 6,000 $ 6,596 1.38% 9.63%
</TABLE>
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1996
December 31, 1996 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1996 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1996 $ 2,000 $ 2,000 N/A N/A
12/31/1997 $ 50,000 $ 48,960 -2.08% -2.08% -2.08% 12/31/1997 $ 4,000 $ 3,958 -2.08% -2.08%
12/31/1998 $ 50,000 $ 30,111 -38.50% -22.40% -39.78% 12/31/1998 $ 6,000 $ 4,434 -38.50% -28.87%
</TABLE>
19
<PAGE>
Strong International Stock
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 54,373 8.75% 8.75% 8.75% 12/31/1996 $ 4,000 $ 4,175 8.75% 8.75%
12/31/1997 $ 50,000 $ 46,313 -14.82% -3.76% -7.37% 12/31/1997 $ 6,000 $ 5,556 -14.82% -7.59%
12/31/1998 $ 50,000 $ 43,433 -6.22% -4.59% -13.13% 12/31/1998 $ 8,000 $ 7,211 -6.22% -6.89%
</TABLE>
Strong Schafer Value
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1997
December 31, 1997 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1997 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1997 $ 2,000 $ 2,000 N/A N/A
12/31/1998 $ 50,000 $ 50,316 0.63% 0.63% 0.63% 12/31/1998 $ 4,000 $ 4,013 0.63% 0.63%
</TABLE>
Wanger U.S. Small Cap Advisor
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 72,231 44.46% 44.46% 44.46% 12/31/1996 $ 4,000 $ 4,889 44.46% 44.46%
12/31/1997 $ 50,000 $ 92,111 27.52% 35.73% 84.22% 12/31/1997 $ 6,000 $ 8,235 27.52% 33.51%
12/31/1998 $ 50,000 $ 98,613 7.06% 25.41% 97.23% 12/31/1998 $ 8,000 $ 10,816 7.06% 20.52%
</TABLE>
20
<PAGE>
Wanger International Small Cap Advisor
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 65,039 30.08% 30.08% 30.08% 12/31/1996 $ 4,000 $ 4,602 30.08% 30.08%
12/31/1997 $ 50,000 $ 63,132 -2.93% 12.37% 26.26% 12/31/1997 $ 6,000 $ 6,467 -2.93% 7.59%
12/31/1998 $ 50,000 $ 72,346 14.59% 13.10% 44.69% 12/31/1998 $ 8,000 $ 9,410 14.59% 10.93%
</TABLE>
Warburg Pincus International Equity
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 54,200 8.40% 8.40% 8.40% 12/31/1996 $ 4,000 $ 4,168 8.40% 8.40%
12/31/1997 $ 50,000 $ 52,126 -3.83% 2.10% 4.25% 12/31/1997 $ 6,000 $ 6,009 -3.83% 0.14%
12/31/1998 $ 50,000 $ 54,093 3.77% 2.66% 8.19% 12/31/1998 $ 8,000 $ 8,235 3.77% 1.93%
</TABLE>
Warburg Pincus Small Company Growth
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1995
December 31, 1995 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1995 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1995 $ 2,000 $ 2,000 N/A N/A
12/31/1996 $ 50,000 $ 56,111 12.22% 12.22% 12.22% 12/31/1996 $ 4,000 $ 4,244 12.22% 12.22%
12/31/1997 $ 50,000 $ 63,936 13.94% 13.08% 27.87% 12/31/1997 $ 6,000 $ 6,836 13.94% 13.35%
12/31/1998 $ 50,000 $ 61,170 -4.33% 6.95% 22.34% 12/31/1998 $ 8,000 $ 8,541 -4.33% 4.38%
</TABLE>
21
<PAGE>
WRL Alger Aggressive Growth
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1994
December 31, 1994 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1994 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1994 $ 2,000 $ 2,000 N/A N/A
12/31/1995 $ 50,000 $ 68,007 36.01% 36.01% 36.01% 12/31/1995 $ 4,000 $ 4,720 36.01% 36.01%
12/31/1996 $ 50,000 $ 73,997 8.81% 21.65% 47.99% 12/31/1996 $ 6,000 $ 7,136 8.81% 17.87%
12/31/1997 $ 50,000 $ 90,348 22.10% 21.80% 80.70% 12/31/1997 $ 8,000 $ 10,713 22.10% 19.85%
12/31/1998 $ 50,000 $ 132,389 46.53% 27.56% 164.78% 12/31/1998 $ 10,000 $ 17,698 46.53% 28.88%
</TABLE>
WRL J.P. Morgan Real Estate Securities
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1998
December 31, 1998 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1998 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1998 $ 2,000 $ 2,000 N/A N/A
</TABLE>
WRL Janus Global
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1992
December 31, 1992 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1992 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1992 $ 2,000 $ 2,000 N/A N/A
12/31/1993 $ 50,000 $ 66,546 33.09% 33.09% 33.09% 12/31/1993 $ 4,000 $ 4,662 33.09% 33.09%
12/31/1994 $ 50,000 $ 65,721 -1.24% 14.65% 31.44% 12/31/1994 $ 6,000 $ 6,604 -1.24% 9.75%
12/31/1995 $ 50,000 $ 79,693 21.26% 16.81% 59.39% 12/31/1995 $ 8,000 $ 10,008 21.26% 15.15%
12/31/1996 $ 50,000 $ 100,306 25.87% 19.01% 100.61% 12/31/1996 $ 10,000 $ 14,597 25.87% 19.01%
12/31/1997 $ 50,000 $ 117,364 17.01% 18.61% 134.73% 12/31/1997 $ 12,000 $ 19,079 17.01% 18.41%
12/31/1998 $ 50,000 $ 150,359 28.11% 20.14% 200.72% 12/31/1998 $ 14,000 $ 26,443 28.11% 20.76%
</TABLE>
22
<PAGE>
WRL Janus Growth
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1986
December 31, 1986 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1986 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1986 $ 2,000 $ 2,000 N/A N/A
12/31/1987 $ 50,000 $ 54,626 9.25% 9.25% 9.25% 12/31/1987 $ 4,000 $ 4,185 9.25% 9.25%
12/31/1988 $ 50,000 $ 63,844 16.87% 13.00% 27.69% 12/31/1988 $ 6,000 $ 6,891 16.87% 14.18%
12/31/1989 $ 50,000 $ 92,519 44.91% 22.77% 85.04% 12/31/1989 $ 8,000 $ 11,986 44.91% 27.74%
12/31/1990 $ 50,000 $ 90,938 -1.71% 16.13% 81.88% 12/31/1990 $ 10,000 $ 13,782 -1.71% 16.10%
12/31/1991 $ 50,000 $ 143,230 57.50% 23.43% 186.46% 12/31/1991 $ 12,000 $ 23,706 57.50% 27.06%
12/31/1992 $ 50,000 $ 144,399 0.82% 19.33% 188.80% 12/31/1992 $ 14,000 $ 25,900 0.82% 20.09%
12/31/1993 $ 50,000 $ 147,925 2.44% 16.76% 195.85% 12/31/1993 $ 16,000 $ 28,532 2.44% 16.05%
12/31/1994 $ 50,000 $ 133,600 -9.68% 13.07% 167.20% 12/31/1994 $ 18,000 $ 27,769 -9.68% 10.53%
12/31/1995 $ 50,000 $ 193,715 45.00% 16.24% 287.43% 12/31/1995 $ 20,000 $ 42,264 45.00% 15.82%
12/31/1996 $ 50,000 $ 225,139 16.22% 16.24% 350.28% 12/31/1996 $ 22,000 $ 51,121 16.22% 15.88%
12/31/1997 $ 50,000 $ 260,744 15.81% 16.20% 421.49% 12/31/1997 $ 24,000 $ 61,205 15.81% 15.87%
12/31/1998 $ 50,000 $ 422,697 62.11% 19.47% 745.39% 12/31/1998 $ 26,000 $ 101,221 62.11% 20.61%
</TABLE>
WRL LKCM Strategic Total Return
<TABLE>
<CAPTION>
$50,000 Single Purchase Payment Made $2,000 Purchase Payment Made December 31, 1993
December 31, 1993 and Yearly December 31st Thereafter
------------------------------------ ----------------------------------------------
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- -----------------
One Average One Average
Year Annual Cumulative Year Annual
Cumulative Accumulated Total Total Fund Total Cumulative Accumulated Total Total
Date Payment Value Return Return Return Date Payment Value Return Return
---- ------- ----- ------ ------ ------ ---- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/1993 $ 50,000 $ 50,000 N/A N/A N/A 12/31/1993 $ 2,000 $ 2,000 N/A N/A
12/31/1994 $ 50,000 $ 48,993 -2.01% -2.01% -2.01% 12/31/1994 $ 4,000 $ 3,960 -2.01% -2.01%
12/31/1995 $ 50,000 $ 60,180 22.83% 9.71% 20.36% 12/31/1995 $ 6,000 $ 6,864 22.83% 13.77%
12/31/1996 $ 50,000 $ 68,183 13.30% 10.89% 36.37% 12/31/1996 $ 8,000 $ 9,777 13.30% 13.54%
12/31/1997 $ 50,000 $ 81,808 19.98% 13.10% 63.62% 12/31/1997 $ 10,000 $ 13,730 19.98% 15.91%
12/31/1998 $ 50,000 $ 88,346 7.99% 12.06% 76.69% 12/31/1998 $ 12,000 $ 16,828 7.99% 13.43%
</TABLE>
Individualized Computer Generated Illustrations
Peoples Benefit may from time to time use computer-based software available
through Morningstar, CDA/Wiesnberger and/or other firms to provide registered
representatives and existing and/or potential owners of Policies with
individualized hypothetical performance illustrations for some or all of the
Portfolios. Such illustrations may include, without limitation, graphs, bar
charts and other types of formats presenting the following information: (i) the
historical results of a hypothetical investment in a single Portfolio; (ii) the
historical fluctuation of the value of a single Portfolio (actual and
hypothetical); (iii) the historical results of a hypothetical investment in more
than one Portfolio; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Portfolios; (v) the
historical performance of two or more market indices in comparison to a single
Portfolio or a group of Portfolios; (vi) a market risk/reward scatter chart
showing the historical risk/reward relationship of one or more mutual funds or
23
<PAGE>
Portfolios to one or more indices and a broad category of similar anonymous
variable annuity subaccounts; and (vii) Portfolio data sheets showing various
information about one or more Portfolios (such as information concerning total
return for various periods, fees and expenses, standard deviation, alpha and
beta, investment objective, inception date and net assets).
PERFORMANCE COMPARISONS
Performance information for any subaccount reflects only the performance of a
hypothetical Policy 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 in which the subaccount
invests, and the market conditions during the given 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, Inc. as
determined by one or more of the ratings services listed below, 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 person 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 Policy (or returns in general) on a tax-deferred basis (assuming
one or more tax rates) with the return on a taxable basis.
Each subaccount's performance depends on, among other things, the performance of
the underlying Portfolio which, in turn, depends upon such variables as:
. quality of underlying investments;
. average maturity of underlying investments;
. type of instruments in which the Portfolio is invested;
. changes in interest rates and market value of underlying investments;
. changes in Portfolio expenses; and
. the relative amount of the Portfolio's cash flow.
From time to time, we may advertise the performance of the subaccounts and the
underlying Portfolios as compared to similar funds or portfolios using certain
indexes, reporting services and financial publications, and we may advertise
rankings or ratings issued by certain services and/or other institutions. These
may include, but are not limited to, the following:
. Dow Jones Industrial Average ("DJIA"), an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.
. Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, which can be used to compare
to the total returns of funds whose portfolios are invested primarily
in common stocks. In addition, the Standard & Poor's index assumes
reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated into the Standard & Poor's figures.
24
<PAGE>
. Lipper Analytical Services, Inc., a reporting service that ranks funds
in various fund categories by making comparative calculations using
total return. Total return assumes the reinvestment of all income
dividends and capital gains distributions, if any. From time to time,
we may quote the Portfolios' Lipper rankings in various fund
categories in advertising and sales literature.
. Bank Rate Monitor National Index, Miami Beach, Florida, a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of
the largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution, and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
. Shearson Lehman Government/Corporate (Total) Index, an index comprised
of approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed-rate, non-convertible
domestic bonds of companies in industry, public utilities and finance.
The average maturity of these bonds approximates nine years. Tracked
by Shearson Lehman, Inc., the index calculates total returns for one
month, three month, twelve month, and ten year periods and
year-to-date.
. Shearson Lehman Government/Corporate (Long-Term) Index, an index
composed of the same types of issues as defined above. However, the
average maturity of the bonds included in this index approximates 22
years.
. Shearson Lehman Government Index, an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government,
or any agency thereof, or any quasi-federal corporation and of
corporate debt guaranteed by the U.S. government. Only notes and bonds
with a minimum outstanding principal of $1 million and a minimum
maturity of one year are included.
. Morningstar, Inc., an independent rating service that publishes the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
. Money, a monthly magazine that regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Fund will quote its Money
ranking in advertising and sales literature.
. Standard & Poor's Utility Index, an unmanaged index of common stocks
from forty different utilities. This index indicates daily changes in
the price of the stocks. The index also provides figures for changes
in price from the beginning of the year to date, and for a twelve
month period.
. Dow Jones Utility Index, an unmanaged index comprised of fifteen
utility stocks that tracks changes in price daily and over a six month
period. The index also provides the highs and lows for each of the
past five years.
. The Consumer Price Index, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such companies.
Unmanaged indexes may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
25
<PAGE>
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
SAFEKEEPING OF ACCOUNT ASSETS
Title to assets of the Separate Account is held by Peoples Benefit. The assets
are kept physically segregated and held separate and apart from Peoples
Benefit's general account assets. The general account contains all of the assets
of Peoples Benefit. Records are maintained of all purchases and redemptions of
eligible Portfolio shares held by each of the subaccounts and the general
account.
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 Peoples Benefit or other
insurance companies. Although Peoples Benefit 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. See the Fund's prospectus for more
information.
PEOPLES BENEFIT
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.
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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary does not constitute tax advice. It is a general discussion
of certain of the expected federal income tax consequences of investment in and
distributions with respect to a policy, based on the Code, as amended, proposed
and final Treasury Regulations thereunder, judicial authority, and current
administrative rulings and practice. This summary discusses only certain federal
income tax consequences to "United States Persons," and does not discuss state,
local, or foreign tax consequences. United States Persons means citizens or
residents of the United States, domestic corporations, domestic partnerships and
trusts or estates that are subject to United States federal income tax
regardless of the source of their income.
26
<PAGE>
TAX STATUS OF THE POLICY
The following discussion is based on the assumption that the policy qualifies as
an annuity contract for federal income tax purposes.
DISTRIBUTION REQUIREMENTS
The Code requires that nonqualified policies contain specific provisions for
distribution of policy proceeds upon the death of any owner. In order to be
treated as an annuity contract for federal income tax purposes, the Code
requires that such policies provide that if any owner dies on or after the
annuity commencement date and before the entire interest in the policy has been
distributed, the remaining portion most be distributed at least as rapidly as
under the method in effect on such owner's death. If any owner dies before the
annuity commencement date, the entire interest in the policy must generally be
distributed within 5 years after such owner's date of death or be used to
purchase an immediate annuity under which payments will begin within one year of
such owner's death and will be made for the life of the beneficiary or for a
period not extending beyond the life expectancy of the "designated beneficiary"
as defined in section 72(s) of the Code. However, if upon such owner's death
prior to the annuity commencement date, such owner's surviving spouse becomes
the sole new owner, then the policy may be continued with the surviving spouse
as the new owner. Under the policy, the beneficiary is the designated
beneficiary of an owner/annuitant and the successor owner is the designated
beneficiary of an owner who is not the annuitant. If any owner is not a natural
person, then for purposes of these distribution requirements, the primary
annuitant shall be treated as an owner and any death or change of such primary
annuitant shall be treated as an owner and any death or change of such primary
annuitant shall be treated as the death of an owner. The nonqualified policies
contain provisions intended to comply with these requirements of the Code. No
regulations interpreting these requirements of the Code have yet been issued and
thus no assurance can be given that the provisions contained in the policy
satisfy all such Code requirements. The provisions contained in the policy will
be reviewed and modified if necessary to assure that they comply with the Code
requirements when clarified by regulation or otherwise.
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code provides that in order for a variable contract which
is based on a segregated asset account to qualify as an annuity contract under
the Code, the investments made by such account must be "adequately diversified"
in accordance with Treasury regulations. The Treasury regulations issued under
Section 817(h) (Treas. Reg. ss.1.817-5) apply a diversification requirement to
each of the subaccounts. The separate account, through its underlying funds and
their portfolios, intends to comply with the diversification requirements of the
Treasury regulations. Peoples Benefit has entered into agreements with each
underlying fund company which requires the portfolios to be operated in
compliance with the Treasury regulations.
OWNER CONTROL
In certain circumstances, owners of variable annuity contracts may be considered
the owners, for federal income tax purposes, of the assets of the separate
account used to support their contracts. In those circumstances, income and
gains from the separate account assets would be includable in the variable
annuity contract owner's gross income. Several years ago, the IRS stated in
published rulings that a variable annuity contract owner will be considered the
owner of separate account assets if the contract owner possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets.
More recently, the Treasury Department announced in connection with the issuance
of regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor (i.e.,
you), rather than the insurance company, to be treated as the owner of the
assets in the account." This announcement also stated that guidance would be
issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the contract are similar to, but different in certain
respects from those described by the IRS in rulings in which it was determined
that contract owners were not owners of separate account assets. For example,
you have the choice of one or more subaccounts in which to allocate purchase
payments and policy values, and may be
27
<PAGE>
able to transfer among these accounts more frequently than in such rulings.
These differences could result in you being treated as the owner of the assets
of the separate account. In addition, Peoples Benefit does not know what
standards will be set forth, if any, in the regulation or rulings that the
Treasury Department has stated it expects to issue. Peoples Benefit therefore
reserves the right to modify the policies as necessary to attempt to prevent you
from being considered the owner of a pro rata share of the assets of the
separate account.
WITHHOLDING
The portion of any distribution under a policy that is includable in gross
income will be subject to federal income tax withholding unless the recipient of
such distribution elects not to have federal income tax withheld. Election forms
will be provided at the time distributions are requested to be made. The
withholding rate varies according to the type of distribution and the owner's
tax status. For qualified policies, "eligible rollover distributions" from
Section 401(a) plans, Section 403(a) annuities, and Section 403(b) tax-sheltered
annuities are subject to mandatory federal income tax withholding of 20%. An
eligible rollover distribution is the taxable portion of any distribution from
such a plan, except certain distributions such as distributions required by the
Code or distributions in a specified annuity form. The 20% withholding does not
apply, however, if the owner chooses a "direct rollover" from the plan to
another tax-qualified plan or IRA. Different withholding requirements may apply
in the case of non-United States persons.
QUALIFIED POLICIES
The qualified policy is designed for use with several types of tax-qualified
retirement plans. The tax rules applicable to participants and beneficiaries in
tax-qualified retirement plans. The tax rules applicable to participants and
beneficiaries in tax-qualified retirement plans vary according to the type of
plan and the terms and conditions of the plan. Special favorable tax treatment
may be available for certain types of contributions and distributions. Adverse
tax consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions); distributions
that do not conform to specified commencement and minimum distribution rules;
and in other specified circumstances. Some retirement plans are subject to
distribution and other requirements that are not incorporated into the policies
or our administration procedures. Owners, participants and beneficiaries are
responsible for determining that contributions, distributions and other
transactions with respect to the policies comply with applicable law.
For qualified plans under Section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in
specified form or manner. If the plan participant is a "5 percent owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year in which the owner (or plan participant reaches age 70 1/2.
Each owner is responsible for requesting distributions under the policy that
satisfy applicable tax rules.
Peoples Benefit makes no attempt to provide more than general information about
use of the policy with the various types of retirement plans. Purchasers of a
policy for use with any retirement plan should consult their legal counsel and
tax adviser regarding the suitability of the policy.
INDIVIDUAL RETIREMENT ANNUITIES
In order to qualify as a traditional individual retirement annuity under Section
408(b) of the Code, a policy must contain certain provisions: (i) the owner must
be the annuitant; (ii) the policy generally is not transferable by the owner,
e.g., the owner may not designate a new owner, designate a contingent owner or
assign the policy as collateral security; (iii) the total Purchase Payments for
any calendar year may not exceed $2,000, except in the case of a rollover amount
or contribution under Section 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the
Code; (iv) annuity payments or withdrawals must begin no later than April 1 of
the calendar year following the calendar year in which the annuitant attains age
70 1/2; (v) an annuity payment option with a period certain that will guarantee
annuity payments beyond the life expectancy of the annuitant and the beneficiary
may not be selected; and certain payments of death benefits must be made in the
event the annuitant dies prior to the distribution of the policy value. Policies
intended to qualify as traditional individual retirement annuities under Section
408(b) of the Code contain such provisions. Amounts in the IRA (other than
nondeductible contributions) are taxed when distributed from the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% penalty tax.
28
<PAGE>
No part of the funds for an individual retirement account (including a Roth IRA)
or annuity should be invested in a life insurance contract, but the regulations
thereunder allow such funds to be invested in an annuity contract that provides
a death benefit that equals the greater of the purchase payments paid or the
cash value for the contract. The policy provides an enhanced death benefit that
could exceed the amount of such a permissible death benefit, but it is unclear
to what extent such an enhanced death benefit could disqualify the policy as an
IRA. The Internal Revenue Service has not reviewed the policy for qualification
as an IRA, and has not addressed in a ruling of general applicability whether an
enhanced death benefit provision, such as the provision in the policy, comports
with IRA qualification requirements.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA)
The Roth IRA, under Section 408A of the Code, contains many of the same
provisions as a traditional IRA. However, there are some differences. First, the
contributions are not deductible and must be made in cash or as a rollover or
transfer from another Roth IRA or other IRA. A rollover from or conversion of an
IRA to a Roth IRA may be subject to tax and other special rules may apply to the
rollover or conversion and to distributions attributable thereto. You should
consult a tax adviser before combining any converted amounts with any other Roth
IRA contributions, including any other conversion amounts from other tax years.
The Roth IRA is available to individuals with earned income and whose modified
adjusted gross income is under $110,000 for single filers, $160,000 for married
filing jointly, and $10,000 for married filing separately. The amount per
individual that may be contributed to all IRAs (Roth and traditional) is $2,000.
Secondly, the distributions are taxed differently. The Roth IRA offers tax-free
distributions when made 5 tax years after the first contribution to any Roth IRA
of the individual and made after attaining age 59 1/2, to pay for qualified
first time homebuyer expenses (lifetime maximum of $10,000) or due to death or
disability. All other distributions are subject to income tax when made from
earnings and may be subject to a premature withdrawal penalty tax unless an
exception applies. Unlike the traditional IRA, there are no minimum required
distributions during the owner's lifetime; however, required distributions at
death are generally the same.
SECTION 403(b) PLANS
Under Section 403(b) of the Code, payments made by public school systems and
certain tax exempt organizations to purchase policies for their employees are
excludable from the gross income of the employee, subject to certain
limitations. However, such payments may be subject to FICA (Social Security)
taxes. The policies include a death benefit that in some cases may exceed the
greater of the purchase payments or the policy value. The death benefit could be
characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity under section 403(b). Because the death benefit may exceed
this limitation, employers using the policies in connection with such plans
should consult their tax adviser. Additionally, in accordance with the
requirements of the Code, Section 403(b) annuities generally may not permit
distribution of (i) elective contributions made in years beginning after
December 31, 1988, and (ii) earnings on those contributions and (iii) earnings
on amounts attributed to elective contributions held as of the end of the last
year beginning before January 1, 1989. Distributions of such amounts will be
allowed only upon the death of the employee, on or after attainment of age
59 1/2, separation from service, disability, or financial hardship, except that
income attributable to elective contributions may not be distributed in the case
of hardship.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of retirement plans for employees and self-employed individuals to
establish qualified plans for themselves and their employees. Such retirement
plans may permit the purchase of the policies to accumulate retirement savings.
Adverse tax consequences to the plan, the participant or both may result if the
policy is assigned or transferred to any individual as a means to provide
benefit payments. The policies include a death benefit that in some cases may
exceed the greater of the purchase payments or the policy value. The death
benefit could be characterized as an incidental benefit, the amount of which is
limited in a pension or profit sharing plan. Because the death benefit may
exceed this limitation, employers using the policies in connection with such
plans should consult their tax adviser.
29
<PAGE>
DEFERRED COMPENSATION PLANS
Section 457 of the Code, while not actually providing for a qualified plan as
that term is normally used, provides for certain deferred compensation plans
with respect to service for state governments, political sub-divisions,
agencies, instrumentality and certain affiliates of such entities, and tax
exempt organizations. The policies can be used with such plans. Under such plans
a participant may specify the form of investment in which his or her
participation will be made. For non-governmental Section 457 plans, all such
investments, however are owned by, and are subject to, the claims of the general
creditors of the sponsoring employer. Depending on the terms of the particular
plan, a non-government employer may be entitled to draw on deferred amounts for
purposes unrelated to its Section 457 plan obligations. In general, all amounts
received under a Section 457 plan are taxable and are subject to federal income
tax withholding as wages.
NON-NATURAL PERSONS
Pursuant to Section 72(u) of the Code, an annuity contract held by a taxpayer
other than a natural person generally will not be treated as an annuity contract
under the Code; accordingly, an owner who is not a natural person will recognize
as ordinary income for a taxable year the excess of (i) the sum of the policy
value as of the close of the taxable year and all previous distributions under
the policy over (ii) the sum of the Purchase Payments paid for the taxable year
and any prior taxable year and the amounts includable in gross income for any
prior taxable year with respect to the policy. For these purposes, the policy
value at the year-end may have to be increased by any positive excess interest
adjustment, which could result from a full surrender at such time. There is
however, no definitive guidance on the proper tax treatment of excess interest
adjustments, and the owner should contact a competent tax adviser with respect
to the potential tax consequences of an excess interest adjustment.
Notwithstanding the preceding sentences in this paragraph, Section 72(u) of the
Code does not apply to (i) a policy where the nominal owner is not a natural
person but the beneficial owner is a natural person, (ii) a policy acquired by
the estate of a decedent by reason of such decedent's death, (iii) a qualified
policy (other than one qualified under Section 457) or (iv) a single-payment
annuity where the annuity commencement date is no later than one year from the
date of the single Purchase Payment; instead, such policies are taxed as
described above under the heading "Taxation of Annuities."
TAXATION OF PEOPLES BENEFIT
Peoples Benefit 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 Peoples Benefit and its operations form a part of Peoples
Benefit, 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 Peoples Benefit. Peoples
Benefit reserves the right to make a deduction for taxes should they be imposed
with respect to such items in the future.
Under present laws, Peoples Benefit will incur state or local taxes in several
states. At the present, Peoples Benefit does not charge the Contract Owner for
these taxes. If there is a change in state or local tax laws, Peoples Benefit
may make charges for such taxes. Peoples Benefit 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.
Peoples Benefit 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
Peoples Benefit incurs. This might become necessary if Peoples Benefit
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 Peoples Benefit's tax status.
If Peoples Benefit should incur federal income taxes attributable to investment
income or capital gains retained as part of the reserves under the Policies, the
Accumulated Value of the Policy would be correspondingly adjusted by any
provision or charge for such taxes.
30
<PAGE>
STATE REGULATION OF PEOPLES BENEFIT
Peoples Benefit is a stock life insurance company organized under the laws of
Iowa, and is subject to regulation by the Iowa State Department of Insurance. An
annual statement is filed with the Iowa Commissioner of Insurance on or before
March 1st of each year covering the operations and reporting on the financial
condition of Peoples Benefit as of December 31st of the preceding calendar year.
Periodically, the Iowa Commissioner of Insurance examines the financial
condition of Peoples Benefit, including the liabilities and reserves of the
Separate Account.
RECORDS AND REPORTS
All records and accounts relating to the Separate Account will be maintained by
Peoples Benefit. As presently required by the Investment Company Act of 1940 and
regulations promulgated thereunder, Peoples Benefit will mail to all Policy
Owners at their last known address of record, at least semi-annually, reports
containing such information as may be required under that Act or by any other
applicable law or regulation. Policy Owners will also receive confirmation of
each financial transaction and any other reports required by law or regulation.
DISTRIBUTION OF THE POLICIES
AFSG Securities Corporation ("AFSG"), formerly Providian Securities Corporation,
the principal underwriter of the Policy, is ultimately a wholly-owned subsidiary
of AEGON N.V. AFSG is registered with the SEC under the Securities Exchange Act
of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Commissions and expense allowance payments not to
exceed, in the aggregate, 6.75% of Purchase Payments may be paid to entities
which sell the Policy. Additional payments may be made for other services not
directly related to the sale of the Policy.
The Policy is offered to the public through brokers licensed under the federal
securities laws and state insurance laws that have entered into agreements with
AFSG. The offering of the Policy is continuous and AFSG does not anticipate
discontinuing the offering of the Policy. However, AFSG does reserve the right
to discontinue the offering of the Policy.
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. Peoples Benefit 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
Policy 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 Policy 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.
31
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements of certain subaccounts of the Separate Account
which are available for investment by Advisor's Edge Select Policy Owners as of
ended December 31, 1999, and for the year then ended and the period October 26,
1998 (commencement of operations) through December 31, 1998, including the
Report of Independent Auditors thereon, are included in this Statement of
Additional Information.
The audited statutory-basis financial statements of Peoples Benefit as of
December 31, 1999, and 1998, and for each of the three years in the period ended
December 31, 1999, including the Reports of Independent Auditors thereon, are
included in this Statement of Additional Information. They should be
distinguished from the financial statements of the subaccounts of the Separate
Account which are available for investment by Advisor's Edge Select Policy
Owners and should be considered only as bearing on the ability of Peoples
Benefit to meet its obligations under the Polices. They should not be considered
as bearing on the investment performance of the assets held in the Separate
Account.
32
<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>
Financial Statements
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge
Select Variable Annuity
Year ended December 31, 1999
with Report of Independent Auditors
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Financial Statements
Year ended December 31, 1999
Contents
Report of Independent Auditors.................................................1
Financial Statements
Balance Sheets.................................................................2
Statements of Operations......................................................10
Statements of Changes in Contract Owners' Equity..............................14
Notes to Financial Statements.................................................21
<PAGE>
Report of Independent Auditors
The Board of Directors and Contract Owners
of the Advisor's Edge Select Variable Annuity,
Peoples Benefit Life Insurance Company
We have audited the accompanying balance sheets of certain subaccounts of
Peoples Benefit Life Insurance Company Separate Account V (comprised of the
Federated American Leaders Fund II, Federated Utility Fund II, Federated Prime
Money Fund II, Federated High Income Bond Fund II, Federated Fund for U.S.
Government Securities II, Wanger U.S. Small Cap Advisor, Wanger International
Small Cap Advisor, Montgomery Growth, Montgomery Emerging Markets, Strong
International Stock Fund II, Strong Schafer Value Fund II, T. Rowe Price
International Stock, Dreyfus Small Cap Value, Endeavor Enhanced Index, Stein Roe
Special Venture Fund Variable Series, Warburg Pincus International Equity,
Warburg Pincus Small Company Growth, WRL Janus Growth, WRL Janus Global, WRL
LKCM Strategic Total Return, WRL Alger Aggressive Growth, and WRL J.P. Morgan
Real Estate Securities subaccounts), which are available for investment by
contract owners of the Advisor's Edge Select Variable Annuity, 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 funds' transfer agents. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 V which
are available for investment by contract owners of the Advisor's Edge Select
Variable Annuity 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 V - Advisor's Edge Select Variable Annuity
Balance Sheets
December 31, 1999
<TABLE>
<CAPTION>
Federated Federated Federated
American Federated Prime High Income
Leaders Utility Money Bond
Fund II Fund II Fund II Fund II
Subaccount Subaccount Subaccount Subaccount
------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Assets
Cash $ - $ - $ 13 $ -
Investments in mutual funds, at current market value:
The Federated Insurance Series:
Federated American Leaders Fund II 1,483,515 - - -
Federated Utility Fund II - 177,474 - -
Federated Prime Money Fund II - - 14,174,442 -
Federated High Income Bond Fund II - - - 348,645
Federated Fund for U. S. Government Securities II - - - -
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor - - - -
Wanger International Small Cap Advisor - - - -
The Montgomery Funds III:
Montgomery Growth Portfolio - - - -
Montgomery Emerging Markets Portfolio - - - -
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II - - - -
Strong Schafer Value Fund II - - - -
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio - - - -
Dreyfus Small Cap Value Portfolio - - - -
Endeavor Enhanced Index Portfolio - - - -
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable Series - - - -
Warburg Pincus Trust:
Warburg Pincus International Equity Portfolio - - - -
Warburg Pincus Small Company Growth Portfolio - - - -
WRL Series Fund, Inc.:
WRL Janus Growth Portfolio - - - -
WRL Janus Global Portfolio - - - -
WRL LKCM Strategic Total Return Portfolio - - - -
WRL Alger Aggressive Growth Portfolio - - - -
WRL J. P. Morgan Real Estate Securities Portfolio - - - -
------------- --------------- -------------- ---------------
Total investments in mutual funds 1,483,515 177,474 14,174,442 348,645
------------- --------------- -------------- ---------------
Total assets $1,483,515 $177,474 $14,174,455 $348,645
============= =============== ============== ===============
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
Federated Wanger Strong
Fund for U. S. Wanger U. S. International Montgomery Strong Schafer
Government Small Cap Small Cap Montgomery Emerging International Value
Securities II Advisor Advisor Growth Markets Stock Fund II Fund II
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------------ -------------- --------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 1 $ - $ - $ - $ - $ - $ -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
1,491,490 - - - - - -
- 754,920 - - - - -
- - 790,489 - - - -
- - - 921,963 - - -
- - - - 33,588 - -
- - - - - 24,782 -
- - - - - - 279,517
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
---------------------------------------------------------------------------------------------------------------
1,491,490 754,920 790,489 921,963 33,588 24,782 279,517
---------------------------------------------------------------------------------------------------------------
$1,491,491 $754,920 $790,489 $921,963 $33,588 $24,782 $279,517
===============================================================================================================
</TABLE>
3
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
Federated Federated
American Federated Federated High Income
Leaders Utility Prime Money Bond
Fund II Fund II Fund II Fund II
Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities and contract owners' equity
Liabilities:
Contract terminations payable $ 23 $ 1 $ - $ 1
-----------------------------------------------------------
Total liabilities 23 1 - 1
Contract owners' equity:
Deferred annuity contracts terminable by owners 1,483,492 177,473 14,174,455 348,644
-----------------------------------------------------------
Total liabilities and contract owners' equity $1,483,515 $177,474 $14,174,455 $348,645
==========================================================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
Federated Wanger Strong
Fund for U. S. Wanger U. S. International Montgomery Strong Schafer
Government Small Cap Small Cap Montgomery Emerging International Value
Securities II Advisor Advisor Growth Markets Stock Fund II Fund II
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ - $ 19 $ 17 $ 16 $ 5 $ 1 $ 7
---------------------------------------------------------------------------------------------------------------
- 19 17 16 5 1 7
1,491,491 754,901 790,472 921,947 33,583 24,781 279,510
---------------------------------------------------------------------------------------------------------------
$1,491,491 $754,920 $790,489 $921,963 $33,588 $24,782 $279,517
===============================================================================================================
</TABLE>
5
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
T. Rowe Price Dreyfus Endeavor Stein Roe Special
International Small Cap Enhanced Venture Fund
Stock Value Index Variable Series
Subaccount Subaccount Subaccount Subaccount
---------------- ------------- --------------- -------------------
<S> <C> <C> <C> <C>
Assets
Cash $ - $ - $ - $ -
Investments in mutual funds, at current market value:
The Federated Insurance Series:
Federated American Leaders Fund II - - - -
Federated Utility Fund II - - - -
Federated Prime Money Fund II - - - -
Federated High Income Bond Fund II - - - -
Federated Fund for U. S. Government Securities II - - - -
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor - - - -
Wanger International Small Cap Advisor - - - -
The Montgomery Funds III:
Montgomery Growth Portfolio - - - -
Montgomery Emerging Markets Portfolio - - - -
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II - - - -
Strong Schafer Value Fund II - - - -
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio 1,638,191 - - -
Dreyfus Small Cap Value Portfolio - 822,781 - -
Endeavor Enhanced Index Portfolio - - 2,233,044 -
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable Series - - - 27,930
Warburg Pincus Trust:
Warburg Pincus International Equity Portfolio - - - -
Warburg Pincus Small Company Growth Portfolio - - - -
WRL Series Fund, Inc.:
WRL Janus Growth Portfolio - - - -
WRL Janus Global Portfolio - - - -
WRL LKCM Strategic Total Return Portfolio - - - -
WRL Alger Aggressive Growth Portfolio - - - -
WRL J. P. Morgan Real Estate Securities Portfolio - - - -
------------------------------------------------------------------
Total investments in mutual funds 1,638,191 822,781 2,233,044 27,930
------------------------------------------------------------------
Total assets $1,638,191 $822,781 $2,233,044 $27,930
==================================================================
</TABLE>
See accompanying notes.
6
<PAGE>
<TABLE>
<CAPTION>
Warburg WRL J. P.
Warburg Pincus Small WRL LKCM WRL Alger Morgan Real
Pincus Company WRL Janus WRL Janus Strategic Aggressive Estate
International Growth Growth Global Total Return Growth Securities
Equity Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ - $ - $ 3 $ - $ - $ - $ -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
- - - - - - -
28,570 - - - - - -
- 28,405 - - - - -
- - 919,584 - - - -
- - - 894,375 - - -
- - - - 295,908 - -
- - - - - 366,174 -
- - - - - - 2,578
---------------------------------------------------------------------------------------------------------------
28,570 28,405 919,584 894,375 295,908 366,174 2,578
---------------------------------------------------------------------------------------------------------------
$28,570 $28,405 $919,587 $894,375 $295,908 $366,174 $2,578
===============================================================================================================
</TABLE>
7
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Balance Sheets (continued)
<TABLE>
<CAPTION>
T. Rowe Price Dreyfus Endeavor Stein Roe Special
International Small Cap Enhanced Venture Fund
Stock Value Index Variable Series
Subaccount Subaccount Subaccount Subaccount
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities and contract owners' equity
Liabilities
Contract terminations payable $ 61 $ 17 $ 7 $ 6
----------------------------------------------------------------
Total liabilities 61 17 7 6
Contract owners' equity:
Deferred annuity contracts terminable by owners 1,638,130 822,764 2,233,037 27,924
----------------------------------------------------------------
Total liabilities and contract owners' equity $1,638,191 $822,781 $2,233,044 $27,930
================================================================
</TABLE>
See accompanying notes.
8
<PAGE>
<TABLE>
<CAPTION>
Warburg Warburg WRL J. P.
Pincus Pincus Small WRL LKCM WRL Alger Morgan Real
International Company WRL Janus WRL Janus Strategic Aggressive Estate
Equity Growth Growth Global Total Return Growth Securities
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 37 $ 5 $ - $ 50 $ 8 $ 2 $ -
-------------------------------------------------------------------------------------------------------------
37 5 - 50 8 2 -
28,533 28,400 919,587 894,325 295,900 366,172 2,578
-------------------------------------------------------------------------------------------------------------
$28,570 $28,405 $919,587 $894,375 $295,908 $366,174 $2,578
=============================================================================================================
</TABLE>
9
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Statements of Operations
Year ended December 31, 1999, except as noted
<TABLE>
<CAPTION>
Federated Federated Federated
American Federated Prime High Income
Leaders Utility Money Bond
Fund II Fund II Fund II Fund II
Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income (loss)
Income:
Dividends $ 21,202 $ 77 $ 187,639 $ 90
Expenses:
Administrative, mortality and expense risk charges 9,397 1,342 35,221 2,561
-----------------------------------------------------------
Net investment income (loss) 11,805 (1,265) 152,418 (2,471)
Net realized and unrealized capital gain (loss)
from investments
Net realized capital gain (loss) from sales of
investments:
Proceeds from sales 57,797 65,003 192,599,013 252,374
Cost of investments sold 62,910 64,150 192,599,013 253,947
-----------------------------------------------------------
Net realized capital gain (loss) from sales of
investments (5,113) 853 - (1,573)
Net change in unrealized appreciation/depreciation of
investments:
Beginning of the period 100 66 - 61
End of the period (12,987) 203 - 6,808
-----------------------------------------------------------
Net change in unrealized appreciation/depreciation
of investments (13,087) 137 - 6,747
-----------------------------------------------------------
Net realized and unrealized capital gain (loss)
from investments (18,200) 990 - 5,174
-----------------------------------------------------------
Increase (decrease) from operations $ (6,395) $ (275) $ 152,418 $ 2,703
==========================================================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
10
<PAGE>
<TABLE>
<CAPTION>
Federated
Fund for Wanger Wanger Strong Strong
U. S. U. S. Small International Montgomery International Schafer
Government Cap Small Cap Montgomery Emerging Stock Value
Securities II Advisor Advisor Growth Markets Fund II Fund II
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 14,781 $ 8,079 $ 931 $ 9,197 $ 4 $ 5 $ 10,245
10,882 4,979 3,531 5,862 210 345 978
------------------------------------------------------------------------------------------------------------
3,899 3,100 (2,600) 3,335 (206) (340) 9,267
368,249 18,245 32,928 13,774 9,166 3,328,178 41,366
386,106 17,289 17,912 12,164 6,364 3,282,750 46,403
------------------------------------------------------------------------------------------------------------
(17,857) 956 15,016 1,610 2,802 45,428 (5,037)
7 119 151 110 56 125 196
5,065 108,658 291,958 63,373 7,344 3,818 (1,571)
-----------------------------------------------------------------------------------------------------------
5,058 108,539 291,807 63,263 7,288 3,693 (1,767)
-----------------------------------------------------------------------------------------------------------
(12,799) 109,495 306,823 64,873 10,090 49,121 (6,804)
-----------------------------------------------------------------------------------------------------------
$ (8,900) $112,595 $304,223 $68,208 $ 9,884 $ 48,781 $ 2,463
===========================================================================================================
</TABLE>
11
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Statements of Operations (continued)
<TABLE>
<CAPTION>
Stein Roe
T. Rowe Price Dreyfus Endeavor Special Venture
International Small Cap Enhanced Fund Variable
Stock Value Index Series
Subaccount Subaccount Subaccount Subaccount
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income (loss)
Income:
Dividends $ 5,300 $ 1,338 $ 21,691 $ -
Expenses:
Administrative, mortality and expense risk 16,784 2,093 13,016 142
charges
---------------------------------------------------------------
Net investment income (loss) (11,484) (755) 8,675 (142)
Net realized and unrealized capital gain (loss)
from investments
Net realized capital gain (loss) from sales of
investments:
Proceeds from sales 63,756,461 57,704 186,041 1,669
Cost of investments sold 62,908,600 58,069 182,898 1,099
---------------------------------------------------------------
Net realized capital gain (loss) from sales of
investments 847,861 (365) 3,143 570
Net change in unrealized appreciation/depreciation of
investments:
Beginning of the period 93 191 162 104
End of the period 100,719 82,411 137,628 8,613
---------------------------------------------------------------
Net change in unrealized appreciation/depreciation
of investments 100,626 82,220 137,466 8,509
---------------------------------------------------------------
Net realized and unrealized capital gain (loss)
from investments 948,487 81,855 140,609 9,079
---------------------------------------------------------------
Increase (decrease) from operations $ 937,003 $81,100 $149,284 $8,937
===============================================================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
12
<PAGE>
<TABLE>
<CAPTION>
Warburg Warburg WRL J. P.
Pincus Pincus Small WRL M WRL Alger Morgan Real
International Company WRL Janus WRL Janus Strategic Total Aggressive Estate
Equity Growth Growth Global Return Growth Securities
Subaccount Subaccount Subaccount (1) Subaccount (1) Subaccount (1) Subaccount (1) Subaccount (1)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 254 $ 480 $ 124,470 $ 44,792 $ 14,906 $ 31,507 $ 16
9,532 109 3,152 11,501 795 1,062 16
-------------------------------------------------------------------------------------------------------------------------
(9,278) 371 121,318 33,291 14,111 30,445 -
64,497,577 9,172 132,783 66,382,205 22,684 36,882 889
63,553,848 7,394 117,426 65,313,661 22,983 27,818 1,028
-------------------------------------------------------------------------------------------------------------------------
943,729 1,778 15,357 1,068,544 (299) 9,064 (139)
67 173 - - - - -
2,207 5,316 38,887 52,484 690 47,294 42
-------------------------------------------------------------------------------------------------------------------------
2,140 5,143 38,887 52,484 690 47,294 42
-------------------------------------------------------------------------------------------------------------------------
945,869 6,921 54,244 1,121,028 391 56,358 (97)
-------------------------------------------------------------------------------------------------------------------------
$ 936,591 $7,292 $175,562 $ 1,154,319 $14,502 $86,803 $ (97)
=========================================================================================================================
</TABLE>
13
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Statements of Changes in Contract Owners' Equity
Year ended December 31, 1999 and the period
from October 26, 1998 (commencement of
operations) through December 31, 1998, except as noted
<TABLE>
<CAPTION>
Federated American Federated Utility
Leaders Fund II Fund II
Subaccount Subaccount
--------------------------- ----------------------------
1999 1998 1999 1998
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 11,805 $ (3) $ (1,265) $ (3)
Net realized capital gain (loss) (5,113) - 853 -
Net change in unrealized appreciation/
depreciation of investments (13,087) 100 137 66
--------------------------- ----------------------------
Increase (decrease) from operations (6,395) 97 (275) 63
Contract transactions:
Net contract purchase payments 1,146,888 1,000 139,097 1,001
Transfer payments from (to) other
subaccounts or general account 362,813 (1) 71,387 -
Contract terminations, withdrawals, and
other deductions (20,910) - (33,798) (2)
--------------------------- ----------------------------
Increase (decrease) from contract
transactions 1,488,791 999 176,686 999
--------------------------- ----------------------------
Net increase in contract owners' equity 1,482,396 1,096 176,411 1,062
Contract owners' equity:
Beginning of the period 1,096 - 1,062 -
--------------------------- ----------------------------
End of the period $1,483,492 $1,096 $177,473 $1,062
=========================== ============================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
14
<PAGE>
<TABLE>
<CAPTION>
Federated High Federated Fund for Wanger U. S.
Federated Prime Money Income Bond U. S. Government Small Cap Advisor
Fund II Subaccount Fund II Subaccount Securities II Subaccount Subaccount
---------------------------- ---------------------------- ---------------------------- ----------------------------
1999 1998 1999 1998 1999 1998 1999 1998
---------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 152,418 $ 521 $ (2,471) $ (3) $ 3,899 $ (3) $ 3,100 $ (3)
- - (1,573) - (17,857) - 956 -
- - 6,747 61 5,058 7 108,539 119
---------------------------- ---------------------------- ---------------------------- ----------------------------
152,418 521 2,703 58 (8,900) 4 112,595 116
10,147,575 451,000 91,461 1,000 1,234,909 1,000 514,403 1,000
3,433,751 - 257,458 (2) 298,849 3 135,205 (2)
(10,810) - (4,034) - (34,374) - (8,416) -
---------------------------- ---------------------------- ---------------------------- ----------------------------
13,570,516 451,000 344,885 998 1,499,384 1,003 641,192 998
---------------------------- ---------------------------- ---------------------------- ----------------------------
13,722,934 451,521 347,588 1,056 1,490,484 1,007 753,787 1,114
451,521 - 1,056 - 1,007 - 1,114 -
---------------------------- ---------------------------- ---------------------------- ----------------------------
$14,174,455 $451,521 $348,644 $1,056 $1,491,491 $1,007 $754,901 $1,114
============================ ============================ ============================ ============================
</TABLE>
15
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Wanger International
Small Cap Advisor Montgomery Growth
Subaccount Subaccount
--------------------------- ----------------------------
1999 1998 1999 1998
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (2,600) $ (3) $ 3,335 $ 6
Net realized capital gain (loss) 15,016 - 1,610 -
Net change in unrealized appreciation/
depreciation of investments 291,807 151 63,263 110
--------------------------- ----------------------------
Increase (decrease)from operations 304,223 148 68,208 116
Contract transactions:
Net contract purchase payments 336,963 1,001 739,247 1,001
Transfer payments from (to) other
subaccounts or general account 159,921 10 120,958 (2)
Contract terminations, withdrawals, and
other deductions (11,794) - (7,581) -
--------------------------- ----------------------------
Increase (decrease) from contract
transactions 485,090 1,011 852,624 999
--------------------------- ----------------------------
Net increase in contract owners' equity 789,313 1,159 920,832 1,115
Contract owners' equity:
Beginning of the period 1,159 - 1,115 -
--------------------------- ----------------------------
End of the period $790,472 $1,159 $921,947 $1,115
=========================== ============================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
16
<PAGE>
<TABLE>
<CAPTION>
Strong T. Rowe Price
Montgomery Emerging International Stock Strong Schafer Value International Stock
Markets Subaccount Fund II Subaccount Fund II Subaccount Subaccount
------------------------- --------------------- ------------------------ -------------------------
1999 1998 1999 1998 1999 1998 1999 1998
------------------------- --------------------- ------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (206) $ (1) $ (340) $ (3) $ 9,267 $ (1) $ (11,484) $ (3)
2,802 - 45,428 - (5,037) - 847,861 -
7,288 56 3,693 125 (1,767) 196 100,626 93
------------------------- --------------------- ------------------------ -------------------------
9,884 55 48,781 122 2,463 195 937,003 90
25,276 1,000 11,444 1,001 254,354 1,001 2,052,993 1,001
(1,006) - (34,517) 23 22,883 (11) (1,343,059) 11
(1,626) - (2,073) - (1,375) - (9,909) -
------------------------- --------------------- ------------------------ -------------------------
22,644 1,000 (25,146) 1,024 275,862 990 700,025 1,012
------------------------- --------------------- ------------------------ -------------------------
32,528 1,055 23,635 1,146 278,325 1,185 1,637,028 1,102
1,055 - 1,146 - 1,185 - 1,102 -
------------------------- --------------------- ------------------------ -------------------------
$33,583 $1,055 $24,781 $1,146 $279,510 $1,185 $1,638,130 $1,102
========================= ===================== ======================== =========================
</TABLE>
17
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Dreyfus Small Cap Value Endeavor Enhanced
Subaccount Index Subaccount
--------------------------- ----------------------------
1999 1998 1999 1998
--------------------------- ----------------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (755) $ (3) $ 8,675 $ (3)
Net realized capital gain (loss) (365) - 3,143 -
Net change in unrealized appreciation/
depreciation of investments 82,220 191 137,466 162
--------------------------- ----------------------------
Increase (decrease)from operations 81,100 188 149,284 159
Contract transactions:
Net contract purchase payments 670,523 1,000 1,949,443 1,001
Transfer payments from (to) other
subaccounts or general account 74,934 4 149,685 (6)
Contract terminations, withdrawals, and
other deductions (4,985) - (16,529) -
--------------------------- ----------------------------
Increase (decrease) from contract 740,472 1,004 2,082,599 995
transactions
--------------------------- ----------------------------
Net increase in contract owners' equity 821,572 1,192 2,231,883 1,154
Contract owners' equity:
Beginning of the period 1,192 - 1,154 -
--------------------------- ----------------------------
End of the period $822,764 $1,192 $2,233,037 $1,154
=========================== ============================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
18
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Special Warburg Pincus Warburg Pincus Small WRL Janus
Venture Fund Variable International Equity Company Growth Growth
Series Subaccount Subaccount Subaccount Subaccount (1)
------------------------- ------------------------- ------------------------- ----------------
1999 1998 1999 1998 1999 1998 1999
------------------------- ------------------------- ------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ (142) $ (3) $ (9,278) $ 3 $ 371 $ (3) $121,318
570 - 943,729 - 1,778 - 15,357
8,509 104 2,140 67 5,143 173 38,887
------------------------- ------------------------- ------------------------- ----------------
8,937 101 936,591 70 7,292 170 175,562
1,392 1,000 1,010,718 999 7,683 1,001 509,264
18,026 (4) (1,918,282) 9 16,591 (2) 248,229
(1,528) - (1,572) - (4,335) - (13,468)
------------------------- ------------------------- ------------------------- ----------------
17,890 996 (909,136) 1,008 19,939 999 744,025
------------------------- ------------------------- ------------------------- ----------------
26,827 1,097 27,455 1,078 27,231 1,169 919,587
1,097 - 1,078 - 1,169 - -
------------------------- ------------------------- ------------------------- ----------------
$27,924 $1,097 $ 28,533 $1,078 $28,400 $1,169 $919,587
========================= ========================= ========================= ================
</TABLE>
19
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Statements of Changes in Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
WRL J. P.
WRL LKCM WRL Alger Morgan Real
WRL Janus Strategic Total Aggressive Estate
Global Return Growth Securities
Subaccount (1) Subaccount (1) Subaccount (1) Subaccount (1)
----------------- ----------------- ----------------- -----------------
1999 1999 1999 1999
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 33,291 $ 14,111 $ 30,445 $ -
Net realized capital gain (loss) 1,068,544 (299) 9,064 (139)
Net change in unrealized appreciation/
depreciation of investments 52,484 690 47,294 42
----------------- ----------------- ----------------- -----------------
Increase (decrease)from operations 1,154,319 14,502 86,803 (97)
Contract transactions:
Net contract purchase payments 1,491,678 192,039 209,789 1,153
Transfer payments from (to) other
subaccounts or general account (1,740,195) 93,989 71,043 2,395
Contract terminations, withdrawals, and
other deductions (11,477) (4,630) (1,463) (873)
----------------- ----------------- ----------------- -----------------
Increase (decrease) from contract
transactions (259,994) 281,398 279,369 2,675
----------------- ----------------- ----------------- -----------------
Net increase in contract owners' equity 894,325 295,900 366,172 2,578
Contract owners' equity:
Beginning of the period - - - -
----------------- ----------------- ----------------- -----------------
End of the period $ 894,325 $295,900 $366,172 $2,578
================= ================= ================= =================
</TABLE>
(1) Commencement of operations, May 3, 1999.
See accompanying notes.
20
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Notes to Financial Statements
December 31, 1999
1. Organizational and Summary of Significant Accounting Policies
Organization of the Account
Peoples Benefit Life Insurance Company Separate Account V (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 forty-seven investment
subaccounts, five of which are invested in specified portfolios of the Federated
Insurance Series, two of which are invested in specified portfolios of the
Wanger Advisor's Trust, two of which are invested in specified portfolios of the
Montgomery Funds III, two of which are invested in specified portfolios of the
Strong Variable Insurance Funds, Inc., three of which are invested in specified
portfolios of the Endeavor Series Trust, one of which is invested in the Stein
Roe Special Venture Fund, Variable Series of the Stein Roe Variable Investment
Trust, two of which are invested in specified portfolio of the Warburg Pincus
Trust and five of which are invested in specified portfolios of WRL Series Fund,
Inc. (each a "Series Fund" and collectively "the Series Funds"). Activity in
these twenty-two subaccounts is available to contract owners of the Advisor's
Edge Select Variable Annuity. Activity in these twenty-two subaccounts is also
available to contract owners of the Advisor's Edge Variable Annuity, also
offered by PBL. The amounts reported herein represent the activity related to
contract owners of the Advisor's Edge Select Variable Annuity only. The
remaining twenty-five subaccounts (not included herein), are available to
contract owners of the Advisor's Edge Variable Annuity, Prism Variable Annuity,
Dimensional Variable Annuity, Marquee Variable Annuity, and Personal Manager
Variable Annuity also issued by PBL.
Investments
Net purchase payments received by the Mutual Fund Account are invested in the
Series Funds as selected by the contract owner. Investments are stated at the
closing net asset values per share as of December 31, 1999.
Realized capital gains and losses from sales of shares in the Series Funds are
determined on the first-in, first-out basis. 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 Funds are credited or charged to contract
owners' equity.
21
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Notes to Financial Statements (continued)
1. Organizational and Summary of Significant Accounting Policies (continued)
Dividend Income
Dividends received from the Series Funds investments are reinvested to purchase
additional mutual fund shares.
2. Investments
A summary of the mutual fund investments at December 31, 1999 follows:
<TABLE>
<CAPTION>
Net Asset
Number of Shares Value Per Market
Held Share Value Cost
---------------------------------------------------------------
<S> <C> <C> <C> <C>
The Federated Insurance Series:
Federated American Leaders Fund II 71,254.345 $20.82 $ 1,483,515 $ 1,496,502
Federated Utility Fund II 12,367.536 14.35 177,474 177,271
Federated Prime Money Fund II 14,174,442.200 1.00 14,174,442 14,174,442
Federated High Income Bond Fund II 34,047.399 10.24 348,645 341,837
Federated Fund for U. S. Government Securities II 141,239.617 10.56 1,491,490 1,486,425
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor 30,342.441 24.88 754,920 646,262
Wanger International Small Cap Advisor 18,101.417 43.67 790,489 498,531
The Montgomery Funds III:
Montgomery Growth Portfolio 50,133.928 18.39 921,963 858,590
Montgomery Emerging Markets Portfolio 3,092.781 10.86 33,588 26,244
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II 1,513.849 16.37 24,782 20,964
Strong Schafer Value Fund II 30,648.843 9.12 279,517 281,088
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio 78,457.438 20.88 1,638,191 1,537,472
Dreyfus Small Cap Value Portfolio 49,835.322 16.51 822,781 740,370
Endeavor Enhanced Index Portfolio 122,964.985 18.16 2,233,044 2,095,416
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable Series 1,384.708 20.17 27,930 19,317
Warburg Pincus Trust:
Warburg Pincus International Equity Portfolio 1,710.774 16.70 28,570 26,363
Warburg Pincus Small Company Growth Portfolio 1,084.146 26.20 28,405 23,089
</TABLE>
22
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Notes to Financial Statements (continued)
2. Investments (continued)
<TABLE>
<CAPTION>
Net Asset
Number of Value Per Market
Shares Held Share Value Cost
---------------------------------------------------------------
<S> <C> <C> <C> <C>
WRL Series Fund, Inc.:
WRL Janus Growth Portfolio 11,790.131 $77.996065 $ 919,584 $ 880,697
WRL Janus Global Portfolio 23,874.669 37.461242 894,375 841,891
WRL LKCM Strategic Total Return Portfolio 17,564.658 16.846756 295,908 295,218
WRL Alger Aggressive Growth Portfolio 11,004.447 33.275092 366,174 318,880
WRL J. P. Morgan Real Estate Securities
Portfolio 320.031 8.056186 2,578 2,536
</TABLE>
The aggregate cost of purchases and proceeds from sales of investments were as
follows:
<TABLE>
<CAPTION>
Period ended December 31
1999 1998
-------------------------- ----------------------
Purchases Sales Purchases Sales
-------------------------- ----------------------
<S> <C> <C> <C> <C>
The Federated Insurance Series:
Federated American Leaders Fund II $ 1,558,416 $ 57,797 $ 999 $ 3
Federated Utility Fund II 240,425 65,003 999 3
Federated Prime Money Fund II 206,321,934 192,599,013 451,781 260
Federated High Income Bond Fund II 594,789 252,374 998 3
Federated Fund for U. S. Government Securities II 1,871,531 368,249 1,003 3
Wanger Advisors Trust:
Wanger U. S. Small Cap Advisor 662,555 18,245 999 3
Wanger International Small Cap Advisor 515,435 32,928 1,011 3
The Montgomery Funds III:
Montgomery Growth Portfolio 869,749 13,774 1,008 3
Montgomery Emerging Markets Portfolio 31,609 9,166 1,002 3
Strong Variable Insurance Funds, Inc.:
Strong International Stock Fund II 3,302,693 3,328,178 1,024 3
Strong Schafer Value Fund II 326,502 41,366 992 3
Endeavor Series Trust:
T. Rowe Price International Stock Portfolio 64,446,063 63,756,461 1,012 3
Dreyfus Small Cap Value Portfolio 797,438 57,704 1,004 3
Endeavor Enhanced Index Portfolio 2,277,322 186,041 995 3
Stein Roe Variable Investment Trust:
Stein Roe Special Venture Fund, Variable Series 19,423 1,669 996 3
Warburg Pincus Trust:
Warburg Pincus International Equity Portfolio 63,579,199 64,497,577 1,015 3
Warburg Pincus Small Company Growth Portfolio 29,487 9,172 999 3
</TABLE>
23
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Notes to Financial Statements (continued)
2. Investments (continued)
<TABLE>
<CAPTION>
Period ended December 31
1999 1998
----------------------------- -----------------------
Purchases Sales Purchases Sales
----------------------------- -----------------------
<S> <C> <C> <C> <C>
WRL Series Fund, Inc.:
WRL Janus Growth Portfolio $ 998,123 $ 132,783 $ - $ -
WRL Janus Global Portfolio 66,155,552 66,382,205 - -
WRL LKCM Strategic Total Return Portfolio 318,201 22,684 - -
WRL Alger Aggressive Growth Portfolio 346,698 36,882 - -
WRL J. P. Morgan Real Estate Securities Portfolio 3,564 889 - -
</TABLE>
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>
Federated American Leaders Fund II 1,288,093.664 $1.151696 $1,483,492
Federated Utility Fund II 166,795.533 1.064017 177,473
Federated Prime Money Fund II 13,680,189.424 1.036130 14,174,455
Federated High Income Bond Fund II 327,458.135 1.064698 348,644
Federated Fund for U. S. Government Securities II 1,512,031.733 .986415 1,491,491
Wanger U. S. Small Cap Advisor 549,765.523 1.373133 754,901
Wanger International Small Cap Advisor 305,860.232 2.584423 790,472
Montgomery Growth 694,678.552 1.327156 921,947
Montgomery Emerging Markets 19,596.252 1.713729 33,583
Strong International Stock Fund II 11,722.205 2.114043 24,781
Strong Schafer Value Fund II 246,469.649 1.134054 279,510
T. Rowe Price International Stock 1,139,792.549 1.437218 1,638,130
Dreyfus Small Cap Value 541,434.492 1.519601 822,764
Endeavor Enhanced Index 1,662,594.471 1.343104 2,233,037
Stein Roe Special Venture Fund, Variable Series 17,442.496 1.600892 27,924
Warburg Pincus International Equity 17,502.684 1.630201 28,533
Warburg Pincus Small Company Growth 14,585.389 1.947187 28,400
WRL Janus Growth 676,854.488 1.358618 919,587
WRL Janus Global 575,729.315 1.553378 894,325
WRL LKCM Strategic Total Return 280,925.447 1.053303 295,900
WRL Alger Aggressive Growth 246,122.268 1.487766 366,172
WRL J. P. Morgan Real Estate Securities 2,881.168 .894820 2,578
</TABLE>
24
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity (continued)
A summary of changes in contract owners' account units follows:
<TABLE>
<CAPTION>
Federated
Federated Federated Federated High Income
American Utility Prime Money Bond
Leaders Fund Fund II Fund II Fund II
II Subaccount Subaccount Subaccount Subaccount
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Units purchased 1,000 1,000 449,266 1,000
Units redeemed and transferred - - - -
----------------------------------------------------------------
Units outstanding at December 31, 1998 1,000 1,000 449,266 1,000
Units purchased 1,155,370 139,439 10,157,515 270,739
Units redeemed and transferred 131,724 26,357 3,073,408 55,719
----------------------------------------------------------------
Units outstanding at December 31, 1999 1,288,094 166,796 13,680,189 327,458
================================================================
</TABLE>
<TABLE>
<CAPTION>
Federated Fund Wanger
for U. S. Wanger U. S. International
Government Small Cap Small Cap Montgomery
Securities II Advisor Advisor Growth
Subaccount Subaccount Subaccount Subaccount
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units purchased 1,000 1,000 1,000 1,000
Units redeemed and transferred - - - -
-------------------------------------------------------------------
Units outstanding at December 31, 1998 1,000 1,000 1,000 1,000
Units purchased 1,319,225 492,206 258,525 600,047
Units redeemed and transferred 191,807 56,560 46,335 93,632
-------------------------------------------------------------------
Units outstanding at December 31, 1999 1,512,032 549,766 305,860 694,679
===================================================================
</TABLE>
25
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
Strong
Montgomery International Strong T. Rowe Price
Emerging Stock Schafer Value International
Markets Fund II Fund II Stock
Subaccount Subaccount Subaccount Subaccount
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units purchased 1,000 1,000 1,000 1,000
Units redeemed and transferred - - - -
------------------------------------------------------------------
Units outstanding at December 31, 1998 1,000 1,000 1,000 1,000
Units purchased 19,596 7,058 226,880 4,705,241
Units redeemed and transferred (1,000) 3,664 18,590 (3,566,448)
------------------------------------------------------------------
Units outstanding at December 31, 1999 19,596 11,722 246,470 1,139,793
==================================================================
</TABLE>
<TABLE>
<CAPTION>
Stein Roe
Special
Venture Warburg
Dreyfus Endeavor Fund, Warburg Pincus Pincus Small
Small Cap Enhanced Variable International Company
Value Index Series Equity Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units purchased 1,000 1,000 1,000 1,000 1,000
Units redeemed and transferred - - - - -
-----------------------------------------------------------------------------
Units outstanding at
December 31, 1998 1,000 1,000 1,000 1,000 1,000
Units purchased 497,045 1,560,996 1,108 3,404,306 12,781
Units redeemed and transferred 43,389 100,598 15,334 (3,387,803) 804
-----------------------------------------------------------------------------
Units outstanding at
December 31, 1999 541,434 1,662,594 17,442 17,503 14,585
=============================================================================
</TABLE>
26
<PAGE>
Peoples Benefit Life Insurance Company
Separate Account V - Advisor's Edge Select Variable Annuity
Notes to Financial Statements (continued)
3. Contract Owners' Equity (continued)
<TABLE>
<CAPTION>
WRL J. P.
WRL LKCM WRL Alger Morgan Real
WRL Janus WRL Janus Strategic Aggressive Estate
Growth Global Total Return Growth Securities
Subaccount Subaccount Subaccount Subaccount Subaccount
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Units purchased - - - - -
Units redeemed and transferred - - - - -
-----------------------------------------------------------------------------
Units outstanding at December 31,
1998 - - - - -
Units purchased 482,035 4,366,485 205,721 178,754 1,177
Units redeemed and transferred 194,819 (3,790,756) 75,204 67,368 1,704
-----------------------------------------------------------------------------
Units outstanding at December 31,
1999 676,854 575,729 280,925 246,122 2,881
=============================================================================
</TABLE>
4. Administrative, Mortality and Expense Risk Charges
An annual charge is deducted from the unit values of the subaccounts of the
Mutual Fund Account for PBL's assumption of certain mortality and expense risks
incurred in connection with the contract. The charge is assessed daily based on
the net asset value of the Mutual Fund Account. The effective annual rate for
this charge was 1.35%.
An administrative charge equal to .15% annually is deducted from the unit values
of the subaccounts of the Mutual Fund Account. This charge is assessed daily by
PBL. This deduction represents reimbursement for the costs expected to be
incurred over the life of the contract for issuing and maintaining each contract
and the Mutual Fund Account.
5. Taxes
Operations of the Mutual Fund Account form a part of PBL, which is taxed as a
life insurance company under Subchapter L of the Internal Revenue Code of 1986,
as amended (the "Code"). The operations of the Mutual Fund Account are accounted
for separately from other operations of PBL for purposes of federal income
taxation. The Mutual Fund Account is not separately taxable as a regulated
investment company under Subchapter M of the Code and is not otherwise taxable
as an entity separate from PBL. Under existing federal income tax laws, the
income of the Mutual Fund Account, to the extent applied to increase reserves
under the variable annuity contracts, is not taxable to PBL.
27
<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 V (formerly Providian Life and
Health Insurance Company Separate Account V) which are available for
investment by Advisor's Edge Contract Owners and Advisor's Edge Select
Contract Owners as of December 31, 1999 and for each of the two years
in the period ended December 31, 1999.
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 Account./2/
(2) Not Applicable.
(3) Distribution Agreement.
(a) Form of Selling Agreement./3/
(4) (a) Form of variable annuity contract (A Unit)./4/
(b) Form of variable annuity contract (B Unit)./4/
(c) Form of variable annuity contract (Advisor's Edge
Select)/11/
(d) Form of variable annuity policy (Advisor's Edge)/16/
(e) Form of variable annuity policy (Advisor's Edge
Select)/16/
(5) (a) Form of Application./5/
(b) 403(b) Rider./3/
(c) Individual Retirement Annuity Rider./3/
(d) Advisor's Edge and Advisor's Edge Select are appless
products
(6) (a) Amended and Restated Articles of Incorporation of
Providian Life and Health Insurance Company./8/
(7) Not Applicable.
(8) (a) Form of Participation Agreement for the Funds./4/
(b) Participation Agreement Among DFA Investment
Dimensions Group, Inc., Dimensional Fund Advisors,
Inc., DFA Securities Inc. and National Home Life
Assurance Company dated as of June 29, 1994./6/
(c) Participation Agreement Among Insurance Management
Series, Federated Advisors, Federated Securities
Corp. and National Home Life Assurance Company dated
as of May 17, 1994./6/
(d) Participation Agreement Among Insurance Investment
Products Trust, SEI Financial Services Company and
National Home Life Assurance Company dated as of
January 1, 1995./7/
(e) Participation Agreement Among Wanger Advisors Trust
and National Home Life Assurance Company dated as of
May 19, 1995./7/
(f) Participation Agreement Among Tomorrow Funds
Retirement Trust, Weiss, Peck & Greer, L.L.C. and
Providian Life and Health Insurance Company dated as
of September 11, 1995./7/
(g) Participation Agreement among Montgomery Funds III,
Montgomery Asset Management, L.P., and Providian Life
and Health Insurance Company dated as of January 31,
1996./8/
<PAGE>
(h) Participation Agreement Among Strong Variable
Insurance Funds, Inc.; Strong Capital Management,
Inc.; Strong Funds Distributors, Inc. and Providian
Life and Health Insurance Company dated March 31,
1997./9/
(i) Participation Agreement Among Warburg Pincus Trust;
Warburg Pincus Counsellors, Inc.; Counsellors
Securities Inc. and Providian Life and Health
Insurance Company dated March 31, 1997./9/
(j) Amendment No. 1 dated December 16, 1996 to
Participation Agreement Among Wanger Advisors Trust
and Providian Life and Health Insurance Company dated
May 19, 1995./9/
(k) Participation Agreement Among SteinRoe Variable
Investment Trust, SteinRoe & Farnham Incorporated and
Providian Life and Health Insurance Company dated
March 31, 1997./9/
(l) Participation Agreement Among Providian Life and
Health Insurance Company, Providian Series Trust, and
Providian Investment Advisors, Inc. dated March 25,
1997./9/
(m) Participation Agreement Among Endeavor Series Trust,
Endeavor Management Co. and PFL Life Insurance
Company dated February 28, 1991, as amended./10/
(n) Participation Agreement Among WRL Series Fund, Inc.,
Western Reserve Life Assurance Co. of Ohio, and PFL
Life Insurance Company./12/
(n)(1) Amendment No. 9 to Participation Agreement among WRL
Series Fund, Inc., PFL Life Insurance Company, and
AUSA Life Insurance Company, Inc./16/
(o) Participation Agreement Among PFL Life Insurance
Company, AFSG Securities Corporation, Alliance
Capital Management L.P., and Alliance Fund
Distributors, Inc. dated as of May 1, 2000./13/
(o)(1) Form of Amendment to Participation Agreement Among
PFL Life Insurance Company, AFSG Securities
Corporation, Alliance Capital Management L.P. and
Alliance Fund Distributors, Inc. dated August 2,
2000./16/
(p) Participation Agreement between PFL Life Insurance
Company, Dreyfus Variable Investment Fund, The
Dreyfus Socially Responsible Growth Fund, Inc., and
Dreyfus Life and Annuity Index Fund, Inc. dated April
15, 1997./14/
(p)(1) Amendment to Participation Agreement between PFL Life
Insurance Company, Dreyfus Variable Investment Fund,
The Dreyfus Socially Responsible Growth Fund, Inc.,
and Dreyfus Life and Annuity Index Fund, Inc. dated
July 28, 2000./1/
(q) Participation Agreement Among Transamerica Variable
Insurance Fund, Inc., Transamerica Occidental Life
Insurance Company and PFL Life Insurance Company
dated November 1, 1999./15/
(q)(1) Amendment to Participation Agreement between
Transamerica Variable Insurance Fund, Inc.,
Transamerica Investment Management, LLC, and PFL Life
Insurance Company dated July 28, 2000./1/
(r) Form of Participation Agreement between Seligman
Portfolios, Inc. and Peoples Benefit Life Insurance
Company/16/
(9) (a) Opinion and Consent of Counsel./1/
(b) Consent of Counsel./1/
(10) Consent of Independent Auditors./1/
(11) No Financial Statements are omitted from Item 23.
(12) Not Applicable.
(13) Performance Computation./9/
(14) Powers of Attorney./16/
------------------------------------
/1/ Filed Herewith.
/2/ Incorporated by reference from the initial Registration Statement of
National Home Life Assurance Company Separate Account V, File No.
33-45862.
/3/ Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement of National Home Life Assurance Company Separate
Account V, File No. 33-45862.
/4/ Incorporated by reference from the Registration Statement of National
Home Life Assurance Company Separate Account V, File No. 33-72838,
filed on December 10, 1993.
/5/ Incorporated by reference from the Registration Statement of National
Home Life Assurance Company Separate Account V, File No. 33-79502,
filed on May 27, 1994.
<PAGE>
/6/ Incorporated by reference from the Post-Effective Amendment No. 1 to
the Registration Statement of National Home Life Assurance Company
Separate Account V, File No. 33-80958, filed April 28, 1995.
/7/ Incorporated by reference from Post-Effective Amendment No. 3 to the
Registration Statement of National Home Life Assurance Company Separate
Account V, File No. 33-80958, filed on November 20, 1995.
/8/ Incorporated by reference from Post-Effective Amendment No. 4 to the
Registration Statement of Providian Life and Health Insurance Company
Separate Account V, File No. 33-80958, filed on April 30, 1996.
/9/ Incorporated by reference from Post-Effective Amendment No. 7 to the
Registration Statement of Providian Life and Health Insurance Company
Separate Account V, File No. 33-80958, filed on April 30, 1997.
/10/ Incorporated by reference from Post-Effective Amendment No. 8 to the
Registration Statement of Providian Life and Health Insurance Company
Separate Account V, File No. 33-80958, filed on April 30, 1998.
/11/ Incorporated by reference from Post-Effective Amendment No. 9 to the
Registration Statement of Providian Life and Health Insurance Company
Separate Account V, File No. 33-80958, filed June 3, 1998.
/12/ Incorporated by reference from Post-Effective Amendment No. 1 to the
Registration Statement of PFL Life Variable Annuity Account A, File No.
333-26209, filed April 29, 1998.
/13/ Incorporated by reference from Post-Effective Amendment No. 3 to the
Registration Statement of PFL Life Variable Annuity Account A, File No.
333-26209, file April 28, 2000.
/14/ Incorporated by reference from Initial Registration Statement on Form
N-4 of PFL Life Variable Annuity Account A, File No. 333-26209, filed
April 30, 1997.
/15/ Incorporated by reference from Post-Effective Amendment No. 2 of PFL
Endeavor VA Separate Account, File No. 33-56908, filed April 27, 2000.
/16/ Incorporated by reference from Post-Effective Amendment No. 12 of
Peoples Benefit Life Insurance Company Separate Account V, File
No. 33-80958, filed September 5, 2000.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF DEPOSITOR
Positions and Offices with Depositor Name and Principal Business Address*
------------------------------------ ------------------------------------
Senior Vice President, Director G. Douglas Mangum, Jr.
Treasurer (Chief Accounting Officer) Martha A. McConnell
Vice President, Director Brian A. Smith
Vice President, Director Brenda K. Clancy
President, Director Bart Herbert, Jr.
Assistant Vice President, Director Kathleen M. Modzelewski
Vice President, Director Larry N. Norman
Senior Vice President, Director David G. Rekoski
Vice President, Director Douglas A. Sarcia
Secretary, Director Craig D. Vermie
*The business address of each director and officer of Peoples Benefit Life
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.
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 control
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% 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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
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
Inter-America Corporation California 100% Transamerica Corp. Insurance Broker
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Intermodal Equipment, Inc. Delaware 100% TLHI Intermodal leasing
Transamerica Leasing N.V. Belg. 100% Intermodal Equipment Inc. Leasing
Transamerica Leasing SRL Italy 100% Intermodal Equipment Inc. Leasing
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
Transamerica Trailer Holdings III, Inc. Delaware 100% TLHI Holding company
Transamerica Trailer Leasing AB Swed. 100% TLHI Leasing
Transamerica Trailer Leasing AG Swetzerland 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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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.
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")
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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>
<PAGE>
<TABLE>
<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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
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>
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of April 25, 2000, there were 1,522 Contract Owners of the Advisor's Edge
Variable Annuity and 479 Contract Owners of the Advisor's Edge Select Variable
Annuity.
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 Separate
Account II, File No. 33-7033.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) AFSG Securities Corporation ("AFSG"), which serves as the principal
underwriter for the variable annuity contracts funded by Separate
Account V, also serves as the principal underwriter for variable life
insurance policies funded by Separate Account I and Variable Annuity
contracts funded by Separate Account II of Peoples Benefit Life
Insurance Company. In addition, AFSG serves as principal underwriter
for variable annuity contracts funded by PFL Life Variable Annuity
Account A, PFL Life Variable Annuity Account C, PFL Life Variable
Annuity Account D, PFL Life Variable Annuity Account E, PFL Endeavor
VA Separate Account, PFL Endeavor Variable Life Account, PFL Endeavor
Target Account, PFL Wright Variable Annuity Account, PFL Retirement
Builder Variable Annuity Account and Legacy Builder Variable Life
Separate Account of PFL Life Insurance Company; Transamerica
Occidental Life Separate Account VUL-3 of Transamerica Occidental
Life Insurance Company; Life Investors Variable Life Account A of
Life Investors Insurance Company of America; WRL Series Life
Corporate Account of Western Reserve Life Assurance Co. of Ohio; and
AUSA Endeavor Variable Annuity Account and AUSA Life Insurance
Company Separate Account C of AUSA Life Insurance Company, Inc.
(b) Directors and Officers:
Larry N. Norman President, Director
Anne M. Spaes Vice President, Director
Lisa A. Wachendorf Vice President, Chief Compliance
Officer, Director
Thomas R. Moriarty Vice President
Michael V. Williams Vice President
Frank A. Camp Secretary
Linda Gilmer Controller and Treasurer
Priscilla I. Hechler Assistant Vice President,
Assistant Secretary
Thomas E. Pierpan Assistant Vice President,
Assistant Secretary
Darin D. Smith Vice President, Assistant Secretary
Teresa L. Stolba Assistant Compliance Officer
Emily Bates Assistant Treasurer
Clifton W. Flenniken Assistant Treasurer
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 Administrative Offices of Peoples Benefit Life Insurance Company in Cedar
Rapids, Iowa.
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.
<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 30th day of November, 2000.
PEOPLES BENEFIT LIFE INSURANCE COMPANY
SEPARATE ACCOUNT V (REGISTRANT)
By: Peoples Benefit Life Insurance Company
By: BART HERBERT, JR.
----------------------------
Bart Herbert, Jr., President
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(DEPOSITOR)
By: BART HERBERT, JR.
----------------------------
Bart Herbert, Jr., President
By: /s/ Michael F. Lane
-------------------
Michael F. Lane
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>
BRENDA K. CLANCY* Director and Vice President November 30, 2000
----------------------------------------------
Brenda K. Clancy
G. DOUGLAS MANGUM, JR.* Director and Senior Vice President November 30, 2000
----------------------------------------------
G. Douglas Mangum, Jr.
MARTHA A. McCONNELL* Treasurer (Chief Accounting Officer) November 30, 2000
----------------------------------------------
Martha A. McConnell
DOUGLAS A. SARCIA* Director and Vice President November 30, 2000
----------------------------------------------
Douglas A. Sarcia
BRIAN A. SMITH* Director and Vice President November 30, 2000
----------------------------------------------
Brian A. Smith
BART HERBERT, JR.* Director and President November 30, 2000
----------------------------------------------
Bart Herbert, Jr.
CRAIG D. VERMIE* Director and Secretary November 30, 2000
----------------------------------------------
Craig D. Vermie
KATHLEEN M. MODZELEWSKI* Director and Assistant Vice President November 30, 2000
----------------------------------------------
Kathleen M. Modzelewski
LARRY N. NORMAN* Director and Vice President November 30, 2000
----------------------------------------------
Larry N. Norman
DAVID G. REKOSKI* Director and Senior Vice President November 30, 2000
----------------------------------------------
David G. Rekoski
DOUGLAS A. SARCIA* Director and Vice President November 30, 2000
----------------------------------------------
Douglas A. Sarcia
*By: /s/ Michael F. Lane
---------------------------------------------
Michael F. Lane
Attorney-in-fact
</TABLE>
<PAGE>
INDEX TO EXHIBITS
EXHIBIT 9(a) Opinion and Consent of Counsel
EXHIBIT 9(b) Consent of Counsel
EXHIBIT 10 Consent of Independent Auditors
