-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CagSCzjDZr6wD8l538AF8cb1pwm04tm0aaDQd8pClaUlN8D5hJMJGBnlyWAhK24f +qSCTSCIxliycitLqK/74Q== 0000950109-96-002516.txt : 19960502 0000950109-96-002516.hdr.sgml : 19960502 ACCESSION NUMBER: 0000950109-96-002516 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19960501 EFFECTIVENESS DATE: 19960501 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROVIDIAN LIFE & HEALTH INSURANCE CO SEPARATE ACCOUNT IV CENTRAL INDEX KEY: 0000866252 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 430378030 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-36073 FILM NUMBER: 96554113 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06144 FILM NUMBER: 96554114 BUSINESS ADDRESS: STREET 1: 20 MOORES RD CITY: FRAZER STATE: PA ZIP: 19355 BUSINESS PHONE: 2156485000 MAIL ADDRESS: STREET 1: 20 MOORES ROAD CITY: FRAZER STATE: PA ZIP: 19355 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL HOME LIFE ASSURANCE CO SEPARATE ACCOUNT IV DATE OF NAME CHANGE: 19920703 485BPOS 1 FORM N-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996. REGISTRATION NO. 33-36073 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. Post-Effective Amendment No. 6 [X] and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 7 [X] PROVIDIAN LIFE & HEALTH INSURANCE COMPANY SEPARATE ACCOUNT IV (Exact Name of Registrant) Providian Life & Health Insurance Company (Name of Depositor) 20 Moores Road Frazer, Pennsylvania 19355 (Address of Depositor's Principal Executive Office) Depositor's Telephone Number: (800) 523-7900 Providian Life & Health Insurance Company Kimberly A. Scouller, Esquire Providian Center P.O. Box 32830 400 West Market Street Louisville, KY 40232 (Name and Address of Agent for Service) Copy to: Michael Berenson, Esquire Jorden Burt Berenson & Johnson LLP 1025 Thomas Jefferson St. N.W. Suite 400 E Washington, DC 20007-0805 It is proposed that this filing will become effective (check appropriate box): [X] Immediately upon filing pursuant to paragraph (b) of Rule 485. [_] On ______ pursuant to paragraph (b)(1)(v) of Rule 485. [_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [_] On ______ pursuant to paragraph (a)(1) of Rule 485. [_] 75 days after filing pursuant to paragraph (a)(2) of Rule 485. [_] On ______ pursuant to paragraph (a)(2) of Rule 485. Pursuant to Rule 24f-2 of the Investment Company Act of 1940, the Registrant registered an indefinite amount of Securities being offered. Registrant filed the 24f-2 notice for the fiscal year ended December 31, 1995, on February 27, 1996. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURSUANT TO RULE 481 SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B (STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION STATEMENT OF INFORMATION REQUIRED BY FORM N-4 PART A
ITEM OF FORM N-4 PROSPECTUS CAPTION 1. Cover Page........................ Cover Page 2. Definitions....................... Glossary 3. Synopsis.......................... Highlights; Fee Table 4. Condensed Financial Information... Condensed Financial Information 5. General Description of Registrant, Depositor, and Portfolio Providian Life & Health Insurance Companies......................... Company; Providian Life & Health Insurance Company Separate Account IV; The Vanguard Variable Insurance Fund; Voting Rights 6. Deductions and Expenses........... Charges and Deductions; Taxes; Vanguard Variable Insurance Fund; Expenses 7. General Description of Variable Annuity Contracts................. Contract Features; Distribution at Death Rules; Voting Rights; Allocation of Purchase Payments; Exchanges Among the Portfolios; Additions, Deletions, or Substitutions of Investments 8. Annuity Period.................... Annuity Payment Options 9. Death Benefit..................... Death of Annuitant Prior to Annuity Date 10. Purchases and Contract Value...... Contract Application and Purchase Payments; Accumulated Value 11. Redemptions....................... Full and Partial Withdrawals; Annuity Payment Options; Free Look Period 12. Taxes............................. Federal Tax Considerations 13. Legal Proceedings................. Part B: Legal Proceedings 14. Table of Contents for the Statement of Additional Table of Contents for the Information....................... Vanguard Variable Annuity Plan Contract Statement of Additional Information PART B ITEM OF STATEMENT OF ADDITIONAL FORM N-4 INFORMATION CAPTION 15. Cover Page........................ Cover Page 16. Table of Contents................. Table of Contents 17. General Information and History... The Company 18. Services.......................... Part A: Auditors; Safekeeping of Account Assets; Distribution of the Contract 19. Purchase of Securities Being Offered........................... Distribution of the Contract 20. Underwriters...................... Distribution of the Contract 21. Calculation of Performance Data... Performance Information 22. Annuity Payments.................. Computations of Variable Annuity Income Payments 23. Financial Statements.............. Financial Statements
PROVIDIAN LIFE & HEALTH INSURANCE COMPANY SEPARATE ACCOUNT IV PROSPECTUS FOR THE VANGUARD VARIABLE ANNUITY PLAN CONTRACT OFFERED BY PROVIDIAN LIFE & HEALTH INSURANCE COMPANY (A MISSOURI STOCK COMPANY) APRIL 30, 1996 The Vanguard Variable Annuity Plan Contract (the "Contract"), offered through Providian Life & Health Insurance Company (the "Company"), provides a vehicle for investing on a tax-deferred basis in nine Portfolios offered by The Vanguard Group, Inc. The Contract is intended for retirement savings or other long-term investment purposes. The minimum Initial Purchase Payment for the Contract is $5,000; there are no sales loads. The Contract is a flexible-premium deferred variable annuity that provides a Free Look Period for a minimum of 10 days (30 days or more in some instances), during which you may cancel your investment in the Contract. Your Purchase Payments for the Contract may be allocated among nine Subaccounts of Providian Life & Health Insurance Company Separate Account IV (the "Separate Account"). Assets of each Subaccount are invested in corresponding Portfolios of Vanguard Variable Insurance Fund, Inc. (the "Fund"), an open-end, diversified investment company offered by The Vanguard Group, Inc. The Fund currently offers nine Portfolios: the Money Market Portfolio, the High-Grade Bond Portfolio, the Balanced Portfolio, the Equity Index Portfolio, the Equity Income Portfolio, the Growth Portfolio, the International Portfolio, the High Yield Bond Portfolio, and the Small Company Growth Portfolio. Net Purchase Payments are automatically allocated to the Money Market Portfolio until the end of your Free Look Period, and are subsequently allocated according to your instructions. The Contract's Accumulated Value varies with the investment performance of the Portfolios you select. You bear all investment risk and investment results for the Portfolios are not guaranteed. The Contract offers a number of ways of withdrawing monies at a future date, including a lump-sum payment and several Annuity Payment Options. Full or partial withdrawals from the Contract may be made at any time before the Annuity Date, although in many instances withdrawals made prior to age 59 1/2 are subject to a 10% penalty tax (and a portion may be subject to ordinary income taxes). If you elect an Annuity Payment Option, Annuity Payments may be received on a fixed or variable basis. You also have significant flexibility in choosing the Annuity Date on which Annuity Payments begin. This Prospectus sets forth the information you should know before investing in the Contract; it must be accompanied by the current Prospectus for Vanguard Variable Insurance Fund. Please read both Prospectuses carefully and retain them for future reference. A Statement of Additional Information for the Contract Prospectus, which has the same date as this Prospectus, has also been filed with the Securities and Exchange Commission, is incorporated herein by reference and is available free by writing to Vanguard Variable Annuity Plan, P.O. Box 2600, Valley Forge, PA 19482. The Table of Contents of the Statement of Additional Information is included at the end of this Prospectus. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 1 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page HIGHLIGHTS.......... 3 Fee Table........... 6 Glossary............ 8 Condensed Financial Information........ 11 Financial State- ments.............. 11 Yield and Total Return ............ 11 The Company and the Separate Account... 12 Vanguard Variable Insurance Fund..... 12 Page CONTRACT FEATURES... 14 Free Look Period.... 14 Contract Application and Purchase Payments.. 14 Allocation of Purchase Payments........... 16 Charges and Deduc- tions.............. 16 Accumulated Value... 19 Dividends and Capital Gains Treatment.......... 19 Exchanges Among the Portfolios......... 19 Page Full and Partial Withdrawals........ 20 IRS-Required Distri- butions............ 21 Minimum Balance Requirements....... 22 Designation of a Beneficiary........ 22 Death of Annuitant Prior to Annuity Date............... 23 Annuity Date........ 23 Annuity Payment Op- tions.............. 24 FEDERAL TAX CONSIDERATIONS..... 26 General Information. 30
- -------------------------------------------------------------------------------- The Contract is not available in all States. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. 2 HIGHLIGHTS REFER TO THE GLOSSARY (PAGE 8) FOR A DEFINITION OF ALL CAPITALIZED TERMS. VANGUARD VARIABLE ANNUITY The Contract provides a vehicle for investing on a tax-de- PLAN CONTRACT ferred basis in nine Portfolios offered by The Vanguard Group, Inc. Monies may be subsequently withdrawn from the Contract either as a lump sum or as an annuity income. Be- cause Accumulated Values and, to the extent Variable Annu- ity Payments are selected, Annuity Payments depend on the investment experience of the selected Portfolios, you bear all investment risk for monies invested under the Contract. The investment performance of the Portfolios is not guaran- teed. - -------------------------------------------------------------------------------- WHO SHOULD The Contract is designed for investors seeking long-term, INVEST tax-deferred accumulation of funds, generally for retire- ment but also for other long-term investment purposes. The tax-deferred feature of the Contract is most attractive to investors in high federal and state marginal tax brackets who have exhausted other avenues of tax deferral, such as "pre-tax" contributions to employer-sponsored retirement or savings plans. The Contract is intended for long-term in- vestors. - -------------------------------------------------------------------------------- INVESTMENT CHOICES Your investment in the Contract may be allocated among sev- eral Subaccounts of the Separate Account. The Subaccounts in turn invest exclusively in the nine Portfolios of Van- guard Variable Insurance Fund. The Fund, a member of The Vanguard Group of Investment Companies, offers nine Portfo- lios: the Money Market Portfolio, the High-Grade Bond Port- folio, the Balanced Portfolio, the Equity Index Portfolio, the Equity Income Portfolio, the Growth Portfolio, the In- ternational Portfolio, the High Yield Bond Portfolio, and the Small Company Growth Portfolio. The assets of each Portfolio are separate, and each Portfolio has distinct in- vestment objectives and policies as described in the accom- panying Fund Prospectus. PAGE 12 - -------------------------------------------------------------------------------- FREE LOOK PERIOD The Contract provides a Free Look Period for a minimum of 10 days (30 or more days in some instances as specified in your Contract) during which you may cancel your investment in the Contract. To cancel your investment, please return your Contract to us. When we receive the Contract, you will be reimbursed for all Purchase Payments and any correspond- ing appreciation credited to your account. PAGE 14 - -------------------------------------------------------------------------------- HOW TO INVEST To invest in the Contract, please complete the accompanying application form. The minimum Initial Purchase Payment is $5,000; the minimum Portfolio balance is $1,000; and subse- quent Purchase Payments must be at least $250. You may make subsequent Purchase Payments at any time before the Con- tract's Annuity Date, as long as the Annuitant or Joint An- nuitant specified in the Contract is living. Please note that when purchasing a Contract, the Annuitant you name, and the Joint Annuitant if applicable, must be 75 years of age or less. PAGE 14 - -------------------------------------------------------------------------------- 3 ALLOCATION OF PURCHASE Your Net Purchase Payments are initially allocated to the PAYMENTS Money Market Portfolio when your Contract is issued. At the end of the Free Look Period, and a 5-day grace period, the then-current Accumulated Value of your Contract is allo- cated among the Portfolios of the Fund in accordance with your application instructions. Requests to change the allo- cation of subsequent Net Purchase Payments may be made in writing, or by telephone if you have completed the Authori- zation Form. PAGE 16 - -------------------------------------------------------------------------------- CHARGES AND The Contract imposes no sales charges. The costs of the DEDUCTIONS UNDER Contract include mortality and expense risk charges, main- THE CONTRACT tenance and administrative charges which cover the cost of administering the Contract, and management, advisory and other fees, which reflect the costs of Vanguard Variable Insurance Fund. There are no charges under the Contract for withdrawals, although withdrawals made prior to age 59 1/2 may be subject to a 10% penalty tax. PAGE 16 - -------------------------------------------------------------------------------- EXCHANGES You may make exchanges among the Fund's Portfolios subject to certain restrictions on excess exchange activity. These restrictions do not apply, however, to non-substantive ex- changes or to the Money Market Portfolio. No fee is imposed for exchanges. Exchanges must be for at least $250, or, if less, for the entire value of the Portfolio from which the exchange is made. PAGE 19 - -------------------------------------------------------------------------------- FULL AND PARTIAL You may withdraw all or part of the Accumulated Value of WITHDRAWALS the Contract before the earlier of the Annuity Date or the Annuitant's death (or the Joint Annuitant's death, if lat- er). You may establish systematic withdrawals from your Contract, and receive distributions at regular intervals. Withdrawals made prior to age 59 1/2 may be subject to a 10% penalty tax. PAGE 20 - -------------------------------------------------------------------------------- DEATH BENEFIT If the Annuitant specified in your Contract dies prior to the Annuity Date, the Annuitant's named Beneficiary will receive the death benefit under the Contract. The death benefit is the greater of the then-current Accumulated Value of the Contract or the sum of all Purchase Payments (less any partial withdrawals and premium taxes). Your Ben- eficiary may elect to receive these proceeds as a lump sum or as Annuity Payments. PAGE 23 - -------------------------------------------------------------------------------- ANNUITY PAYMENT OPTIONS Beginning on the Annuity Date, you may withdraw monies from the Contract in the form of an annuity income. As the Con- tract Owner you may elect one of several Annuity Payment Options. The Options provide a wide range of flexibility in choosing an annuity payment schedule that meets your par- ticular needs. Annuity Payments may be received for a des- ignated period or for life (for either a single or joint life), with or without a guaranteed number of payments. An- nuity Payments can be fixed, or can vary with the invest- ment performance of a Portfolio of the Fund. You may elect a lump-sum payment prior to the Annuity Date in lieu of An- nuity Payments. PAGE 24 - -------------------------------------------------------------------------------- 4 CONTRACT AND If you have questions about your Contract, please telephone POLICYHOLDER the Vanguard Variable Annuity Center (1-800-462-2391). INFORMATION Please have ready the Contract number and the Contract Own- er's name when you call. As Contract Owner, you will re- ceive periodic statements confirming any transactions that take place, as well as quarterly statements and an Annual Report. - -------------------------------------------------------------------------------- 5 FEE TABLE The following table illustrates all expenses that you would incur as a Contract Owner, except for Premium Taxes that may be assessed by your state (see "Charges and Deduc- tions"). The expenses and fees shown are for the Fund's and the Separate Account's 1995 fiscal years. The expenses and fees shown for the High Yield Bond Portfolio and the Small Company Growth Portfolio are based on estimates for their respective first fiscal year of operation. The purpose of this table is to assist you in understanding the various costs and expenses that you would bear directly or indi- rectly as a purchaser of the Contract. The fee table re- flects ALL expenses for both the Separate Account and the Fund. For a complete discussion of contract costs and ex- penses, see "Charges and Deductions."
SEPARATE OWNER TRANSACTION EXPENSES ACCOUNT ------------------------------------------------------------------- Sales Load Imposed on Purchases........................... None Redemption Fees........................................... None Exchange Fees............................................. None ------------------------------------------------------------- Annual Contract Maintenance Fee*.......................... $25 * Applies to Contracts valued at less than $25,000 at the time of initial purchase and on the last Business Day of each year. SEPARATE ANNUAL SEPARATE ACCOUNT EXPENSES ACCOUNT --------------------------------------------------------------- Mortality and Expense Risk Charge**......................... .38% Administrative Expense Charge............................... .10% --- TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES.................... .48% ===
** This charge is reduced to 0.30% for average daily net assets attributable to the Separate Account (and Sepa- rate Account B of First Providian Life & Health Insur- ance Company) in excess of $1.5 billion. See "Mortality and Expense Risk Charge."
SMALL HIGH MONEY HIGH-GRADE EQUITY EQUITY COMPANY YIELD ANNUAL FUND OPERATING MARKET BOND BALANCED INDEX INCOME GROWTH INTERNATIONAL GROWTH BOND EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------- Management & Administrative Expenses.............. .16% .20% .22% .23% .22% .26% .28% .22% .22% Investment Advisory Fees......... .01 .01 .10 .01 .10 .15 .15 .15 .06 12b-1 Distribution Fees.................. None None None None None None None None None Other Expenses Distribution Costs.... .03 .02 .02 .02 .02 .02 .02 .02 .02 Miscellaneous Expenses............. .03 .06 .02 .02 .05 .04 .09 .02 .02 ---- ---- ---- ---- ---- ---- ---- ---- ---- Total Other Expenses... .06 .08 .04 .04 .07 .06 .11 .04 .04 ---- ---- ---- ---- ---- ---- ---- ---- ---- TOTAL FUND OPERATING EXPENSES............. .23% .29% .36% .28% .39% .47% .54% .41% .32% ==== ==== ==== ==== ==== ==== ==== ==== ====
6
SMALL HIGH MONEY HIGH-GRADE EQUITY EQUITY COMPANY YIELD MARKET BOND BALANCED INDEX INCOME GROWTH INTERNATIONAL GROWTH BOND TOTAL EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - ----------------------------------------------------------------------------------------------------------------------- Total Separate Account Expenses.............. .48% .48% .48% .48% .48% .48% .48% .48% .48% Total Fund Operating Expenses.............. .23 .29 .36 .28 .39 .47 .54 .41 .32 --- --- --- --- --- --- ---- --- --- GRAND TOTAL, SEPARATE ACCOUNT AND FUND OPERATING EXPENSES... .71% .77% .84% .76% .87% .95% 1.02% .89% .80% === === === === === === ==== === ===
The following example illustrates the expenses that you would incur on a $1,000 purchase payment over various periods, assuming (1) a 5% annual rate of return and (2) redemption at the end of each period. As noted in the table above, the Contract imposes no redemption fees of any kind. Your expenses are identical whether you continue the Contract or withdraw the entire value of your Contract at the end of the applicable period as a lump sum or under one of the Contract's Annuity Payment Options.
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Money Market Portfolio............. $ 7 $23 $40 $90 High-Grade Bond Portfolio.......... 8 25 44 97 Balanced Portfolio................. 9 27 48 105 Equity Index Portfolio............. 8 25 43 96 Equity Income Portfolio............ 9 28 49 109 Growth Portfolio................... 10 31 53 118 International Portfolio............ 11 33 57 127 High-Yield Bond Portfolio.......... 8 26 45 101 Small Company Growth Portfolio..... 9 29 50 111
The Annual Contract Maintenance Fee is reflected in these examples as a percentage equal to the total amount of fees collected during a year divided by the total average net assets of the Portfolios during the same year. The fee is assumed to remain the same in each year of the above peri- ods. The fee is prorated to reflect only the remaining por- tion of the calendar year of purchase. Thereafter, the fee is deducted on the last business day of the year for the following year, on a pro rata basis, from each of the Port- folios you have chosen. For a complete discussion of Con- tract costs and expenses, see "Charges and Deductions." THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN, SUBJECT TO THE GUARAN- TEES IN THE CONTRACT. ------------------------------------------------------------ AUTOMATED QUOTES The Vanguard Tele-Account Service provides access to accu- mulated unit values (to two decimal places) for all subaccounts, and yield information for the Money Market and High-Grade Bond Portfolios of the Vanguard Variable Annuity Plan. Contract Owners may utilize this service for 24-hour access to Plan Portfolio information. To access the service you may call Tele-Account at 1-800-662-6273 (ON-BOARD) and follow the step-by-step instructions, or speak with a Van- guard associate at 1-800-522-5555 to request a brochure that explains how to use the service. - -------------------------------------------------------------------------------- 7 GLOSSARY ACCUMULATION UNIT--A measure of your ownership interest in the Contract prior to the Annuity Date. Analogous, though not identical, to a share owned in a mutual fund account. ACCUMULATION UNIT VALUE--The value of each Accumulation Unit which is calculated each Valuation Period. Analogous, though not identical, to the share price (net asset value) of a mutual fund. ACCUMULATED VALUE--The value of all amounts accumulated un- der the Contract prior to the Annuity Date, equivalent to the Accumulation Units multiplied by the Accumulation Unit Value. Analogous to the current market value of a mutual fund account. ANNUITANT--The person or persons whose life is used to de- termine the duration of any Annuity Payments and, subject to the provision dealing with Joint Annuitants, upon whose death, prior to the Annuity Date, benefits under the Con- tract are paid. ANNUITY DATE--The date on which Annuity Payments begin. The Annuity Date is always the first day of the month you spec- ify. ANNUITY PAYMENT--One of a series of payments made under an Annuity Payment Option. ANNUITY PAYMENT OPTION--One of several ways in which a se- ries of payments are made after the Annuity Date. Under a FIXED ANNUITY OPTION, the dollar amount of each Annuity Payment does not change over time. Annuity Payments are based on the Contract's Accumulated Value as of the Annuity Date. Under a VARIABLE ANNUITY OPTION, the dollar amount of each Annuity Payment may change over time, depending upon the investment experience of the Portfolio or Portfolios you choose. ANNUITY UNIT--Unit of measure used to calculate Variable Annuity Payments. BENEFICIARY--The person to whom any benefits are due upon the Annuitant's death. BUSINESS DAY--A day when the New York Stock Exchange is open for trading. COMPANY ("We", "Us", "Our")--Providian Life & Health Insur- ance Company, a Missouri stock company. CONTRACT ANNIVERSARY--Any anniversary of the Contract Date. CONTRACT DATE--The date of issue of this Contract. CONTRACT OWNER ("You", "Your")--The person or persons des- ignated as the Contract Owner in the Contract application. The term shall also include any person named as Joint Own- er. 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. CONTRACT YEAR--A period of 12 months starting with the Con- tract Date or any Contract Anniversary. 8 FREE LOOK PERIOD--The period during which the Contract can be cancelled and treated as void from the Contract Date. FUND--Vanguard Variable Insurance Fund, Inc., an open-end, diversified investment company, offered by The Vanguard Group, Inc., in which the Separate Account invests. JOINT ANNUITANT--The person other than the Annuitant who may be designated by the Contract Owner and on whose life Annuity Payments may also be based. NET PURCHASE PAYMENT--Any Purchase Payment less the appli- cable Premium Tax, if any. NON-QUALIFIED CONTRACT--A Contract other than a Qualified Contract. Contributions to such a Contract are made with after-tax dollars. OWNER'S DESIGNATED BENEFICIARY--The person designated to receive the Contract Owner's interest in the Contract if the Contract Owner dies before the entire interest in the Contract is distributed, as explained in the "IRS-Required Distribution" section. PAYEE--The Contract Owner, Annuitant, Beneficiary, or any other person, estate, or legal entity to whom benefits are to be paid. PORTFOLIO--The separate investment Portfolios of the Van- guard Variable Insurance Fund. The Fund currently offers nine Portfolios: the Money Market Portfolio, the High-Grade Bond Portfolio, the Balanced Portfolio, the Equity Index Portfolio, the Equity Income Portfolio, the Growth Portfo- lio, the International Portfolio, the High Yield Bond Port- folio, and the Small Company Growth Portfolio. In this Pro- spectus, Portfolio will also be used to refer to the Subaccount that invests in the corresponding Portfolio. PREMIUM TAX--A regulatory tax that may be assessed by your state on the Purchase Payments made into your Contract. The amount which we must pay as Premium Tax will be deducted from each Purchase Payment or from your Accumulated Value as it is incurred by us. PROOF OF DEATH--(a) A certified death certificate; (b) a certified decree of a court of competent jurisdiction as to the finding of death; (c) a written statement by a medical doctor who attended the deceased; or (d) any other proof satisfactory to the Company. PURCHASE PAYMENT--Any premium payment--any amount you in- vest in the Contract. The minimum Initial Purchase Payment is $5,000; each Additional Purchase Payment must be at least $250. Purchase Payments may be made at any time prior to the Annuity Date as long as the Annuitant is living. QUALIFIED CONTRACT--A Contract that qualifies as an indi- vidual retirement annuity under Section 408(b) of the In- ternal Revenue Code of 1986, as amended. SEPARATE ACCOUNT--Providian Life & Health Insurance Company Separate Account IV. The Separate Account consists of as- sets that are segregated by Providian Life & Health Insur- ance Company and invested in the Vanguard 9 Variable Insurance Fund. The Separate Account is indepen- dent of the general assets of the Company. SUBACCOUNT--That portion of the Separate Account that in- vests in shares of the Fund's Portfolios. Each Subaccount will only invest in a single Portfolio. The investment per- formance of each Subaccount is linked directly to the in- vestment performance of one of the nine Portfolios of the Fund. VALUATION PERIOD--A period between two successive Business Days commencing at the close of business of the first Busi- ness Day and ending at the close of business of the follow- ing Business Day. - -------------------------------------------------------------------------------- 10 CONDENSED FINAN- CIAL INFORMATION The Accumulation Unit Values and the number of Accumulation Units outstanding for each Subaccount in 1991 through 1995 are as follows:
FOR THE PERIOD APRIL 29, 1991 THROUGH DECEMBER 31, 1995* -------------------------------------------------------------------------------------------------------- SMALL MONEY HIGH-GRADE EQUITY EQUITY HIGH YIELD COMPANY MARKET BOND BALANCED INDEX INCOME GROWTH INTERNATIONAL BOND GROWTH -------------------------------------------------------------------------------------------------------- Accumulation unit value as of: Start Date*............. 1.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 10.000 12/31/91................ 1.032 11.027 10.802 11.275 . . . . . 12/31/92................ 1.064 11.656 11.514 12.039 . . . . . 12/31/93................ 1.091 12.695 12.961 13.144 10.488 10.569 . . . 12/31/94................ 1.130 12.290 12.815 13.224 10.304 10.964 10.128 . . 12/31/95................ 1.191 14.437 16.885 18.073 14.239 15.089 11.678 . . Number of units outstanding as of: 12/31/91................ 32,495 2,122 3,395 2,311 . . . . . 12/31/92................ 75,564 4,417 8,682 9,645 . . . . . 12/31/93................ 109,190 6,592 16,164 12,971 6,411 4,879 . . . 12/31/94................ 154,415 6,589 16,429 13,676 6,089 8,004 6,818 . . 12/31/95................ 183,867 8,684 17,021 16,292 7,355 11,857 8,146 . . (UNITS ARE SHOWN IN THOUSANDS)
* Date of commencement of operations for the High-Grade Bond and Equity Index Subaccounts was 4/29/91, for the Money Market Subaccount was 5/2/91, for the Balanced Subaccount was 5/23/91, for the Equity Income and Growth Subaccounts was 6/7/93, for the International Subaccount was 6/3/94, and for the High Yield Bond and Small Company Growth Subaccounts will be 6/3/96. - -------------------------------------------------------------------------------- FINANCIAL The audited statutory-basis financial statements of the STATEMENTS Company and the financial statements of the Separate Ac- count (as well as the Independent Auditors' Reports there- on) are contained in the Statement of Additional Informa- tion. - -------------------------------------------------------------------------------- YIELD AND TOTAL From time to time a Portfolio of the Fund may advertise its RETURN yield and total return investment performance. Advertised yields and total returns include all charges and expenses attributable to the Contract. Including these fees has the effect of decreasing the advertised performance of a Port- folio, so that a Portfolio's investment performance will not be directly comparable to that of an ordinary mutual fund. Please refer to the Statement of Additional Information for a description of the method used to calculate a Portfolio's yield and total return, and a list of the indexes and other benchmarks used in evaluating a Portfolio's performance. - -------------------------------------------------------------------------------- 11 THE COMPANY AND THE SEPARATE The Company is a stock life insurance company incorporated ACCOUNT under the laws of Missouri on August 6, 1920, with adminis- trative offices at 20 Moores Road, Frazer, Pennsylvania PROVIDIAN LIFE & 19355. The Company is principally engaged in offering life HEALTH INSURANCE insurance, annuity contracts, and accident and health in- COMPANY surance and is admitted to do business in 49 states, the District of Columbia and Puerto Rico. The Company is ulti- mately wholly owned by Providian Corporation, a publicly- held diversified consumer financial services company whose shares are traded on the New York Stock Exchange with as- sets of $26.8 billion as of December 31, 1995. ------------------------------------------------------------ PROVIDIAN LIFE & The Separate Account was established by the Company as a HEALTH INSURANCE separate account under the laws of the State of Missouri on COMPANY SEPARATE July 16, 1990, pursuant to a resolution of the Company's ACCOUNT IV Board of Directors. The Separate Account is a unit invest- ment trust registered with the Securities and Exchange Com- mission (the "SEC") under the Investment Company Act of 1940 (the "1940 Act"). Such registration does not signify that the SEC supervises the management or the investment practices or policies of the Separate Account. The assets of the Separate Account are owned by the Company and the obligations under the Contract are obligations of the Company. These assets are held separately from the other assets of the Company and are not chargeable with li- abilities incurred in any other business operation of the Company (except to the extent that assets in the Separate Account exceed the reserves and other liabilities of the Separate Account). The Company will always keep assets in the Separate Account with a value at least equal to the to- tal Accumulated Value under the Contracts. Income, gains and losses incurred on the assets in the Separate Account, whether or not realized, are credited to or charged against the Separate Account without regard to other income, gains or losses of the Company. Therefore, the investment perfor- mance of the Separate Account is entirely independent of the investment performance of the Company's general account assets or any other separate account maintained by the Com- pany. The Separate Account has nine Subaccounts, each of which invests solely in a corresponding Portfolio of the Fund. Additional Subaccounts may be established at the discretion of the Company. The Separate Account meets the definition of a "separate account" under Rule O-1(e)(1) of the Invest- ment Company Act of 1940. - -------------------------------------------------------------------------------- VANGUARD Vanguard Variable Insurance Fund is an open-end diversified VARIABLE investment company intended exclusively as an investment INSURANCE FUND vehicle for variable annuity or variable life insurance contracts offered by insurance companies. The Fund is a member of The Vanguard Group of Investment Companies, a family of more than 30 investment companies with more than 90 distinct portfolios and assets in excess of $190 billion. Through their jointly-owned subsidiary, The Vanguard Group, Inc. ("Vanguard"), the Fund and the other Funds in the Group obtain at cost virtually all of their corporate management, administrative, shareholder ac- counting and distribution services. 12 The Fund offers nine Portfolios--a money market portfolio, a bond portfolio, a balanced portfolio, an equity index portfolio, an equity income portfolio, a growth portfolio, an international portfolio, a high-yield bond portfolio and a small company growth portfolio--each with distinct in- vestment objectives and policies. THE MONEY MARKET PORTFOLIO seeks to provide current income consistent with the preservation of capital and liquidity. The Portfolio also seeks to maintain a stable net asset value of $1.00 per share. The Portfolio invests primarily in high-quality money market instruments issued by finan- cial institutions, non-financial corporations, the U.S. Government, state and municipal governments and their agen- cies or instrumentalities, as well as repurchase agreements collateralized by such securities. The Portfolio also in- vests in Eurodollar obligations (dollar-denominated obliga- tions issued outside the U.S. by foreign banks or foreign branches of domestic banks) and Yankee obligations (dollar- denominated obligations issued in the U.S. by foreign banks). Vanguard's Fixed Income Group serves as this Port- folio's investment adviser. THE HIGH-GRADE BOND PORTFOLIO seeks to parallel the invest- ment results of the Lehman Brothers Aggregate Bond Index. The Portfolio invests primarily in a diversified portfolio of U.S. Government and corporate bonds, and mortgage-backed securities. Vanguard's Fixed Income Group serves as this Portfolio's investment adviser. THE BALANCED PORTFOLIO seeks the conservation of principal, a reasonable income return and profits without undue risk. The Portfolio invests in a diversified portfolio of common stocks and bonds, with common stocks expected to represent 60% to 70% of the Portfolio's total assets and bonds to represent 30% to 40%. Wellington Management Company serves as this Portfolio's investment adviser. THE EQUITY INDEX PORTFOLIO seeks to parallel the investment results of the Standard & Poor's 500 Composite Stock Price Index (S&P 500). The Portfolio invests in common stocks in- cluded in the S&P 500. Vanguard's Core Management Group serves as this Portfolio's investment adviser. THE EQUITY INCOME PORTFOLIO seeks to provide a high level of current income by investing principally in dividend-pay- ing equity securities. Newell Associates serves as this Portfolio's investment adviser. THE GROWTH PORTFOLIO seeks to provide long-term capital ap- preciation by investing primarily in equity securities of seasoned U.S. companies with above-average prospects for growth. Lincoln Capital Management Company serves as this Portfolio's investment adviser. THE INTERNATIONAL PORTFOLIO seeks to provide long-term cap- ital appreciation. The Portfolio invests primarily in eq- uity securities of companies based outside the United States. Schroder Capital Management International, Inc. serves as this Portfolio's investment adviser. THE HIGH YIELD BOND PORTFOLIO seeks to provide a high level of current income by investing in lower-rated debt securi- ties, which may be regarded as having speculative charac- teristics and are commonly referred to as "junk bonds." Un- der normal circumstances, at least 80% of the Portfolio's assets 13 will be invested in high-yield corporate debt obligations rated at least B by Moody's Investors Service, Inc. or Standard & Poor's Corporation or, if unrated, of comparable quality as determined by the Portfolio's adviser, Wellington Management Company. THE SMALL COMPANY GROWTH PORTFOLIO seeks to provide long term growth in capital by investing primarily in equity se- curities of small companies deemed to have favorable pros- pects for growth. These securities are primarily common stocks but may also include securities convertible into common stock. Granahan Investment Management serves as this Portfolio's investment adviser. There is no assurance that a Portfolio will achieve its stated objective. Additional information concerning the investment objectives and policies of the Portfolios and the investment advisory services, total expenses and charges can be found in the current prospectus for the Fund, which accompanies this Prospectus. The Fund Prospectus should be read carefully before any decision is made concerning the allocation of Purchase Payments to a Portfolio. The Portfolios may be made available to registered separate accounts offering variable annuity and variable life prod- ucts of the Company as well as other insurance companies. Although we believe it is unlikely, a material conflict could arise between the interests of the Separate Account and one or more of the other participating separate ac- counts. In the event of a material conflict, the affected insurance companies agree to take any necessary steps, in- cluding removing their separate account from the Fund if required by law, to resolve the matter. See the Fund's Pro- spectus for more information. - -------------------------------------------------------------------------------- CONTRACT FEATURES The rights and benefits under the Contract are described below and in the Contract. The Company reserves the right to make any modification to conform the Contract to, or give the Contract Owner the benefit of, any federal or state statute or any rule or regulation of the United States Treasury Department. ------------------------------------------------------------ FREE LOOK PERIOD A Free Look Period exists for a minimum of 10 days after the Contract Owner receives the Contract (30 or more days in some instances as set forth in your Contract). The Con- tract permits the Contract Owner to cancel the Contract during the Free Look Period by returning the Contract to Vanguard Variable Annuity Center, P.O. Box 13285, Kansas City, MO 64199. Upon cancellation, the Contract is treated as void from the Contract Date and the Contract Owner will receive the greater of the Purchase Payments made under the Contract or the Accumulated Value of the Contract as of the day the Contract is received by the Company. - -------------------------------------------------------------------------------- CONTRACT Individuals wishing to purchase a Non-Qualified Contract APPLICATION AND should send a completed application and your Initial Pur- PURCHASE chase Payment to the Vanguard Variable Annuity Center. Your PAYMENTS Initial Purchase Payment must be equal to or greater than the $5,000 minimum investment requirement. Furthermore, the named Annuitant and Joint Annuitant must be 75 years of age or less. 14 The Contract will be issued and the Initial Net Purchase Payment will be credited within two Business Days after ac- ceptance of the application and the Initial Purchase Pay- ment. Acceptance is subject to the application being re- ceived in good order, and the Company reserves the right to reject any application or Initial Purchase Payment. If the Initial Purchase Payment cannot be credited because the application is incomplete, the Company will contact the applicant in writing, explain the reason for the delay and will refund the Initial Purchase Payment within five Busi- ness Days. As soon as the necessary requirements are ful- filled the Purchase Payment will be credited. Additional Purchase Payments may be made at any time prior to the Annuity Date, as long as the Annuitant or Joint An- nuitant, if applicable, is living. Additional Purchase Pay- ments must be for at least $250. Additional Purchase Pay- ments received prior to the close of the New York Stock Ex- change (generally 4:00 p.m. Eastern time) are credited to the Accumulated Value of the Contract as of the close of business that same day. In order to prevent lengthy processing delays caused by the clearing of foreign checks, we will only accept a foreign check which has been drawn in U.S. dollars and has been is- sued by a foreign bank with a U.S. correspondent bank. The Contracts are available on a non-qualified basis and as individual retirement annuities (IRAs) that qualify for special federal income tax treatment. Generally, Qualified Contracts may be purchased only in connection with a "rollover" of funds from another qualified plan or IRA and contain certain other restrictive provisions limiting the timing and amount of payments to and distributions from the Qualified Contract. Total Purchase Payments may not exceed $300,000 without prior approval of the Company. PURCHASING BY WIRE INVESTORS FIDUCIARY TRUST COMPANY MONEY SHOULD BE ABA 101003621 WIRED TO: DEPOSIT ACCOUNT NUMBER 8907513496 PLEASE CALL: PROVIDIAN LIFE & HEALTH INSURANCE COMPANY 1-800-462-2391 BEFORE WIRING CONTRACT NUMBER CONTRACT REGISTRATION To assure proper receipt, please be sure your bank includes the contract number Vanguard has assigned you. For an Ini- tial Purchase Payment, please complete the Vanguard Vari- able Annuity Plan Application and mail it to the Vanguard Variable Annuity Center, P.O. Box 13285, Kansas City, MO 64199 after completing wire arrangements. Note: Federal funds wire purchase orders will be accepted only when the New York Stock Exchange and Custodian Bank are open for business. ------------------------------------------------------------ SECTION 1035 You may exchange your Accumulated Value under an existing EXCHANGES annuity contract to the Vanguard Variable Annuity Plan. Section 1035 of the IRS Code of 1986, as amended (the "Code"), provides, in general, that no gain or loss shall be 15 recognized on the exchange of one annuity contract for an- other. To complete a "1035 Exchange" simply provide all the requested information on the 1035 Exchange Form and mail it, along with the application and your current contract, to the Variable Annuity Center. Special rules and proce- dures apply to Code Section 1035 transactions, particularly if the Contract being exchanged was issued prior to August 14, 1982. Prospective Contract Owners wishing to take ad- vantage of Code Section 1035 should consult their tax ad- visers. Please note, that an outstanding loan on the Contract that you wish to transfer may create a tax consequence. There- fore, you are encouraged to settle any outstanding loans with your current insurance company prior to initiating a 1035 Exchange into the Plan. - -------------------------------------------------------------------------------- ALLOCATION OF The Contract Owner specifies on the Contract Application PURCHASE how Purchase Payments will be allocated. The Contract Owner PAYMENTS may allocate each Purchase Payment to one or more of the Portfolios as long as such portions are whole number per- centages and any allocation made is at least 10% and at least $1,000. Allocation instructions for future Purchase Payments may be changed by the Contract Owner by sending a written notice to the Vanguard Variable Annuity Center. You may complete a Telephone Allocation Authorization Form to establish an op- tion that allows you to provide allocation instructions by telephone. This option includes the ability to change your investment by eliminating a Contract Portfolio from your allocations or by adding a new Contract Portfolio to your list. Please note that you must maintain a minimum of $1,000 in each Portfolio to which you have allocated as- sets. During the Free Look Period (which is assumed for this pur- pose to be 10 to 30 days (or more in some instances as specified in your contract) after the issuance of the Con- tract), the Initial Net Purchase Payment will be allocated to the Money Market Portfolio. Upon expiration of the Free Look Period, the Accumulated Value will remain in the Money Market Portfolio for an additional 5-day grace period to allow for mail delivery. Upon the expiration of the Free Look Period and the 5-day grace period (15 to 35 days), the Accumulated Value will then be allocated among the Portfo- lios in accordance with the Contract Owner's instructions. - -------------------------------------------------------------------------------- CHARGES AND DEDUCTIONS The projected expenses for the Contract are substantially below the costs of other variable annuity contracts. For example, based on a $25,000 contract the average expense ratio of other variable annuity contracts was 2.04% as of December 31, 1995, compared to 0.82% for the Vanguard Vari- able Annuity Plan (source for competitors' data: Morning- star, Inc.) No sales load is deducted from the Initial Purchase Payment or any Additional Purchase Payments. In addition, there are no sales charges imposed upon withdrawals. ------------------------------------------------------------ 16 MORTALITY AND The Company imposes a charge as compensation for bearing EXPENSE RISK certain mortality and expense risks under the Contracts. CHARGE The annual charge is assessed daily based on the combined net assets of the Separate Account and Separate Account B of First Providian Life & Health Insurance Company in the Fund according to the following schedule:
NET ASSETS RATE ------------------ ------ First $1.5 Billion 0.375% Over $1.5 Billion 0.300%
The Company guarantees that these mortality and expense risk breakpoints will never increase. If this charge is in- sufficient to cover actual costs and assumed risks, the loss will fall on the Company. Conversely, if the charge proves more than sufficient, any excess will be added to the Company surplus. The mortality risk borne by the Company under the Con- tracts, where one of the life Annuity Payment Options was selected, is to make monthly annuity payments (determined in accordance with the annuity tables and other provisions contained in the Contract) regardless of how long all Annuitants may live. We also assume mortality risk as a re- sult of our guarantee of a minimum payment in the event the Annuitant dies prior to the Annuity Date. The expense risk borne by the Company under the Contracts is the risk that the charges for administrative expenses which are guaranteed for the life of the Contract may be insufficient to cover the actual costs of issuing and ad- ministering the Contract. ------------------------------------------------------------ ADMINISTRATIVE CHARGE & An annual administrative charge of .10% of the net asset MAINTENANCE FEE value of the Separate Account is assessed daily along with an annual maintenance fee of $25 for Contracts valued at less than $25,000 at the time of initial purchase and on the last Business Day of each year. The annual maintenance fee is deducted proportionately from each Contract's Accu- mulated Value; therefore, the $25 fee is assessed per Con- tract, not per Portfolio chosen. Your Initial Purchase Pay- ment of less than $25,000 is reduced by an initial mainte- nance fee which is pro- rated to reflect only the remaining portion of the calendar year of purchase. Thereafter, the fee is deducted on the last Business Day of the year for the following year, on a pro rata basis from each of the Portfolios you have chosen. These deductions represent re- imbursement for the costs expected to be incurred over the life of the Contract for issuing and maintaining each Con- tract and the Separate Account. Please note that Contracts valued at $25,000 or more as of the last Business Day of the year will not be assessed the $25 maintenance fee for the following year. ------------------------------------------------------------ TAXES The Contract Owner will, where such taxes are imposed by state law, pay Premium Taxes that currently range up to 3.5%. These taxes will be deducted from the Accumulated Value or Purchase Payments as incurred by the Company. 17 As of the date of this Prospectus, the following state as- sesses a Premium Tax on all Initial and subsequent Purchase Payments:
NON- QUALIFIED QUALIFIED ------------------------------------------------------------- South Dakota................................... 0% 1.25% As of the date of this Prospectus, the following states as- sess a Premium Tax against the Accumulated Value if the Owner chooses an Annuity Payment Option instead of receiv- ing a lump sum distribution: NON- QUALIFIED QUALIFIED ------------------------------------------------------------- Alabama........................................ 1.00% 1.00% California..................................... .50% 2.35% District of Columbia........................... 2.25% 2.25% Kansas......................................... 0% 2.00% Kentucky....................................... 2.00% 2.00% Maine.......................................... 0% 2.00% Nevada......................................... 0% 3.50% West Virginia.................................. 1.00% 1.00% Wyoming........................................ 0% 1.00%
Under present laws, the Company will incur state or local taxes (in addition to the Premium Taxes described above) in several states. At present, the Company does not charge the Contract Owner for these other taxes. If there is a change in state or local tax laws, charges for such taxes may be made. The Company does not expect to incur any federal in- come tax liability attributable to investment income or capital gains retained as part of the reserves under the Contracts. (See "Federal Tax Considerations," page 26.) Based upon these expectations, no charge is currently being made to the Separate Account for corporate federal income taxes that may be attributable to the Separate Account. The Company will periodically review the question of a charge to the Separate Account for corporate federal income taxes related to the Separate Account. Such a charge may be made in future years for any federal income taxes incurred by the Company. This might become necessary if the tax treatment of the Company is ultimately determined to be other than what the Company currently believes it to be, if there are changes made in the federal income tax treatment of annuities at the corporate level, or if there is a change in the Company's tax status. In the event that the Company should incur federal income taxes attributable to investment income or capital gains retained as part of the reserves under the Contracts, the Accumulated Value of the Contract would be correspondingly adjusted by any provision or charge for such taxes. ------------------------------------------------------------ VANGUARD The value of the assets in the Separate Account will re- VARIABLE flect the fees and expenses paid by the Fund. A complete INSURANCE FUND description of these expenses is found in the "Fee Table" EXPENSES section of this Prospectus and in the "Management of the Fund" Section of the Fund's Prospectus and in the Fund's Statement of Additional Information. - -------------------------------------------------------------------------------- 18 ACCUMULATED At the commencement of the Contract, the Accumulated Value VALUE equals the Initial Net Purchase Payment. Thereafter, on any Business Day the Accumulated Value equals the Accumulated Value from the previous Business Day increased by: i) any Additional Net Purchase Payments received by the Company and ii) any increase in the Accumulated Value due to in- vestment results of the selected Portfolio(s) that occur during the Valuation Period; and reduced by: i) any de- crease in the Accumulated Value due to investment results of the selected Portfolio(s), ii) a daily charge to cover the mortality and expense risks assumed by the Company, iii) any charge to cover the cost of administering the Con- tract, iv) any partial withdrawals, and v) Premium Taxes, if any, that occur during the Valuation Period. The Accumulated Value is expected to change from Valuation Period to Valuation Period, reflecting the investment expe- rience of the selected Portfolios of the Fund as well as the daily deduction of charges. When your Net Purchase Pay- ments are allocated to a selected Portfolio, they result in a particular number of Accumulation Units being credited to your Contract. The number of Accumulation Units credited is determined by dividing the dollar amount allocated to each Portfolio by the Accumulation Unit Value for that Portfolio as of the end of the Valuation Period in which the payment is received. The Accumulation Unit Value varies each Valua- tion Period (i.e., each day that there is trading on the New York Stock Exchange) with the net rate of return of the Portfolio. The net rate of return reflects the investment performance of the Portfolio for the Valuation Period and is net of asset charges to the Portfolio. - -------------------------------------------------------------------------------- DIVIDENDS AND All dividends and capital gains earned will be reinvested CAPITAL GAINS and reflected in the Accumulation Unit Value. Only in this TREATMENT way can these earnings remain tax deferred. - -------------------------------------------------------------------------------- EXCHANGES AMONG Should your investment goals change, you may exchange the THE PORTFOLIOS Accumulated Value among the Portfolios of the Fund. Re- quests for exchanges received by mail or by telephone prior to the close of the New York Stock Exchange (generally 4:00 p.m. Eastern time) are processed at the close of business that same day. Requests received after the close of the Ex- change are processed the next Business Day. The Contract's exchange privilege is not intended to afford Contract Owners a way to speculate on short-term movements in the market. Accordingly, in order to prevent excessive use of the exchange privilege that may potentially disrupt the management of the Fund and increase transaction costs, the Separate Account has established a policy of limiting excessive exchange activity. You may make two substantive exchanges from each Portfolio (at least 30 days apart) during any calendar year. A sub- stantive exchange is an exchange from a Portfolio for the lesser of: i) 51% of the Accumulated Value in the Portfo- lio, or ii) $100,000. This restriction does not limit non- substantive exchanges and does not apply to exchanges from the Money Market Portfolio. All exchanges must be for at least $250, or, if less, the Accumulated Value in the Port- folio. However, the Company and the Fund reserve the right to revise or terminate the exchange privilege, limit the amount of or reject any exchange, as deemed necessary, at any time. ------------------------------------------------------------ 19 AUTOMATIC EX- The Automatic Exchange Service allows you to move money au- CHANGES tomatically among the Portfolios of the Fund. You may ex- change fixed amounts or percentages of your Portfolio bal- ance either monthly, quarterly, semiannually or annually into existing (the $1,000 minimum balance requirement has been met) Portfolios. Exchanges at regular intervals or "dollar-cost averaging" can be used, for example, to move money from a money market portfolio into a stock or bond portfolio. The minimum exchange amount is $250, and the maximum exchange amount is $50,000. The Automatic Exchange Service may be established by completing a Vanguard Vari- able Annuity Plan Automatic Exchange Service Application Form or writing a letter of instruction. You may change the transfer amount or cancel this service in writing or by telephone, if you have established telephone authorization on your Contract. Please note that the Automatic Exchange Service cannot be used to establish a new Portfolio, and will not be activated until the Free Look Period has ex- pired. ------------------------------------------------------------ TELEPHONE EX- To establish the telephone exchange privilege on your Con- CHANGES tract, please complete the appropriate section of the Plan Application. The Company, the Fund, and Vanguard shall not be responsible for the authenticity of exchange instruc- tions received by telephone. Reasonable procedures will be undertaken to confirm that instructions communicated by telephone are genuine. Prior to the acceptance of any re- quest, the caller will be asked by a customer service rep- resentative for his or her contract number and social secu- rity number. All calls will be recorded, and this informa- tion will be verified with the Contract Owner's records prior to processing a transaction. Furthermore, all trans- actions performed by a service representative will be veri- fied with the Contract Owner through a written confirmation statement. The Company, the Fund, and Vanguard shall not be liable for any loss, cost or expense for action on tele- phone instructions that are believed to be genuine in ac- cordance with these procedures. Every effort will be made to maintain the exchange privilege. However, the Company and the Fund reserve the right to revise or terminate its provisions, limit the amount of or reject any exchange, as deemed necessary, at any time. - -------------------------------------------------------------------------------- FULL AND PARTIAL At any time before the Annuity Date and while the Annuitant WITHDRAWALS or Joint Annuitant is living, the Contract Owner may make a partial or full withdrawal of the Contract to receive all or part of the Accumulated Value by sending a written re- quest to the Vanguard Variable Annuity Center. Full or par- tial withdrawals may only be made before the Annuity Date and all partial withdrawal requests must be for at least $250. You can make a withdrawal by writing to the Vanguard Vari- able Annuity Center. Your written request should include your Contract number, social security number, withdrawal amount, and the signature of all owners. Your proceeds will normally be distributed within two Business Days after the receipt of the request but in no event will it be later than seven calendar days, subject to postponement in cer- tain circumstances (see "Deferment of Payment" page 25). ------------------------------------------------------------ 20 SYSTEMATIC WITH- You may establish an automatic withdrawal of a specific DRAWALS amount, a percentage of the balance, or accumulated earn- ings from your Contract, and receive distributions on a monthly, quarterly, semiannual, or annual schedule. Once established, a check will be sent to your Contract address, bank account or as you direct. Please note that each sys- tematic withdrawal is subject to federal income taxes on the earnings, and may be subject to a 10% tax imposed by the IRS on withdrawals made prior to age 59 1/2. A minimum Contract balance of $10,000, and Portfolio bal- ance of $1,000 are required to establish a systematic with- drawal program for your Contract. The minimum automatic withdrawal amount is $250, and the maximum is $50,000. Changes to the withdrawal amount, percentage, or the fre- quency of distributions may be made by telephone. Any other changes, including a change in the destination of the check, must be requested in writing, and should include signatures of all Contract owners. To cancel the systematic withdrawal program, the Contract owner(s) needs to submit a letter of instruction with the appropriate signatures. To establish a systematic withdrawal program for your Con- tract, simply complete the Vanguard Variable Annuity Plan Systematic Withdrawal Program Application Form. Please note that the completed form must be signed by all Contract own- ers, and must be signature guaranteed if you are directing the withdrawal checks to an address other than the Contract address. Payments under the Contract of any amounts derived from premiums paid by check may be delayed until such time as the check has cleared your bank. If, at the time the Con- tract Owner requests a full or partial withdrawal, he or she has not provided the Company with a written election not to have federal income taxes withheld, the Company must by law withhold such taxes from the taxable portion of any full or partial withdrawal and remit that amount to the federal government. Moreover, the Internal Revenue Code provides that a 10% penalty tax will be imposed on certain early withdrawals. (See "Federal Tax Considerations," page 26.) Since the Contract Owner assumes the investment risk with respect to amounts allocated to the Separate Account, the total amount paid upon withdrawal of the Contract (taking into account any prior withdrawals) may be more or less than the total Purchase Payments made. - -------------------------------------------------------------------------------- IRS-REQUIRED If the Contract Owner or, if applicable a Joint Owner, dies DISTRIBUTIONS before the entire interest in the Contract is distributed, the value of the Contract must be distributed to the Own- er's Designated Beneficiary as described in this section so that the Contract qualifies as an annuity under the Inter- nal Revenue Code. If the death occurs on or after the Annuity Date, the re- maining portion of such interest will be distributed at least as rapidly as under the method of distribution being used as of the date of death. If the death occurs before the Annuity Date, the entire interest in the Contract will be distributed within five years after date of death or be paid under an annuity option under which payments will be- gin within one year of the Contract Owner's death and will be made for the life of the "Owner's Designated Beneficia- ry" or for a period not extending 21 beyond the life expectancy of that beneficiary. The Owner's Designated Beneficiary is the person to whom Ownership of the Contract passes by reason of death. If any portion of the Contract Owner's interest is payable to (or for the benefit of) the surviving spouse of the Con- tract Owner, the Contract may be continued with the surviv- ing spouse as the new Contract Owner. - -------------------------------------------------------------------------------- MINIMUM BALANCE REQUIREMENTS Due to the relatively high cost of maintaining smaller ac- counts, the Company reserves the right to transfer the bal- ance in any Portfolio account that falls below $1,000, due to a partial withdrawal or exchange, to the remaining Port- folios held under that Contract, on a pro rata basis. In the event that the entire value of the Contract falls below $1,000, you may be notified that the Accumulated Value of your account is below the Contract's minimum requirement. You would then be allowed 60 days to make an additional in- vestment before the account is liquidated. Proceeds would be promptly paid to the Contract Owner. The full proceeds would be taxable as a withdrawal. A full withdrawal will result in an automatic termination of the Contract. - -------------------------------------------------------------------------------- DESIGNATION OF A The Contract Owner may select one or more Beneficiaries, BENEFICIARY who would receive benefits upon the death of the Annuitant, and name them in the application. The Beneficiary(ies), as named on the application, will serve as the beneficiary designation. Thereafter, while the Annuitant or Joint Annu- itant is living, the Contract Owner may change the Benefi- ciary by written notice. Such change will take effect on the date the notice is signed by the Contract Owner but will not affect any payment made or other action taken be- fore the Company acknowledges the notice. The Contract Owner may also make the designation of Beneficiary irrevo- cable by sending written notice to, and obtaining approval from, the Company. Changes in the Beneficiary may then be made only with the consent of the designated irrevocable Beneficiary. If the Annuitant dies prior to the Annuity Date, the fol- lowing will apply unless the Contract Owner has made other provisions: (a) If there is more than one Beneficiary, each will share in the Death Benefits equally; (b) If one or two or more Beneficiaries has already died, that share of the Death Benefit will be paid equally to the survivor(s); (c) If no Beneficiary is living, the proceeds will be paid to the Contract Owner; (d) If a Beneficiary dies at the same time as the Annui- tant, the proceeds will be paid as though the Benefi- ciary had died first. If a Beneficiary dies within 15 days after the Annuitant's death and before the Company receives due proof of the Annuitant's death, proceeds will be paid as though the Beneficiary had died first. If a Beneficiary who is receiving Annuity Payments dies, any remaining Payments Certain will be paid to that Beneficiary's named Beneficiary(ies) when due. If no Bene- ficiary survives the Annuitant, the right to any amount payable 22 will pass to the Contract Owner. If the Contract Owner is the Annuitant, this right will pass to his or her estate. If a Life Annuity with Period Certain Option was elected, and if the Annuitant dies on or after the Annuity Date, any unpaid Payments Certain will be paid to the Beneficiary. - -------------------------------------------------------------------------------- DEATH OF Subject to the provisions dealing with Joint Annuitants, if ANNUITANT PRIOR the Annuitant dies prior to the Annuity Date, an amount TO ANNUITY DATE will be paid as proceeds to the Beneficiary. If the Annui- tant or Joint Annuitant dies prior to the Annuity Date, the survivor shall become the sole Annuitant. The Death Benefit is calculated and is payable upon receipt of due Proof of Death of the Annuitant as well as proof that the Annuitant died prior to the Annuity Date. Upon receipt of this proof, the Death Benefit will be paid within seven days, or as soon thereafter as the Company has sufficient information about the Beneficiary to make the payment. The Beneficiary may receive the amount payable in a lump sum cash benefit or under one of the Annuity Payment Options. A lump sum cash benefit will equal the greater of: (a) the Accumulated Value as of the date of due Proof of Death and proof that the Annuitant died prior to the Annuity Date or (b) the sum of Purchase Payments less the sum of all par- tial withdrawals and premium taxes. An Annuity Payment will be based on the greater of: (a) the Accumulated Value ten Business Days prior to the Annuity Date elected by the Ben- eficiary and approved by the Company or (b) the sum of Pur- chase Payments less the sum of all partial withdrawals and Premium Taxes. The Contract Owner may elect an Annuity Pay- ment Option for the Beneficiary or, if no such election was made by the Contract Owner and a cash benefit has not been paid, the Beneficiary may make this election after the Annuitant's death. - -------------------------------------------------------------------------------- ANNUITY DATE The Contract Owner may specify an Annuity Date in the ap- plication, which can be no later than the first day of the month after the Annuitant's 85th birthday. If no Annuity Date is specified in the application, the Annuitant will begin receiving Annuity Payments on the first day of the month after ten full years from the date of this Contract, or the first day of the month which follows the Annuitant's 65th birthday, whichever is later. The Annuity Date is the date that Annuity Payments are scheduled to commence under the Contract, unless the Contract has been surrendered or an amount has been paid as proceeds to the designated Bene- ficiary prior to that date. The Contract Owner may advance or defer the Annuity Date. However, the Annuity Date may not be advanced to a date prior to 30 days after the date of receipt of a written re- quest or, without the Company's prior approval, deferred to a date beyond the Annuitant's 85th birthday. An Annuity Date may only be changed by written request during the Annuitant's or Joint Annuitant's lifetime and must be made at least 30 days before the then-scheduled Annuity Date. The Annuity Date and Annuity Payment Options available for Qualified Contracts may also be controlled by endorsements, the plan or applicable law. - -------------------------------------------------------------------------------- 23 ANNUITY PAYMENT All Annuity Payment Options (except the Designated Period OPTIONS Annuity Option) are offered as "Variable Annuity Options." This means that Annuity Payments, after the initial pay- ment, will reflect the investment experience of the Portfo- lio or Portfolios chosen by the Contract Owner. All Annuity Payment Options are offered as "Fixed Annuity Options." This means that the amount of each payment will be set on the Annuity Date and will not change. If you choose a Fixed Option, your investment will be moved out of the underlying Vanguard Portfolios and into the general account of Providian Life & Health Insurance Company. If you do not wish to receive your payments on an annuity basis, you may take a lump sum payment at anytime before the annuity date. The lump sum value is equal to the Accumulation Value. The following Annuity Payment Options are available under the Contract: LIFE ANNUITY--Available as either a Fixed or Variable Op- tion. Monthly Annuity Payments are paid for the life of an Annuitant, ceasing with the last Annuity Payment due prior to the Annuitant's death. JOINT AND LAST SURVIVOR ANNUITY--Available as either a Fixed or Variable Option. Monthly Annuity Payments are paid for the life of two Annuitants and thereafter for the life of the survivor, ceasing with the last Annuity Payment due prior to the survivor's death. LIFE ANNUITY WITH PERIOD CERTAIN--Available as either a Fixed or Variable Option. Monthly Annuity Payments are paid for the life of an Annuitant, with a Period Certain of not less than 120, 180, or 240 months, as elected. INSTALLMENT OR UNIT REFUND LIFE ANNUITY--Available as ei- ther a Fixed (Installment Refund) or Variable (Unit Refund) Option. Monthly Annuity Payments are paid for the life of an Annuitant, with a Period Certain determined by dividing the Accumulated Value by the First Annuity Payment. DESIGNATED PERIOD ANNUITY--Only available as a Fixed Op- tion. Monthly Annuity Payments are paid for a Period Cer- tain as elected, which may be from 10 to 30 years. In the event that an Annuity Payment Option is not select- ed, the Company will make monthly Annuity Payments that will go on for as long as the Annuitant lives (120 payments guaranteed) in accordance with the Life Annuity with Period Certain Option and the annuity benefit sections of the Con- tract. That portion of the Accumulated Value that has been held in a Portfolio prior to the Annuity Date will be ap- plied under a Variable Annuity Option based on the perfor- mance of that Portfolio. Subject to approval by the Compa- ny, the Contract Owner may select any other Annuity Payment Option then being offered by the Company. Annuity Payments are guaranteed to be not less than as provided by the Annu- ity Tables for the first payment under a Variable Option and each payment under a Fixed Option. The minimum monthly payment, however, is $100 ($20 for Massachusetts Contract Owners). If the Accumulated Value is less than $5,000, or less than $2,000 for Texas and Massachusetts Contract Own- ers, the Company has the right to pay that amount in a lump sum. From time-to-time, the Company may require proof that the Annuitant, Joint Annuitant, or Contract Owner is liv- ing. Annuity Payment Options 24 are not available to: (1) an assignee; or (2) any other than a natural person, except with the consent of the Com- pany. The Company may, at the time of election of an Annuity Pay- ment Option, offer more favorable rates in lieu of the guaranteed rates specified in the Annuity Tables found in the Contract. The value of Variable Annuity Payments will reflect the in- vestment experience of the chosen Portfolio. On or after the Annuity Date, the Annuity Payment Option is irrevoca- ble. Only one Annuity Option may be chosen from among those made available by the Company per each Portfolio. The annu- ity tables, which are contained in the Contract and are used to calculate the value of Variable Annuity Payments, are based on an assumed interest rate of 4%. If the actual net investment experience exactly equals the assumed inter- est rate, then the Variable Annuity Payments will remain the same (equal to the first Annuity Payment). However, if actual investment experience exceeds the assumed interest rate, the Variable Annuity Payments will increase; con- versely, they will decrease if the actual experience is lower. If an Annuity Payment Option is chosen that depends on the continuation of the life of the Annuitant or of a Joint An- nuitant, proof of birth date may be required before Annuity Payments begin. For Annuity Payment Options involving life income, the actual age of the Annuitant or of a Joint Annu- itant will affect the amount of each payment. Since pay- ments to older Annuitants are expected to be fewer in num- ber, the amount of each Annuity Payment shall be greater. If at the time of any Annuity Payment the Contract Owner has not provided the Company with a written election not to have federal income taxes withheld, the Company must by law withhold such taxes from the taxable portion of such Annu- ity Payment and remit that amount to the federal govern- ment. The value of all payments, both fixed and variable, will be greater for shorter guaranteed periods than for longer guaranteed periods, and greater for life annuities than for joint and survivor annuities, because they are expected to be made for a shorter period. After the Annuity Date, the Contract Owner may change the Portfolio funding the Variable Annuity Payments, either by written request or by calling the Vanguard Variable Annuity Center (1-800-462-2391). The method of computation of Vari- able Annuity Payments is described in more detail in the Statement of Additional Information. ------------------------------------------------------------ DEFERMENT OF PAYMENT Payment of any cash withdrawal or lump-sum death benefit due from the Separate Account will occur within seven days from the date the election becomes effective, except that the Company may be permitted to defer such payment if: (1) the New York Stock Exchange is closed for other than usual weekends or holidays, or trading on the Exchange is other- wise restricted; or (2) an emergency exists as defined by the SEC, or the SEC requires that trading be restricted; or (3) the SEC permits a delay for the protection of Contract Owners. - -------------------------------------------------------------------------------- 25 FEDERAL TAX CONSIDERATIONS INTRODUCTION The ultimate effect of federal income taxes on the amounts paid for the Contract, on the investment returns on assets held under a Contract, on Annuity Payments, and on the eco- nomic benefits to the Contract Owner, Annuitant or Benefi- ciary, depends on the Company's tax status and upon the tax status of the individuals concerned. The following discus- sion is general in nature and is not intended as tax ad- vice. You should consult a tax adviser regarding the tax consequences of purchasing a Contract. No attempt is made to consider any applicable state or other tax laws. More- over, the discussion is based upon the Company's under- standing of the federal income tax laws as they are cur- rently interpreted. No representation is made regarding the likelihood of continuation of the federal income tax laws, the Treasury Regulations, or the current interpretations by the Internal Revenue Service. We reserve the right to make uniform changes on the Contract to the extent necessary to continue to qualify the Contract as an annuity. For a dis- cussion of federal income taxes as they relate to the Fund, please see the accompanying Prospectus for the Fund. ------------------------------------------------------------ TAXATION OF ANNUITIES IN Section 72 of the Code governs taxation of annuities. In GENERAL general, a Contract Owner is not taxed on increases in value under a Contract until some form of withdrawal or distribution is made under it. However, under certain cir- cumstances, the increase in value may be subject to current federal income tax. (See "Contracts Owned by Non-Natural Persons" and "Diversification Standards", pages 28 and 29.) Section 72 provides that the proceeds of a full or partial withdrawal from a Contract prior to the Annuity Date will be treated as taxable income to the extent the amounts held under the Contract exceed the "investment in the Contract", as that term is defined in the Code. The "investment in the Contract" can generally be described as the cost of the Contract, and generally constitutes all purchase payments paid for the Contract less any amounts received under the Contract that are excluded from the individual's gross in- come. The taxable portion is taxed at ordinary income tax rates. For purposes of this rule, a pledge or assignment of a Contract is treated as a payment received on account of a partial withdrawal of a Contract. Upon receipt of a full or partial withdrawal or an Annuity Payment under the Contract, you will be taxed if the value of the Contract exceeds the investment in the Contract. Or- dinarily, the taxable portion of such payments will be taxed at ordinary income tax rates. For Fixed Annuity Payments, in general, the taxable portion of each payment is determined by using a formula known as the "exclusion ratio", which establishes the ratio that the investment in the Contract bears to the total expected amount of Annuity Payments for the term of the Contract. That ratio is then applied to each payment to determine the non-taxable portion of the payment. The remaining portion of each payment is taxed at ordinary income tax rates. For Variable Annuity Payments, in general, the taxable portion is determined by a formula that establishes a specific dol- lar amount of each payment that is not taxed. The dollar amount is determined by dividing the investment 26 in the Contract by the total number of expected periodic payments. The remaining portion of each payment is taxed at ordinary income tax rates. Once the excludible portion of Annuity Payments to date equals the investment in the Con- tracts, the balance of the Annuity Payments will be fully taxable. Withholding of federal income taxes on all distributions may be required unless the recipient elects not to have any amounts withheld and properly notifies the Company of that election. With respect to amounts withdrawn or distributed before the taxpayer reaches age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of amounts withdrawn or dis- tributed. However, the penalty tax will not apply to with- drawals: (i) made on or after the death of the Contract Owner (or where the Contract Owner is not an individual, the death of the primary Annuitant, who is defined as the individual the events in whose life are of primary impor- tance in affecting the timing and payment under the Con- tract); (ii) attributable to the taxpayer's becoming disa- bled within the meaning of Code Section 72(m)(7); (iii) that are part of a series of substantially equal periodic payments made at least annually for the life (or life ex- pectancy) of the taxpayer, or joint lives (or joint life expectancies) of the taxpayer and his Beneficiary; (iv) from a qualified plan; (v) allocable to investment in the Contract before August 14, 1982; (vi) under a qualified funding asset (as defined in Code Section 130(d)); (vii) under an immediate annuity contract as defined in Sec- tion 72(u)(4); or (viii) that are purchased by an employer on termination of certain types of qualified plans and that are held by the employer until the employee separates from service. Other tax penalties may apply to certain distribu- tions as well as to certain contributions and other trans- actions under a qualified contract. If the penalty tax does not apply to a withdrawal as a re- sult of the application of item (iii) above, and the series of payments are subsequently modified (other than by reason of death or disability), the tax for the year in which the modification occurs will be increased by an amount (as de- termined under Treasury Regulations) equal to the tax that would have been imposed but for item (iii) above, plus in- terest 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 pay- ment and after the taxpayer attains age 59 1/2, or (b) be- fore the taxpayer reaches age 59 1/2. ------------------------------------------------------------ THE COMPANY'S The Company is taxed as a life insurance company under Part TAX STATUS I of Subchapter L of the Code. Since the Separate Account is not a separate entity from the Company and its opera- tions form a part of the Company, it will not be taxed sep- arately as a "regulated investment company" under Subchapter M of the Code. Investment income and realized capital gains on the assets of the Separate Account are re- invested and taken into account in determining the Accumu- lation Value. Under existing federal income tax law, the Separate Account's investment income, including realized net capital gains, is not taxed to the Company. The Company reserves the right to make a deduction for taxes should they be imposed with respect to such items in the future. ------------------------------------------------------------ 27 DISTRIBUTION-AT- In order to be treated as an annuity contract, a contract DEATH RULES must, generally, provide the following two distribution rules: (a) if any Contract Owner dies on or after the Annu- ity Date and before the entire interest in the Contract has been distributed, the remaining portion of such interest must be distributed at least as quickly as the method in effect on the Contract Owner's death; and (b) if any Con- tract Owner dies before the Annuity Date, the entire inter- est must generally be distributed within five years after the date of death. To the extent such interest is payable to a Designated Beneficiary, however, such interest may be annuitized over the life of that Designated Beneficiary or over a period not extending beyond the life expectancy of that Beneficiary, so long as distributions commence within one year after the Contract Owner's death. If the Desig- nated Beneficiary is the spouse of the Contract Owner, the Contract (together with the deferred tax on the accrued and future income thereunder) may be continued unchanged in the name of the spouse as Contract Owner. The term Designated Beneficiary means the natural person named by the Contract Owner as a beneficiary and to whom ownership of the Con- tract passes by reason of the Contract Owner's death. If the Contract Owner is not an individual, the "primary Annuitant" (as defined under the Code) is considered the Contract Owner. The primary Annuitant is the individual who is of primary importance in affecting the timing or the amount of payout under a Contract. In addition, when the Contract Owner is not an individual, a change in the pri- mary Annuitant is treated as the death of the Contract Own- er. Finally, in the case of Joint Contract Owners, the distri- bution will be required at the death of the first of the Contract Owners. ------------------------------------------------------------ TRANSFERS OF Any transfer of a non-qualified annuity Contract prior to ANNUITY the Annuity Date for less than full and adequate considera- CONTRACTS tion will generally trigger tax on the gain in the Contract to the Contract Owner at the time of such transfer. The in- vestment in the Contract of the transferee will be in- creased by any amount included in the Contract Owner's in- come. This provision, however, does not apply to those transfers between spouses or incident to a divorce which are governed by Code Section 1041(a). ------------------------------------------------------------ CONTRACTS OWNED Where the Contract is held by a non-natural person (for ex- BY NON-NATURAL ample, a corporation), the Contract is generally not PERSONS treated as an annuity contract for federal income tax pur- poses, and the income on that Contract (generally the in- crease in the net Accumulated Value less the payments) is includible in taxable income each year. The 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. If an employer is the nominal owner of a Contract, and the beneficial owners are employees, then the Contract is not treated as being held by a non-natural per- son. The rule also does not apply where the Contract is ac- quired by the estate of a decedent, where the Contract is a qualified funding asset for structured settlements, where the Contract is purchased on behalf of an employee upon termination of a qualified plan, and in the case of an im- mediate annuity. ------------------------------------------------------------ 28 ASSIGNMENTS A transfer of ownership of a Contract, a collateral assign- ment or the designation of an Annuitant or other Benefi- ciary who is not also the Contract Owner may result in tax consequences to the Contract Owner, Annuitant or Benefi- ciary that are not discussed herein. A Contract Owner con- templating such a transfer or assignment of a Contract should contact a tax adviser with respect to the potential tax effects of such a transaction. ------------------------------------------------------------ MULTIPLE All non-qualified annuity contracts issued by the same com- CONTRACTS RULE pany (or affiliate) to the same Contract Owner during any calendar year are to be aggregated and treated as one con- tract for purposes of determining the amount includible in the taxpayer's gross income. Thus, any amount received un- der any Contract prior to the Contract's Annuity Date, such as a partial withdrawal, will be taxable (and possibly sub- ject to the 10% penalty tax) to the extent of the combined income in all such contracts. The Treasury Department has specific authority to issue regulations that prevent the avoidance of Code Section 72(e) through the serial purchase of annuity Contracts or otherwise. In addition, there may be other situations in which the Treasury may conclude that it would be appropriate to aggregate two or more Contracts purchased by the same Contract Owner. Accordingly, a Con- tract Owner should consult a tax adviser before purchasing more than one Contract or other annuity contracts. ------------------------------------------------------------ DIVERSIFICATION To comply with certain diversification regulations (the STANDARDS "Regulations"), which were issued in final form on March 2, 1989, under Code Section 817(h), after a start up period, the Separate Account will be required to diversify its in- vestments. The Regulations generally require that on the last day of each quarter of a calendar year, no more than 55% of the value of the Separate Account is represented by any one investment, no more than 70% is represented by any two investments, no more than 80% is represented by any three investments, and no more than 90% is represented by any four investments. A "look-through" rule applies that suggests that each Subaccount of the Separate Account will be tested for compliance with the percentage limitations by looking through to the assets of the Portfolio of the Fund in which each such division invests. All securities of the same issuer are treated as a single investment. As a result of the 1988 Act, each government agency or instrumentality will be treated as a separate issuer for purposes of those limitations. In connection with the issuance of temporary diversifica- tion regulations in 1986, the Treasury announced that such regulations did not provide guidance concerning the extent to which Contract Owners may direct their investments to particular divisions 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 is- sued, the Contracts may need to be modified in order to re- main in compliance. For these reasons, the Company reserves the right to modify the Contracts, as necessary, to prevent the Contract Owner from being considered the owner of as- sets of the Separate Account. 29 We intend to comply with the Regulations to assure that the Contracts continue to be treated as annuity contracts for federal income tax purposes. ------------------------------------------------------------ QUALIFIED Qualified Contracts to provide for retirement may generally INDIVIDUAL be purchased only in connection with a "rollover" of funds RETIREMENT from another individual retirement annuity (IRA) or quali- ANNUITIES fied plan. IRA Contracts must contain special provisions and are subject to limitations on contributions and the timing of when distributions can be made. Tax penalties may apply to contributions in excess of specified limits, loans or reassignments, distributions that do not meet specified requirements, or in other circumstances. Anyone desiring to purchase a Qualified Contract should consult a personal tax adviser. - -------------------------------------------------------------------------------- GENERAL The Company retains the right, subject to any applicable INFORMATION law, to make certain changes. The Company reserves the right to eliminate the shares of any of the Portfolios and ADDITIONS, to substitute shares of another Portfolio of the Fund, or DELETIONS, OR of another registered open-end management investment compa- SUBSTITUTIONS OF ny, if the shares of the Portfolios are no longer available INVESTMENTS for investment, or, if in the Company's judgment, invest- ment 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 a Contract Owner's interest in a Portfolio will not be made until SEC approval has been obtained and the Contract Owner has been notified of the change. New Portfolios may be established when marketing, tax, in- vestment, or other conditions so warrant. Any new Portfo- lios will be made available to existing Contract Owners on a basis to be determined by the Company. The Company may also eliminate one or more Portfolios if marketing, tax, investment or other conditions so warrant. In the event of any such substitution or change, the Com- pany may, by appropriate endorsement, make such changes in the Contracts 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 Contracts, the Separate Account may be operated as a management company under the 1940 Act or any other form permitted by law, may be deregistered under such Act in the event such registration is no longer required, or may be combined with one or more other separate accounts. ------------------------------------------------------------ DISTRIBUTOR OF THE CONTRACTS The Vanguard Group, Inc., through its wholly-owned subsidi- ary, Vanguard Marketing Corp., is the principal distributor of the Contract. For these services, the Fund paid a fee of less than .02% of the Fund's average net assets for the 1995 fiscal year. This fee is guaranteed not to exceed .20% of the Fund's average month-end net assets. A complete de- scription of these services is found in the "Management of the Fund" section of the Fund's Prospectus and in the Fund's Statement of Additional Information. ------------------------------------------------------------ 30 VOTING RIGHTS The Fund does not hold regular meetings of shareholders. The Directors of the Fund may call special meetings of shareholders as may be required by the 1940 Act or other applicable law. To the extent required by law, the Portfo- lio shares held in the Separate Account will be voted by the Company at shareholder meetings of the Fund in accor- dance with instructions received from persons having voting interests in the corresponding Portfolio. Fund shares as to which no timely instructions are received or shares held by the Company as to which Contract Owners have no beneficial interest will be voted in proportion to the voting instruc- tions that are received with respect to all Contracts par- ticipating in that Portfolio. Voting instructions to ab- stain on any item to be voted upon will be applied on a pro rata basis to reduce the votes eligible to be cast. The number of votes that are available to a Contract Owner will be calculated separately for each Portfolio of the Separate Account. That number will be determined by apply- ing his or her percentage interest, if any, in a particular Portfolio to the total number of votes attributable to the Portfolio. Prior to the Annuity Date, the Contract Owner holds a vot- ing interest in each Portfolio to which the Accumulated Value is allocated. The number of votes which are available to a Contract Owner will be determined by dividing the Ac- cumulated Value attributable to a Portfolio by the net as- set value per share of the applicable Portfolio. After the Annuity Date, the person receiving Annuity Payments under any variable annuity option has the voting interest. The number of votes after the Annuity Date will be determined by dividing the reserve for such Contract allocated to the Portfolio by the net asset value per share of the corre- sponding Portfolio. After the Annuity Date, the votes at- tributable to a Contract decrease as the reserves allocated to the Portfolio decrease. In determining the number of votes, fractional shares will be recognized. The number of votes of the Portfolio that are available will be determined as of the date coincident with the date established by that Portfolio for determining shareholders eligible to vote at the meeting of the Fund. Voting in- structions will be solicited by written communication prior to such meeting in accordance with procedures established by the Fund. ------------------------------------------------------------ AUDITORS Ernst & Young LLP serves as independent auditors for the Separate Account and the Company and will audit their fi- nancial statements annually. ------------------------------------------------------------ LEGAL MATTERS Jorden Burt Berenson & Johnson LLP of Washington, DC, has provided legal advice relating to the federal securities laws applicable to the issue and sale of the Contracts. All matters of Missouri law pertaining to the validity of the Contract and the Company's right to issue such Contracts have been passed upon by Kimberly A. Scouller, Esquire, on behalf of the Company. - -------------------------------------------------------------------------------- 31 TABLE OF CONTENTS FOR THE VANGUARD VARIABLE ANNUITY PLAN CONTRACT STATEMENT OF ADDITIONAL INFORMATION
PAGE ---- THE CONTRACT............................................................. 2 Computation of Variable Annuity Income Payments......................... 2 Exchanges............................................................... 3 Joint Annuitant......................................................... 3 GENERAL MATTERS.......................................................... 3 Non-Participating....................................................... 3 Misstatement of Age or Sex.............................................. 3 Assignment.............................................................. 4 Annuity Data............................................................ 4 Annual Report........................................................... 4 Incontestability........................................................ 4 Ownership............................................................... 4 DISTRIBUTION OF THE CONTRACT............................................. 4 PERFORMANCE INFORMATION.................................................. 4 Money Market Subaccount Yields.......................................... 5 30-Day Yield for Non-Money Market Subaccounts........................... 5 Average Annual Total Return for Non-Money Market Subaccounts............ 5 SAFEKEEPING OF ACCOUNT ASSETS............................................ 7 THE COMPANY.............................................................. 7 STATE REGULATION......................................................... 7 RECORDS AND REPORTS...................................................... 7 LEGAL PROCEEDINGS........................................................ 8 OTHER INFORMATION........................................................ 8 FINANCIAL STATEMENTS..................................................... 8 Audited Financial Statements............................................ 8
32 PROVIDIAN LIFE & HEALTH INSURANCE COMPANY SEPARATE ACCOUNT IV STATEMENT OF ADDITIONAL INFORMATION FOR THE VANGUARD VARIABLE ANNUITY PLAN CONTRACT OFFERED BY PROVIDIAN LIFE & HEALTH INSURANCE COMPANY (A MISSOURI STOCK COMPANY) ADMINISTRATIVE OFFICES 20 MOORES ROAD FRAZER, PENNSYLVANIA 19355 ---------------- This Statement of Additional Information expands upon subjects discussed in the current Prospectus for the Vanguard Variable Annuity Plan Contract (the "Contract") offered by Providian Life & Health Insurance Company (the "Compa- ny"). You may obtain a copy of the Prospectus dated April 30, 1996; by calling 1-800-522-5555, or writing to Vanguard Variable Annuity Plan, P.O. Box 2600, Valley Forge, Pa 19482. Terms used in the current Prospectus for the Contract are incorporated in this Statement. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT. APRIL 30, 1996
TABLE OF CONTENTS PAGE ----------------- ---- THE CONTRACT............................................................. B-2 Computation of Variable Annuity Income Payments......................... B-2 Exchanges............................................................... B-3 Joint Annuitant......................................................... B-3 GENERAL MATTERS.......................................................... B-3 Non-Participating....................................................... B-3 Misstatement of Age or Sex.............................................. B-3 Assignment.............................................................. B-4 Annuity Data............................................................ B-4 Annual Report........................................................... B-4 Incontestability........................................................ B-4 Ownership............................................................... B-4 DISTRIBUTION OF THE CONTRACT............................................. B-4 PERFORMANCE INFORMATION.................................................. B-4 Money Market Subaccount Yields.......................................... B-5 30-Day Yield for Non-Money Market Subaccounts........................... B-5 Average Annual Total Return for Non-Money Market Subaccounts............ B-5 SAFEKEEPING OF ACCOUNT ASSETS............................................ B-7 THE COMPANY.............................................................. B-7 STATE REGULATION......................................................... B-7 RECORDS AND REPORTS...................................................... B-7 LEGAL PROCEEDINGS........................................................ B-8 OTHER INFORMATION........................................................ B-8 FINANCIAL STATEMENTS..................................................... B-8 Audited Financial Statements............................................ B-8
B-1 THE CONTRACT In order to supplement the description in the Prospectus, the following pro- vides additional information about the Contract which may be of interest to Contract Owners. COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS Variable Annuity Income Payments are computed as follows. First, the Accumu- lated Value (or the portion of the Accumulated Value used to provide variable payments) is applied under the Annuity Table contained in the Contract corre- sponding to the Annuity Option elected by the Contract Owner and based on an assumed interest rate of 4%. This will produce a dollar amount which is the first monthly payment. The Company may, at the time Annuity Income Payments are computed, offer more favorable rates in lieu of the guaranteed rates spec- ified in the Annuity Table. 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 multi- plied by the Annuity Unit value for the Subaccount ten Business Days before the due date of the Annuity Payment. The Annuity Unit value for each Subaccount was initially established at $10.00 on the day money was first deposited in that Subaccount. The Annuity Unit value for any subsequent Business Day is equal to (a) times (b) times (c), where: (a) the Annuity Unit value for the immediately preceding Business Day; (b) the Net Investment Factor for the day; (c) the investment result adjustment factor (.99989255 per day), which recog- nizes an assumed interest rate of 4% per year used in determining the An- nuity Payment amounts. The Net Investment Factor is a factor applied to a Subaccount that reflects daily changes in the value of the Subaccount due to: (a) any increase or decrease in the value of the Subaccount due to investment results; (b) a daily charge for the mortality and expense risks assumed by the Company corresponding to an annual rate according to the following schedule:
NET ASSETS* RATE ----------- ------ First $1.5 Billion................................................... 0.375% Over $1.5 Billion.................................................... 0.300%
* Based on the combined net assets of the Separate Account and Separate Ac- count B of First Providian Life & Health Insurance Company. (c) a daily charge for the cost of administering the Contract corresponding to an annual charge of .10%. (d) an annual charge of $25 for maintenance of Contracts valued at less than $25,000 at time of initial purchase and on the last business day of each year. The Annuity Tables contained in the Contract are based on the 1983 Table "A" Mortality Table projected for mortality improvement to the year 2000 using Projection Scale G and an interest rate of 4% a year; except that in Massachu- setts and Montana, the Annuity Tables contained in B-2 the Contract are based on a 60% female/40% male blending of the above, for all annuitants of either gender. EXCHANGES After the Annuity Date, if a Variable Annuity Option has been chosen, the Contract Owner may, by making a written request or by calling the Variable An- nuity Center, exchange the current value of the existing Subaccount to Annuity Units of any other Subaccount then available. The request for the exchange must be received, however, at least 10 Business Days prior to the first pay- ment date on which the exchange is to take effect. This exchange shall result in the same dollar amount of Annuity Payment on the date of exchange. The Con- tract Owner is limited to two substantive exchanges (at least 30 days apart) in any Contract Year, and the value of the Annuity Units exchanged must pro- vide a monthly Annuity Payment of at least $100 at the time of the exchange. Exchanges will be made using the Annuity Unit value for the Subaccounts on the date the request for exchange is received by the Administrator. On the ex- change date, the Company will: establish a value for the current Subaccount by multiplying the Annuity Unit value by the number of Annuity Units in the ex- isting Subaccount, and compute the number of Annuity Units for the new Subaccount by dividing the Annuity Unit value of the new Subaccount into the value previously calculated for the existing Subaccount. JOINT ANNUITANT The Contract Owner may, in the Contract Application or by written request at least 30 days prior to the Annuity Date, name a Joint Annuitant. Such Joint Annuitant must meet the Company's underwriting requirements. If approved by the Company, the Joint Annuitant shall be named on the Contract Schedule or added by endorsement. An Annuitant or Joint Annuitant may not be replaced. The Annuity Date shall be determined based on the date of birth of the Annui- tant. If the Annuitant or Joint Annuitant dies prior to the Annuity Date, the survivor shall be the sole Annuitant. Another Joint Annuitant may not be des- ignated. Payment to a Beneficiary shall not be made until the death of the surviving Annuitant. GENERAL MATTERS NON-PARTICIPATING The Contracts are non-participating. No dividends are payable and the Con- tracts will not share in the profits or surplus earnings of the Company. MISSTATEMENT OF AGE OR SEX The Company may require proof of age and sex before making Annuity Payments. If the Annuitant's stated age, sex or both in the Contract are incorrect, the Company will change the Annuity Benefits payable to those which the Purchase Payments would have purchased for the correct age and sex. In the case of cor- rection of the stated age or sex after payments have commenced, the Company will: (1) in the case of underpayment, pay the full amount due with the next payment; or (2) in the case of overpayment, deduct the amount due from one or more future payments. B-3 ASSIGNMENT Any Nonqualified Contract may be assigned by the Contract Owner prior to the Annuity Date and during the Annuitant's lifetime. The Company is not responsi- ble for the validity of any assignment. No assignment will be recognized until the Company receives written notice thereof. The interest of any Beneficiary which the assignor has the right to change shall be subordinate to the inter- est of an assignee. Any amount paid to the assignee shall be paid in one sum, notwithstanding any settlement agreement in effect at the time assignment was executed. The Company shall not be liable as to any payment or other settle- ment made by the Company before receipt of written notice. ANNUITY DATA The Company will not be liable for obligations which depend on receiving in- formation from a Payee until such information is received in a form satisfac- tory to the Company. ANNUAL REPORT Once each Contract Year, the Company will send the Contract Owner an annual report of the current Accumulated Value allocated to each Subaccount; and any Purchase Payments, charges, exchanges or withdrawals during the year. This re- port will also give the Contract Owner any other information required by law or regulation. The Contract Owner may ask for a report like this at any time. INCONTESTABILITY This Contract is incontestable from the Contract Date, subject to the "Mis- statement of Age or Sex" provision. OWNERSHIP The Owner of the Contract on the Contract Date is the Annuitant, unless oth- erwise specified in the application. The Owner may specify a new Owner by written notice at any time thereafter. The term Owner also includes any person named as a Joint Owner. A Joint Owner shares ownership in all respects with the Owner. During the Annuitant's lifetime all rights and privileges under this Contract may be exercised solely by the Owner. Upon the death of the Own- er(s), Ownership is retained by the surviving Joint Owner or passes to the Owner's Designated Beneficiary, if one has been designated by the Owner. If no Owner's Designated Beneficiary is designated or if no Owner's Designated Bene- ficiary is living, the Owner's Designated Beneficiary is the Owner's estate. From time to time the Company may require proof that the Owner is still liv- ing. DISTRIBUTION OF THE CONTRACT The Vanguard Group, Inc. through its wholly-owned subsidiary, Vanguard Mar- keting Corporation, will be the principal distributor of the Contracts. For these services, the Fund paid a fee .02% of the Funds' average net assets for its 1995 fiscal year. This fee is guaranteed not to exceed .20% of the Fund's average month-end net assets. A complete description of these services is found in the "Management of the Fund" section of the Fund's Prospectus and in the Fund's Statement of Additional Information. PERFORMANCE INFORMATION Performance information for the Subaccounts including the yield and effective yield of the Money Market Subaccount, the yield of the remaining Subaccounts, and the total return of all Subaccounts, may appear in reports or promotional literature to current or prospective Contract Owners. B-4 MONEY MARKET SUBACCOUNT YIELDS Current yield for the Money Market Subaccount will be based on the change in the value of a hypothetical investment (exclusive of capital changes) over a particular 7-day period, less a pro-rata share of Subaccount expenses accrued over that period (the "base-period"), and stated as a percentage of the in- vestment 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. Calcu- lation of "effective yield" begins with the same "base period return" used in the calculation of yield, which is then annualized to reflect weekly com- pounding pursuant to the following formula: Effective Yield = [((Base Period Return) +1) /3//6//5///7/]-1 The yield of the Money Market Subaccount for the 7-day period ended December 29, 1995, was 5.02%. 30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS Quotations of yield for the remaining Subaccounts will be based on all in- vestment income per Unit earned during a particular 30-day period, less ex- penses accrued during the period ("net investment income"), and will be com- puted 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] ____ cXd Where: [a] equals the net investment income earned during the period by the Series attributable to shares owned by a Subaccount [b] equals the expenses accrued for the period (net of reimbursements) [c] equals the average daily number of Units outstanding during the period [d] equals the maximum offering price per Accumulation Unit on the last day of the period Yield on the Subaccount is earned from the increase in net asset value of shares of the Series in which the Subaccount invests and from dividends de- clared and paid by the Series, which are automatically reinvested in shares of the Series. The yield of each Subaccount for the 30-day period ended December 29, 1995, is set forth below. Yields are calculated daily for each Subaccount. Premiums and discounts on asset-backed securities are not amortized. The High Yield Bond and Small Company Growth Subaccounts had no operations during the period. High-Grade Bond Subaccount............................................. 5.40% Balanced Subaccount.................................................... 3.27% Equity Index Subaccount................................................ 1.60% Equity Income Subaccount............................................... 3.06% Growth Subaccount...................................................... 0.81% International Subaccount............................................... -- High Yield Bond Subaccount............................................. N/A Small Company Growth Subaccount........................................ N/A
AVERAGE ANNUAL TOTAL RETURN FOR NON-MONEY MARKET SUBACCOUNTS Quotations of average annual total return for any Subaccount will be ex- pressed in terms of the average annual compounded rate of return of a hypo- thetical investment in a Contract over a period of one, five and 10 years (or, if less, up to the life of the Subaccount), calculated pursuant to the formu- la: P(1 + T)n = ERV B-5 Where: (1) [P] equals a hypothetical Initial Purchase Payment of $1,000 (2) [T] equal an average annual total return (3) [n] equals the number of years (4) [ERV] equals the ending redeemable value of a hypothetical $1,000 Pur- chase Payment made at the beginning of the period (or fractional portion thereof) The average annual total return of each for one year and the period since in- ception, is set forth below:
YEAR ENDED SINCE 12/29/95 INCEPTION* ---------- ---------- High-Grade Bond Subaccount............................. 17.47% 8.17% Balanced Subaccount.................................... 31.76% 12.03% Equity Index Subaccount................................ 36.67% 13.49% Equity Income Subaccount............................... 36.19% 14.76% Growth Subaccount...................................... 37.62% 17.38% International Subaccount............................... 15.31% 10.33% High Yield Bond Subaccount............................. -- -- Small Company Growth Subaccount........................ -- --
- -------- * Since Inception: Equity Index Subaccount and High-Grade Bond Subaccount--April 29, 1991 Balanced Subaccount--May 23, 1991 Equity Income Subaccount and Growth Subaccount--June 7, 1993 International Subaccount--June 3, 1994 High Yield Bond Subaccount and Small Company Growth Subaccount--June 3, 1996 All total return figures reflect the deduction of the administrative charge, and the mortality and expense risk charge. The SEC requires that an assumption be made that the Contract Owner surrenders the entire Contract at the end of the 1, 5 and 10 year periods (or, if less, up to the life of the Subaccount) for which performance is required to be calculated. Performance information for a Subaccount may be compared, in reports and pro- motional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P 500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market Institu- tional Averages, or other indices that measure performance of a pertinent group of securities so that investors may compare a Subaccount's results with those of a group of securities widely regarded by investors as representative of the securities markets in general; (ii) other groups of variable annuity separate accounts or other investment products tracked by Lipper Analytical Services, a widely-used independent research firm which ranks mutual funds and other investment companies by overall performance, investment objectives, and assets, or tracked by other services, companies, publications, or persons who rank such investment companies on overall performance or other criteria; and (iii) the Consumer Price Index (measure for inflation) to assess the real rate of return from an investment in the Contract. Unmanaged indices may assume the reinvestment of dividends but generally do not reflect deductions for adminis- trative and management costs and expenses. Performance information for any Subaccount reflects only the performance of a hypothetical Contract under which Accumulation Value is allocated to a Subaccount during a particular time period on which the calculations are based. Performance information should be considered in light of the investment objectives and policies, characteristics and quality of the portfolio of the Fund in which the Subaccount invests, and the market conditions during the given time period, and should not be considered as a representation of what may be achieved in the future. B-6 Reports and marketing materials may, from time to time, include information concerning the rating of Providian Life & Health Insurance Company as deter- mined by A.M. Best, Moody's, Standard & Poor's or other recognized rating services. Reports and promotional literature may also contain other informa- tion 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, publica- tions, or other persons who rank separate accounts or other investment prod- ucts on overall performance or other criteria, and (ii) the effect of tax-de- ferred compounding on a Subaccount's investment returns, or returns in gener- al, 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 invest- ment in a Contract (or returns in general) on a tax-deferred basis (assuming one or more tax rates) with the return on a taxable basis. SAFEKEEPING OF ACCOUNT ASSETS Title to assets of the Separate Account is held by the Company. The assets are kept physically segregated and held separate and apart from the Company's general account assets. Records are maintained of all purchases and redemp- tions of eligible Portfolio shares held by each of the Subaccounts. THE COMPANY Effective July 1, 1995, National Home Life Assurance Company changed it name to Providian Life and Health Insurance Company. Providian Corporation owns a 4% interest, Commonwealth Life Insurance Company owns a 61% interest, Peoples Security Life Insurance Company owns a 15% interest and Capital Liberty, L.P. owns a 20% interest in the Company. A 5% interest in Capital Liberty, L.P. is owned by Providian Corporation, which is the general partner, and 76% and 19% interests, respectively, are held by two limited partners, Commonwealth Life Insurance Company and Peoples Security Life Insurance Company, which are both wholly owned by Providian Corporation. STATE REGULATION The Company is a stock life insurance company organized under the laws of Missouri, and is subject to regulation by the Missouri State Department of In- surance. An annual statement is filed with the Missouri Commissioner of Insur- ance on or before March 1 of each year covering the operations and reporting on the financial condition of the Company as of December 31 of the preceding calendar year. Periodically, the Missouri Commissioner of Insurance examines the financial condition of the Company, including the liabilities and reserves of the Separate Account. In addition, the Company is subject to the insurance laws and regulations of all the states where it is licensed to operate. The availability of certain contract rights and provisions depends on state approval and/or filing and re- view processes. Where required by state law or regulation, the Contracts will be modified accordingly. RECORDS AND REPORTS All records and accounts relating to the Separate Account will be maintained by the Company or by its Administrator. As presently required by the Invest- ment Company Act of 1940 and B-7 regulations promulgated thereunder, the Company will mail to all Contract Own- ers at their last known address of record, at least semiannually, reports con- taining such information as may be required under that Act or by any other ap- plicable law or regulation. LEGAL PROCEEDINGS There are no legal proceedings to which the Separate Account is a party or to which the assets of the Separate Account are subject. The Company is not in- volved in any litigation that is of material importance in relation to its to- tal assets or that relates to the Separate Account. OTHER INFORMATION A Registration Statement has been filed with the Securities and Exchange Com- mission, under the Securities Act of 1933 as amended, with respect to the Con- tracts 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. State- ments contained in this Statement of Additional Information concerning the content of the Contracts and other legal instruments are intended to be summa- ries. For a complete statement of the terms of these documents, reference should be made to the instruments filed with the Securities and Exchange Com- mission. FINANCIAL STATEMENTS The audited financial statements of the Separate Account for the years ended December 31, 1995 and December 31, 1994, respectively, including the Report of Independent Auditors thereon, are included in this Statement of Additional In- formation. The audited statutory-basis financial statements of the Company for the years ended December 31, 1995 and December 31, 1994, respectively, includ- ing the Report of Independent Auditors thereon, which are also included in this Statement of Additional Information, should be distinguished from the fi- nancial statements of the Separate Account and should be considered only as bearing on the ability of the Company to meet its obligations under the Con- tracts. They should not be considered as bearing on the investment performance of the assets held in the Separate Account. B-8 Financial Statements Providian Life and Health Insurance Company Separate Account IV Years ended December 31, 1995 and 1994 with Report of Independent Auditors Providian Life and Health Insurance Company Separate Account IV Financial Statements Years ended December 31, 1995 and 1994 CONTENTS
Report of Independent Auditors.............................. 1 Audited Financial Statements Statements of Assets and Liabilities........................ 2 Statements of Operations.................................... 4 Statements of Changes in Net Assets......................... 6 Notes to Financial Statements............................... 8
Report of Independent Auditors Contract Holders Providian Life and Health Insurance Company Separate Account IV We have audited the accompanying statements of assets and liabilities of Providian Life and Health Insurance Company Separate Account IV (comprising the Money Market, High-Grade Bond, Balanced, Equity Index, Growth, Equity Income, and International Subaccounts) as of December 31, 1995 and 1994, and the related statements of operations and changes in net assets for the years then ended. 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 audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995 and 1994, by correspondence with the custodian. 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 constituting the Providian Life and Health Insurance Company Separate Account IV at December 31, 1995 and 1994, and the results of their operations and changes in their net assets for the years then ended in conformity with generally accepted accounting principles. /s/ Ernst & Young Louisville, Kentucky April 23, 1996 1 Providian Life and Health Insurance Company Separate Account IV Statements of Assets and Liabilities
DECEMBER 31 1995 1994 ------------------------------------ ASSETS Investments in Vanguard Variable Insurance Fund: Money Market Portfolio (1995 and 1994, respectively: 217,738,607.700 and 174,443,889.560 shares at net asset value of $1.00 per share; cost $217,738,608 and $174,443,890) $ 217,738,608 $174,443,890 High-Grade Bond Portfolio (1995 and 1994, respectively: 11,656,837.206 and 8,343,973.030 shares at net asset value of $10.75 and $9.71 per share; cost $120,647,973 and $86,549,508) 125,311,000 81,019,978 Balanced Portfolio (1995 and 1994, respectively: 20,618,768.217 and 19,187,012.921 shares at net asset value of $13.95 and $10.98 per share; cost $234,102,665 and $212,478,544) 287,631,817 210,673,402 Equity Index Portfolio (1995 and 1994, respectively: 18,078,521.279 and 14,786,913.150 shares at net asset value of $16.30 and $12.24 per share; cost $229,332,072 and $174,389,382) 294,679,897 180,991,817 Growth Portfolio (1995 and 1994 respectively: 12,199,317.112 and 8,079,582.533 shares at net asset value of $14.67 and $10.87 per share; cost $142,004,170 and $84,341,426) 178,963,982 87,825,062 Equity Income Portfolio (1995 and 1994 respectively: 8,098,632.631 and 6,445,509.476 shares at net asset value of $12.91 and $9.74 per share; cost $85,429,290 and $65,094,926) 104,553,347 62,779,262 International Portfolio (1995 and 1994 respectively: 8,245,565.227 and 6,839,329.026 shares at net asset value of $11.54 and $10.10 per share; cost $86,425,822 and $69,746,847) 95,153,823 69,077,223 ------------------------------------- 1,304,032,474 866,810,634 Amounts due from Providian Life and Health Insurance Company 1,305,118 -- ------------------------------------- TOTAL ASSETS 1,305,337,592 866,810,634 LIABILITIES Amounts due to Providian Life and Health Insurance Company 406,906 298,317 Amounts due to the Vanguard Group, Inc. -- 51,584 NET ASSETS $1,304,930,686 $866,460,733 =====================================
2
DECEMBER 31 1995 1994 ---------------------------------- NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS Money Market Subaccount (1995 and 1994, respectively: accumulation units outstanding 183,867,044.733 and 154,414,727.137; unit value $1.190771 and $1.130419) $ 218,943,545 $174,553,341 High-Grade Bond Subaccount (1995 and 1994, respectively: accumulation units outstanding 8,684,285.622 and 6,589,365.136; unit value $14.436898 and $12.289960) 125,374,146 80,983,034 Balanced Subaccount (1995 and 1994, respectively: accumulation units outstanding 17,020,904.719 and 16,428,575.298; unit value $16.884656 and $12.814549) 287,392,121 210,524,783 Equity Index Subaccount (1995 and 1994, respectively: accumulation units outstanding 16,292,023.678 and 13,676,091.207; unit value $18.073261 and $13.223746) 294,449,996 180,849,156 Growth Subaccount (1995 and 1994, respectively: accumulation units outstanding 11,856,793.774 and 8,004,469.507; unit value $15.089461 and $10.964223) 178,912,627 87,762,789 Equity Income Subaccount (1995 and 1994, respectively: accumulation units outstanding 7,354,576.945 and 6,088,771.702; unit value $14.239424 and $10.303993) 104,724,939 62,738,661 International Subaccount (1995 and 1994, respectively: accumulation units outstanding 8,146,285.194 and 6,817,666.179; unit value $11.678122 and $10.127948) 95,133,312 69,048,969 ------------------------------------ NET ASSETS ATTRIBUTABLE TO VARIABLE ANNUITY CONTRACT OWNERS $1,304,930,686 $866,460,733 ====================================
See accompanying notes. 3 PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT IV STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
Money High-Grade Equity Equity Market Bond Balanced Index Growth Income International Total ------------------------------------------------------------------------------------------------------- Investment income: Dividends $11,204,406 $ 6,609,782 $ 9,915,934 $ 7,603,005 $ 3,903,520 $ 3,632,740 $1,219,138 $ 44,088,525 Expenses: Mortality and expense risk and administrative charges 1,015,942 451,324 1,463,934 1,363,951 701,788 222,931 425,400 5,645,270 -------------------------------------------------------------------------------------------------------- Net investment income 10,188,464 6,158,458 8,452,000 6,239,054 3,201,732 3,409,809 793,738 38,443,255 Realized and unrealized gain on investments: Net realized gain from investment transactions: Proceeds from sales 229,967,188 30,654,842 45,657,519 39,754,640 23,901,774 16,524,319 27,209,957 413,670,239 Cost of investments sold 229,967,188 30,645,358 41,884,579 33,545,855 20,112,614 15,351,255 26,350,573 397,857,422 --------------------------------------------------------------------------------------------------------- - 9,484 3,772,940 6,208,785 3,789,160 1,173,064 859,384 15,812,817 Net unrealized appreciation (depreciation) of investments: At end of year - 4,663,027 53,529,152 65,347,825 36,959,812 19,124,057 8,728,001 188,351,874 At beginning of year - (5,529,530) (1,805,142) 6,602,435 3,483,636 (2,315,664) (669,624) (233,889) --------------------------------------------------------------------------------------------------------- - 10,192,557 55,334,294 58,745,390 33,476,176 21,439,721 9,397,625 188,585,763 --------------------------------------------------------------------------------------------------------- Net gain on investments - 10,202,041 59,107,234 64,954,175 37,265,336 22,612,785 10,257,009 204,398,580 --------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 10,188,464 $16,360,499 $67,559,234 $71,193,229 $40,467,068 $26,022,594 $11,050,747 $242,841,835 =========================================================================================================
See accompanying notes. 4 PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT IV STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1994
Money High-Grade Equity Equity Inter- Market Bond Balanced Index Growth Income national Total -------------------------------------------------------------------------------------------------------- Investment income: Dividends $ 6,372,462 $ 4,983,498 $ 8,784,643 $ 4,591,959 $ 817,598 $ 2,749,839 $ 378,739 $ 28,678,738 Expenses: Mortality and expense risk and administrative charges 795,232 426,594 1,154,099 975,934 384,784 355,114 163,898 4,255,655 -------------------------------------------------------------------------------------------------------- Net investment income 5,577,230 4,556,904 7,630,544 3,616,025 432,814 2,394,725 214,841 24,423,083 Realized and unrealized gain (loss) on investments: Net realized gain (loss) from investment transactions: Proceeds from sales 246,154,610 36,731,381 66,971,292 49,514,134 23,890,958 39,758,697 8,870,355 471,891,427 Cost of investments sold 246,154,610 38,193,870 66,729,340 46,835,556 23,586,273 41,086,553 8,761,952 471,348,154 -------------------------------------------------------------------------------------------------------- - (1,462,489) 241,952 2,678,578 304,685 (1,327,856) 108,403 543,273 Net unrealized appreciation (depreciation) of investments: At end of year - (5,529,530) (1,805,142) 6,602,435 3,483,636 (2,315,664) (669,624) (233,889) At beginning of year - 252,641 8,935,075 11,935,571 1,462,740 35,122 - 22,621,149 -------------------------------------------------------------------------------------------------------- (5,782,171) (10,740,217) (5,333,136) 2,020,896 (2,350,786) (669,624) (22,855,038) -------------------------------------------------------------------------------------------------------- Net gain (loss) on investments - (7,244,660) (10,498,265) (2,654,558) 2,325,581 (3,678,642) (561,221) (22,311,765) -------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 5,577,230 $(2,687,756) $(2,867,721) $ 961,467 $2,758,395 $(1,283,917) $ (346,380) $ 2,111,318 ========================================================================================================
See accompanying notes. 5 Providian Life and Health Insurance Company Separate Account IV Statement of Changes in Net Assets Year ended December 31, 1995
Money High-Grade Equity Equity Market Bond Balanced Index Growth Income ------------------------------------------------------------------------------------------- Balances at January 1, 1995 $174,553,341 $80,983,034 $210,524,783 $180,849,156 $ 87,762,789 $ 62,738,661 Increase in net assets resulting from operations: Net investment income 10,188,464 6,158,458 8,452,000 6,239,054 3,201,732 3,409,809 Net realized gain on investments - 9,484 3,772,940 6,208,785 3,789,160 1,173,064 Net unrealized appreciation of investments - 10,192,557 55,334,294 58,745,390 33,476,176 21,439,721 ------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 10,188,464 16,360,499 67,559,234 71,193,229 40,467,068 26,022,594 Changes from variable annuity contract transactions: Transfers of net premiums 150,223,807 12,786,625 22,610,492 31,694,775 21,330,346 9,642,644 Transfers for terminations (29,847,722) (3,246,738) (12,646,934) (8,166,636) (3,512,645) (3,275,910) Transfers for annuity benefits (125,802) (62,961) (130,018) (169,490) (2,020) (3,984) Net transfers within Separate Account IV (86,048,543) 18,553,687 (525,436) 19,048,962 32,867,089 9,600,934 ------------------------------------------------------------------------------------------- Net increase in net assets derived from variable annuity contract transactions 34,201,740 28,030,613 9,308,104 42,407,611 50,682,770 15,963,684 ------------------------------------------------------------------------------------------- Net increase in net assets 44,390,204 44,391,112 76,867,338 113,600,840 91,149,838 41,986,278 ------------------------------------------------------------------------------------------- Balances at December 31, 1995 $218,943,545 $125,374,146 $287,392,121 $294,449,996 $178,912,627 $104,724,939 =========================================================================================== International Total ------------------------------- Balances at January 1, 1995 $69,048,969 $ 866,460,733 Increase in net assets resulting from operations: Net investment income 793,738 38,443,255 Net realized gain on investments 859,384 15,812,817 Net unrealized appreciation of investments 9,397,625 188,585,763 ----------------------------- Net increase in net assets resulting from operations 11,050,747 242,841,835 Changes from variable annuity contract transactions: Transfers of net premiums 11,827,884 260,116,573 Transfers for terminations (3,126,828) (63,823,413) Transfers for annuity benefits (170,767) (665,042) Net transfers within Separate Account IV 6,503,307 - ----------------------------- Net increase in net assets derived from variable annuity contract transactions 15,033,596 195,628,118 ----------------------------- Net increase in net assets 26,084,343 438,469,953 ----------------------------- Balances at December 31, 1995 $95,133,312 $1,304,930,686 =============================
See accompanying notes. 6 Providian Life and Health Insurance Company Separate Account IV Statement of Changes in Net Assets Year ended December 31, 1994
Money High-Grade Equity Equity Market Bond Balanced Index Growth Income ------------------------------------------------------------------------------------------- Balances at January 1, 1994 $119,074,153 $83,681,334 $209,495,261 $170,484,429 $ 51,566,881 $ 67,238,585 Increase (decrease) in net assets resulting from operations: Net investment income 5,577,230 4,556,904 7,630,544 3,616,025 432,814 2,394,725 Net realized gain (loss) on investments - (1,462,489) 241,952 2,678,578 304,685 (1,327,856) Net unrealized appreciation (depreciation) of investments - (5,782,171) (10,740,217) (5,333,136) 2,020,896 (2,350,786) ------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 5,577,230 (2,687,756) (2,867,721) 961,467 2,758,395 (1,283,917) Changes from variable annuity contract transactions: Transfers of net premiums 152,185,888 5,659,693 15,014,692 13,617,463 11,369,429 7,827,484 Transfers for terminations (21,180,234) (3,627,352) (10,014,202) (8,365,172) (3,346,107) (4,933,892) Transfers for annuity benefits (82,309) (7,197) (1,933) (3,828) - (7,353) Net transfers within Separate Account IV (81,021,387) (2,035,688) (1,101,314) 4,154,797 25,414,191 (6,102,246) ------------------------------------------------------------------------------------------- Net increase (decrease) in net assets derived from variable annuity contract transactions 49,901,958 (10,544) 3,897,243 9,403,260 33,437,513 (3,216,007) ------------------------------------------------------------------------------------------- Net increase (decrease) in net assets 55,479,188 (2,698,300) 1,029,522 10,364,727 36,195,908 (4,499,924) ------------------------------------------------------------------------------------------- Balances at December 31, 1994 $174,553,341 $80,983,034 $210,524,783 $180,849,156 $87,762,789 $62,738,661 =========================================================================================== International Total ------------------------------- Balances at January 1, 1994 - $701,540,643 Increase (decrease) in net assets resulting from operations: Net investment income 214,841 24,423,083 Net realized gain (loss) on investments 108,403 543,273 Net unrealized appreciation (depreciation) of investments (669,624) (22,855,038) ----------------------------- Net increase (decrease) in net assets resulting from operations (346,380) 2,111,318 Changes from variable annuity contract transactions: Transfers of net premiums 9,392,494 215,067,143 Transfers for terminations (688,792) (52,155,751) Transfers for annuity benefits - (102,620) Net transfers within Separate Account IV 60,691,647 - ----------------------------- Net increase (decrease) in net assets derived from variable annuity contract transactions 69,395,349 162,808,772 ----------------------------- Net increase (decrease) in net 69,048,969 164,920,090 assets ----------------------------- $69,048,969 $866,460,733 Balances at December 31, 1994 =============================
See accompanying notes. 7 Providian Life and Health Insurance Company Separate Account IV Notes to Financial Statements December 31, 1995 1. ACCOUNTING POLICIES ORGANIZATION OF THE ACCOUNT Providian Life and Health Insurance Company Separate Account IV (the "Separate Account") is a separate account of Providian Life and Health Insurance Company ("PLH"), formerly National Home Life Assurance Company, a wholly owned subsidiary of Providian Corporation, and is registered as a unit investment trust under the Investment Company Act of 1940, as amended. The Separate Account was established for the purpose of funding variable annuity contracts issued by PLH. As of December 31, 1995, the Separate Account has seven subaccounts. The contract owner's initial premium is automatically allocated to the Money Market Subaccount until the end of the free look period (typically ten days or, in certain instances, 30 days or more). Subsequent to the free look period and a five day grace period, a contract owner may allocate all or a portion of the initial premium and additional premiums, if any, to one or more subaccounts of the Separate Account. INVESTMENTS Each subaccount invests exclusively in shares of a corresponding portfolio of the Vanguard Variable Insurance Fund (the "Fund"), an open-end diversified investment company offered by The Vanguard Group, Inc. ("Vanguard"). The investment objectives of the Fund's portfolios are as follows: The Money Market Portfolio seeks to provide current income consistent -------------------------- with the preservation of capital and liquidity. The portfolio also seeks to maintain a stable net asset value of $1.00 per share. The portfolio invests primarily in high-quality money market instruments issued by financial institutions, non-financial corporations, the U.S. Government, state and municipal governments and their agencies or instrumentalities, as well as repurchase agreements collateralized by such securities. The portfolio also invests in Eurodollar obligations (dollar-denominated obligations issued outside the U.S. by foreign banks or foreign branches of domestic banks) and Yankee obligations (dollar-denominated obligations issued in the U.S. by foreign banks). Vanguard's Fixed Income Group serves as the portfolio's investment adviser. 8 Providian Life and Health Insurance Company Separate Account IV Notes to Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) The High-Grade Bond Portfolio seeks to parallel the investment results ----------------------------- of the Lehman Brothers Aggregate Bond Index. The portfolio invests primarily in a diversified portfolio of U.S. Government and corporate bonds, and mortgage-backed securities. Vanguard's Fixed Income Group serves as the portfolio's investment adviser. The Balanced Portfolio seeks the conservation of principal, a reasonable ---------------------- income return and profits without undue risk. The portfolio invests in a diversified portfolio of common stocks and bonds with common stocks expected to represent 60% to 70% of the portfolio's total assets and bonds to represent 30% to 40%. Wellington Management Company serves as the portfolio's investment adviser. The Equity Index Portfolio seeks to parallel the investment results of -------------------------- the Standard & Poor's 500 Composite Stock Price Index ("S&P 500"). The portfolio invests primarily in common stocks included in the S&P 500. Vanguard's Core Management Group serves as the portfolio's investment adviser. The Growth Portfolio seeks to provide long-term capital appreciation by -------------------- investing primarily in equity securities of seasoned U.S. companies with above-average prospects for growth. Lincoln Capital Management Company serves as the portfolio's investment adviser. The Equity Income Portfolio seeks to provide a high level of current --------------------------- income by investing principally in dividend-paying equity securities. Newell Associates serves as the portfolio's investment adviser. The International Portfolio seeks to provide long-term capital --------------------------- appreciation by investing primarily in equity securities of seasoned companies located outside the United States. The portfolio was added in 1994. Schroder Capital Management International, Inc. serves as the portfolio's investment adviser. 9 Providian Life and Health Insurance Company Separate Account IV Notes to Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) Effective June 3, 1996, two new subaccounts will be added to the Separate Account. The investment objectives of the new subaccounts' corresponding portfolios are as follows: The High-Yield Bond Portfolio seeks to provide a high level of current ----------------------------- income by investing in lower-rated debt securities, which may be regarded as having speculative characteristics and are commonly referred to as "junk bonds." Under normal circumstances, at least 80% of the portfolio's assets will be invested in high-yield corporate debt obligations rated at least B by Moody's Investors Service, Inc. or Standard & Poor's Corporation or, if unrated, of comparable quality as determined by the portfolio's adviser, Wellington Management Company. The Small Company Growth Portfolio seeks to provide long-term growth in ---------------------------------- capital by investing primarily in equity securities of small companies deemed to have favorable prospects for growth. These securities are primarily common stocks but may also include securities convertible into common stock. Granahan Investments serves as this portfolio's investment adviser. There is no assurance that a portfolio will achieve its stated investment objective. The Separate Account purchases shares of the Fund at net asset value in connection with premium payments allocated to the subaccounts in accordance with contract owners' directions and redeems shares of the Fund to process transfers and to meet policy contract obligations. Gains and losses resulting from the redemption of shares are computed on the basis of average cost. Investment transactions are recorded on the trade dates. 10 Providian Life and Health Insurance Company Separate Account IV Notes to Financial Statements (continued) 1. ACCOUNTING POLICIES (CONTINUED) The aggregate cost of shares purchased during the years ended December 31, 1995 and 1994 for each of the respective portfolios is as follows:
1995 1994 ----------------------------- Money Market Portfolio $273,261,907 $301,966,662 High-Grade Bond Portfolio 64,743,821 41,294,787 Balanced Portfolio 63,508,701 78,549,615 Equity Index Portfolio 88,488,544 62,593,520 Growth Portfolio 77,775,358 57,801,840 Equity Income Portfolio 35,685,619 38,944,187 International Portfolio 43,029,548 78,508,799 ----------------------------- $646,493,498 $659,659,410 =============================
All dividends and capital gains earned on the portfolios are reinvested in the portfolios and are reflected in the unit values of the subaccounts of the Separate Account. Investments in the Fund portfolios are valued at market which is calculated daily on each day the New York Stock Exchange is open for trading. Income and both realized and unrealized gains or losses from assets of each subaccount will be credited to or charged against that subaccount without regard to income, gains or losses from any other subaccount of the Separate Account or arising out of any other business PLH may conduct. The contract's accumulated value varies with the investment performance of the corresponding portfolios. Investment results are not guaranteed by the Separate Account or PLH. Although the assets in the Separate Account are the property of PLH, the assets in the Separate Account attributable to the contracts cannot be used to discharge the liabilities arising out of any other business which PLH may conduct. The assets of the Separate Account are available to cover the general liabilities of PLH only to the extent that the Separate Account's assets exceed its liabilities under the contracts. Certain 1994 amounts have been reclassified to conform with the 1995 presentation. 11 Providian Life and Health Insurance Company Separate Account IV Notes to Financial Statements (continued) 2. FEDERAL INCOME TAXES Operations of the Separate Account are included in the federal income tax return of PLH, which is taxed as a life insurance company under the Internal Revenue Code. The Separate Account will not be taxed as a regulated investment company under Subchapter M of the Internal Revenue Code. Under current federal income tax law, no federal income taxes are payable with respect to the Separate Account. 3. ADVISORY AND SERVICE FEES Vanguard furnishes corporate management, administrative, marketing and distribution services. Additionally, Vanguard furnishes investment advisory services to certain Fund portfolios. The net asset value of the portfolios is net of the advisory and service fees. 4. EXPENSES An annual charge is deducted from the unit values of the subaccounts of the Separate Account for PLH's assumption of certain mortality and expense risks incurred in connection with the contract and for the cost of administering the contract. It is assessed daily based on the Fund's net assets attributable to the Separate Account and Separate Account B of First Providian Life and Health Insurance Company ("FPLH"), an affiliate of PLH. The annual rate on the first $500 million of combined net assets in the Fund is .45% and is .40% on the next $250 million of combined net assets in the Fund. This charge is reduced in various increments to .30% on combined net assets in the Fund in excess of $1.5 billion. For the years ended December 31, 1995 and 1994, the effective annual rate for this charge was .41% and .43%, respectively, and the total charge was $4,391,683 and $3,398,112, respectively. Effective April 30, 1996, the Separate Account's annual rate for the mortality and expense charge will change to .375% on the first $1.5 billion of combined net assets in the Fund. This charge will be reduced to .30% of combined net assets in the Fund in excess of $1.5 billion. In addition, an annual administrative charge of .10% is deducted from the unit values of the subaccounts of the Separate Account. This charge is assessed daily by Vanguard, based on the net assets attributable to the Separate Account and Separate Account B of FPLH. Additionally, an annual maintenance fee of $25 per contract is charged for contracts valued at less than $25,000 at the time of initial purchase and on the last 12 Providian Life and Health Insurance Company Separate Account IV Notes to Financial Statements (continued) 4. EXPENSES (CONTINUED) business day of each year. The maintenance fee is deducted proportionately from the contract's accumulated value. These deductions represent reimbursement to Vanguard for the costs expected to be incurred for issuing and maintaining each contract and the Separate Account. The total of these costs for the years ended December 31, 1995 and 1994 was $1,253,587 and $857,543, respectively. 5. CONTRACT OWNER TRANSACTIONS Transactions with contract owners during the years ended December 31, 1995 and 1994 for each of the respective subaccounts were as follows:
1995 1994 ------------------------ ---------------------- UNITS AMOUNT UNITS AMOUNT ------------------------ ---------------------- (In Thousands) (In Thousands) MONEY MARKET SUBACCOUNT Issuance of units 227,264 $ 263,112 267,142 $ 295,279 Increase from operations - 10,188 - 5,577 Redemption of units (197,812) (228,910) (221,917) (245,377) ------------------------ ---------------------- Net increase 29,452 $ 44,390 45,225 $ 55,479 ======================== ====================== HIGH-GRADE BOND SUBACCOUNT Issuance of units 4,337 $ 58,134 2,929 $ 36,311 Increase (decrease) from operations - 16,360 - (2,688) Redemption of units (2,242) (30,103) (2,931) (36,321) ------------------------ ---------------------- Net increase (decrease) 2,095 $ 44,391 (2) $ (2,698) ======================== ====================== BALANCED SUBACCOUNT Issuance of units 3,640 $ 53,593 5,402 $ 69,765 Increase (decrease) from operations - 67,559 - (2,868) Redemption of units (3,048) (44,285) (5,137) (65,867) ------------------------ ---------------------- Net increase 592 $ 76,867 265 $ 1,030 ======================== ====================== EQUITY INDEX SUBACCOUNT Issuance of units 5,104 $ 80,886 4,426 $ 58,002 Increase from operations - 71,193 - 961 Redemption of units (2,488) (38,478) (3,721) (48,598) ------------------------ ---------------------- Net increase 2,616 $113,601 705 $ 10,365 ======================== ======================
13 Providian Life and Health Insurance Company Separate Account IV Notes to Financial Statements (continued) 5. CONTRACT OWNER TRANSACTIONS (CONTINUED)
1995 1994 ------------------------------------------- UNITS AMOUNT UNITS AMOUNT ------------------------------------------- (In Thousands) (In Thousands) GROWTH SUBACCOUNT Issuance of units 5,612 $ 73,872 5,342 $ 56,984 Increase from operations - 40,467 - 2,758 Redemption of units (1,760) (23,189) (2,217) (23,546) ------------------------------------------- Net increase 3,852 $ 91,150 3,125 $ 36,196 =========================================== EQUITY INCOME SUBACCOUNT Issuance of units 2,603 $ 32,052 3,518 $ 36,194 Increase (decrease) from operations - 26,023 - (1,284) Redemption of units (1,337) (16,089) (3,840) (39,410) ------------------------------------------- Net increase (decrease) 1,266 $ 41,986 (322) $ (4,500) =========================================== INTERNATIONAL SUBACCOUNT Issuance of units 3,877 $ 41,810 7,678 $ 78,130 Increase (decrease) from operations - 11,051 - (346) Redemption of units (2,548) (26,777) (860) (8,735) ------------------------------------------- Net increase 1,329 $ 26,084 6,818 $ 69,049 ===========================================
14 Providian Life and Health Insurance Company Separate Account IV Notes to Financial Statements (continued) 6. NET ASSETS Net assets at December 31, 1995 are summarized in the following tables:
MONEY HIGH-GRADE EQUITY MARKET BOND BALANCED INDEX ----------------------------------------------------------------- Contract owner transactions $198,476,711 $102,321,282 $198,417,312 $ 199,725,934 Accumulated net investment income 20,466,834 18,621,565 29,271,167 16,135,645 Accumulated net realized gain (loss) on investments - (231,728) 6,174,490 13,240,592 Net unrealized appreciation on investments - 4,663,027 53,529,152 65,347,825 ----------------------------------------------------------------- $218,943,545 $125,374,146 $287,392,121 $ 294,449,996 ================================================================= EQUITY GROWTH INDEX INTERNATIONAL TOTAL ----------------------------------------------------------------- Contract owner transactions $133,882,806 $ 78,762,408 $ 84,428,945 $ 996,015,398 Accumulated net investment income 3,826,763 6,836,368 1,008,579 96,166,921 Accumulated net realized gain on investments 4,243,246 2,106 967,787 24,396,493 Net unrealized appreciation on investments 36,959,812 19,124,057 8,728,001 188,351,874 ----------------------------------------------------------------- $178,912,627 $104,724,939 $ 95,133,312 $1,304,930,686 ================================================================= 15
OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (A) FINANCIAL STATEMENTS Part A None Part B Audited Financial Statements Providian Life & Health Insurance Company Separate Account IV Years ended December 31, 1995 and 1994 with Report of Independent Auditors Audited Financial Statements--Statutory-Basis Providian Life & Health Insurance Company Years ended December 31, 1995 and 1994 with Report of Independent Auditors Part C None (B) EXHIBITS (1) Resolution of the Board of Directors of National Home Life Assurance Company ("National Home") authorizing establishment of the Separate Ac- count./5/ (2) Not Applicable. (3) Not Applicable. (4) Form of variable annuity contract/6/ (5) Form of application/6/ (6) (a) Articles of Incorporation of National Home/2/ (b) Amendment to Articles of Incorporation of National Home/3/ (c) Amended and Restated Articles of Incorporation of National Home/4/ (7) Not applicable. (8) (a) Participation Agreement for the Vanguard Variable Insurance Fund/7/ (b) First Amendment to Participation, Market Consulting and Administra- tion Agreement/1/ (c) Administration Agreement/6/ (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/1/ (14) Not applicable. - -------- /1/ Filed herewith. /2/ Incorporated by reference from the initial Registration Statement of the Providian Life & Health Insurance Company Separate Account II, File No. 33- 7033. /3/ Incorporated/by reference from Post-Effective Amendment No. 3 to the Regis- tration Statement of Providian Life & Health Insurance Company Separate Ac- count II, File No. 33-7033. /4/ Incorporated by reference from Post-Effective Amendment No. 5 to the Regis- tration Statement of the Providian Life & Health Insurance Company Separate Account II, File No. 33-7033. /5/ Incorporated by reference from the initial Registration Statement of the Providian Life & Health Insurance Company Separate Account IV, File No. 33- 36073. /6/ Incorporated by reference from Pre-Effective Amendment No. 1 to the Regis- tration Statement of the Providian Life & Health Insurance Company Separate Account IV, File No. 33-36073. /7/ Incorporated by reference from Post-Effective Amendment No.1 to the Regis- tration Statement of Providian Life & Health Insurance Company Separate Ac- count IV, File No. 33-36073. C-1 ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS* WITH DEPOSITOR ------------------ --------------------- Shailesh J. Mehta.............. Chairman of the Board and Chief Executive Officer David J. Miller................ President Stephen J. Leaman.............. Chief Operating Officer Jean A. Young.................. Vice President and Controller Robert A. Long................. Senior Vice President Paul Yakulis................... Senior Vice President John H. Rogers................. Senior Vice President/Human Resources & Corporate Communications Martin Renninger............... Senior Vice President David R. Aplington............. Vice President, Secretary and General Counsel G. Douglas Mangum, Jr. ........ Vice President John C. Prestwood, Jr. ........ Vice President and Actuary Richard A. Babyak.............. Vice President Stephen F. Eulie............... Vice President Thomas Nesspor................. Vice President Carolyn M. Kerstein............ Vice President Brian Alford................... Vice President Kevin P. McGlynn............... Vice President William Strickland............. Vice President Douglas A. Sarcia.............. Vice President Nancy B. Schuckert............. Vice President Edward A. Biemer............... Vice President Joseph D. Strenk............... Vice President Julie S. Congdon............... Vice President and Associate General Counsel Dennis E. Brady................ Vice President, Treasurer and CFO Charles N. Coatsworth.......... Vice President James P. Greaton............... Assistant Vice President William J. Kline............... Vice President/Underwriting Michael F. Lane................ Vice President Anita Gambos................... Vice President Susan Martin................... Vice President Douglas S. Menges.............. Vice President G. Eric O'Brien................ Vice President Harold W. Peterson, Jr. ....... Vice President John R. Pegues................. Vice President Frank J. Rosa.................. Vice President Oris Stuart, III............... Vice President Anita Tilley................... Vice President William C. Tomlin.............. Vice President Joan G. Chandler............... Assistant Vice President Geralyn Barbato................ Assistant Vice President Janice Boehmler................ Assistant Vice President Mary Ellen Fahringer........... Assistant Vice President Harvey Waite................... Assistant Vice President John A. Mazzuca................ Assistant Vice President and Assistant Treasurer Elaine J. Robinson............. Assistant Treasurer Joseph C. Noone................ Assistant Controller Karen Fleming.................. Vice President Rita Biesiot................... Vice President Cindy L. Chanley............... Second Vice President Curt Burns..................... Second Vice President/Investments Caroline A. Johnson............ Second Vice President/Investments Michael K. Mingus.............. Second Vice President
C-2
NAME AND PRINCIPAL POSITIONS AND OFFICES BUSINESS ADDRESS* WITH DEPOSITOR ------------------ --------------------- Terri L. Allen.................... Second Vice President/Investments Tom Bauer......................... Second Vice President/Investments Lisa M. Longino................... Second Vice President/Investments Kirk W. Buese..................... Second Vice President/Investments William S. Cook................... Second Vice President/Investments Deborah A. Dias................... Second Vice President/Investments Eric B. Goodman................... Second Vice President/Investments James Grant....................... Second Vice President/Investments Theodore M. Haag.................. Second Vice President/Investments Frederick B. Howard............... Second Vice President/Investments Diane J. Hulls.................... Second Vice President/Investments William H. Jenkins................ Second Vice President/Investments Frederick C. Kessell.............. Second Vice President/Investments Tim Kuussalo...................... Second Vice President/Investments Mark E. Lamb...................... Second Vice President/Investments Monika Machon..................... Second Vice President/Investments James D. MacKinnon................ Second Vice President/Investments Jack McCabe....................... Second Vice President/Investments James G. Nickerson................ Second Vice President/Investments Wayne R. Nelis.................... Second Vice President/Investments Douglas H. Owen, Jr. ............. Second Vice President/Investments Brad H. Seibel.................... Second Vice President/Investments Jon L. Skaggs..................... Second Vice President/Investments James A. Skufca................... Second Vice President/Investments Robert A. Smedley................. Second Vice President/Investments Bradley L. Stofferahn............. Second Vice President/Investments Randall K. Waddell................ Second Vice President/Investments Tammy C. Wetterer................. Second Vice President/Investments Debra K. Pellman.................. Second Vice President/Investments Robert Saunders................... Second Vice President/Investments Michael B. Simpson................ Second Vice President/Investments Gregory Lee Chapman............... Second Vice President/Special Markets John B. Cobb, III................. Second Vice President/Special Markets Gregory M. Curry.................. Second Vice President/Special Markets Julie Ford........................ Second Vice President/Special Markets Kim A. Bivins..................... Second Vice President/Special Markets Lauren M.S. Kaltman............... Second Vice President/Special Markets Paul Farley Olschwanger........... Second Vice President/Special Markets Lisa L. Patterson................. Second Vice President/Special Markets Rhonda L. Pritchett............... Second Vice President/Special Markets Prentice J. Siegel................ Second Vice President/Special Markets Kris A. Robbins................... Second Vice President/Special Markets Harvey Willis..................... Second Vice President/Special Markets Rosa Marie Mathison............... Second Vice President/Special Markets Thomas E. Walsh................... Second Vice President/Special Markets Edward P. Reiter.................. Second Vice President and Assistant Secretary Kimberly A. Scouller.............. Assistant Secretary L. Jude Clark..................... Assistant Secretary Colleen S. Lyons.................. Assistant Secretary John E. Reesor.................... Assistant Secretary Mary Ann Malinyak................. Assistant Secretary R. Michael Slaven................. Assistant Secretary Carolyn Wetterer.................. Assistant Secretary James T. Bradley.................. Product Compliance Officer Nancy E. Partington............... Advertising Compliance Officer
C-3 DIRECTORS: David R. Aplington John H. Rogers Dennis E. Brady Stephen J. Leaman Robert A. Long David J. Miller Shailesh J. Mehta Thomas B. Nesspor - -------- * The business address of each director and officer of Providian Life & Health Insurance Company is 20 Moores Road, Frazer, Pennsylvania 19355 or 400 West Market Street, Louisville, Kentucky 40202. ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT. The Depositor, Providian Life & Health Insurance Company, is directly and in- directly wholly owned by Providian Corporation. The Registrant is a segregated asset account of Providian Life & Health Insurance Company. The following chart indicates the persons controlled by or under common con- trol with Providian Life & Health Insurance Company.
PERCENT OF JURISDICTION OF VOTING SECURITIES NAME INCORPORATION OWNED ---- --------------- ----------------- Providian Corporation Delaware 100% Publicly Owned Providian Agency Group, Inc. Kentucky 100% Providian Corporation College Resource Group, Inc. Kentucky 100% Providian Corporation Knight Insurance Agency, Massachusetts 100% College Resource Group, Inc. Inc. Knight Tuition Payment Massachusetts 100% Knight Insurance Agency, Plans, Inc. Inc. Knight Insurance Agency (New New Hampshire 100% Knight Insurance Agency, Hampshire), Inc. Inc. Capital General Development Delaware 100% Providian Corporation Corporation Commonwealth Life Insurance Kentucky 100% Capital General Company Development Corporation Agency Holding I, Inc. Delaware 100% Commonwealth Life Insurance Company Agency Investments I, Inc. Delaware 100% Agency Holding I, Inc. Commonwealth Agency, Inc. Kentucky 100% Commonwealth Life Insurance Company Peoples Security Life Insur- North Carolina 100% Capital General ance Company Development Corporation Agency Holding II, Inc. Delaware 100% Peoples Security Life Insurance Company Agency Investments II, Inc. Delaware 100% Agency Holding II, Inc. Agency Holding III, Inc. Delaware 100% Peoples Security Life Insurance Company Agency Investments III, Inc. Delaware 100% Agency Holding III, Inc. Ammest Realty Corporation Texas 100% Peoples Security Life Insurance Company Providian Assignment Corpo- Kentucky 100% Providian Corporation ration Providian Capital Manage- Delaware 100% Providian Corporation ment, Inc. Providian Capital Management Delaware 100% Providian Capital Real Estate Services, Inc. Management, Inc. Capital Real Estate Delaware 100% Providian Corporation Development Corporation
C-4
PERCENT OF JURISDICTION OF VOTING SECURITIES NAME INCORPORATION OWNED ---- --------------- ----------------- Capital 200 Block Corpora- Delaware 100% Providian Corporation tion Providian Services, Inc. Pennsylvania 100% Veterans Life Insurance Co. Capital Values Financial Pennsylvania 100% Providian Corporation Services, Inc. Providian Securities Cor- Pennsylvania 100% Capital Values Financial poration Services, Inc. Wannalancit Corporation Massachusetts 100% Providian Corporation KB Currency Advisors, Inc. Delaware 33 1/3% Capital Real Estate Development Corporation 33 1/3% Jonathan M. Berg 33 1/3% Andrew J. Krieger Capital Broadway Corpora- Kentucky 100% Providian Corporation tion Providian Investment Delaware 100% Providian Corporation Advisors, Inc. Capital Security Life North Carolina 100% Providian Corporation Insurance Company Security Trust Life Kentucky 100% Capital Security Life Insurance Company Insurance Company Independence Automobile Florida 100% Capital Security Life Association, Inc. Insurance Company Independence Automobile Georgia 100% Capital Security Life Club, Inc. Insurance Company Southlife, Inc. Tennessee 100% Providian Corporation Providian Bancorp, Inc.. Delaware 100% Providian Corporation First Deposit Service Cor- California 100% Providian Bancorp, Inc. poration First Deposit Life Insur- Arkansas 100% Providian Bancorp, Inc. ance Company First Deposit National United States 100% Providian Bancorp, Inc. Bank Winnisquam Community De- New Hampshire 96% First Deposit National Bank velopment Corporation 4% First New Hampshire Bank Providian National Bank United States 100% Providian Bancorp, Inc. Providian National Bancorp California 100% Providian Bancorp, Inc. Providian Credit Corpora- Delaware 100% Providian Bancorp, Inc. tion Commonwealth Premium Fi- California 100% Providian National Bancorp nance Providian Credit Services, Utah 100% Providian Bancorp, Inc. Inc. National Liberty Corpora- Pennsylvania 100% Providian Corporation tion National Home Life Pennsylvania 100% National Liberty Corporation Corporation Compass Rose Development Pennsylvania 100% National Liberty Corporation Corporation Association Consultants, Illinois 100% National Liberty Inc. Corporation Valley Forge Associates, Pennsylvania 100% National Liberty Inc. Corporation Veterans Benefits Plans, Pennsylvania 100% National Liberty Inc. Corporation Veterans Insurance Servic- Delaware 100% National Liberty es, Inc. Corporation Financial Planning Servic- Washington, D.C. 100% National Liberty es, Inc. Corporation Providian Auto and Home Missouri 100% Providian Corporation Insurance Company Academy Insurance Group, Delaware 100% Providian Auto and Home Inc. Insurance Company Academy Life Insurance Missouri 100% Academy Insurance Group, Company Inc. Pension Life Insurance New Jersey 100% Academy Insurance Group, Company of America Inc.
C-5
PERCENT OF JURISDICTION OF VOTING SECURITIES NAME INCORPORATION OWNED ---- --------------- ----------------- Academy Services, Inc. Delaware 100% Academy Insurance Group, Inc. Ammest Development Kansas 100% Academy Insurance Group, Corporation, Inc. Inc. Ammest Insurance Agency, California 100% Academy Insurance Group, Inc. Inc. Ammest Massachusetts Massachusetts 100% Academy Insurance Group, Insurance Agency, Inc. Inc. Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Group, Inc. AMPAC, Inc. Texas 100% Academy Insurance Group, Inc. AMPAC Insurance Agency, Pennsylvania 100% Academy Insurance Group, Inc. Inc. Data/Mark Services, Inc. Delaware 100% Academy Insurance Group, Inc. Force Financial Group, Delaware 100% Academy Insurance Group, Inc. Inc. Force Financial Services, Massachusetts 100% Force Financial Group, Inc. Inc. Military Associates, Inc. Pennsylvania 100% Academy Insurance Group, Inc. NCOAA Management Company Texas 100% Academy Insurance Group, Inc. NCOA Motor Club, Inc. Georgia 100% Academy Insurance Group, Inc. Unicom Administrative Pennsylvania 100% Academy Insurance Group, Services, Inc. Inc. Unicom Administrative Germany 100% Unicom Administrative Services GmbH Services Inc. Providian Property and Ca- Kentucky 100% Providian Auto and Home sualty Insurance Company Insurance Company Capital Landmark Insurance Kentucky 100% Providian Property and Company Casualty Insurance Company Capital Liberty, L.P. Delaware 5% Providian Corporation (Limited Partnership) (General Partnership Interest) 76% Commonwealth Life Insurance Company (Limited Partnership Interest) 19% Peoples Security Life Insurance Company (Limited Partnership Interest) Providian Life & Health Missouri 4% Providian Corporation Insurance Company 61% Commonwealth Life Insurance Company 15% Peoples Security Life Insurance Company 20% Capital Liberty, L.P. Veterans Life Insurance Illinois 100% Providian Life & Health Company Insurance Company
C-6
PERCENT OF JURISDICTION OF VOTING SECURITIES NAME INCORPORATION OWNED ---- --------------- ----------------- First Providian Life & Health New York 100% Veterans Life Insurance Insurance Company Co. Benefit Plans, Inc. Delaware 100% Providian Corporation DurCo Agency, Inc. Virginia 100% Benefit Plans, Inc.
All subsidiaries are included in the consolidated financial statements for Providian Corporation. ITEM 27. NUMBER OF CONTRACT OWNERS As of February 29, 1996 there were 24,865 owners of Contracts. ITEM 28. INDEMNIFICATION Item 28 is incorporated by reference from the Post-Effective Amendment No. 6 to the Registration Statement of the National Home Life Assurance Company Sep- arate Account II, File No. 33-7037. ITEM 29. PRINCIPAL UNDERWRITERS (a) None. (b) Not Applicable. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS The books, accounts and other documents required by Section 31(a) under the Investment Company Act and the rules promulgated thereunder will be maintained in the physical possession of Vantage Computer Systems, Inc., Kansas City, Missouri. ITEM 31. MANAGEMENT SERVICES All management contracts are discussed in Part A or Part B. ITEM 32. UNDERTAKINGS (a) The Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted; (b) The Registrant hereby undertakes to include either (1) as part of any ap- plication to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the pro- spectus that the applicant can remove to send for a Statement of Additional Information; (c) The Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. (d) The Registrant hereby represents that no Director has resigned due to a disagreement with the Registrant or any matter relating to the Separate Ac- count's operations, policies or practices. C-7 SIGNATURES AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT, PROVIDIAN LIFE & HEALTH INSURANCE COMPANY SEPARATE AC- COUNT IV, CERTIFIES THAT IT MEETS THE REQUIREMENTS OF SECURITIES ACT RULE 486(B) FOR EFFECTIVENESS HEREOF AND HAS DULY CAUSED THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF IN THE TOWN OF VALLEY FORGE AND COMMON- WEALTH OF PENNSYLVANIA ON THE 25TH DAY OF APRIL, 1996. Providian Life & Health Insurance Company Separate Account IV (Registrant) By: Providian Life & Health Insurance Company /s/ David J. Miller By: __________________________________ DAVID J. MILLER, PRESIDENT Providian Life & Health Insurance Company (Depositor) /s/ David J. Miller By: __________________________________ DAVID J. MILLER, PRESIDENT C-8 AS REQUIRED BY THE SECURITIES ACT OF 1933, THIS AMENDED REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES IN- DICATED. SIGNATURE TITLE DATE /s/ Shailesh J. Mehta Director, Chairman April 25, 1996 - ------------------------------------- of the Board and SHAILESH J. MEHTA Chief Executive Officer /s/ David J. Miller Director and April 25, 1996 - ------------------------------------- President DAVID J. MILLER /s/ Dennis E. Brady Director, Vice April 25, 1996 - ------------------------------------- President, and Chief Financial DENNIS E. BRADY Officer /s/ Robert A. Long Director and Senior April 25, 1996 - ------------------------------------- Vice President ROBERT A. LONG /s/ John H. Rogers Director and Senior April 25, 1996 - ------------------------------------- Vice President JOHN H. ROGERS /s/ David R. Aplington Director, Vice April 25, 1996 - ------------------------------------- President, General Counsel and DAVID R. APLINGTON Secretary /s/ Stephen J. Leaman Director and Chief April 25, 1996 - ------------------------------------- Operating Officer STEPHEN J. LEAMAN /s/ Thomas B. Nesspor Director and Vice April 25, 1996 - ------------------------------------- President THOMAS B. NESSPOR /s/ Jean A. Young Vice President and April 25, 1996 - ------------------------------------- Controller (Chief JEAN A. YOUNG Accounting Officer) C-9 EX-8.(B) 2 FIRST AMENDMENT TO PARTICIPATION EXHIBIT 8(B) FIRST AMENDMENT TO PARTICIPATION, MARKET CONSULTING AND ADMINISTRATION AGREEMENT AMONG VANGUARD VARIABLE INSURANCE FUND, INC. AND THE VANGUARD GROUP, INC. AND PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY (FORMERLY KNOWN AS NATIONAL HOME LIFE ASSURANCE COMPANY) This First Amendment is entered into as of the 30th day of April, 1996, among Vanguard Variable Insurance Fund, Inc. ("Fund"), The Vanguard Group, Inc. ("Sponsor") and Providian Life and Health Insurance Company ("Company") for the purpose of further amending the Participation, Marketing Consulting and Admin- istration Agreement, dated as of April 23, 1991, by and among Fund, Sponsor and the Company, as amended by an Addendum effective November 16, 1992, (the "Agreement"). Fund, Sponsor and Company, intending to be legally bound, hereby agree to amend the Agreement as follows: 1. For purposes of the Agreement, as amended hereby, the term "Company" is defined to mean Providian Life and Health Insurance Company (successor by name change to National Home Life Assurance Company). 2. For purposes of the Agreement, as amended hereby, the term "Account" is defined to mean the Company's Separate Account IV and any other segregated asset account of the Company established in connection with the Contracts offered under the Agreement. Except as otherwise defined in this First Amendment, the defined words and phrases in the Agreement shall have the same meanings when used herein. 3. The first sentence of Section 1.1 of the Agreement is deleted in its en- tirety and the following new first sentence is substituted in place thereof: Company, Sponsor and Fund hereby agree to perform the duties and assume the responsibilities set forth herein in connection with the offering of certain mutually agreed upon variable annuity contracts ("Contracts") listed on Schedule 1.1 attached hereto. 4. Schedule 1.1 attached to the Agreement is deleted in its entirety and the Schedule 1.1 attached to this First Amendment is substituted in place thereof. 5. The first sentence of Section 1.5 of the Agreement is deleted in its en- tirety and the following new first sentence is substituted in place thereof: Sponsor agrees that during the term of this Agreement it will not by di- rect marketing offer, or participate directly or indirectly in the offer- ing of, variable annuity contacts (which are not intended to include sin- gle premium life insurance contracts or single premium deferred (fixed) contracts), other than the Contract; provided that the Sponsor may par- ticipate directly or indirectly in the offering and issuance of variable annuity contracts to pension funds, employer-employee plans or employer- employee trusts and, provided further, that Sponsor may offer any finan- cial product by direct marketing except as limited by this section. 6. The second sentence of Section 1.5 is deleted in its entirety. 7. The caption for Section 7 is amended to read Fixed Annuitization Fee and Mortality and Expense and Administration Charges and the following new para- graph is added at the end of such section: The mortality and expense and administration charges with respect to the Contracts shall be as set forth on Schedule 7 attached hereto. 8. A new Schedule 7 is added to the Agreement in the form of Schedule 7 at- tached hereto. 9. Section 9.1 is deleted in its entirety and the following new Section 9.1 is substituted in place thereof: 9.1 The initial term of this Agreement shall be from April 23, 1991 through April 30, 2001. This Agreement shall thereafter automatically re- new for an additional period of two years and after such additional pe- riod for additional periods of two years; provided that either Party may terminate this Agreement at the end of the first additional period or any additional period thereafter without cause upon notice given at least two years prior to the end of the first additional period or any extension thereof. 10. Section 9.2 is deleted in its entirety. 11. Notice to the Company, as provided in Section 10 shall be changed as follows: Jeff Lammers Providian Capital Management 400 West Market Street Louisville, Kentucky 40202 12. The following new Sections 11.10, 11.11, 11.12 and 11.13 are added: 11.10 Sponsor agrees that, during the term of this Agreement and for a period of one year following termination of this Agreement, neither it nor any of its affiliates will, directly or indirectly, solicit for em- ployment or hire any employee of the Company or any of its affiliates en- gaged in the development, distribution or administration of the Con- tracts. Company agrees that during the term of this Agreement, and for a period of one year following termination of this Agreement, neither it nor any of its affiliates will, directly or indirectly, solicit for em- ployment or hire any employee of the Sponsor or any of its affiliates en- gaged in the development, distribution or administration of the Con- tracts. 11.11 The "Work Product" shall be the sole and exclusive property of Sponsor and all rights, title and interest therein shall vest in Sponsor; provided that Company may disclose Work Product if required by law, regu- lation, subpoena, court order or other lawful authority. For purpose of this Section 11.11, Work Product means all concepts, designs, files, re- ports, programs, manuals, listings, databases and any other material de- veloped or prepared, whether in hard copy or electronic media, by Company for Sponsor which is unique to Sponsor or Fund, but does not include any such material if it applies, or may be applied, generally to variable an- nuities (such as, among other things, insurance features, separate ac- count charges, annuitization options, software programs). Sponsor shall have the right to obtain from Company and to hold in its own name copy- rights, trademark registrations, patents or whatever protection Sponsor may deem appropriate for the Work Product. Company agrees to give Spon- sor, at Sponsor's expense, all assistance reasonably required to protect the rights set forth in this Section 11.11. The parties intend the Work Product to be deemed "works made for hire" as defined in the United States Copyright Act. In the event and to the extent that they are deemed not to constitute works made for hire, Company assigns to Sponsor the copyright to the Work Product in perpetuity. 11.12 This Agreement, including all reference to exhibits hereto, con- stitutes the entire agreement between the parties on this subject matter and may not be modified or amended except in a writing signed by both parties; all prior agreements, representations, statements, negotiations and understandings between the parties are superseded hereby. The Company acknowledges the Sponsor does not guarantee any level of business. 11.13 In the event that any dispute, controversy or claim arising out of this Agreement cannot be resolved in the normal course of discussion be- tween the parties, then within ten (10) days of request by either party, the issue will be submitted to a committee com- prised of representatives of Sponsor's Legal and Corporate Planning De- partments and Company. If agreement cannot be reached by such committee within ten (10) days thereafter, the dispute shall be settled by arbitra- tion in accordance with the rules then in effect of the American Arbitra- tion Association. The arbitration shall be held in the City of Philadel- phia, Commonwealth of Pennsylvania, unless Company and Sponsor agree to hold the arbitration in a different location. Any judgment upon the award rendered may be entered in any court having jurisdiction and shall be fi- nal and unappealable. Without limiting the foregoing, Company consents to the jurisdiction of the Court of Common Pleas of Philadelphia County and the United States District Court for the Eastern District of Pennsylvania if arbitration is unavailable for any reason. Company and Sponsor also consent to service of process by first class mail. 13. This Agreement and all terms and provisions thereof, as amended hereby, are hereby ratified and affirmed and shall be and remain in full force and effect. IN WITNESS WHEREOF, each of the Parties hereto has caused this First Amendment to be duly executed as of the date first set forth above. Company: PROVIDIAN LIFE AND HEALTH ASSURANCE COMPANY /s/ Robert S. Saunders ________________________________________ Fund: VANGUARD VARIABLE INSURANCE FUND, INC. /s/ John J. Brennan ________________________________________ Sponsor: THE VANGUARD GROUP, INC. /s/ Jonn J. Brennan ________________________________________ SCHEDULE 7 SCHEDULE OF MORTALITY AND EXPENSE AND ADMINISTRATIVE CHARGES I. VANGUARD VARIABLE ANNUITY PLAN--DEFERRED CONTRACTS M&E Charge Payable to Company An annual charge shall be assessed daily based on the combined net assets of the Company's Separate Accounts IV and B (excluding assets deposited with re- spect to payouts or immediate contracts described in paragraph II) as follows:
NET ASSETS RATE ---------- ------ First $1.5 billion.............................. 0.375% Over $1.5 billion............................... 0.30%
Administrative Charge Payable to Sponsor An Annual administrative charge shall be assessed daily equal to .10% of the net asset value of the Company's Separate Accounts IV and B (excluding assets deposited with respect to payouts or immediate contracts described in paragraph II). II. NEW PAYOUT OPTIONS WITHIN THE DEFERRED ANNUITY CONTRACT AND IN THE NEW VARIABLE IMMEDIATE ANNUITY CONTRACT M&E Charge Payable to Company An annual charge of .45% shall be assessed daily based on the combined net as- sets of the Company's Separate Accounts IV and B (excluding assets deposited with respect to deferred contracts described in paragraph I). Administrative Fee Payable to Sponsor An annual administrative charge shall be assessed daily equal to an amount to be agreed upon between the parties, such amount to be a percentage of the net asset value of the Company's Separate Accounts IV and B (excluding assets de- posited with respect to deferred contracts described in paragraph I). SCHEDULE 1.1 The Vanguard Variable Annuity Plan, a flexible premium multi-funded variable annuity contract, offering nine Vanguard portfolio options as such may be modi- fied or amended from time to time. A new variable immediate annuity contract, product name to be determined, which will offer the same Vanguard portfolio options as those currently avail- able in the Vanguard Variable Annuity Plan as such may be modified or amended from time to time. EX-9.(A) 3 OPINION AND CONSENT EXHIBIT 9(a) April 25, 1996 PROVIDIAN LIFE & HEALTH INSURANCE COMPANY ADMINISTRATIVE OFFICES 20 MOORES ROAD FRAZER, PENNSYLVANIA 19355 RE: PROVIDIAN LIFE & HEALTH INSURANCE COMPANY SEPARATE ACCOUNT IV--OPINION AND CONSENT To Whom It May Concern: This opinion and consent is furnished in connection with the filing of Post- Effective Amendment No. 6 (the "Amendment") to the Registration Statement on Form N-4, File No. 33-36073 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), of Providian Life & Health Insurance Com- pany Separate Account IV ("Separate Account IV"). Separate Account IV receives and invests premiums allocated to it under a flexible premium multi-funded an- nuity contract (the "Annuity Contract"). The Annuity Contract is offered in the manner described in the prospectus contained in the Registration Statement (the "Prospectus"). In my capacity as legal adviser to Providian Life & Health Insurance Company, I hereby confirm the establishment of Separate Account IV pursuant to a resolu- tion adopted by the Board of Directors of Providian Life & Health Insurance Company for a separate account for assets applicable to the Annuity Contract, pursuant to the provisions of Section 376.309 of the Missouri Insurance Stat- utes. In addition, I have made such examination of the law in addition to con- sultation with outside counsel and have examined such corporate records and such other documents as I consider appropriate as a basis for the opinion here- inafter expressed. On the basis of such examination, it is my professional opinion that: 1. Providian Life & Health Insurance Company is a corporation duly orga- nized and validly existing under the laws of the State of Missouri. 2. Separate Account IV is an account established and maintained by Providian Life & Health Insurance Company pursuant to the laws of the State of Missouri, under which income, capital gains and capital losses incurred on the assets of Separate Account IV are credited to or charged against the assets of Separate Account IV, without regard to the income, capital gains or capital losses arising out of any other business which Providian Life & Health Insurance Company may conduct. 3. Assets allocated to Separate Account IV will be owned by Providian Life & Health Insurance Company. The assets in Separate Account IV attributable to the Annuity Contract generally are not chargeable with liabilities aris- ing out of any other business which Providian Life & Health Insurance Com- pany may conduct. The assets of Separate Account IV are available to cover the general liabilities of Providian Life & Health Insurance Company only to the extent that the assets of Separate Account IV exceed the liabilities arising under the Annuity Contracts. 4. The Annuity Contracts have been duly authorized by Providian Life & Health Insurance Company and, when sold in jurisdictions authorizing such sales, in accordance with the Registration Statement, will constitute val- idly issued and binding obligations of Providian Life & Health Insurance Company in accordance with their terms. Providian Life and Health Insurance Company Separate Account IV April 25, 1996 5. Owners of the Annuity Contracts as such, will not be subject to any de- ductions, charges or assessments imposed by Providian Life and Health Insur- ance Company other than those provided in the Annuity Contract. I hereby consent to the use of this opinion as an exhibit to the Amendment and to the reference to my name under the heading "Legal Matters" in the Prospec- tus. Very truly yours, /s/ Kimberly A. Scouller Assistant General Counsel EX-9.(B) 4 JORDEN BURT BERENSON & JOHNSON CONSENT EXHIBIT 9(b) JORDEN BURT BERENSON & JOHNSON LLP 1025 THOMAS JEFFERSON STREET, N.W. SUITE 400-EAST WASHINGTON, D.C. 20007-0805 (202) 965-8100 TELECOPIER (202) 965-8104 April 25, 1996 PROVIDIAN LIFE & HEALTH INSURANCE COMPANY 20 MOORES ROAD FRAZER, PENNSYLVANIA 19355 Ladies and Gentlemen: We hereby consent to the reference to our name under the caption "Legal Mat- ters" in the Prospectus contained in Post-Effective Amendment No. 6 to the Reg- istration Statement on Form N-4 (file No. 33-36073) filed by Providian Life & Health Insurance Company and Providian Life & Health Insurance Company Separate Account IV with the Securities and Exchange Commission under the Securities Act of 1933 and the Investment Company Act of 1940. Very truly yours, /s/ Jorden Burt Berenson & Johnson LLP Jorden Burt Berenson & Johnson LLP EX-10 5 CONSENT OF INDEPENDENT AUDITORS Exhibit No. (10) CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Auditors" and to the use of our reports dated April 23, 1996, with respect to the financial statements of Providian Life and Health Insurance Company Separate Account IV and the statutory-basis financial statements of Providian Life and Health Insurance Company in Post-Effective Amendment No. 6 to the Registration Statement (Form N-4 No. 33-36073) and related Prospectus of Providian Life and Health Insurance Company Separate Account IV. /s/ Ernst & Young Louisville, Kentucky April 23, 1996 EX-13 6 PERFORMANCE CALCULATION EXAMPLE EXHIBIT 13 PERFORMANCE CALCULATION EXAMPLE SEPARATE ACCOUNT IV VANGUARD VARIABLE ANNUITY Fund is VVAP Equity Index The Vanguard Variable Annuity has only one class of units AUV 12/31/94 13.223746 AUV 12/31/95 18.073261 1 year nonstandard actual total return and actual average annual total return is: 18.073261 --------- -1 = .3667278* 100% rounded to 2 decimal places = 36.67% 13.223746 -----END PRIVACY-ENHANCED MESSAGE-----