<PAGE>
PROVIDENT NATIONAL ASSURANCE COMPANY
Separate Account B
June 30, 1997
Semiannual Report
<PAGE>
MANAGEMENT
BOARD OF MANAGERS OF SEPARATE ACCOUNT B
Henry E. Blaine
H. Grant Law, Jr.
David G. Fussell
Susan N. Roth, Secretary
to the Board of Managers
PRINCIPAL OFFICERS OF
PROVIDENT NATIONAL ASSURANCE COMPANY
J. Harold Chandler, Chairman, President and
Chief Executive Officer
Thomas R. Watjen, Vice Chairman and
Chief Financial Officer
Robert O. Best, Executive Vice President and
Chief Information Officer
F. Dean Copeland, Executive Vice President and
General Counsel
Timothy C. Gartland, Executive Vice President,
Human Resources
Thomas B. Heys, Jr., Executive Vice President,
Risk Management
Peter C. Madeja, Executive Vice President
Jeffrey F. Olingy, Executive Vice President,
Sales Management
Donald E. Boggs, Senior Vice President and
Deputy Risk Manager
Gerald M. Gates, Senior Vice President
Robert C. Greving, Senior Vice President and
Chief Actuary
Barry E. Lundquist, Senior Vice President
Ralph W. Mohney, Senior Vice President
Richard A. Wolf, Senior Vice President
Ralph A. Rogers, Jr., Senior Vice President and
Treasurer
Susan N. Roth, Vice President, Secretary and
Counsel
Vicki W. Corbett, Vice President and Controller
This report and the financial statements attached are submitted solely for the
general information of contract owners of Separate Account B and are not
authorized for other use.
<PAGE>
MESSAGE TO PARTICIPANTS IN
PROVIDENT NATIONAL'S
VARIABLE ANNUITY CONTRACTS
This semiannual report of Separate Account B contains the financial
statements and portfolio information of Separate Account B for the six
months ended June 30, 1997. Comparative figures which relate to Separate
Account B's activities during the first half of 1997 are provided below.
The accumulation unit value for Separate Account B increased 21.4% in
the first half of 1997, from $8.435567 at year end 1996 to $10.238554 on
June 30, 1997. During this same period, the S&P 500 Index rose by a yield
adjusted 20.6%. Reflecting transfers to the fixed-dollar account, as well as
withdrawals and retirements, the number of accumulation units outstanding
on June 30, 1997, was 1,354,200, down from 1,538,926 six months earlier.
As a result of withdrawals, net purchase payments received, and changes in
the accumulation unit value, total contract owners' equity on June 30, 1997,
was $15,158,366 compared to $13,917,113 on December 31, 1996.
The stock market shrugged off a nearly 10% correction during the
second quarter and continued to appreciate during the first half of the year.
The combination of a growing economy, strong earnings, and a good
inflation outlook resulted in very good market results. Although stocks are
subject to a market correction at current levels, we continue to see value in
those companies exhibiting high margins and sales growth.
Thank you for your continued support.
David Fussell
Chairman, Board of Managers
Provident National Assurance Company
Separate Account B
<PAGE>
Provident National Assurance Company Separate Account B
(Unaudited)
June 30, 1997
Statement of Assets and Liabilities..................................... 1
Statements of Changes in Variable Annuity Contract Owners' Equity....... 2
Statement of Operations................................................. 3
Schedule of Investments................................................. 4
Supplementary Information............................................... 6
Notes to Financial Statements........................................... 7
Accumulation Unit Value Table........................................... 9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
(Unaudited)
Provident National Assurance Company Separate Account B
June 30, 1997
-------------
ASSETS
Investments:
Common stocks--at market value
(cost: $9,080,967) $15,153,487
Cash 51,630
Accrued dividends and interest 12,925
Amounts due from Provident National Assurance Company 1,846
-----------
TOTAL ASSETS 15,219,888
-----------
LIABILITIES AND CONTRACT OWNERS' EQUITY
Amounts payable for purchase of investments 12,800
Management fee and other amounts due Provident
National Assurance Company 48,722
-----------
TOTAL LIABILITIES 61,522
-----------
Variable annuity contract owners' equity:
Deferred annuity contracts terminable by owners--(accumulation
units outstanding: 1,354,200.307; unit value: $10.238554) 13,865,053
Annuity contracts in pay-out period 1,292,313
-----------
TOTAL CONTRACT OWNERS' EQUITY $15,158,366
===========
See notes to financial statements.
1
<PAGE>
STATEMENTS OF CHANGES IN VARIABLE ANNUITY CONTRACT OWNERS' EQUITY
(Unaudited)
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
<S> <C> <C>
Balance at beginning of period $13,917,113 $13,151,831
----------- -----------
From investment activities:
Net investment income (expense) (7,631) 40,175
Net realized gain on investments 738,579 1,477,966
Increase in net unrealized appreciation of investments 2,069,172 1,194,258
----------- -----------
Increase in contract owners' equity from
investment activities 2,800,120 2,712,399
----------- -----------
From variable annuity contract transactions:
Net contract purchase payments (Units purchased:
1997--1,069.880;
1996--4,869.798) 9,770 35,994
Terminations and death benefits (Units terminated:
1997--163,180.814;
1996--243,557.308) (1,501,858) (1,866,405)
Variable annuity benefits paid (Number of units:
1997--7,184.365;
1996--15,310.532) (66,779) (116,706)
----------- -----------
Decrease in contract owners' equity from variable
contract transactions (1,558,867) (1,947,117)
----------- -----------
Net increase in contract owners' equity 1,241,253 765,282
----------- -----------
Balance at end of period $15,158,366 $13,917,113
=========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
STATEMENT OF OPERATIONS
(Unaudited)
Provident National Assurance Company Separate Account B
Six Months Ended
June 30, 1997
-----------------
INVESTMENT INCOME
Income:
Dividends $ 72,101
Interest 800
---------
72,901
---------
Expenses--Note C:
Investment advisory services 33,555
Mortality and expense assurances 46,977
---------
80,532
---------
NET INVESTMENT EXPENSE (7,631)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS--NOTE A
Net realized gain from investment transactions
(excluding short-term securities):
Proceeds from sales 1,961,175
Cost of investments sold 1,222,596
---------
Net realized gain 738,579
---------
Net unrealized appreciation of investments:
At end of period 6,072,520
At beginning of period 4,003,348
---------
Increase in net unrealized appreciation of investments 2,069,172
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,807,751
----------
NET GAIN $2,800,120
==========
Ratio of expenses to total investment income 110.47%
==========
See notes to financial statements.
3
<PAGE>
SCHEDULE OF INVESTMENTS
Provident National Assurance Company Separate Account B
June 30, 1997
<TABLE>
<CAPTION>
Number of Market
Shares Value
--------- ----------
<S> <C> <C>
COMMON STOCKS
CAPITAL GOODS (6.0%)
Boeing Company 4,000 $ 212,500
General Electric Company 10,800 702,000
---------
914,500
CONSUMER (30.7%)
Bristol-Myers Squibb Company 8,000 648,000
Coca-Cola Company 9,000 612,000
Gannett Company, Inc. 5,500 543,125
General Motors Corporation 7,000 390,250
Lear Corporation 3,200 142,000
McDonald's Corporation 9,500 459,563
PepsiCo, Inc. 8,000 301,000
Proctor & Gamble Company 3,500 494,375
Safeway, Inc. 4,200 193,725
Viacom, Inc. Class B 10,000 300,000
Wal-Mart Stores, Inc. 17,000 575,875
---------
4,659,913
FINANCIAL (11.4%)
American Express Company 8,000 596,000
Corestates Financial Corporation 6,250 335,937
NationsBank Corporation 4,000 258,500
Textron, Inc. 4,000 265,500
Wells Fargo & Company 1,000 269,500
---------
1,725,437
</TABLE>
See notes to financial statements.
4
<PAGE>
SCHEDULE OF INVESTMENTS - Continued
Provident National Assurance Company Separate Account B
June 30, 1997
<TABLE>
<CAPTION>
Number of Market
Shares Value
--------- -----------
<S> <C> <C>
COMMON STOCKS
HEALTH CARE (13.3%)
Columbia Healthcare Corporation 5,000 $ 196,875
Eli Lilly & Company 1,500 164,063
HealthSouth Corporation 19,000 473,822
Johnson & Johnson 9,032 581,435
Merck & Company, Inc. 5,800 593,775
---------
2,009,970
HIGH GROWTH TECHNOLOGY (23.8%)
Cisco Systems, Inc. 1,600 107,400
Computer Associates International 7,000 390,250
Emerson Electric Company 10,000 551,250
Hewlett Packard Company 7,000 392,000
Intel Corporation 4,250 602,968
Microsoft Corporation 4,000 505,500
Motorola, Inc. 4,500 342,563
Oracle Corporation 5,000 251,875
SCI Systems, Inc. 5,000 318,750
3Com Corporaton 3,250 146,250
---------
3,608,806
MISCELLANEOUS (0.7%)
Minnesota Mining & Manufacturing Company 1,000 102,250
---------
</TABLE>
See notes to financial statements.
5
<PAGE>
SCHEDULE OF INVESTMENTS - Continued
Provident National Assurance Company Separate Account B
June 30, 1997
<TABLE>
<CAPTION>
Number of Market
Shares Value
----------- -----------
<S> <C> <C>
COMMON STOCKS
TELECOMMUNICATIONS (14.1%)
Airtouch Communications, Inc. 11,000 302,500
Comcast Corporation 14,500 309,937
Lucent Technologies, Inc. 4,444 320,524
Sprint Corporation 3,000 156,750
Teleport Communications Group, Inc. Class A 10,400 354,900
Worldcom, Inc. 21,500 688,000
-----------
2,132,611
TOTAL COMMON STOCKS (100.0%) 15,153,487
-----------
CASH AND RECEIVABLES LESS LIABILITIES (0.0%) 4,879
-----------
TOTAL VARIABLE ANNUITY CONTRACT
OWNERS' EQUITY (100.0%) $15,158,366
===========
</TABLE>
See notes to financial statements.
6
<PAGE>
SUPPLEMENTARY INFORMATION
(Unaudited)
Provident National Assurance Company Separate Account B
Selected data for an accumulation unit outstanding throughout each year:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31
June 30, 1997 1996 1995 1994 1993
------------ ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income $ .05 $ .11 $ .13 $ .15 $ .14
Expenses .06 .09 .07 .07 .06
-------- ------- -------- -------- --------
Net investment income (expense) (.01) .02 .06 .08 .08
Net realized and unrealized
gain (loss) on investments 1.81 1.51 1.44 (.32) .54
-------- ------- -------- -------- --------
Net increase (decrease) in
contract owners' equity 1.80 1.53 1.50 (.24) .62
Net contract owners' equity:
Beginning of period 8.44 6.91 5.41 5.65 5.03
-------- ------- -------- -------- --------
End of period $10.24 $8.44 $6.91 $5.41 $5.65
======== ======= ======== ======== ========
Ratio of expenses to average
contract owners' equity .57% 1.20% 1.21% 1.21% 1.22%
Ratio of net investment income (expense)
to average contract owners' equity (0.05%) 0.30% 0.89% 1.72% 1.39%
Portfolio turnover 4% 28% 101% 70% 57%
Number of accumulation units
outstanding at end of period 1,354,200 1,538,926 1,767,394 2,097,793 2,242,809
</TABLE>
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Provident National Assurance Company Separate Account B
NOTE A--INVESTMENTS AND ACCOUNTING POLICIES
Separate Account B is a segregated investment account of Provident National
Assurance Company (a wholly-owned subsidiary of Provident Companies, Inc.) and
is registered under the Investment Company Act of 1940, as amended, as an open-
end diversified management investment company.
Common stocks and bonds are valued at published market quotations which
represent the closing sales price for securities traded on a national stock
exchange or the mean between the quoted bid and asked prices for those traded
over-the-counter. Short-term investments are valued at cost plus accrued
interest.
Realized and unrealized gains and losses are credited to or charged to variable
annuity contract owners' equity. The identified cost basis has been used in
determining realized gains and losses on sales of investments. If determined on
the average cost basis, the net realized gain would have been $699,362 and
$1,369,834 for the six months ended June 30, 1997 and the year ended December
31, 1996, respectively. There were gross unrealized gains of $6,171,506 and
gross unrealized losses of $98,986 at June 30, 1997. Security transactions are
recorded on the date the securities are purchased or sold which is the common
practice of the industry. Dividends are taken into income on an accrual basis as
of the ex-dividend date.
A summary of the cost of investments purchased and proceeds from investments
sold for the six months ended June 30, 1997 and the year ended December 31, 1996
is shown below.
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
---------------- -----------------
Cost of investments purchased $2,594,595 $ 9,751,620
Less: Short-term securities 2,016,689 6,012,666
---------- ------------
$ 577,906 $ 3,738,954
========== ============
Proceeds from investments sold $4,174,766 $11,698,035
Less: Short-term securities 2,213,591 5,815,765
---------- -----------
$1,961,175 $ 5,882,270
========== ===========
The aggregate cost of investments for federal income tax purposes is the same as
that presented in the Statements of Assets and Liabilities.
NOTE B--FEDERAL INCOME TAXES
Operations of Separate Account B will form a part of the income tax return of
Provident National Assurance Company, which is taxed as a "life insurance
company" under the Internal Revenue Code.
Under current law, no federal income taxes are payable with respect to Separate
Account B.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
Provident National Assurance Company Separate Account B
NOTE C--EXPENSES
Deductions are made by Provident National Assurance Company at the end of each
valuation period for investment advisory services and for mortality and expense
assurances, which on an annual basis are approximately .50% and .70%,
respectively, of the net assets of Separate Account B.
9
<PAGE>
ACCUMULATION UNIT VALUE TABLE
(Unaudited)
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
End of Month Accumulation Unit Value End of Month Accumulation Unit Value
- ------------ ----------------------- ------------ -----------------------
<S> <C> <C> <C>
December 1968 1.036279 March 1991 4.312244
December 1969 1.080379 June 4.243108
December 1970 1.030039 September 4.513598
December 1971 1.178612 December 5.036212
December 1972 1.403795 March 1992 4.735470
December 1973 1.126624 June 4.585274
December 1974 .863269 September 4.694884
December 1975 1.022844 December 5.028547
December 1976 1.156853 March 1993 5.208499
December 1977 1.064425 June 5.190340
December 1978 1.094150 September 5.441446
December 1979 1.219189 December 5.646864
December 1980 1.555258 March 1994 5.386379
December 1981 1.473246 June 5.274454
December 1982 1.812441 September 5.475394
December 1983 2.132092 December 5.410722
December 1984 2.029912 March 1995 5.656995
December 1985 2.480050 June 6.194660
December 1986 2.743444 September 6.505252
December 1987 2.734169 December 6.908158
December 1988 3.087892 March 1996 7.309625
March 1989 3.263117 June 7.593667
June 3.506709 September 7.851947
September 3.841545 December 8.435567
December 3.812606 January 1997 9.019615
March 1990 3.729963 February 8.984136
June 4.080042 March 8.468896
September 3.435225 April 9.126089
December 3.736441 May 9.704040
June 10.238554
</TABLE>
Initial contributions to Separate Account B were received on February 1, 1968,
prior to which time the unit value was set at 1.000000.
The above indicates the accumulation unit value on the last valuation day of
each year from December 1968 through December 1988 on the last valuation day of
each quarter from 1989 through December 1996, and on the last valuation day
during each month of 1997. The results shown should not be considered as a
representation of the results which may be realized in the future.
10
