<PAGE>
SEPARATE ACCOUNT B
Semiannual Report
June 30, 2000
PROVIDENT NATIONAL ASSURANCE COMPANY
A subsidiary of
UnumProvident Corporation
<PAGE>
MANAGEMENT
BOARD OF MANAGERS OF SEPARATE ACCOUNT B
Henry E. Blaine, Chairman
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, Executive Vice President - Finance and Risk
Management
F. Dean Copeland, Executive Vice President - Legal and
Administrative Affairs, General Counsel and Assistant Secretary
Elaine D. Rosen - Executive Vice President - Customer Development
Robert C. Greving, Senior Vice President - Finance and Chief Actuary
John J. Iwanicki, Vice President and Treasurer
Susan N. Roth, Vice President, Corporate Secretary and
Assistant General 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>
SEPARATE ACCOUNT B
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, 2000. Comparative figures which relate to Separate Account B's activities
during the first half of 2000 are provided below.
The accumulation value for Separate Account B decreased 0.69% for the first six
months of 2000, from 19.18 at year-end 1999 to 19.05 on June 30, 2000. During
this same period the S & P 500 index declined by a yield adjusted 0.43%.
Reflecting transfers to the fixed-dollar account, as well as withdrawals and
retirements the number of accumulation units outstanding on June 30, 2000 was
478,993 down from 609,502 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, 2000 was 11,390,613 compared to 14,186,833
on December 31, 1999.
The economy continues its record setting performance with strong GDP growth for
the first half of the year. Inflation, however, has begun to pick up and the
Fed has started to raise rates aggressively to cool the economy down. This has
the stock market worried and the S & P down slightly for the year. In this
environment large, stable growth companies tend to do well. In your portfolio
health care, technology, and energy stocks have done well, while some of the
more popular communication stocks have faired poorly. Going forward, if the
Federal reserve can engineer a slow-down in the economy without causing a
recession, the stock market can rebound and the markets' unprecedented strong
performance over the past years can continue.
Thank you for your continued support.
/s/David Fussell
----------------
DAVID FUSSELL
CHAIRMAN, BOARD OF MANAGERS
PROVIDENT NATIONAL ASSURANCE COMPANY
SEPARATE ACCOUNT B
<PAGE>
Provident National Assurance Company Separate Account B
FINANCIAL STATEMENTS
(Unaudited)
June 30, 2000
Statement of Assets and Liabilities................................ 1
Statement of Operations............................................ 2
Statements of Changes in Variable Annuity Contract Owners' Equity.. 3
Schedule of Investments............................................ 4
Supplementary Information.......................................... 7
Notes to Financial Statements...................................... 9
Accumulation Unit Value Table...................................... 11
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
(Unaudited)
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
June 30, 2000
-------------
<S> <C>
ASSETS
Investments:
Common stocks--at market value
(cost: $6,048,322) $11,401,576
Cash 34,601
Accrued dividends and interest 3,355
Amounts due from Provident National Assurance Company 3,232
-----------
TOTAL ASSETS 11,442,764
-----------
LIABILITIES AND CONTRACT OWNERS' EQUITY
Amounts payable for terminations and variable annuity benefits 41,115
Management fee and other amounts due Provident
National Assurance Company 11,036
-----------
TOTAL LIABILITIES 52,151
-----------
Contract owners' equity:
Deferred annuity contracts terminable by owners--(accumulation
units outstanding: 478,993.444; unit value: $19.048870) 9,124,284
Annuity contracts in pay-out period 2,266,329
-----------
TOTAL CONTRACT OWNERS' EQUITY $11,390,613
===========
</TABLE>
See notes to financial statements.
-1-
<PAGE>
STATEMENT OF OPERATIONS
(Unaudited)
Provident National Assurance Company Separate Account B
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000
----------------
<S> <C>
INVESTMENT INCOME
Income:
Dividends $ 37,809
Interest 1,366
-----------
39,175
-----------
Expenses--Note C:
Investment advisory services 30,898
Mortality and expense assurances 43,256
-----------
74,154
-----------
NET INVESTMENT LOSS (34,979)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS--NOTE A
Net realized gain from investment transactions
(excluding short-term securities):
Proceeds from sales 4,182,586
Cost of investments sold (1,282,731)
-----------
Net realized gain 2,899,855
-----------
Net unrealized appreciation of investments:
At end of year 5,353,254
At beginning of year 8,413,483
-----------
Decrease in net unrealized appreciation
of investments (3,060,229)
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (160,374)
-----------
DECREASE IN CONTRACT OWNERS' EQUITY
FROM INVESTMENT ACTIVITIES $ (195,353)
===========
Ratio of expenses to total investment income 189.29%
===========
</TABLE>
See notes to financial statements.
-2-
<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, 2000 December 31, 1999
----------------- ------------------
<S> <C> <C>
BALANCE AT BEGINNING OF YEAR $14,186,833 $18,293,024
----------- -----------
FROM INVESTMENT ACTIVITIES:
Net investment loss (34,979) (91,305)
Net realized gain on investments 2,899,855 4,882,096
Decrease in net unrealized appreciation of investments (3,060,229) (885,785)
----------- -----------
Increase (decrease) in contract owners' equity
from investment activities (195,353) 3,905,006
----------- -----------
FROM VARIABLE ANNUITY CONTRACT TRANSACTIONS:
Net contract purchase payments (Units purchased):
2000-- 229.559;
1999-- 940.920; 4,234 15,418
Terminations and death benefits (Units terminated):
2000-- 130,737.620;
1999-- 438,602.231; (2,399,354) (7,587,364)
Variable annuity benefits paid (Number of units):
2000-- 11,153.813;
1999-- 26,818.794; (205,747) (439,251)
----------- -----------
Decrease in contract owners' equity from variable
annuity contract transactions (2,600,867) (8,011,197)
----------- -----------
NET DECREASE IN CONTRACT OWNERS' EQUITY (2,796,220) (4,106,191)
----------- -----------
BALANCE AT END OF PERIOD $11,390,613 $14,186,833
=========== ===========
</TABLE>
See notes to financial statements.
-3-
<PAGE>
SCHEDULE OF INVESTMENTS
Provident National Assurance Company Separate Account B
June 30, 2000
<TABLE>
<CAPTION>
Number of Market
Shares Value
--------- -------
<S> <C> <C>
COMMON STOCKS
CAPITAL GOODS (11.1%)
Allied Waste Industries, Inc. 8,800 $88,000
Corning, Inc. 1,100 296,862
General Electric Company 8,700 461,100
Textron, Inc. 2,000 108,625
Tyco International, Ltd. 4,600 217,925
Waste Management, Inc. 4,800 91,200
---------
1,263,712
CONSUMER GOODS (7.7%)
Gillette Company 4,200 146,738
Lear Corporation 3,200 64,000
Lowe's Companies, Inc. 800 32,850
Newell Rubbermaid, Inc. 6,800 175,100
Office Depot, Inc. 8,100 50,625
PepsiCo, Inc. 8,400 373,275
Staples, Inc. 2,500 38,438
---------
881,026
CONSUMER SERVICES (18.5%)
Cendant Corporation 5,660 79,240
Comcast Corporation, Class A 11,800 477,900
Gannett Company, Inc. 2,000 119,625
Kroger Company 7,600 167,675
McDonald's Corporation 5,200 171,275
Safeway, Inc. 8,000 361,000
United Rentals, Inc. 7,200 123,300
Viacom, Inc., Class B 2,600 177,287
Wal-Mart Stores, Inc. 4,500 259,313
Walt Disney Company 4,400 170,775
---------
2,107,390
ENERGY (4.5%)
Grant Prideco, Inc. 3,600 90,000
Royal Dutch Petroleum Company 2,900 178,531
Schlumberger, Ltd. 1,400 104,475
Weatherford International, Inc. 3,600 143,325
---------
516,331
</TABLE>
See notes to financial statements.
-4-
<PAGE>
SCHEDULE OF INVESTMENTS - Continued
Provident National Assurance Company Separate Account B
June 30, 2000
<TABLE>
<CAPTION>
Number of Market
Shares Value
--------- -------
<S> <C> <C>
COMMON STOCKS - Continued
FINANCIAL (6.1%)
American Express Company 4,000 $ 208,500
Bank of America Corporation 3,500 150,500
Chase Manhattan Corporation 4,950 228,009
Washington Mutual, Inc. 3,800 109,725
----------
696,734
HEALTH CARE (11.7%)
Bristol Myers Squibb Company 2,300 133,975
Eli Lilly and Company 2,000 199,750
HealthSouth Corporation 21,600 155,250
Johnson & Johnson 1,632 166,260
Medtronic, Inc. 4,500 224,156
Merck & Company, Inc. 2,000 153,250
Sunrise Assisted Living, Inc. 6,000 111,000
Tenet Healthcare Corporation 6,800 183,600
----------
1,327,241
TECHNOLOGY - HARDWARE (13.8%)
Cisco Systems, Inc. 8,000 508,500
Intel Corporation 2,900 387,694
Lucent Technologies, Inc. 5,876 348,153
SCI Systems, Inc. 8,500 333,094
----------
1,577,441
TECHNOLOGY - SOFTWARE & SERVICES (13.1%)
America Online, Inc. 4,000 211,000
Computer Associates International 4,500 230,344
First Data Corporation 2,800 138,950
Microsoft Corporation 6,100 488,000
Oracle Corporation 5,000 420,313
----------
1,488,607
</TABLE>
See notes to financial statements.
-5-
<PAGE>
SCHEDULE OF INVESTMENTS - Continued
Provident National Assurance Company Separate Account B
June 30, 2000
<TABLE>
<CAPTION>
Number of Market
Shares Value
--------- -------
<S> <C> <C>
COMMON STOCKS - Continued
TELECOMMUNICATIONS (13.6%)
AT&T Corporation 2,545 $ 80,486
Broadwing, Inc. 5,600 145,250
Global Crossing, Ltd. 5,740 151,034
Qwest Communications International 1,500 74,531
Sprint Corporation FON Group 4,000 204,000
Sprint Corporation PCS Group 3,000 178,500
Vodafone - ADR 3,500 145,031
Worldcom, Inc. 12,300 564,262
-----------
1,543,094
-----------
TOTAL COMMON STOCK (100.1%) 11,401,576
-----------
TOTAL INVESTMENTS (100.1%) 11,401,576
CASH AND RECEIVABLES LESS LIABILITIES (-0.1%) (10,963)
-----------
TOTAL CONTRACT OWNERS' EQUITY (100.0%) $11,390,613
===========
</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
excluding sales loads:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31
June 30, 2000 1999 1998 1997 1996
--------------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Investment income $ 0.06 $ 0.12 $ 0.10 $ 0.10 $ 0.11
Expenses 0.11 0.20 0.14 0.12 0.09
-------- -------- ---------- ---------- ----------
Net investment income (loss) (0.05) (0.08) (0.04) (0.02) 0.02
Net realized and unrealized gain (loss)
on investments (0.08) 4.07 3.85 2.96 1.51
-------- -------- ---------- ---------- ----------
Net increase (decrease) in contract
owners' equity (0.13) 3.99 3.81 2.94 1.53
Net contract owners' equity:
Beginning of year 19.18 15.19 11.38 8.44 6.91
-------- -------- ---------- ---------- ----------
End of period $ 19.05 $ 19.18 $ 15.19 $ 11.38 $ 8.44
======== ======== ========== ========== ==========
Ratio of expenses to average contract
owners' equity 0.59% 1.22% 1.07% 1.16% 1.20%
Ratio of net investment income (loss) to
average contract owners' equity (0.28%) (0.51%) (0.30%) (0.16%) 0.30%
Portfolio turnover - 14% 11% 25% 28%
Number of accumulation units
outstanding at end of period 478,993 609,502 1,043,607 1,310,831 1,538,926
</TABLE>
See notes to financial statements.
-7-
<PAGE>
SUPPLEMENTARY INFORMATION - Continued
(Unaudited)
Provident National Assurance Company Separate Account B
Selected data for an accumulation unit outstanding throughout each year
excluding sales loads:
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment income $ 0.13 $ 0.15 $ 0.14 $ 0.12 $ 0.13
Expenses 0.07 0.07 0.06 0.06 0.05
---------- ---------- ---------- ---------- ----------
Net investment income 0.06 0.08 0.08 0.06 0.08
Net realized and unrealized gain (loss)
on investments 1.44 (0.32) 0.54 (0.07) 1.22
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in contract
owners' equity 1.50 (0.24) 0.62 (0.01) 1.30
Net contract owners' equity:
Beginning of year 5.41 5.65 5.03 5.04 3.74
---------- ---------- ---------- ---------- ----------
End of year $ 6.91 $ 5.41 $ 5.65 $ 5.03 $ 5.04
========== ========== ========== ========== ==========
Ratio of expenses to average contract
owners' equity 1.21% 1.21% 1.22% 1.21% 1.21%
Ratio of net investment income to
average contract owners' equity 0.89% 1.72% 1.39% 1.36% 1.91%
Portfolio turnover 101% 70% 57% 35% 42%
Number of accumulation units
outstanding at end of year 1,767,394 2,097,793 2,242,809 2,655,895 2,854,559
</TABLE>
See notes to financial statements.
-8-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Provident National Assurance Company Separate Account B
June 30, 2000
NOTE A--INVESTMENTS AND ACCOUNTING POLICIES
Separate Account B is a segregated investment account of Provident National
Assurance Company (a wholly-owned subsidiary of UnumProvident Corporation,
formerly Provident Companies, Inc.) and is registered under the Investment
Company Act of 1940, as amended, as an open-end diversified management
investment company.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in those statements and accompanying notes. Actual
results may differ from such estimates.
Common stocks 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 contract
owners' equity. The identified cost basis has been used in determining realized
gains and losses on sales of investments. There were gross unrealized gains of
$6,304,760 and gross unrealized losses of $951,506 at June 30, 2000. Security
transactions are recorded on the day after the securities are purchased or sold.
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, 2000 and the year ended December 31, 1999
is shown below.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------- -----------------
<S> <C> <C>
Cost of investments purchased $3,641,955 $19,725,034
Less: Short-term securities 3,586,634 17,082,494
---------- -----------
$ 55,321 $ 2,642,540
========== ===========
Proceeds from investments sold $7,769,219 $26,374,430
Less: Short-term securities 3,586,633 17,091,400
---------- -----------
$4,182,586 $ 9,283,030
========== ===========
</TABLE>
The aggregate cost of investments for Federal income tax purposes is the same as
that presented in the Statements of Assets and Liabilities.
-9-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
(Unaudited)
Provident National Assurance Company Separate Account B
June 30, 2000
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.
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.
NOTE D--COMMITMENTS
On May 15, 1998 Provident completed an Asset Transfer and Acquisition Agreement
under which American General Corporation assumed Provident Companies', Inc.
(Provident) individual and tax-sheltered annuity business including all
individual annuities. In accordance with the agreement, American General
Corporation, through its subsidiaries The Variable Annuity Life Insurance
Company and American General Annuity assumed the administration, but not the
ownership, of Provident's two registered separate accounts, Separate Account B
and The Paul Revere Variable Annuity Contract Accumulation Fund. The
administration services provided to the Fund by American General Corporation
include processing of unit transactions and daily unit valuation calculations
subsequent to December 1, 1998 as well as accounting and other services. These
services were previously performed by Provident. Fees for such services are
deducted from Separate Account B as shown in the Statement of Operations.
-10-
<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 June 5.274454
December 1969 1.080379 September 5.475394
December 1970 1.030039 December 5.410722
December 1971 1.178612 March 1995 5.656995
December 1972 1.403795 June 6.194660
December 1973 1.126624 September 6.505252
December 1974 0.863269 December 6.908158
December 1975 1.022844 March 1996 7.309625
December 1976 1.156853 June 7.593667
December 1977 1.064425 September 7.851947
December 1978 1.094150 December 8.435567
December 1979 1.219189 March 1997 8.468896
December 1980 1.555258 June 10.238554
December 1981 1.473246 September 11.146167
December 1982 1.812441 December 11.384926
December 1983 2.132092 March 1998 12.975484
December 1984 2.029912 June 13.465013
December 1985 2.480050 September 11.758633
December 1986 2.743444 December 15.192155
December 1987 2.734169 March 1999 15.889579
December 1988 3.087892 June 17.218781
December 1989 3.812606 September 15.844714
December 1990 3.736441 December 19.180992
December 1991 5.036212 January 2000 18.177575
December 1992 5.028547 February 17.920791
March 1993 5.208499 March 19.749348
June 5.190340 April 18.957049
September 5.441446 May 18.336997
December 5.646864 June 19.048870
March 1994 5.386379
</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 1992, on the last valuation day of
each quarter from March 1993 through December 1999, and on the last valuation
day of each month of 2000. The results shown should not be considered as a
representation of the results which may be realized in the future.
-11-
