<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996.
REGISTRATION NO. 33-39946
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 5 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6 [X]
FIRST PROVIDIAN LIFE & HEALTH INSURANCE COMPANY SEPARATE ACCOUNT B
(Exact Name of Registrant)
First Providian Life & Health Insurance Company
(Name of Depositor)
520 Columbia Drive Johnson City, New York 13790
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (607) 772-8750
First 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
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
[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.
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- --------------------------------------------------------------------------------
<PAGE>
PURSUANT TO RULE 481
SHOWING LOCATION IN PART A (PROSPECTUS) AND PART B
(STATEMENT OF ADDITIONAL INFORMATION) OF REGISTRATION
STATEMENT OF INFORMATION REQUIRED BY FORM N-4
PART A
<TABLE>
<CAPTION>
ITEM OF
FORM N-4 PROSPECTUS CAPTION
<C> <S> <C>
1. Cover Page........................ Cover Page
2. Definitions....................... Glossary
3. Synopsis.......................... Highlights; Fee Table
4. Condensed Financial Information... Condensed Financial Information
5. General Description of Registrant,
Depositor, and Portfolio
Companies......................... First Providian Life & Health
Insurance Company; First
Providian Life & Health Insurance
Company Separate Account B;
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
Information....................... Table of Contents for the
Vanguard Variable Annuity Plan
Contract Statement of Additional
Information
PART B
<CAPTION>
ITEM OF STATEMENT OF ADDITIONAL
FORM N-4 INFORMATION CAPTION
<C> <S> <C>
15. Cover Page........................ Cover Page
16. Table of Contents................. Table of Contents
17. General Information and History... The Company
18. Services.......................... Part A: Auditors; Safekeeping of
Account Assets; Distribution of
the Contract
19. Purchase of Securities Being
Offered........................... Distribution of the Contract
20. Underwriters...................... Distribution of the Contract
21. Calculation of Performance Data... Performance Information
22. Annuity Payments.................. Computations of Variable Annuity
Income Payments
23. Financial Statements.............. Financial Statements
</TABLE>
<PAGE>
FIRST PROVIDIAN LIFE & HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
PROSPECTUS
FOR THE
VANGUARD VARIABLE ANNUITY PLAN CONTRACT
OFFERED BY
FIRST PROVIDIAN LIFE & HEALTH INSURANCE COMPANY
(A NEW YORK STOCK COMPANY)
APRIL 30, 1996
The Vanguard Variable Annuity Plan Contract (the "Contract"), offered through
First 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 (20 days for replacement),
during which you may cancel your investment in the Contract.
Your Purchase Payments for the Contract may be allocated among nine
Subaccounts of First Providian Life & Health Insurance Company Separate Account
B (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 the
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
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
HIGHLIGHTS........... 3
Fee Table............ 6
Glossary............. 8
Condensed Financial
Information......... 11
Financial Statements. 11
Yield and Total
Return.............. 11
The Company and the
Separate Account.... 11
Vanguard Variable
Insurance Fund...... 12
<CAPTION>
Page
<S> <C>
CONTRACT FEATURES... 15
Free Look Period.... 15
Contract Application
and
Purchase Payments.. 15
Allocation of
Purchase Payments.. 16
Charges and Deduc-
tions.............. 17
Accumulated Value... 18
Dividends and Capi-
tal Gains Treat-
ment............... 19
Exchanges Among the
Portfolios......... 19
<CAPTION>
Page
<S> <C>
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
</TABLE>
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The Contract is only available in the State of New York.
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
<PAGE>
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 HighYield Bond Portfolio and the
Small Company Growth Portfolio. The assets of each Portfo-
lio are separate, and each Portfolio has distinct invest-
ment objectives and policies as described in the accompany-
ing Fund Prospectus. PAGE 12
- --------------------------------------------------------------------------------
FREE LOOK PERIOD
The Contract provides a Free Look Period for a minimum of
10 days (20 days for replacement as set forth in your Con-
tract), 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 corresponding
appreciation credited to your account. PAGE 15
- --------------------------------------------------------------------------------
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 15
- --------------------------------------------------------------------------------
3
<PAGE>
ALLOCATION OF
PURCHASE Your Net Purchase Payments are initially allocated to the
PAYMENTS Money Market Portfolio when your Contract is issued. Subse-
quently, at the end of the Free Look Period, and a 5-day
grace period, the then-current Accumulated Value of your
Contract is allocated among the Portfolios of the Fund in
accordance with your application instructions. Requests to
change the allocation of subsequent Net Purchase Payments
may be made in writing or by telephone if you have com-
pleted the Authorization Form. PAGE 16
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CHARGES AND
DEDUCTIONS UNDER The Contract imposes no sales charges. The costs of the
THE CONTRACT Contract include mortality and expense risk charges, main-
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 17
- --------------------------------------------------------------------------------
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
WITHDRAWALS You may withdraw all or part of the Accumulated Value of
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). Your Beneficiary may elect
to receive these proceeds as a lump sum or as Annuity
Payments. PAGE 23
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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
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4
<PAGE>
CONTRACT AND If you have questions about your Contract, please telephone
POLICYHOLDER the Vanguard Variable Annuity Center (1-800-258-4271).
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
<PAGE>
FEE TABLE The following table illustrates all expenses that you would
incur as a Contract Owner. The expenses and fees shown are
for the Fund's 1995 fiscal year. The expenses and fees
shown for the HighYield Bond Portfolio and the Small Com-
pany Growth Portfolio are based on estimates for their re-
spective first fiscal year of operations. 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."
<TABLE>
<CAPTION>
SEPARATE
OWNER TRANSACTION EXPENSES ACCOUNT
-------------------------------------------------------------------
<S> <C>
Sales Load Imposed on Purchases........................... None
Redemption Fees........................................... None
Exchange Fees............................................. None
-------------------------------------------------------------------
Annual Account Maintenance Fee*........................... $25
</TABLE>
* Applies to Contracts valued at less than $25,000 at the
time of initial purchase and on the last Business Day of
each year.
<TABLE>
<CAPTION>
SEPARATE
ANNUAL SEPARATE ACCOUNT EXPENSES ACCOUNT
---------------------------------------------------------------------
<S> <C>
Mortality and Expense Risk Charge**......................... .38%
Administrative Expense Charge............................... .10%
---
TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES.................... .48%
===
</TABLE>
** This charge is reduced to 0.30% for average daily net
assets attributable to the Separate Account (and Sepa-
rate Account IV of Providian Life & Health Insurance
Company) in excess of $1.5 billion. See "Mortality and
Expense--Risk Charge."
<TABLE>
<CAPTION>
SMALL HIGH
MONEY HIGH-GRADE EQUITY EQUITY COMPANY YIELD
ANNUAL FUND MARKET BOND BALANCED INDEX INCOME GROWTH INTERNATIONAL GROWTH BOND
OPERATING EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
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
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
=== === === === === === ==== === ===
</TABLE>
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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
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
</TABLE>
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 Plan. Contract Owners may
utilize this service for 24-hour access to Plan Portfolio
information. To access the service you may call Tele-Ac-
count at 1-800-662-6273 (ON-BOARD) and follow the step-by-
step instructions, or speak with a Vanguard associate at 1-
800-522-5555 to request a brochure that explains how to use
the service.
- --------------------------------------------------------------------------------
7
<PAGE>
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 Payments are based on the
lifetime or life expectancy of the Annuitant unless, after
the Contract Date, an Annuity Income Option which pays for
a certain period only is elected.
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")--First Providian Life & Health
Insurance Company, a New York 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
<PAGE>
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 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 Portfolio, the International Portfo-
lio, the High Yield Bond Portfolio, and the Small Company
Growth Portfolio. In this Prospectus, Portfolio will also
be used to refer to the Subaccount that invests in the cor-
responding 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--First Providian Life & Health Insurance
Company Separate Account B. The Separate Account consists
of assets that are segregated by First Providian Life &
Health Insurance Company and invested in the Fund. The Sep-
arate Account is independent of the general assets of the
Company.
9
<PAGE>
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 underlying Portfo-
lios 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
<PAGE>
CONDENSED FINAN-
CIAL INFORMATION The Accumulation Unit Values and the number of Accumulation
Units outstanding for each Subaccount in 1992 through 1995
are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD DECEMBER 1, 1992 THROUGH DECEMBER 31, 1995*
---------------------------------------------------------------------
HIGH- HIGH SMALL
MONEY GRADE EQUITY EQUITY YIELD COMPANY
MARKET BOND BALANCED INDEX INCOME GROWTH INTERNATIONAL BOND GROWTH
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit value
as of:
Start Date*............ 1.061 11.489 11.098 11.596 10.000 10.000 10.000 10.000 10.000
12/31/92............... 1.064 11.656 11.514 12.039 * * * * *
12/31/93............... 1.091 12.514 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:
12/31/92............... 1,660 11 9 33 * * * * *
12/31/93............... 4,079 271 636 440 290 220 * * *
12/31/94............... 5,365 526 745 534 306 457 322 * *
12/31/95............... 9,080 622 766 784 380 620 433 * *
<CAPTION>
(UNITS ARE SHOWN IN
THOUSANDS)
</TABLE>
* Date of commencement of operations for the Money Market Subaccount was
12/1/92, for the High-Grade Bond, Balanced, and Equity Index Subaccounts was
12/16/92, 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.
- --------------------------------------------------------------------------------
THE COMPANY AND
THE SEPARATE The Company is a stock life insurance company incorporated
ACCOUNT under the laws of the State of New York on March 23, 1970,
with administrative offices at 520 Columbia Drive, Johnson
City, New York 13790. The Company is principally engaged in
offering life insurance, annuity contracts, and accident
and health insurance and is admitted to do business in 10
states and the District of Columbia. 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.
FIRST PROVIDIAN
LIFE & HEALTH
INSURANCE
COMPANY
------------------------------------------------------------
11
<PAGE>
FIRST PROVIDIAN The Separate Account was established by the Company as a
LIFE & HEALTH separate account under the laws of the State of New York on
INSURANCE November 2, 1987, pursuant to a resolution of the Company's
COMPANY SEPARATE Board of Directors. The Separate Account is a unit invest-
ACCOUNT B 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.
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
12
<PAGE>
and their agencies or instrumentalities as well as repur-
chase 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 ob-
ligations (dollar-denominated obligations issued in the
U.S. by foreign banks). Vanguard's Fixed Income Group
serves as this Portfolio'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. The Portfolio invests primarily in equity secu-
rities of seasoned U.S. companies with above average pros-
pects 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 will be invested in high-yield corporate debt obli-
gations rated at least B by Moody's Investors Service, Inc.
or Standard & Poor's Corporation or, if unrated, of compa-
rable 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.
13
<PAGE>
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 allocation of Pur-
chase 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.
- --------------------------------------------------------------------------------
14
<PAGE>
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 (20 days for re-
placement as set forth in your Contract). The Contract per-
mits the Contract Owner to cancel the Contract during the
Free Look Period by returning the Contract to the agent,
person or entity from whom it was purchased. The contract
should be returned to Vanguard Variable Annuity Center,
P.O. Box 419812, Kansas City, MO 64141-6812. Upon cancella-
tion, 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 Accumu-
lated 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 Variable Annuity Center. Your Initial
PAYMENTS 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.
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.
15
<PAGE>
Generally, Qualified Contracts may be purchased only in
connection with a "rollover" of funds from another quali-
fied plan or IRA and contain certain other restrictive pro-
visions limiting the timing and amount of payments to and
distributions from the Qualified Contract.
Total Purchase Payments may not exceed $1,000,000 without
prior approval of the Company.
PURCHASING BY WIRE INVESTORS FIDUCIARY TRUST COMPANY
ABA 101003621
MONEY SHOULD BE DEPOSIT ACCOUNT NUMBER 8907513798
WIRED TO: FIRST PROVIDIAN LIFE & HEALTH INSURANCE
PLEASE CALL: COMPANY
1-800-258-4271 CONTRACT NUMBER
BEFORE WIRING 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 419812, Kansas City, MO
64141-6812, after completing wire arrangements. Note: Fed-
eral funds wire purchase orders will be accepted only when
the New York Stock Exchange and Custodian Bank are open for
business.
------------------------------------------------------------
SECTION 1035
EXCHANGES You may exchange your Accumulated Value under an existing
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 recognized on the exchange of one annuity contract for
another. To complete a "1035 Exchange" simply provide all
the requested information on the 1035 Exchange Form and
mail it, along with your application and current contract,
to the Vanguard Variable Annuity Center. Special rules and
procedures apply to Code Section 1035 transactions, partic-
ularly if the Contract being exchanged was issued prior to
August 14, 1982. Prospective Contract Owners wishing to
take advantage of Code Section 1035 should consult their
tax advisers.
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
16
<PAGE>
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 assets.
During the Free Look Period (which is assumed for this pur-
pose to be 10 days after the issuance of the Contract), 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 Port-
folio 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 days), the Accumulated Value
will then be allocated among the Portfolios 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 .82% for the Vanguard Vari-
able Annuity Contract (source for competitors' data: Morn-
ingstar, 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.
------------------------------------------------------------
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 IV
of Providian Life & Health Insurance Company in the Fund
according to the following schedule:
<TABLE>
<CAPTION>
NET ASSETS RATE
------------------ ------
<S> <C>
First $1.5 Billion 0.375%
Over $1.5 Billion 0.300%
</TABLE>
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 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 administering the
Contract.
------------------------------------------------------------
17
<PAGE>
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 to the Company for the costs expected to be in-
curred over the life of the Contract for issuing and main-
taining each Contract 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 main-
tenance fee for the following year.
------------------------------------------------------------
TAXES
Under present laws, the Company will not incur New York
state or local taxes. If there is a change in state or lo-
cal tax laws, charges for such taxes may be made. The Com-
pany does not expect to incur any federal income tax lia-
bility 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 Sep-
arate 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 Statement of Additional Infor-
mation.
- --------------------------------------------------------------------------------
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 Com-
18
<PAGE>
pany and ii) any increase in the Accumulated Value due to
investment 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 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
<PAGE>
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 Variable Annuity Center. Full or partial with-
drawals 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 Variable Annu-
ity Center. Your written request should include your Con-
tract number, social security number, withdrawal amount,
and the signature of all owners. Your proceeds will nor-
mally be distributed within two Business Days after the re-
ceipt of the request but in no event will it be later than
seven calendar days, subject to postponement in certain
circumstances (see "Deferment of Payment" page 25).
------------------------------------------------------------
20
<PAGE>
SYSTEMATIC You may establish an automatic withdrawal of a specific
WITHDRAWALS 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 the date of death or
be paid under an annuity option under which payments will
begin within one year of the Contract Owner's death and
will be made for the life of the "Owner's Designated Bene-
ficiary" or for a period
21
<PAGE>
not extending beyond the life expectancy of that beneficia-
ry. 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
<PAGE>
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 on
the Annuity Date elected by the Beneficiary and approved by
the Company or (b) the sum of Purchase Payments less the
sum of all partial withdrawals and premium taxes. The Con-
tract Owner may elect an Annuity Payment Option for the
Beneficiary or, if no such election was made by the Con-
tract Owner and a cash benefit has not been paid, the Bene-
ficiary 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 Annuity will be-
gin 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
<PAGE>
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 First
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, and the Annuity Pay-
ment Option elected by the Contract Owner. The minimum
monthly payment, however, is $100. If the Accumulated Value
is less than $5,000, 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 Con-
tract Owner is living. Annuity Payment Options are not
available to: (1) an
24
<PAGE>
assignee; or (2) any other than a natural person, except
with the consent of the Company.
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 Variable Annuity Option may be chosen from
among those made available by the Company per each Portfo-
lio. The annuity tables, which are contained in the Con-
tract and are used to calculate the value of Variable Annu-
ity Payments, are based on an assumed interest rate of 4%.
If the actual net investment experience exactly equals the
assumed interest rate, then the Variable Annuity Payments
will remain the same (equal to the first Annuity Payment).
However, if actual investment experience exceeds the as-
sumed interest rate, the Variable Annuity Payments will in-
crease; conversely, they will decrease if the actual expe-
rience 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 Variable Annuity Center
(1-800-258-4271). The method of computation of Variable An-
nuity Payments is described in more detail in the Statement
of Additional Information.
------------------------------------------------------------
DEFERMENT OF Payment of any cash withdrawal or lump-sum death benefit
PAYMENT 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
<PAGE>
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 terms of the Contract, the Company's
tax status and upon the tax status of the individuals con-
cerned. The following discussion is general in nature and
is not intended as tax advice. You should consult a tax ad-
viser regarding the tax consequences of purchasing a Con-
tract. No attempt is made to consider any applicable state
or other tax laws. Moreover, the discussion is based upon
the Company's understanding of the federal income tax laws
as they are currently interpreted. No representation is
made regarding the likelihood of continuation of the fed-
eral income tax laws, the Treasury Regulations, or the cur-
rent 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 discussion of federal income taxes as
they relate to the Fund, please see the accompanying Pro-
spectus 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
26
<PAGE>
payment that is not taxed. The dollar amount is determined
by dividing the investment 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 Contracts, 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 Section
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
27
<PAGE>
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.
------------------------------------------------------------
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 dis-
tribution 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
28
<PAGE>
an employee upon termination of a qualified plan, and in
the case of an immediate annuity.
------------------------------------------------------------
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
29
<PAGE>
the Contract Owner from being considered the owner of as-
sets of the Separate Account.
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
to substitute shares of another Portfolio of the Fund, or
of another registered open-end management investment compa-
ny, if the shares of the Portfolios are no longer available
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.
ADDITIONS,
DELETIONS, OR
SUBSTITUTIONS OF
INVESTMENTS
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
<PAGE>
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 New York 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
<PAGE>
TABLE OF CONTENTS FOR THE VANGUARD VARIABLE ANNUITY PLAN CONTRACT STATEMENT OF
ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
32
<PAGE>
FIRST PROVIDIAN LIFE & HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
VANGUARD VARIABLE ANNUITY PLAN CONTRACT
OFFERED BY
FIRST PROVIDIAN LIFE & HEALTH INSURANCE COMPANY
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
520 COLUMBIA DRIVE
JOHNSON CITY, NEW YORK 13790
----------------
This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Vanguard Variable Annuity Plan Contract (the
"Contract") offered by First Providian Life & Health Insurance Company (the
"Company"). 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>
<CAPTION>
TABLE OF CONTENTS PAGE
----------------- ----
<S> <C>
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
</TABLE>
B-1
<PAGE>
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 on 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 Pay-
ment is equal to the number of Annuity Units multiplied by the Annuity Unit
value for the Subaccount on 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:
<TABLE>
<CAPTION>
NET ASSETS* RATE
----------- ------
<S> <C>
First $1.5 Billion................................................... 0.375%
Over $1.5 Billion.................................................... 0.300%
</TABLE>
* Based on combined net assets of the Separate Account and Separate Account
IV of 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 the time of initial purchase and on the last business day of
each year.
B-2
<PAGE>
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.
EXCHANGES
After the Annuity Date, if a Variable Annuity Option has been chosen, the
Contract Owner may, by telephone or written request, exchange the current
value of the existing Subaccount to Annuity Units of any other Subaccount then
available. The request for the exchange must be received, however, at least 10
Business Days prior to the first payment date on which the exchange is to take
effect. This exchange shall result in the same dollar amount of Annuity Pay-
ment on the date of exchange. The Contract 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 provide 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
<PAGE>
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 of .02% of the Funds' average net assets
for the fiscal year ended September 30, 1995. 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
<PAGE>
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]
----
c X d
Where:
[a] equals the net investment income earned during the period by the Series
attributable to shares owned by a Subaccount
[b] equals the expenses accrued for the period (net of reimbursements)
[c] equals the average daily number of Units outstanding during the period
[d] equals the maximum offering price per Accumulation Unit on the last day
of the period
Yield on the Subaccount is earned from the increase in net asset value of
shares of the Series in which the Subaccount invests and from dividends 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.
<TABLE>
<S> <C>
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
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
YEAR ENDED SINCE
12/29/95 INCEPTION*
---------- ----------
<S> <C> <C>
High-Grade Bond Subaccount............................. 17.47% 7.80%
Balanced Subaccount.................................... 31.76% 14.80%
Equity Index Subaccount................................ 36.67% 15.71%
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........................ -- --
</TABLE>
- --------
* Since Inception:
Equity Index Subaccount and High-Grade Bond Subaccount--December 16, 1992
Balanced Subaccount--December 16, 1992
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
<PAGE>
Reports and marketing materials may, from time to time, include information
concerning the rating of First Providian Life & Health Insurance Company as
determined by A.M. Best, Moody's, Standard & Poor's or other recognized rating
services. Reports and promotional literature may also contain other 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 of New York
changed its name to First Providian Life & Health Insurance Company. All the
stock of the Company is owned by Veterans Life Insurance Company, which is a
subsidiary of Providian Life & Health Insurance Company, a Missouri insurance
company ("PLH"). 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 PLH. 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 the
State of New York, and is subject to regulation by the New York State Depart-
ment of Insurance. An annual statement is filed with the New York
Superintendant of Insurance on or before March 1 of each year covering the op-
erations and reporting on the financial condition of the Company as of Decem-
ber 31 of the preceding calendar year. Periodically, the New York
Superintendant of Insurance examines the financial condition of the Company,
including the liabilities and reserves of the Separate Account.
The availability of certain contract rights and provisions depends on state
approval and/or filing and review 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 regulations promulgated thereunder, the Company
will mail to all Contract Owners at their last known address of record, at
least semiannually, reports containing such information as may be required un-
der that Act or by any other applicable law or regulation.
B-7
<PAGE>
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, including
the Report of Independent Auditors thereon, which are also included in this
Statement of Additional Information, should be distinguished from the finan-
cial statements of the Separate Account and should be considered only as bear-
ing on the ability of the Company to meet its obligations under the Contracts.
They should not be considered as bearing on the investment performance of the
assets held in the Separate Account.
B-8
<PAGE>
Financial Statements
First Providian Life and Health Insurance
Company Separate Account B
Years ended December 31, 1995 and 1994
with Report of Independent Auditors
<PAGE>
First Providian Life and Health Insurance Company
Separate Account B
Financial Statements
Years ended December 31, 1995 and 1994
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
<PAGE>
Report of Independent Auditors
Contract Holders
First Providian Life and Health Insurance Company Separate Account B
We have audited the accompanying statements of assets and liabilities of First
Providian Life and Health Insurance Company Separate Account B (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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 First Providian Life and Health Insurance Company
Separate Account B 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
<PAGE>
First Providian Life and Health Insurance Company
Separate Account B
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
---------------------------
<S> <C> <C>
ASSETS
Investments in Vanguard
Variable Insurance Fund:
Money Market Portfolio (1995 and 1994,
respectively: 10,799,962.550 and
6,066,629.440 shares at net asset
value of $1.00 per share; cost
$10,799,963 and $6,066,629) $10,799,963 $ 6,066,629
High-Grade Bond Portfolio (1995 and
1994, respectively: 835,577.655 and
665,924.845 shares at net asset
value of $10.75 and $9.71 per
share; cost $8,524,987 and
$6,775,060) 8,982,460 6,466,130
Balanced Portfolio (1995 and 1994,
respectively: 929,958.708
and 871,439.349 shares at
net asset value of $13.95
and $10.98 per share; cost
$10,729,191 and $9,871,297) 12,972,924 9,568,404
Equity Index Portfolio (1995 and
1994, respectively:
868,879.713 and 577,276.233
shares at net asset value of
$16.30 and $12.24 per share;
cost $11,501,260 and
$7,022,553) 14,162,739 7,065,861
Growth Portfolio (1995 and 1994,
respectively: 638,511.750 and
461,366.487 shares at net
asset value of $14.67 and
$10.87 per share; cost
$7,362,813 and $4,828,458) 9,366,967 5,015,054
Equity Income Portfolio (1995 and
1994, respectively:
419,741.636 and 323,476.578
shares at net asset value of
$12.91 and $9.74 per share;
cost $4,436,629 and
$3,311,142) 5,418,865 3,150,662
International Portfolio (1995 and 1994,
respectively: 438,058.080 and
323,369.608 shares at net asset
value of $11.54 and $10.10 per
share; cost $4,586,612 and
$3,305,355) 5,055,190 3,266,033
--------------------------
TOTAL ASSETS 66,759,108 40,598,773
LIABILITIES
Amounts due to First Providian Life
and Health Insurance Company 20,790 13,972
Amounts due to the Vanguard Group, Inc. 10,999 27,793
--------------------------
NET ASSETS $66,727,319 $40,557,008
==========================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
---------------------------
<S> <C> <C>
NET ASSETS ATTRIBUTABLE TO
VARIABLE ANNUITY CONTRACT OWNERS
Money Market Subaccount (1995 and
1994, respectively: accumulation
units outstanding 9,080,164.861 and
5,365,112.677; unit value
$1.190771 and $1.130419) $10,812,397 $ 6,064,825
High-Grade Bond Subaccount (1995 and 1994,
respectively: accumulation units
outstanding 621,861.498 and
525,581.016; unit value
$14.436898 and $12.289960) 8,977,751 6,459,370
Balanced Subaccount (1995
and 1994, respectively:
accumulation units
outstanding 766,458.776
and 744,654.789; unit
value $16.884656 and
$12.814549) 12,941,393 9,542,415
Equity Index Subaccount (1995 and 1994,
respectively: accumulation units
outstanding 783,606.794 and
534,100.758; unit value
$18.073261 and $13.223746) 14,162,330 7,062,813
Growth Subaccount (1995 and 1994,
respectively: accumulation units
outstanding 620,485.748
and 457,117.267; unit
value $15.089461 and
$10.964223) 9,362,795 5,011,936
Equity Income Subaccount (1995 and 1994,
respectively: accumulation units
outstanding 380,466.275 and
305,755.616; unit value
$14.239424 and $10.303993) 5,417,621 3,150,504
International Subaccount (1995 and 1994,
respectively: accumulation units
outstanding 432,692.144 and
322,389.639; unit value
$11.678122 and $10.127948) 5,053,032 3,265,145
--------------------------
NET ASSETS ATTRIBUTABLE TO
VARIABLE ANNUITY CONTRACT
OWNERS $66,727,319 $40,557,008
==========================
</TABLE>
See accompanying notes.
3
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Money High-Grade Equity Equity
Market Bond Balanced Index Growth Income International Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 475,452 $ 496,098 $ 441,480 $ 338,218 $ 203,874 $ 186,897 $ 62,754 $ 2,204,773
Expenses:
Mortality and expense risk
and administrative charges 31,690 36,783 61,206 48,361 36,566 21,822 21,256 257,684
--------------------------------------------------------------------------------------------------
Net investment income 443,762 459,315 380,274 289,857 167,308 165,075 41,498 1,947,089
Realized and unrealized gain
on investments:
Net realized gain from
investment transactions:
Proceeds from sales 8,809,248 830,901 1,857,126 1,834,629 1,223,853 479,199 798,041 15,832,997
Cost of investments sold 8,809,248 824,201 1,789,701 1,652,059 1,079,469 457,088 778,956 15,390,722
--------------------------------------------------------------------------------------------------
- 6,700 67,425 182,570 144,384 22,111 19,085 442,275
Net unrealized appreciation
(depreciation) of
investments:
At end of year - 457,473 2,243,733 2,661,479 2,004,154 982,236 468,578 8,817,653
At beginning of year - (308,930) (302,893) 43,308 186,596 (160,480) (39,322) (581,721)
--------------------------------------------------------------------------------------------------
- 766,403 2,546,626 2,618,171 1,817,558 1,142,716 507,900 9,399,374
--------------------------------------------------------------------------------------------------
Net gain on investments - 773,103 2,614,051 2,800,741 1,961,942 1,164,827 526,985 9,841,649
--------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $ 443,762 $1,232,418 $2,994,325 $3,090,598 $2,129,250 $1,329,902 $568,483 $11,788,738
==================================================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT B
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Money High-Grade Equity Equity
Market Bond Balanced Index Growth Income International Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends $ 245,588 $ 341,608 $ 371,433 $ 171,806 $ 43,757 $ 134,125 $ 17,779 $ 1,326,096
Expenses:
Mortality and expense risk
and administrative charges 34,193 29,990 78,091 39,277 24,606 18,788 9,442 234,387
--------------------------------------------------------------------------------------------------
Net investment income 211,395 311,618 293,342 132,529 19,151 115,337 8,337 1,091,709
Realized and unrealized gain
(loss) on investments:
Net realized gain (loss)
from investment
transactions:
Proceeds from sales 14,376,456 1,649,982 2,420,635 1,439,764 835,962 1,633,335 279,583 22,635,717
Cost of investments sold 14,376,456 1,749,132 2,411,914 1,403,680 843,508 1,653,509 265,787 22,703,986
--------------------------------------------------------------------------------------------------
- (99,150) 8,721 36,084 (7,546) (20,174) 13,796 (68,269)
Net unrealized appreciation
(depreciation) of
investments:
At end of year - (308,930) (302,893) 43,308 186,596 (160,480) (39,322) (581,721)
At beginning of year - (31,929) 138,776 172,931 51,240 (11,093) - 319,925
--------------------------------------------------------------------------------------------------
- (277,001) (441,669) (129,623) 135,356 (149,387) (39,322) (901,646)
--------------------------------------------------------------------------------------------------
Net gain (loss) on investments - (376,151) (432,948) (93,539) 127,810 (169,561) (25,526) (969,915)
--------------------------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting from
operations $ 211,395 $ (64,533) $ (139,606) $ 38,990 $ 146,961 $ (54,224) $ (17,189) $ 121,794
==================================================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT B
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Money High-Grade Equity Equity
Market Bond Balanced Index Growth Income International Total
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1995 $ 6,064,825 $6,459,370 $9,542,415 $ 7,062,813 $5,011,936 $3,150,504 $3,265,145 $40,557,008
Increase in net assets
resulting from operations:
Net investment income 443,762 459,315 380,274 289,857 167,308 165,075 41,498 1,947,089
Net realized gain on
investments - 6,700 67,425 182,570 144,384 22,111 19,085 442,275
Net unrealized appreciation
of investments - 766,403 2,546,626 2,618,171 1,817,558 1,142,716 507,900 9,399,374
-----------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 443,762 1,232,418 2,994,325 3,090,598 2,129,250 1,329,902 568,483 11,788,738
Changes from variable annuity
contract transactions:
Transfers of net premiums 9,557,439 623,112 1,045,702 2,766,760 1,448,375 672,523 867,858 16,981,769
Transfers for terminations (801,670) (122,891) (234,624) (1,148,629) (103,073) (105,027) (84,282) (2,600,196)
Net transfers within
Separate Account B (4,451,959) 785,742 (406,425) 2,390,788 876,307 369,719 435,828 -
-----------------------------------------------------------------------------------------------------
Net increase in net assets
derived from variable
annuity contract
transactions 4,303,810 1,285,963 404,653 4,008,919 2,221,609 937,215 1,219,404 14,381,573
-----------------------------------------------------------------------------------------------------
Net increase in net assets 4,747,572 2,518,381 3,398,978 7,099,517 4,350,859 2,267,117 1,787,887 26,170,311
-----------------------------------------------------------------------------------------------------
Balances at December 31, 1995 $10,812,397 $8,977,751 $12,941,393 $14,162,330 $9,362,795 $5,417,621 $5,053,032 $66,727,319
=====================================================================================================
</TABLE>
See accompanying notes.
6
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT B
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Money High-Grade Equity Equity
Market Bond Balanced Index Growth Income International Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1994 $ 4,448,478 $3,390,280 $8,244,214 $5,776,599 $2,327,449 $3,039,278 $ - $27,226,298
Increase (decrease) in net
assets resulting from
operations:
Net investment income 221,395 311,618 293,342 132,529 19,151 115,337 8,337 1,091,709
Net realized gain (loss) on
investments - (99,150) 8,721 36,084 (7,546) (20,174) 13,796 (68,269)
Net unrealized
appreciation
(depreciation) of
investments - (277,001) (441,669) (129,623) 135,356 (149,387) (39,322) (901,646)
-------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from
operations 211,395 (64,533) (139,606) 38,990 146,961 (54,224) (17,189) 121,794
Changes from variable
annuity contract
transactions:
Transfers of net premiums 8,954,237 3,654,640 911,380 934,009 1,070,707 469,316 875,901 16,870,190
Transfers for terminations (2,218,665) (93,605) (487,840) (378,837) (201,439) (263,740) (17,148) (3,661,274)
Net transfers within Separate
Account B (5,330,620) (427,412) 1,014,267 692,052 1,668,258 (40,126) 2,423,581 -
--------------------------------------------------------------------------------------------------
Net increase in net assets
derived from variable annuity
contract transactions 1,404,952 3,133,623 1,437,807 1,247,224 2,537,526 165,450 3,282,334 13,208,916
--------------------------------------------------------------------------------------------------
Net increase in net assets 1,616,347 3,069,090 1,298,201 1,286,214 2,684,487 111,226 3,265,145 13,330,710
--------------------------------------------------------------------------------------------------
Balances at December 31, 1994 $ 6,064,825 $6,459,370 $9,542,415 $7,062,813 $5,011,936 $3,150,504 $3,265,145 $40,557,008
==================================================================================================
</TABLE>
See accompanying notes.
7
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ACCOUNTING POLICIES
ORGANIZATION OF THE ACCOUNT
First Providian Life and Health Insurance Company Separate Account B (the
"Separate Account") is a separate account of First Providian Life and Health
Insurance Company ("FPLH"), formerly National Home Life Assurance Company of New
York, a wholly-owned subsidiary of Providian Corporation ("Providian"), 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 FPLH.
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 a minimum of ten
days or, for replacement, 20 days). 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
8
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
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.
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.
9
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
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.
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 portfolio will commence operations June 3, 1996.
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. The portfolio will
commence operations June 3, 1996.
There is no assurance that a portfolio will achieve its stated investment
objectives.
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
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
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:
<TABLE>
<CAPTION>
1995 1994
---------------------------
<S> <C> <C>
Money Market Portfolio $13,542,581 $ 5,992,801
High-Grade Bond Portfolio 2,574,128 5,100,025
Balanced Portfolio 2,647,595 4,174,563
Equity Index Portfolio 6,130,767 2,819,873
Growth Portfolio 3,613,826 3,394,726
Equity Income Portfolio 1,582,574 1,913,191
International Portfolio 2,060,212 3,571,142
---------------------------
$32,151,683 $36,966,321
===========================
</TABLE>
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 FPLH 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 FPLH.
Although the assets in the Separate Account are the property of FPLH, the assets
in the Separate Account attributable to the contracts cannot be used to
discharge the liabilities arising out of any other business which FPLH may
conduct. The assets of the Separate Account are available to cover the general
liabilities of FPLH only to the extent that the Separate Account's assets exceed
its liabilities under the contracts.
11
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. FEDERAL INCOME TAXES
Operations of the Separate Account are included in the federal income tax return
of FPLH, 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 FPLH'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 IV of Providian Life and Health
Insurance Company ("PLH"), an affiliate of Providian. 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
$213,800 and $147,579, 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
value of the subaccounts of the Separate Account. This charge is assessed daily
by Vanguard based on the Fund's net assets attributable to the Separate Account
and Separate Account IV of PLH. Additionally, an annual maintenance fee of $25
per contract is
12
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. EXPENSES (CONTINUED)
charged for contracts valued at less than $25,000 at the time of initial
purchase and on the last 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 $43,884
and $86,808, 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:
<TABLE>
<CAPTION>
1995 1994
------------------------- ----------------------
UNITS AMOUNT UNITS AMOUNT
------------------------- ----------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
MONEY MARKET SUBACCOUNT
Issuance of units 11,293 $ 13,072 14,251 $ 15,747
Increase from operations - 444 - 211
Redemption of units (7,578) (8,768) (12,965) (14,342)
---------------------- -------------------
Net increase 3,715 $ 4,748 1,286 $ 1,616
====================== ===================
HIGH-GRADE BOND SUBACCOUNT
Issuance of units 155 $ 2,078 387 $ 4,758
Increase (decrease) from
operations - 1,232 - (65)
Redemption of units (59) (792) (132) (1,624)
---------------------- -------------------
Net increase 96 $ 2,518 255 $ 3,069
====================== ===================
BALANCED SUBACCOUNT
Issuance of units 149 $ 2,206 295 $ 3,803
Increase (decrease) from
operations - 2,994 - (140)
Redemption of units (127) (1,801) (186) (2,365)
---------------------- -------------------
Net increase 22 $ 3,399 109 $ 1,298
====================== ===================
</TABLE>
13
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CONTRACT OWNER TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
UNITS AMOUNT UNITS AMOUNT
----------------- -----------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
EQUITY INDEX SUBACCOUNT
Issuance of units 372 $ 5,793 202 $ 2,648
Increase from operations - 3,091 - 39
Redemption of units (122) (1,784) (107) (1,401)
--------------- ---------------
Net increase 250 $ 7,100 95 $ 1,286
GROWTH SUBACCOUNT
Issuance of units 259 $ 3,410 314 $ 3,351
Increase from operations - 2,129 - 147
Redemption of units (96) (1,188) (77) (814)
--------------- ---------------
Net increase 163 $ 4,351 237 $ 2,684
=============== ===============
EQUITY INCOME SUBACCOUNT
Issuance of units 114 $ 1,396 173 $ 1,779
Increase (decrease) from
operations - 1,330 - (54)
Redemption of units (39) (459) (157) (1,614)
--------------- ---------------
Net increase 75 $ 2,267 16 $ 111
=============== ===============
INTERNATIONAL SUBACCOUNT
Issuance of units 185 $ 1,998 349 $ 3,553
Increase (decrease) from
operations - 568 - (17)
Redemption of units (75) (778) (27) (271)
--------------- ---------------
Net increase 110 $ 1,788 322 $ 3,265
=============== ===============
</TABLE>
14
<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. NET ASSETS
Net assets at December 31, 1995 are summarized in the following tables:
<TABLE>
<CAPTION>
MONEY HIGH-GRADE EQUITY
MARKET BOND BALANCED INDEX
---------------------------------------------------------
<S> <C> <C> <C> <C>
Contract owner transactions $10,081,535 $7,756,044 $ 9,603,564 $10,724,370
Accumulated net investment
income 730,862 859,742 1,001,039 544,534
Accumulated net realized
gain (loss) on investments - (95,508) 93,057 231,947
Net unrealized appreciation
on investments - 457,473 2,243,733 2,661,479
---------------------------------------------------------
$10,812,397 $8,977,751 $12,941,393 $14,162,330
=========================================================
<CAPTION>
EQUITY
GROWTH INCOME INTERNATIONAL TOTAL
---------------------------------------------------------
<S> <C> <C> <C> <C>
Contract owner transactions $ 7,027,152 $4,124,044 $ 4,501,738 $53,818,447
Accumulated net investment
income 194,044 321,250 49,835 3,701,306
Accumulated net realized
gain (loss) on investments 137,445 (9,909) 32,881 389,913
Net unrealized appreciation
on investments 2,004,154 982,236 468,578 8,817,653
---------------------------------------------------------
$ 9,362,795 $5,417,621 $ 5,053,032 $66,727,319
=========================================================
</TABLE>
15
<PAGE>
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
Part A None
Part B Audited Financial Statements
First Providian Life & Health Insurance Company Separate Account B
Years ended December 31, 1995 and 1994 with Report of Independent
Auditors
Audited Financial Statements--Statutory-Basis
First 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 of New York authorizing establishment of the Separate Ac-
count./2/
(2) Not Applicable.
(3) Not Applicable.
(4) Form of variable annuity contract/2/
(5) Form of application/2/
(6) (a) Declaration of Intention and Charter of National Home Life Assur-
ance Company of New York/2/
(b) Amendments to Declaration of Intention and Charter of National Home
Life Assurance Company of New York/2/
(c) Amended and restated By-laws of National Home Life Assurance Com-
pany of New York/2/
(7) Not applicable.
(8) (a) Form of Participation Agreement for the Vanguard Variable Insurance
Fund/2/
(b) First Amendment to Participation, Market Consulting and Administra-
tion Agreement/1/
(c) Administration Agreement/2/
(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 Pre-Effective Amendment No. 1 to the Regis-
tration Statement of the National Home Life Assurance Company Separate Ac-
count IV, File No. 33-36073.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
OFFICERS:
Chairman of the Board and President David J. Miller
Vice President, Treasurer & CFO Dennis E. Brady
Senior Vice President David B. Smith
Senior Vice President/Human Resources
and Corporate Communications John H. Rogers
Vice President, General Counsel and
Secretary David R. Aplington
C-1
<PAGE>
Senior Vice President Martin Renninger
Vice President Thomas B. Nesspor
Vice President Anita R. Tilley
Vice President and Controller Jean A. Young
Vice President Brian Alford
Vice President Edward A. Biemer
Vice President/Underwriting Carolyn M. Kerstein
Vice President Kevin P. McGlynn
Vice President & Assistant Secretary Susan E. Martin
Vice President and Actuary John C. Prestwood, Jr.
Vice President Nancy B. Schuckert
Vice President Joseph D. Strenk
Vice President Douglas E. Menges
Vice President G. Eric O'Brien
Vice President William C. Tomlin
Assistant Vice President James P. Greaton
Vice President/Underwriting William J. Kline
Assistant Vice President Geralyn Barbato
Assistant Vice President Mary Ellen Fahringer
Assistant Vice President Joan G. Chandler
Assistant Vice President & Assistant John A. Mazzuca
Treasurer
Assistant Controller Joseph C. Noone
Assistant Vice President and Consumer
Services Officer Rosalie Smith
Assistant Controller Joseph C. Noone
Second Vice President Rita Biesiot
Second Vice President Cindy L. Chanley
Second Vice President Michael K. Mingus
Second Vice President William Strickland
Second Vice President/Investments Terri L. Allen
Second Vice President/Investments Tom Bauer
Second Vice President/Investments Kirk W. Buese
Second Vice President Curt M. Burns
Second Vice President Karen H. Fleming
Second Vice President Michael F. Lane
Second Vice President John R. Pegues
Second Vice President Frank J. Rosa
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 Caroline A. Johnson
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
C-2
<PAGE>
Second Vice President/Investments Jack McCabe
Second Vice President/Investments Wayne R. Nelis
Second Vice President/Investments James G. Nickerson
Second Vice President/Investments Douglas H. Owen, Jr.
Second Vice President Debra K. Pellman
Second Vice President/Investments Jon L. Skaggs
Second Vice President/Investments James A. Skufca
Second Vice President/Investments Robert Smedley
Second Vice President/Investments Bradley L. Stofferahn
Second Vice President/Investments Randall K. Waddell
Second Vice President and Assistant
Secretary Edward P. Reiter
Assistant Secretary L. Jude Clark
Assistant Secretary Colleen S. Lyons
Assistant Secretary Mary Ann Malinyak
Assistant Secretary John E. Reesor
Assistant Secretary R. Michael Slaven
Product Compliance Officer James T. Bradley
DIRECTORS:
David R. Aplington David J. Miller
Dennis E. Brady Brian H. Perry
I. Donald Britton Martin Renninger
Patricia A. Collins Rosalie M. Smith
Jack M. Dann Paul Yakulis
Jeffrey H. Goldberger Thomas B. Nesspor
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
The Depositor, First Providian Life & Health Insurance Company ("First
Providian"), is directly and indirectly wholly owned by Providian Corporation.
The Registrant is a segregated asset account of First Providian.
The following chart indicates the persons controlled by or under common con-
trol with First Providian Life & Health Insurance Company:
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED
---- --------------- ---------------------------
<S> <C> <C>
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, Inc. Massachusetts 100% College Resource
Group, Inc.
Knight Tuition Payment Plans, Inc. Massachusetts 100% Knight Insurance
Agency, Inc.
Knight Insurance Agency (New New Hampshire 100% Knight Insurance
Hampshire), Inc. Agency, Inc.
Capital General Development Delaware 100% Providian Corporation
Corporation
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED
---- --------------- ---------------------------
<S> <C> <C>
Commonwealth Life Kentucky 100% Capital General
Insurance Company Development Corporation
Agency Holding I, Inc. Delaware 100% Commonwealth
Life Insurance
Corporation
Agency Investments I, Inc. Delaware 100% Agency Holding
I, Inc.
Commonwealth Kentucky 100% Commonwealth
Agency, Inc. Life Insurance
Company
Peoples Security Life North Carolina 100% Capital General
Insurance 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 Kentucky 100% Providian Corporation
Corporation
Providian Capital Management, Delaware 100% Providian Corporation
Inc.
Providian Capital Management Real Delaware 100% Providian Capital
Estate Services, Inc. Management, Inc.
Capital Real Estate Delaware 100% Providian Corporation
Development
Corporation
Capital 200 Block Delaware 100% Providian Corporation
Corporation
Providian Services, Inc. Pennsylvania 100% Veterans Life
Insurance Co.
Capital Values Financial Pennsylvania 100% Providian Corporation
Services, Inc.
Providian Securities Corporation Pennsylvania 100% Capital Values
Financial 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 Kentucky 100% Providian Corporation
Corporation
Providian Investment Advisors, Delaware 100% Providian Corporation
Inc.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED
---- --------------- ---------------------------
<S> <C> <C>
Capital Security North Carolina 100% Providian Corporation
Life Insurance
Company
Security Trust Life Kentucky 100% Capital Security
Insurance Company Life Insurance
Company
Independence Florida 100% Capital Security
Automobile Life Insurance
Association, Inc. Company
Independence Georgia 100% Capital Security
Automobile Club, Inc. Life Insurance
Company
Southlife, Inc. Tennessee 100% Providian Corporation
Providian Bancorp, Inc. Delaware 100% Providian Corporation
First Deposit California 100% Providian Bancorp,
Service Corporation Inc.
First Deposit Life Arkansas 100% Providian Bancorp,
Insurance Company Inc.
First Deposit United States 100% Providian Bancorp,
National Bank Inc.
Winnisquam Community Development New Hampshire 96% First Deposit
Corporation National Bank
4% First New-Hampshire Bank
Providian National Bank United States 100% Providian Bancorp,
Inc.
Providian National Bancorp California 100% Providian Bancorp,
Inc.
Providian Credit Corporation Delaware 100% Providian Bancorp,
Inc.
Commonwealth Premium California 100% Providian National
Finance Bancorp
Providian Credit Utah 100% Providian Bancorp,
Services, Inc. Inc.
National Liberty Pennsylvania 100% Providian Corporation
Corporation
National Home Life Pennsylvania 100% National Liberty
Corporation Corporation
Compass Rose Pennsylvania 100% National Liberty
Development Corporation Corporation
Association Illinois 100% National Liberty
Consultants, Inc. Corporation
Valley Forge Pennsylvania 100% National Liberty
Associates, Inc. Corporation
Veterans Benefits Pennsylvania 100% National Liberty
Plans, Inc. Corporation
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED
---- --------------- ---------------------------
<S> <C> <C>
Veterans Insurance Delaware 100% National Liberty
Services, Inc. Corporation
Financial Planning Washington, 100% National Liberty
Services, Inc. D.C. Corporation
Providian Auto and Home Missouri 100% Providian Corporation
Insurance Company
Academy Insurance Group, Inc. Delaware 100% Providian Auto and
Home Insurance Company
Academy Life Insurance Company Missouri 100% Academy
Insurance Group, Inc.
Pension Life Insurance Company of New Jersey 100% Academy
America Insurance Group, Inc.
Academy Services, Inc. Delaware 100% Academy
Insurance Group, Inc.
Ammest Development Corporation, Kansas 100% Academy
Inc. Insurance Group, Inc.
Ammest Insurance Agency, Inc. California 100% Academy
Insurance Group, Inc.
Ammest Massachusetts Insurance Massachusetts 100% Academy
Agency, Inc. Insurance Group, Inc.
Ammest Realty, Inc. Pennsylvania 100% Academy
Insurance Group, Inc.
AMPAC, Inc. Texas 100% Academy
Insurance Group, Inc.
AMPAC Insurance Agency, Inc. Pennsylvania 100% Academy
Insurance Group, Inc.
Data/Mark Services, Inc. Delaware 100% Academy
Insurance Group, Inc.
Force Financial Group, Inc. Delaware 100% Academy
Insurance Group, Inc.
Force Financial Services, Inc. Massachusetts 100% Force Financial Group,
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 Services, Pennsylvania 100% Academy Insurance
Inc. Group, Inc.
Unicom Administrative Services Germany 100% Unicom Administrative
GmbH Service Inc.
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED
---- --------------- ---------------------------
<C> <C> <S>
Providian Property and Kentucky 100% Providian Auto
Casualty Insurance Company and Home Insurance
Company
Providian Fire 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 and 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 Illinois 100% Providian Life and
Insurance Company Health Insurance Company
First Providian Life & Health New York 100% Veterans Life
Insurance Company Insurance Company
Benefit Plans, Inc. Delaware 100% Providian
Corporation
DurCo Agency, Inc. Virginia 100% Benefit Plans, Inc.
</TABLE>
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 1,482 owners of Contracts.
ITEM 28. INDEMNIFICATION
Item 28 is incorporated by reference from the initial Registration Statement
of National Home Life Assurance Company of New York Separate Account B, File
No. 33-39946.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) None.
(b) Not Applicable.
C-7
<PAGE>
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 on any matter relating to the Separate Ac-
count's operations, policies or practices.
C-8
<PAGE>
SIGNATURES
AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF
1940, THE REGISTRANT, FIRST PROVIDIAN LIFE & HEALTH INSURANCE COMPANY SEPARATE
ACCOUNT B, CERTIFIES THAT IT MEETS THE REQUIREMENTS OF SECURITIES ACT RULE
485(B) FOR EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT AND HAS CAUSED
THIS AMENDED REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF IN THE COUNTY
OF JEFFERSON AND COMMONWEALTH OF KENTUCKY ON THE 25TH DAY OF APRIL, 1996.
First Providian Life & Health
Insurance Company Separate Account
B (Registrant)
By: First Providian Life & Health
Insurance Company
By: David J. Miller*
---------------------------------
DAVID J. MILLER
CHAIRMAN OF THE BOARD
AND PRESIDENT
First Providian Life & Health
Insurance Company (Depositor)
By: David J. Miller*
---------------------------------
DAVID J. MILLER
CHAIRMAN OF THE BOARD
AND PRESIDENT
*By: /s/ R. Michael Slaven
---------------------------
R. MICHAEL SLAVEN
ATTORNEY-IN-FACT
C-9
<PAGE>
AS REQUIRED BY THE SECURITIES ACT OF 1933, THIS AMENDED REGISTRATION STATE-
MENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
David J. Miller* Director, Chairman April 25, 1996
- ------------------------------------- of the Board, and
DAVID J. MILLER President
Dennis E. Brady* Director, Vice April 25, 1996
- ------------------------------------- President,
DENNIS E. BRADY Treasurer and Chief
Financial Officer
David R. Aplington* Director, Vice April 25, 1996
- ------------------------------------- President,
DAVID R. APLINGTON Secretary and
General Counsel
I. Donald Britton* Director April 25, 1996
- -------------------------------------
I. DONALD BRITTON
Patricia A. Collins* Director April 25, 1996
- -------------------------------------
PATRICIA A. COLLINS
Jack M. Dann* Director April 25, 1996
- -------------------------------------
JACK M. DANN
Jeffrey H. Goldberger* Director April 25, 1996
- -------------------------------------
JEFFREY H. GOLDBERGER
Brian H. Perry* Director April 25, 1996
- -------------------------------------
BRIAN H. PERRY
Martin Renninger* Director and Senior April 25, 1996
- ------------------------------------- Vice President
MARTIN RENNINGER
Paul Yakulis* Director April 25, 1996
- -------------------------------------
PAUL YAKULIS
Rosalie M. Smith* Director April 25, 1996
- -------------------------------------
ROSALIE M. SMITH
Jean A. Young* Vice President and April 25, 1996
- ------------------------------------- Controller (Chief
JEAN A. YOUNG Accounting Officer)
Thomas B. Nesspor* Director and Vice April 25, 1996
- ------------------------------------- President
THOMAS B. NESSPOR
*By: /s/ R. Michael Slaven
-----------------------------
R. MICHAEL SLAVEN
ATTORNEY-IN-FACT
</TABLE>
C-10
<PAGE>
EXHIBIT 8(B)
FIRST AMENDMENT TO PARTICIPATION, MARKET CONSULTING
AND ADMINISTRATION AGREEMENT AMONG
VANGUARD VARIABLE INSURANCE FUND, INC. AND
THE VANGUARD GROUP, INC. AND
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(FORMERLY KNOWN AS NATIONAL HOME LIFE ASSURANCE COMPANY OF NEW YORK)
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 First Providian Life and Health Insurance Company ("Com-
pany") for the purpose of amending the Participation, Marketing Consulting and
Administration Agreement, dated November 16, 1992, by and among Fund, Sponsor
and the Company (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 First Providian Life and Health Insurance Company (successor
by name change to National Home Life Assurance Company of New York).
2. For purposes of the Agreement, as amended hereby, the term "Account" is
defined to mean the Company's Separate Account B and any other segregated as-
set account of the Company established in connection with the Contracts of-
fered under the Agreement. Except as otherwise defined in this First Amend-
ment, the defined words and phrases in the Agreement shall have the same mean-
ings 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 offering
of, variable annuity contracts (which are not intended to include single
premium life insurance contracts or single premium deferred (fixed) con-
tracts), other than the Contract; provided that the Sponsor may participate
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 financial 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 10.1 is deleted in its entirety and the following new Section
10.1 is substituted in place thereof:
<PAGE>
10.1 The initial term of this Agreement shall be from November 16, 1992
through April 30, 2001. This Agreement shall thereafter automatically renew
for an additional period of two years and after such additional period 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 10.2 is deleted in its entirety.
11. Notice to the Company, as provided in Section 11 shall be changed as
follows:
Jeff Lammers Providian Capital Management 400 West Market Street
Louisville, Kentucky 40202
12. The following new Sections 12.10, 12.11, 12.12 and 12.13 are added:
12.10 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 employment
or hire any employee of the Company or any of its affiliates engaged in the
development, distribution or administration of the Contracts. 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 affili-
ates will, directly or indirectly, solicit for employment or hire any em-
ployee of the Sponsor or any of its affiliates engaged in the development,
distribution or administration of the Contracts.
12.11 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, regula-
tion, subpoena, court order or other lawful authority. For purpose of this
Section 12.11, Work Product means all concepts, designs, files, reports,
programs, manuals, listings, databases and any other material developed 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 annuities (such as,
among other things, insurance features, separate account charges,
annuitization options, software programs). Sponsor shall have the right to
obtain from Company and to hold in its own name copyrights, trademark reg-
istrations, patents or whatever protection Sponsor may deem appropriate for
the Work Product. Company agrees to give Sponsor, at Sponsor's expense, all
assistance reasonably required to protect the rights set forth in this Sec-
tion 12.11. 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.
12.12 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 par-
ties; all prior agreements, representations, statements, negotiations and
understandings between the parties are superseded hereby. The Company ac-
knowledges the Sponsor does not guarantee any level of business.
12.13 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 comprised of representatives of
Sponsor's Legal and Corporate Planning Departments and Company. If agree-
ment cannot be reached by such committee within ten (10) days thereafter,
the dispute shall be settled by arbitration in accordance with the rules
then in effect of the American Arbitration Association. The arbitration
shall be held in the City of Philadelphia, Commonwealth of Pennsylvania,
unless Company and Sponsor agree to hold the arbitration in a different lo-
cation. Any judgment upon the award rendered may be entered in any court
having jurisdiction and shall be final 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
<PAGE>
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 ef-
fect.
IN WITNESS WHEREOF, each of the Parties hereto has caused this First Amend-
ment to be duly executed as of the date first set forth above.
Company:
FIRST PROVIDIAN LIFE AND HEALTH
ASSURANCE COMPANY
/s/ Joseph Strenk
_____________________________________
Fund:
VANGUARD VARIABLE INSURANCE FUND,
INC.
/s/ John J. Brennan
_____________________________________
Sponsor:
THE VANGUARD GROUP, INC.
/s/ John J. Brennan
_____________________________________
<PAGE>
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 Account B and Separate Account IV of Providian Life and
Health Insurance Company (excluding assets deposited with respect to payouts
or immediate contracts described in paragraph II) as follows:
<TABLE>
<CAPTION>
NET ASSETS RATE
---------- ------
<S> <C>
First $1.5 billion................................................ 0.375%
Over $1.5 billion................................................. 0.30%
</TABLE>
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 Account B and Separate Account IV of
Providian Life and Health Insurance Company (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
assets of the Company's Separate Account B and Separate Account IV of
Providian Life and Health Insurance Company (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 Account B and Separate Account IV of
Providian Life and Health Insurance Company (excluding assets deposited with
respect to deferred contracts described in paragraph I).
<PAGE>
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 mod-
ified 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.
<PAGE>
EXHIBIT 9(a)
April 25, 1996
First Providian Life & Health Insurance Company Administrative Offices 520
Columbia Drive Johnson City, New York 13790
RE: First Providian Life & Health Insurance Company Separate Account B--
Opinion and Consent
To Whom It May Concern:
This opinion and consent is furnished in connection with the filing of Post-
Effective Amendment No. 5 (the "Amendment") to the Registration Statement on
Form N-4, File No. 33-39946 (the "Registration Statement") under the Securi-
ties Act of 1933, as amended (the "Act"), of First Providian Life & Health In-
surance Company Separate Account B ("Separate Account B"). Separate Account B
receives and invests premiums allocated to it under a flexible premium multi-
funded annuity contract (the "Annuity Contract"). The Annuity Contract is of-
fered in the manner described in the prospectus contained in the Registration
Statement (the "Prospectus").
In my capacity as legal adviser to First Providian Life & Health Insurance
Company, I hereby confirm the establishment of Separate Account B pursuant to
a resolution adopted by the Board of Directors of First Providian Life &
Health Insurance Company for a separate account for assets applicable to the
Annuity Contract, pursuant to the provisions of Section 46 of the New York In-
surance Statutes. In addition, I have made such examination of the law in ad-
dition to consultation with outside counsel and have examined such corporate
records and such other documents as I consider appropriate as a basis for the
opinion hereinafter expressed. On the basis of such examination, it is my pro-
fessional opinion that:
1. First Providian Life & Health Insurance Company is a corporation duly
organized and validly existing under the laws of the State of New York.
2. Separate Account B is an account established and maintained by First
Providian Life & Health Insurance Company pursuant to the laws of the
State of New York, under which income, capital gains and capital losses
incurred on the assets of Separate Account B are credited to or charged
against the assets of Separate Account B, without regard to the income,
capital gains or capital losses arising out of any other business which
First Providian Life & Health Insurance Company may conduct.
3. Assets allocated to Separate Account B will be owned by First Providian
Life & Health Insurance Company. The assets in Separate Account B at-
tributable to the Annuity Contract generally are not chargeable with li-
abilities arising out of any other business which First Providian Life &
Health Insurance Company may conduct. The assets of Separate Account B
are available to cover the general liabilities of First Providian Life &
Health Insurance Company only to the extent that the assets of Separate
Account B exceed the liabilities arising under the Annuity Contracts.
4. The Annuity Contracts have been duly authorized by First Providian Life
& Health Insurance Company and, when sold in jurisdictions authorizing
such sales, in accordance with the Registration Statement, will consti-
tute validly issued and binding obligations of First Providian Life &
Health Insurance Company in accordance with their terms.
5. Owners of the Annuity Contracts as such, will not be subject to any de-
ductions, charges or assessments imposed by First Providian Life &
Health Insurance Company other than those provided in the Annuity Con-
tract.
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 Pro-
spectus.
Very truly yours,
/s/ Kimberly A. Scouller
Assistant General Counsel
<PAGE>
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
First Providian Life & Health Insurance Company 520 Columbia Drive Johnson
City, New York 13790
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. 5 to the
Registration Statement on Form N-4 (file No. 33-39946) filed by First
Providian Life & Health Insurance Company and First Providian Life & Health
Insurance Company Separate Account B with the Securities and Exchange Commis-
sion 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
<PAGE>
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 First Providian Life and Health Insurance Company Separate Account
B and the statutory-basis financial statements of First Providian Life and
Health Insurance Company in Post-Effective Amendment No. 5 to the Registration
Statement (Form N-4 No. 33-39946) and related Prospectus of First Providian Life
and Health Insurance Company Separate Account B.
/s/ Ernst & Young
Louisville, Kentucky
April 23, 1996
<PAGE>
EXHIBIT 13
PERFORMANCE CALCULATION EXAMPLE
SEPARATE ACCOUNT B
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
