<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 1997.
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. 8 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10 [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):
[_] Immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] On December 1, 1997 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, 1996, on February 27,
1997.
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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;
Additional Performance Measures
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)
DECEMBER 1, 1997
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 replace-
ment), 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 Ac-
count B (the "Separate Account"). Assets of each Subaccount are invested in
corresponding Portfolios of Vanguard Variable Insurance Fund (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 Portfo-
lio, the High Yield Bond Portfolio, and the Small Company Growth Portfolio.
Net Purchase Payments are automatically allocated to the Money Market Portfo-
lio until the end of your Free Look Period, and are subsequently allocated ac-
cording 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 par-
tial 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 sub-
ject 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 re-
ceived 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 Van-
guard Variable Insurance Fund. Please read both Prospectuses carefully and re-
tain 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 COMMIS-
SION 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 Re-
turn................ 11
The Company and the
Separate Account.... 12
Vanguard Variable
Insurance Fund...... 13
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
CONTRACT FEATURES... 15
Free Look Period.... 15
Contract Application
and Purchase
Payments........... 15
Allocation of
Purchase Payments.. 17
Charges and Deduc-
tions.............. 17
Accumulated Value... 19
Dividends and Capi-
tal Gains Treat-
ment............... 19
Exchanges Among the
Portfolios......... 19
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Full and Partial
Withdrawals........ 21
IRS-Required Distri-
butions............ 22
Minimum Balance
Requirements....... 22
Designation of a
Beneficiary........ 22
Death of Annuitant
Prior to Annuity
Date............... 23
Annuity Date........ 24
Annuity Payment Op-
tions.............. 24
FEDERAL TAX
CONSIDERATIONS..... 27
General Information. 31
</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 The Contract provides a vehicle for investing on a tax-
ANNUITY PLAN deferred basis in nine Portfolios offered by The Van-
CONTRACT guard Group, Inc. Monies may be subsequently withdrawn
from the Contract either as a lump sum or as an annuity
income. Because Accumulated Values and, to the extent
Variable Annuity Payments are selected, Annuity Payments
depend on the investment experience of the selected
Portfolios, you bear all investment risk for monies in-
vested under the Contract. The investment performance of
the Portfolios is not guaranteed.
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WHO SHOULD INVEST The Contract is designed for investors seeking long-
term, tax-deferred accumulation of funds, generally for
retirement but also for other long-term investment pur-
poses. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state mar-
ginal tax brackets who have exhausted other avenues of
tax deferral, such as "pre-tax" contributions to employ-
er-sponsored retirement or savings plans. The Contract
is intended for long-term investors.
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INVESTMENT CHOICES Your investment in the Contract may be allocated among
several Subaccounts of the Separate Account. The
Subaccounts in turn invest exclusively in the nine Port-
folios of Vanguard Variable Insurance Fund. The Fund, a
member of The Vanguard Group of Investment Companies,
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
HighYield Bond Portfolio and the Small Company Growth
Portfolio. The assets of each Portfolio are separate,
and each Portfolio has distinct investment objectives
and policies as described in the accompanying Fund
Prospectus. PAGE 13
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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
Contract), during which you may cancel your investment
in the Contract. To cancel your investment, please re-
turn 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
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HOW TO INVEST To invest in the Contract, please complete the accompa-
nying application form. The minimum Initial Purchase
Payment is $5,000; the minimum Portfolio balance is
$1,000; and subsequent 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 Annuitant specified in the
Contract is living. Please note that when purchasing a
Contract, the Annuitant you name, and the Joint Annui-
tant if applicable, must be 75 years of age or less. PAGE
15
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3
<PAGE>
ALLOCATION OF Your Net Purchase Payments are initially allocated to
PURCHASE PAYMENTS the Money Market Portfolio when your Contract is issued.
Subsequently, 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 instruc-
tions. Requests to change the allocation of subsequent
Net Purchase Payments may be made in writing or by tele-
phone if you have com- pleted the Authorization
Form. PAGE 17
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CHARGES AND The Contract imposes no sales charges. The costs of the
DEDUCTIONS UNDER Contract include mortality and expense risk charges,
THE CONTRACT maintenance and administrative charges which cover the
cost of administering the Contract, and management, ad-
visory and other fees, which reflect the costs of Van-
guard Variable Insurance Fund. There are no charges un-
der the Contract for withdrawals, although withdrawals
made prior to age 59 1/2 may be subject to a 10% penalty
tax. PAGE 17
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EXCHANGES You may make exchanges among the Fund's Portfolios sub-
ject to certain restrictions on excess exchange activi-
ty. These restrictions do not apply, however, to non-
substantive exchanges 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
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FULL AND PARTIAL You may withdraw all or part of the Accumulated Value of
WITHDRAWALS the Contract before the earlier of the Annuity Date or
the Annuitant's death (or the Joint Annuitant's death,
if later). You may establish systematic withdrawals from
your Contract, and receive distributions at regular in-
tervals. Withdrawals made prior to age 59 1/2 may be
subject to a 10% penalty tax. PAGE 21
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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 Accumu-
lated Value of the Contract or the sum of all Purchase
Payments (less any partial withdrawals). Your Benefi-
ciary may elect to receive these proceeds as a lump sum
or as Annuity Payments. PAGE 23
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ANNUITY PAYMENT Beginning on the Annuity Date, you may withdraw monies
OPTIONS from the Contract in the form of an annuity income. As
the Contract 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 designated period or for life (for either
a single or joint life), with or without a guaranteed
number of payments. Annuity Payments can be fixed, or
can vary with the invest- ment performance of a Portfo-
lio of the Fund. You may elect a lump-sum payment prior
to the Annuity Date in lieu of Annuity Payments. PAGE 24
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4
<PAGE>
CONTRACT AND If you have questions about your Contract, please tele-
POLICYHOLDER phone the Vanguard Variable Annuity Center (1-800-258-
INFORMATION 4271). Please have ready the Contract number and the
Contract Owner's name when you call. As Contract Owner,
you will receive 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 1996 fiscal year. The expenses
and fees shown for the High Yield Bond Portfolio and the
Small Company Growth Portfolio are the annualized ex-
penses and fees incurred since June 3, 1996 to December
31, 1996. The purpose of this table is to assist you in
understanding the various costs and expenses that you
would bear directly or indirectly as a purchaser of the
Contract. The fee table reflects ALL expenses for both
the Separate Account and the Fund. For a complete dis-
cussion of contract costs and expenses, 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 Contract 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**......................... .28%
Administrative Expense Charge............................... .10%
---
TOTAL ANNUAL SEPARATE ACCOUNT EXPENSES.................... .38%
===
</TABLE>
** This charge is currently reduced to 0.28% of all as-
sets when net assets attributable to the Separate Ac-
count (and Separate Account IV of Providian Life &
Health Insurance Company) exceed $2.5 billion. This
charge is further reduced to 0.27% of all assets when
net assets attributable to the Separate Account (and
Separate Account IV of Providian Life & Health Insur-
ance Company) exceed $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............... .13% .18% .18% .19% .20% .20% .22% .24% .20%
Investment Advisory
Fees................... .01 .01 .10 .00 .10 .15 .16 .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. .02 .04 .01 .01 .03 .02 .09 .04 .04
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Other Expenses.... .05 .06 .03 .03 .05 .04 .11 .06 .06
---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES............. .19% .25% .31% .22% .35% .39% .49% .45% .32%
==== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
HIGH- SMALL HIGH
MONEY 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............... .38% .38% .38% .38% .38% .38% .38% .38% .38%
Total Fund Operating
Expenses............... .19 .25 .31 .22 .35 .39 .49 .45 .32
--- --- --- --- --- --- --- --- ---
GRAND TOTAL,
SEPARATE ACCOUNT AND
FUND
OPERATING
EXPENSES............. .57% .63% .69% .60% .73% .77% .87% .83% .70%
=== === === === === === === === ===
</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............. $6 $18 $32 $ 72
High-Grade Bond Portfolio.......... 7 21 36 80
Balanced Portfolio................. 7 22 38 86
Equity Index Portfolio............. 6 20 34 76
Equity Income Portfolio............ 8 24 42 93
Growth Portfolio................... 8 25 43 97
International Portfolio............ 9 28 49 108
High-Yield Bond Portfolio.......... 7 23 40 89
Small Company Growth Portfolio..... 9 27 47 104
</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 periods. The fee is prorated 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. For a complete discussion of Contract 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 GUARANTEES IN THE CONTRACT.
---------------------------------------------------------
The Vanguard Tele-Account Service provides access to ac-
AUTOMATED QUOTES cumulated 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-Account 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 bro-
chure 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. Analo-
gous, though not identical, to the share price (net as-
set value) of a mutual fund.
ACCUMULATED VALUE--The value of all amounts accumulated
under 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
determine the duration of any Annuity Payments and, sub-
ject to the provision dealing with Joint Annuitants,
upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.
ANNUITY DATE--The date on which Annuity Payments begin.
The Annuity Date is always the first day of the month
you specify.
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
series of payments are made after the Annuity Date. Un-
der a FIXED ANNUITY OPTION, the dollar amount of each
Annuity Payment does not change over time. Annuity Pay-
ments 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
designated as the Contract Owner in the Contract appli-
cation. The term shall also include any person named as
Joint Owner. A Joint Owner shares ownership in all re-
spects with the Owner. The Owner has the right to assign
ownership to a person or party other than himself.
8
<PAGE>
CONTRACT YEAR--A period of 12 months starting with the
Contract Date or any Contract Anniversary.
DEATH BENEFIT--The greater of the then-current Accumu-
lated Value or the sum of all Purchase Payments (less
any partial withdrawals and premium taxes).
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 Van-
guard Group, Inc., in which the Separate Account in-
vests.
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 ap-
plicable Premium Tax, if any.
NON-QUALIFIED CONTRACT--A Contract other than a Quali-
fied 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 bene-
fits 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 In-
ternational Portfolio, the High Yield Bond Portfolio,
and the Small Company Growth Portfolio. In this Prospec-
tus, Portfolio will also be used to refer to the
Subaccount that invests in the corresponding Portfolio.
PREMIUM TAX--A regulatory tax that may be assessed by
your state on the Purchase Payments made into your Con-
tract. The amount which we must pay as Premium Tax will
be deducted from each Purchase Payment or from your Ac-
cumulated 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
invest 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.
9
<PAGE>
QUALIFIED CONTRACT--A Contract that qualifies as an in-
dividual retirement annuity under Section 408(b) of the
Internal Revenue Code of 1986, as amended.
SEPARATE ACCOUNT--First Providian Life & Health Insur-
ance 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 Separate Account is independent of the
general assets of the Company.
SUBACCOUNT--That portion of the Separate Account that
invests in shares of the Fund's Portfolios. Each
Subaccount will only invest in a single Portfolio. The
investment performance of each Subaccount is linked di-
rectly to the in- vestment performance of one of the
nine underlying Portfolios of the Fund.
VALUATION PERIOD--A period between two successive Busi-
ness Days commencing at the close of business of the
first Business Day and ending at the close of business
of the following Business Day.
- -------------------------------------------------------------------------------
10
<PAGE>
CONDENSED The Accumulation Unit Values and the number of Accumula-
FINANCIAL tion Units outstanding for each Subaccount in 1992
INFORMATION through 1996 are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD DECEMBER 1, 1992 THROUGH DECEMBER 31, 1996*
---------------------------------------------------------------------
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 * *
12/31/96............... 1.250 14.882 19.532 22.098 16.820 19.057 13.319 10.871 9.725
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 * *
12/31/96............... 13,590 689 852 1,035 525 906 698 253 246
<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 was 6/3/96.
- -------------------------------------------------------------------------------
FINANCIAL
STATEMENTS The audited statutory-basis financial statements of the
Company and the financial statements of the Separate Ac-
count (as well as the Independent Auditors' Reports
thereon) are contained in the Statement of Additional
Information.
- -------------------------------------------------------------------------------
YIELD AND TOTAL From time to time a Portfolio of the Fund may advertise
RETURN its yield and total return investment performance for
various periods, including quarter-to-date, year-to-
date, one year, three year, five year and since incep-
tion. Advertised yields and total returns include all
charges and expenses attributable to the Contract. In-
cluding these fees has the effect of decreasing the ad-
vertised performance of a Portfolio, so that a Portfo-
lio's investment performance will not be directly compa-
rable 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 Port-
folio's performance.
- -------------------------------------------------------------------------------
11
<PAGE>
THE COMPANY AND The Company is a stock life insurance company incorpo-
THE SEPARATE rated under the laws of the State of New York on March
ACCOUNT 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 ad-
mitted to do business in 10 states and the District of
Columbia.
FIRST PROVIDIAN
LIFE & HEALTH
INSURANCE COMPANY
As of December 31, 1996, the Company had statutory as-
sets of approximately $324 million. The Company is a
wholly owned indirect subsidiary of AEGON International
N.V., which conducts substantially all of its operations
through subsidiary companies engaged in the insurance
business or in providing non-insurance financial servic-
es. All of the stock of AEGON International N.V. is
owned by AEGON N.V. of the Netherlands. AEGON N.V., a
holding company, conducts its business through subsidi-
ary companies engaged primarily in the insurance busi-
ness.
---------------------------------------------------------
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
INSURANCE COMPANY on November 2, 1987, pursuant to a resolution of the
SEPARATE ACCOUNT B Company's Board of Directors. The Separate Account is a
unit investment trust registered with the Securities and
Exchange Commission (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 Com-
pany and the obligations under the Contract are obliga-
tions of the Company. These assets are held separately
from the other assets of the Company and are not charge-
able with liabilities incurred in any other business op-
eration 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 total Accumulated Value under the
Contracts. Income, gains and losses incurred on the as-
sets 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 performance of the
Separate Account is entirely independent of the invest-
ment performance of the Company's general account assets
or any other separate account maintained by the Company.
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 discre-
tion of the Company. The Separate Account meets the def-
inition of a "separate account" under Rule O-1(e)(1) of
the Investment Company Act of 1940.
- -------------------------------------------------------------------------------
VANGUARD VARIABLE Vanguard Variable Insurance Fund is an open-end diversi-
INSURANCE FUND fied investment company intended exclusively as an in-
vestment vehicle for variable annuity or variable life
insurance contracts offered by insurance companies.
12
<PAGE>
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 ex-
cess of $230 billion. Through their jointly owned sub-
sidiary, The Vanguard Group, Inc. ("Vanguard"), the Fund
and the other Funds in the Group obtain at cost virtu-
ally all of their corporate management, administrative,
shareholder accounting and distribution services.
The Fund offers nine Portfolios--a money market portfo-
lio, 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 investment objectives and policies.
THE MONEY MARKET PORTFOLIO seeks to provide current in-
come consistent with the preservation of capital and li-
quidity. The Portfolio also seeks to maintain a stable
net asset value of $1.00 per share. The Portfolio in-
vests primarily in high-quality money market instruments
issued by financial institutions, non-financial corpora-
tions, the U.S. Government, state and municipal govern-
ments and their agencies or instrumentalities as well as
repurchase agreements collateralized by such securities.
The Portfolio also invests in Eurodollar obligations
(dollar-denominated obligations issued outside the U.S.
by foreign banks or foreign branches of domestic banks)
and Yankee obligations (dollar- denominated obligations
issued in the U.S. by foreign banks). Vanguard's Fixed
Income Group serves as this Portfolio's investment ad-
viser.
THE HIGH-GRADE BOND PORTFOLIO seeks to parallel the in-
vestment 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 princi-
pal, a reasonable income return and profits without un-
due risk. The Portfolio invests in a diversified portfo-
lio of common stocks and bonds, with common stocks ex-
pected 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 invest-
ment results of the Standard & Poor's 500 Composite
Stock Price Index (S&P 500). The Portfolio invests in
common stocks included 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 div-
idend-paying equity securities. Newell Associates serves
as this Portfolio's investment adviser.
THE GROWTH PORTFOLIO seeks to provide long-term capital
appreciation. The Portfolio invests primarily in equity
securities of seasoned U.S. companies with above average
prospects for growth. Lincoln Capital Management Company
serves as this Portfolio's investment adviser.
13
<PAGE>
THE INTERNATIONAL PORTFOLIO seeks to provide long-term
capital appreciation. The Portfolio invests primarily in
equity 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
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 corpo-
rate debt obligations rated at least B by Moody's In-
vestors Service, Inc. or Standard & Poor's Corporation
or, if unrated, of comparable quality as determined by
the Portfolio's adviser, Wellington Management Company.
THE SMALL COMPANY GROWTH PORTFOLIO seeks to provide long
term growth in capital by investing primarily in equity
securities of small companies deemed to have favorable
prospects for growth. These securities are primarily
common stocks but may also include securities convert-
ible into common stock. Granahan Investment Management
serves as this Portfolio's investment adviser.
There is no assurance that a Portfolio will achieve its
stated objective.
ADDITIONAL INFORMATION CONCERNING THE INVESTMENT OBJEC-
TIVES 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 AC-
COMPANIES THIS PROSPECTUS. THE FUND PROSPECTUS SHOULD BE
READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING
ALLOCATION OF PURCHASE PAYMENTS TO A PORTFOLIO.
The Portfolios may be made available to registered sepa-
rate accounts offering variable annuity and variable
life products of the Company as well as other insurance
companies. Although we believe it is unlikely, a mate-
rial conflict could arise between the interests of the
Separate Account and one or more of the other partici-
pating separate accounts. In the event of a material
conflict, the affected insurance companies agree to take
any necessary steps, including removing their separate
account from the Fund if required by law, to resolve the
matter. See the Fund's Prospectus for more information.
Administrative services are provided by The Vanguard
Group, Inc., Vanguard Service Center, 100 Vanguard Bou-
levard, Malvern, PA 19355. In addition, The Continuum
Company, Inc., 301 West 11th Street, Kansas City, MO
64105, provides some subadministrative services.
- -------------------------------------------------------------------------------
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 fed-
eral 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
replacement as set forth in your Contract). The Contract
permits 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.
Withdrawals are not permitted during the Free Look Peri-
od. Upon cancellation, the Contract is treated as void
from the Contract Date and the Contract Owner will re-
ceive the greater of the Purchase Payments made under
the Contract or the Accumulated Value of the Contract as
of the day the Contract is received by the Company.
- -------------------------------------------------------------------------------
CONTRACT Individuals wishing to purchase a Non-Qualified Contract
APPLICATION AND should send a completed application and your Initial
PURCHASE PAYMENTS Purchase Payment to the Variable Annuity Center. Your
Initial Purchase Payment must be equal to or greater
than the $5,000 minimum investment requirement. Further-
more, 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
acceptance of the application and the Initial Purchase
Payment. Acceptance is subject to the application being
received in good order, and the Company reserves the
right to reject any application or Initial Purchase Pay-
ment.
If the Initial Purchase Payment cannot be credited be-
cause 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 Business Days. As soon as the necessary re-
quirements are fulfilled 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 Annuitant, if applicable, is living. Additional
Purchase Payments must be for at least $250. Additional
Purchase Payments received prior to the close of the New
York Stock Exchange (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 issued by a foreign bank with a U.S. correspon-
dent 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 qual-
ified plan or IRA and contain certain other restrictive
provisions limiting the timing and amount of payments to
and distributions from the Qualified Contract.
Total Purchase Payments may not exceed $1,000,000 with-
out prior approval of the Company.
PURCHASING BY WIRE
CORESTATES BANK N.A., ABA 031000011
MONEY SHOULD BE DEPOSIT ACCOUNT NUMBER 1412652296
WIRED TO: FIRST PROVIDIAN LIFE & HEALTH
INSURANCE COMPANY
PLEASE CALL: 1-
800-258-4271
BEFORE WIRING CONTRACT NUMBER CONTRACT REGISTRATION
To assure proper receipt, please be sure your bank in-
cludes the contract number Vanguard has assigned you.
For an Initial Purchase Payment, please complete the
Vanguard Variable Annuity Plan Application and mail it
to the Vanguard Variable Annuity Center, P.O. Box 1103,
Valley Forge, PA 19482-1103, prior to completing wire
arrangements. Note: Federal funds wire purchase orders
will be accepted only when the New York Stock Exchange
and Custodian Bank are open for business.
---------------------------------------------------------
SECTION 1035 You may exchange your Accumulated Value under an exist-
EXCHANGES ing 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 con-
tract for another. To complete a "1035 Exchange" simply
provide all the requested information on the 1035 Ex-
change Form and mail it, along with your application and
current contract, to the Vanguard Variable Annuity Cen-
ter. As an accommodation to owners of Vanguard Variable
Annuity Plan contracts, and in accordance with the Code,
we will accept, under certain conditions, the consolida-
tion of two or more Vanguard Variable Annuity Plan con-
tracts into one. Such exchanges will be accepted on a
case by case basis in order to provide contract owners
with consolidated account reporting. In addition, if ap-
plicable, contract owners will be responsible for only
one Annual Contract Maintenance Fee. Under no circum-
stances will an exchange of an existing Vanguard Vari-
able Annuity Plan contract for an identical new Vanguard
Variable Annuity Plan contract be allowed. Special rules
and procedures apply to Code Section 1035 transactions,
particularly if the Contract being exchanged was issued
prior to August 14, 1982. Prospective Contract Owners
wishing to take 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.
Therefore, you are encouraged to settle any outstanding
loans with your current insurance company prior to ini-
tiating a 1035 exchange into the Plan.
- -------------------------------------------------------------------------------
16
<PAGE>
ALLOCATION OF
PURCHASE PAYMENTS The Contract Owner specifies on the Contract Application
how Purchase Payments will be allocated. The Contract
Owner may allocate each Purchase Payment to one or more
of the Portfolios as long as such portions are whole
number percentages 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 option that allows you to provide alloca-
tion instructions by telephone. This option includes the
ability to change your investment by eliminating a Con-
tract 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
purpose to be 10 days after the issuance of the Con-
tract), the Initial Net Purchase Payment and additional
Purchase Payments received during the Free Look Period
will be allocated to the Money Market Portfolio. Upon
expiration of the Free Look Period, the Accumulated
Value will remain in the Money Market Portfolio for an
additional 5-day grace period to allow for mail deliv-
ery. 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 The projected expenses for the Contract are substan-
DEDUCTIONS tially below the costs of other variable annuity con-
tracts. For example, based on a $25,000 contract the av-
erage expense ratio of other variable annuity contracts
was 2.10% as of December 31, 1996, compared to .81% for
the Vanguard Variable Annuity Contract (source for com-
petitors' data: Morningstar Performance Report January
1997).
No sales load is deducted from the Initial Purchase Pay-
ment 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 com-
bined 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>
RATE FOR
NET ASSETS ALL ASSETS
-------------------------------------- ----------
<S> <C>
Up to $2.5 Billion 0.30%
Over $2.5 Billion and Up To $5 Billion 0.28%
Over $5 Billion 0.27%
</TABLE>
The Company guarantees that these mortality and expense
risk breakpoints will never increase. If this charge is
insufficient 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.
17
<PAGE>
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 (de-
termined 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 result of our guarantee of a minimum Death
Benefit in the event the Annuitant dies prior to the An-
nuity Date.
The expense risk borne by the Company under the Con-
tracts 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.
---------------------------------------------------------
ADMINISTRATIVE An annual administrative charge of .10% of the net asset
CHARGE & value of the Separate Account is assessed daily along
MAINTENANCE FEE with an annual maintenance fee of $25 for Contracts val-
ued at less than $25,000 at the time of initial purchase
and on the last Business Day of each year. It is impor-
tant to note that fluctuation in Accumulation Unit Val-
ues due to changes in the market values of securities
may cause an investor's Contract's value to fall below
$25,000. The annual maintenance fee is deducted propor-
tionately from each Contract's Accumulated Value; there-
fore, the $25 fee is assessed per Contract, not per
Portfolio chosen. Your Initial Purchase Payment of less
than $25,000 is reduced by an initial maintenance 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
reimbursement to the Company for the costs expected to
be incurred over the life of the Contract for issuing
and maintaining 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 as-
sessed the $25 maintenance 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
local tax laws, charges for such taxes may be made. The
Company does not expect to incur any federal income tax
liability attributable to investment income or capital
gains retained as part of the reserves under the Con-
tracts. (See "Federal Tax Considerations," page 27.)
Based upon these expectations, no charge is currently
being made to the Separate Account for corporate federal
income taxes that may be attributable to the Separate
Account.
The Company will periodically review the question of a
charge to the Separate Account for corporate federal in-
come taxes related to the Separate Account. Such a
charge may be made in future years for any federal in-
come taxes incurred by the Company. This might become
necessary if the tax treatment of the Company is ulti-
mately determined to be other than what the Company cur-
rently 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 in-
vestment income or capital gains retained as part
18
<PAGE>
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 VARIABLE The value of the assets in the Separate Account will re-
INSURANCE FUND flect the fees and expenses paid by the Fund. A complete
EXPENSES description of these expenses is found in the "Fee Ta-
ble" section of this Prospectus and in the "Management
of the Fund" section of the Fund's Statement of Addi-
tional Information.
- -------------------------------------------------------------------------------
ACCUMULATED VALUE At the commencement of the Contract, the Accumulated
Value equals the Initial Net Purchase Payment. Thereaf-
ter, on any Business Day the Accumulated Value equals
the Accumulated Value from the previous Business Day in-
creased by: i) any Additional Net Purchase Payments re-
ceived by the Company and ii) any increase in the Accu-
mulated Value due to investment results of the selected
Portfolio(s) that occur during the Valuation Period; and
reduced by: i) any decrease 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 Contract, iv) any partial
withdrawals, and v) Premium Taxes, if any, that occur
during the Valuation Period.
The Accumulated Value is expected to change from Valua-
tion Period to Valuation Period, reflecting the invest-
ment experience of the selected Portfolios of the Fund
as well as the daily deduction of charges. When your Net
Purchase Payments are allocated to a selected Portfolio,
they result in a particular number of Accumulation Units
being credited to your Contract. The number of Accumula-
tion 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 Valu-
ation Period in which the payment is received. The Accu-
mulation Unit Value varies each Valuation Period (i.e.,
each day that there is trading on the New York Stock Ex-
change) with the net rate of return of the Portfolio.
The net rate of return reflects the investment perfor-
mance of the Portfolio for the Valuation Period and is
net of asset charges to the Portfolio.
- -------------------------------------------------------------------------------
DIVIDENDS AND
CAPITAL GAINS All dividends and capital gains earned will be rein-
TREATMENT vested and reflected in the Accumulation Unit Value.
Only in this way can these earnings remain tax deferred.
- -------------------------------------------------------------------------------
EXCHANGES AMONG Should your investment goals change, you may exchange
THE PORTFOLIOS the Accumulated Value among the Portfolios of the Fund.
Requests for exchanges received by mail or telephone
prior to the close of the New York Stock Exchange (gen-
erally 4:00 p.m. Eastern time) are processed at the
close of business that same day. Requests received after
the close of the Exchange are processed the next
Business Day.
The Contract's exchange privilege is not intended to af-
ford Contract Owners a way to speculate on short-term
movements in the market. Accordingly, in order to pre-
vent excessive use of the exchange privilege that may
potentially disrupt
19
<PAGE>
the management of the Fund and increase transaction
costs, the Separate Account has established a policy of
limiting excessive exchange activity.
Because excessive exchanges can potentially disrupt the
management of the Portfolios and increase transaction
costs, exchange activity is limited to two substantive
exchanges (at least 30 days apart) from each Portfolio
(except the Money Market Portfolio) during any 12 month
period. "Substantive" means either a dollar amount large
enough to have a negative impact on a Portfolio or a se-
ries of movements between Portfolios. 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 Ac-
cumulated Value in the Portfolio. 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.
---------------------------------------------------------
AUTOMATIC The Automatic Exchange Service allows you to move money
EXCHANGES automatically among the Portfolios of the Fund. You may
exchange fixed amounts or percentages of your Portfolio
balance either monthly, quarterly, semiannually or annu-
ally into existing (the $1,000 minimum balance require-
ment has been met) Portfolios. Exchanges at regular in-
tervals or "dollar-cost averaging" can be used, for ex-
ample, 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 com-
pleting a Vanguard Variable Annuity Plan Automatic Ex-
change Service Application Form or writing a letter of
instruction. You may change the transfer amount or can-
cel 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 expired.
---------------------------------------------------------
TELEPHONE To establish the telephone exchange privilege on your
EXCHANGES Contract, please complete the Telephone Exchange Form.
The Company, the Fund, and Vanguard shall not be respon-
sible for the authenticity of exchange instructions re-
ceived by telephone. Reasonable procedures will be un-
dertaken to confirm that instructions communicated by
telephone are genuine. Prior to the acceptance of any
request, the caller will be asked by a customer service
representative for his or her contract number and social
security number. All calls will be recorded, and this
information will be verified with the Contract Owner's
records prior to processing a transaction. Furthermore,
all transactions performed by a service representative
will be verified with the Contract Owner through a writ-
ten confirmation statement. The Company, the Fund, and
Vanguard shall not be liable for any loss, cost or ex-
pense for action on telephone instructions that are be-
lieved to be genuine in accordance with these proce-
dures. Every effort will be made to maintain the ex-
change privilege. However, the Company and the Fund re-
serve the right to revise or terminate its provisions,
limit the amount of or reject any exchange, as deemed
necessary, at any time.
- -------------------------------------------------------------------------------
20
<PAGE>
FULL AND PARTIAL
WITHDRAWALS At any time before the Annuity Date and while the Annui-
tant 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 request to the Variable Annuity Center. Full
or partial withdrawals may only be made before the Annu-
ity Date and all partial withdrawal requests must be for
at least $250. (See "Federal Tax Considerations," page
27.)
You can make a withdrawal by writing to the Variable An-
nuity Center. Your written request should include your
Contract number, social security number, withdrawal
amount, the signature of all owners, and federal tax
withholding election (if no withholding election is cho-
sen, we will be required to withhold 10%). Your proceeds
will normally be distributed within two Business Days
after the receipt of the request but in no event will it
be later than seven calendar days, subject to postpone-
ment in certain circumstances (see "Deferment of Pay-
ment" page 26).
---------------------------------------------------------
SYSTEMATIC You may establish an automatic withdrawal of a specific
WITHDRAWALS amount, a percentage of the balance, or accumulated
earnings 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 systematic withdrawal, like any other partial with-
drawal, is subject to federal income taxes on the earn-
ings, 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
balance of $1,000 are required to establish a systematic
withdrawal program for your Contract. The minimum auto-
matic withdrawal amount is $250, and the maximum is
$50,000. Changes to the withdrawal amount, percentage,
or the frequency of distributions may be made by tele-
phone. Any other changes, including a change in the des-
tination 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
Contract, simply complete the Vanguard Variable Annuity
Plan Systematic Withdrawal Program Application Form.
Please note that the completed form must be signed by
all Contract owners, 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
Contract Owner requests a full or partial withdrawal, he
or she has not provided the Company with a written elec-
tion not to have federal income taxes withheld, the Com-
pany 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 im-
posed on certain early withdrawals. (See "Federal Tax
Considerations," page 27.)
21
<PAGE>
Since the Contract Owner assumes the investment risk
with respect to amounts allocated to the Separate Ac-
count, the total amount paid upon withdrawal of the Con-
tract (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,
DISTRIBUTIONS dies before the entire interest in the Contract is dis-
tributed, the value of the Contract must be distributed
to the Owner's Designated Beneficiary as described in
this section so that the Contract qualifies as an annu-
ity under the Internal Revenue Code.
If the death occurs on or after the Annuity Date, the
remaining 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 Con-
tract 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 Con-
tract Owner's death and will be made for the life of the
"Owner's Designated Beneficiary" or for a period not ex-
tending beyond the life expectancy of that beneficiary.
The Owner's Designated Beneficiary is the person to whom
Ownership of the Contract passes by reason of death.
If any portion of the Contract Owner's interest is pay-
able to (or for the benefit of) the surviving spouse of
the Contract Owner, the Contract may be continued with
the surviving spouse as the new Contract Owner.
- -------------------------------------------------------------------------------
MINIMUM BALANCE Due to the relatively high cost of maintaining smaller
REQUIREMENTS accounts, the Company reserves the right to transfer the
balance in any Portfolio account that falls below
$1,000, due to a partial withdrawal or exchange, to the
remaining Portfolios 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 Con-
tract's minimum requirement. You would then be allowed
60 days to make an additional investment before the ac-
count 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 au-
tomatic termination of the Contract.
- -------------------------------------------------------------------------------
DESIGNATION OF A
BENEFICIARY The Contract Owner may select one or more Beneficiaries,
who would receive benefits upon the death of the Annui-
tant, 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 Annuitant is living, the Contract
Owner may change the Beneficiary 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 before the Company acknowl-
edges the notice. The Contract Owner may also make the
designation of Beneficiary irrevocable by sending writ-
ten 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.
22
<PAGE>
If the Annuitant dies prior to the Annuity Date, the
following 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 Bene-
ficiary 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
Beneficiary survives the Annuitant, the right to any
amount payable 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 elect-
ed, and if the Annuitant dies on or after the Annuity
Date, any unpaid Payments Certain will be paid to the
Beneficiary.
- -------------------------------------------------------------------------------
DEATH OF ANNUITANT Subject to the provisions dealing with Joint Annuitants,
PRIOR TO ANNUITY if the Annuitant dies prior to the Annuity Date, an
DATE amount will be paid as proceeds to the Beneficiary. If
the Annuitant or Joint Annuitant dies prior to the Annu-
ity Date, the survivor shall become the sole Annuitant.
The Death Benefit is calculated and is payable upon re-
ceipt 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 An-
nuity Date or (b) the sum of Purchase Payments less the
sum of all partial withdrawals and premium taxes. An An-
nuity 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 with-
drawals and premium taxes. The Contract Owner may elect
an Annuity Payment Option for the Beneficiary or, if no
such election was made by the Contract Owner and a cash
benefit has not been paid, the Beneficiary may make this
election after the Annuitant's death.
For a discussion of the consequences of the death of the
Contract Owner, if different from the Annuitant, see
"IRS-Required Distributors," page 22 and "Distribution-
at-Death Rules," page 29.
- -------------------------------------------------------------------------------
23
<PAGE>
ANNUITY DATE
The Contract Owner may specify an Annuity Date in the
application, which can be no later than the first day of
the month after the Annuitant's 85th birthday, without
the Company's prior approval. If no Annuity Date is
specified in the application, the Annuity will begin re-
ceiving 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 surren-
dered or an amount has been paid as proceeds to the des-
ignated Beneficiary 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 request or, without the Company's prior approv-
al, 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 Annu-
ity Payment Options available for Qualified Contracts
may also be controlled by endorsements, the plan or ap-
plicable law.
- -------------------------------------------------------------------------------
ANNUITY PAYMENT All Annuity Payment Options (except the Designated Pe-
OPTIONS riod Annuity Option) are offered as "Variable Annuity
Options." This means that Annuity Payments, after the
initial payment, will reflect the investment experience
of the Portfolio 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 fol-
lowing Annuity Payment Options are available under the
Contract:
LIFE ANNUITY--Available as either a Fixed or Variable
Option. 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
either a Fixed (Installment Refund) or Variable (Unit
Refund) Option. Monthly Annuity Payments are paid for
the life of an Annuitant, with a Period Certain deter-
mined by dividing the Accumulated Value by the First An-
nuity Payment.
24
<PAGE>
DESIGNATED PERIOD ANNUITY--Only available as a Fixed Op-
tion. Monthly Annuity Payments are paid for a Period
Certain as elected, which may be from 10 to 30 years.
In the event that an Annuity Payment Option is not se-
lected, 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 sec-
tions of the Contract. That portion of the Accumulated
Value that has been held in a Portfolio prior to the An-
nuity Date will be applied under a Variable Annuity Op-
tion based on the performance of that Portfolio. Subject
to approval by the Company, the Contract Owner may se-
lect any other Annuity Payment Option then being offered
by the Company. Annuity Payments are guaranteed to be
not less than as provided by the Annuity Tables for the
first payment under a Variable Option and each payment
under a Fixed Option, and the Annuity Payment Option
elected by the Contract Owner. The minimum payment, how-
ever, 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 Contract
Owner is living. Annuity Payment Options are not avail-
able to: (1) an assignee; or (2) any other than a natu-
ral person, except with the consent of the Company.
The Company may, at the time of election of an Annuity
Payment 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
investment experience of the chosen Portfolio. On or af-
ter the Annuity Date, the Annuity Payment Option is ir-
revocable. Only one Variable Annuity Option may be cho-
sen from among those made available by the Company per
each Portfolio. The annuity tables, which are contained
in the Contract and are used to calculate the value of
Variable Annuity Payments, are based on an assumed in-
terest rate of 4%. If the actual net investment experi-
ence exactly equals the assumed interest rate, then the
Variable Annuity Payments will remain the same (equal to
the first Annuity Payment). However, if actual invest-
ment experience exceeds the assumed interest rate, the
Variable Annuity Payments will increase; conversely,
they will decrease if the actual experience is lower.
If an Annuity Payment Option is chosen that depends on
the continuation of the life of the Annuitant or of a
Joint Annuitant, proof of birth date may be required be-
fore Annuity Payments begin. For Annuity Payment Options
involving life income, the actual age of the Annuitant
or of a Joint Annuitant will affect the amount of each
payment. Since payments to older Annuitants are expected
to be fewer in number, the amount of each Annuity Pay-
ment 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 Annuity Payment and remit that amount to the fed-
eral government.
25
<PAGE>
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 annui-
ties 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, ei-
ther by written request or by calling the Variable Annu-
ity Center (1-800-258-4271). Because excessive exchanges
can potentially disrupt the management of the Portfolios
and increase transaction costs, exchange activity is
limited to two substantive exchanges (at least 30 days
apart) from the Portfolios (except the Money Market
Portfolio) during any 12-month period. "Substantive"
means either a dollar amount large enough to have a neg-
ative impact on a Portfolio or a series of movements be-
tween Portfolios. The method of computation of Variable
Annuity 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, ex-
cept 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 otherwise restricted; or (2) an emer-
gency exists as defined by the SEC, or the SEC requires
that trading be restricted; or (3) the SEC permits a de-
lay for the protection of Contract Owners.
- -------------------------------------------------------------------------------
26
<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 economic benefits to the Contract Owner, An-
nuitant or Beneficiary, depends on the terms of the Con-
tract, the Company's tax status and upon the tax status
of the individuals concerned. The following discussion
is general in nature and is not intended as tax advice.
You should consult a tax adviser regarding the tax con-
sequences of purchasing a Contract. No attempt is made
to consider any applicable state or other tax laws.
Moreover, the discussion is based upon the Company's un-
derstanding of the federal income tax laws as they are
currently interpreted. No representation is made regard-
ing the likelihood of continuation of the federal income
tax laws, the Treasury Regulations, or the current in-
terpretations by the Internal Revenue Service. We re-
serve the right to make uniform changes on the Contract
to the extent necessary to continue to qualify the Con-
tract as an annuity. For a discussion of federal income
taxes as they relate to the Fund, please see the accom-
panying Prospectus for the Fund.
---------------------------------------------------------
TAXATION OF Section 72 of the Code governs taxation of annuities. In
ANNUITIES IN general, a Contract Owner is not taxed on increases in
GENERAL value under a Contract until some form of withdrawal or
distribution is made under it. However, under certain
circumstances, the increase in value may be subject to
current federal income tax. (See "Contracts Owned by
Non-Natural Persons" and "Diversification Standards",
pages 30 and 31.)
Section 72 provides that the proceeds of a full or par-
tial 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 de-
scribed as the cost of the Contract, and generally con-
stitutes all purchase payments paid for the Contract
less any amounts received under the Contract that are
excluded from the individual's gross income. The taxable
portion is taxed at ordinary income tax rates. For pur-
poses 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 Annu-
ity Payment under the Contract, you will be taxed if the
value of the Contract exceeds the investment in the Con-
tract. Ordinarily, the taxable portion of such payments
will be taxed at ordinary income tax rates. Partial
withdrawals are generally taken out of earnings first
and then Purchase Payments.
For Fixed Annuity Payments, in general, the taxable por-
tion 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 pay-
ment to determine the non-taxable portion of the pay-
ment. The remaining portion of each payment is taxed at
ordinary income tax rates. For Variable Annuity Pay-
ments, in general, the taxable portion is deter-
27
<PAGE>
mined by a formula that establishes a specific dollar
amount of each payment that is not taxed. The dollar
amount is determined by dividing the investment in the
Contract by the total number of expected periodic pay-
ments. 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
is required unless the recipient elects not to have any
amounts withheld and properly notifies the Company of
that election. In certain situations, taxes will be
withheld on distributions to non-resident aliens at a
30% flat rate unless an exemption from withholding ap-
plies under the applicable tax treaty.
With respect to amounts withdrawn or distributed before
the taxpayer reaches age 59 1/2, a penalty tax is im-
posed equal to 10% of the taxable portion of amounts
withdrawn or distributed. However, the penalty tax will
not apply to withdrawals: (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 importance in affecting the timing
and payment under the Contract); (ii) attributable to
the taxpayer's becoming disabled 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 expectancy) of the tax-
payer, 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 im-
mediate annuity contract as defined in Section 72(u)(4);
or (viii) that are purchased by an employer on termina-
tion 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 dis-
tributions as well as to certain contributions and other
transactions under a qualified contract.
If the penalty tax does not apply to a withdrawal as a
result 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 determined under Treasury Regulations) equal
to the penalty tax that would have been imposed but for
item (iii) above, plus interest for the deferral period.
The foregoing rule applies if the modification takes
place (a) before the close of the period that is five
years from the date of the first payment and after the
taxpayer attains age 59 1/2, or (b) before the taxpayer
reaches age 59 1/2.
---------------------------------------------------------
THE COMPANY'S TAX The Company is taxed as a life insurance company under
STATUS Part I of Subchapter L of the Code. Since the Separate
Account is not a separate entity from the Company and
its operations form a part of the Company, it will not
be taxed separately as a "regulated investment company"
under Subchapter M of the Code. Investment income and
realized capital gains on the assets of the Separate Ac-
count are reinvested and taken into account in determin-
ing the Accu-
28
<PAGE>
mulation Value. Under existing federal income tax law,
the Separate Account's investment income, including re-
alized net capital gains, is not taxed to the Company.
The Company reserves the right to make a deduction for
taxes should they be imposed with respect to such items
in the future.
---------------------------------------------------------
DISTRIBUTION-AT- In order to be treated as an annuity contract, a con-
DEATH RULES tract must, generally, provide the following two distri-
bution rules: (a) if any Contract Owner dies on or after
the Annuity 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 Contract Owner dies before the Annuity Date,
the entire interest must generally be distributed within
five years after the date of death. To the extent such
interest is payable to a Designated Beneficiary, howev-
er, such interest may be annuitized over the life of
that Designated Beneficiary or over a period not ex-
tending beyond the life expectancy of that Beneficiary,
so long as distributions commence within one year after
the Contract Owner's death. If the Designated Benefi-
ciary is the spouse of the Contract Owner, the Contract
(together with the deferred tax on the accrued and fu-
ture income thereunder) may be continued unchanged in
the name of the spouse as Contract Owner. The term Des-
ignated Beneficiary means the natural person named by
the Contract Owner as a beneficiary and to whom owner-
ship of the Contract passes by reason of the Contract
Owner's death.
If the Contract Owner is not an individual, death of the
"primary Annuitant" (as defined under the Code) is
treated as the death of 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 primary Annuitant is treated
as the death of the Contract Owner. Finally, in the case
of Joint Contract Owners, the distribution will be re-
quired at the death of the first of the Contract Owners.
---------------------------------------------------------
TRANSFERS OF Any transfer of a non-qualified annuity Contract prior
ANNUITY CONTRACTS to the Annuity Date for less than full and adequate con-
sideration will generally trigger tax on the gain in the
Contract to the Contract Owner at the time of such
transfer. The investment in the Contract of the trans-
feree will be increased by any amount included in the
Contract Owner's income. 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 BY
NON-NATURAL Where the Contract is held by a non-natural person (for
PERSONS example, a corporation), the Contract is generally not
treated as an annuity contract for federal income tax
purposes, and the income on that Contract (generally the
increase 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 benefi-
29
<PAGE>
cial owners are employees, then the Contract is not
treated as being held by a non-natural person. The rule
also does not apply where the Contract is acquired by
the estate of a decedent, where the Contract is a quali-
fied funding asset for structured settlements, where the
Contract is purchased on behalf of an employee upon ter-
mination of a qualified plan, and in the case of an im-
mediate annuity as defined under the Code.
---------------------------------------------------------
ASSIGNMENTS A transfer of ownership of a Contract, a collateral as-
signment or the designation of an Annuitant or other
Beneficiary who is not also the Contract Owner may re-
sult in tax consequences to the Contract Owner, Annui-
tant or Beneficiary that are not discussed herein. A
Contract Owner contemplating such a transfer or assign-
ment of a Contract should contact a tax adviser with re-
spect to the potential tax effects of such a transac-
tion.
---------------------------------------------------------
MULTIPLE CONTRACTS All non-qualified annuity contracts issued by the same
RULE company (or affiliate) to the same Contract Owner during
any calendar year are to be aggregated and treated as
one contract for purposes of determining the amount in-
cludible in the taxpayer's gross income. Thus, any
amount received under any Contract prior to the Con-
tract's Annuity Date, such as a partial withdrawal, will
be taxable (and possibly subject to the 10% penalty tax)
to the extent of the combined income in all such con-
tracts. 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. The aggregation
rules do not apply to immediate annuities as defined un-
der Section 72(u)(4) of the Code. Accordingly, a Con-
tract Owner should consult a tax adviser before purchas-
ing more than one Contract or other annuity contracts.
---------------------------------------------------------
DIVERSIFICATION
STANDARDS To comply with certain diversification regulations (the
"Regulations"), which were issued in final form on March
2, 1989, under Code Section 817(h), after a start up pe-
riod, the Separate Account will be required to diversify
its investments. 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 diversifi-
cation regulations in 1986, the Treasury announced that
such regulations did not provide guidance
30
<PAGE>
concerning the extent to which Contract Owners may di-
rect their investments to particular divisions of a sep-
arate account. It is possible that regulations or reve-
nue rulings may be issued in this area at some time in
the future. It is not clear, at this time, what these
regulations or rulings would provide. It is possible
that when the regulations or rulings are issued, the
Contracts may need to be modified in order to remain in
compliance. For these reasons, the Company reserves the
right to modify the Contracts, as necessary, to prevent
the Contract Owner from being considered the owner of
assets of the Separate Account.
We intend to comply with the Regulations to assure that
the Contracts continue to be treated as annuity con-
tracts for federal income tax purposes.
---------------------------------------------------------
QUALIFIED Qualified Contracts to provide for retirement may gener-
INDIVIDUAL ally be purchased only in connection with a "rollover"
RETIREMENT of funds from another individual retirement annuity
ANNUITIES (IRA) or qualified plan. IRA Contracts must contain spe-
cial provisions and are subject to limitations on con-
tributions and the timing of when distributions can be
made. Tax penalties may apply to contributions in excess
of specified limits, loans or reassignments, distribu-
tions that do not meet specified requirements, or in
other circumstances. Anyone desiring to purchase a Qual-
ified Contract should consult a personal tax adviser.
- -------------------------------------------------------------------------------
GENERAL
INFORMATION The Company retains the right, subject to any applicable
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 in-
vestment company, if the shares of the Portfolios are no
longer available for investment, or, if in the Company's
judgment, investment in any Portfolio would be inappro-
priate 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,
investment, or other conditions so warrant. Any new
Portfolios 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 war-
rant.
In the event of any such substitution or change, the
Company may, by appropriate endorsement, make such
changes in the Contracts as may be necessary or appro-
priate to reflect such substitution or change. Further-
more, 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 registra-
tion is no longer required, or may be combined with one
or more other separate accounts.
---------------------------------------------------------
31
<PAGE>
DISTRIBUTOR OF THE
CONTRACTS The Vanguard Group, Inc., through its wholly-owned sub-
sidiary, Vanguard Marketing Corp., is the principal dis-
tributor of the Contract. For these services, the Fund
paid a fee of less than .02% of the Fund's average net
assets for the 1996 fiscal year. This fee is guaranteed
not to exceed .20% of the Fund's average month-end net
assets. A complete description of these services is
found in the "Management of the Fund" section of the
Fund's Prospectus and in the Fund's Statement of Addi-
tional Information.
---------------------------------------------------------
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 Port-
folio shares held in the Separate Account will be voted
by the Company at shareholder meetings of the Fund in
accordance with instructions received from persons hav-
ing voting interests in the corresponding Portfolio.
Fund shares as to which no timely instructions are re-
ceived or shares held by the Company as to which Con-
tract Owners have no beneficial interest will be voted
in proportion to the voting instructions that are re-
ceived with respect to all Contracts participating in
that Portfolio. Voting instructions to abstain on any
item to be voted upon will be applied on a pro rata ba-
sis 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 applying his or her percentage interest, if any, in a
particular Portfolio to the total number of votes at-
tributable to the Portfolio.
Prior to the Annuity Date, the Contract Owner holds a
voting interest in each Portfolio to which the Accumu-
lated Value is allocated. The number of votes which are
available to a Contract Owner will be determined by di-
viding the Accumulated Value attributable to a Portfolio
by the net asset value per share of the applicable Port-
folio. After the Annuity Date, the person receiving An-
nuity 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 corresponding Portfolio. After
the Annuity Date, the votes attributable to a Contract
decrease as the reserves allocated to the Portfolio de-
crease. 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 instructions 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
financial statements annually.
---------------------------------------------------------
32
<PAGE>
LEGAL MATTERS
Jorden Burt Berenson & Johnson LLP, of Washington, DC,
has provided legal advice relating to the federal secu-
rities laws applicable to the issue and sale of the Con-
tracts. All matters of New York law pertaining to the
validity of the Contract and the Company's right to is-
sue such Contracts have been passed upon by Kimberly A.
Scouller, Esquire, on behalf of the Company.
- -------------------------------------------------------------------------------
33
<PAGE>
TABLE OF CONTENTS FOR THE VANGUARD VARIABLE ANNUITY PLAN CONTRACT STATEMENT OF
ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
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-3
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-4
30-Day Yield for Non-Money Market Subaccounts.......................... B-5
Standardized Average Annual Total Return for Non-Money Market
Subaccounts........................................................... B-5
ADDITIONAL PERFORMANCE MEASURES......................................... B-7
Non-Standardized Total Return and Non-Standardized Average Annual Total
Return................................................................ B-7
Non-Standardized Total Return Year-to-Date............................. B-8
Non-Standardized One Year Return....................................... B-8
SAFEKEEPING OF ACCOUNT ASSETS........................................... B-9
THE COMPANY............................................................. B-9
STATE REGULATION........................................................ B-9
RECORDS AND REPORTS..................................................... B-9
LEGAL PROCEEDINGS....................................................... B-9
OTHER INFORMATION....................................................... B-10
FINANCIAL STATEMENTS.................................................... B-10
Audited Financial Statements........................................... B-10
</TABLE>
34
<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 December 1, 1997 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.
DECEMBER 1, 1997
<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-3
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-4
30-Day Yield for Non-Money Market Subaccounts.......................... B-5
Standardized Average Annual Total Return for Non-Money Market
Subaccounts........................................................... B-5
ADDITIONAL PERFORMANCE MEASURES......................................... B-7
Non-Standardized Total Return and Non-Standardized Average Annual Total
Return................................................................ B-7
Non-Standardized Total Return Year-to-Date............................. B-8
Non-Standardized One Year Return....................................... B-8
SAFEKEEPING OF ACCOUNT ASSETS........................................... B-9
THE COMPANY............................................................. B-9
STATE REGULATION........................................................ B-9
RECORDS AND REPORTS..................................................... B-9
LEGAL PROCEEDINGS....................................................... B-9
OTHER INFORMATION....................................................... B-10
FINANCIAL STATEMENTS.................................................... B-10
Audited Financial Statements........................................... B-10
</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>
RATE FOR
NET ASSETS* ALL ASSETS
----------- ----------
<S> <C>
Up to $2.5 Billion............................................... 0.30%
Over $2.5 Billion and Up To $5 Billion........................... 0.28%
Over $5 Billion.................................................. 0.27%
</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 time of initial purchase and on the last business day of each
year.
The Annuity Tables contained in the Contract are based on the 1983 Table "A"
Mortality Table projected for mortality improvement to the year 2000 using
Projection Scale G and an interest rate of 4% a year.
B-2
<PAGE>
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.
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.
B-3
<PAGE>
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, 1996. 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.
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
31, 1996, was 4.84%.
B-4
<PAGE>
30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS
Quotations of yield for the remaining Subaccounts will be based on all in-
vestment income per Unit earned during a particular 30-day period, less ex-
penses accrued during the period ("net investment income"), and will be com-
puted by dividing net investment income by the value of a Unit on the last day
of the period, according to the following formula:
YIELD = 2[(a-b + 1)/6/ - 1]
cXd
Where:
[a] equals the net investment income earned during the period by the Series
attributable to shares owned by a Subaccount
[b] equals the expenses accrued for the period (net of reimbursements)
[c] equals the average daily number of Units outstanding during the period
[d] equals the maximum offering price per Accumulation Unit on the last day
of the period
Yield on the Subaccount is earned from the increase in net asset value of
shares of the Series in which the Subaccount invests and from dividends de-
clared and paid by the Series, which are automatically reinvested in shares of
the Series.
The yield of each Subaccount for the 30-day period ended December 31, 1996,
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............................................. 5.95%
Balanced Subaccount.................................................... 3.43%
Equity Index Subaccount................................................ 1.46%
Equity Income Subaccount............................................... 2.86%
Growth Subaccount...................................................... 0.70%
International Subaccount............................................... --
High Yield Bond Subaccount............................................. 8.46%
Small Company Growth Subaccount........................................ 0.43%
</TABLE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR NON-MONEY MARKET SUBACCOUNTS
When advertising performance of the Subaccounts, the Company will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have pro-
duced the cash redemption value over the stated period had the performance re-
mained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the pe-
riod. It reflects the deduction of all applicable sales loads, the Annual Con-
tract Maintenance Fee and all other Portfolio, Separate Account and Contract
level charges except Premium Taxes, if any. In calculating performance infor-
mation, the Annual Contract Maintenance Fee is reflected as a percentage equal
to the total amount of fees collected during a year divided by the total aver-
age net assets of the Portfolios during the same year. The fee is assumed to
remain the same in each year of the applicable period. The fee is prorated to
reflect only the remaining portion of the calendar year of purchase. Thereaf-
ter, the fee is deducted on the last business day of the year for the follow-
ing year, on a pro rata basis, from each of the Portfolios you have chosen.
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, three, five and
B-5
<PAGE>
10 years (or, if less, up to the life of the Subaccount) and year-to-date and
quarter-to-date, calculated pursuant to the formula:
P(1 + T)n = ERV
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 following tables show the average annual total return for the Subaccounts
for the period beginning at the inception of each Subaccount and ending on De-
cember 31, 1996.
<TABLE>
<CAPTION>
YEAR YEAR ENDED SINCE
1 YEAR 3 YEARS 5 YEARS TO DATE 12/31/96 INCEPTION*
------ ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
High-Grade Bond
Subaccount............... 3.07% 5.43% 6.16% 3.07% 3.07% 7.22%
Balanced Subaccount....... 15.66% 14.63% 12.55% 15.66% 15.66% 12.62%
Equity Index Subaccount... 22.25% 18.89% 14.38% 22.25% 22.25% 14.93%
Equity Income Subaccount.. 18.11% 17.04% -- 18.11% 18.11% 15.64%
Growth Subaccount......... 26.27% 21.70% -- 26.27% 26.27% 19.76%
International Subaccount.. 14.04% -- -- 14.04% 14.04% 11.72%
High Yield Bond
Subaccount............... -- -- -- 8.69% -- 8.69%
Small Company Growth
Subaccount............... -- -- -- 2.76% -- 2.76%
</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
<TABLE>
<CAPTION>
MONTH-
TO- QUARTER 6 MONTHS-
DATE TO-DATE TO-DATE
------ ------- ---------
<S> <C> <C> <C>
High-Grade Bond Subaccount............................ -0.99% 2.91% 4.76%
Balanced Subaccount................................... -2.25% 6.46% 10.66%
Equity Index Subaccount............................... -2.00% 8.21% 11.38%
Equity Income Subaccount.............................. -0.99% 8.82% 10.42%
Growth Subaccount..................................... -2.30% 5.77% 10.35%
International Subaccount.............................. -0.12% 3.68% 4.13%
High Yield Bond Subaccount............................ 1.43% 4.10% 9.09%
Small Company Growth Subaccount....................... 1.11% -1.12% 2.08%
</TABLE>
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
B-6
<PAGE>
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 perfor-
mance, investment objectives, and assets, or tracked by other services, compa-
nies, 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 Con-
tract. Unmanaged indices may assume the reinvestment of dividends but gener-
ally do not reflect deductions for administrative and management costs and ex-
penses.
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.
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.
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
The Company may show Non-Standardized Total Return (i.e., the percentage
change in the value of an Accumulation Unit) for one or more Subaccounts with
respect to one or more periods. The Company may also show Non-Standardized Av-
erage Annual Total Return (i.e., the average annual change in Accumulation
Unit Value) with respect to one or more periods. For one year and periods less
than one year, the Non-Standardized Total Return and the Non-Standardized Av-
erage Annual Total Return are effective annual rates of return and are equal.
For periods greater than one year, the Non-Standardized Average Annual Total
Return is the effective annual compounded rate of return for the periods stat-
ed. Because the value of an Accumulation Unit reflects the Separate Account
and Portfolio expenses (See Fee Table in the Prospectus), the Non-Standardized
Total Return and Non-Standardized Average Annual Total Return also reflect
these expenses. However, these percentages do not reflect the Annual Contract
Maintenance Fee or Premium Taxes (if any), which if included would reduce the
percentages reported by the Company.
NON-STANDARDIZED TOTAL RETURN
FOR PERIOD ENDING 12/31/96
<TABLE>
<CAPTION>
MONTH-
TO- QUARTER- 6 MONTHS- ONE SINCE
DATE TO-DATE TO-DATE YEAR INCEPTION
------ -------- --------- ----- ---------
<S> <C> <C> <C> <C> <C>
High-Grade Bond Subaccount........... -0.99% 2.91% 4.76% 3.08% 48.82%
Balanced Subaccount.................. -2.25% 6.46% 10.66% 15.68% 95.32%
Equity Index Subaccount.............. -2.00% 8.21% 11.39% 22.27% 120.98%
Equity Income Subaccount............. -0.99% 8.82% 10.43% 18.13% 68.20%
Growth Subaccount.................... -2.30% 5.77% 10.35% 26.29% 90.57%
International Subaccount............. -0.12% 3.68% 4.13% 14.05% 33.19%
High Yield Bond Subaccount........... 1.43% 4.10% 9.09% -- 8.71%
Small Company Growth Subaccount...... 1.11% -1.02% 2.08% -- -2.75%
</TABLE>
B-7
<PAGE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS
FOR PERIOD ENDING 12/31/96
<TABLE>
<CAPTION>
SINCE
ONE YEAR THREE YEAR FIVE YEAR TEN YEAR INCEPTION
-------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
High-Grade Bond Subaccount.... 3.08% 5.44% 6.18% -- 7.25%
Balanced Subaccount........... 15.68% 14.65% 12.58% -- 12.67%
Equity Index Subaccount....... 22.27% 18.91% 14.41% -- 14.98%
Equity Income Subaccount...... 18.13% 17.05% -- -- 15.68%
Growth Subaccount............. 26.29% 21.71% -- -- 19.80%
International Subaccount...... 14.05% -- -- -- 11.75%
High Yield Bond Subaccount.... -- -- -- -- 8.71%
Small Company Growth
Subaccount................... -- -- -- -- -2.75%
</TABLE>
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
The Company may show Non-Standardized Total Return Year-to-Date as of a par-
ticular date, or simply Total Return YTD, for one or more Subaccounts with re-
spect to one or more non-standardized base periods commencing at the beginning
of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These percentages
reflect a deduction for the Separate Account and Portfolio expenses, but do
not include the Annual Contract Maintenance Fee or Premium Taxes (if any),
which if included would reduce the percentages reported by the Company.
<TABLE>
<CAPTION>
TOTAL RETURN YTD
AS OF 12/31/96
----------------
<S> <C>
High-Grade Bond Subaccount..................................... 3.08%
Balanced Subaccount............................................ 15.68%
Equity Index Subaccount........................................ 22.27%
Equity Income Subaccount....................................... 18.13%
Growth Subaccount.............................................. 26.29%
International Subaccount....................................... 14.05%
High Yield Bond Subaccount..................................... 8.71%
Small Company Growth Subaccount................................ -2.75%
</TABLE>
NON-STANDARDIZED ONE YEAR RETURN
The Company may show Non-Standardized One Year Return, for one or more
Subaccounts with respect to one or more non-standardized base periods commenc-
ing at the beginning of a calendar year (or date of inception, if during the
relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the percentage change in actual Accumulation Unit Values dur-
ing the relevant period. These percentages reflect a deduction for the Sepa-
rate Account and Portfolio expenses, but do not include the Annual Contract
Maintenance Fee or Premium Taxes (if any), which if included would reduce the
percentages reported by the Company.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C>
High-Grade Bond Subaccount.................... 3.08% 17.47% -3.19% 8.92% 5.70%
Balanced Subaccount........................... 15.68% 31.76% -1.13% 12.56% 6.59%
Equity Index Subaccount....................... 22.27% 36.67% 0.61% 9.18% 6.77%
Equity Income Subaccount...................... 18.13% 38.19% -1.76% -- --
Growth Subaccount............................. 26.29% 37.62% 3.74% -- --
International Subaccount...................... 14.05% 15.31% -- -- --
High Yield Bond Subaccount.................... -- -- -- -- --
Small Company Growth Subaccount............... -- -- -- -- --
</TABLE>
B-8
<PAGE>
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
The stock of the Company is owned by Veterans Life Insurance Company, which
is a subsidiary of Providian Life and Health Insurance Company, a Missouri in-
surance company ("PLH"). Commonwealth General Corporation owns a 4% interest
in PLH and 61%, 15% and 20% interests in PLH, respectively, are held by Com-
monwealth Life Insurance Company, Peoples Security Life Insurance Company and
Capital Liberty, L.P. Commonwealth Life Insurance Company and Peoples Security
Life Insurance Company are each wholly owned by Capital General Development
Corporation, which in turn is wholly owned by Commonwealth General Corporation
. A 3% interest in Capital Liberty, L.P. is owned by Providian Corporation,
which is the general partner, and 78% and 19% interests, respectively, are
held by two limited partners, Commonwealth Life Insurance Company and Peoples
Security Life Insurance Company.
Commonwealth General Corporation is a wholly owned subsidiary of AEGON Inter-
national N.V. AEGON International N.V. is a wholly owned subsidiary of AEGON
N.V. Vereniging AEGON (a Netherlands membership association) has a 53% inter-
est in AEGON N.V.
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 Superinten-
dent of Insurance on or before March 1 of each year covering the operations
and reporting on the financial condition of the Company as of December 31 of
the preceding calendar year. Periodically, the New York Superintendent of In-
surance examines the financial condition of the Company, including the liabil-
ities 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.
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.
B-9
<PAGE>
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, 1996 and December 31, 1995, including the Report of Independent
Auditors thereon, are included in this Statement of Additional Information.
The audited statutory-basis financial statements of the Company for the years
ended December 31, 1996 and December 31, 1995, including the Report of Inde-
pendent Auditors thereon, which are also included in this Statement of Addi-
tional Information, should be distinguished from the financial statements of
the Separate Account and should be considered only as bearing 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-10
<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, 1996 and 1995 with Report of Independent Au-
ditors/4/
Audited Financial Statements--Statutory-Basis
First Providian Life & Health Insurance Company
Years ended December 31, 1996 and 1995 with Report of Independent Au-
ditors/4/
Part C None
(B) EXHIBITS
(1) Resolution of the Board of Directors of First Providian Life and Health
Insurance Company ("First Providian") authorizing establishment of the
Separate Account./3/
(2) Not Applicable.
(3) Not Applicable.
(4) Form of variable annuity contract/1/
(5) Form of application/1/
(6) (a) Amended and Restated Charter of First Providian/3/
(b) By-Laws of First Providian as amended February 28, 1995/3/
(7) Not applicable.
(8) (a) Form of Participation Agreement for the Vanguard Variable Insurance
Fund/1/
(b) First Amendment to Participation, Market Consulting and Administra-
tion Agreement/2/
(c) Administration Agreement/1/
(9) (a) Opinion and Consent of Counsel/4/
(b) Consent of Counsel/4/
(10) Consent of Independent Auditors/4/
(11) No financial statements are omitted from item 23.
(12) Not applicable.
(13) Performance computation/2/
(14) Not applicable.
- --------
/1/ Incorporated by reference from Pre-Effective Amendment No. 1 to the Regis-
tration Statement of National Home Life Assurance Company Separate Account
IV, File No. 33-36073.
/2/ Incorporated by reference from Post-Effective Amendment No. 5 to the Regis-
tration Statement of First Providian Life & Health Insurance Company Sepa-
rate Account B, File No. 33-39946.
/3/ Incorporated by reference from Pre-Effective Amendment No. 1 to the Regis-
tration Statement of First Providian Life & Health Insurance Company Sepa-
rate Account C, File No. 33-94204.
/4/ Incorporated by reference from Post-Effective Amendment No. 7 to the Regis-
tration Statement of First Provision Life & Health Insurance Company Sepa-
rate Account B, File No. 33-39946.
C-1
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
OFFICERS:
<TABLE>
<S> <C>
President....................................... David G. Rekoski
Senior Vice President, Treasurer & Senior Dennis E. Brady
Financial Officer...............................
Senior Vice President........................... Carol E. Ballentine
Senior Vice President........................... Martin Renninger
Vice President.................................. Thomas B. Nesspor
Vice President.................................. Brian Alford
Vice President.................................. Edward A. Biemer
Vice President/Underwriting..................... Carolyn M. Johnson
Vice President.................................. Kevin F. McGlynn
Vice President and Secretary.................... Susan E. Martin
Vice President and Actuary...................... John C. Prestwood, Jr.
Vice President.................................. Nancy B. Schuckert
Vice President.................................. Joseph D. Strenk
Vice President.................................. G. Eric O'Brien
Vice President/Underwriting..................... William J. Kline
Vice President.................................. Nathan C. Anguiano
Vice President.................................. Thomas P. Bowie
Vice President.................................. Gregory J. Garvin
Vice President.................................. Daniel H. Odum
Vice President and Consumer Services Officer.... Rosalie M. Smith
Assistant Vice President........................ Geralyn Barbato
Assistant Vice President........................ Mary Ellen Fahringer
Assistant Vice President and Qualified Actuary.. Michael A. Cioffi
Assistant Vice President........................ Patricia A. Lukacs
Assistant Vice President and Assistant John A. Mazzuca
Treasurer.......................................
Assistant Controller............................ Paul J. Lukacs
Assistant Controller............................ Joseph C. Noone
Second Vice President........................... Cindy L. Chanley
Second Vice President/Investments............... Terri L. Allen
Second Vice President/Investments............... Kirk W. Buese
Second Vice President........................... Karen H. Fleming
Second Vice President........................... Michael F. Lane
Second Vice President........................... Frank J. Rosa
Second Vice President........................... George E. Claiborne, Jr.
Second Vice President........................... Michele M. Coan
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............... Frederick B. Howard
Second Vice President/Investments............... Tim Kuussalo
Second Vice President/Investments............... Mark E. Lamb
Second Vice President/Investments............... James D. MacKinnon
Second Vice President/Investments............... James G. Nickerson
Second Vice President/Investments............... Douglas H. Owen, Jr.
Second Vice President/Investments............... Jon L. Skaggs
Second Vice President/Investments............... Robert Smedley
Second Vice President/Investments............... Bradley L. Stofferahn
Second Vice President/Investments............... Randall K. Waddell
Second Vice President/Investments............... Joel L. Coleman
Second Vice President/Investments............... Jeffrey T. McGlaun
Second Vice President and Assistant Secretary... Edward P. Reiter
Assistant Secretary............................. L. Jude Clark
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
Assistant Secretary............................. Colleen S. Lyons
Assistant Secretary............................. Mary Ann Malinyak
Assistant Secretary............................. John E. Reesor
Assistant Secretary............................. Kimberly A. Scouller
Assistant Secretary............................. R. Michael Slaven
Product Compliance Officer...................... James T. Bradley
</TABLE>
DIRECTORS:
<TABLE>
<S> <C>
Dennis E. Brady John C. Prestwood, Jr.
I. Donald Britton Martin Renninger
Patricia A. Collins Rosalie M. Smith
Jeffrey H. Goldberger Thomas B. Nesspor
Susan E. Martin David G. Rekoski
Kevin McGlynn Craig D. Vermie
Brian B. Perry
</TABLE>
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 Commonwealth General
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 BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
AEGON USA, Inc. Iowa 100% AEGON U.S. Holding Holding company
Corporation
AUSA Holding Company Maryland 100% AEGON USA, Inc. Holding company
Monumental General Maryland 100% AUSA Holding Co. Holding company
Insurance Group, Inc.
Monumental General Maryland 100% Monumental General Provides management
Administrators, Inc. Insurance Group, Inc. srvcs. to unaffiliated
third party
administrator
Executive Management and Maryland 100% Monumental General Provides actuarial
Consultant Services, Administrators, Inc. consulting services
Inc.
Monumental General Mass Maryland 100% Monumental General Marketing arm for sale
Marketing, Inc. Insurance Group, Inc. of mass marketed
insurance coverages
Diversified Investment Delaware 100% AUSA Holding Co. Registered investment
Advisors, Inc. advisor
Diversified Investors Delaware 100% Diversified Broker-Dealer
Securities Corp. Investment Advisors,
Inc.
AEGON USA Securities, Iowa 100% AUSA Holding Co. Broker-Dealer
Inc.
American Forum For Iowa 100% AUSA Holding Co. Marketing
Fiscal Fitness, Inc.
Supplemental Ins. Tennessee 100% AUSA Holding Co. Insurance
Division, Inc.
Creditor Resources, Inc. Michigan 100% AUSA Holding Co. Credit insurance
CRC Creditor Resources Canada 100% Creditor Insurance agency
Canadian Dealer Network Resources, Inc.
Inc.
AEGON USA Investment Iowa 100% AUSA Holding Co. Investment advisor
Management, Inc.
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
AEGON USA Realty Iowa 100% AUSA Holding Co. Provides real estate
Advisors, Inc. administrative and real
estate investment
services
Quantra Corporation Delaware 100% AEGON USA Realty Real estate and
Advisors, Inc. financial software
production and sales
Quantra Software Delaware 100% Quantra Corporation Manufacture and sell
Corporation mortgage loan and
security management
software
Landauer Realty Iowa 100% AEGON USA Realty Real estate counseling
Advisors, Inc. Advisors, Inc.
Landauer Associates, Delaware 100% AEGON USA Realty Real estate counseling
Inc. Advisors, Inc.
Realty Information Iowa 100% AEGON USA Realty Information Systems for
Systems, Inc. Advisors, Inc. real estate investment
management
AEGON USA Realty Iowa 100% AEGON USA Realty Real estate management
Management, Inc. Advisors, Inc.
USP Real Estate Iowa 21.89% First AUSA Life Real estate investment
Investment Trust Ins. Co. trust
13.11% PFL Life Ins. Co.
4.86% Bankers United
Life Assurance Co.
Cedar Income Fund, Ltd. Iowa 16.73% PFL Life Ins. Co. Real estate investment
trust
3.77% Bankers United
Life Assurance Company
3.38% Life Investors Co.
of America
1.97% AEGON USA Realty
Advisors, Inc.
.18% First AUSA Life
Ins. Co.
AUSA Financial Markets, Iowa 100% AUSA Holding Co. Marketing
Inc.
Universal Benefits Iowa 100% AUSA Holding Co. Third party
Corporation administrator
Investors Warranty of Iowa 100% AUSA Holding Co. Provider of automobile
America, Inc. extended maintenance
contracts
Massachusetts Fidelity Iowa 100% AUSA Holding Co. Trust company
Trust Co.
Money Services, Inc. Delaware 100% AUSA Holding Co. Provides financial
counseling for
employees and agents of
affiliated companies
Zahorik Company, Inc. California 100% AUSA Holding Co. Broker-Dealer
ZCI, Inc. Alabama 100% Zahorik Company, Insurance agency
Inc.
AEGON Institutional Minnesota 100% AUSA Holding Co. Insurance agency
Marketing Group, Inc.
AEGON Asset Management Delaware 100% AUSA Holding Co. Registered investment
Services, Inc. advisor
Intersecurities, Inc. Delaware 100% AUSA Holding Co. Broker-Dealer
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
ISI Insurance Agency, California 100% Intersecurities, Insurance agency
Inc. Inc.
ISI Insurance Agency of Ohio 100% ISI Insurance Insurance agency
Ohio, Inc. Agency, Inc.
ISI Insurance Agency of Texas 100% ISI Insurance Insurance agency
Texas, Inc. Agency, Inc.
ISI Insurance Agency of Massachusetts 100% ISI Insurance Insurance Agency
Massachusetts, Inc. Agency, Inc.
Associated Mariner Michigan 100% Intersecurities, Holding co./management
Financial Group, Inc.-- Inc. services
Holding company
Mariner Financial Michigan 100% Associated Mariner Broker/Dealer
Services, Inc. Financial Group, Inc.
Mariner Planning Michigan 100% Mariner Financial Financial planning
Corporation Services, Inc.
Associated Mariner Michigan 100% Associated Mariner Insurance agency
Agency, Inc. Financial Group, Inc.
Mariner Agency of Hawaii 100% Associated Mariner Insurance agency
Hawaii, Inc. Agency, Inc.
Associated Mariner Ins. Massachusetts 100% Associated Mariner Insurance agency
Agency of Agency, Inc.
Massachusetts, Inc.
Associated Mariner Ohio 100% Associated Mariner Insurance agency
Agency Ohio, Inc. Agency, Inc.
Associated Mariner Texas 100% Associated Mariner Insurance agency
Agency Texas, Inc. Agency, Inc.
Associated Mariner New Mexico 100% Associated Mariner Insurance agency
Agency New Mexico, Inc. Agency, Inc.
Mariner Mortgage Corp. Michigan 100% Associated Mariner Mortgage origination
Financial Group, Inc.
Idex Investor Services, Florida 100% AUSA Holding Co. Shareholder services
Inc.
Idex Management, Inc. Delaware 50% AUSA Holding Co. Investment advisor
50% Janus Capital Corp.
IDEX II Series Fund Massachusetts Various Mutual fund
IDEX Fund Massachusetts Various Mutual fund
IDEX Fund 3 Massachusetts Various Mutual fund
First AUSA Life Maryland 100% AEGON USA, Inc. Insurance holding
Insurance Co. company
AUSA Life Insurance Co. New York 100% First AUSA Life Insurance
Inc. Insurance Company
Life Investors Insurance Iowa 100% First AUSA Life Insurance
Company of America Ins. Co.
Bankers United Life Iowa 100% Life Investors Ins. Insurance
Assurance Company Company of America
PFL Life Insurance Iowa 100% First AUSA Life Insurance
Company Ins. Co.
Southwest Equity Life Arizona 100% of Common Insurance
Ins. Co. Voting Stock First AUSA
Life Ins. Co.
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
Iowa Fidelity Life Arizona 100% of Common Voting Insurance
Insurance Co. Stock First AUSA Life
Ins. Co.
Western Reserve Life Ohio 100% First AUSA Life Insurance
Assurance Co. of Ohio Ins. Co.
WRL Series Fund, Inc. Maryland Various Mutual fund
WRL Investment Services, Florida 100% Western Reserve Provides administration
Inc. Life Assurance Co. of for affiliated mutual
Ohio fund
WRL Investment Florida 100% Western Reserve Registered investment
Management, Inc. Life Assurance Co. of advisor
Ohio
Monumental Life Maryland 100% First AUSA Life Insurance
Insurance Co. Ins. Co.
Monumental General Maryland 100% Monumental Life Insurance
Casualty Co. Ins. Co.
United Financial Maryland 100% Monumental Life General agency
Services, Inc. Ins. Co.
Bankers Financial Life Arizona 100% Monumental Life Insurance
Ins. Co. Insurance Company
The Whitestone Maryland 100% Monumental Life Insurance agency
Corporation Ins. Co.
Cadet Holding Corp. Iowa 100% First AUSA Life Holding company
Insurance Company
Commonwealth General Delaware 100% AEGON N.V. Holding company
Corporation
Providian Series Trust Massachusetts N/A Mutual fund
Providian Agency Group, Kentucky 100% Commonwealth Provider of services to
Inc. General Corp. ins. cos.
Benefit Plans, Inc. Delaware 100% Commonwealth TPA for Peoples Security
General Corp. Life Insurance Company
Durco Agency, Inc. Virginia 100% Benefit Plans, Inc. General agent
Providian Assignment Kentucky 100% Commonwealth Administrator of
Corp. General Corp. structured settlements
Providian Financial Pennsylvania 100% Commonwealth Financial services
Services, Inc. General Corp.
Providian Securities Pennsylvania 100% Providian Financial Broker-Dealer
Corporation Services, Inc.
Providian Investment Delaware 100% Commonwealth Registered investment
Advisors, Inc. General Corp. advisor
Providian Capital Delaware 100% Commonwealth Provider of investment,
Management, Inc. General Corp. marketing and admin.
services to ins. cos.
Providian Capital Delaware 100% Providian Capital Real estate and mortgage
Management Real Estate Management, Inc. holding company
Services, Inc.
Capital Real Estate Delaware 100% Commonwealth Furniture and
Development Corporation General Corp. equipment lessor
Capital General Delaware 100% Commonwealth Holding company
Development Corporation General Corp.
Commonwealth Life Kentucky 100% Capital General Insurance company
Insurance Company Development Corporation
Agency Holding I, Inc. Delaware 100% Commonwealth Life Investment subsidiary
Insurance Company
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
Agency Investments I, Delaware 100% Agency Holding I, Investment subsidiary
Inc. Inc.
Commonwealth Agency, Kentucky 100% Commonwealth Life Special purpose
Inc. Insurance Company subsidiary
Camden Asset Management California 51% Commonwealth Life Investment entity
L.P.................... Insurance Company
Peoples Security Life North Carolina 100% Capital General Insurance company
Insurance Company Development Corporation
Ammest Realty Texas 100% Peoples Security Special purpose
Corporation Life Insurance Company subsidiary
Agency Holding II, Inc. Delaware 100% Peoples Security Investment subsidiary
Life Insurance Company
Agency Investments II, Delaware 100% Agency Holding II, Investment subsidiary
Inc. Inc.
Agency Holding III, Inc. Delaware 100% Peoples Security Investment subsidiary
Life Insurance Company
Agency Investments III, Delaware 100% Agency Investment subsidiary
Inc. Holding III, Inc.
JMH Operating Company, Mississippi 100% Peoples Security Real estate holdings
Inc. Life Insurance Company
Capital Security Life North Carolina 100% Capital General Insurance company
Ins. Co. Development Corporation
Independence Automobile Florida 100% Capital Security Automobile Club
Association, Inc. Life Insurance Company
Independence Automobile Georgia 100% Capital Security Automobile Club
Club, Inc. Life Insurance Company
Capital 200 Block Delaware 100% Commonwealth Real estate holdings
Corporation General Corp.
Capital Broadway Kentucky 100% Commonwealth Real estate holdings
Corporation General Corp.
Southlife, Inc. Tennessee 100% Commonwealth Investment subsidiary
General Corp.
Providian Insurance Pennsylvania 100% Commonwealth Provider of management
Agency, Inc. General Corp. support services
National Home Life Pennsylvania 100% Providian Insurance Special-purpose
Corporation Agency, Inc. subsidiary
Compass Rose Development Pennsylvania 100% Providian Insurance Special-purpose
Corporation Agency, Inc. subsidiary
Association Consultants, Illinois 100% Providian Insurance TPA license-holder
Inc. Agency, Inc.
Valley Forge Associates, Pennsylvania 100% Providian Insurance Furniture & equipment
Inc. Agency, Inc. lessor
Veterans Benefits Plans, Pennsylvania 100% Providian Insurance Administrator of group
Inc. Agency, Inc. insurance programs
Veterans Insurance Delaware 100% Providian Insurance Special-purpose
Services, Inc. Agency, Inc. subsidiary
Financial Planning Dist. Columbia 100% Providian Insurance Special-purpose
Services, Inc. Agency, Inc. subsidiary
Providian Auto and Home Missouri 100% Commonwealth Insurance company
Insurance Company General Corp.
Academy Insurance Group, Delaware 100% Providian Auto and Holding company
Inc. Home Insurance Company
Academy Life Insurance Missouri 100% Academy Insurance Insurance company
Co. Group, Inc.
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
Pension Life Insurance New Jersey 100% Academy Insurance Insurance company
Company of America Group, Inc.
Academy Services, Inc. Delaware 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Ammest Development Corp. Kansas 100% Academy Insurance Special-purpose
Inc. Group, Inc. subsidiary
Ammest Insurance Agency, California 100% Academy Insurance General agent
Inc. Group, Inc.
Ammest Massachusetts Massachusetts 100% Academy Insurance Special-purpose
Insurance Agency, Inc. Group, Inc. subsidiary
Ammest Realty, Inc. Pennsylvania 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
AMPAC, Inc. Texas 100% Academy Insurance Managing general agent
Group, Inc.
AMPAC Insurance Agency, Pennsylvania 100% Academy Insurance Special-purpose
Inc. Group, Inc. subsidiary
Data/Mark Services, Inc. Delaware 100% Academy Insurance Provider of mgmt.
Group, Inc. services
Force Financial Group, Delaware 100% Academy Insurance Special-purpose
Inc. Group, Inc. subsidiary
Force Financial Massachusetts 100% Force Fin. Group, Special-purpose
Services, Inc. Inc. subsidiary
Military Associates, Pennsylvania 100% Academy Insurance Special-purpose
Inc. Group, Inc. subsidiary
NCOA Motor Club, Inc. Georgia 100% Academy Insurance Automobile club
Group, Inc.
NCOAA Management Company Texas 100% Academy Insurance Special-purpose
Group, Inc. subsidiary
Unicom Administrative Pennsylvania 100% Academy Insurance Provider of admin.
Services, Inc. Group, Inc. services
Unicom Administrative Germany 100% Unicom Provider of admin.
Services, GmbH Administrative services
Services, Inc.
Providian Property and Kentucky 100% Providian Auto and Insurance company
Casualty Insurance Home Insurance Company
Company
Providian Fire Insurance Kentucky 100% Providian Property Insurance company
Co. and Casualty Insurance
Co.
Capital Liberty, L.P. Delaware 78% Commonwealth Life Holding Company
Insurance Company
19% Peoples Security
Life Insurance Company
3% Commonwealth General
Corp.
Providian LLC Turks & 100% Commonwealth Special-purpose
Caicos Islands General Corp. subsidiary
Providian Life and Missouri 4% Commonwealth General Insurance company
Health Insurance Corp.
Company 15% Peoples Security
Life
Insurance Company
20% Capital Liberty,
L.P.
61% Commonwealth Life
Insurance Company
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
JURISDICTION OF VOTING SECURITIES
NAME INCORPORATION OWNED BUSINESS
---- --------------- ----------------- --------
<S> <C> <C> <C>
Veterans Life Insurance Illinois 100% Providian Life and Insurance company
Co. Health Insurance
Company
Providian Services, Inc. Pennsylvania 100% Veterans Life Ins. Special-purpose
Co. subsidiary
First Providian Life and New York 100% Veterans Life Ins. Insurance Company
Health Insurance Co.
Company
</TABLE>
All subsidiaries are included in the consolidated financial statements for
Providian Corporation.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of July 31, 1997 there were 2,500 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.
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 The Continuum Company, Inc., Kansas City, Mis-
souri and The Vanguard Group, Inc., Valley Forge, Pennsylvania.
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.
(e) First Providian Life and Health Insurance Company represents that the
fees and charges deducted under the contracts in this registration statement,
in the aggregate, are reasonable in relation to the services rendered, the ex-
penses expected to be incurred and the risks assumed by First Providian Life
and Health Insurance Company.
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<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
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 17TH DAY OF NOVEMBER, 1997.
First Providian Life & Health
Insurance Company Separate Account
B (Registrant)
By: First Providian Life & Health
Insurance Company
/s/ David G. Rekoski*
By: ____________________________
DAVID G. REKOSKI, DIRECTOR AND
PRESIDENT
First Providian Life & Health
Insurance Company (Depositor)
/s/ David G. Rekoski*
By: ____________________________
DAVID G. REKOSKI, DIRECTOR AND
PRESIDENT
/s/ R. Michael Slaven
*By: ________________________________
R. MICHAEL SLAVEN, ATTORNEY-IN-
FACT
C-10
<PAGE>
AS REQUIRED BY THE SECURITIES ACT OF 1933, THIS AMENDED REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
DATE
/s/ David G. Rekoski Director and Novmeber 17,
- ------------------------------------- President 1997
DAVID G. REKOSKI
/s/ Dennis E. Brady* Director, Senior Vice November 17,
- ------------------------------------- President, Treasurer 1997
DENNIS E. BRADY and Senior Financial
Officer (Chief
Accounting Officer)
/s/ Susan E. Martin* Director, Vice November 17,
- ------------------------------------- President, and 1997
SUSAN E. MARTIN Secretary
/s/ I. Donald Britton* Director November 17,
- ------------------------------------- 1997
I. DONALD BRITTON
/s/ Patricia A. Collins* Director November 17,
- ------------------------------------- 1997
PATRICIA A. COLLINS
/s/ Jeffrey H. Goldberger* Director November 17,
- ------------------------------------- 1997
JEFFREY H. GOLDBERGER
/s/ Brian H. Perry* Director November 17,
- ------------------------------------- 1997
BRIAN H. PERRY
/s/ Martin Renninger* Director and Senior November 17,
- ------------------------------------- Vice President 1997
MARTIN RENNINGER
/s/ Rosalie M. Smith* Director November 17,
- ------------------------------------- 1997
ROSALIE M. SMITH
/s/ John C. Prestwood, Jr.* Director, Vice November 17,
- ------------------------------------- President and 1997
JOHN C. PRESTWOOD, JR. Actuary
/s/ Thomas B. Nesspor* Director and Vice November 17,
- ------------------------------------- President 1997
THOMAS B. NESSPOR
/s/ Kevin McGlynn* Director and Vice November 17,
- ------------------------------------- President 1997
KEVIN MCGLYNN
/s/ Craig D. Vermie Director November 17,
- ------------------------------------- 1997
CRAIG D. VERMIE
/s/ R. Michael Slaven
*By: ________________________________
R. MICHAEL SLAVEN, ATTORNEY-IN-FACT
<S> <C>
</TABLE>
C-11
