<PAGE>
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
PROSPECTUS
FOR THE
PROVIDIAN MARQUEE VARIABLE ANNUITY
OFFERED BY
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(A NEW YORK STOCK COMPANY)
ADMINISTRATIVE OFFICES
520 COLUMBIA DRIVE
JOHNSON CITY, NEW YORK 13790
The Providian Marquee variable annuity contract (the "Contract"), offered
through First Providian Life and Health Insurance Company (the "Company",
"us", "we" or "our"), provides a vehicle for investing on a tax-deferred basis
in 12 investment company Portfolios. The Contract is a group variable annuity
contract and is intended for retirement savings or other long-term investment
purposes.
The minimum initial Purchase Payment for Non-Qualified Contracts is $5,000.
The minimum initial Purchase Payment for Qualified Contracts is $2,000 (or $50
monthly by payroll deduction). The Contract is a flexible-premium deferred
variable annuity that provides for a Right to Cancel Period of 10 days (20
days for replacement) plus a 5 day grace period to allow for mail delivery,
during which you may cancel your investment in the Contract.
Your Net Purchase Payments for the Contract may be allocated among 12
Subaccounts of First Providian Life and Health Insurance Company's Separate
Account C. Assets of each Subaccount are invested in one of the following
Portfolios (which are contained within six open-end, diversified investment
companies):
. Fidelity Money Market Portfolio . T. Rowe Price Equity Income
. Fidelity Equity-Income Portfolio Portfolio
. Fidelity Growth Portfolio . T. Rowe Price New America
. Fidelity Asset Manager Portfolio Growth Portfolio
. T. Rowe Price International
Stock Portfolio
. Dreyfus Growth and Income Portfolio
. Dreyfus Quality Bond Portfolio
. OpCap Advisors Managed
Portfolio
. OpCap Advisors Small Cap
Portfolio
. OpCap Advisors U.S. Government
Income Portfolio
Your initial Net Purchase Payment(s) will, when your Contract is issued, be
invested immediately in your chosen Portfolios, unless you indicate otherwise.
The Contract's Accumulated Value varies with the investment performance of the
Portfolios you select. You bear all investment risk associated with the
Portfolios. Investment results for your Contract are not guaranteed. The
Contract offers a number of ways of withdrawing monies at a future at any
time, although in many instances withdrawals made prior to age 59 1/2 are
subject to a 10% penalty tax (and a portion may be subject to ordinary income
taxes) and may be subject to a surrender charge of up to 7%. If you elect an
Annuity Payment Option, Annuity Payments may be received on a fixed and/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 a current Prospectus for each Fund.
Please read the Prospectuses carefully and retain them for future reference. A
Statement of Additional Information for the Contract Prospectus, which has the
same date as this Prospectus, has also been filed with the Securities and
Exchange Commission, is incorporated herein by reference and is available free
by calling our Administrative Offices at 1-800-250-1828. The Table of Contents
of the Statement of Additional Information is included at the end of this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The Contract is available only 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.
The date of this Prospectus is November 15, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GLOSSARY.................. 2
HIGHLIGHTS................ 5
FEE TABLE................. 7
Financial Statements...... 9
Performance Measures...... 10
Additional Performance
Measures................. 10
Yield and Effective Yield. 11
The Company and the
Separate Account......... 12
Variable Insurance
Products Fund and
Variable Insurance
Products Fund II......... 12
Dreyfus Variable
Investment Fund.......... 12
T. Rowe Price Equity
Series, Inc.............. 12
T. Rowe Price
International Series,
Inc...................... 13
OCC Accumulation Trust.... 13
The Portfolios............ 13
CONTRACT FEATURES......... 15
Right to Cancel Period.. 15
Contract Application and
Purchase Payments...... 15
Purchasing by Wire...... 15
Allocation of Purchase
Payments............... 15
Charges and Deductions.. 16
Accumulated Value....... 17
Exchanges Among the
Portfolios............. 18
Full and Partial
Withdrawals............ 18
Systematic Withdrawal
Option................. 18
Dollar Cost Averaging
Option................. 19
IRS-Required
Distributions.......... 19
Minimum Balance
Requirement............ 20
Designation of an
Annuitant's
Beneficiary............ 20
Death of Annuitant Prior
to Annuity Date........ 20
Annuity Date............ 21
Lump Sum Payment Option. 21
Annuity Payment Options. 21
Deferment of Payment.... 22
FEDERAL TAX
CONSIDERATIONS........... 22
GENERAL INFORMATION....... 27
</TABLE>
GLOSSARY
Accumulation Unit - A measure of your ownership interest in the Contract prior
to the Annuity Date.
Accumulation Unit Value - The value of each Accumulation Unit which is
calculated each Valuation Period.
Accumulated Value - The value of all amounts accumulated under the Contract
prior to the Annuity Date.
Adjusted Death Benefit - The sum of all Net Purchase Payments made during the
first six Contract Years, less any partial withdrawals taken. During each
subsequent six-year period, the Adjusted Death Benefit will be the Death
Benefit on the last day of the previous six-year period plus any Net Purchase
Payments made, less any partial withdrawals taken during the current six-year
period. After the Annuitant attains age 75, the Adjusted Death Benefit will
remain equal to the Death Benefit on the last day of the six-year period
before age 75 occurs plus any Net Purchase Payments subsequently made, less
any partial withdrawals subsequently taken.
Annual Contract Fee - The $30 annual fee charged by the Company to cover the
cost of administering each Contract. The Annual Contract Fee will be deducted
on each Contract Anniversary and upon surrender, on a pro rata basis, from
each Subaccount.
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Annuitant - The person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.
Annuitant's Beneficiary - The person(s) to whom any benefits are due upon the
Annuitant's death prior to the Annuity Date.
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 Payment Option - One of several ways in which withdrawals from the
Contract may be made. Under a Fixed Annuity Option (see "Annuity Payment
Options," page 21), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page 21), the dollar amount of each Annuity Payment may change over time,
depending upon the investment experience of the Portfolio or Portfolios you
choose. Annuity Payments are based on the Contract's Accumulated Value as of
10 Business Days prior to the Annuity Date.
Annuity Unit - Unit of measure used to calculate Variable Annuity Payments
(see "Annuity Payment Options," page 20).
Annuity Unit Value - The value of each Annuity Unit which is calculated each
Valuation Period.
Business Day - A day when the New York Stock Exchange is open for trading.
Company ("we", "us", "our") - First Providian Life and Health Insurance
Company, a New York stock company.
Contract - The group flexible premium variable annuity contract described in
this Prospectus, participation in which may be evidenced by a certificate
issued to the Contract Owner.
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 application. The term shall also include any
person named as Joint Owner. A Joint Owner shares ownership in all respects
with the Contract Owner. Prior to the Annuity Date, the Contract Owner has the
right to assign ownership, designate beneficiaries, make permitted withdrawals
and Exchanges among Subaccounts.
Contract Year - A period of 12 months starting with the Contract Date or any
Contract Anniversary.
Death Benefit - The greater of the Contract's Accumulated Value on the date
the Company receives due Proof of Death of the Annuitant or the Adjusted Death
Benefit.
Exchange - One Exchange will be deemed to occur with each voluntary transfer
from any Subaccount.
Funds - Each of (i) Variable Insurance Products Fund, (ii) Variable Insurance
Products Fund II, (iii) Dreyfus Variable Investment Fund, (iv) T. Rowe Price
Equity Series, Inc., (v) T. Rowe Price International Series, Inc. and (vi) OCC
Accumulation Trust. The Separate Account invests in the Portfolios contained
within the Funds.
General Account - The account which contains all of our assets other than
those held in our separate accounts.
Net Purchase Payment - Any Purchase Payment less the applicable Premium Tax,
if any.
Non-Qualified Contract - Any Contract other than those described under the
Qualified Contract reference in this Glossary.
Owner's Designated Beneficiary - The person to whom ownership of this Contract
passes upon the Contract Owner's death, unless the Contract Owner was also the
Annuitant--in which case the Annuitant's Beneficiary is
3
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entitled to the Death Benefit. (Note: this transfer of ownership to the Owner's
Designated Beneficiary will generally not be subject to probate, but will be
subject to estate and inheritance taxes. Consult with your tax and estate
adviser to be sure which rules will apply to you.)
Payee - The Contract Owner, Annuitant, Annuitant's Beneficiary, or any other
person, estate, or legal entity to whom benefits are to be paid.
Portfolio - A separate investment portfolio of the Funds. The Funds currently
offer 12 portfolios in the Providian Marquee variable annuity: the Money Market
Portfolio ("Fidelity Money Market"), the Equity-Income Portfolio ("Fidelity
Equity-Income") and the Growth Portfolio ("Fidelity Growth") of Variable
Insurance Products Fund; the Asset Manager Portfolio ("Fidelity Asset Manager")
of Variable Insurance Products Fund II; the Dreyfus Growth and Income Portfolio
("Dreyfus Growth and Income") and the Dreyfus Quality Bond Portfolio ("Dreyfus
Quality Bond") of Dreyfus Variable Investment Fund; the T. Rowe Price Equity
Income Portfolio ("T. Rowe Price Equity Income") and the T. Rowe Price New
America Growth Portfolio ("T. Rowe Price New America Growth") of T. Rowe Price
Equity Series, Inc.; the T. Rowe Price International Stock Portfolio ("T. Rowe
Price International Stock") of T. Rowe Price International Series, Inc.; and
the OpCap Advisors Managed Portfolio ("OpCap Advisors Managed"), the OpCap
Advisors Small Cap Portfolio ("OpCap Advisors Small Cap") and the OpCap
Advisors U.S. Government Income Portfolio ("OpCap Advisors U.S. Government
Income") of OCC Accumulation Trust (each, a "Portfolio" and collectively, the
"Portfolios"). In this Prospectus, 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 you make to this Contract. The amount which we must pay as
Premium Tax, if any, will be deducted from each Purchase Payment or from your
Accumulated Value as it is incurred by us.
Proof of Death - (a) A certified death certificate; (b) a certified decree of a
court of competent jurisdiction as to the finding of death; (c) a written
statement by a medical doctor who attended the deceased; or (d) any other proof
of death satisfactory to the Company.
Purchase Payment - Any premium payment. The minimum initial Purchase Payment is
$5,000 for Non-Qualified Contracts and $2,000 for Qualified Contracts (or $50
monthly by payroll deduction for Qualified Contracts); each additional Purchase
Payment must be at least $500 for Non-Qualified Contracts or $50 for Qualified
Contracts. Purchase Payments may be made at any time prior to the Annuity Date
as long as the Annuitant is living.
Qualified Contract - An annuity contract as defined under Sections 403(b) and
408(b) of the Internal Revenue Code of 1986, as amended (the "Code").
Right to Cancel Period - The period during which the Contract can be canceled
and treated as void from the Contract Date.
Separate Account - That portion of First Providian Life and Health Insurance
Company Separate Account C dedicated to the Contract. The Separate Account
consists of assets that are segregated by First Providian Life and Health
Insurance Company and, for Contract Owners, invested in the Portfolios. 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
Funds' Portfolios. Each Subaccount will only invest in a single Portfolio. The
investment performance of each Subaccount is linked directly to the investment
performance of one of the 12 Portfolios.
Surrender Value - The Accumulated Value, less any applicable contingent
deferred sales load (i.e., surrender charge) and any Premium Taxes incurred but
not yet deducted.
Valuation Period - The relative performance of your Contract is measured by the
Accumulation Unit Value. This value is calculated each Valuation Period. A
Valuation Period is defined as the period of time between the close of business
on one Business Day and the close of business on the following Business Day.
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HIGHLIGHTS
You can find definitions of important terms in the Glossary (page 2).
THE PROVIDIAN MARQUEE VARIABLE ANNUITY
The Contract provides a vehicle for investing on a tax-deferred basis in 12
investment company Portfolios. Monies may be subsequently withdrawn from the
Contract either as a lump sum or as annuity income as permitted under the
Contract. Accumulated Values and Annuity Payments depend on the investment
experience of the selected Portfolios. The investment performance of the
Portfolios is not guaranteed. Thus, you bear all investment risk for monies
invested under the Contract.
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 purposes. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state marginal income tax
brackets. The Contract is offered as both a Qualified Contract and a Non-
Qualified Contract. Both Qualified and Non-Qualified Contracts offer tax-
deferral on increases in the Contract's value prior to withdrawal or
distribution--however, Purchase Payments made by Contract Owners of Qualified
Contracts may be excludible or deductible from gross income in the year such
payments are made, subject to certain statutory restrictions and limitations.
(See "Federal Tax Considerations," page 22.)
INVESTMENT CHOICES
Your investment in the Contract may be allocated among 12 Subaccounts of the
Separate Account. The Subaccounts in turn invest exclusively in the following
12 Portfolios offered by the Funds: Fidelity Money Market, Fidelity Equity-
Income, Fidelity Growth, Fidelity Asset Manager, Dreyfus Growth and Income,
Dreyfus Quality Bond, T. Rowe Price Equity Income, T. Rowe Price New America
Growth, T. Rowe Price International Stock, OpCap Advisors Managed, OpCap
Advisors Small Cap and OpCap Advisors U.S. Government Income. The assets of
each Portfolio are separate, and each Portfolio has distinct investment
objectives and policies as described in the corresponding Fund or Portfolio
Prospectus. ............................................................Page 13
CONTRACT OWNER
The Contract Owner is the person designated as the owner of the Contract in
the Contract application. The Contract Owner may designate any person as a
Joint Owner. A Joint Owner shares ownership in all respects with the Contract
Owner. Prior to the Annuity Date, the Contract Owner has the right to assign
ownership, designate beneficiaries, and make permitted withdrawals and
Exchanges among the Subaccounts.
ANNUITANT
The Annuitant is a person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.
ANNUITANT'S BENEFICIARY
The Contract Owner may designate any person to receive benefits under the
Contract which are payable upon the death of the Annuitant prior to the
Annuity Date.
HOW TO INVEST
To invest in the Contract, please consult your adviser who will assist you in
completing the Contract application. You will need to select an Annuitant. The
Annuitant may not be older than age 75. The minimum initial Purchase Payment
is $5,000 for Non-Qualified Contracts, and $2,000 (or $50 monthly by payroll
deduction) for Qualified Contracts; subsequent Purchase Payments must be at
least $500 for Non-Qualified Contracts or $50 for Qualified Contracts.
Additional Purchase Payments after the first Contract Year are limited to
$10,000 annually. You may make subsequent Purchase Payments at any time before
the Contract's Annuity Date, as long as the Annuitant specified in the
Contract is living. ....................................................Page 15
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ALLOCATION OF PURCHASE PAYMENTS
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in your chosen Portfolios immediately upon our receipt thereof, IN
WHICH CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE
PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD. You must fill out and send us
the appropriate form or comply with other designated Company procedures if you
would like to change how subsequent Net Purchase Payments are allocated. ..Page
15
RIGHT TO CANCEL PERIOD
The Contract provides for a Right to Cancel Period of 10 days (20 days for
replacement) plus a 5 day period to allow for mail delivery, during which you
may cancel your investment in the Contract. To cancel your investment, please
return your Contract to us or to the agent from whom you purchased the
Contract. When we receive the Contract, we will return the Accumulated Value
of your Purchase Payment(s) invested in the Portfolios plus any loads, fees
and/or Premium Taxes that may have been subtracted from such amount. ...Page 15
EXCHANGES
You may make unlimited Exchanges among the Portfolios, provided you maintain a
minimum balance of $1,000, except in cases where Purchase Payments are made by
monthly payroll deduction, in each Subaccount to which you have allocated a
portion of your Accumulated Value. No fee is currently imposed for such
Exchanges; however, we reserve the right to charge a $15 fee for Exchanges in
excess of 12 per Contract Year. Exchanges must not reduce the value of any
Subaccount below $1,000, except in cases where Purchase Payments are made by
monthly payroll deduction, or that remaining amount will be transferred to
your other Subaccounts on a pro rata basis. (See also "Charges and
Deductions," page 16). .................................................Page 17
DEATH BENEFIT
If the Annuitant specified in your Contract dies prior to the Annuity Date,
your named Annuitant's Beneficiary will receive the Death Benefit under the
Contract. The Death Benefit is the greater of your Accumulated Value or the
Adjusted Death Benefit on the date we receive due proof of the Annuitant's
death. During the first six Contract Years, the Adjusted Death Benefit will be
the sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period, the Adjusted Death Benefit will be the
Death Benefit on the last day of the previous six-year period plus any Net
Purchase Payments made, less any partial withdrawals taken during the current
six-year period. After the Annuitant attains age 75, the Adjusted Death
Benefit will remain equal to the Death Benefit on the last day of the six-year
period before age 75 occurs plus any Net Purchase Payments subsequently made,
less any partial withdrawals subsequently taken. The Annuitant's Beneficiary
may elect to receive these proceeds as a lump sum or as Annuity Payments. If
the Annuitant dies on or after the Annuity Date, any unpaid payments certain
will be paid, generally to the Annuitant's Beneficiary, in accordance with the
Contract. ..............................................................Page 20
ANNUITY PAYMENT OPTIONS
In addition to the full and partial withdrawal privileges, you may also choose
to create an income stream by requesting an annuity income from us. As the
Contract Owner, you may elect one of several Annuity Payment Options. By
electing an Annuity Payment Option, you are asking us to systematically
liquidate your annuity. We provide you with a variety of options as it relates
to those payments. At your discretion, payments may be either fixed or
variable or both. Fixed payouts are guaranteed for a designated period or for
life (either single or joint). Variable payments will vary depending on the
performance of the underlying Portfolio or Portfolios selected. ........Page 21
CONTRACT AND POLICYHOLDER INFORMATION
If you have questions about your Contract, please telephone our Administrative
Offices at 1-800-250-1828 between the hours of 8:00 A.M. to 5:00 P.M. Eastern
time. Please have the Contract number and the Contract Owner's name ready when
you call. As Contract Owner you will receive periodic statements confirming
any financial transactions that take place, as well as quarterly statements
and an annual statement.
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CHARGES AND DEDUCTIONS UNDER THE CONTRACT
The Contract has an annual mortality and expense risk charge of 1.25%. The
Contract has no front-end sales load and up to 10% of the Accumulated Value
can be withdrawn once per year without a surrender charge. However, additional
withdrawals are subject to a surrender charge of up to 7% during the first six
Contract Years.
The Contract also includes administrative charges and policy fees which pay
for administering the Contract, and management, advisory and other fees, which
reflect the costs of the Funds..........................................Page 16
FULL AND PARTIAL WITHDRAWALS
You may withdraw all or part of the Surrender Value of the Contract before the
earlier of the Annuity Date or the Annuitant's death. Withdrawals made prior
to age 59 1/2 may be subject to a 10% penalty tax (and a portion may be
subject to ordinary income taxes).......................................Page 18
FEE TABLE
The following table illustrates all expenses (except for Premium Taxes that
may be assessed) that you would incur as an owner of a Contract (see page 16).
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 Funds. For a complete discussion of Contract costs and expenses, see
"Charges and Deductions," page 16.
<TABLE>
<CAPTION>
CONTRACTOWNER TRANSACTION EXPENSES
<S> <C>
Sales Load Imposed on Purchases......................................... None
Contingent Deferred Sales Load (surrender charge)....................... 7%*
Exchange Fees........................................................... None
ANNUAL CONTRACT FEE..................................................... $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in the
Separate Account)
Mortality and Expense Risk Charge....................................... 1.25%
Administrative Charge................................................... .15%
-----
Total Annual Separate Account Expenses.................................. 1.40%
</TABLE>
*Up to 10% of the Accumulated Value as of the last Contract Anniversary (10%
of the initial Net Purchase Payment during the first Contract Year) can be
withdrawn once per year, or pursuant to a series of systematic withdrawals,
without a surrender charge (the "Penalty Free Amount"). Additional
withdrawals in excess of the Penalty Free Amount in the first Contract Year
are subject to a 7% charge on the portion of such withdrawal that consists
of Net Purchase Payments. The charge decreases one percentage point per year
until after the sixth Contract Year at which time there is no surrender
charge. The total surrender charges assessed will not exceed 8.5% of the
Purchase Payments under the Contract.
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PORTFOLIO ANNUAL EXPENSES
Except as indicated, the figures below are based on expenses for fiscal year
1995 (as a percentage of each Portfolio's average net assets after fee waiver
and/or expense reimbursement limitation, if applicable).
<TABLE>
<CAPTION>
MANAGEMENT
AND ADVISORY OTHER TOTAL PORTFOLIO
EXPENSES EXPENSES ANNUAL EXPENSES
------------ -------- ---------------
<S> <C> <C> <C>
Fidelity Money Market... 0.24% 0.09% 0.33%
Fidelity Equity-Income.. 0.51% 0.10% 0.61%
Fidelity Growth......... 0.61% 0.09% 0.70%
Fidelity Asset Manager*. 0.71% 0.08% 0.79%
Dreyfus Growth and
Income**............... 0.72% 0.20% 0.92%
Dreyfus Quality Bond**.. 0.61% 0.20% 0.81%
T. Rowe Price Equity
Income................. 0.85% 0.00% 0.85%
T. Rowe Price New
America Growth......... 0.85% 0.00% 0.85%
T. Rowe Price
International Stock.... 1.05% 0.00% 1.05%
OpCap Advisors
Managed***............. 0.80% 0.14% 0.94%
OpCap Advisors Small
Cap***................. 0.80% 0.20% 1.00%
OpCap Advisors U.S.
Government Income***... 0.60% 0.40% 1.00%
</TABLE>
*The expenses for the Fidelity Asset Manager Portfolio were reduced by use
of a portion of the brokerage commissions paid by the Fund. Without this
reduction, the Total Portfolio Annual Expenses would have been 0.81%. There
is no guarantee that any fee waivers and/or expense reimbursements will
continue in the future.
**From time to time, the Dreyfus Growth and Income and Quality Bond
Portfolios' investment adviser in its sole discretion may waive all or part
of its fees and/or voluntarily assume certain of the Portfolios' expenses.
For a more complete description of the Portfolios' fees and expenses, see
the Dreyfus Variable Investment Fund's Prospectus. During 1995, certain fees
were waived and/or expenses were assumed, in each case on a voluntary basis.
Without such waivers or reimbursements, the Management and Advisory
Expenses, Other Expenses and Total Portfolio Annual Expenses that would have
been incurred for the fiscal year ended December 31, 1995, would have been:
0.75%, 0.20% and 0.95%, respectively, for the Dreyfus Growth and Income
Portfolio; and 0.65%, 0.20% and 0.85%, respectively, for the Dreyfus Quality
Bond Portfolio. There is no guarantee that any fee waivers or expense
reimbursements will continue in the future. See the Dreyfus Variable
Investment Fund's Prospectus for a discussion of fee waiver and/or expense
reimbursements.
***The annual expenses of the OCC Accumulation Trust Portfolios as of
December 31, 1995 have been restated to reflect new management fee and
expense limitation arrangements in effect as of May 1, 1996. Effective May
1, 1996, the expenses of the Portfolios of the OCC Accumulation Trust are
contractually limited by OpCap Advisors so that their respective annualized
operating expenses do not exceed 1.25% of their respective average daily net
assets. Furthermore, through April 30, 1997, the annualized operating
expenses of the Portfolios will be voluntarily limited by OpCap Advisors so
that the annualized operating expenses of these Portfolios do not exceed
1.00% of their respective average daily net assets. Without such voluntary
expense limitations, and taking into account the revised contractual
provisions effective May 1, 1996 concerning management fees and expense
limitations, the Management Fees, Other Expenses and Total Portfolio Annual
Expenses incurred for the fiscal year ended December 31, 1995 would have
been: 0.80%, 0.14% and 0.94%, respectively, for the OpCap Advisors Managed
Portfolio; 0.80%, 0.39% and 1.19%, respectively, for the OpCap Advisors
Small Cap Portfolio; and 0.60%, 0.65% and 1.25%, respectively, for the OpCap
Advisors U.S. Government Income Portfolio.
8
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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.
<TABLE>
<CAPTION>
10
1 YEAR 3 YEARS 5 YEARS YEARS
------ ------- ------- -------
<S> <C> <C> <C> <C>
Fidelity Money Market...................... $88.25 $106.46 $127.07 $210.19
Fidelity Equity-Income..................... $91.07 $115.01 $141.48 $239.76
Fidelity Growth............................ $91.97 $117.74 $146.07 $249.08
Fidelity Asset Manager..................... $92.87 $120.47 $150.64 $258.31
Dreyfus Growth and Income.................. $94.18 $124.39 $157.20 $271.48
Dreyfus Quality Bond....................... $93.08 $121.07 $151.65 $260.35
T. Rowe Price Equity Income................ $93.48 $122.28 $153.67 $264.41
T. Rowe Price New America Growth........... $93.48 $122.28 $153.67 $264.41
T. Rowe Price International Stock.......... $95.48 $128.30 $163.71 $284.47
OpCap Advisors Managed..................... $94.38 $124.99 $158.20 $273.50
OpCap Advisors Small Cap................... $94.98 $126.80 $161.21 $279.50
OpCap Advisors U.S. Government Income...... $94.98 $126.80 $161.21 $279.50
</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) you do not surrender your Contract or you annuitize at the end of each
period.
<TABLE>
<CAPTION>
3 10
1 YEAR YEARS 5 YEARS YEARS
------ ------ ------- -------
<S> <C> <C> <C> <C>
Fidelity Money Market....................... $18.25 $56.46 $ 97.07 $210.19
Fidelity Equity-Income...................... $21.07 $65.01 $111.48 $239.76
Fidelity Growth............................. $21.97 $67.74 $116.07 $249.08
Fidelity Asset Manager...................... $22.87 $70.47 $120.64 $258.31
Dreyfus Growth and Income................... $24.18 $74.39 $127.20 $271.48
Dreyfus Quality Bond........................ $23.08 $71.07 $121.65 $260.35
T. Rowe Price Equity Income................. $23.48 $72.28 $123.67 $264.41
T. Rowe Price New America Growth............ $23.48 $72.28 $123.67 $264.41
T. Rowe Price International Stock........... $25.48 $78.30 $133.71 $284.47
OpCap Advisors Managed...................... $24.38 $74.99 $128.20 $273.50
OpCap Advisors Small Cap.................... $24.98 $76.80 $131.21 $279.50
OpCap Advisors U.S. Government Income....... $24.98 $76.80 $131.21 $279.50
</TABLE>
The Annual Contract Fee is reflected in these examples as a percentage equal to
the estimated total amount of fees collected during a calendar year divided by
the estimated total average net assets of the Portfolios during the same
calendar year. The fee is assumed to remain the same in each year of the above
periods. (With respect to partial year periods, if any, in the examples, the
Annual Contract Fee is pro-rated to reflect only the applicable portions of the
partial year period.) The Annual Contract Fee will be deducted on each Contract
Anniversary and upon surrender, on a pro rata basis, from each Subaccount. The
Company may deduct Premium Taxes, if any, as they are incurred.
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.
FINANCIAL STATEMENTS
The audited statutory-basis financial statements of the Company (as well as the
Independent Auditors' Report thereon) are contained in the Statement of
Additional Information. No financial statements are included for the Separate
Account because, as of the date of this Prospectus, the Subaccounts which
invest in the Portfolios offered by the Providian Marquee Variable Annuity had
not commenced operations with respect to the Portfolios, and consequently had
no assets or liabilities.
9
<PAGE>
PERFORMANCE MEASURES
Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of the Fidelity Money Market Subaccount, the yield of the
other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Contract Owners.
On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two
investment funds, the Old Trust and the Quest for Value Accumulation Trust (now
known as the OCC Accumulation Trust) that is included in the Contract (the "New
Trust"), at which time the New Trust commenced operations. The total net assets
for each of the OpCap Advisors Small Cap and OpCap Advisors Managed Portfolios
immediately after the transaction were $139,812,573 and $682,601,380,
respectively, with respect to the Old Trust and, with respect to the New Trust
were $8,129,274 and $51,345,102, for the OpCap Advisors Small Cap and OpCap
Advisors Managed Portfolios, respectively. For the period prior to September
16, 1994, performance figures for each of the OpCap Advisors Small Cap and
OpCap Advisors Managed Portfolios reflect the performance of the corresponding
Portfolios of the Old Trust.
Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's yield and total return, and a list of the indexes and other
benchmarks used in evaluating a Portfolio's performance.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
When advertising performance of the Subaccounts, the Company will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the Securities and Exchange Commission (the "SEC"), is the
effective annual compounded rate of return that would have produced the cash
redemption value over the stated period had the performance remained constant
throughout. The Standardized Average Annual Total Return assumes a single
$1,000 payment made at the beginning of the period and full redemption at the
end of the period. It reflects the deduction of all applicable sales loads
(including the contingent deferred sales load), the Annual Contract Fee and all
other Portfolio, Separate Account and Contract level charges except Premium
Taxes, if any.
ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE ANNUAL
TOTAL RETURN
The Company may show actual 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 actual Average Annual Total Return
(i.e., the average annual change in Accumulation Unit Values) with respect to
one or more periods. For one year, the actual Total Return and the actual
Average Annual Total Return are effective annual rates of return and are equal.
For periods greater than one year, the actual Average Annual Total Return is
the effective annual compounded rate of return for the periods stated. Because
the value of an Accumulation Unit reflects the Separate Account and Portfolio
expenses (see "Fee Table") the actual Total Return and actual Average Annual
Total Return also reflect these expenses. These percentages do not reflect the
Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the percentages reported.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more subaccounts with
respect 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 Fee, any sales loads or
Premium Taxes (if any), which if included would reduce the percentages reported
by the Company.
10
<PAGE>
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
commencing 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 during
the relevant period. These percentages reflect a deduction for the Separate
Account and Portfolio expenses, but do not include the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which if included would reduce the
percentage reported by the Company.
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN
The Company may show Non-Standardized Hypothetical Total Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios, and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which
produce the resulting Accumulated Values. They reflect a deduction for the
Separate Account expenses and Portfolio expenses. These returns do not include
the Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the percentages reported.
The Non-Standardized Hypothetical Total Return for a Subaccount is the
effective annual rate of return that would have produced the ending Accumulated
Value of the stated one-year period.
The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.
YIELD AND EFFECTIVE YIELD
The Company may also show yield and effective yield figures for the Subaccount
investing in shares of the Fidelity Money Market Portfolio. "Yield" refers to
the income generated by an investment in Fidelity Money Market over a seven-day
period, which is then "annualized." That is, the amount of income generated by
the investment during that week is assumed to be generated each week over a 52-
week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in Fidelity Money Market is assumed to be reinvested. Therefore the
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. These figures do not reflect
the Annual Contract Fee, any sales loads or Premium Taxes (if any) which, if
included, would reduce the yields reported.
From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than Fidelity Money
Market for which the Company advertises yield, the Company shall furnish a
yield quotation referring to the Portfolio computed in the following manner:
the net investment income per Accumulation Unit earned during a recent one
month period is divided by the Accumulation Unit Value on the last day of the
period.
Please refer to the Statement of Additional Information for a description of
the method used to calculate a Portfolio's yield and total return, and a list
of the indexes and other benchmarks used in evaluating a Portfolio's
performance.
The performance measures discussed above reflect results of the Portfolios and
are not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.
Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service which ranks mutual funds and other investment companies by
overall performance, investment objectives and assets. Performance may also be
tracked by other ratings services, companies, publications or persons who rank
separate accounts or other investment products on overall performance or other
criteria. Performance figures will be calculated in accordance with
standardized methods established by each reporting service.
11
<PAGE>
THE COMPANY AND THE SEPARATE ACCOUNT
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
The Company (formerly National Home Life Assurance Company of New York) is a
stock life insurance company incorporated under the laws of the State of New
York on March 23, 1970, with administrative offices at 520 Columbia Drive,
Johnson City, New York 13790. The Company is principally engaged in offering
life insurance, annuity contracts, and accident and health insurance and is
admitted to do business in 10 states and the District of Columbia. The Company
is ultimately wholly-owned by Providian Corporation, a publicly-held
diversified consumer financial services company whose shares are traded on the
New York Stock Exchange with assets of $26.8 billion as of December 31, 1995.
FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT C
The Separate Account was established by the Company as a separate account under
the laws of the State of New York on November 4, 1994, pursuant to a resolution
of the Company's Board of Directors. The Separate Account is a unit investment
trust registered with 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
Separate Account meets the definition of a "separate account" under the federal
securities laws.
The assets of the Separate Account are owned by the Company and the obligations
under the Contract are obligations of the Company. These assets are held
separately from the other assets of the Company and are not chargeable with
liabilities incurred in any other business operation of the Company (except to
the extent that assets in the Separate Account exceed the reserves and other
liabilities of the Separate Account). Income, gains and losses incurred on the
assets in the Separate Account, whether or not realized, are credited to or
charged against the Separate Account without regard to other income, gains or
losses of the Company. Therefore, the investment performance of the Separate
Account is entirely independent of the investment performance of the General
Account assets or any other separate account maintained by the Company.
The Separate Account has dedicated 12 Subaccounts to the Contract, each of
which invests solely in a corresponding Portfolio of the Funds. Additional
Subaccounts may be established at the discretion of the Company. The Separate
Account also includes other subaccounts which are not available under the
Contract.
VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND II
Variable Insurance Products Fund and Variable Insurance Products Fund II (each,
a "Fidelity Fund" and collectively, the "Fidelity Funds") are diversified,
open-end management investment companies organized by Fidelity Management &
Research Company ("FMR") and registered under the 1940 Act. Each Fidelity Fund
consists of several investment portfolios, including the Money Market, Equity-
Income, Growth and Asset Manager Portfolios available as part of the Providian
Marquee. FMR serves as the Fidelity Funds' investment adviser.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is a diversified, open-end management
investment company organized under the 1940 Act. The Dreyfus Variable
Investment Fund consists of eleven separate investment portfolios, including
the Growth and Income and Quality Bond Portfolios, which are the only
portfolios available as part of the Providian Marquee. The Dreyfus Corporation
serves as this Fund's investment adviser.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price Equity Series Inc. is a Maryland corporation organized in 1994
and is registered with the SEC under the 1940 Act as a diversified, open-end
management investment company, commonly known as a "mutual fund." Currently,
the fund consists of the Equity-Income and the New America Growth Portfolios,
each of which represents a separate class of shares having different objectives
and investment policies, and both of which are available as part of the
Providian Marquee. T. Rowe Price Associates, Inc. is responsible for the
selection and management of this Fund's portfolio investments and serves as the
Fund's investment adviser.
12
<PAGE>
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Series, Inc. is a Maryland corporation organized in
1994 and is registered with the SEC under the 1940 Act as a diversified, open-
end management investment company, commonly known as a "mutual fund." The
corporation is a series fund and has the authority to issue other series in
addition to the International Stock Portfolio currently available as part of
the Providian Marquee. Rowe Price-Fleming International, Inc. is responsible
for selection and management of this Fund's portfolio investments and serves as
the Fund's investment adviser.
OCC ACCUMULATION TRUST
OCC Accumulation Trust is a Massachusetts business trust and is registered with
the SEC under the 1940 Act as a diversified, open-end management investment
company. The Fund receives investment advice with respect to each of its
portfolios from OpCap Advisors, a subsidiary of Oppenheimer Capital, a
registered investment adviser. The Fund currently consists of seven series,
including the OpCap Advisors Managed, OpCap Advisors Small Cap and OpCap
Advisors Government Income Portfolios available as part of the Providian
Marquee. The OCC Accumulation Trust was formerly known as the Quest for Value
Accumulation Trust.
THE PORTFOLIOS (SEE ACCOMPANYING PROSPECTUSES)
FOR MORE INFORMATION CONCERNING THE RISKS ASSOCIATED WITH EACH PORTFOLIO'S
INVESTMENTS, PLEASE REFER TO THE APPLICABLE UNDERLYING FUND PROSPECTUS.
FIDELITY MONEY MARKET PORTFOLIO ("FIDELITY MONEY MARKET")
Fidelity Money Market seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. It invests only in
high-quality U.S. dollar denominated money market instruments of domestic and
foreign issuers.
FIDELITY EQUITY-INCOME PORTFOLIO ("FIDELITY EQUITY-INCOME")
Fidelity Equity-Income seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities the Portfolio
will also consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of 500 Stocks.
FIDELITY GROWTH PORTFOLIO ("FIDELITY GROWTH")
Fidelity Growth seeks to achieve capital appreciation normally through the
purchase of common stocks (although the Portfolio's investments are not
restricted to any one type of security). Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
FIDELITY ASSET MANAGER PORTFOLIO ("FIDELITY ASSET MANAGER")
Fidelity Asset Manager seeks high total return with reduced risk over the long-
term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed income instruments.
DREYFUS GROWTH AND INCOME PORTFOLIO ("DREYFUS GROWTH AND INCOME")
Dreyfus Growth and Income is a non-diversified Portfolio, the goal of which is
long-term capital growth, current income and growth of income, consistent with
reasonable investment risk. The Portfolio invests in equity and debt securities
and money market instruments of domestic and foreign issuers.
DREYFUS QUALITY BOND PORTFOLIO ("DREYFUS QUALITY BOND")
Dreyfus Quality Bond is a diversified Portfolio, the goal of which is to
provide the maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Dreyfus Quality
Bond Portfolio invests in debt obligations of corporations, the U.S. Government
and its agencies and instrumentalities, and major U.S. banking institutions.
13
<PAGE>
T. ROWE PRICE EQUITY INCOME PORTFOLIO ("T. ROWE PRICE EQUITY INCOME")
T. Rowe Price Equity Income seeks to provide substantial dividend income as
well as long-term capital appreciation by investing primarily in dividend-
paying common stocks of established companies. In pursuing its objective, the
Portfolio emphasizes companies with favorable prospects for both increasing
dividend income and capital appreciation.
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO ("T. ROWE PRICE NEW AMERICA GROWTH")
T. Rowe Price New America Growth seeks long-term growth of capital through
investments primarily in the common stocks of U.S. growth companies which
operate in service industries. In pursuing its objective, this Portfolio
invests primarily in companies deriving a majority of their revenues or
operating earnings from service-related activities and in companies whose
prospects are closely tied to service industries. This Portfolio may also
invest up to 25% of its assets in non-service related growth companies in
pursuit of capital appreciation whose earnings are believed to hold the
prospect of superior growth.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ("T. ROWE PRICE INTERNATIONAL
STOCK")
T. Rowe Price International Stock seeks long-term growth of capital, through
investments primarily in common stocks of established, non-U.S. companies.
OPCAP ADVISORS MANAGED PORTFOLIO ("OPCAP ADVISORS MANAGED")
OpCap Advisors Managed seeks to achieve growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary over time based on the
investment manager's assessments of the relative outlook for such investments.
OPCAP ADVISORS SMALL CAP PORTFOLIO ("OPCAP ADVISORS SMALL CAP")
OpCap Advisors Small Cap seeks capital appreciation through investments in a
diversified portfolio consisting primarily of equity securities of companies
with market capitalizations under $1 billion.
OPCAP ADVISORS U.S. GOVERNMENT INCOME PORTFOLIO ("OPCAP ADVISORS U.S.
GOVERNMENT INCOME")
The investment objective of OpCap Advisors U.S. Government Income is to seek a
high level of current income together with the protection of capital. This
Portfolio seeks to achieve its investment objective by investing exclusively in
debt obligations, including mortgage-backed securities, issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
OTHER PORTFOLIO INFORMATION
There is no assurance that a Portfolio will achieve its stated investment
objective.
Additional information concerning the investment objectives and policies of the
Portfolios and the investment advisory services, total expenses and charges can
be found in the current prospectuses for the corresponding Funds. THE FUNDS' OR
PORTFOLIOS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF NET PURCHASE PAYMENTS TO A PORTFOLIO.
The Portfolios may be made available to registered separate accounts offering
variable annuity and variable life products of the Company as well as other
insurance companies or to a person or plan, including a pension or retirement
plan receiving favorable tax treatment under the Code, that qualifies to
purchase shares of the Funds under Section 817(h) of the Code. Although we
believe it is unlikely, a material conflict could arise among the interests of
the Separate Account and one or more of the other participating separate
accounts and other qualified persons or plans. In the event of a material
conflict, the affected insurance companies agree to take any necessary steps,
including removing their separate accounts from the Funds if required by law,
to resolve the matter.
14
<PAGE>
CONTRACT FEATURES
The rights and benefits under the Contract are described below and in the
Contract. The Company reserves the right to make any modification to conform
the Contract to, or give the Contract Owner the benefit of, any federal or
state statute or any rule or regulation of the United States Treasury
Department.
RIGHT TO CANCEL PERIOD
A Right to Cancel Period exists for 10 days after you receive the Contract (20
days for replacement) plus a 5 day grace period to allow for mail delivery. You
may cancel the Contract during the Right to Cancel Period by returning the
Contract to our Administrative Offices, 520 Columbia Drive, Johnson City, New
York 13790, or to the agent from whom you purchased the Contract or mailing it
to us at P.O. Box 1950, Binghamton, New York 13902. Upon cancellation, the
Contract is treated as void from the Contract Date and when we receive the
Contract, we will return the Accumulated Value of your Purchase Payment(s)
invested in the Portfolios plus any loads, fees and/or Premium Taxes that may
have been subtracted from such amount.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
If you wish to purchase a Contract, you should send your completed application
and your initial Purchase Payment to the address indicated on your application,
or to such other location as the Company may from time to time designate. If
you wish to make personal delivery by hand or courier to the Company of your
completed application and initial Purchase Payment (rather than through the
mail), you must do so at our Administrative Offices, 520 Columbia Drive,
Johnson City, NY 13790. Your initial Purchase Payment for a Non-Qualified
Contract must be equal to or greater than the $5,000 minimum investment
requirement. The initial Purchase Payment for a Qualified Contract must be
equal to or greater than $2,000 (or you may establish a payment schedule of $50
a month by payroll deduction).
The Contract will be issued and the initial Purchase Payment less any Premium
Taxes 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 Payment.
If the initial Purchase Payment cannot be credited because the application is
incomplete, we will contact the applicant, explain the reason for the delay and
will refund the initial Purchase Payment within five Business Days, unless the
applicant instructs us to retain the initial Purchase Payment and credit it as
soon as the necessary requirements are fulfilled.
Additional Purchase Payments may be made at any time prior to the Annuity Date,
as long as the Annuitant is living. Any additional Purchase Payments must be
for at least $500 for Non-Qualified Contracts, or $50 for Qualified Contracts,
and are limited to $10,000 annually after the first Contract Anniversary. If
additional Purchase Payments are received prior to the close of the New York
Stock Exchange (generally 4:00 P.M. Eastern time) they will be credited to the
Accumulated Value at the close of business that same day. Additional Purchase
Payments received after the close of the New York Stock Exchange are processed
the next Business Day.
Total Purchase Payments may not exceed $1,000,000 without our prior approval.
PURCHASING BY WIRE
For wiring instructions please contact our Administrative Offices at 1-800-250-
1828.
ALLOCATION OF PURCHASE PAYMENTS
You specify in the Contract application how your Net Purchase Payments will be
allocated. You may allocate each Net Purchase Payment to one or more of the
Portfolios as long as such portions are whole number percentages provided that
no Portfolio may contain a balance less than $1,000, except in cases where
Purchase Payments are made by monthly payroll deduction. You may choose not to
allocate any monies to a particular Portfolio. You may change allocation
instructions for future Net Purchase Payments by sending us the appropriate
Company form or by complying with other designated Company procedures.
15
<PAGE>
Your initial Net Purchase Payment(s) will, unless you indicate otherwise, be
invested in your Portfolios immediately upon our receipt thereof, IN WHICH CASE
YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO THE PORTFOLIOS
DURING THE RIGHT TO CANCEL PERIOD.
CHARGES AND DEDUCTIONS
No sales load is deducted from Purchase Payments and up to 10% of the
Accumulated Value as of the last Contract Anniversary (10% of the initial Net
Purchase Payment during the first Contract Year), can be withdrawn once per
year, or pursuant to a series of systematic withdrawals, without a surrender
charge (the "Penalty Free Amount"). Additional withdrawals in excess of the
Penalty Free Amount are subject to a surrender charge according to the
following schedule on the portion of such withdrawal that consists of Net
Purchase Payments:
<TABLE>
<CAPTION>
CURRENT
CONTRACT YEAR CHARGE
------------- -------
<S> <C>
1............................. 7%
2............................. 6%
3............................. 5%
4............................. 4%
5............................. 3%
6............................. 2%
7............................. 0%
</TABLE>
The total surrender charges assessed will not exceed 8.5% of the Purchase
Payments under the Contract. There will be no surrender charge assessed on the
death of the Annuitant or after the sixth Contract Year.
MORTALITY AND EXPENSE RISK CHARGE
We impose a charge as compensation for bearing certain mortality and expense
risks under the Contract. The annual charge is assessed daily based on the net
asset value of the Separate Account. The annual mortality and expense risk
charge is 1.25% of the net asset value of the Separate Account.
We guarantee that this annual charge will never increase. If this charge is
insufficient to cover actual costs and assumed risks, the loss will fall on us.
Conversely, if the charge proves more than sufficient, any excess will be added
to the Company surplus and will be used for any lawful purpose, including any
shortfall on the costs of distributing the Contract.
The mortality risk borne by us under the Contract, where one of the life
Annuity Payment Options is selected, is to make monthly Annuity Payments
(determined in accordance with the annuity tables and other provisions
contained in the Contract) regardless of how long all Annuitants may live. We
also assume mortality risk as a result of our guarantee of a Death Benefit in
the event the Annuitant dies prior to the Annuity Date.
The expense risk borne by us under the Contract is the risk that the charges
for administrative expenses which are guaranteed for the life of the Contract
may be insufficient to cover the actual costs of issuing and administering the
Contract.
ADMINISTRATIVE CHARGE AND ANNUAL CONTRACT FEE
An administrative charge equal to .15% annually of the net asset value of the
Separate Account is assessed daily along with the Annual Contract Fee of $30.
The Annual Contract Fee is deducted proportionately from the Subaccounts. For
any Contract with amounts allocated to the Subaccounts, the $30 fee is assessed
per Contract, not per Portfolio chosen. The Annual Contract Fee will be
deducted on each Contract Anniversary and upon surrender, on a pro rata basis,
from each Subaccount. These deductions represent reimbursement for the costs
expected to be incurred over the life of the Contract for issuing and
maintaining each Contract and the Separate Account.
16
<PAGE>
EXCHANGES
Each Contract Year you may make an unlimited number of free Exchanges between
Portfolios, provided that after an Exchange no Portfolio may contain a balance
less than $1,000, except in cases where Purchase Payments are made by monthly
payroll deduction. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of 12 per Contract Year.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The contingent deferred sales load or other administrative charges or fees may
be reduced for sales of Contracts to a trustee, employer or similar entity
representing a group where the Company determines that such sales result in
savings of sales and/or administrative expenses. In addition, directors,
officers and bona fide full-time employees (and their spouses and minor
children) of the Company, its ultimate parent company, Providian Corporation
and certain of their affiliates and certain sales representatives for the
Contract are permitted to purchase Contracts with substantial reduction of the
contingent deferred sales load or other administrative charges or fees or with
a waiver or modification of certain minimum or maximum purchase and transaction
amounts or balance requirements. Contracts so purchased are for investment
purposes only and may not be resold except to the Company.
In no event will reduction or elimination of the contingent deferred sales
loads or other fees or charges or waiver or modification of transaction or
balance requirements be permitted where such reduction, elimination, waiver or
modification will be unfairly discriminatory to any person. Additional
information about reductions in charges is contained in the Statement of
Additional Information.
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 Contract. (See "Federal Tax Considerations," page 22.) 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 federal income taxes related to the Separate Account. Such a charge
may be made in future years for any federal income taxes incurred by the
Company. This might become necessary if the tax treatment of the Company is
ultimately determined to be other than what the Company currently believes it
to be, if there are changes made in the federal income tax treatment of
annuities at the corporate level, or if there is a change in the Company's tax
status. In the event that the Company should incur federal income taxes
attributable to investment income or capital gains retained as part of the
reserves under the Contracts, the Accumulated Value of the Contract would be
correspondingly adjusted by any provision or charge for such taxes.
PORTFOLIO EXPENSES
The value of the assets in the Separate Account reflect the fees and expenses
paid by the Portfolios. A complete description of these expenses is found in
the "Fee Table" section of this Prospectus and in each Fund's Prospectus and
Statement of Additional Information.
ACCUMULATED VALUE
At the commencement of the Contract, the Accumulated Value equals the initial
Net Purchase Payment. Thereafter, the Accumulated Value equals the Accumulated
Value from the previous Business Day increased by: (i) any additional Net
Purchase Payments received by the Company and (ii) any increase in the
Accumulated Value due to investment results of the selected Portfolio(s); 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) any charges
for any Exchanges made after the first twelve in any Contract Year.
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EXCHANGES AMONG THE PORTFOLIOS
Should your investment goals change, you may exchange Accumulated Value among
the Portfolios of the Funds. Requests for Exchanges, received by mail or by
telephone, prior to the close of the New York Stock Exchange (generally 4:00
P.M. Eastern time) are processed at the close of business that same day.
Requests received after the close of the New York Stock Exchange are processed
the next Business Day. If you experience difficulty in making a telephone
Exchange your Exchange request may be made by regular or express mail. It will
be processed on the date received.
To take advantage of the privilege of initiating transactions by telephone,
you must first elect the privilege by completing the appropriate section of
the application or by completing a separate telephone authorization form at a
later date. To take advantage of the privilege of authorizing a third party to
initiate transactions by telephone, you must first complete a third party
authorization form.
The Company will undertake reasonable procedures 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. In addition, telephone
communications from a third party authorized to transact in an account will
undergo reasonable procedures to confirm that instructions are genuine. The
third party caller will be asked for his or her name, company affiliation (if
appropriate), the Contract number to which he or she is referring, and the
social security number of the Contract Owner. 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
customer service representative will be verified with the Contract Owner
through a written confirmation statement. Neither the Company nor the Funds
shall be liable for any loss, cost or expense for action on telephone
instructions that are believed to be genuine in accordance with these
procedures.
FULL AND PARTIAL WITHDRAWALS
At any time before the Annuity Date and while the Annuitant is living, you may
make a partial or full withdrawal of the Contract to receive all or part of
the Surrender Value by sending a written request to our Administrative
Offices. Full or partial withdrawals may only be made before the Annuity Date
and all partial withdrawal requests must be for at least $500. The amount
available for full or partial withdrawal is the Surrender Value at the end of
the Valuation Period during which the written request for withdrawal is
received. The Surrender Value is an amount equal to the Accumulated Value,
less any applicable contingent deferred sales load (i.e., surrender charge)
and any Premium Taxes incurred but not yet deducted. The withdrawal amount may
be paid in a lump sum to you, or if elected, all or any part may be paid out
under an Annuity Payment Option. (See "Annuity Payment Options," page 21.)
You can make a withdrawal by sending the appropriate Company form to our
Administrative Offices. Your proceeds will normally be processed and mailed to
you within two Business Days after the receipt of the request but in no event
will it be later than seven calendar days, subject to postponement in certain
circumstances. (See "Deferment of Payment," page 22).
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 has not
provided the Company with a written election not to have federal income taxes
withheld, the Company must by law withhold such taxes from the taxable portion
of any full or partial withdrawal and remit that amount to the federal
government. Moreover, the Code provides that a 10% penalty tax may be imposed
on certain early withdrawals. (See "Federal Tax Considerations," page 22.)
Since the Contract Owner assumes the investment risk with respect to amounts
allocated to the Separate Account, the total amount paid upon withdrawal of
the Contract (taking into account any prior withdrawals) may be more or less
than the total Net Purchase Payments made.
SYSTEMATIC WITHDRAWAL OPTION
You may choose to have a specified dollar amount provided to you on a regular
basis from the portion of your Contract's Accumulated Value that is allocated
to the Portfolios. By electing the Systematic Withdrawal Option, withdrawals
may be made on a monthly, quarterly, semiannual or annual basis. The minimum
amount for each withdrawal is $250.
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This option may be elected by completing the Systematic Withdrawal Request
Form. This form must be received by us at least 30 days prior to the date
systematic withdrawals will begin. Each withdrawal will be processed on the
day and at the frequency indicated on the Systematic Withdrawal Request Form.
The start date for the systematic withdrawals must be between the first and
twenty-eighth day of the month. You may discontinue the Systematic Withdrawal
Option at any time by notifying us in writing at least 30 days prior to your
next scheduled withdrawal date.
A surrender charge will apply when withdrawals in any of the first six
Contract Years exceed 10% of that year's beginning Accumulated Value. (See
"Charges and Deductions," page 16.) Each systematic withdrawal is subject to
federal income taxes on the taxable portion, and may be subject to a 10%
federal penalty tax if you are under age 59 1/2. You may elect to have federal
income taxes withheld from each withdrawal at a 10% rate on the Systematic
Withdrawal Request Form. For a discussion of the tax consequences of
withdrawals, see "Federal Tax Considerations" on page 22 of the Prospectus.
You may wish to consult a tax adviser regarding any tax consequences that
might result prior to electing the Systematic Withdrawal Option.
We reserve the right to discontinue offering the Systematic Withdrawal Option
upon 30 days written notice. We also reserve the right to charge a fee for
such service.
DOLLAR COST AVERAGING OPTION
If you have at least $5,000 of Accumulated Value in Fidelity Money Market, you
may choose to have a specified dollar amount transferred from this Portfolio
to other Portfolios in the Separate Account on a monthly basis. The main
objective of Dollar Cost Averaging is to shield your investment from short
term price fluctuations. Since the same dollar amount is transferred to other
Portfolios each month, more units are purchased in a Portfolio if the value
per unit is low and less units are purchased if the value per unit is high.
Therefore, a lower average cost per unit may be achieved over the long term.
This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in
declining markets.
This Dollar Cost Averaging Option may be elected on the application or at a
later date. The minimum amount that may be transferred each month into any
Portfolio is $250. The maximum amount which may be transferred is equal to the
Accumulated Value in Fidelity Money Market when elected, divided by 12.
The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Portfolios in the proportions
you specify on the appropriate Company form, or, if none are specified, in
accordance with your original investment allocation. If, on any transfer date,
the Accumulated Value is equal to or less than the amount you have elected to
have transferred, the entire amount will be transferred and the option will
end. You may change the transfer amount once each Contract Year, or cancel
this option by sending the appropriate Company form to our Administrative
Offices which must be received at least seven days before the next transfer
date.
IRS-REQUIRED DISTRIBUTIONS
Prior to the Annuity Date, if you or, if applicable, a Joint Owner dies before
the entire interest in the Contract is distributed, the value of the Contract
must be distributed to the Owner's Designated Beneficiary (unless the Contract
Owner was also the Annuitant-in which case the Annuitant's Beneficiary is
entitled to the Death Benefit) as described in this section so that the
Contract qualifies as an annuity under the Code. If the death occurs on or
after the Annuity Date, the remaining portions of such interest will be
distributed at least as rapidly as under the method of distribution being used
as of the date of death. If the death occurs before the Annuity Date, the
entire interest in the Contract will be distributed within five years after
date of death or be paid under an Annuity Payment Option under which payments
will begin within one year of the Contract Owner's death and will be made for
the life of the Owner's Designated Beneficiary or for a period not extending
beyond the life expectancy of that beneficiary. The Owner's Designated
Beneficiary is the person to whom ownership of the Contract passes by reason
of death.
If any portion of the Contract Owner's interest is payable to (or for the
benefit of) the surviving spouse of the Contract Owner, the Contract may be
continued with the surviving spouse as the new Contract Owner.
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MINIMUM BALANCE REQUIREMENT
We will transfer the balance in any Portfolio that falls below $1,000, except
in cases where Purchase Payments are made by monthly payroll deduction, 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, and if no Purchase Payment has been received
within three years, we reserve the right to liquidate the account. You would be
notified that the Accumulated Value of your account is below the Contract's
minimum requirement and be allowed 60 days to make an additional investment
before the account is liquidated. Proceeds would be promptly paid to the
Contract Owner. The full proceeds would be taxable as a withdrawal. We will not
exercise this right with respect to Qualified Contracts.
DESIGNATION OF AN ANNUITANT'S BENEFICIARY
The Contract Owner may select one or more Annuitant's Beneficiaries and name
them in the application. Thereafter, while the Annuitant is living, the
Contract Owner may change the Annuitant's Beneficiary by sending us the
appropriate Company form. Such change will take effect on the date such form is
signed by the Contract Owner but will not affect any payment made or other
action taken before the Company acknowledges such form. You may also make the
designation of Annuitant's Beneficiary irrevocable by sending us the
appropriate Company form and obtaining approval from the Company. Changes in
the Annuitant's Beneficiary may then be made only with the consent of the
designated irrevocable Annuitant's Beneficiary.
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 Annuitant's Beneficiary, each will share in
the Death Benefits equally;
(b) If one or two or more Annuitant's Beneficiaries have already died, that
share of the Death Benefit will be paid equally to the survivor(s);
(c) If no Annuitant's Beneficiary is living, the proceeds will be paid to
the Contract Owner;
(d) Unless otherwise provided, if an Annuitant's Beneficiary dies at the
same time as the Annuitant, the proceeds will be paid as though the
Annuitant's Beneficiary had died first. Unless otherwise provided, if
an Annuitant's 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 Annuitant's Beneficiary had
died first.
If an Annuitant's Beneficiary who is receiving Annuity Payments dies, any
remaining payments certain will be paid to that Annuitant's Beneficiary's named
beneficiary(ies) when due. If no Annuitant's 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 elected, and if the Annuitant
dies on or after the Annuity Date, any unpaid payments certain will be paid to
the Annuitant's Beneficiary or your designated Payee.
DEATH OF ANNUITANT PRIOR TO ANNUITY DATE
If the Annuitant dies prior to the Annuity Date, an amount will be paid as
proceeds to the Annuitant's Beneficiary. The Death Benefit is calculated and is
payable upon receipt of due Proof of Death of the Annuitant as well as proof
that the Annuitant died prior to the Annuity Date. Upon receipt of this proof,
the Death Benefit will be paid within seven days, or as soon thereafter as the
Company has sufficient information about the Annuitant's Beneficiary to make
the payment. The Annuitant's Beneficiary may receive the amount payable in a
lump sum cash benefit or under one of the Annuity Payment Options.
The Death Benefit is the greater of:
(1) The Accumulated Value on the date we receive due Proof of Death; or
(2) The Adjusted Death Benefit.
During the first six Contract Years, the Adjusted Death Benefit will be the sum
of all Net Purchase Payments made, less any partial withdrawals taken. During
each subsequent six-year period, the Adjusted Death Benefit will be the Death
Benefit on the last day of the previous six-year period plus any Net Purchase
Payments made, less any partial
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withdrawals taken during the current six-year period. After the Annuitant
attains age 75, the Adjusted Death Benefit will remain equal to the Death
Benefit on the last day of the six year period before age 75 occurs plus any
Net Purchase Payments subsequently made, less any partial withdrawals
subsequently taken.
ANNUITY DATE
You 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. The Annuity Date is the date that Annuity Payments
are scheduled to commence under the Contract unless the Contract has been
surrendered or an amount has been paid as proceeds to the designated
Annuitant's Beneficiary prior to that date.
You 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 approval, deferred to a date beyond the
first day of the month after the Annuitant's 85th birthday. The Annuity Date
may only be changed by written request during the Annuitant's lifetime and must
be made at least 30 days before the then-scheduled Annuity Date. The Annuity
Date and Annuity Payment Options available for Qualified Contracts may also be
controlled by endorsements, the plan or applicable law.
LUMP SUM PAYMENT OPTION
You may surrender the Contract at any time while the Annuitant is living and
before the Annuity Date. The Surrender Value is equal to the Accumulated Value,
less any applicable deferred sales load (i.e., surrender charge) and any
Premium Taxes incurred but not yet deducted.
ANNUITY PAYMENT OPTIONS
All Annuity Payment Options (except for the Designated Period 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 you have chosen. All Annuity Payment Options are also
offered as "Fixed Annuity Options." This means that the amount of each payment
will be set on the Annuity Date and will not change. The following Annuity
Payment Options are available under the Contract:
Life Annuity--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--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--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) Annuity Option. Monthly Annuity
Payments are paid for the life of an Annuitant, with a Period Certain
determined by dividing the Accumulated Value by the first Annuity Payment.
Designated Period Annuity--Only available as a Fixed Annuity Option. Monthly
Annuity Payments are paid for a Period Certain as elected, which may be from 10
to 30 years.
Before the Annuity Date and while the Annuitant is living, you may change the
Annuity Payment Option by written request. The request for change must be made
at least 30 days prior to the Annuity Date and is subject to the approval of
the Company. If an Annuity Payment Option is chosen that depends on the
continuation of the life of the Annuitant, proof of birth date may be required
before Annuity Payments begin. For Annuity Payment Options involving life
income, the actual age of the 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 Payment will generally be greater.
All or part of the Accumulated Value may be placed under one or more Annuity
Payment Options. If Annuity Payments are to be paid under more than one option,
the Company must be told what part of the Accumulated Value is to be paid under
each option.
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If at the time of any Annuity Payment you have 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 portions of such Annuity Payment and
remit that amount to the federal government.
In the event that an Annuity Payment Option is not selected, the Company will
make monthly Annuity Payments that will go on for as long as the Annuitant
lives (120 payments guaranteed) in accordance with the Life Annuity with Period
Certain Option and the annuity benefit sections of the Contract. That portion
of the Accumulated Value that has been held in a Portfolio prior to the Annuity
Date will be applied under a Variable Annuity Option based on the performance
of that Portfolio. Subject to approval by the Company, you may select any other
Annuity Payment Option then being offered by the Company. All Fixed Annuity
Payments and the initial Variable Annuity Payment are guaranteed to be not less
than as provided by the Annuity Tables and the Annuity Payment Option elected
by the Contract Owner. The minimum payment, however, is $100. If the
Accumulated Value is less than $2,000 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 or Contract Owner is living. Annuity Payment Options are not
available to: (1) an assignee; or (2) any other than a natural person, except
with the consent of the Company.
We 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. Only one Variable Annuity Option may be chosen from
among those made available by the Company for each Portfolio. The Annuity
Tables, which are contained in the Contract and are used to calculate the value
of the initial Variable Annuity Payment, are based on an assumed interest rate
of 4%. If the actual net investment experience exactly equals the assumed
interest rate, then the Variable Annuity Payments will remain the same (equal
to the first Annuity Payment). However, if actual investment experience exceeds
the assumed interest rate, the Variable Annuity Payments will increase;
conversely, they will decrease if the actual experience is lower. The method of
computation of Variable Annuity Payments is described in more detail in the
Statement of Additional Information.
The value of all payments, both fixed and variable, will be greater for shorter
guaranteed periods than for longer guaranteed periods, and greater for life
annuities than for joint and survivor annuities, because they are expected to
be made for a shorter period.
After the Annuity Date, you may change the Portfolio funding the Variable
Annuity Payments on the appropriate Company form or by calling our
Administrative Offices at 1-800-250-1828.
DEFERMENT OF PAYMENT
Payment of any cash withdrawal or lump sum Death Benefit due from the Separate
Account will occur within seven days from the date the election becomes
effective except that the Company may be permitted to defer such payment if:
(1) the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the New York Stock Exchange is otherwise restricted; or
(2) an emergency exists as defined by the SEC, or the SEC requires that trading
be restricted; or (3) the SEC permits a delay for the protection of Contract
Owners.
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The ultimate effect of federal income taxes on the amounts paid for the
Contract, on the investment return on assets held under a Contract, on Annuity
Payments, and on the economic benefits to the Contract Owner, Annuitant or
Annuitant's Beneficiary, depends on the terms of the Contract, 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 advisor regarding the tax consequences 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 understanding of the
federal income tax laws as they are currently interpreted. No representation is
made regarding the likelihood of continuation of the federal income tax laws,
the Treasury regulations or the current interpretations by the Internal Revenue
Service. We reserve the right to make uniform changes in the Contract to the
extent necessary to continue to qualify the
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Contract as an annuity. For a discussion of federal income taxes as they
relate to the Funds, please see the accompanying Prospectuses for the Funds.
TAXATION OF ANNUITIES IN GENERAL
Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value under a Contract until some form of
withdrawal or distribution is made under it. However, under certain
circumstances, the increase in value may be subject to current federal income
tax. (See "Contracts Owned by Non-Natural Persons" and "Diversification
Standards," pages 24 and 25, respectively.)
Section 72 provides that the proceeds of a full or partial withdrawal from a
Contract prior to the Annuity Date will be treated as taxable income to the
extent the amounts held under the Contract exceed the "investment in the
Contract," as that term is defined in the Code. The "investment in the
Contract" can generally be described as the cost of the Contract, and
generally constitutes all Purchase Payments paid for the Contract less any
amounts received under the Contract that are excluded from the individual's
gross income. The taxable portion is taxed at ordinary income tax rates. For
purposes of this rule, a pledge or assignment of a Contract is treated as a
payment received on account of a partial withdrawal of a Contract.
Upon receipt of a full or partial withdrawal or an Annuity Payment under the
Contract, you will be taxed if the value of the Contract exceeds the
investment in the Contract. Ordinarily, the taxable portion of such payments
will be taxed at ordinary income tax rates.
For Fixed Annuity Payments, in general, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which
establishes the ratio that the investment in the Contract bears to the total
expected amount of Annuity Payments for the term of the Contract. That ratio
is then applied to each payment to determine the non-taxable portion of the
payment. The remaining portion of each payment is taxed at ordinary income tax
rates. For Variable Annuity Payments, in general, the taxable portion is
determined by a formula that establishes a specific 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 payments.
The remaining portion of each payment is taxed at ordinary income tax rates.
Once the excludible portion of Annuity Payments to date equals the investment
in the Contract, the balance of the Annuity Payments will be fully taxable.
Withholding of federal income taxes on all distributions may be required
unless the recipient elects not to have any amounts withheld and properly
notifies the Company of that election.
With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of
amounts withdrawn or 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 Annuitant, who is
defined as the individual the events in whose life are of primary importance
in affecting the timing and payment under the Contracts; (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 taxpayer, or joint
lives (or joint life expectancies) of the taxpayer and his or her beneficiary;
(iv) from a qualified plan (note, however, other penalties may apply); (v)
under a qualified funding asset (as defined in Code Section 130(d)); (vi)
under an immediate annuity contract as defined in Section 72(u)(4); or (vii)
that are purchased by an employer on termination of certain types of qualified
plans and that are held by the employer until the employee separates from
service. Other tax penalties may apply to certain distributions as well as to
certain contributions and other transactions under Qualified Contracts.
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 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.
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THE COMPANY'S TAX STATUS
The Company is taxed as a life insurance company under 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
Account are reinvested and taken into account in determining the Accumulated
Value. Under existing federal income tax law, the Separate Account's investment
income, including realized net capital gains, is not taxed to the Company. The
Company reserves the right to make a deduction for taxes should they be imposed
with respect to such items in the future.
DISTRIBUTION-AT-DEATH RULES
In order to be treated as an annuity contract, a Contract must generally
provide the following two distribution 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 the Owner's Designated Beneficiary, however,
such interests may be annuitized over the life of that Owner's Designated
Beneficiary or over a period not extending beyond the life expectancy of that
Owner's Designated Beneficiary, so long as distributions commence within one
year after the Contract Owner's death. If the Owner's Designated Beneficiary is
the spouse of the Contract Owner, the Contract (together with the deferral on
tax on the accrued and future income thereunder) may be continued unchanged in
the name of the spouse as Contract Owner. The term Owner's Designated
Beneficiary means the natural person named by the Contract Owner as a
beneficiary and to whom ownership of the Contract passes by reason of the
Contract Owner's death (unless the Contract Owner was also the Annuitant--in
which case the Annuitant's Beneficiary is entitled to the Death Benefit).
If the Contract Owner is not an individual, the "primary Annuitant" (as defined
under the Code) is considered the Contract Owner. The primary Annuitant is the
individual who is of primary importance in affecting the timing or the amount
of payout under a Contract. In addition, when the Contract Owner is not an
individual, a change in the primary Annuitant is treated as the death of the
Contract Owner. Finally, in the case of joint Contract Owners, the distribution
will be required at the death of the first of the Contract Owners.
TRANSFERS OF ANNUITY CONTRACTS
Any transfer of a Non-Qualified Contract prior to the Annuity Date for less
than full and adequate consideration 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 transferee 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 PERSONS
Where the Contract is held by a non-natural person (for 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
beneficial 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 qualified funding
asset for structured settlements, where the Contract is purchased on behalf of
an employee upon termination of a qualified plan, and in the case of an
immediate annuity.
ASSIGNMENTS
A transfer of ownership of a Contract, a collateral assignment or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant or
beneficiary that are not discussed herein. A Contract Owner contemplating such
a transfer or assignment of a Contract should contact a tax adviser with
respect to the potential tax effects of such a transaction.
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MULTIPLE CONTRACTS RULE
All non-qualified annuity contracts issued by the same 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 includible in
the taxpayer's gross income. Thus, any amount received under any Contract prior
to the Contract's Annuity Date, such as a partial withdrawal, will be taxable
(and possibly subject to the 10% federal penalty tax) to the extent of the
combined income in all such contracts. The Treasury Department has specific
authority to issue regulations that prevent the avoidance of Code Section 72(e)
through the serial purchase of annuity contracts or otherwise. In addition,
there may be other situations in which the Treasury Department may conclude
that it would be appropriate to aggregate two or more Contracts purchased by
the same Contract Owner. Accordingly, a Contract Owner should consult a tax
adviser before purchasing more than one Contract or other annuity contracts.
DIVERSIFICATION STANDARDS
To comply with certain diversification regulations (the "Regulations") under
Code Section 817(h), after a start up period, 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 Portfolios in which each
such division invests. All securities of the same issuer are treated as a
single investment. Each government agency or instrumentality will be treated as
a separate issuer for purposes of those limitations.
In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance concerning the extent to which Contract Owners may direct their
investments to particular divisions of a separate account. It is possible that
regulations or revenue rulings may be issued in this area at some time in the
future. It is not clear, at this time, what these regulations or rulings would
provide. It is possible that when the regulations or ruling are issued, the
Contract may need to be modified in order to remain in compliance. For these
reasons, the Company reserves the right to modify the Contract, 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 Contract continues
to be treated as annuity contracts for federal income tax purposes.
403(B) CONTRACTS
Contracts will be offered in connection with retirement plans adopted by public
school systems and certain tax-exempt organizations (Code Section 501(c)(3)
organizations) for their employees under Section 403(b) of the Code; except, as
discussed below and subject to any conditions in an employer's plan, a Contract
used in connection with a Section 403(b) Plan offers the same benefits and is
subject to the same charges described in this Prospectus.
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from your gross income. Such limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. In addition, Purchase
Payments will be excluded from your gross income only if the 403(b) Plan meets
certain Code non-discrimination requirements.
Under your 403(b) Contract, you may borrow against your Contract's Surrender
Value after the first Contract Year. No additional loans will be extended until
prior loan balances are paid in full. The loan amount must be at least $1,000
with a minimum vested Accumulated Value of $2,000. The loan amount may not
exceed the lesser of (a) or (b), where (a) is 50% of the Contract's vested
Accumulated Value on the date on which the loan is made, or $10,000, and (b) is
$50,000 reduced by the excess, if any, of the highest outstanding balance of
loans within the preceding 12 months ending on the day before the current loan
is made, over the outstanding balance of loans on the date on which the loan is
made. If you are married, your spouse must consent in writing to a loan
request. This consent must be given within the 90-day period before the loan is
to be made.
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The loan interest rate is variable, is determined monthly, and is based on the
Moody's Corporate Bond Yield Averages-Monthly Average Corporates (the
"Average"), which is published by Moody's Investors Service, Inc. We will
notify you of the initial loan interest rate at the time the loan is made. The
initial interest rate may be increased or reduced by us during the life of the
loan based on changes of the Average. If a change in the Average would cause
the initial loan interest rate (or a subsequent rate that has been previously
increased or reduced by us) to be reduced by 0.50% per annum or more, we must
reduce the loan interest rate. If a change in the Average would cause the
initial loan interest rate (or a subsequent rate that has been previously
increased or reduced by us) to be increased by 0.50% per annum, we may increase
the loan interest rate at our discretion. In no event will the loan interest
rate be greater than the maximum allowed by the insurance regulations of the
State of New York.
On the first Business Day of each calendar month, the Company will determine a
loan interest rate. The loan interest rate for the calendar month in which the
loan is effective will apply for one year from the loan effective date.
Annually on the anniversary of the loan effective date, the rate will be
adjusted to equal the loan interest rate determined for the month in which the
loan anniversary occurs.
Principal and interest on loans must be amortized in quarterly installments
over a five year term except for certain loans for the purchase of a principal
residence. If the loan interest rate is adjusted, future payments will be
adjusted so that the outstanding loan balance is amortized in equal quarterly
installments over the remaining term. The remainder of each repayment will be
credited to the individual account.
If a loan payment is not made when due, interest will continue to accrue. The
defaulted payment plus accrued interest will be deducted from any future
distributions under the Contract and paid to us. Any loan payment which is not
made when due, plus interest, will be treated as a distribution, as permitted
by law. The loan payment may be taxable to the borrower, and may be subject to
the early withdrawal tax penalty. When a loan is made, the number of
Accumulation Units equal to the loan amount will be withdrawn from the
individual account and placed in the Collateral Fixed Account. Accumulation
Units taken from the individual account to provide a loan do not participate in
the investment experience of the related Portfolios. Unless instructed to the
contrary by you, the loan amount will be withdrawn on a pro rata basis from the
Portfolios to which Accumulated Value has been allocated. Until the loan is
repaid in full, that portion of the Collateral Fixed Account shall be credited
with interest at a rate of 2% less than the loan interest rate applicable to
the loan. However, the interest rate credited to the Collateral Fixed Account
will never be less than the guaranteed rate of 3%.
A bill in the amount of the quarterly principal and interest will be mailed
directly to you in advance of the payment due date. The initial quarterly
repayment will be due three months from the loan date. The loan date will be
the date that the Company receives the loan request form in good order. Payment
is due within 30 calendar days after the due date. Subsequent quarterly
installments are based on the first due date.
When repayment of principal is made, Accumulation Units will be reallocated on
a current value basis among the same investment Portfolios and in the same
proportion as when the loan was initially made, unless you specify otherwise.
If a repayment in excess of a billed amount is received, the excess will be
applied towards the principal portion of the outstanding loan. Payments
received which are less than the billed amount will not be accepted and will be
returned to you.
If a partial surrender is taken from your individual account due to nonpayment
of a billed quarterly installment, the date of the surrender will be the first
Business Day following the 30 calendar day period in which the repayment was
due.
Prepayment of the entire loan is allowed. At the time of prepayment, the
Company will bill you for any accrued interest. The Company will consider the
loan paid when the loan balance and accrued interest are paid.
If the individual account is surrendered with an outstanding loan balance, the
outstanding loan balance and accrued interest will be deducted from the
Surrender Value. If the individual account is surrendered, with an outstanding
loan balance, due to the Contract Owner's death or the election of an Annuity
Payment Option, the outstanding loan balance and accrued interest will be
deducted.
The Company may require that any outstanding loan be paid if the individual
account value falls below an amount equal to 25% of total loans outstanding.
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The Code requires the aggregation of all loans made to an individual employee
under a single employer-sponsored 403(b) Plan. However, since the Company has
no information concerning the outstanding loans that you may have with other
companies, it will only use the information available under Contracts issued
by the Company.
The Code imposes restrictions on full or partial surrenders from 403(b)
individual accounts attributable to Purchase Payments under a salary reduction
agreement and to any earnings on the entire 403(b) individual account credited
on and after January 1, 1989. Surrenders of these amounts are allowed only if
the Contract Owner (a) has died, (b) has become disabled, as defined in the
Code, (c) has attained age 59 1/2, or (d) has separated from service.
Surrenders are also allowed if the Contract Owner can show "hardship," as
defined by the Internal Revenue Service, but the surrender is limited to the
lesser of Purchase Payments made on or after January 1, 1989 or the amount
necessary to relieve the hardship. Even if a surrender is permitted under
these provisions, a 10% federal tax penalty may be assessed on the withdrawn
amount if it does not otherwise meet the exceptions to the penalty tax
provisions. (See "Taxation of Annuities in General," page 23.)
Under the Code, you may request a full or partial surrender of an amount equal
to the individual account cash value as of December 31, 1988 (the
"grandfathered" amount), subject to the terms of the 403(b) Plan. Although the
Code surrender restrictions do not apply to this amount, a 10% federal penalty
tax may be assessed on the withdrawn amount if it does not otherwise meet the
exceptions to the penalty tax provisions (See "Taxation of Annuities in
General," page 23.)
The Company believes that the Code surrender restrictions do not apply to tax-
free transfers pursuant to Revenue Ruling 90-24. The Company further believes
that the surrender restrictions will not apply to any "grandfathered" amount
transferred pursuant to Revenue Ruling 90-24 into another 403(b) Contract.
GENERAL INFORMATION
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
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 Funds, or of
another registered, open-end management investment 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 inappropriate in view of the
purposes of the Separate Account. To the extent required by the 1940 Act,
substitutions of shares attributable to a Contract Owner's interest in a
Portfolio will not be made until SEC approval has been obtained and the
Contract Owner has been notified of the change.
New Portfolios may be established at the discretion of the Company. Any new
Portfolio will be made available to existing Contract Owners on a basis to be
determined by the Company. The Company may also eliminate one or more
Portfolios if marketing, tax, investment or other conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contracts as may be
necessary or appropriate to reflect such substitution or change. Furthermore,
if deemed to be in the best interests of persons having voting rights under
the Contract, 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 the 1940 Act in the event such registration is no longer required, or
may be combined with one or more other separate accounts.
VOTING RIGHTS
The Funds do not hold regular meetings of shareholders. The Directors/Trustees
of each 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
Portfolio shares held in the Separate Account will be voted by the Company at
shareholder meetings of each Fund in accordance with instructions received
from persons having voting interests in the corresponding Portfolio. Fund
shares as to which no timely instructions are received or shares held by the
Company as to which Contract Owners have no beneficial interest will be voted
in proportion to the voting instructions that are received 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 basis to reduce the
votes eligible to be cast.
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The number of votes that are available to a Contract Owner will be calculated
separately for each Portfolio. That number will be determined by applying his
or her percentage interest, if any, in a particular Portfolio to the total
number of votes attributable to the Portfolio.
Prior to the Annuity Date, a Contract Owner holds a voting interest in each
Portfolio to which the Accumulated Value is allocated. The number of votes
which are available to a Contract Owner will be determined by dividing the
Accumulated Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Date, the person receiving
Annuity Payments 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 decrease. In determining the number of
votes, fractional shares will be recognized.
The number of votes of the Portfolio that are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the corresponding
Fund. Voting instructions will be solicited by written communication prior to
such meeting in accordance with procedures established by such Fund.
AUDITORS
Ernst & Young LLP serves as independent auditors for the Separate Account and
the Company and will audit their financial statements annually.
LEGAL MATTERS
Jorden Burt Berenson & Johnson LLP of Washington, D.C. has provided legal
advice relating to the federal securities laws applicable to the issue and sale
of the Contracts. All matters of New York law pertaining to the validity of the
Contract and the Company's right to issue such Contracts have been passed upon
by Kimberly A. Scouller, Esquire, on behalf of the Company.
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TABLE OF CONTENTS FOR THE PROVIDIAN MARQUEE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CONTRACT.............................................................. 2
Computation of Variable Annuity Income Payments......................... 2
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 3
GENERAL MATTERS........................................................... 3
Non-Participating....................................................... 3
Misstatement of Age or Sex.............................................. 3
Assignment.............................................................. 3
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 4
PERFORMANCE INFORMATION................................................... 4
Money Market Subaccount Yields.......................................... 4
30-Day Yield for Non-Money Market Subaccounts........................... 5
Standardized Average Annual Total Return for Subaccounts................ 5
ADDITIONAL PERFORMANCE MEASURES........................................... 6
Non-Standardized Actual Total Return and Non-Standardized Actual Average
Annual Total Return.................................................... 6
Non-Standardized Total Return Year-to-Date.............................. 6
Non-Standardized One Year Return........................................ 6
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 6
Individualized Computer Generated Illustrations......................... 11
PERFORMANCE COMPARISONS................................................... 12
SAFEKEEPING OF ACCOUNT ASSETS............................................. 13
THE COMPANY............................................................... 14
STATE REGULATION.......................................................... 14
RECORDS AND REPORTS....................................................... 14
DISTRIBUTION OF THE CONTRACTS............................................. 14
LEGAL PROCEEDINGS......................................................... 14
OTHER INFORMATION......................................................... 15
FINANCIAL STATEMENTS...................................................... 15
Audited Financial Statements............................................ 15
</TABLE>
29
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FIRST PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT C
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
PROVIDIAN MARQUEE VARIABLE ANNUITY
Offered by
First Providian Life and 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 Providian Marquee variable annuity contract (the
"Contract") offered by First Providian Life and Health Insurance Company (the
"Company"). You may obtain a copy of the Prospectus dated November 15, 1996, by
calling 1-800-250-1828 or by writing to our Administrative Offices, 520 Columbia
Drive, Johnson City, New York 13790. 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.
November 15, 1996
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
- ----------------- ----
<S> <C>
THE CONTRACT............................................................... 2
Computation of Variable Annuity Income Payments.......................... 2
Exchanges................................................................ 3
Exceptions to Charges and to Transaction or Balance Requirements......... 3
GENERAL MATTERS............................................................ 3
Non-Participating........................................................ 3
Misstatement of Age or Sex............................................... 3
Assignment............................................................... 3
Annuity Data............................................................. 4
Annual Statement......................................................... 4
Incontestability......................................................... 4
Ownership................................................................ 4
PERFORMANCE INFORMATION.................................................... 4
Money Market Subaccount Yields........................................... 4
30-Day Yield for Non-Money Market Subaccounts............................ 5
Standardized Average Annual Total Return for Subaccounts................. 5
ADDITIONAL PERFORMANCE MEASURES............................................ 6
Non-Standardized Actual Total Return and Non-Standardized
Actual Average Annual Total Return....................................... 6
Non-Standardized Total Return Year-to-Date............................... 6
Non-Standardized One Year Return......................................... 6
Non-Standardized Hypothetical Total Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 6
Individualized Computer Generated Illustrations.......................... 11
PERFORMANCE COMPARISONS.................................................... 12
SAFEKEEPING OF ACCOUNT ASSETS.............................................. 13
THE COMPANY................................................................ 14
STATE REGULATION........................................................... 14
RECORDS AND REPORTS........................................................ 14
DISTRIBUTION OF THE CONTRACTS.............................................. 14
LEGAL PROCEEDINGS.......................................................... 14
OTHER INFORMATION.......................................................... 15
FINANCIAL STATEMENTS....................................................... 15
Audited Financial Statements............................................. 15
</TABLE>
<PAGE>
THE CONTRACT
In order to supplement the description in the Prospectus, the following provides
additional information about the Contract which may be of interest to Contract
Owners.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
The amounts shown in the Annuity Tables contained in your Contract represent the
guaranteed minimum for each Annuity Payment under a Fixed Payment Option.
Variable annuity income payments are computed as follows. First, the
Accumulated Value (or the portion of the Accumulated Value used to provide
variable payments) is applied under the Annuity Tables contained in your
Contract corresponding to the Annuity Payment 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 specified in the Annuity Tables.
The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set forth
below) is made. After the first Annuity Payment, the dollar amount of each
subsequent Annuity Payment is equal to the number of Annuity Units multiplied by
the Annuity Unit Value for the Subaccount ten Business Days before the due date
of the Annuity Payment.
The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date 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 recognizes an assumed interest rate of 4% per year
used in determining the Annuity 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 of 1.25%;
(c) = a daily charge for the cost of administering the Contract
corresponding to an annual charge of .15% of the value of
the Subaccount, plus the Annual Contract Fee.
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.
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EXCHANGES
After the Annuity Date you may, by making a written request, exchange the
current value of an existing Subaccount to Annuity Units of any other
Subaccount(s) then available. The written request for an Exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the Exchange is to take effect. An Exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of Exchange (the
"Exchange Date"). Each year you may make an unlimited number of free Exchanges
between Subaccounts. We reserve the right to charge a $15 fee in the future for
Exchanges in excess of twelve per Contract Year.
Exchanges will be made using the Annuity Unit Value for the Subaccounts on the
date the written request for Exchange is received. On the Exchange Date, the
Company will establish a value for the current Subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing Subaccounts
and compute the number of Annuity Units for the new Subaccounts by dividing the
Annuity Unit Value of the new Subaccounts into the value previously calculated
for the existing Subaccounts.
EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS
The Company may reduce any applicable sales loads and reduce administrative
charges or other deductions from Purchase Payments in certain situations where
the Company expects to realize significant economies of scale or other economic
benefits with respect to the sales of Contracts. This is possible because sales
costs do not increase in proportion to the dollar amount of the Contracts sold.
For example, the per-dollar transaction cost for a sale of a Contract equal to
$5,000 is generally much higher than the per-dollar cost for a sale of Contract
equal to $1,000,000. As a result, any applicable sales charge declines as a
percentage of the dollar amount of Contracts sold as the dollar amount
increases.
The Company may also reduce any applicable sales loads and reduce administrative
charges and fees on sales to directors, officers and bona fide full-time
employees (and their spouses and minor children) of the Company, its ultimate
parent company, Providian Corporation, and certain of their affiliates and
certain sales representatives for the Contract. The Company may also grant
waivers or modifications of certain minimum or maximum purchase and transaction
amounts or balance requirements in these circumstances.
Notwithstanding the above, any variations in the sales loads, administrative
charges or other deductions from Purchase Payments or in the minimum or maximum
transaction or balance requirements shall reflect differences in costs or
services and shall not be unfairly discriminatory against any person.
GENERAL MATTERS
NON-PARTICIPATING
The Contracts are non-participating. No dividends are payable and the Contracts
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 benefits which the
Purchase Payments would have purchased for the correct age and sex. In the case
of correction of the stated age and/or sex after payments have commenced, the
Company will (1) in the case of underpayment, pay the full amount due with the
next payment; (2) in the case of overpayment, deduct the amount due from one or
more future payments.
ASSIGNMENT
Any Non-Qualified Contract may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. The Company is not responsible for the validity
of any assignment. No assignment will be recognized until the Company receives
the appropriate Company form notifying the Company of such assignment. The
interest of any beneficiary which the assignor has the right to change shall be
subordinate to the interest of an assignee. Any amount paid to the
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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 settlement made by the Company before receipt of the
appropriate Company form.
ANNUITY DATA
The Company will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to the Company.
ANNUAL STATEMENT
Once each Contract Year, the Company will send you an annual statement of the
current Accumulated Value allocated to each Subaccount; and any Purchase
Payments, charges, Exchanges or withdrawals during the year. This report will
also give you any other information required by law or regulation. You may ask
for an annual statement like this at any time. We will also send you quarterly
statements. However, we reserve the right to discontinue quarterly statements
at any time.
INCONTESTABILITY
This Contract is incontestable from the Contract Date, subject to the
"Misstatement of Age or Sex" provision.
OWNERSHIP
The Contract Owner on the Contract Date is the Annuitant, unless otherwise
specified in the application. The Contract Owner may specify a new Contract
Owner by sending us the appropriate Company form at any time thereafter. The
term Contract Owner also includes any person named as a Joint Owner. A Joint
Owner shares ownership in all respects with the Contract Owner. During the
Annuitant's lifetime, all rights and privileges under this Contract may be
exercised solely by the Contract Owner. Upon the death of the Contract Owner,
ownership is retained by the surviving Joint Owner or passes to the Owner's
Designated Beneficiary, if one has been designated by the Contract Owner. If no
Owner's Designated Beneficiary has been selected or if no Owner's Designated
Beneficiary is living, then the Owner's Designated Beneficiary is the Contract
Owner's estate. From time to time the Company may require proof that the
Contract Owner is still living.
PERFORMANCE INFORMATION
Performance information for the Subaccounts including the yield and effective
yield of the Fidelity 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.
Where applicable in calculating performance information, the Annual Contract Fee
is reflected as a percentage equal to the estimated total amount of fees
collected during a calendar year divided by the estimated total average net
assets of the Portfolios during the same calendar year. The fee is assumed to
remain the same in each year of the applicable period. (With respect to partial
year periods, if any, the Annual Contract Fee is pro-rated to reflect only the
applicable portion of the partial year period.)
MONEY MARKET SUBACCOUNT YIELDS
Current yield for the Fidelity 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
investment 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.
Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:
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Effective Yield = [((Base Period Return)+1)/365/7/]-1
30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS
Quotations of yield for the remaining Subaccounts will be based on all
investment income per Unit earned during a particular 30-day period, less
expenses accrued during the period ("net investment income"), and will be
computed 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]
---
cd
Where:
[a] equals the net investment income earned during the period by the
Portfolio attributable to shares owned by a Subaccount
[b] equals the expenses accrued for the period (net of reimbursement)
[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 a Subaccount is earned from the increase in net asset value of shares
of the Portfolio in which the Subaccount invests and from dividends declared and
paid by the Portfolio, which are automatically reinvested in shares of the
Portfolio.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR 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
produced the cash redemption value over the stated period had the performance
remained 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
period. It reflects the deduction of all applicable sales loads (including the
contingent deferred sales load), the Annual Contract Fee and all other
Portfolio, Separate Account and Contract level charges except Premium Taxes, if
any.
Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a Contract over a period of one, five and ten years (or, if less,
up to the life of the Subaccount), calculated pursuant to the formula:
P(1 + T)/n/ = ERV
Where:
(1) [P] equals a hypothetical initial Purchase Payment of $1,000
(2) [T] equals an average annual total return
(3) [n] equals the number of years
(4) [ERV] equals the ending redeemable value of a hypothetical $1,000
Purchase Payment made at the beginning of the period (or fractional
portion thereof)
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ADDITIONAL PERFORMANCE MEASURES
NON-STANDARDIZED ACTUAL TOTAL RETURN AND NON-STANDARDIZED ACTUAL AVERAGE ANNUAL
TOTAL RETURN
The Company may show Non-Standardized Actual 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
Actual Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Value) with respect to one or more periods. For one year, the
Non-Standardized Actual Total Return and the Non-Standardized Actual Average
Annual Total Return are effective annual rates of return and are equal. For
periods greater than one year, the Non-Standardized Actual Average Annual Total
Return is the effective annual compounded rate of return for the periods stated.
Because the value of an Accumulation Unit reflects the Separate Account and
Portfolio expenses (See Fee Table in the Prospectus), the Non-Standardized
Actual Total Return and Non-Standardized Actual Average Annual Total Return also
reflect these expenses. However, these percentages do not reflect the Annual
Contract Fee, any sales loads or Premium Taxes (if any), which if included would
reduce the percentages reported by the Company.
NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE
The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more subaccounts with
respect 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 Fee, any sales loads or Premium Taxes (if any),
which if included would reduce the percentages reported by the Company.
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 commencing
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 during
the relevant period. These percentages reflect a deduction for the Separate
Account and Portfolio expenses, but do not include the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which if included would reduce the
percentage reported by the Company.
NON-STANDARDIZED HYPOTHETICAL TOTAL RETURN AND NON-STANDARDIZED HYPOTHETICAL
AVERAGE ANNUAL TOTAL RETURN*
The Company may show Non-Standardized Hypothetical Total Return and
Non-Standardized Hypothetical Average Annual Total Return, calculated on the
basis of the historical performance of the Portfolios (calculated beginning from
the end of the year of inception for each Portfolio) and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which produce
the resulting Accumulated Values. They reflect a deduction for the Separate
Account expenses and Portfolio expenses. However, they do not include the Annual
Contract Fee, any sales loads or Premium Taxes (if any), which if included would
reduce the percentages reported.
The Non-Standardized Hypothetical Total Return for a Subaccount is the effective
annual rate of return that would have produced the ending Accumulated Value of
the stated one-year period.
The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.
-6-
<PAGE>
<TABLE>
<CAPTION>
HYPOTHETICAL TOTAL RETURNS FOR PERIODS ENDING 12/31/95
Since Inception
1 Year 3 Year 5 Year Year-End
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
Fidelity Money Market Portfolio 4.39% 9.22% 17.04% 111.59%
Fidelity Equity-Income Portfolio 33.20% 64.01% 144.98% 178.59%
Fidelity Growth Portfolio 33.46% 54.96% 139.48% 214.52%
Fidelity Asset Manager Portfolio 15.32% 27.69% 69.90% 79.26%
Dreyfus Growth and Income Portfolio 59.62% N/A N/A 55.79%
Dreyfus Quality Bond Portfolio 18.73% 27.02% 57.96% 60.88%
T. Rowe Price Equity Income Portfolio 32.87% N/A N/A 40.70%
T. Rowe Price New America Growth
Portfolio 48.96% N/A N/A 48.65%
T. Rowe Price International Stock
Portfolio 9.62% N/A N/A 10.37%
OpCap Advisors Managed Portfolio 43.52% 58.08% 166.30% 164.28%
OpCap Advisors Small Cap Portfolio 13.62% 30.71% 128.72% 143.02%
OpCap Advisors Government Income 10.07% N/A N/A 11.73%
Portfolio
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/95
(Based on Single Initial Purchase)
Since Inception
1 Year 3 Year 5 Year Year-End
------ ------ ------ ---------------
Fidelity Money Market Portfolio 4.39% 2.98% 3.20% 5.60%
Fidelity Equity-Income Portfolio 33.20% 17.93% 19.63% 11.74%
Fidelity Growth Portfolio 33.46% 15.69% 19.08% 13.22%
Fidelity Asset Manager Portfolio 15.32% 8.48% 11.18% 9.68%
Dreyfus Growth and Income Portfolio 59.62% N/A N/A 30.61%
Dreyfus Quality Bond Portfolio 18.73% 8.30% 9.57% 9.33%
T. Rowe Price Equity Income Portfolio 32.87% N/A N/A 21.57%
T. Rowe Price New America Growth
Portfolio 48.96% N/A N/A 25.46%
T. Rowe Price International Stock
Portfolio 9.62% N/A N/A 5.81%
OpCap Advisors Managed Portfolio 43.52% 16.49% 21.64% 14.00%
OpCap Advisors Small Cap Portfolio 13.62% 9.34% 17.99% 12.72%
OpCap Advisors Government Income 10.07% N/A N/A 10.48%
Portfolio
</TABLE>
* On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two investment
funds, the Old Trust and the Quest For Value Accumulation Trust that is included
in the Contract (the "New Trust"), at which time the New Trust commenced
operations. The total net assets for each of the Small Cap and Managed
Portfolios immediately after the transaction were $139,812,573 and $682,601,380,
respectively, with respect to the Old Trust and, with respect to the New Trust
were $8,129,274 and $51,345,102, for the OpCap Advisors Small Cap and OpCap
Advisors Managed Growth Portfolios, respectively. For the period prior to
September 16, 1994, the performance figures above for each of the OpCap Advisors
Small Cap and OpCap Advisors Managed Portfolios reflect the performance of the
corresponding Portfolios of the Old Trust.
-7-
<PAGE>
Note: Advertisements and other sales literature for the Portfolios may quote
total returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an investment
in the Portfolios based on monthly reinvestment of dividends over a specific
period of time.
HYPOTHETICAL ILLUSTRATIONS
<TABLE>
<CAPTION>
FIDELITY EQUITY INCOME PORTFOLIO FIDELITY EQUITY INCOME PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1986
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
------------------------ ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A
12/31/87 $ 4,000 $ 1,950 -2.51% -2.51% 12/31/87 $50,000 $ 48,743 -2.51% -2.51%
12/31/88 $ 6,000 $ 4,779 20.99% 12.46% 12/31/88 $50,000 $ 58,975 20.99% 8.60%
12/31/89 $ 8,000 $ 7,843 15.70% 14.00% 12/31/89 $50,000 $ 68,233 15.70% 10.92%
12/31/90 $10,000 $ 8,221 -16.48% 1.09% 12/31/90 $50,000 $ 56,991 -16.48% 3.33%
12/31/91 $12,000 $13,247 29.60% 9.52% 12/31/91 $50,000 $ 73,860 29.60% 8.12%
12/31/92 $14,000 $17,572 15.25% 11.01% 12/31/92 $50,000 $ 85,126 15.25% 9.27%
12/31/93 $16,000 $22,828 16.63% 12.25% 12/31/93 $50,000 $ 99,286 16.63% 10.30%
12/31/94 $18,000 $26,211 5.57% 10.90% 12/31/94 $50,000 $104,817 5.57% 9.69%
12/31/95 $20,000 $37,583 33.22% 14.48% 12/31/95 $50,000 $139,637 33.22% 12.09%
</TABLE>
<TABLE>
<CAPTION>
FIDELITY GROWTH PORTFOLIO FIDELITY GROWTH PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1986 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1986
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/86 $ 2,000 N/A N/A N/A 12/31/86 $50,000 N/A N/A N/A
12/31/87 $ 4,000 $ 2,044 2.21% 2.21% 12/31/87 $50,000 $ 51,104 2.21% 2.21%
12/31/88 $ 6,000 $ 4,609 13.96% 9.83% 12/31/88 $50,000 $ 58,240 13.96% 7.93%
12/31/89 $ 8,000 $ 8,570 29.67% 18.92% 12/31/89 $50,000 $ 75,519 29.67% 14.73%
12/31/90 $10,000 $ 9,199 -12.97% 5.67% 12/31/90 $50,000 $ 65,727 -12.97% 7.08%
12/31/91 $12,000 $16,068 43.47% 16.25% 12/31/91 $50,000 $ 94,300 43.47% 13.53%
12/31/92 $14,000 $19,475 7.79% 14.02% 12/31/92 $50,000 $101,646 7.79% 12.55%
12/31/93 $16,000 $25,276 17.70% 14.82% 12/31/93 $50,000 $119,636 17.70% 13.27%
12/31/94 $18,000 $26,889 -1.42% 11.46% 12/31/94 $50,000 $117,937 -1.42% 11.32%
12/31/95 $20,000 $38,563 33.49% 14.98% 12/31/95 $50,000 $157,433 33.49% 13.59%
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
FIDELITY ASSET MANAGER PORTFOLIO FIDELITY ASSET MANAGER PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1989
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A N/A 12/31/89 $50,000 N/A N/A N/A
12/31/90 $ 4,000 $ 2,105 5.23% 5.23% 12/31/90 $50,000 $52,613 5.23% 5.23%
12/31/91 $ 6,000 $ 4,960 20.84% 15.23% 12/31/91 $50,000 $63,580 20.84% 12.76%
12/31/92 $ 8,000 $ 7,666 10.15% 12.76% 12/31/92 $50,000 $70,031 10.15% 11.89%
12/31/93 $10,000 $11,554 19.53% 15.26% 12/31/93 $50,000 $83,709 19.53% 13.75%
12/31/94 $12,000 $12,551 -7.40% 7.67% 12/31/94 $50,000 $77,511 -7.40% 9.16%
12/31/95 $14,000 $16,782 15.33% 9.67% 12/31/95 $50,000 $89,396 15.33% 10.17%
</TABLE>
<TABLE>
<CAPTION>
FIDELITY MONEY MARKET PORTFOLIO FIDELITY MONEY MARKET PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1983 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1983
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/83 $ 2,000 N/A N/A N/A 12/31/83 $50,000 N/A N/A N/A
12/31/84 $ 4,000 $ 2,178 8.88% 8.88% 12/31/84 $50,000 $54,442 8.88% 8.88%
12/31/85 $ 6,000 $ 4,453 6.60% 7.37% 12/31/85 $50,000 $58,033 6.60% 7.73%
12/31/86 $ 8,000 $ 6,789 5.21% 6.31% 12/31/86 $50,000 $61,055 5.21% 6.88%
12/31/87 $10,000 $ 9,224 4.95% 5.78% 12/31/87 $50,000 $64,077 4.95% 6.40%
12/31/88 $12,000 $11,885 5.89% 5.81% 12/31/88 $50,000 $67,849 5.89% 6.30%
12/31/89 $14,000 $14,939 7.59% 6.29% 12/31/89 $50,000 $73,000 7.59% 6.51%
12/31/90 $16,000 $18,045 6.53% 6.35% 12/31/90 $50,000 $77,765 6.53% 6.51%
12/31/91 $18,000 $20,968 4.60% 5.98% 12/31/91 $50,000 $81,346 4.60% 6.27%
12/31/92 $20,000 $23,530 2.45% 5.32% 12/31/92 $50,000 $83,335 2.45% 5.84%
12/31/93 $22,000 $25,985 1.79% 4.71% 12/31/93 $50,000 $84,822 1.78% 5.43%
12/31/94 $24,000 $28,766 2.79% 4.41% 12/31/94 $50,000 $87,189 2.79% 5.19%
12/31/95 $26,000 $32,125 4.42% 4.41% 12/31/95 $50,000 $91,039 4.42% 5.12%
</TABLE>
<TABLE>
<CAPTION>
DREYFUS QUALITY BOND PORTFOLIO DREYFUS QUALITY BOND PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1989 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1989
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/89 $ 2,000 N/A N/A 12/31/89 $50,000 N/A N/A N/A
12/31/90 $ 4,000 $ 2,019 0.97% 0.97% 12/31/90 $50,000 $50,483 0.97% 0.97%
12/31/91 $ 6,000 $ 4,523 12.52% 8.47% 12/31/91 $50,000 $56,805 12.52% 6.59%
12/31/92 $ 8,000 $ 7,209 10.52% 9.46% 12/31/92 $50,000 $62,781 10.52% 7.88%
12/31/93 $10,000 $10,472 13.72% 11.07% 12/31/93 $50,000 $71,392 13.72% 9.31%
12/31/94 $12,000 $11,733 -5.93% 5.38% 12/31/94 $50,000 $67,161 -5.93% 6.08%
12/31/95 $14,000 $16,308 18.75% 8.83% 12/31/95 $50,000 $79,755 18.75% 8.09%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DREYFUS GROWTH AND INCOME PORTFOLIO DREYFUS GROWTH AND INCOME PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, 1994 $50,000 SINGLE PURCHASE PAYMENT MADE
AND YEARLY DECEMBER 31ST THEREAFTER DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ------------------------ ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------- ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $4,000 $3,193 59.65% 59.65% 12/31/95 $50,000 $79,825 59.65% 59.65%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
T. ROWE PRICE EQUITY INCOME PORTFOLIO T. ROWE PRICE EQUITY INCOME
PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $ 4,000 $ 2,658 32.89% 32.89% 12/31/95 $50,000 $66,446 32.89% 32.89%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE INTERNATIONAL PORTFOLIO T. ROWE PRICE INTERNATIONAL
PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $ 4,000 $ 2,193 9.64% 9.64% 12/31/95 $50,000 $54,818 9.64% 9.64%
</TABLE>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW AMERICAN GROWTH FUND T. ROWE PRICE NEW AMERICAN
PORTFOLIO GROWTH FUND PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1994 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
----------------------- ---------------- ----------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $ 4,000 $ 2,980 48.99% 48.99% 12/31/95 $50,000 $74,495 48.99% 48.99%
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
OPCAP ADVISORS MANAGED PORTFOLIO OPCAP ADVISORS MANAGED PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE
1988 AND YEARLY DECEMBER 31ST THEREAFTER PAYMENT MADE DECEMBER 31, 1988
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A
12/31/89 $ 4,000 $ 2,504 25.19% 25.19% 12/31/89 $50,000 $62,595 25.19% 25.19%
12/31/90 $ 6,000 $ 3,229 -28.32% -13.46% 12/31/90 $50,000 $44,868 -28.32% -5.27%
12/31/91 $ 8,000 $ 7,809 49.36% 13.77% 12/31/91 $50,000 $67,015 49.36% 10.26%
12/31/92 $10,000 $ 7,861 -19.86% -0.70% 12/31/92 $50,000 $53,706 -19.86% 1.80%
12/31/93 $12,000 $ 9,046 -8.26% -3.32% 12/31/93 $50,000 $49,270 -8.26% -0.29%
12/31/94 $14,000 $10,124 -8.35% -4.84% 12/31/94 $50,000 $45,156 -8.35% -1.68%
12/31/95 $16,000 $17,402 43.53% -0.25% 12/31/95 $50,000 $64,814 43.53% 3.78%
</TABLE>
<TABLE>
<CAPTION>
OPCAP ADVISORS US GOVERNMENT INCOME PORTFOLIO OPCAP ADVISORS US GOVERNMENT INCOME PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE PAYMENT
1994 AND YEARLY DECEMBER 31ST THEREAFTER MADE DECEMBER 31, 1994
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------- ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/94 $ 2,000 N/A N/A N/A 12/31/94 $50,000 N/A N/A N/A
12/31/95 $ 4,000 $ 2,201 10.07% 10.07% 12/31/95 $50,000 $55,035 10.07% 10.-7%
</TABLE>
<TABLE>
<CAPTION>
OPCAP ADVISORS SMALL CAPITAL PORTFOLIO OPCAP ADVISORS SMALL CAPITAL PORTFOLIO
$2,000 PURCHASE PAYMENT MADE DECEMBER 31, $50,000 SINGLE PURCHASE PAYMENT
1988 AND YEARLY DECEMBER 31ST THEREAFTER MADE DECEMBER 31, 1988
Values prior to current Values prior to current
year's purchase payment Non-Standardized year's purchase payment Non-Standardized
- ----------------------------------- ---------------- ---------------------------------- ----------------
One Average One Average
Year Annual Year Annual
Cumulative Accumulated Total Total Cumulative Accumulated Total Total
Date Payment Value Return Return Date Payment Value Return Return
- ---- ---------- ----------- ------ ------ ---- ---------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/88 $ 2,000 N/A N/A N/A 12/31/88 $50,000 N/A N/A N/A
12/31/89 $ 4,000 $ 2,290 14.52% 14.52% 12/31/89 $50,000 $57,259 14.52% 14.52%
12/31/90 $ 6,000 $ 3,225 -24.82% -13.52% 12/31/90 $50,000 $43,047 -24.82% -7.21%
12/31/91 $ 8,000 $ 8,457 61.85% 18.17% 12/31/91 $50,000 $69,670 61.85% 11.69%
12/31/92 $10,000 $ 8,457 -19.13% 2.24% 12/31/92 $50,000 $56,345 -19.13% 3.03%
12/31/93 $12,000 $10,143 -3.01% 0.47% 12/31/93 $50,000 $54,650 -3.01% 1.79%
12/31/94 $14,000 $ 9,917 -18.33% -5.42% 12/31/94 $50,000 $44,634 -18.33% -1.87%
12/31/95 $16,000 $13,541 13.63% -0.42% 12/31/95 $50,000 $50,715 13.63% 0.20%
</TABLE>
Individualized Computer Generated Illustrations
The Company may from time to time use computer-based software available through
Morningstar, CDA/Wiesnberger and/or other firms to provide registered
representatives and existing and/or potential owners of Contracts with
individualized hypothetical performance illustrations for some or all of the
Portfolios. Such illustrations may include, without limitation, graphs, bar
charts and other types of formats presenting the following information: (i) the
historical results of a hypothetical investment in a single Portfolio; (ii) the
historical fluctuation of the value of a single Portfolio (actual and
hypothetical); (iii) the historical results of a hypothetical investment in more
than one Portfolios; (iv) the historical performance of two or more market
indices in relation to one another and/or one or more Portfolios; (v) the
historical performance of two or more market indices in comparison to a single
Portfolio or a group of Portfolios; (vi) a market risk/reward scatter chart
showing the historical risk/reward relationship of one or more mutual funds or
-11-
<PAGE>
Portfolios to one or more indices and a broad category of similar anonymous
variable annuity subaccounts; and (vii) Portfolio data sheets showing various
information about one or more Portfolios (such as information concerning total
return for various periods, fees and expenses, standard deviation, alpha and
beta, investment objective, inception date and net assets).
PERFORMANCE COMPARISONS
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 in which
the Subaccount invests, and the market conditions during the given 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 and Health Insurance Company as
determined by one or more of the ratings services listed below, or other
recognized rating services. Reports and promotional literature may also contain
other information 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,
publications, or other person who rank separate accounts or other investment
products on overall performance or other criteria, and (ii) the effect of tax-
deferred compounding on a Subaccount's investment returns, or returns in
general, 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
investment 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.
Each Subaccount's performance depends on, among other things, the performance of
the underlying Portfolio which, in turn, depends upon such variables as:
. quality of underlying investments;
. average maturity of underlying investments;
. type of instruments in which the Portfolio is invested;
. changes in interest rates and market value of underlying investments;
. changes in Portfolio expenses; and
. the relative amount of the Portfolio's cash flow.
From time to time, we may advertise the performance of the Subaccounts and the
underlying Portfolios as compared to similar funds or portfolios using certain
indexes, reporting services and financial publications, and we may advertise
rankings or ratings issued by certain services and/or other institutions. These
may include, but are not limited to, the following:
. Dow Jones Industrial Average ("DJIA"), an unmanaged index representing share
prices of major industrial corporations, public utilities, and transportation
companies. Produced by the Dow Jones & Company, it is cited as a principal
indicator of market conditions.
. Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a composite
index of common stocks in industrial, transportation, and financial and
public utility companies, which can be used to compare to the total returns
of funds whose portfolios are invested primarily in common stocks. In
addition, the Standard & Poor's index assumes reinvestments of all dividends
paid by stocks listed on its index. Taxes due on any of these distributions
are not included, nor are brokerage or other fees calculated into the
Standard & Poor's figures.
. Lipper Analytical Services, Inc., a reporting service that ranks funds in
various fund categories by making comparative calculations using total
return. Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, we may quote the
Portfolios' Lipper rankings in various fund categories in advertising and
sales literature.
. Bank Rate Monitor National Index, Miami Beach, Florida, a financial reporting
service which publishes weekly average rates of 50 leading bank and thrift
institution money market deposit accounts. The rates
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published in the index are an average of the personal account rates offered
on the Wednesday prior to the date of publication by ten of the largest banks
and thrifts in each of the five largest Standard Metropolitan Statistical
Areas. Account minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the lowest rate
is used. Rates are subject to change at any time specified by the
institution.
. Shearson Lehman Government/Corporate (Total) Index, an index comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed by
the U.S. government and quasi-federal corporations; and publicly issued,
fixed-rate, non-convertible domestic bonds of companies in industry, public
utilities and finance. The average maturity of these bonds approximates nine
years. Tracked by Shearson Lehman, Inc., the index calculates total returns
for one month, three month, twelve month, and ten year periods and year-to-
date.
. Shearson Lehman Government/Corporate (Long-Term) Index, an index composed of
the same types of issues as defined above. However, the average maturity of
the bonds included in this index approximates 22 years.
. Shearson Lehman Government Index, an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or any
agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with a minimum
outstanding principal of $1 million and a minimum maturity of one year are
included.
. Morningstar, Inc., an independent rating service that publishes the bi-weekly
Mutual Fund Values. Mutual Fund Values rates more than 1,000 NASDAQ-listed
mutual funds of all types, according to their risk-adjusted returns. The
maximum rating is five stars, and ratings are effective for two weeks.
. Money, a monthly magazine that regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective)
yield. From time to time, the Fund will quote its Money ranking in
advertising and sales literature.
. Standard & Poor's Utility Index, an unmanaged index of common stocks from
forty different utilities. This index indicates daily changes in the price
of the stocks. The index also provides figures for changes in price from the
beginning of the year to date, and for a twelve month period.
. Dow Jones Utility Index, an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The
index also provides the highs and lows for each of the past five years.
. The Consumer Price Index, a measure for determining inflation.
Investors may use such indexes (or reporting services) in addition to the Funds'
Prospectuses to obtain a more complete view of each Portfolio's performance
before investing. Of course, when comparing each Portfolio's performance to any
index, conditions such as composition of the index and prevailing market
conditions should be considered in assessing the significance of such companies.
Unmanaged indexes may assume the reinvestment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
When comparing funds using reporting services, or total return and yield, or
effective yield, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price.
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. The General Account contains all of the assets of the
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Company. Records are maintained of all purchases and redemptions of eligible
Portfolio shares held by each of the Subaccounts and the General Account.
THE COMPANY
All 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
insurance company ("PLH"). Providian Corporation owns a 4% interest,
Commonwealth Life Insurance Company owns a 61% interest, Peoples Security Life
Insurance Company owns a 15% interest and Capital Liberty, L.P. owns a 20%
interest in PLH. A 5% interest in Capital Liberty, L.P. is owned by Providian
Corporation, which is the general partner, and 76% and 19% interests,
respectively, are held by two limited partners, Commonwealth Life Insurance
Company and Peoples Security Life Insurance Company, which are both wholly owned
by Providian Corporation.
STATE REGULATION
The Company is a stock life insurance company organized under the laws of the
State of New York, and is subject to regulation by the New York State Department
of Insurance. An annual statement is filed with the New York Superintendent of
Insurance on or before March 1st of each year covering the operations and
reporting on the financial condition of the Company as of December 31st of the
preceding calendar year. Periodically, the New York Superintendent of Insurance
examines the financial condition of the Company, including the liabilities and
reserves of the Separate Account.
In addition, the Company is subject to the insurance laws and regulations of all
the states where it is licensed to operate. The availability of certain contract
rights and provisions depends on state approval and/or filing and 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 Investment
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
semi-annually, reports containing such information as may be required under that
Act or by any other applicable law or regulation.
DISTRIBUTION OF THE CONTRACTS
Providian Securities Corporation ("PSC"), the principal underwriter of the
Contracts, is a wholly owned subsidiary of Providian Financial Services, Inc.,
which is a wholly owned subsidiary of Providian Corporation. PSC is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc. Commissions and
expense allowance payments not to exceed, in the aggregate, 6.75% of Purchase
Payments may be paid to entities which sell the Contracts. Additional payments
may be made for other services not directly related to the sale of the
Contracts.
The Contracts are offered to the public through brokers licensed under the
federal securities laws and New York State insurance laws that have entered into
agreements with PSC. The offering of the Contracts is continuous and PSC does
not anticipate discontinuing the offering of the Contracts. However, PSC does
reserve the right to discontinue the offering of the Contracts.
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
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
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OTHER INFORMATION
A Registration Statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contracts 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.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The audited statutory-basis financial statements of the Company for the years
ended December 31, 1995 and 1994, including the Reports of Independent Auditors'
thereon, which are also included in this Statement of Additional 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. No
financial statements are included for the Separate Account because, as of the
date of this Prospectus, the Subaccounts of the Separate Account, which invest
in the Portfolios offered by the Providian Marquee Variable Annuity, had not
commenced operations and consequently had no assets or liabilities with respect
thereto.
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