PROVIDIAN SERIES TRUST, N-1A EL/A, 1997-01-13

PROVIDIAN SERIES TRUST
N-1A EL/A, 1997-01-13

Previous: NHANCEMENT TECHNOLOGIES INC, SB-2/A, 1997-01-13

Next: BAY VIEW SECURITIZATION CORP, S-3/A, 1997-01-13

<PAGE>

As Filed With The Securities And Exchange Commission On January 13, 1997

Registration Nos. 333-15555
811-07911

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

-------------
Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __X__

Pre-Effective Amendment No. __1__

Post-Effective Amendment No. ____

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__

Amendment No. __1__

PROVIDIAN SERIES TRUST
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

Post Office Box 32700
400 West Market Street
Louisville, Kentucky 40232
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

(502) 560-2000
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)

Kimberly A. Scouller, Esquire
Providian Corporation
400 West Market Street
Louisville, Kentucky 40202
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service of Process)

Copies to:
Michael Berenson, Esquire
Ann B. Furman, Esquire
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007

Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant declares that an indefinite amount of shares is being registered
under the Securities Act of 1933.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
shall determine.
<PAGE>

PROVIDIAN SERIES TRUST
Contents of Registration Statement

This Registration Statement consists of the following papers and documents:

. Cover Sheet

. Contents of Registration Statement

. Cross Reference Sheet

. Part A - Prospectus for High Quality Stock Fund, Fixed Income Fund,
International Active Fund, and Money Market Fund

Prospectus for Capital Preservation Portfolio, Income Oriented
Portfolio, Growth and Income Portfolio, Capital Growth Portfolio,
Maximum Appreciation Portfolio, and Money Market Fund

. Part B - Statement of Additional Information for High Quality Stock Fund,
Fixed Income Fund, International Active Fund, and Money Market
Fund

Statement of Additional Information for Capital Preservation
Portfolio, Income Oriented Portfolio, Growth and Income
Portfolio, Capital Growth Portfolio, Maximum Appreciation
Portfolio, and Money Market Fund

. Part C - Other Information

. Signature Pages

<PAGE>

PROVIDIAN SERIES TRUST

REGISTRATION STATEMENT ON FORM N-1A

CROSS REFERENCE SHEET

N-1A Location in
Item No. Registration Statement
-------- ----------------------
<S> <C> <C>
Part A: Information Required In Prospectus
------------------------------------------

1. Cover Page Cover Page

2. Synopsis Not Applicable

3. Condensed Financial Information Not Applicable

4. General Description of Registrant Summary

5. Management of the Fund Management

6. Capital Stock and Other Securities Investment Objectives and Policies
of the Funds

7. Purchase of Securities Being Offered Purchase and Redemption of
Shares

8. Redemption of Repurchase Purchase and Redemption of
Shares

9. Pending Legal Proceedings Not Applicable
</TABLE>

<TABLE>
<CAPTION>
Part B: Information Required In
Statement of Additional Information
-----------------------------------
<S> <C> <C>
10. Cover Page Cover Page

11. Table of Contents Cover Page

12. General Information and History General Information

13. Investment Objectives and Policies Investment Policies

14. Management of the Registrant Management

15. Control Persons and Holders of Securities Not Applicable

16. Investment Advisory and Other Services Management

17. Brokerage Allocation Portfolio Turnover and Securities
Transactions

18. Capital Stock and Other Securities General Information
</TABLE>
<PAGE>

N-1A Location in
Item No. Registration Statement
-------- ----------------------
<S> <C> <C>
19. Purchase, Redemption and Pricing of Net Asset Values of Shares
Securities Being Offered of the Funds

20. Tax Status Taxes

21. Underwriters Not Applicable

22. Calculation of Performance Data Investment Performance

23. Financial Statements Financial Statements
</TABLE>

<TABLE>
Part C: Other Information
<S> <C> <C>
24. Financial Statements and Exhibits Financial Statements and Exhibits

25. Persons Controlled by or Under Common Control Persons Controlled by or Under
Common Control

26. Number of Holders of Securities Number of Holders of Securities

27. Indemnification Indemnification

28. Business and Other Connections Business and Other Connections
of Investment Adviser of Investment Adviser

29. Principal Underwriters Not Applicable

30. Location of Accounts and Records Location of Accounts and Records

31. Management Services Management Services

32. Undertakings Undertakings
</TABLE>
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JANUARY 13, 1997

PROSPECTUS

PROVIDIAN SERIES TRUST
P.O. BOX 32700
LOUISVILLE, KENTUCKY 40232
, 1997

Providian Series Trust (the "Trust") is a diversified investment company
presently consisting of nine separate series (the "Funds") each having
different investment objectives and policies. Shares of four Funds are offered
through this prospectus.

The investment objectives of the four Funds are as follows:

The HIGH QUALITY STOCK FUND seeks long term growth of capital. The Fund pursues
its investment objective by investing primarily in stocks in three categories
of companies that are publicly traded in the United States: the 500 largest in
market capitalization, the 501st to the 1250th largest in market
capitalization, and the 1000th to the 3000th largest in market capitalization
at the time of purchase.

The FIXED INCOME FUND seeks the highest level of income as is consistent with
the preservation of capital. The Fund pursues its investment objective
primarily by investing in investment grade debt securities, which range in
maturity from one to ten years, including securities issued by the U.S.
government or an agency or instrumentality of the U.S. government, asset-backed
securities and corporate debt obligations.

The INTERNATIONAL ACTIVE FUND seeks long term growth of capital. The Fund
pursues its objective by investing primarily in a diversified portfolio of
international equity securities.

The MONEY MARKET FUND seeks to provide current income consistent with stability
of principal and liquidity. The Fund invests in money market instruments
maturing in thirteen months or less from time of investment. AN INVESTMENT IN
THE MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, AND
THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.

The purpose of the Trust currently is to serve as the investment medium for
variable annuity contracts ("Contracts") offered by insurance companies (see
"Purchase and Redemption of Shares") and qualified plans. One or more of the
Funds offered through this Prospectus will be the investment medium for five
other series of the Trust whose shares are offered through another prospectus.
The Trust may offer other series of shares in the future. The Funds' shares
will not be offered directly to the public. There is no assurance that any of
the Funds will achieve their investment objectives.

This Prospectus sets forth concisely the information about the Trust that an
investor should know before investing. A Statement of Additional Information
(the "SAI") dated , 1997, containing additional information about the
Trust, has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus in its entirety. You may obtain a
copy of the SAI without charge by calling or writing the Trust.

INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus is , 1997.
<PAGE>

TABLE OF CONTENTS

Page
<TABLE>
<S> <C>
SUMMARY..................................................................... 1
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS............................. 1
PORTFOLIO TURNOVER.......................................................... 5
IMPLEMENTATION OF POLICIES AND RISKS........................................ 5
MANAGEMENT.................................................................. 7
PURCHASE AND REDEMPTION OF SHARES........................................... 8
NET ASSET VALUE AND PRICING................................................. 8
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................... 9
PERFORMANCE AND YIELD INFORMATION........................................... 9
GENERAL INFORMATION......................................................... 10
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS....................... 11
APPENDIX A--COMMON STOCK RANKINGS........................................... A-1
APPENDIX B--SECURITIES RATINGS.............................................. B-1
</TABLE>
<PAGE>

SUMMARY

The Providian Series Trust (the "Trust") was organized as a Massachusetts
business trust on October 22, 1996. The Trust is a diversified, no-load, open-
end management investment company registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940 ("1940 Act"). The
Trust is a "series" type of mutual fund which issues separate classes (or
series) of stock, each of which represents a separate diversified portfolio of
investments. This Prospectus offers shares of four funds ("Funds") of the
Trust, each with its own investment objective or objectives and investment
policies.

The shares of the Funds are offered to separate accounts of insurance
companies to fund various variable annuity contracts issued by Providian Life
and Health Insurance Company and First Providian Life and Health Insurance
Company (together, "Providian Life"). Shares of the Funds may be offered to
qualified plans and, in the future, in connection with variable life insurance
policies. The rights of an insurance company holding Trust shares for a
separate account are different from the rights of the owner of a Contract. The
terms "shareholder" or "shareholders" in this Prospectus shall refer to the
insurance companies and qualified plans, and not to any Contract Owner.

Providian Investment Advisors, Inc. (the "Adviser") serves as the Trust's
investment adviser. Atlanta Capital Management Company, L.L.C. ("Atlanta
Capital") serves as the sub-adviser to the High Quality Stock Fund and the
Fixed Income Fund. Blairlogie Capital Management ("Blairlogie") serves as the
sub-adviser to the International Active Fund. Federated Investment Counseling
("Federated") serves as the sub-adviser to the Money Market Fund. (Atlanta
Capital, Blairlogie and Federated are referred to collectively as the "Sub-
Advisers.") The Adviser supervises the Trust's overall management and
investment program, performs a variety of administrative services on behalf of
the Trust, pays the Sub-Advisers and all fees and expenses of officers and
Trustees of the Trust who are affiliated persons of the Adviser, the Sub-
Advisers or the Trust. The Trust pays all other expenses incurred in the
operation of the Trust, including fees and expenses of Trustees who are
unaffiliated persons of the Adviser, the Sub-Advisers, or the Trust.

The Adviser has agreed to limit the operating expenses (excluding advisory
fees) of each Fund so that the ratio of expenses to net assets on an annual
basis for each Fund does not exceed 0.25%. These limitations will apply for
three years after commencement of operations.

INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS

Each of the Funds has a different investment objective or objectives as
described below. The High Quality Stock Fund and the Fixed Income Fund are
managed by Atlanta Capital; the International Active Fund is managed by
Blairlogie; and the Money Market Fund is managed by Federated. There can be no
assurance that any of the Funds will achieve their investment objective or
objectives. Each Fund is subject to the risk of changing economic conditions,
as well as the risk inherent in the ability of the Sub-Advisers to make
changes in a Fund's investments in anticipation of changes in economic,
business, and financial conditions.

The different types of securities and investment techniques common to one or
more Funds all have attendant risks of varying degrees. For example, with
respect to equity securities, there can be no assurance of capital
appreciation and there is a substantial risk of decline. With respect to debt
securities, there can be no assurance that the issuer of such securities will
be able to meet its obligations on interest or principal payments in a timely
manner. In addition, the value of debt instruments generally rises and falls
inversely with changes in interest rates.

The investments and investment techniques common to one or more Funds,
including the risks of each, are described in greater detail below and in the
"Description of Securities and Investment Techniques" in the SAI.

The Funds are subject to investment restrictions that are described under
"Investment Restrictions" in the SAI. Each Fund's investment objective and
investment restrictions are "fundamental policies," which means that they may
not be changed without a majority vote of shareholders of the affected Funds.
Except for investment objectives and fundamental policies, all investment
policies and practices described in this Prospectus and in the SAI are not
<PAGE>

fundamental, meaning that the Board of Trustees may change them without
shareholder approval. See "Description of Securities and Investment
Techniques" and "Investment Restrictions" in the SAI for further information.

HIGH QUALITY STOCK FUND

In seeking its objective of long term growth of capital, the High Quality
Stock Fund will attempt to achieve a high total return (i.e., price
appreciation plus potential dividend yield) primarily through investment in
selected high quality common stocks of large, medium and small size companies
that are publicly traded in the United States. The High Quality Stock Fund
primarily selects stocks from among three categories of companies: the largest
500 in market capitalization, the 501st to the 1250th largest in market
capitalization, and the 1,000th to the 3,000th largest in market
capitalization at the time of purchase. Each company must have a common stock
ranking of B+ or better by Standard & Poor's Corporation ("S&P") (or if not
ranked by S&P, of comparable quality ranking by another recognized ranking
service, or if unranked, of comparable quality in the opinion of Atlanta
Capital) (hereafter this standard is referred to as a "common stock ranking of
B+ or better"). From this universe of stock issues, Atlanta Capital selects
stocks based upon a favorable combination of valuation, price volatility and
earnings stability. Approximately 50 stocks of large market capitalization
companies, 60 stocks of medium market capitalization companies, and 75 stocks
of small market capitalization companies are included in the Fund's portfolio.

Atlanta Capital generally believes that high quality companies, that is,
companies with superior track records of consistent earnings and dividend
growth, tend to outperform the stock market over the long term. The Fund seeks
to outperform its benchmarks, the S&P 500 Composite Stock Price Index and the
Russell 3000 Index. Atlanta Capital's stock selection methods will be based
upon, among other things, the analysis of variables which it believes
significantly relate to the future market performance of a stock, such as
recent changes in earnings per share and their deviations from analysts'
expectations, past growth trends, price action of the stock itself, publicly
recorded trading transactions by corporate insiders, and relative price-
earnings ratios.

By investing in securities that are subject to market risk, the High Quality
Stock Fund is also subject to greater fluctuations in its market value and a
higher degree of risk as compared to a fund seeking stability of principal,
such as a money market fund or a fund investing primarily in debt obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities (these obligations are referred to in this Prospectus as
"U.S. government securities").

The High Quality Stock Fund's investment philosophy is based on extensive
research which shows that high quality growth companies have produced
consistently increasing earnings and dividends, thereby providing attractive
returns with moderate risk over the long term. To qualify for purchase, each
company must have a common stock ranking of B+ or better. Atlanta Capital will
conduct fundamental income statement and balance sheet research on individual
companies to estimate future sustainable growth rates, evaluate current
earnings momentum, and estimate relative value of the stock. Atlanta Capital
intends to sell stocks based on such factors as deteriorating fundamentals,
below B+ quality ranking, and/or poor relative valuation.

If market conditions indicate their desirability, Atlanta Capital may, for
defensive purposes, temporarily invest, without limitation, the assets of the
High Quality Stock Fund in cash or cash equivalents. See "Cash Equivalents"
below, and "Debt Securities" under "Description of Securities and Investment
Techniques" in the SAI for further information.

FIXED INCOME FUND

In seeking its objective of the highest level of income as is consistent with
the preservation of capital, the Fixed Income Fund will invest in securities
issued by the U.S. government or an agency or instrumentality of the U.S.
government, including mortgage-related securities. The U.S. government
securities which may be purchased by the Fixed Income Fund include direct
obligations issued by the United States Treasury, such as Treasury bills,
certificates of indebtedness, notes and bonds. The Fixed Income Fund may also
purchase instruments issued or guaranteed by agencies or instrumentalities of
the United States government, including mortgage-related securities.

The Fixed Income Fund may also purchase mortgage-related securities or asset-
backed securities not issued by the U.S. government or any agency or
instrumentality thereof. The Fixed Income Fund may also invest in investment
grade corporate debt securities rated in one of the three highest rating
categories by Moody's Investor Service, Inc. ("Moody's"), S&P, Fitch Investor
Services, or another nationally recognized statistical rating organization
("NRSRO"),

2
<PAGE>

or if unrated, of comparable quality in the opinion of Atlanta Capital. While
non-U.S. government securities may present greater credit risk than U.S.
government securities, they also tend to afford higher yields than U.S.
government securities. Debt securities purchased by the Fund may be of any
maturity. It is anticipated that the weighted average maturity of the debt
portfolio generally will be between 3 and 7 years, but may be shorter or
longer under unusual market circumstances.

Among the mortgage-related securities that may be purchased by the Fixed
Income Fund are "mortgage-backed securities" of the Government National
Mortgage Association ("GNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") and the Federal National Mortgage Association ("FNMA"). These
mortgage-backed securities include "pass-through" securities and
"participation certificates," both of which are similar, representing pools of
mortgages that are assembled, with interests sold in each pool. Payments of
principal (including prepayments) and interest by individual mortgagors are
"passed through" to the holders of the interests in each pool; thus, each
payment to holders may contain varying amounts of principal and interest.
Another type of mortgage-backed security is the collateralized mortgage
obligation ("CMO"). A CMO is a security that is backed by mortgage pass-
through securities or in some cases mortgage loans. The cash flow from the
pass-throughs or loans is redirected to one or more classes or tranches in a
prescribed manner. Timely payment of principal and interest on GNMA pass-
throughs is guaranteed by the full faith and credit of the United States.
FHLMC and FNMA are both instrumentalities of the U.S. government, but their
obligations are not backed by the full faith and credit of the United States.
See "Mortgage-Backed Securities" under "Description of Securities and
Investment Techniques" in the SAI for further information.

There is minimal credit risk involved in the purchase of government or
government-guaranteed securities. However, as with any fixed income
investment, when interest rates decline, the market value of a portfolio
invested at higher yields can be expected to rise. Conversely, when interest
rates rise, the market value of a portfolio invested at lower yields can be
expected to decline. Therefore, Atlanta Capital may engage in portfolio
trading to take advantage of market developments and yield disparities, for
example, shortening the average maturity of the portfolio in anticipation of a
rise in interest rates so as to minimize depreciation of principal, or
lengthening the average maturity of the portfolio in anticipation of a decline
in interest rates so as to maximize appreciation of principal.

The Fixed Income Fund seeks to outperform the Lehman Brothers Intermediate
Aggregate Index (the "Index") over an interest rate cycle. (See the SAI for a
description of the Index). The portfolio duration will generally range from
80% to 120% of the Index duration. Typically, this causes the weighted average
maturity of the portfolio to vary between 3 and 7 years. Atlanta Capital sets
duration strategy based on its assessment of secular and cyclical economic,
demographic and political trends.

The Fixed Income Fund may invest in asset-backed securities which represent
fractional interests in pools of leases, retail installment loans and
revolving credit receivables, both secured and unsecured. The Fixed Income
Fund may also use various other investment strategies and techniques when
Atlanta Capital determines that such use is appropriate in an effort to meet
the Fund's investment objective. Such strategies and techniques include, but
are not limited to, entering into repurchase agreements and investing in when-
issued or delayed delivery securities. See "Description of Securities and
Investment Techniques" in the SAI for further information.

INTERNATIONAL ACTIVE FUND

The International Active Fund seeks long term growth of capital. In pursuing
this objective, the Fund invests primarily in a diversified portfolio of
international equity securities. The Morgan Stanley Capital International EAFE
(Europe, Australia, Far East) Index ("EAFE Index") is used as a basis for
choosing the countries in which the Fund invests, however, the Fund is not
limited to the countries and weightings of the EAFE Index. Blairlogie applies
two levels of screening in selecting investments for the Fund. First, an
active country selection model analyzes world markets and assigns a relative
value ranking, or "favorability weighting," to each country in the relevant
universe to determine markets which are relatively undervalued. Second, at the
stock selection level, quality analysis and value are applied to each
security, assessing variables such as balance sheet strength and earnings
growth (quality factors) and performance relative to the industry, price to
earnings ratios and price to book ratios (value factors). This two-level
screening method identifies undervalued securities for purchase as well as
provides a sell discipline for fully valued securities. While Blairlogie
endeavors to apply the same variables to all stockmarkets, the applicability
of analytical tools can differ between countries. In selecting securities,
Blairlogie considers, to the extent practicable and on the basis of
information available to it for research, a company's environmental business
practices.

3
<PAGE>

Most of the foreign securities in which the Fund invests will be denominated in
foreign currencies. The Fund may engage in foreign currency transactions to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar or to the weighting of a particular foreign currency on the
EAFE Index. Such foreign currency transactions may include forward foreign
currency contracts, currency exchange transactions on a spot (i.e., cash)
basis, put and call options on foreign currencies, and foreign exchange futures
contracts. The Fund may invest in stock index futures contracts, foreign
exchange futures contracts, and options thereon, and may sell (write) call and
put options. The Fund also may engage in equity index swap transactions.

Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies which
are described below and in the SAI.

MONEY MARKET FUND

The Money Market Fund seeks to provide current income consistent with stability
of principal and liquidity. While there is no assurance that the Money Market
Fund will achieve its investment objective, it endeavors to do so by complying
with the various requirements of Rule 2a-7 under the 1940 Act which regulates
money market mutual funds and by following the investment policies described in
this prospectus.

The Money Market Fund seeks money market yields with no anticipated
fluctuations in principal. Because the Fund seeks to maintain a constant net
asset value of $1.00 per share, capital appreciation is not expected to play a
role in the Fund's returns, and dividend income alone is expected to provide
its entire investment return. All money market instruments can change in value
when interest rates or an issuer's creditworthiness changes dramatically. THE
FUND CANNOT GUARANTEE THAT IT WILL ALWAYS BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. An investment in the Fund is neither insured
nor guaranteed by the U.S. government.

The Money Market Fund pursues its investment objective by investing exclusively
in a portfolio of money market instruments maturing in 397 days or less. The
average maturity of the money market instruments in the Money Market Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies of the Money Market Fund may be
changed by the Trustees without the approval of shareholders. Shareholders will
be notified before any material change in these policies becomes effective.

The Money Market Fund invests in high-quality money market instruments that are
denominated and payable only in U.S. dollars and that are rated (or issued by
an issuer that is rated with respect to its short-term debt) in either one of
the two highest short-term rating categories by one or more NRSROs or of
comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:

(1) domestic issues of corporate debt obligations, including variable rate
demand notes;

(2) commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);

(3) certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions;

(4) short-term credit facilities, such as demand notes;

(5) asset-backed securities;

(6) obligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities;

(7) repurchase agreements; and

(8) other money market instruments.

CONCENTRATION OF INVESTMENTS. The Money Market Fund may invest 25% or more of
its total assets in commercial paper issued by finance companies. The finance
companies in which the Money Market Fund intends to invest can be divided into
two categories, commercial finance companies and consumer finance companies.
Commercial finance companies are principally engaged in lending to corporations
or other businesses. Consumer finance companies are primarily engaged in
lending to individuals. Captive finance companies or finance subsidiaries which
exist to facilitate the marketing and financial activities of their parent
will, for purposes of industry concentration, be classified by the Money Market
Fund in the industry of its parent corporation.

4
<PAGE>

In addition, the Money Market Fund may invest more than 25% of the value of its
total assets in cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, or instruments secured by these
money market instruments, such as repurchase agreements.

PORTFOLIO TURNOVER

Each Fund's turnover rate is not expected to exceed 50% annually. A Fund may
purchase or sell securities to accommodate purchases and sales of its shares.

IMPLEMENTATION OF POLICIES AND RISKS

In addition to the investment policies described above (and subject to certain
restrictions described below), the Funds may invest in some or all of the
following securities and may employ some or all of the following investment
techniques, some of which may present special risks as described below. A more
complete discussion of certain of these securities and investment techniques
and the associated risks is contained in the Funds' SAI.

GOVERNMENT SECURITIES

U.S. government securities are issued or guaranteed by the U.S. government or
its agencies or instrumentalities. Securities issued by the government include
U.S. Treasury obligations, such as Treasury bills, notes and bonds. Securities
issued or guaranteed by government agencies or instrumentalities include the
following:

. the Federal Housing Administration, Farmers Home Administration, Export-
Import Bank of the United States, Small Business Administration, and the
Government National Mortgage Association, including GNMA pass-through
certificates, whose securities are supported by the full faith and
credit of the United States;

. the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right
of the agency to borrow from the U.S. Treasury;

. the Federal National Mortgage Association, whose securities are
supported by the discretionary authority of the U.S. government to
purchase certain obligations of the agency or instrumentality; and

. the Student Loan Marketing Association, the Interamerican Development
Bank, and International Bank for Reconstruction and Development, whose
securities are supported only by the credit of such agencies.

Although the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so. The U.S. government and its agencies and
instrumentalities do not guarantee the market value of their securities;
consequently, the value of such securities will fluctuate.

CASH EQUIVALENTS

Each Fund may from time to time invest in cash or cash equivalents, which
include, but are not limited to the following instruments:

(a) short term (maturing in 13 months or less) obligations issued or
guaranteed as to interest and principal by the U.S. Government or any
agency or instrumentality thereof;

(b) obligations of banks (including certificates of deposit and bankers'
acceptances) that have capital, surplus, and undivided profits (as of the
date of their most recently published financial statements) in excess of
$100,000,000; and obligations of other banks or savings and loan
associations if such obligations are federally insured, provided that not
more than 10% of the total assets of the Fund will be invested in such
other insured obligations;

(c) commercial paper rated in the top two categories by an NRSRO (short-
term unsecured promissory notes of corporations including variable rate
master demand notes);

(d) short term (maturing in one year or less) corporate obligations;

5
<PAGE>

(e) obligations of U.S. and non-U.S. issuers denominated in U.S. dollars
and in securities of foreign branches of U.S. banks, such as negotiable
certificates of deposit, and including variable rate master demand notes
and floating rate notes; and

(f) debt instruments not specifically described if such instruments are
deemed by the Sub-Advisers to be of comparable high quality and liquidity.

Each Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933 (the
"1933 Act"). Section 4(2) commercial paper is restricted as to disposition
under federal securities laws and is generally sold to institutional
investors, such as the Funds, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper
is normally resold to other institutional investors like the Funds through or
with the assistance of the issuer or investment dealers who make a market in
Section 4(2) commercial paper, thus providing liquidity.

For a description of the ratings referred to above, see Appendix B to this
Prospectus.

FOREIGN SECURITIES

The High Quality Stock Fund and the International Active Fund may invest in
foreign securities. These include dollar-denominated securities traded in the
U.S. on the New York Stock Exchange (the "NYSE"). The High Quality Stock Fund
may invest in foreign securities if the foreign securities are traded on the
NYSE.

The International Active Fund may invest directly in foreign equity
securities; U.S. dollar- or foreign currency-denominated foreign corporate
debt securities; foreign preferred securities; certificates of deposit, fixed
time deposits and bankers' acceptances issued by foreign banks; obligations of
foreign governments or their subdivisions, agencies and instrumentalities,
international agencies and supranational entities; and securities represented
by European Depositary Receipts ("EDRs"), American Depositary Receipts
("ADRs"), or Global Depositary Receipts ("GDRs"). ADRs are dollar-denominated
receipts issued generally by domestic banks and representing the deposit with
the bank of a security of a foreign issuer, and are publicly traded on
exchanges or over-the-counter in the United States. EDRs are receipts similar
to ADRs and are issued and traded in Europe. GDRs are global receipts similar
to ADRs and may be offered privately in the United States and also trade in
public or private markets in other countries.

Investing in the securities of issuers in any foreign country involves special
risks and considerations not typically associated with investing in U.S.
companies and governments of foreign nations. These risks include: differences
in accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of
the ability to transfer currency from a country); and political instability
which could affect U.S. investments in foreign countries. Additionally,
foreign securities and dividends and interest payable on those securities may
be subject to foreign taxes, including taxes withheld from payments on those
securities. Foreign securities often trade with less frequency and volume than
domestic securities and therefore may exhibit greater price volatility.
Additional costs associated with an investment in foreign securities may
include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted
in currencies other than the U.S. dollar.

FOREIGN CURRENCY TRANSACTIONS

Foreign currency rates may fluctuate significantly over short periods of time.
They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates
also can be affected unpredictably by intervention (or the failure to
intervene) by U.S. or foreign governments or central banks, by currency
controls or political developments in the U.S. or abroad. Currencies in which
the International Active Fund's assets are denominated may be devalued against
the U.S. dollar, resulting in a loss to the Fund.

6
<PAGE>

The International Active Fund may, in addition to buying and selling foreign
currency futures contracts and options on foreign currencies and foreign
currency futures, enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. A forward
foreign currency exchange contract involves an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. By entering into a forward foreign currency
contract, the Fund "locks in" the exchange rate between the currency it will
deliver and the currency it will receive for the duration of the contract. As
a result, the Fund reduces its exposure to changes in the value of the
currency it will deliver and increases its exposure to changes in the value of
the currency it will exchange into. The effect on the value of the Fund is
similar to selling securities denominated in one currency and purchasing
securities denominated in another. Contracts to sell foreign currency would
limit any potential gain which might be realized by the Fund if the value of
the hedged currency increases. The Fund may enter into these contracts for the
purpose of hedging against foreign exchange risk arising from the Fund's
investment or anticipated investment in securities denominated in foreign
currencies. The Fund also may enter into these contracts for purposes of
increasing exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one country to another. The Fund may use one
currency (or a basket of currencies) to hedge against adverse changes in the
value of another currency (or a basket of currencies) when exchange rates
between the two currencies are positively correlated. The Fund will segregate
liquid assets, such as cash or high grade debt obligations, in a segregated
account to cover forward currency contracts entered into for non-hedging
purposes.

MANAGEMENT

The Board of Trustees is responsible for the overall operations of the Trust,
including reviewing the actions of the Trust's Adviser and Sub-Advisers as set
forth below. The Trust's officers supervise the daily business operations of
the Trust.

PROVIDIAN INVESTMENT ADVISORS, INC., 400 West Market Street, Louisville,
Kentucky 40202, has been retained under an Investment Advisory Agreement with
the Trust, dated , 1997, in general to supervise the management and
investment program of the Trust and each Fund. In addition, the Adviser
generally manages the affairs of the Trust, subject to the supervision of the
Board of Trustees. For information about the Board of Trustees and the Trust's
officers, see "Management" in the SAI. Under the Investment Advisory
Agreement, the Adviser receives an investment advisory fee equal to an annual
rate of 0.65% of the daily net asset value of the Fixed Income Fund, 0.65% of
the daily net asset value of the High Quality Stock Fund, 0.90% of the daily
net asset value of the International Active Fund, and 0.40% of the daily net
assets of the Money Market Fund.

BLAIRLOGIE CAPITAL MANAGEMENT, 125 Princes Street, Fourth Floor, Edinburgh EH2
4AD, Scotland, has been retained by the Adviser pursuant to a Sub-Advisory
Agreement with the Adviser dated , 1997, to serve as the sub-adviser
to the International Active Fund. Blairlogie is an investment management firm,
organized as a limited partnership under the laws of Scotland, United Kingdom,
with two general partners and one limited partner. The general partners are
PIMCO Advisors, which serves as the supervisory partner, and Blairlogie
Holdings Limited, a wholly owned corporate subsidiary of PIMCO Advisors, which
serves as the managing partner. The limited partner is Blairlogie Partners,
L.P., a limited partnership, the general partner of which is Pacific Financial
Asset Management Corporation, and the limited partners of which are the
principal executive officers of Blairlogie Capital Management. Blairlogie
Partners L.P. has agreed with PIMCO Advisors that PIMCO Advisors will acquire
one-fifth of its 25% interest annually, beginning December 31, 1997.
Blairlogie Capital Management Ltd., the predecessor investment adviser to
Blairlogie, commenced operations in 1992. Accounts managed by Blairlogie had
combined assets as of July 31, 1996

7
<PAGE>

of approximately $.7 billion. Blairlogie is registered as an investment
adviser with the SEC in the United States and with the Investment Management
Regulatory Organization ("IMRO") in the United Kingdom. As compensation for
its services, the Adviser pays Blairlogie a fee based on the monthly average
net assets of the International Active Fund. This fee equals 0.75% annually on
assets up to $25 million, 0.60% annually on assets above $25 million and up to
$50 million, and 0.50% annually on assets above $50 million.

FEDERATED INVESTMENT COUNSELING, Federated Investment Tower, Pittsburgh,
Pennsylvania 15222-3779, has been retained by the Adviser pursuant to a Sub-
Advisory Agreement with the Adviser, dated 1997, to serve as the
sub-adviser to the Money Market Fund. Federated, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher
Donahue, who is President and Trustee of Federated Investors.

Federated Investment Counseling and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to a
number of investment companies. With over $80 billion invested across more
than 250 funds under management and/or administration by its subsidiaries, as
of December 31, 1995, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,800 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients. As compensation for its services,
the Adviser pays Federated a fee at an annual rate of 0.25% based on the
monthly average net assets up to $75 million and 0.20% annually on assets
above $75 million of the Money Market Fund.

The investment professionals primarily responsible for the management of each
Fund (other than the Money Market Fund), with the respective responsibilities
and business experience for the past five years are as follows:

HIGH QUALITY STOCK FUND: Daniel W. Boone III, Senior Partner of Atlanta
Capital. He is responsible for the research and portfolio management of the
High Quality Stock Fund's equity portfolio and oversight of the equity
investment process. Mr. Boone joined Atlanta Capital in 1976.

FIXED INCOME FUND: Gregory L. Coleman, Partner of Atlanta Capital. He is
responsible for the fixed income trading, portfolio management of the Fixed
Income Fund and investment strategy. Mr. Coleman joined Atlanta Capital in
1990.

INTERNATIONAL ACTIVE FUND: James Smith, a Managing Director and Chief
Investment Officer of Blairlogie. Mr. Smith is responsible for managing an
investment team of seven professionals who, in turn, specialize in selection
of stocks within Europe, Asia, the Americas and in currency and derivatives.
He joined Blairlogie as a founder in 1992 and previously served as a senior
portfolio manager at Murray Johnstone in Glasgow, Scotland, responsible for
international investment management for North American clients.

PURCHASE AND REDEMPTION OF SHARES

Shares of each Fund are purchased or redeemed at their respective net asset
values next computed after receipt of an order (without a sales charge). For
information on how shares of the Funds are purchased and redeemed, read the
Contract prospectus.

NET ASSET VALUE AND PRICING

The net asset value of shares of each Fund is determined as of the close of
trading on each day the New York Stock Exchange is open for trading (currently
4:00 p.m. Eastern Time). The net asset value of shares for each Fund is
determined by adding up the value of its securities (determined as set forth
below) and other assets, subtracting the liabilities, and dividing by the
number of shares outstanding.

Securities held by the Funds (other than the Money Market Fund) are valued
based upon readily available market quotations. Where such market quotations
are not available, securities are valued at fair value as determined by or
under the general supervision of the Board of Trustees.

8
<PAGE>

The securities in the Money Market Fund are valued on an amortized-cost basis.
Under this method of valuation, a security is initially valued at its
acquisition cost, and thereafter, amortization of any discount or premium is
assumed each day, regardless of the impact of fluctuating interest rates on
the market value of the instrument. Under most conditions, Federated believes
it will be possible to maintain the net asset value of the Fund at $1.00 per
share. Calculations are periodically made to compare the value of the Fund's
portfolio valued at amortized cost with market values. If a deviation of 1/2
of 1% or more were to occur between the net asset value calculated by
reference to market values and the Fund's $1.00 per share net asset value, or
if there were any other deviation that the Board of Trustees believed would
result in a material dilution to shareholders or purchasers, the Board of
Trustees would promptly consider what action, if any, should be initiated. See
"Net Asset Values of the Shares of the Funds" in the SAI for details.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Fund is treated as a separate taxable entity and will elect to qualify as
a "regulated investment company" under applicable provisions of the Internal
Revenue Code of 1986 (the "Code"). As such and by complying with the
applicable provisions of the Code regarding the sources of its income, the
timing of its distributions, and the diversification of its assets, each fund
will be allowed a deduction for amounts distributed to its shareholders from
its ordinary income and net realized capital gains and will not be subject to
federal income tax on such amounts. To qualify for treatment as a "regulated
investment company," each Fund must, among other things, derive in each
taxable year at least 90 percent of its gross income from dividends, interest
and gains from the sale or other disposition of securities, and derive less
than 30 percent of its gross income in each taxable year from the gains
(without deduction for losses) from the sale or other disposition of
securities held for less than three months.

Each Fund intends to distribute sufficient net investment income to avoid the
application of federal income tax on the Trust. Each Fund also intends to
distribute sufficient income to avoid the losses from the sale of its
investments less its estimated expenses (including fees payable to the
Adviser).

In order to comply with certain potentially applicable regulations under
Section 817(h) of the Code concerning variable annuity contracts and variable
life insurance policies, each Fund will diversify its investments so that on
the last day of each quarter of a calendar year, no more than 55% of the value
on each Fund 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. For this purpose, securities of a single issuer are treated as
one investment and each U.S. Government agency or instrumentality is treated
as a separate issuer. Any security issued, guaranteed, or insured (to the
extent so guaranteed or insured) by the U.S. Government or an agency or
instrumentality of the U.S. Government is treated as a security issued by the
U.S. Government or its agency or instrumentality, whichever is applicable.

Dividends from the Funds (other than the Money Market Fund) will be declared
and distributed at such frequency, but at least annually, and in such amount
as to assure compliance with the Code. Dividends from the Money Market Fund
will be declared on each day its net asset value is calculated except bank
holidays. Income earned on weekends, holidays (including bank holidays), and
days on which net asset value is not calculated is declared as a dividend on
the day on which the Fund's net asset value was most recently calculated. The
Trustees may decide to declare dividends at other intervals.

All net realized long-term capital gains of the Trust, if any, are declared
and distributed annually after the close of the Trust's fiscal year to the
shareholders of the Fund or Funds to which such gains are attributable.

PERFORMANCE AND YIELD INFORMATION

From time to time, the Trust may advertise a variety of types of performance
information including "yield," "average annual total return," "total return,"
"cumulative total return," and "effective yield." Each of these figures will
be based on historical information and is not intended to indicate future
performance of the Funds.

The yield of a Fund (other than the Money Market Fund) refers to the
annualized income generated by an investment in that Fund over a specified 30-
day period. The yield is calculated by assuming that the income generated by
the investment during that 30-day period is generated each 30-day period over
a twelve-month period and is shown as a percentage of the investment. The
Money Market Fund's yield and effective yield are measures of the net
investment

9
<PAGE>

income per share earned by the Fund over a specific seven-day period and are
shown as a percentage of the investment. However, effective yield will be
slightly higher than the yield because effective yield assumes that the net
investment income earned by the Fund will be reinvested.

The total return of a Fund refers to return quotations assuming an investment
has been held in the Fund for various periods of time including, but not
limited to, one year and a period measured from the date the Fund commenced
operations. When a Fund has been in operation for five and ten years,
respectively, the total return for these periods will be provided. The total
return quotations will represent the average annual compounded rates of return
that would equate an initial investment of $1,000 to the redemption value of
that investment as of the last day of each of the periods for which total
return quotations are provided.

The yield and total return calculations do not reflect the effect of the
charges that may be applicable to a particular Contract or separate account.
Such charges will reduce the net yield and total return of that Contract.
Performance figures for a Fund will only be advertised if the comparable
figures for the Contract are included in the advertisement.

GENERAL INFORMATION

SHARES OF BENEFICIAL INTEREST

All shares of beneficial interest of the Trust are entitled to one vote, and
votes are generally on an aggregate basis. However, on matters where the
interests of the Funds differ (such as approval of an investment advisory
agreement or a change in fundamental investment policies), the voting is on a
Fund-by-Fund basis. The Trust does not hold routine annual shareholders'
meetings. The shares of each Fund issued are fully paid and non-assessable,
have no preference, conversion, exchange or similar rights, and are freely
transferrable. In addition, each issued and outstanding share in a Fund is
entitled to participate equally in dividends and distributions declared by
such Fund. Providian Life and Health Insurance Company Separate Account V and
First Providian Life and Health Insurance Company Separate Account C are the
legal owners of the shares each holds and as such each has the right to vote
to elect the Trustees of the Trust, to vote upon certain matters that are
required by the 1940 Act to be approved or ratified by the shareholders of a
mutual fund and to vote upon any other matter that may be voted upon at a
shareholders' meeting. However, in accordance with its view of presently
applicable law, Providian Life and Health Insurance Company Separate Account V
and First Providian Life and Health Insurance Company Separate Account C will
vote the shares of the Trust at special meetings of the shareholders of the
Trust in accordance with instructions received from Contract Owners.

AUDITORS

Ernst & Young LLP serves as independent auditors for the Trust and will audit
each Fund's financial statements annually.

LEGAL COUNSEL

Legal advice regarding certain matters relating to the Federal securities laws
has been provided by Jorden Burt Berenson & Johnson LLP, Washington, D.C.

CUSTODIAN

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is the Custodian of the Trust's assets.

REPORTS TO SHAREHOLDERS

The Trust will send annual and semi-annual reports to Contract Owners showing
the financial conditions of the Funds and the investments held in each.

OTHER INFORMATION

Inquiries and requests for the Statement of Additional Information should be
directed to the Trust at (800) or P.O. Box 32700, Louisville,
Kentucky 40232.

10
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this Prospectus. The following is the
Table of Contents for the SAI:

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies........................................................ B-2
Description of Securities and Investment Techniques........................ B-4
Portfolio Turnover and Securities Transactions............................. B-24
Management................................................................. B-25
Net Asset Values of the Shares of the Funds................................ B-27
Investment Performance..................................................... B-28
Taxes...................................................................... B-32
General Information........................................................ B-32
Independent Accountants.................................................... B-34
Financial Statements....................................................... F-
</TABLE>

11
<PAGE>

APPENDIX A--STANDARD AND POOR'S
EARNINGS AND DIVIDEND RANKINGS FOR COMMON STOCKS

In establishing Standard and Poor's quality rankings for common stocks, growth
and stability of earnings and dividends are deemed key elements. The point of
departure in arriving at these rankings is a computerized scoring system based
on per-share earnings and dividend records of the most recent ten years. Basic
scores are computed for earnings and dividends, then adjusted as indicated by
a set of predetermined modifiers for growth, stability within long-term trend,
and cyclicality.

The final score for each stock is measured against a scoring matrix determined
by analysis of the scores of a large and representative sample of stocks. The
range of scores in the array of this sample has been aligned with the
following ladder of rankings:

<TABLE>
<S> <C> <C>
A+ Highest A- Above Average B- Lower
A High B+ Average C Lowest
B Below Average D in Reorganization
</TABLE>

NR signifies no ranking because of insufficient data or because the stock is
not amenable to the ranking process.

A-1
<PAGE>

APPENDIX B--SECURITIES RATINGS

DESCRIPTION OF CORPORATE BOND
RATINGS

Moody's Investor Service, Inc.'s Corporate Bond Ratings:

Aaa--Bonds which are rated Aaa by Moody's Investor Service, Inc. ("Moody's")
are judged to be the best quality and carry the smallest degree of investment
risk. Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.

A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa--Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
period of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

Standard & Poor's Corporation's Corporate Bond Ratings:

AAA--This is the highest rating assigned by Standard & Poor's ("S&P") to a
debt obligation and indicates an extremely strong capacity to pay principal
and interest.

AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.

A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.

BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.

B-1
<PAGE>

BB/B/CCC/CC--Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

Plus (+) or Minus (-): The ratings from AA to B may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

B-2
<PAGE>

PROVIDIAN SERIES TRUST
ADMINISTRATIVE OFFICE
P.O. BOX 32700
LOUISVILLE, KENTUCKY 40232

, 1997

<PAGE>

SUBJECT TO COMPLETION, DATED JANUARY 13, 1997

PROSPECTUS

PROVIDIAN SERIES TRUST
P.O. BOX 32700
LOUISVILLE, KENTUCKY 40232
, 1997

Providian Series Trust (the "Trust") is a diversified investment company
presently consisting of nine separate series each having different investment
objectives and policies. This prospectus describes five series of shares, each
a professionally managed investment portfolio (a "Portfolio"). These Portfolios
currently serve as the investment medium for variable annuity contracts
("Contracts") offered by insurance companies (see "Purchase and Redemption of
Shares") and qualified plans. Each Portfolio seeks to achieve its objective by
investing in a number of Providian mutual funds. This prospectus also describes
the Money Market Fund, which is available only for the purpose of depositing
and holding initial purchase payments during the Free Look Period for the
Contracts issued in certain states.

The CAPITAL PRESERVATION PORTFOLIO seeks high current income with low
volatility of principal.

The INCOME ORIENTED PORTFOLIO seeks income and, secondarily, long term growth
of capital.

The GROWTH AND INCOME PORTFOLIO seeks growth of capital and income.

The CAPITAL GROWTH PORTFOLIO seeks long term growth of capital and,
secondarily, current income.

The MAXIMUM APPRECIATION PORTFOLIO seeks capital appreciation.

The MONEY MARKET FUND seeks to provide current income consistent with stability
of principal and liquidity. The Money Market Fund invests in money market
instruments maturing in thirteen months or less from the time of investment. AN
INVESTMENT IN THE MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

The Trust may offer other series of shares in the future. The Portfolios'
shares (and the Money Market Fund's shares) will not be offered directly to the
public. There is no assurance that any of the Portfolios will achieve their
investment objectives.

This Prospectus sets forth concisely the information about the Trust, each of
the Portfolios, and the Money Market Fund that an investor should know before
investing. A Statement of Additional Information (the "SAI") dated ,
1997, containing additional information about the Trust, has been filed with
the Securities and Exchange Commission and is incorporated by reference in this
Prospectus in its entirety. You may obtain a copy of the SAI without charge by
calling or writing the Trust.

INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.

The date of this Prospectus is , 1997.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Page
SUMMARY.................................................................... 1
INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS....................... 2
RISK FACTORS AND SPECIAL CONSIDERATIONS.................................... 3
PORTFOLIO TURNOVER......................................................... 4
INVESTMENT RESTRICTIONS.................................................... 4
DESCRIPTION OF THE UNDERLYING FUNDS........................................ 4
IMPLEMENTATION OF POLICIES AND RISKS OF THE UNDERLYING FUNDS............... 7
MANAGEMENT................................................................. 10
PURCHASE AND REDEMPTION OF SHARES.......................................... 11
NET ASSET VALUE AND PRICING................................................ 11
DIVIDENDS, DISTRIBUTIONS AND TAXES......................................... 12
PERFORMANCE AND YIELD INFORMATION.......................................... 12
GENERAL INFORMATION........................................................ 13
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS...................... 14
APPENDIX A--COMMON STOCK RANKINGS.......................................... A-1
APPENDIX B--SECURITIES RATINGS............................................. B-1
</TABLE>
<PAGE>

SUMMARY

The Providian Series Trust (the "Trust") was organized as a Massachusetts
business trust on October 22, 1996. The Trust is a diversified, no-load, open-
end management investment company registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940 ("1940 Act"). The
Trust is a "series" type of mutual fund which issues separate classes (or
series) of stock, each of which represents a separate diversified portfolio of
investments. This Prospectus offers shares of five investment portfolios
("Portfolios") of the Trust and the Money Market Fund (for the purpose of
holding initial deposits during the free look period for Contracts issued in
certain states).

INVESTMENT OBJECTIVES. Each Portfolio seeks to achieve its objective by
investing in a number of other Providian mutual funds. The Capital
Preservation Portfolio seeks high current income with low volatility of
principal. The Income Oriented Portfolio seeks income and, secondarily, long-
term growth of capital. The Growth and Income Portfolio seeks growth of
capital and income. The Capital Growth Portfolio seeks long-term growth of
capital and, secondarily, current income. The Maximum Appreciation Portfolio
seeks capital appreciation. Each Portfolio seeks to achieve its investment
objective by investing in a diverse mix of "Underlying Funds," which consist
of open-end management investment companies or series thereof for which
Providian Investment Advisors, Inc. acts as investment adviser. Investors may
choose to invest in one of the Portfolios based on their personal investment
goals, risk tolerance and financial circumstances. See "Investment Objectives
and Policies of the Portfolios."

The shares of the Portfolios are offered to separate accounts of insurance
companies to fund variable annuity contracts issued by Providian Life and
Health Insurance Company and First Providian Life and Health Insurance Company
(together, "Providian Life"). Shares of the Portfolios may be offered to
qualified plans and, in the future, in connection with variable life insurance
policies. The rights of an insurance company holding Trust shares for a
separate account are different from the rights of the owner of a Contract
("Contract Owner"). The terms "shareholder" or "shareholders" in this
Prospectus shall refer to the insurance companies and qualified plans, and not
to any Contract Owner.

Providian Investment Advisors, Inc. (the "Adviser") serves as each Portfolio's
investment adviser. Atlanta Capital Management Company, L.L.C. ("Atlanta
Capital") serves as each Portfolio's sub-adviser. Federated Investment
Counseling ("Federated") serves as the sub-adviser to the Money Market Fund.
Atlanta Capital, Federated, and Blairlogie Capital Management ("Blairlogie")
serve as sub-advisers to the Underlying Funds (collectively referred to as the
"Sub-Advisers"). The Adviser supervises the Trust's overall management and
investment program, performs a variety of administrative services on behalf of
the Trust, pays the Sub-Advisers of the Underlying Funds and fees and expenses
of officers and Trustees of the Trust who are affiliated persons of the
Adviser, the Sub-Advisers or the Trust. The Trust pays all other expenses
incurred in the operation of the Trust, including fees and expenses of
Trustees who are unaffiliated persons of the Adviser, the Sub-Advisers, or the
Trust. Although the Portfolios do not pay an investment management fee in
connection with management of the Portfolios, the Portfolios will indirectly
bear their pro rata share of the fees and expenses incurred by the Underlying
Funds. The Adviser has agreed to waive operating expenses of each Portfolio
for three years and to limit the operating expenses (excluding advisory fees)
of each Underlying Fund so that the ratio of expenses to net assets on an
annual basis incurred does not exceed .25%. This limitation will apply for
three years after commencement of operations.

RISK FACTORS AND SPECIAL CONSIDERATIONS. The assets of each Portfolio are
invested in certain Underlying Funds, so each Portfolio's investment
performance is directly related to the investment performance of the
Underlying Funds held. The ability of each Portfolio to meet its investment
objective is directly related to the ability of the Underlying Funds held to
meet their objectives as well as the allocation among those Underlying Funds
by the Adviser and Atlanta Capital. There can be no assurance that the
investment objective of any Portfolio or any Underlying Fund will be achieved.

The value of the Underlying Funds' investments, and thus the net asset value
of both those Underlying Funds' and the Portfolios' shares, will fluctuate in
response to changes in market and economic conditions, as well as the
financial condition and prospects of issuers in which the Underlying Funds
invest. For a description of the risks involved in an investment in the
Portfolios, see "Investment Objectives and Policies of the Portfolios," and
"Description of the Underlying Funds."

1
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

The Portfolios will be managed so that each Portfolio can serve as a complete
investment program for the Contracts. Each of the Portfolios invests in a
select group of Underlying Funds suited to the Portfolio's particular
investment objective. The allocation of assets among Underlying Funds within
each Portfolio is determined by Atlanta Capital within guidelines established
by the Trustees of the Trust according to fundamental and quantitative
analysis of the expected long term return and risk characteristics for each
Underlying Fund. Because the assets will be adjusted only periodically and
only within pre-determined ranges that will attempt to ensure broad
diversification, there should not be any sudden large scale changes in the
allocation of a Portfolio's investments among Underlying Funds. The Portfolios
are not designed as a tactical asset allocation vehicle, but rather as a
simple and conservative approach to helping investors meet retirement and
other long-term goals.

The Providian Series Trust is an open-end, diversified, management investment
company that currently offers nine investment portfolios. The Portfolios seek
to achieve their investment objective by investing within specified ranges
among Underlying Funds. Initially, each Portfolio will invest in the
Underlying Funds listed below.

Atlanta Capital will allocate investments for each Portfolio among Underlying
Funds based on their outlook for the economy, financial markets and the
relative performance of the Underlying Funds. The allocation among the
Underlying Funds will be made within investment ranges established by the
Trustees of the Trust which designate minimum and maximum percentages for each
of the Underlying Funds.

The Capital Preservation Portfolio seeks high current income with low
volatility of principal. The Income Oriented Portfolio seeks income and,
secondarily, long term growth of capital. The Growth and Income Portfolio
seeks growth of capital and income. The Capital Growth Portfolio seeks long
term growth of capital and, secondarily, current income. The Maximum
Appreciation Portfolio seeks capital appreciation. Each Portfolio's investment
objective is fundamental and may be changed only with the approval of a
majority of the Portfolio's outstanding shares. There can be no assurance that
any Portfolio's investment objective will be achieved.

By investing in Underlying Funds, the Portfolios seek to maintain different
allocations between equity funds and fixed income funds (including the Money
Market Fund) depending on a Portfolio's investment objective. Allocating
investments between equity funds and fixed income funds permits each Portfolio
to attempt to optimize performance consistent with its investment objective.
The tables below illustrate the initial equity/fixed income/money market fund
allocation targets and ranges for each Portfolio:

EQUITY/FIXED INCOME/MONEY MARKET FUND RANGE (PERCENT OF EACH PORTFOLIO'S NET
ASSETS)

<TABLE>
<CAPTION>
INITIAL POLICY
TYPE OF FUND TARGET RANGE
- ------------ ------- -------
<S> <C> <C>
CAPITAL PRESERVATION PORTFOLIO
Equity....................................................... 0 0
Fixed Income................................................. 50% 40%-60%
Money Market................................................. 50% 40%-60%
---
100%
INCOME ORIENTED PORTFOLIO
Equity....................................................... 35% 25%-40%
Fixed Income................................................. 50% 40%-60%
Money Market................................................. 15% 0-25%
---
100%
GROWTH AND INCOME PORTFOLIO
Equity....................................................... 50% 40%-60%
Fixed Income................................................. 40% 30%-50%
Money Market................................................. 10% 0-25%
---
100%
CAPITAL GROWTH PORTFOLIO
Equity....................................................... 75% 60%-85%
Fixed Income................................................. 25% 15%-35%
Money Market................................................. 0 0-25%
---
100%
MAXIMUM APPRECIATION PORTFOLIO
Equity....................................................... 100% 85%-100%
Fixed Income................................................. 0 0-15%
Money Market................................................. 0 0-15%
---
100%
</TABLE>

2
<PAGE>

The Portfolios invest their assets in the Underlying Funds listed below within
the ranges indicated.

INVESTMENT RANGE (PERCENT OF EACH PORTFOLIO'S NET ASSETS)

<TABLE>
<CAPTION>
CAPITAL INCOME GROWTH & CAPITAL MAXIMUM
PRESERVATION ORIENTED INCOME GROWTH APPRECIATION
UNDERLYING FUND PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------- ------------ --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
High Quality Stock Fund. 0% 15-40% 25-55% 35-75% 50-90%
International Active
Fund................... 0% 0-10% 5-15% 10-25% 10-35%
Total Equity Funds...... 0% 25-40% 40-60% 60-85% 85-100%
Fixed Income Fund....... 40-60% 40-60% 30-50% 15-35% 0-15%
Money Market Fund....... 40-60% 0-25% 0-25% 0-25% 0-15%
</TABLE>

The Underlying Funds have been selected to represent a broad spectrum of
investment options for the Portfolios. The equity/fixed income/money market
ranges and the investment ranges are based on the degree to which the
Underlying Funds selected are appropriate for a Portfolio's particular
investment objective. If, as a result of appreciation or depreciation, the
percentage of a Portfolio's assets invested in an Underlying Fund exceeds or
is less than the applicable percentage limitations set forth above, Atlanta
Capital will consider, in its discretion, whether to reallocate the assets of
the Portfolio to comply with the foregoing percentage limitations. THE
PARTICULAR UNDERLYING FUNDS IN WHICH EACH PORTFOLIO MAY INVEST, THE
EQUITY/FIXED INCOME/MONEY MARKET FUND TARGETS AND RANGES AND THE INVESTMENT
RANGES APPLICABLE TO EACH UNDERLYING FUND MAY BE CHANGED FROM TIME TO TIME BY
THE BOARD OF TRUSTEES WITHOUT THE APPROVAL OF THE PORTFOLIO'S SHAREHOLDERS.

Each Portfolio can invest a certain portion of its cash reserves in money
market instruments and U.S. government securities. Each Portfolio may also
invest its cash reserves in the Money Market Fund. A reserve position provides
flexibility in meeting redemptions, expenses and the timing of new
investments, and serves as a short term defense during periods of unusual
volatility.

FOR INFORMATION ABOUT THE INVESTMENT OBJECTIVES OF EACH OF THE UNDERLYING
FUNDS AND THE INVESTMENT TECHNIQUES AND THE RISKS INVOLVED IN THE UNDERLYING
FUNDS, PLEASE REFER TO "DESCRIPTION OF THE UNDERLYING FUNDS" AND THE SAI.

RISK FACTORS AND SPECIAL CONSIDERATIONS

Investment Practices of the Underlying Funds. The different types of
securities and investment techniques common to one or more of the Underlying
Funds all have attendant risks of varying degrees. For example, with respect
to equity securities, there can be no assurance of capital appreciation and
there is a substantial risk of decline. With respect to debt securities, there
can be no assurance that the issuer of such securities will be able to meet
its obligations on interest or principal payments in a timely manner. In
addition, the value of debt instruments generally rises and falls inversely
with changes in interest rates.

The Portfolios differ in terms of stock market risk, interest rate risk, and
credit risk. Stock market risk is the possibility that stock prices in general
will decline over short or extended periods. Stock markets tend to be cyclical
with periods when stock prices generally rise or fall. The Maximum
Appreciation, Capital Growth, Growth and Income and Income Oriented Portfolios
also may have exposure to foreign stock markets, which are generally thought
to be riskier than domestic markets. Interest rate risk is the possibility
that bond prices will decline over short or long periods due primarily to
changes in market interest rates. Credit risk is the possibility that an
issuer's ability to make debt service payments will decline.

Three of the Portfolios, Maximum Appreciation, Capital Growth and Growth and
Income, will have a higher exposure to stock market risk because of the
significant investment these Portfolios have in equity funds. The other two
Portfolios, Capital Preservation and Income Oriented, will have higher
exposure to interest rate and credit risk because of the significant
investment exposure these Portfolios have in bond funds.

The investments and investment techniques common to one or more of the
Underlying Funds are described in greater detail, including the risks of each,
in the "Description of Securities and Investment Techniques" in the SAI.

3
<PAGE>

Affiliated Persons. The Adviser, the investment manager of the Portfolios,
Atlanta Capital, the sub-adviser of the Portfolios, and the officers and
Trustees of the Trust presently serve as investment adviser, sub-adviser, and
Trustees, respectively, of the Underlying Funds. Therefore, conflicts
theoretically may arise as these persons fulfill their fiduciary
responsibilities to the Portfolios and the Underlying Funds.

PORTFOLIO TURNOVER

Each Portfolio's turnover rate is not expected to exceed 25% annually. A
Portfolio may purchase or sell securities to (a) accommodate purchases and
sales of its shares; (b) change the percentages of its assets invested in the
Underlying Funds in response to market conditions; or (c) maintain or modify
the allocation of its assets between equity and fixed income/money market
funds and among the Underlying Funds within the percentage limits described
previously.

INVESTMENT RESTRICTIONS

In addition to the investment objectives of each Portfolio, the Portfolios are
subject to investment restrictions that are described under "Investment
Objectives" in the SAI. Each Portfolio's investment objective and investment
restrictions are "fundamental policies," which means that they may not be
changed without a majority vote of shareholders of the affected Portfolios.
Except for fundamental policies, all investment policies and practices
described in this Prospectus and in the SAI are not fundamental, meaning that
the Board of Trustees may change them without shareholder approval. See
"Description of Securities and Investment Techniques" and "Investment
Restrictions" in the SAI for further information.

The following is a concise description of the investment objectives and
practices for each of the Underlying Funds in which the Portfolios may invest.
There can be no assurance that the investment objectives of the Underlying
Funds will be met. Additional information regarding the investment practices
of the Underlying Funds is located in the SAI and in the prospectus of the
Underlying Funds. No offer is made in this Prospectus of any of the Underlying
Funds except the Money Market Fund, which is only used during the Free Look
Period under the Contracts in certain states.

DESCRIPTION OF THE UNDERLYING FUNDS

Four Underlying Funds serve as investment medium for the Portfolios. The
investment objectives of the four Underlying Funds are as follows:

. The HIGH QUALITY STOCK FUND seeks long-term growth of capital. The Fund
pursues its investment objective by investing primarily in stocks of three
categories of companies that are publicly traded in the United States: the
500 largest in market capitalization, the 501st to the 1250th largest in
market capitalization, and the 1000th to the 3000th largest in market
capitalization at the time of purchase.

. The FIXED INCOME FUND seeks the highest level of income as is consistent
with the preservation of capital. The Fund pursues its investment objective
primarily by investing in investment grade debt securities, which range in
maturity from one to ten years, including securities issued by the U.S.
government or an agency or instrumentality of the U.S. government, asset-
backed securities and corporate debt obligations.

. The INTERNATIONAL ACTIVE FUND seeks long term growth of capital. The Fund
pursues its objective by investing primarily in a diversified portfolio of
international equity securities.

. The MONEY MARKET FUND seeks to provide current income consistent with
stability of principal and liquidity. The Fund invests in money market
instruments maturing in thirteen months or less from the time of investment.

The Adviser serves as each Underlying Fund's investment adviser. Atlanta
Capital serves as the sub-adviser to the High Quality Stock Fund and the Fixed
Income Fund. Blairlogie serves as the sub-adviser to the International Active
Fund. Federated serves as the sub-adviser to the Money Market Fund.

4
<PAGE>

HIGH QUALITY STOCK FUND

In seeking its objective of long term growth of capital, the High Quality
Stock Fund will attempt to achieve a high total return (i.e., price
appreciation plus potential dividend yield) primarily through investment in
selected high quality common stocks of large, medium and small size companies
that are publicly traded in the United States. The High Quality Stock Fund
primarily selects stocks from among three categories of companies: the 500
largest in market capitalization, the 501st to the 1250th largest in market
capitalization and the 1000th to the 3000th largest in market capitalization
at the time of purchase. Each company must have a common stock ranking of B+
or better by Standard & Poor's Corporation ("S&P") (or if not ranked by S&P,
of comparable quality ranking by another recognized ranking service, or if
unranked, of comparable quality in the opinion of Atlanta Capital) (this
standard is referred to as a "common stock ranking of B+ or better"). From
this universe of stock issues, Atlanta Capital selects stocks based upon a
favorable combination of valuation, price volatility and earnings stability.
Approximately 50 stocks of large market capitalization companies, 60 stocks of
medium market capitalization companies, and 75 stocks of small market
capitalization companies are included in the Fund's portfolio.

Atlanta Capital, the investment sub-adviser to the High Quality Stock Fund,
generally believes that high quality companies, that is, companies with
superior track records of consistent earnings and dividend growth, tend to
outperform the stock market over the long term. The Fund seeks to outperform
its benchmarks, the S&P 500 Composite Stock Price Index and the Russell 3000
Index. Atlanta Capital's stock selection methods will be based upon, among
other things, the analysis of variables which it believes significantly relate
to the future market performance of a stock, such as recent changes in
earnings per share and their deviations from analysts' expectations, past
growth trends, price action of the stock itself, publicly recorded trading
transactions by corporate insiders, and relative price-earnings ratios.

By investing in securities that are subject to market risk, the High Quality
Stock Fund is also subject to greater fluctuations in its market values and a
higher degree of risk as compared to a fund seeking stability of principal,
such as a money market fund or a fund investing primarily in debt obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities (these obligations are referred to in this Prospectus as
"U.S. government securities").

The High Quality Stock Fund's investment philosophy is based on extensive
research which shows that high-quality growth companies have produced
consistently increasing earnings and dividends, thereby providing attractive
returns with moderate risk over the long term. To qualify for purchase, each
company must have a common stock ranking of B+ or better. Atlanta Capital will
conduct fundamental income statement and balance sheet research on individual
companies to estimate future sustainable growth rates, evaluate current
earnings momentum, and estimate relative value of the stock. Atlanta Capital
intends to sell stocks based on such factors as deteriorating fundamentals,
below B+ quality ranking, and/or poor relative valuation.

FIXED INCOME FUND

The Fixed Income Fund may also purchase mortgage-related securities and asset-
backed securities not issued by the U.S. government or any agency or
instrumentality thereof. The Fixed Income Fund may also invest in investment
grade corporate debt securities rated in one of the three highest rating
categories by Moody's Investor Service, Inc. ("Moody's"), S&P, Fitch Investor
Services, or another nationally recognized statistical rating organization
("NRSRO"), or if unrated, of comparable quality in the opinion of Atlanta
Capital. While non-U.S. government securities may present greater credit risk
than U.S. government securities, they also tend to afford higher yields than
U.S. government securities. Debt securities purchased by the Fund may be of
any maturity. It is anticipated that the weighted average maturity of the debt
portfolio generally will be between 3 and 7 years, but may be shorter or
longer under unusual market circumstances.

5
<PAGE>

INTERNATIONAL ACTIVE FUND

The International Active Fund seeks long term growth of capital. In pursuing
this objective, the Fund invests primarily in a diversified portfolio of
international equity securities. The Morgan Stanley Capital International EAFE
(Europe, Australia, Far East) Index ("EAFE Index") is used as a basis for
choosing the countries in which the Fund invests. However, the Fund is not
limited to the countries and weightings of the EAFE Index. Blairlogie applies
two levels of screening in selecting investments for the Fund. First, an
active country selection model analyzes world markets and assigns a relative
value ranking, or "favorability weighting," to each country in the relevant
universe to determine markets which are relatively undervalued. Second, at the
stock selection level, quality analysis and value are applied to each
security, assessing variables such as balance sheet strength and earnings
growth (quality factors) and performance relative to the industry, price to
earnings ratios and price to book ratios (value factors). This two-level
screening method identifies undervalued securities for purchase as well as
provides a sell discipline for fully valued securities. While Blairlogie
endeavors to apply the same variables to all stock markets, the applicability
of the analytical tools can differ between countries. In selecting securities,
Blairlogie considers, to the extent practicable and on the basis of
information available to it for research, a company's environmental business
practices.

Most of the foreign securities in which the Fund invests will be denominated
in foreign currencies. The Fund may engage in foreign currency transactions to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar or to the weighting of a particular foreign currency on the
EAFE Index. Such foreign currency transactions may include forward foreign
currency contracts, currency exchange transactions on a spot (i.e., cash)
basis, put and call options on foreign currencies, and foreign exchange
futures contracts. The Fund may invest in stock index futures contracts,
foreign exchange futures contracts, and options thereon, and may sell (write)
call and put options. The Fund also may engage in equity index swap
transactions.

6
<PAGE>

Investing in the securities of foreign involves special risks and
considerations not typically associated with investing in U.S. companies. For
information on other investment policies, see the SAI for more details on
investment practices.

MONEY MARKET FUND

The Money Market Fund seeks to provide current income consistent with
stability of principal and liquidity. While there is no assurance that the
Money Market Fund will achieve its investment objective, it endeavors to do so
by complying with the various requirements of Rule 2a-7 under the 1940 Act
which regulates money market mutual funds and by following the investment
policies described in this prospectus.

The Money Market Fund will be used during the Free Look Period under the
Contracts in certain states. Because the Fund seeks to maintain a constant net
asset value of $1.00 per share, capital appreciation is not expected to play a
role in the Fund's returns, and dividend income alone is expected to provide
its entire investment return. All money market instruments can change in value
when interest rates or an issuer's creditworthiness changes dramatically. THE
FUND CANNOT GUARANTEE THAT IT WILL ALWAYS BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE. An investment in the Fund is neither insured
nor guaranteed by the U.S. government.

The Money Market Fund pursues its investment objective by investing
exclusively in a portfolio of money market instruments maturing in 397 days or
less. The average maturity of the money market instruments in the Money Market
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days or
less. Unless indicated otherwise, the investment policies of the Money Market
Fund may be changed by the Trustees without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.

The Money Market Fund invests in high-quality money market instruments that
are denominated and payable only in U.S. dollars and that are rated (or issued
by an issuer that is rated with respect to its short-term debt) in either one
of the two highest short-term rating categories by one or more NRSROs or of
comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:

(1) domestic issues of corporate debt obligations, including variable rate
demand notes;

(2) commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);

(3) certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions;

(4) short-term credit facilities, such as demand notes;

(5) asset-backed securities;

(6) obligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities;

(7) repurchase agreements; and

(8) other money market instruments.

CONCENTRATION OF INVESTMENTS. The Money Market Fund may invest 25% or more of
its total assets in commercial paper issued by finance companies. The finance
companies in which the Money Market Fund intends to invest can be divided into
two categories, commercial finance companies and consumer finance companies.
Commercial finance companies are principally engaged in lending to
corporations or other businesses. Consumer finance companies are primarily
engaged in lending to individuals. Captive finance companies or finance
subsidiaries which exist to facilitate the marketing and financial activities
of their parent will, for purposes of industry concentration, be classified by
the Money Market Fund in the industry of its parent corporation.

In addition, the Money Market Fund may invest more than 25% of the value of
its total assets in cash or cash items, securities issued or guaranteed by the
U.S. government, its agencies, or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements.

IMPLEMENTATION OF POLICIES AND RISKS OF THE UNDERLYING FUNDS

In addition to the investment policies described above (and subject to certain
restrictions described below), the Underlying Funds may invest in some or all
of the following securities and may employ some or all of the following
investment techniques, some of which may present special risks as described
below. A more complete discussion of certain of these securities and
investment techniques and the associated risks is contained in the SAI.

7
<PAGE>

GOVERNMENT SECURITIES

. the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of
the agency to borrow from the U.S. Treasury;

. the Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and

. the Student Loan Marketing Association, the Interamerican Development Bank,
and International Bank for Reconstruction and Development, whose securities
are supported only by the credit of such agencies.

CASH EQUIVALENTS

Each Underlying Fund may from time to time invest in cash or cash equivalents,
which include, but are not limited to the following instruments:

(a) short term (maturing in 13 months or less) obligations issued or
guaranteed as to interest and principal by the U.S. government or any
agency or instrumentality thereof;

(b) obligations of banks (including certificates of deposit and bankers'
acceptances) that have capital, surplus, and undivided profits (as of the
date of their most recently published financial statements) in excess of
$100,000,000; and obligations of other banks or savings and loan
associations if such obligations are federally insured, provided that not
more than 10% of the total assets of the Underlying Fund will be invested
in such other insured obligations;

(c) commercial paper rated in the top two categories by an NRSRO (short-
term unsecured promissory notes of corporations including variable rate
master demand notes);

(d) short term (maturing in one year or less) corporate obligations;

(f) debt instruments not specifically described if such instruments are
deemed by the Sub-Advisers to be of comparable high quality and liquidity.

Each Underlying Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933 (the "1933 Act"). Section 4(2) commercial paper is restricted as to
disposition under federal securities laws and is generally sold to
institutional investors, such as the Underlying Funds, who agree that they are
purchasing the paper for investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) commercial paper is normally resold to other institutional
investors like the Underlying Funds through or with the assistance of the
issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.

For a description of the ratings referred to above, see Appendix B to this
Prospectus.

8
<PAGE>

FOREIGN SECURITIES

FOREIGN CURRENCY TRANSACTIONS

9
<PAGE>

MANAGEMENT

PROVIDIAN INVESTMENT ADVISORS, INC., 400 West Market Street, Louisville,
Kentucky 40202, has been retained under an Investment Advisory Agreement with
the Trust, dated , 1997, in general to supervise the management and
investment program of the Trust and each Portfolio. In addition, the Adviser
generally manages the affairs of the Trust, subject to the supervision of the
Board of Trustees. For information about the Board of Trustees and the Trust's
officers, see "Management" in the SAI. The Adviser does not receive an
investment management fee for the advisory and asset allocation services it
provides to the Portfolios. Under an Advisory Agreement with each Portfolio,
the Adviser has agreed to waive operating expenses of each Portfolio for three
years and to limit the operating expenses of each Underlying Fund so that the
ratio of expenses (excluding advisory fees) to net assets on an annual basis
incurred does not exceed 0.25%. This limitation will apply for three years
after commencement of operations.

ATLANTA CAPITAL MANAGEMENT COMPANY, L.L.C., Two Midtown Plaza, Suite 1600,
1360 Peachtree Street, Atlanta, Georgia 30309, has been retained by the
Adviser pursuant to a Sub-Advisory Agreement with the Adviser, dated ,
1997, to serve as the sub-adviser to the Portfolios. Atlanta Capital, founded
in 1969, performs investment management services for various clients,
including pension, profit sharing and other employee benefit plans as well as
other institutions and individuals. The firm, which is owned and operated by
six partners, manages approximately $1.8 billion in fixed income and equity
assets. Subject to the supervision and direction of the Board of Trustees,
Atlanta Capital will determine how each Portfolio's assets will be invested in
the Underlying Funds and in other securities pursuant to the investment
objective and policies of each Portfolio set forth in this Prospectus and make
recommendations to the Board of Trustees concerning changes to (a) the
Underlying Funds in which the Portfolios may invest, (b) the percentage range
of assets that may be invested by each Portfolio in any one Underlying Fund
and (c) the percentage range of assets of any Portfolio that may be invested
in equity funds and fixed income funds (including the money market fund). The
Trustees of the Trust will periodically monitor the allocations made and the
basis upon which such allocations were made or maintained. Atlanta Capital
also serves as sub-adviser of the High Quality Stock Fund and the Fixed Income
Fund for which it receives a fee equal to 0.50% annually on assets up to $25
million, 0.40% annually on assets above $25 million and up to $50 million, and
0.30% annually on assets above $50 million.

10
<PAGE>

Each Portfolio, as a shareholder in the Underlying Funds, will indirectly bear
its proportionate share of any investment management fees and other expenses
paid by the Underlying Funds. The effective management fee of each of the
Underlying Funds in which the Portfolios may invest is set forth below as a
percentage rate of the Fund's annual net assets:

<TABLE>
<CAPTION>
MANAGEMENT
UNDERLYING FUND FEES
--------------- ----------
<S> <C>
High Quality Stock Fund........................................ .65%
Fixed Income Fund.............................................. .65%
International Active Fund...................................... .90%
Money Market Fund.............................................. .40%
</TABLE>

The investment professionals primarily responsible for the management of each
Portfolio, with the respective responsibilities and business experience for
the past five years are as follows:

GROWTH AND INCOME, CAPITAL GROWTH AND MAXIMUM APPRECIATION PORTFOLIOS: Daniel
W. Boone III, Senior Partner of Atlanta Capital. He is responsible for the
research and portfolio management of the High Quality Stock Fund's equity
portfolio and oversight of the equity investment process. Mr. Boone joined
Atlanta Capital in 1976.

CAPITAL PRESERVATION AND INCOME ORIENTED PORTFOLIOS: Gregory L. Coleman,
Partner of Atlanta Capital. He is responsible for the fixed income trading,
portfolio management of the Fixed Income Fund, and investment strategy. Mr.
Coleman joined Atlanta Capital in 1990.

PURCHASE AND REDEMPTION OF SHARES

Investment in the Portfolios currently is available to owners of variable
annuity contracts issued by insurance companies through their separate
accounts and to qualified plans. Shares of each Portfolio and the Money Market
Fund are purchased or redeemed at their respective net asset values next
computed after receipt of an order (without a sales charge).

NET ASSET VALUE AND PRICING

The net asset value of shares of each Portfolio and the Money Market Fund is
determined as of the close of trading on each day the New York Stock Exchange
is open for trading (currently 4:00 P.M. Eastern Time). The net asset value of
shares for each Portfolio and the Money Market Fund is determined by adding up
the value of its securities (determined as set forth below) and other assets,
subtracting the liabilities, and dividing by the number of shares outstanding.
The value of each Underlying Fund will be its net asset value at the time of
computation.

Securities held by the Portfolios (other than the Money Market Fund) are
valued based upon readily available market quotations. Where such market
quotations are not available, securities are valued at fair value as
determined by or under the general supervision of the Board of Trustees.

11
<PAGE>

values and the Portfolio's $1.00 per share net asset value, or if there were
any other deviation that the Board of Trustees believed would result in a
material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. See "Net Asset
Values of the Shares of the Portfolios" in the SAI for details.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Each Portfolio and the Money Market Fund are treated as separate taxable
entities and will elect to qualify as a "regulated investment company" under
applicable provisions of the Internal Revenue Code of 1986 (the "Code"). As
such and by complying with the applicable provisions of the Code regarding the
sources of its income, the timing of its distributions, and the diversification
of its assets, each Portfolio and the Money Market Fund will be allowed a
deduction for amounts distributed to its shareholders from its ordinary income
and net realized capital gains and will not be subject to federal income tax on
such amounts. To qualify for treatment as a "regulated investment company,"
each Portfolio and the Money Market Fund must, among other things, derive in
each taxable year at least 90 percent of its gross income from dividends,
interest and gains from the sale or other disposition of securities, and derive
less than 30 percent of its gross income in each taxable year from the gains
(without deduction for losses) from the sale or other disposition of securities
held for less than three months.

Each Portfolio and the Money Market Fund intends to distribute sufficient net
investment income to avoid the application of federal income tax on the Trust.
Each Portfolio and the Money Market Fund also intends to distribute sufficient
income to avoid the application of any federal excise tax. For dividend
purposes, the net investment income of each Portfolio and the Money Market Fund
will consist of all payments of dividends or interest received and any net
short-term gains or losses from the sale of its investments less its estimated
expenses (including fees payable to the Adviser and Sub-Adviser).

In order for the separate accounts to comply with regulations under Section
817(h) of the Code applicable to investment companies used as the investment
medium for variable annuity contracts, each Portfolio and the Money Market Fund
will diversify its investments so that, after a one year start-up period, on
the last day of each calendar quarter, no more than 55% of the value on each
Portfolio 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. For
this purpose, securities of a single issuer are treated as one investment and
each U.S. government agency or instrumentality is treated as a separate issuer.
Any security issued, guaranteed, or insured (to the extent so guaranteed or
insured) by the U.S. government or an agency or instrumentality of the U.S.
government is treated as a security issued by the U.S. government or its agency
or instrumentality, whichever is applicable.

Dividends from the Portfolios (other than the Money Market Fund) will be
declared and distributed at such frequency, but at least annually, and in such
amount as to assure compliance with the Code. Dividends from the Money Market
Fund will be declared on each day its net asset value is calculated except bank
holidays. Income earned on weekends, holidays (including bank holidays), and
days on which net asset value is not calculated is declared as a dividend on
the day on which the Portfolio's net asset value was most recently calculated.
The Trustees may decide to declare dividends at other intervals. All net
realized long-term capital gains of the Trust, if any, are declared and
distributed annually after the close of the Trust's fiscal year to the
shareholders of the Portfolio or Portfolios to which such gains are
attributable.

PERFORMANCE AND YIELD INFORMATION

From time to time, the Trust may advertise a variety of types of performance
information including "yield," "average annual total return," "total return,"
"cumulative total return," and "effective yield." Each of these figures will be
based on historical information and are not intended to indicate future
performance.

The yield of the Portfolios refers to the annualized income generated by an
investment in that Portfolio over a specified 30-day period. The yield is
calculated by assuming that the income generated by the investment during that
30-day period is generated each 30-day period over a twelve-month period and is
shown as a percentage of the investment. The Money Market Fund's yield and
effective yield are measures of the net investment income per share earned by
the Fund over a specific seven-day period and are shown as a percentage of the
investment. However, effective yield will be slightly higher than the yield
because effective yield assumes that the net investment income earned by that
Fund will be reinvested.

12
<PAGE>

The total return of a Portfolio refers to return quotations assuming an
investment has been held in the Portfolio for various periods of time
including, but not limited to, one year and a period measured from the date
the Portfolio commenced operations. When a Portfolio has been in operation for
five and ten years, respectively, the total return for these periods will be
provided. The total return quotations will represent the average annual
compounded rates of return that would equate an initial investment of $1,000
to the redemption value of that investment as of the last day of each of the
periods for which total return quotations are provided.

The yield and total return calculations do not reflect the effect of the
charges that may be applicable to a particular Contract or separate account.
Such charges will reduce the net yield and total return of that Contract.
Performance figures for a Portfolio or the Money Market Fund will only be
advertised if the comparable figures for the Contract are included in the
advertisement.

GENERAL INFORMATION

SHARES OF BENEFICIAL INTEREST

All shares of beneficial interest of the Trust are entitled to one vote, and
votes are generally on an aggregate basis. However, on matters where the
interests of the Portfolios differ (such as approval of an investment advisory
agreement or a change in fundamental investment policies), the voting is on a
Portfolio-by-Portfolio basis. The Trust does not hold routine annual
shareholders' meetings. The shares of each Portfolio and the Money Market Fund
issued are fully paid and non-assessable, have no preference, conversion,
exchange or similar rights, and are freely transferable. In addition, each
issued and outstanding share in a Portfolio is entitled to participate equally
in dividends and distributions declared by such Portfolio. Providian Life and
Health Insurance Company Separate Account V and First Providian Life and
Health Insurance Company Separate Account C are the legal owners of the shares
each holds and as such each has the right to vote to elect the Trustees of the
Trust, to vote upon certain matters that are required by the 1940 Act to be
approved or ratified by the shareholders of a mutual fund and to vote upon any
other matter that may be voted upon at a shareholders' meeting. However, in
accordance with its view of presently applicable law, Providian Life and
Health Insurance Company Separate Account V and First Providian Life and
Health Insurance Company Separate Account C will vote the shares of the Trust
at special meetings of the shareholders of the Trust in accordance with
instructions received from Contract Owners.

AUDITORS

Ernst & Young LLP serves as independent auditors for the Trust and will audit
each Portfolio's and the Underlying Fund's, including the Money Market Fund's,
financial statements annually.

LEGAL COUNSEL

Legal advice regarding certain matters relating to the Federal securities laws
has been provided by Jorden Burt Berenson & Johnson LLP, Washington, D.C.

CUSTODIAN

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri
64105, is the Custodian of the Trust's assets.

REPORTS TO SHAREHOLDERS

The Trust will send annual and semi-annual reports to Contract Owners showing
the financial conditions of the Portfolios and the Underlying Funds, including
the Money Market Fund, and the investments held in each.

OTHER INFORMATION

Inquiries and requests for the Statement of Additional Information should be
directed to the Trust at (800) or P.O. Box 32700, Louisville,
Kentucky 40232.

13
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this Prospectus. The following is the
Table of Contents for the SAI:

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Policies....................................................... B-
Description of Securities and Investment Techniques....................... B-
Portfolio Turnover and Securities Transactions............................ B-
Management................................................................ B-
Net Asset Values of the Shares of the Portfolios and the Money Market
Fund..................................................................... B-
Investment Performance.................................................... B-
Taxes..................................................................... B-
General Information....................................................... B-
Independent Accountants................................................... B-
Financial Statements...................................................... F-
</TABLE>

14
<PAGE>

APPENDIX A--STANDARD AND POOR'S
EARNINGS AND DIVIDEND RANKINGS FOR COMMON STOCKS

<TABLE>
<S> <C> <C>
A+ Highest A- Above Average B- Lower
A High B+ Average C Lowest
B Below Average D in Reorganization
</TABLE>

NR signifies no ranking because of insufficient data or because the stock is
not amenable to the ranking process.

A-1
<PAGE>

APPENDIX B--SECURITIES RATINGS

DESCRIPTION OF CORPORATE BOND RATINGS

Moody's Investor Service, Inc.'s Corporate Bond Ratings:

Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

Standard & Poor's Corporation's Corporate Bond Ratings:

AAA--This is the highest rating assigned by Standard & Poor's ("S&P") to a
debt obligation and indicates an extremely strong capacity to pay principal
and interest.

A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.

CI--The rating CI is reserved for income bonds on which no interest is being
paid.

D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

Plus (+) or Minus (-): The ratings from AA to B may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

B-1
<PAGE>

PROVIDIAN SERIES TRUST
ADMINISTRATIVE OFFICE
P.O. BOX 32700
LOUISVILLE, KENTUCKY 40232
, 1997
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
_________, 1997

PROVIDIAN SERIES TRUST
HIGH QUALITY STOCK FUND
FIXED INCOME FUND
INTERNATIONAL ACTIVE FUND
MONEY MARKET FUND

This Statement of Additional Information is not a prospectus. It contains
additional information about the Providian Series Trust (the "Trust") and should
be read in conjunction with the Trust's Prospectus dated _________, 1997. You
can obtain a copy by contacting the Trust's Administrative Office, P. O. Box
32700, Louisville, Kentucky 40232.

TABLE OF CONTENTS

Page
<S> <C>
Investment Policies B-
Description of Securities and Investment Techniques B-
Portfolio Turnover and Securities Transactions B-
Management B-
Net Asset Values of the Shares of the Funds B-
Investment Performance B-
Taxes B-
General Information B-
Independent Accountants B-
Financial Statements B-
</TABLE>

B-1
<PAGE>

The HIGH QUALITY STOCK FUND seeks long-term growth of capital. The Fund pursues
its investment objective by investing primarily in stocks of three categories of
companies that are publicly traded in the United States: the 500 largest in
market capitalization, the 501st to the 1250th largest in market capitalization,
and the 1000th to the 3000th largest in market capitalization at the time of
purchase.

The FIXED INCOME FUND seeks the highest level of income as is consistent with
the preservation of capital. The Fund pursues its investment objective primarily
by investing in investment grade debt securities, which range in maturity from
one to ten years, including securities issued by the U.S. government or an
agency or instrumentality of the U.S. government, asset-backed securities and
corporate debt obligations.

The INTERNATIONAL ACTIVE FUND seeks long-term growth of capital. The Fund
pursues its objective by investing primarily in a diversified portfolio of
international equity securities.

INVESTMENT POLICIES

The Trust has adopted the following policies relating to the investment of
assets of the Funds and their activities. These are fundamental policies and may
not be changed without the approval of the holders of a "majority" of the
outstanding shares of each Fund affected. Under the Investment Company Act of
1940 (the "1940 Act"), the vote of such a "majority" means the vote of the
holders of the lesser of (i) 67 percent of the shares represented at a meeting
at which more than 50 percent of the outstanding shares are represented or (ii)
more than 50 percent of the outstanding shares. A change in policy affecting
only one Fund may be effected with the approval of the holders of a "majority"
of the outstanding shares of such fund.

POLICIES PERTAINING TO THE FUNDS, OTHER THAN THE MONEY MARKET FUND

Each Fund, other than the Money Market Fund, may not (except as noted):

1. With respect to 75% of a Fund's total assets, purchase the securities
of any issuer if, immediately after such purchase, (i) more than 5% of the
Fund's total assets would be invested in the securities of such issuer or (ii)
the Fund would own more than 10% of the outstanding voting securities of such
issuer, except that this restriction does not apply to purchases by the Fund of
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities;

B-2
<PAGE>

2. Invest in the securities of issuers in any one industry if thereafter more
than 25 percent of the assets of the Fund in question would be invested in
securities of issuers in that same industry; investing in cash items (including
time and demand deposits such as certificates of deposit and obligations of
domestic banks), U.S. government securities, or repurchase agreements as to
these securities, shall not be considered investments in an industry

3. Purchase securities on margin or sell securities short, except that each
Fund may make short sales against the box and that effecting short sales against
the box will not be deemed to constitute a purchase of securities on margin;

4. Purchase or sell commodities or commodity contracts (which, for the purpose
of this restriction, shall not include foreign currency futures or forward
currency contracts);

5. Borrow money except that (i) the High Quality Stock Fund and the
International Active Fund each may borrow from banks as a temporary measure for
extraordinary or emergency purposes, but only if immediately after each
borrowing and continuing thereafter it will have an asset coverage of at least
300 percent; and (ii) the Fixed Income Fund and the International Active Fund
may enter into reverse repurchase agreements as described in the Prospectus and
in this Statement of Additional Information. (The deposit of assets in escrow in
connection with the purchase of securities on a when-issued or delayed delivery
basis will not be deemed to be pledges of a Fund's assets);

6. Underwrite securities of another issuer's securities, except to the extent
that a Fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in connection with the purchase and sale of portfolio
securities;

7. Invest in securities of a company for the purpose of exercising control or
management;

8. Participate on a joint or a joint and several basis in any trading account
in securities;

9. Purchase or sell real estate, except that it may purchase marketable
securities which are issued by companies which invest in real estate or
interests therein;

B-3
<PAGE>

10. Make loans of its assets if, as a result, more than 50% of a Fund's total
assets would be lent to other persons, except (i) to purchase or hold money
market instruments permitted by a Fund's investment objective and policies, or
(ii) to enter into repurchase agreements or through lending of a Fund's
portfolio securities, or (iii) through purchases of debt securities or other
debt instruments;

11. Issue senior securities, except as permitted under the 1940 Act. For
purposes of this restriction, the purchase or sale of securities on a when-
issued or delayed delivery basis, permissible borrowings entered into in
accordance with a Fund's investment policies, and reverse repurchase agreements
for which a segregated account has been established to cover such transactions
or for which an offsetting position has been established by the Fund, are not
deemed to be issuances of senior securities; or

12. Purchase securities of registered open-end investment companies or
registered unit investment trusts in reliance on Sections 12(d)(1)(F) or (G) of
the 1940 Act.

POLICIES PERTAINING TO THE MONEY MARKET FUND
- --------------------------------------------

The Money Market Fund may not (except as noted):

1. sell any securities short or purchase any securities on margin, but may
obtain such short-term credits as may be necessary for clearance of purchases
and sales of portfolio securities;

2. issue senior securities except that the Fund may borrow money directly or
through reverse repurchase agreements as a temporary, extraordinary, or
emergency measure to facilitate management of the portfolio by enabling the Fund
to meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous, and then only in amounts not in
excess of one-third of the value of its total assets; provided that, while
borrowings and reverse repurchase agreements outstanding exceed 5% of the Fund's
total assets, any such borrowings will be repaid before additional investments
are made;

3. borrow money or engage in reverse repurchase agreements for investment
leverage purposes;

4. mortgage, pledge, or hypothecate any assets except to secure permitted
borrowings. In those cases, it may mortgage, pledge or hypothecate assets having
a market value not exceeding the lesser of the dollar amounts borrowed or 15% of
the value of its total assets at the time of borrowing;

5. purchase securities if, as a result of such purchase, 25% or more of its
total assets would be invested in securities of companies engaged principally in
any one industry other than finance companies. However, the Fund may at any
time invest 25% or more of its total assets in cash or cash items and securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities;

6. purchase or sell commodities, commodity contracts, or commodity futures
contracts;

7. purchase or sell real estate, including limited partnership interests in
real estate, although it may invest in securities of companies whose business
involves the purchase or sale of real estate or in securities secured by real
estate or interests in real estate;

8. lend any of its assets, except portfolio securities up to one-third of its
total assets. This shall not prevent the Fund from purchasing or holding money
market instruments, corporate or U.S. government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, entering
into repurchase agreements, or engaging in other transactions which are
permitted by the Fund's investment objective and policies or the Trust's
Declaration of Trust;

9. underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
securities in accordance with its investment objective, policies, and
limitations;

10. with respect to 75% of its total assets, purchase the securities of any one
issuer (other than cash, cash items, or securities issued and/or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result, more than 5% of
its total assets would be invested in the securities of that issuer; or

11. purchase securities of registered open-end investment companies or
registered unit investment trusts in reliance on Sections 12(d)(1)(F) or (G) of
the 1940 Act.

The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
in this limitation becomes effective. Unless otherwise indicated, the Money
Market Fund may not:

1. invest more than 10% of its net assets in illiquid securities, including,
among others, repurchase agreements providing for settlement more than seven
days after notice and certain restricted securities not determined by the
Trustees to be liquid.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value of total or net assets will not result in a violation
of such restriction.

The Money Market Fund has no present intention to borrow money in excess of 5%
of the value of its net assets during the coming fiscal year.

For purposes of its policies and limitations, the Money Market Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings association having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."

In order to limit the risks associated with entry into repurchase agreements,
the Trustees have adopted certain criteria (which are not fundamental policies)
to be followed by the Funds. These criteria provide for entering into repurchase
agreement transactions (a) only with banks or broker-dealers meeting certain
guidelines for creditworthiness, (b) that are fully collateralized as defined,
(c) on an approved standard form of agreement and (d) that meet limits on
investments in the repurchase agreements of any one bank, broker or dealer. In
accordance with regulatory requirements, the Board of Trustees has also adopted
procedures for segregating Fund assets whenever a Fund enters into reverse
repurchase agreements with institutions other than banks.

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES

The following discussion describes in greater detail different types of
securities and investment techniques used by the individual Funds, as described
in "Investment Objectives and Policies of the Funds" in the Prospectus, as well
as the risks associated with such securities and techniques.

OTHER INVESTMENT POLICIES OF THE FIXED INCOME FUND
- --------------------------------------------------

Corporate debt securities may bear fixed, contingent, or variable rates of
interest and may involve equity features, such as conversion or exchange rights
or warrants for the

B-4
<PAGE>

acquisition of stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered as a
unit).

Under normal market conditions, not more than 10% of the value of the Fixed
Income Fund's total assets will be invested in equity securities, including
common stocks, preferred stocks, warrants and rights.

When and if available, debt securities may be purchased at a discount from face
value. However, the Fund does not intend to hold such securities to maturity for
the purpose of achieving potential capital gains, unless yields to maturity on
these securities remain attractive. From time to time the Fund may purchase
securities not paying interest or dividends at the time acquired if, in the
opinion of Atlanta Capital Management ("Atlanta Capital"), the Fund's sub-
adviser, such securities have the potential for future income (or capital
appreciation).

Since shares of the Fund represent an investment in securities with fluctuating
market prices, the value of shares of the Fund will vary as the aggregate value
of the Fund's portfolio securities increases or decreases. Lower rated fixed
income securities generally tend to reflect short-term corporate and market
developments to a greater extent than higher rated securities which react
primarily to fluctuations in the general level of interest rates. Changes in the
value of securities subsequent to their acquisition will not affect cash income
to the Fund but will be reflected in the net asset value of the Fund's shares.

MORTGAGE-BACKED SECURITIES

The Fixed Income Fund may invest in mortgage-backed securities, and in other
asset-backed securities (unrelated to mortgage loans) see description under
heading "Investment Practices Common to Two or More Funds: Asset-Backed
Securities" that are offered to investors in the future. The value of some
mortgage-backed or asset-backed securities in which the Fund invests may be
particularly sensitive to changes in prevailing interest rates, and, like the
other investments of the Funds, the ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of Atlanta Capital to
forecast interest rates and other economic factors correctly.

MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a "pass through" of the monthly payments made by the individual
borrowers on their residential mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of the underlying residential
property, refinancing or foreclosure, net of fees or costs which may be
incurred. Some mortgage-related securities (such as securities issued by the
Government National

B-5
<PAGE>

Mortgage Association ("GNMA")) are described as "modified pass through"
securities. These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.

The principal governmental guarantor of mortgage-related securities is the GNMA.
GNMA is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of Federal Housing Administration insured or Veterans Administration-
guaranteed mortgages.

Government-related guarantors (i.e., not backed by the full faith and credit of
the U.S. Government) include the Federal National Mortgage Association ("FNMA")
and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a government-
sponsored corporation owned entirely by private stockholders. It is subject to
general regulation by the Secretary of Housing and Urban Development. FNMA
purchases conventional (i.e., not insured or guaranteed by any government
agency) residential mortgages from a list of approved sellers/servicers which
include state and federally chartered savings and loan associations, mutual
savings banks, commercial banks, credit unions and mortgage bankers. Pass-
through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the U.S. Government.

FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a government-
sponsored corporation formerly owned by the twelve Federal Home Loan Banks and
now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("PCs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCs are not backed by the full faith and
credit of the U.S. Government.

B-6

<PAGE>

insurance and guarantees and the creditworthiness of the issuers thereof will be
considered in determining whether a mortgage-related security meets the Fund's
investment quality standards. There can be no assurance that the private
insurers, or guarantors can meet their obligations under the insurance policies
or guarantee arrangements. The Fund may buy mortgage-related securities without
insurance or guarantees if through an examination of the structure or the loan
experience and practices of the originator/servicers and poolers, Atlanta
Capital determines that the securities meet the Fund's quality standards.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable. The Fund will not purchase mortgage-related securities or any other
assets which in the opinion of the Atlanta Capital are illiquid if, as a result,
more than 15% of the value of the Fund's total assets will be illiquid.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMO's"). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid on a CMO, in most cases, monthly. CMOs
may be collateralized by whole mortgage loans, but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC, or FNMA, and their income streams.

CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity class receive principal only after the first call has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.

In a typical CMO transaction, a corporation ("issuer") issues multiple series
(e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are
used to purchase mortgages or mortgage pass-through certificates ("Collateral").
The Collateral is pledged to a third-party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal on
the Bonds in the order A, B, C, Z. The Series A, B, and C bonds all bear current
interest. Interest on the Series Z Bond is accrued and added to principal and a
like amount is paid as principal on the Series A, B, or C Bonds currently being
paid off. When the Series A, B, and C Bonds are paid in full, interest and
principal on the Series Z Bond begins to be paid currently. With some CMOs, the
issuer serves as a conduit to allow loan originators (primarily builders or
savings and loan associations) to borrow against their loan portfolios.

B-7
<PAGE>

OTHER MORTGAGE-RELATED SECURITIES. Mortgage-related securities are interests in
pools of mortgage loans made to residential home buyers, including mortgage
loans made by savings and loan institutions, mortgage bankers, commercial banks
and others. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations
(see "Mortgage Pass-Through Securities," below). The Fixed Income Fund may also
invest in debt securities which are secured with collateral consisting of
mortgage-related securities (see "Collateralized Mortgage Obligations," at page
_____), and in other types of mortgage-related securities. The Fixed Income Fund
will not purchase mortgage-related securities or any other assets which in the
opinion of Atlanta Capital are illiquid, if, as a result, more than 15% of the
value of this Fund's assets will be illiquid.

Other mortgage-related securities include securities other than those described
above that directly or indirectly represent a participation in, or are secured
by and payable from, mortgage loans on real property, including CMO residuals or
stripped mortgage-backed securities. Other mortgage-related securities may be
equity or debt securities issued by agencies or instrumentalities of the U.S.
Government or by private originators of, or investors in, mortgage loans,
including savings and loan associations, homebuilders, mortgage banks,
commercial banks, investment banks, partnerships, trusts and special purpose
entities of the foregoing.

CMO RESIDUALS. CMO residuals are derivative mortgage securities issued by
agencies or instrumentalities of the U.S. Government or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.

The cash flow generated by the mortgage assets underlying a series of CMOs is
applied first to make required payments of principal and interest on the CMOs
and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets. In
particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
interest-only ("I0") class of stripped mortgage backed securities. See "Stripped
Mortgage-Backed Securities." In addition, if a series of a CMO includes a class
that bears interest at an adjustable rate, the yield to maturity on the related
CMO residual will also be extremely sensitive to changes in the level of the
index upon which interest rate adjustments are based. As described below with
respect to stripped mortgage-backed securities, in certain circumstances the
Fund may fail to recoup fully its initial investment in a CMO residual.

B-8

<PAGE>

CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets. Transactions in CMO residuals are generally completed only after
careful review of the characteristics of the securities in question. In
addition, CMO residuals may or, pursuant to an exemption therefrom, may not have
been registered under the Securities Act of 1933, as amended. CMO residuals,
whether or not registered under such Act, may be subject to certain restrictions
on transferability, and may be deemed "illiquid" and subject to the Fund's
limitations on investment in illiquid securities.

STRIPPED MORTGAGE-BACKED SECURITIES. Stripped Mortgage-Backed Securities
("SMBS") are derivative multiclass mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose entities
of the foregoing.

SMBS are usually structured with two classes that receive different proportions
of the interest and principal distributions on a pool of mortgage assets. A
common type of SMBS will have one class receiving some of the interest and most
of the principal from the mortgage assets, while the other class will receive
most of the interest and the remainder of the principal. In the most extreme
case, one class will receive all of the interest (the "I0" class), while the
other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an I0 class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on the Fund's yield to maturity from these securities. If the underlying
mortgage assets experience greater than anticipated prepayments of principal,
the Fund may fail to fully recoup its initial investment in these securities
even if the security is in one of the highest rating categories.

Although SMBS are purchased and sold by institutional investors through several
investment banking firms acting as brokers or dealers, these securities were
only recently developed. As a result, established trading markets have not yet
developed and, accordingly, these securities may be deemed "illiquid" and
subject to the Fund's limitations on investment in illiquid securities.

B-9

<PAGE>

OTHER INVESTMENT POLICIES OF THE INTERNATIONAL ACTIVE FUND
- ----------------------------------------------------------

DERIVATIVE INSTRUMENTS

The International Active Fund may purchase and write call and put options on
securities, securities indexes and foreign currencies, and enter into futures
contracts and use options on futures contracts as further described below. The
International Active Fund may engage in the purchase and writing of call and put
options on foreign currencies. The International Active Fund also may enter into
swap agreements with respect to securities indexes. The Fund may use these
techniques to hedge against changes in interest rates, foreign currency exchange
rates or securities prices; to increase exposure to a foreign currency; to shift
exposure to foreign currency fluctuations from one country to another; or as
part of its overall investment strategies. The Fund will maintain segregated
accounts consisting of liquid assets, such as cash, and U.S. Government
securities (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under options, futures, and swaps
to avoid leveraging of the Fund.

The Fund considers derivative instruments to consist of securities or other
instruments whose value is derived from or related to the value of some other
instrument or asset, and not to include those securities whose payment of
principal and/or interest depends upon cash flows from underlying assets, such
as mortgage or asset-backed securities. The value of some derivative instruments
in which the Fund invests may be particularly sensitive to changes in prevailing
interest rates, and, like the other investments of the Fund, the ability of the
Fund to successfully utilize these instruments may depend in part upon the
ability of Blairlogie Capital Management ("Blairlogie") to forecast interest
rates and other economic factors correctly. If Blairlogie incorrectly forecasts
such factors and has taken positions in derivative instruments contrary to
prevailing market trends, the Fund could be exposed to the risk of loss.

B-10

<PAGE>

The Fund might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If Blairlogie
incorrectly forecasts interest rates, market values or other economic factors in
utilizing a derivatives strategy for the Fund, the Fund might have been in a
better position if it had not entered into the transaction at all. The use of
these strategies involves certain special risks, including a possible imperfect
correlation, or even no correlation, between price movements of derivative
instruments and price movements of related investments. While some strategies
involving derivative instruments can reduce the risk of loss, they can also
reduce the opportunity for gain or even result in losses by offsetting favorable
price movements in related investments, or due to the possible inability of the
Fund to purchase or sell a portfolio security at a time that otherwise would be
favorable for it to do so, or the possible need for the Fund to sell a portfolio
security at a disadvantageous time, because the Fund is required to maintain
asset coverage or offsetting positions in connection with transactions in
derivative instruments, and the possible inability of the Fund to close out or
to liquidate its derivatives positions.

OPTIONS ON SECURITIES, SECURITIES INDEXES, AND CURRENCIES. The International
Active Fund may purchase put options on securities. One purpose of purchasing
put options is to protect holdings in an underlying or related security against
a substantial decline in market value. The Fund may also purchase call options
on securities. One purpose of purchasing call options is to protect against
substantial increases in prices of securities the Fund intends to purchase
pending its ability to invest in such securities in an orderly manner. The Fund
may sell put or call options it has previously purchased, which could result in
a net gain or loss depending on whether the amount realized on the sale is more
or less than the premium and other transaction costs paid on the put or call
option which is sold. The Fund may write a call or put option only if the option
is "covered" by the Fund holding a position in the underlying securities or by
other means which would permit immediate satisfaction of the Fund's obligation
as a writer of the option. Prior to exercise or expiration, an option may be
closed out by an offsetting purchase or sale of an option of the same series.

The purchase and writing of options involve certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but, as long as its obligation as a writer
continues, has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying securities at the exercise price. If a put or call
option purchased by the Fund is not sold when it has remaining value, and if the
market price of the underlying security remains equal to or greater than the
exercise price (in the case of a put), or remains less than or equal to the
exercise price (in the case of a call), the Fund will lose its entire investment
in the option. Also, where a put or call option on a particular security is
purchased to

B-11
<PAGE>

hedge against price movements in a related security, the price of the put or
call option may move more or less than the price of the related security. There
can be no assurance that a liquid market will exist when the Fund seeks to close
out an option position. Furthermore, if trading restrictions or suspension are
imposed on the options markets, the Fund may be unable to close out a position.

The International Active Fund may buy or sell put and call options on foreign
currencies as a hedge against changes in the value of the U.S. dollar (or
another currency) in relation to a foreign currency in which the Fund's
securities may be denominated. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the ability of the
Fund to reduce foreign currency risk using such options. Over-the-counter
options differ from traded options in that they are two-party contracts with
price and other terms negotiated between buyer and seller and generally do not
have as much market liquidity as exchange-traded options. The Fund may be
required to treat as illiquid over-the-counter options purchased and securities
being used to cover certain written over-the-counter options.

SWAP AGREEMENTS. The International Active Fund may enter into equity index swap
agreements for purposes of gaining exposure to the stocks making up an index of
securities in a foreign market without actually purchasing those stocks. Swap
agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard swap transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest factor. The
gross returns to be exchanged or "swapped" between the parties are generally
calculated with respect to a "notional amount," i.e., the return on or increase
in value of a particular dollar amount invested at a particular interest rate,
or in a "basket" of securities representing a particular index.

Most swap agreements entered into by the Fund would calculate the obligations of
the parties to the agreement on a "net basis." Consequently, the Fund's current
obligations (or rights) under a swap agreement will generally be equal to the
net amount to be paid or received under the agreement based on the relative
values of the positions held by each party to the agreement (the "net amount").
The Fund's current obligations under a swap agreement will be accrued daily
(offset against amounts owed to the Fund), and any accrued but unpaid net
amounts owed to a swap counterparty will be covered by the maintenance of a
segregated account consisting of liquid assets such as cash, U.S. Government
securities, or high grade debt obligations, to avoid any potential leveraging of
the Fund's portfolio. Obligations under swap agreements so covered will not be
construed to be "senior securities" for purposes of the Fund's investment
restriction concerning senior securities. The Fund will not enter into a swap
agreement with any single party if the net amount owed or to be received under
existing contracts with that party would exceed 5% of the Fund's assets.

B-12
<PAGE>

Whether the Fund's use of swap agreements will be successful in furthering its
investment objective will depend on Blairlogie's ability to predict correctly
whether certain types of investments are likely to produce greater returns than
other investments. Because they are two-party contracts and because they may
have terms of greater than seven days, swap agreements may be considered to be
illiquid investments. Moreover, the Fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. The Fund will enter into swap
agreements only with counterparties that meet certain standards for
creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Fund's repurchase agreement guidelines).
Certain restrictions imposed on the Funds by the Internal Revenue Code of 1986
(the "Code") may limit the Fund's ability to use swap agreements. The swaps
market is a relatively new market and is largely unregulated. It is possible
that developments in the swaps market, including potential government
regulation, could adversely affect the Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.

FUTURES CONTRACTS AND OPTIONS ON FUTURE CONTRACTS. The International Active
Fund may invest in exchange futures contracts and options thereon ("futures
options") that are traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. The Fund may engage
in such futures transactions as an adjunct to its securities activities.

There are several risks associated with the use of futures and futures options
for hedging purposes. There can be no guarantee that there will be a correlation
between price movements in the hedging vehicle and in the portfolio securities
being hedged. An incorrect correlation could result in a loss on both the hedged
securities in the Fund and the hedging vehicle so that the portfolio return
might have been greater had hedging not been attempted. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to close
out a futures contract or a futures option position. Most futures exchanges or
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and without
a significant trading history. As a result, there is no assurance that an active
secondary market will develope or continue to exist. Lack of a liquid market for
any reason may prevent the Fund from liquidating an unfavorable position, and
the Fund would remain obligated to meet margin requirements until the position
is closed.

B-13
<PAGE>

to positions in financial futures and related options that do not qualify as
"bona fide hedging" positions, will enter such positions only to the extent that
aggregate initial margin deposits plus premium paid by it for open futures
option positions, less the amount by which any such positions are "in-the-money"
would not exceed 5% of the Fund's net assets.

OTHER INVESTMENT POLICIES OF THE MONEY MARKET FUND
- --------------------------------------------------

The Money Market Fund may follow non-fundamental operational policies that are
more restrictive than its fundamental investment limitations, as set forth in
its prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the 1940 Act. In particular, the Fund will comply with the
various requirements of Rule 2a-7, which regulates money market mutual funds.
The Fund will determine the effective maturity of its investments, as well as
its ability to consider a security as having received the requisite short-term
ratings by NRSROs, according to Rule 2a-7. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.

RULE 2a-7: MATURITY QUALITY AND DIVERSIFICATION RESTRICTIONS

The Money Market Fund is subject to certain maturity restrictions pursuant to
Rule 2a-7 under the 1940 Act for money market funds that use the amortized cost
method of valuation to maintain a stable net asset value of $1.00 per share.
Accordingly, the Fund will (i) maintain a dollar weighted average portfolio
maturity of 90 days or less, and (ii) will purchase securities with a remaining
maturity of no more than 13 months (397 calendar days). Further, the Fund will
limit its investments to U.S. dollar denominated securities which present
minimal credit risks and meet certain credit quality and diversification
requirements. For purposes of calculating the maturity of portfolio instruments,
the Fund will follow the requirements of Rule 2a-7. Under Rule 2a-7, the
maturity of portfolio instruments is calculated as indicated below.

Generally, the maturity of a portfolio security shall be deemed to be the period
remaining (calculated from the trade date or such other date on which the Fund's
interest in the security is subject to market action) until the date on which,
in accordance with the terms of the security, the principal amount must
unconditionally be paid, or in the case of a security called for redemption,
the date on which the redemption payment must be made, except that:

(1) A Government Security which is a Variable Rate Security where the variable
rate of interest is readjusted no less frequently than every 762 days shall be
deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate. A Government Security which is a Floating
Rate Security shall be deemed to have a remaining maturity of one day.

(2) A Variable Rate Security, the principal amount of which, in accordance with
the terms of the security, must unconditionally be paid in 397 calendar days or
less shall be deemed to have a maturity equal to the earlier of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.

(3) A Variable Rate Security, the principal amount of which is scheduled to be
paid in more than 397 days, that is subject to a Demand Feature shall be deemed
to have a maturity equal to the longer of the period remaining until the next
readjustment of the interest rate or the period remaining until the principal
amount can be recovered through demand.

(4) A Floating Rate Security, the principal amount of which, in accordance with
the terms of the security, must unconditionally be paid in 397 calendar days or
less shall be deemed to have a maturity of one day.

(5) A Floating Rate Security, the principal amount of which is scheduled to be
paid in more than 397 days, that is subject to a Demand Feature, shall be deemed
to have a maturity equal to the period remaining until the principal amount can
be recovered through demand.

(6) A repurchase agreement shall be deemed to have a maturity equal to the
period remaining until the date on which the repurchase of the underlying
securities is scheduled to occur, or, where the agreement is subject to demand,
the notice period applicable to a demand for the repurchase of the securities.

(7) A portfolio lending agreement shall be treated as having a maturity equal
to the period remaining until the date on which the loaned securities are
scheduled to be returned, or, where the agreement is subject to demand, the
notice period applicable to a demand for the return of the loaned securities.

(8) An investment in a money market fund shall be treated as having a maturity
equal to the period of time within which the acquired money market fund is
required to make payment upon redemption, unless the acquired money market fund
has agreed in writing to provide redemption proceeds to the investing money
market fund within a shorter time period, in which case the maturity of such
investment shall be deemed to be the shorter period.

B-14
<PAGE>

The Money Market Fund is subject to certain credit quality restrictions pursuant
to Rule 2a-7 under the 1940 Act. The Fund will invest at least 95% of its assets
in instruments that are determined to present minimal credit risks and at the
time of acquisition, that are (i) obligations issued or guaranteed by the U.S.
government, its agencies, or instrumentalities; (ii) rated by at least two
nationally recognized rating agencies (or by one agency if only one agency has
issued a rating) (the "required rating agencies") in the highest rating category
for short-term debt obligations; (iii) unrated but whose issuer is rated in the
highest category by the required rating agencies with respect to a class of
short-term debt obligations or any security within that class that is comparable
in priority and security with the instrument; (iv) unrated (other than the type
described in (iii)) but determined by the Board of Trustees to be of comparable
quality to the foregoing (provided the unrated security has not received a
short-term rating, and with respect to a long-term security with a remaining
maturity within the Fund's maturity restrictions, has not received a long-term
rating from any agency that is other than in its highest rating category); or
(v) a security issued by a registered investment company that is a money market
fund. The foregoing are referred to as "first-tier securities."

The balance of the securities in which the Fund may invest are instruments
determined to present minimal credit risks, which do not qualify as first-tier
securities, and at the time of acquisition, are (i) rated by the required rating
agencies in one of the two highest rating categories for short-term debt
obligations; (ii) unrated but whose issuer is rated in one of the two highest
categories by the required rating agencies with respect to a class of short-term
debt obligations or any security within that class that is comparable in
priority and security with the obligation; or (iii) unrated (other than
described in (ii)) but determined by the Board of Trustees to be of comparable
quality to the foregoing (provided the unrated security has not received a
short-term rating and with respect to a long-term security with a remaining
maturity within the Fund's maturity restrictions, has not received a long-term
rating from any agency that is other than in one of its highest two rating
categories). The foregoing are referred to as "second-tier securities."

B-15
<PAGE>

million dollars in second-tier securities issued by that issuer, and (ii) the
Fund will not invest more than 5% of the Fund's assets in the securities (other
than securities issued by the U.S. government or any agency or instrumentality
thereof) issued by a single issuer, except for certain investments held for not
more than 3 business days.

As used herein, all capitalized but undefined terms shall have the meaning such
terms have in Rule 2a-7.

Set forth below are descriptions of certain instruments in which the Money
Market Fund may invest and certain investment risks, policies and restrictions
applicable to the Money Market Fund.

VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase at its
stated principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par. The
interest rate may float or be adjusted at regular intervals (ranging from daily
to annually), and is normally based on a published interest rate or interest
rate index. Most variable rate demand notes allow the Fund to demand the
repurchase of the security on not more than seven days prior notice. Other notes
only permit the Fund to tender the security at the time of each interest rate
adjustment or at other fixed intervals. See "Demand Features." The Fund treats
variable rate demand notes as maturing on the later of the date of the next
interest adjustment or the date on which the Fund may next tender the security
for repurchase.

SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations in,
short-term revolving credit facilities with corporate borrowers. Demand notes
and other short-term credit arrangements usually provide for floating or
variable rates of interest.

CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have
been credit enhanced by a guaranty, letter of credit or insurance. Any
bankruptcy receivership or default of the party providing the credit enhancement
will adversely affect the quality and marketability of the underlying security.

DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.

BANK INSTRUMENTS. The Fund only invests in bank instruments either
issued by an institution having capital, surplus and undivided profits over $100
million or insured by the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF"). The Fund will treat securities credit enhanced by a
bank as bank instruments. In addition to domestic bank obligations such as
certificates of deposit, demand and time deposits, savings shares, and bankers'
acceptances, the Money Market Fund may invest in:

(1) Eurodollar Certificates of Deposit ("ECDs") issued by foreign branches of
U.S. or foreign banks;

(2) Eurodollar Time Deposits ("ETDs"), which are U.S. dollar-denominated
deposits in foreign branches of U.S. or foreign banks;

(3) Canadian Time Deposits, which are U.S. dollar-denominated deposits issued
by branches of major Canadian banks located in the U.S.; and

(4) Yankee Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-
denominated certificates of deposit issued by U.S. branches of foreign
banks and held in the U.S.

RATINGS. An NRSROs two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated A-1+,
A-1 or A-2 by Standard & Poor's Ratings Group ("S&P"), Prime-1 or Prime-2 by
Moody's Investors Service, Inc. ("Moody's"), or F-1 (+ or -) or F-2 (+ or -) by
Fitch Investors Service, Inc. ("Fitch") are all considered rated in one of the
two highest short-term rating categories. The Money Market Fund will limit its
investments in securities rated in the second highest short-term rating category
(e.g., A-2 by S&P, Prime-2 by Moody's or F-2 (+ or -) by Fitch) to not more than
5% of its total assets, with not more than 1% invested in the securities of any
one issuer. The Fund will follow applicable regulations in determining whether a
security rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be rated
by two NRSROs in one of their two highest rating categories.

U.S. GOVERNMENT OBLIGATIONS. The types of U.S. government obligations in
which the Money Market Fund may invest generally include direct obligations of
the U.S. Treasury (such as U.S. Treasury bills, notes, and bonds) and
obligations issued and/or guaranteed by U.S. government agencies or
instrumentalities. These securities are backed by:

(1) the full faith and credit of the U.S. Treasury;

(2) the issuer's right to borrow from the U.S. Treasury;

(3) the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or

(4) the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

(1) Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives;

(2) Federal Home Loan Banks;

(3) Federal Home Loan Mortgage Corporation;

(4) Federal National Mortgage Association; and

(5) Student Loan Marketing Association.

CREDIT ENHANCEMENT. The Money Market Fund typically evaluates the credit
quality and ratings of credit-enhanced securities based upon the financial
condition and ratings of the party providing the credit enhancement (the "credit
enhancer"), rather than the issuer. However, credit-enhanced securities will
not be treated as having been issued by the credit enhancer for diversification
purposes, unless the Fund has invested more than 10% of its assets in securities
issued, guaranteed or otherwise credit enhanced by the credit enhancer, in which
case the securities will be treated as having been issued by both the issuer and
the credit enhancer. The Fund may have more than 25% of its total assets
invested in securities credit enhanced by banks.

CONCENTRATION OF INVESTMENTS. The Fund may invest 25% or more of its total
assets in commercial paper issued by finance companies. The finance companies in
which the Fund intends to invest can be divided into two categories, commercial
finance companies and consumer finance companies. Commercial finance companies
are principally engaged in lending to corporations or other businesses. Consumer
finance companies are primarily engaged in lending to individuals. Captive
finance companies or finance subsidiaries which exist to facilitate the
marketing and financial activities of their parent will, for purposes of
industry concentration, be classified by the Fund in the industry of its parent
corporation.

In addition, the Fund may invest more than 25% of the value of its total assets
in cash or cash items, securities issued or guaranteed by the U.S. government,
its agencies, or instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.

CERTAIN INVESTMENT RISKS. ECDs, ETDs, Yankee CDs, Canadian commercial
paper, and Europaper are subject to somewhat different risks than domestic
obligations of domestic banks. Examples of these risks include international,
economic and political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholding or
other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing bank, and the possible impact of interruptions in
the flow of international currency transactions. Different risks may also exist
for ECDs, ETDs, and Yankee CDs because the banks issuing these instruments, or
their domestic or foreign branches, are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing, and
recordkeeping, and the public availability of information. These factors will be
carefully considered by Federated in selecting investments for the Fund.

INVESTMENT PRACTICES COMMON TO TWO OR MORE FUNDS
- ------------------------------------------------

Except as otherwise noted below, the following description of investment
practices is applicable to all of the Funds.

BORROWING

B-16
<PAGE>

effect of any increase or decrease in the value of portfolio securities on a
Fund's net asset value; money borrowed will be subject to interest and other
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances), which may or may not exceed the income received from the
securities purchased with borrowed funds. The use of borrowing tends to result
in a faster than average movement, up or down, in the net asset value of a
Fund's shares. A Fund also may be required to maintain minimum average balances
in connection with such borrowing or to pay a commitment or other fee to
maintain a line of credit; either of these requirements would increase the cost
of borrowing over the stated interest rate.

FOREIGN SECURITIES

The International Active Fund may invest in U.S. dollar- or foreign currency-
denominated corporate debt securities of foreign issuers; preferred securities
of foreign issuers; certain foreign bank obligations; and U.S. dollar- or
foreign currency-denominated obligations of foreign governments or their
subdivisions, agencies and instrumentalities, international agencies and
supranational entities. The International Active Fund may also invest in common
stocks issued by foreign companies or in securities represented by ADRs,
European Depositary Receipts ("EDRs"), or Global Depositary Receipts ("GDRs").
ADRs are dollar-denominated receipts issued generally by domestic banks and
represent the deposit with the bank of a security of a foreign issuer. EDRs are
foreign currency-denominated receipts similar to ADRs and are issued and traded
in Europe, and are publicly traded on exchanges or over-the-counter in the
United States. GDRs may be offered privately in the United States and also trade
in public or private markets in other countries. ADRs, EDRs and GDRs may be
issued as sponsored or unsponsored programs. In sponsored programs, an issuer
has made arrangements to have its securities trade in the form of ADRs, EDRs or
GDRs. In unsponsored programs, the issuer may not be directly involved in the
creation of the program. Although regulatory requirements with respect to
sponsored and unsponsored programs are generally similar, in some cases it may
be easier to obtain financial information from an issuer that has participated
in the creation of a sponsored program.

B-17
<PAGE>

suspension of the ability to transfer currency from a country), political
instability which can affect U.S. investments in foreign countries and potential
restrictions on the flow of international capital. In addition, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility. Changes in
foreign exchange rates will affect the value of those securities which are
denominated or quoted in currencies other than the U.S. dollar.

The International Active Fund may also purchase and sell foreign currency
options and foreign currency futures contracts and related options (see
"Derivative Instruments"), and enter into forward foreign currency exchange
contracts in order to protect against uncertainty in the level of future foreign
exchange rates in the purchase and sale of securities. The Fund may also use
foreign currency options and foreign currency forward contracts to increase
exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another.

A forward foreign currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts may be bought or sold to protect the Fund
against a possible loss resulting from an adverse change in the relationship
between foreign currencies and the U.S. dollar or to increase exposure to a
particular foreign currency. Open positions in forward contracts used for non-
hedging purposes will be covered by the segregation with the Trust's custodian
of liquid assets, such as cash, U.S. Government securities and high quality
short-term investments and are marked to market daily. Although forward
contracts are intended to minimize the risk of loss due to a decline in the
value of the hedged currencies, at the same time, they tend to limit any
potential gain which might result should the value of such currencies increase.

LENDING OF PORTFOLIO SECURITIES

Each Fund may seek to increase its income by lending portfolio securities. Under
present regulatory policies, such loans may be made to institutions, such as
broker-dealers, and would be required to be secured continuously by collateral
in cash, cash equivalents or liquid assets, including equity securities and debt
securities of any grade, maintained on a current basis at an amount at least
equal to the market value of the securities loaned. A Fund would have the right
to call a loan and obtain the securities loaned at any time on five days'
notice. For the duration of a loan, a Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive compensation from the investment of the
collateral. A Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but a Fund would call the
loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their

B-18
<PAGE>

consent on a material matter affecting the investment. As with other extensions
of credit, there are risks of delay in recovery of, or even loss of rights in,
the collateral should the borrower of the securities fail financially. However,
the loans would be made only to firms deemed by the appropriate Sub-Adviser to
be of good standing, and when, in the judgment of the Sub-Adviser, the
consideration which can be earned currently from securities loans of this type
justifies the attendant risk. If the Sub-Adviser determines to make securities
loans, it is intended that the value of the securities loaned would not exceed
50% of the value of the total assets of the lending Fund (33 1/3% in the case of
the Money Market Fund).

REPURCHASE AGREEMENTS

The Funds may enter into repurchase agreements with any member bank of the
Federal Reserve System or a member firm of the National Association of
Securities Dealers, Inc. A repurchase agreement, which provides a means for a
Fund to earn income on uninvested cash for periods as short as overnight, is an
arrangement under which the purchaser (i.e., a Fund) purchases a U.S. Government
or other high quality short-term debt obligation (the "Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. The custody of the Obligation will be maintained by the Fund's
Custodian. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price upon repurchase. In either case, the income to a Fund is
unrelated to the interest rate on the Obligation subject to the repurchase
agreement.

For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
the Fund to the seller of the Obligation. It is not clear whether a court would
consider the Obligation purchased by a Fund subject to a repurchase agreement as
being owned by the Fund or as being collateral for a loan by the Fund to the
seller. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, a Fund may encounter delays and incur costs before
being able to sell the security. Delays may involve loss of interest or decline
in price of the Obligation. If the court characterizes the transaction as a loan
and a Fund has not perfected a security interest in the Obligation, a Fund may
be required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt instrument purchased for a Fund, the
Fund's Sub-Adviser seeks to minimize the risk of loss from repurchase agreements
by analyzing the creditworthiness of the obligor, in this case the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the security. However,
if the market value of the Obligation subject to the repurchase agreement
becomes less than the repurchase price (including accrued interest), the Fund
will direct the seller of the Obligation to deliver additional securities so
that the market

B-19
<PAGE>

value of all securities subject to the repurchase agreement equals or exceeds
the repurchase price.

REVERSE REPURCHASE AGREEMENTS

The Fixed Income Fund, International Active Fund and Money Market Fund may enter
into reverse repurchase agreements. These agreements involve the sale of debt
securities (obligations) held by a Fund, with an agreement to repurchase the
obligations at an agreed upon price, date and interest payment. The proceeds
will be used to purchase other debt securities either maturing, or under an
agreement to resell, at a date simultaneous with or prior to the expiration of
the reverse repurchase agreement. Reverse repurchase agreements will be
utilized, when permitted by law, only when the expected interest income to be
earned from the investment of the proceeds from the transaction is greater than
the interest expense of the reverse repurchase transaction. When a Fund enters
into such an agreement, it will establish a segregated account with the Fund's
Custodian in which it will maintain cash or cash equivalents or other liquid
assets, including equity securities and debt securities of any grade equal in
value to the repurchase price (which price will already include interest
charges). If the buyer of the debt securities pursuant to the reverse repurchase
agreement becomes bankrupt, realization upon the underlying securities may be
delayed and there is a risk of loss due to any decline in their value. Reverse
repurchase agreements will not extend for more than 30 days nor will such
agreements involve more than 10% of the net assets of a Fund (or, in the case of
the Money Market Fund, no more than 33 1/3% of the total assets of the
Fund).

WHEN-ISSUED SECURITIES

The Fixed Income Fund, the International Active Fund, and the Money Market Fund
may from time to time purchase securities on a "when-issued" basis. Debt
securities are often issued in this manner. The price of such securities, which
may be expressed in yield terms, is fixed at the time a commitment to purchase
is made, but delivery of and payment for the when-issued securities take place
at a later date. Normally, the settlement date occurs within one month of the
purchase. During the period between purchase and settlement, no payment is made
by a Fund and no interest accrues to a Fund. Although when-issued securities may
be sold prior to the settlement date, a Fund intends to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons.

At the time a Fund makes the commitment to purchase a security on a when-issued
basis, it will record the transaction and reflect the amount due and the value
of the security in determining a Fund's net asset value. The market value of the
when-issued securities may be more or less than the purchase price payable at
the settlement date. The Trustees do not believe that a Fund's net asset value
or income will be exposed to additional risk by the purchase of securities on a
when-issued basis. A Fund will establish a segregated account in which it will
maintain cash, U.S. Government securities or other liquid assets

B-20
<PAGE>

at least equal in value to commitments for when-issued securities. Such
segregated securities either will mature or, if necessary, be sold on or before
the settlement date. The Money Market Fund does not intend to engage in
when-issued transactions to an extent that would cause the segregation of more
than 20% of the total value of its assets.

VARIABLE OR FLOATING-RATE SECURITIES

The Fixed Income and Money Market Funds may invest in securities which offer a
variable or floating rate of interest. Variable-rate securities provide for
automatic establishment of a new interest rate at fixed intervals (e.g., daily,
monthly, semi-annually, etc.). Floating-rate securities generally provide for
automatic adjustment of the interest rate whenever some specified interest rate
index changes. The interest rate on variable or floating-rate securities is
ordinarily determined by reference to or is a percentage of a bank's prime rate,
the 90-day U.S. Treasury bill rate, the rate of return on commercial paper or
bank certificates of deposit, an index of short-term interest rates, or some
other objective measure.

Variable or floating-rate securities frequently include a demand feature
entitling the holder to sell the securities to the issuer at par. In many cases,
the demand feature can be exercised at any time on 7 days notice: in other
cases, the demand feature is exercisable at any time on 30 days notice or on
similar notice at intervals of not more than one year. Some securities which do
not have variable or floating interest rates may be accompanied by puts
producing similar results and price characteristics. When considering the
maturity of any instrument which may be sold or put to the issuer or a third
party, a Fund may consider that instrument's maturity to be shorter than its
stated maturity. Any such determination by the Money Market Fund will be made in
accordance with Rule 2a-7.

Variable-rate demand notes include master demand notes that are obligations
that permit a Fund to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between a Fund, as lender, and the
borrower. The interest rates on these notes fluctuate from time to time. The
issuer of such obligations normally has a corresponding right after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders of such obligations. The interest rate on a floating-rate demand
obligation is based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments will generally be traded. There generally is
not an established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, a Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by

B-21
<PAGE>

credit rating agencies and, if not so rated, a Fund may invest in them only if
the appropriate Sub-Adviser determines that at the time of investment the
obligations are of comparable quality to the other obligations in which the Fund
may invest. The Sub-Adviser, on behalf of a Fund, will consider on an ongoing
basis the creditworthiness of the issuers of the floating and variable-rate
demand obligations in the Fund's portfolio.

A Fund will not invest more than 10% of its net assets in variable and floating-
rate demand obligations that are not readily marketable (a variable or floating-
rate demand obligation that may be disposed of on not more than seven days
notice will be deemed readily marketable and will not be subject to this
limitation). (See "Illiquid Securities" and "Investment Objectives.") In
addition, each variable or floating-rate obligation must meet the credit quality
requirements applicable to all the Fund's investments at the time of purchase.
When determining whether such an obligation meets the Fund's credit quality
requirements, the Fund may look to the credit quality of the financial guarantor
providing a letter of credit or other credit support arrangement.

In determining the Fund's weighted average portfolio maturity, the Fund will
consider a floating or variable-rate security to have a maturity equal to its
stated maturity (or redemption date if it has been called for redemption),
except that it may consider (i) variable-rate securities to have a maturity
equal to the period remaining until the next readjustment in the interest rate,
unless subject to a demand feature, (ii) variable-rate securities subject to a
demand feature to have a remaining maturity equal to the longer of (a) the next
readjustment in the interest rate or (b) the period remaining until the
principal can be recovered through demand, and (iii) floating rate securities
subject to a demand feature to have a maturity equal to the period remaining
until the principal can be recovered through demand. Variable and floating-rate
securities generally are subject to less principal fluctuation than securities
without these attributes since the securities usually trade at par following the
readjustment in the interest rate.

ASSET-BACKED SECURITIES

The Fixed Income Fund may invest in asset-backed securities which represent
fractional interests in pools of leases, retail installment loans and revolving
credit receivables, both secured and unsecured. These assets are generally held
by a trust. Payments of principal and interest or interest only are passed
through to certificate holders and may be guaranteed up to certain amounts by
letters of credit issued by a financial institution affiliated or unaffiliated
with the trustee or originator of the trust.

Underlying automobile sales contracts or credit card receivables are subject to
prepayment, which may reduce the overall return to certificate holders.
Nevertheless, principal repayment rates tend not to vary much with interest
rates and the short-term nature of the underlying car loans or other receivables
tends to dampen the impact of any change in the prepayment level. Certificate
holders may also experience delays in payment on the certificates if the full
amounts due on underlying sales contracts or receivables are not realized by the
trust because of unanticipated legal or administrative costs of enforcing the
contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors. If consistent with
its investment objective and policies, the Funds may invest in other asset-
backed securities that may be developed in the future.

ILLIQUID SECURITIES

The Funds may invest in illiquid securities (i.e., securities that are not
readily marketable). However, a Fund will not acquire illiquid securities if, as
a result, they would comprise more than 15%, or 10% with respect to the Money
Market Fund, of the value of the Fund's net assets (or such other amounts as may
be permitted under the 1940 Act).

The Board of Trustees, or its delegate, has the ultimate authority to determine,
to the extent permissible under the federal securities laws, which securities
are illiquid for purposes of this limitation. Certain securities exempt from
registration or issued in transactions exempt from registration under the
Securities Act of 1933 (the "Securities Act"), such as securities that may be
resold to institutional investors under Rule 144A of the Securities Act and
Section 4(2) commercial paper, may be considered liquid under guidelines adopted
by the Board of Trustees.

B-22
<PAGE>

The Board of Trustees has delegated to the respective Sub-Advisers the day-to-
day determination of the liquidity of a security, although it has retained
oversight and ultimate responsibility for such determinations. The Board of
Trustees has directed each Sub-Adviser to look to such factors as (i) the
frequency of trades or quotes for a security, (ii) the number of dealers willing
to purchase or sell the security and number of potential buyers, (iii) the
willingness of dealers to undertake to make a market in the security, (iv) the
nature of the security and nature of the marketplace trades, such as the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer, (v) the likelihood that the security's marketability will
be maintained throughout the anticipated holding period, and (vi) any other
relevant factors. A Sub-Adviser may determine 4(2) commercial paper to be liquid
if (i) the 4(2) commercial paper is not traded flat or in default as to
principal and interest, (ii) the 4(2) commercial paper is rated in one of the
two highest rating categories by at least two NRSROs, or if only one NRSRO rates
the security, by that NRSRO, or is determined by the Sub-Adviser to be of
equivalent quality and (iii) the Sub-Adviser considers the trading market for
the specific security taking into account all relevant factors. A foreign
security may be considered liquid by a Sub-Adviser (despite its restricted
nature under the Securities Act) if the security can be freely traded in a
foreign securities market and all the facts and circumstances support a finding
of liquidity.

RESTRICTED SECURITIES

The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a SEC Staff position set forth in the adopting
release for Rule 144A under the Securities Act (the "Rule"). The Rule is a
nonexclusive safe-harbor for certain secondary market transactions involving
securities subject to restrictions on resale under federal securities laws. The
Rule provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Trust believes that the Staff
of the SEC has left the question of determining the liquidity of all restricted
securities to the Trustees, who will consider established factors in making such
a determination.

TEMPORARY DEFENSIVE POSITION

When a Sub-Adviser determines that market conditions warrant a temporary
defensive position, a Fund may invest without limitation in cash and short-term
fixed income securities, including U.S. government securities, commercial paper,
banker's acceptances, certificates of deposit, and time deposits.

B-23
<PAGE>

PORTFOLIO TURNOVER AND SECURITIES TRANSACTIONS

A portfolio turnover rate is, in general, the percentage computed by taking the
lesser of purchases or sales of portfolio securities (excluding certain short-
term securities) for a year and dividing it by the monthly average of the market
value of such securities during the year. The Funds do not have a predetermined
rate of portfolio turnover since such turnover will be incidental to
transactions taken with a view to achieving their respective objectives.

High turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. If a Fund derives more than 30 percent of its
gross income from the sale of securities held less than three months, the Fund
may fail to qualify under the tax laws as a regulated investment company in
particular years and thereupon would lose certain beneficial tax treatment of
its income (see "Dividends, Distributions and Taxes" in the Prospectus).

Each Sub-Adviser is responsible for decisions to buy and sell securities,
broker-dealer selection, and negotiation of its brokerage commission rates.
The Sub-Adviser's primary consideration in effecting a securities transaction
will be execution at the most favorable price. In certain instances, the Sub-
Adviser may make purchases of underwritten issues at prices which include
underwriting fees, and, in selecting a broker-dealer to execute each particular
transaction, the Sub-Adviser will take the following into consideration: the
best net price available; the reliability, integrity and financial condition of
the broker-dealer; and the size of contribution of the broker-dealer to the
investment performance of the Funds on a continuing basis. The Sub-Adviser shall
not be deemed to have acted unlawfully or to have breached any duty created by
the Investment Advisory Agreements in question or otherwise solely by reason of
its having caused the Trust to pay a broker-dealer that provides brokerage and
research services to the Sub-Adviser an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Sub-
Adviser determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the Sub-
Adviser's overall responsibilities with respect to the Trust.

B-24
<PAGE>

in, purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analysis and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto, such as clearance and settlement.

The receipt of research from broker-dealers may be useful to the Sub-Adviser
in rendering investment management services to the Trust and/or the Sub-
Adviser's other clients; conversely, such information provided by broker-
dealers who have executed transaction orders on behalf of other clients may be
useful to the Sub-Adviser in carrying out its obligations to the Trust. The
receipt of such research will not be substituted for the independent research
of the Sub-Adviser. It does enable the Sub-Adviser to reduce costs to less
than those which would have been required to develop comparable information
through its own staff. The use of broker-dealers who supply research may
result in the payment of higher commissions than those available from other
broker-dealers who provide only the execution of portfolio transactions.
Orders on behalf of the Trust may be bunched with orders on behalf of other
clients of the Sub-Adviser.

The Board of Trustees periodically reviews each Sub-Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Trust.

MANAGEMENT

Pursuant to the Sub-Advisory Agreements with the Adviser, subject to the
supervision of the Trustees of the Trust, and in conformity with the stated
policies of the Funds, Atlanta Capital manages the investment operations of the
High Quality Stock Fund and the Fixed Income Fund, Blairlogie manages the
investment operations of the International Active Fund, and Federated Investment
Counseling ("Federated") manages the investment operations of the Money Market
Fund. The Sub-Advisers also manage the composition of each respective Fund's
portfolio, including the purchase, retention, disposition and loan of
securities.

Each Invest ment Advisory and Sub-Advisory Agreement will remain in effect for
two years following its effective date, and will continue in effect thereafter
only if such

B-25
<PAGE>

continuance is specifically approved at least annually by the Trustees or by
vote of a majority of the outstanding voting securities of the particular Fund
(as defined in the 1940 Act and in a rule under the Act) and, in either case, by
a majority of the Trustees who are not parties to the Investment Advisory
Agreements or interested persons of any such party.

The Adviser and Sub-Advisers (collectively the "Advisers") have each authorized
any of their officers and employees who have been elected or appointed as
Trustees or officers of the Trust to serve in the capacities in which they have
been elected or appointed. In connection with the services it renders, the
Advisers each bear the salaries and expenses of all of its respective personnel.

Other than as imposed by law, the Investment Advisory and Sub-Advisory
Agreements provide that the Advisers shall not be liable to the Funds for any
error of judgment by the Advisers or for any loss sustained by the Funds except
in the case of willful misfeasance, bad faith, gross negligence or reckless
disregard of duty. Each Agreement also provides that it shall terminate
automatically if assigned and that it may be terminated without penalty by
either party upon no more than 60 days' nor less than 30 days' written notice.

The Investment Advisory and Sub-Advisory Agreements provide that the Advisers
shall not be liable for any error in judgment or mistake of law or for any loss
suffered by the Trust in connection with any investment policy or the purchase,
sale or redemption of any securities on the recommendations of the Advisers. The
Agreements provide that the Advisers are not protected against any liability to
the Trust or its security holders for which the Advisers shall otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon them by the Agreements or the
violation of any applicable law.

TRUSTEES AND OFFICERS

The names of the Trustees and executive officers of the Trust, their
affiliations, if any, with the Advisers and their principal occupations during
the past five years are set forth below. Each Trustee who is an "interested
person" of the Trust, as defined in the 1940 Act, is indicated by an asterisk.

Positions(s) Held Principal Occupation(s)
Name and Address Age With Registrant During Past Five Years
<S> <C> <C> <C>

Kris A. Robbins* 37 President and Chief Group Sales and Product Development Officer of Providian
Trustee Corporation since September 1996; Manager, Institutional
Marketing of Providian Corporation, from 1994 to September 1996;
Director, Managed Funds of Providian Corporation, from 1992 to 1994;
Director and Vice President of Providian Investment Advisors, Inc.

Thomas J. Hartlage* 44 Chief Financial Director, Product Management, of Providian Corporation since 1995;
Officer Director, Institutional Marketing of Providian Corporation from 1993
to 1995; Director, New Initiatives of Providian Corporation from
1992-1993; Director, Business Planning of Providian Corporation from
1991-1992; Vice President of Providian Investment Advisors, Inc.

</TABLE>

B-26
<PAGE>

NET ASSET VALUES OF THE SHARES OF THE FUNDS

As set forth in the Prospectus under the caption "Net Asset Value and Pricing,"
the net asset value of each Fund will be determined as of the close of trading
on each day the NYSE is open for trading (currently 4:00 P.M. Eastern Time). The
New York Stock Exchange is open for trading Monday through Friday except New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. Additionally, if any of the
aforementioned holidays falls on a Saturday, the NYSE will not be open for
trading on the preceding Friday, and when any such holiday falls on a Sunday,
the NYSE will not be open for trading on the succeeding Monday, unless unusual
business conditions exist, such as the ending of a monthly or yearly accounting
period.

Securities held by all Funds will be valued as follows: Fund securities which
are traded on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued (currently 4:00 P.M.
Eastern Time), or lacking any sales, at the last quoted bid price. Bonds and
other fixed income securities (other than short-term obligations), including
listed issues, are valued using matrix pricing systems of a major dealer in
bonds which take into account factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data, without exclusive reliance
upon quoted exchange or over-the-counter prices. Short-term debt securities with
61 days or more to maturity at time of purchase are valued, through the 61st day
prior to maturity, at market value based on quotations obtained from market
makers or other appropriate sources; thereafter, the value on the 61st day is
amortized on a straight-line basis over the remaining number of days to
maturity. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Trust. Debt securities with maturities
of 60 days or less are valued at amortized cost.

The Money Market Fund values its securities on the amortized cost basis and
seeks to maintain its net asset value at a constant $1.00 per share. In the
event a difference of 1/2 of 1% or more were to occur between the net asset
value calculated by reference to market values of the Money Market Fund's $1.00
per share net asset value, or if there were any other deviation which the Board
of Trustees believed would result in a material dilution to shareholders or
purchasers, the Board of Trustees would consider taking any one or more of the
following actions or any other action considered appropriate: selling portfolio
securities to shorten average portfolio maturity or to realize capital gains or
losses, reducing or suspending shareholder income accruals, redeeming shares in
kind, or utilizing a value per unit based upon available indications of market
value. Available indications of market value may include, among other things,
quotations or market value estimates of securities and/or values based on yield
data relating to money market securities that are published by reputable
sources.

B-27
<PAGE>

INVESTMENT PERFORMANCE

YIELD CALCULATIONS
- ------------------

The Trust may from time to time disclose the current annualized yield of the
High Quality Stock, Fixed Income and International Active Funds for 30-day
periods. The annualized yield of these Funds refers to the income generated by
the Fund over a specified 30-day period. Because the yield is annualized, the
yield generated by the Fund during the 30-day period is assumed to be generated
each 30-day period. The yield is computed by dividing the net investment income
per share earned during the period by the price per share on the last day of the
period, according to the following formula:

YIELD = 2[(a-b + 1)/6/ - 1]
---
cd

Where: a = net investment income earned during the period by the Fund.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the period.

d = the maximum offering price per share on the last day of the period.

Net investment income will be determined in accordance with rules established by
the SEC. Accrued expenses will include all recurring fees that are charged to
all shareholder accounts. The yield calculations do not reflect the effect of
any charges that may be applicable to a particular Policy.

Because of the charges and deductions imposed by the separate accounts and, in
certain cases, by series of the Trust which invest in the Funds described in
this SAI, the yield realized by Contract Owners in the investment divisions of
the separate accounts will be lower than the yield for the corresponding Fund of
the Trust. The yield on amounts held in the High Quality Stock, Fixed Income and
International Active Funds normally will fluctuate over time. Therefore, the
disclosed yield for any given past period is not an indication or representation
of future yields or rates of return. Each of the High Quality Stock, Fixed
Income and International Active Funds actual yield will be affected by the types
and quality of Fund securities held by the respective Fund, and its operating
expenses.

B-28
<PAGE>

CURRENT YIELD
- -------------

The Money Market Fund's current yield quotation is based on a seven-day period
and is computed as follows. The first calculation is net investment income
per share, which is accrued interest on portfolio securities, plus or minus
amortized premium, less accrued expenses. This number is then divided by the
price per share (expected to remain constant at $1.00) at the beginning of the
period ("based period return"). The result is then divided by 7 and
multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the
calculation.

EFFECTIVE YIELD
- ---------------

The Money Market Fund's effective yield is determined by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
return + 1)/(365/7)/ - 1.

STANDARDIZED TOTAL RETURN CALCULATIONS
- --------------------------------------

The Trust may from time to time also disclose average annual total returns for
the Funds for various periods of time. Average annual total return quotations
are computed by finding the average annual compounded rates of return over
one, five and ten year periods that would equate the initial amount invested
to the ending redeemable value, according to the following formula:

P (1 + T)/n/ = ERV

Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one, five, or ten-year period at the end of
the one, five, or ten-year period (or fractional portion thereof).

All recurring fees that are charged to all shareholder accounts are recognized
in the ending redeemable value. The average annual total return calculations
for the Fund will not reflect the effect of charges that may be applicable to
a particular policy.

NON-STANDARDIZED PERFORMANCE. In addition, in order to more completely
represent a Fund's performance or more accurately compare such performance to
other measures of investment return, a Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return may be
quoted for the same or different periods as those for

B-29
<PAGE>

which Standardized Return is quoted; it may consist of an aggregate or average
annual percentage rate of return, actual year-by-year rates or any combination
thereof. Non-Standardized Return will be accompanied by Standardized Return.
Non-Standardized Return may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges into
account will be higher than data including the effect of such charges. All
non-standardized performance will be advertised only if the standard
performance data for the same period, as well as for the required periods, is
also presented.

GENERAL INFORMATION. From time to time, the Funds may advertise their
performance compared to similar funds using certain unmanaged indices,
reporting services and publications. Descriptions of some of the indices
which may be used are listed below.

The Standard & Poor's 500 Composite Stock Price Index is a well diversified
list of 500 companies representing the U.S. stock market.

The Standard & Poor's 400 Midcap Index tracks the stock price movement of 400
companies with mid-size market capitalization of $300 million to $5 billion.
Stocks are chosen for market size, liquidity and industry group
representation.

The Standard and Poor's Small Cap 600 index is designed to represent price
movements in the small cap U.S. equity market. It contains companies chosen
by the Standard & Poors Index Committee for their size, industry,
characteristics, and liquidity. None of the companies in the S&P 600 overlap
with the S&P 500 or the S&P 400 (MidCap Index). The S&P 600 is weighted by
market capitalization. REITs are not eligible for inclusion.

The NASDAQ Composite OTC Price Index is a market value-weighted and unmanaged
index showing the changes in the aggregate market value of approximately 3,500
stocks.

The Lehman Brothers Aggregate Bond Index is an index consisting of the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers Mortgage-Backed
Securities Index, and the Lehman Brothers Assets-Backed Securities Index. The
Government/Corporate Bond Index is described below. The Mortgage-Backed
Securities Index consists of 15 and 30-year fixed rate securities backed by
mortgage pools of GNMA, FHLMC and FNMA (excluding buy downs, manufactured
homes and graduated equity mortgages). The Asset-Backed Securities Index
consists of credit card, auto and home equity loans (excluding subordinated
tranches) with an average life of one year. Each Index includes income and
distributions but does not reflect fees, brokerage commissions or other
expenses of investing.

B-30
<PAGE>

Index less the Long Government/Corporate Index). This Index offers a broad
based benchmark with a shorter duration than the Lehman Brothers Aggregate
Index.

The Lehman Brothers Government Bond Index is a measure of the market value of
all public obligations of the U.S. Treasury; all publicly issued debt of all
agencies of the U.S. Government and all quasi-federal corporations; and all
corporate debt guaranteed by the U.S. Government; mortgage backed securities,
bonds and foreign targeted issues are not included in the Lehman Government
Index.

The Lehman Brothers Government/Corporate Bond Index is a measure of the market
value of approximately 5,300 bonds with a face value currently in excess of
$1.3 trillion. To be included in the Lehman Government/Corporate Index, an
issue must have amounts outstanding in excess of $1 million, have at least one
year to maturity and be rated "Baa" or higher ("investment grade") by a
nationally recognized rating agency.

The Russell 3000 Index is composed of the 3,000 largest U.S. companies ranked by
market capitalization representing approximately 98% of the U.S. equity market.

The Russell 2000 Index represents the bottom two thirds of the largest 3000
publicly traded companies domiciled in the U.S. Russell uses total market
capitalization to sort its universe to determine the companies that are
included in the index. Only common stocks are included in the Index. REITs
are eligible for inclusion.

The Wilshire Mid Cap 750 Index is a subset of the Wilshire 5000 Index of
common stocks. The Mid Cap 750 Index consists of those Wilshire 5000
companies ranked between 501 and 1,250 according to market capitalization.

The Wilshire 5000 Equity Index represents the return on the market value of all
common equity securities for which daily pricing is available.

In addition, from time to time in reports and promotions: (1) a Fund's
performance may be compared to other groups of mutual funds tracked by: (a)
Lipper Analytical Services, a widely used independent research firm which
ranks mutual funds by overall performance, investment objectives, and assets;
(b) Morningstar, Inc., another widely used independent research firm which
ranks mutual funds by overall performance, investment objectives, and assets;
or (c) other financial or business publications, such as Business Week, Money
Magazine, Forbes and Barron's which provide similar information; (2) the
Consumer Price Index (measure of inflation) may be used to assess the real
rate of return from an investment in a Fund; (3) other statistics such as GNP,
and net import and export figures derived from governmental publications,
e.g., The Survey of Current Business or other independent parties, e.g., the
Investment Company Institute, may be used to illustrate investment attributes
of a Fund or the general economic, business, investment, or financial
environment in which a Fund operates; (4) various financial economic and
market statistics developed by brokers, dealers and other persons may be used
to illustrate aspects of a Fund's performance; (5) the effect of tax-deferred
compounding on a Fund's investment returns, or on returns in general, may be
illustrated by graphs, charts, etc. where such graphs or charts would compare,
at various points in time, the return from an investment in a Fund (or returns
in general) on a tax-deferred basis (assuming reinvestment of capital gains
and dividends and assuming one or more tax rates) with the return on a taxable
basis; and (6) the sectors or industries in which the Fund invests may

B-31
<PAGE>

be compared to relevant indices or surveys (e.g., S&P Industry Surveys) in
order to evaluate the Fund's historical performance or current or potential
value with respect to the particular industry or sector.

TAXES

Each Fund intends to elect to qualify as a "regulated investment company"
under the provisions of Subchapter M of the Internal Revenue Code of 1986 (the
"Code"). If each Fund qualifies as a "regulated investment company" and
complies with the appropriate provisions of the Code, each Fund will be
relieved of federal income tax on the amounts distributed.

In order to qualify as a regulated investment company, in each taxable year
each Fund must, among other requirements, (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to loans of securities,
and gains (without deduction for losses) from the sale or other disposition of
securities or foreign currencies (subject to the authority of the Secretary of
the Treasury to exclude certain foreign currency gains) or other income
derived with regard to its investing in such securities or currencies and (b)
derive less than 30% of its gross income from gains (without deduction for
losses) realized on the sale or other disposition of securities held for less
than three months. In order to meet this 30% requirement, a Fund may defer
selling certain investments beyond the time when it might otherwise do so.

The discussion of "Taxes" in the Prospectus, in conjunction with the
foregoing, is a general summary of applicable provisions of the Code and U.S.
Treasury Regulations now in effect as currently interpreted by the courts and
the Internal Revenue Service. The Code and these Regulations, as well as the
current interpretations thereof, may be changed at any time by legislative,
judicial or administrative action.

GENERAL INFORMATION

B-32
<PAGE>

shareholders to vote on the removal of a Trustee upon the written request of
the holders of 10 percent of the Trust's shares. In addition, 10 or more
shareholders meeting certain conditions and holding the lesser of $25,000
worth or one percent of the Trust's shares may advise the Trustees in writing
that they wish to communicate with other shareholders for the purpose of
requesting a meeting to remove a Trustee. The Trustees will then either give
those shareholders access to the shareholder list or, if requested by those
shareholders, mail at the shareholders' expense the shareholders'
communication to all other shareholders. See the Contract Prospectus for
information as to the voting of shares by Contract Owners.

Each issued and outstanding share of each Fund is entitled to participate
equally in dividends and distributions of the respective Fund and in the net
assets of such Fund upon liquidation or dissolution remaining after
satisfaction of outstanding liabilities. The shares of each Fund have no
preference, preemptive, conversion, exchange or similar rights, and are freely
transferable.

Under Rule 18f-2 under the 1940 Act, as to any investment company which has
two or more series (such as the Funds) outstanding and as to any matter
required to be submitted to shareholder vote, such matter is not deemed to
have been effectively acted upon unless approved by the holders of a
"majority" (as defined in that Rule) of the voting securities of each series
affected by the matter. Such separate voting requirements do not apply to the
election of Trustees or the ratification of the selection of accountants. The
Rule contains special provisions for cases in which an advisory contract is
approved by one or more, but not all, series. A change in investment policy
may go into effect as to one or more series whose holders so approve the
change even though the required vote is not obtained as to the holders of
other affected series.

Under Massachusetts law, shareholders of a trust such as the Trust may, under
certain circumstances, be held personally liable as partners for the
obligations of the Trust. The Declaration of Trust, however, contains an
express disclaimer of shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or its
Trustees. The Declaration of Trust provides for indemnification and
reimbursement of expenses out of Trust property for any shareholder held
personally liable for its obligations. The Declaration of Trust also provides
that the Trust shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Trust and satisfy any
judgment thereon. Thus, while Massachusetts law permits a shareholder of a
trust such as the Trust to be held personally liable as a partner under
certain circumstances, the risk of a Contract Owner incurring financial loss
on account of shareholder liability is highly unlikely and is limited to the
relatively remote circumstances in which the Trust would be unable to meet its
obligations.

B-33
<PAGE>

The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.

The Trust has Codes of Ethics governing the personal securities transactions
of officers and employees, its Adviser and Sub-Advisers.

INDEPENDENT ACCOUNTANTS

The financial statements of the Trust included in the Prospectus and the
Statement of Additional Information have been examined by Ernst & Young,
L.L.P., independent accountants, for the periods indicated in their reports as
stated in their opinion and have been so included in reliance upon such
opinion given upon the authority of the firm as experts in accounting and
auditing.

FINANCIAL STATEMENTS

B-34
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
_________, 1997

PROVIDIAN SERIES TRUST
CAPITAL PRESERVATION PORTFOLIO
INCOME ORIENTATED PORTFOLIO
GROWTH AND INCOME PORTFOLIO
CAPITAL GROWTH PORTFOLIO
MAXIMUM APPRECIATION PORTFOLIO
MONEY MARKET FUND

TABLE OF CONTENTS

Page

Investment Policies B-
Description of Securities and Investment Techniques B-
Portfolio Turnover and Securities Transactions B-
Management B-
Net Asset Values of the Shares of the Portfolios
and the Money Market Fund B-
Investment Performance B-
Taxes B-
General Information B-
Independent Accountants B-
Financial Statements B-

B-1

<PAGE>

Providian Series Trust (the "Trust") is an investment company presently
consisting of nine separate series (the "Funds") each having different
investment objectives and policies. This SAI pertains to six series, five of
which are professionally managed investment portfolios (each, a "Portfolio")
which seek to achieve their investment objective by investing in a diverse mix
of "Underlying Funds," which consist of open-end management investment companies
or series thereof for which Providian Investment Advisors, Inc. acts as
investment adviser. The investment objectives of the Portfolios and the Money
Market Fund are as follows:

The CAPITAL PRESERVATION PORTFOLIO seeks high current income with low volatility
of principal.

The INCOME ORIENTED PORTFOLIO seeks income and, secondarily, long-term growth
of capital.

The GROWTH AND INCOME PORTFOLIO seeks growth of capital and income.

The CAPITAL GROWTH PORTFOLIO seeks long-term growth of capital and, secondarily,
current income.

The MAXIMUM APPRECIATION PORTFOLIO seeks capital appreciation.

INVESTMENT POLICIES

The Trust has adopted the following policies relating to the investment of
assets of the Portfolios and the Money Market Fund and their activities. These
are fundamental policies and may not be changed without the approval of the
holders of a "majority" of the outstanding shares of each Portfolios and the
Money Market Fund affected. Under the Investment Company Act of 1940 (the "1940
Act"), the vote of such a "majority" means the vote of the holders of the lesser
of (i) 67 percent of the shares represented at a meeting at which more than 50
percent of the outstanding shares are represented or (ii) more than 50 percent
of the outstanding shares. A change in policy affecting only one Portfolio or
the Money Market Fund may be effected with the approval of the holders of a
"majority" of the outstanding shares of such Portfolio or the Money Market
Fund.

POLICIES PERTAINING TO THE PORTFOLIOS

Each Portfolio may not (except as noted):

1. Purchase securities on margin or sell securities short, except that each
Portfolio may make short sales against the box and that effecting short sales
against the box will not be deemed to constitute a purchase of securities on
margin;

B-2
<PAGE>

2. Purchase or sell commodities or commodity contracts (which, for the purpose
of this restriction, shall not include foreign currency futures or forward
currency contracts);

3. Borrow money except from banks as a temporary measure for extraordinary or
emergency purposes, but only if immediately after each borrowing and continuing
thereafter it will have an asset coverage of at least 300%;

4. Underwrite securities of other issuers, except to the extent that a Portfolio
may be deemed to be an underwriter within the meaning of the Securities Act of
1933 in connection with the purchase and sale of portfolio securities;

5. Invest in securities of a company for the purpose of exercising control or
management;

6. Participate on a joint or a joint and several basis in any trading account in
securities;

7. Purchase or sell real estate, except that it may purchase marketable
securities which are issued by companies which invest in real estate or
interests therein;

8. Make loans of its assets if, as a result, more than 50% of a Portfolio's
total assets would be lent to other persons, except (i) to purchase or hold
money market instruments permitted by a Portfolio's investment objective and
policies, or (ii) to enter into repurchase agreements or through lending of a
Portfolio's portfolio securities, or (iii) through purchases of debt securities
or other debt instruments.

9. Issue senior securities, except as permitted under the 1940 Act.

Notwithstanding the foregoing investment restrictions, the Underlying Funds in
which the Portfolios invest have adopted certain investment restrictions which
may be more or less restrictive than those listed above, thereby permitting a
Portfolio to engage in investment strategies indirectly that are prohibited
under the investment restrictions listed above. The investment restrictions of
an Underlying Fund are located in its Statement of Additional Information.

POLICIES PERTAINING TO THE MONEY MARKET FUND
- --------------------------------------------

The Money Market Fund may not (except as noted):

1. sell any securities short or purchase any securities on margin, but may
obtain such short-term credits as may be necessary for clearance of purchases
and sales of portfolio securities;

3. borrow money or engage in reverse repurchase agreements for investment
leverage purposes;

6. purchase or sell commodities, commodity contracts, or commodity futures
contracts;

11. purchase securities of registered open-end investment companies or
registered unit investment trusts in reliance on Sections 12(d)(1)(F) or (G) of
the 1940 Act.

The Money Market Fund has no present intention to borrow money in excess of 5%
of the value of its net assets during the coming fiscal year.

B-3
<PAGE>

Because of their investment objectives and policies, the Portfolios will each
concentrate more than 25% of their assets in the mutual fund industry. In
accordance with the Portfolios' investment programs set forth in the Prospectus,
each of the Portfolios may invest more than 25% of its assets in certain
Underlying Funds. However, each of the Underlying Funds in which each Fund will
invest will not concentrate more than 25% of its total assets in any one
industry; except that the Money Market Fund may invest 25% or more of its total
assets in commercial paper issued by finance companies.

In order to limit the risks associated with entry into repurchase agreements,
the Trustees have adopted certain criteria (which are not fundamental policies)
to be followed by the Portfolios and the Money Market Fund. These criteria
provide for entering into repurchase agreement transactions (a) only with banks
or broker-dealers meeting certain guidelines for creditworthiness, (b) that are
fully collateralized as defined, (a) on an approved standard form of agreement
and (d) that meet limits on investments in the repurchase agreements of any one
bank, broker or dealer. In accordance with regulatory requirements, the Board of
Trustees has also adopted procedures for segregating Portfolio or Money Market
Fund assets whenever a Portfolio or Money Market Fund enters into reverse
repurchase agreements with institutions other than banks.

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES

The Prospectus discusses the investment objectives of the Portfolios, the Money
Market Fund and each of the Underlying Funds in which the Portfolios may invest,
as well as the policies employed to achieve those objectives. This section
contains supplemental information concerning the types of securities and other
instruments in which the Underlying Funds may invest (and repurchase agreements
in which the Portfolios and/or the Underlying Funds may invest), the investment
policies and portfolio strategies the Underlying Funds may utilize and certain
risks attendant to such investments, policies and strategies. There can be no
assurance that the respective investment objectives of the Portfolios or the
Underlying Funds will be achieved.

The Declaration of Trust for the Portfolios permits the Board of Trustees to
establish additional Portfolios from time to time. The investment objectives,
policies and restrictions applicable to additional Portfolios would be
established by the Board of Trustees at the time such portfolios were
established and may differ from those set forth in the Prospectus and this SAI.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES

The Fixed Income Fund may invest in mortgage-backed securities, and in other
asset-backed securities (unrelated to mortgage loans) that are offered to
investors in the future. The value of some mortgage-backed or asset-backed
securities in which the Fund invests may be particularly sensitive to changes in
prevailing interest rates, and, like the other investments of the Funds, the
ability of the Fund to successfully utilize these instruments

B-4
<PAGE>

may depend in part upon the ability of Atlanta Capital Management Company,
L.L.C. ("Atlanta Capital"), sub-adviser of the Portfolios, to forecast interest
rates and other economic factors correctly.

B-5
<PAGE>

guarantees the timely payment of interest and ultimate collection of principal,
but PCs are not backed by the full faith and credit of the U.S. Government.

Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools. However, timely
payment of interest and principal of these pools may be supported by various
forms of insurance, guarantees or structures, including individual loan, title,
pool and hazard insurance and letters of credit. The insurance and guarantees
are issued by governmental entities, private insurers and the mortgage poolers.
Such insurance and guarantees and the creditworthiness of the issuers thereof
will be considered in determining whether a mortgage-related security meets the
Fund's investment quality standards. There can be no assurance that the private
insurers, or guarantors can meet their obligations under the insurance policies
or guarantee arrangements. The Fund may buy mortgage-related securities without
insurance or guarantees if through an examination of the structure or the loan
experience and practices of the originator/servicers and poolers, the Atlanta
Capital determines that the securities meet the Fund's quality standards.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable. The Fund will not purchase mortgage-related securities or any other
assets which in the opinion of the Atlanta Capital are illiquid if, as a result,
more than 15% of the value of the Fund's total assets will be illiquid.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs"). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid on a CMO, in most cases, monthly. CMOs
may be collateralized by whole mortgage loans, but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC, or FNMA, and their income streams.

B-6
<PAGE>

OTHER MORTGAGE-RELATED SECURITIES. Mortgage-related securities are interests in
pools of mortgage loans made to residential home buyers, including mortgage
loans made by savings and loan institutions, mortgage bankers, commercial banks
and others. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations
(see "Mortgage Pass-Through Securities," above). The Fixed Income Fund may also
invest in debt securities which are secured with collateral consisting of
mortgage-related securities (see "Collateralized Mortgage Obligations," at page
_____), and in other types of mortgage-related securities. The Fixed Income Fund
will not purchase mortgage-related securities or any other assets which in the
opinion of Atlanta Capital are illiquid, if, as a result, more than 15% of the
value of this Fund's assets will be illiquid.

B-7
<PAGE>

flow resulting from a CMO will depend on, among other things, the
characteristics of the mortgage assets, the coupon rate of each class of CMO,
prevailing interest rates, the amount of administrative expenses and the
prepayment experience on the mortgage assets. In particular, the yield to
maturity on CMO residuals is extremely sensitive to prepayments on the related
underlying mortgage assets, in the same manner as an interest-only ("I0") class
of stripped mortgage backed securities. See "Stripped Mortgage-Backed
Securities." In addition, if a series of a CMO includes a class that bears
interest at an adjustable rate, the yield to maturity on the related CMO
residual will also be extremely sensitive to changes in the level of the index
upon which interest rate adjustments are based. As described below with respect
to stripped mortgage-backed securities, in certain circumstances the Fund may
fail to recoup fully its initial investment in a CMO residual.

B-8
<PAGE>

ASSET-BACKED SECURITIES

The Fixed Income Fund and the Money Market Fund may invest in asset-backed
securities which represent fractional interests in pools of leases, retail
installment loans and revolving credit receivables, both secured and unsecured.
These assets are generally held by a trust. Payments of principal and interest
or interest only are passed through to certificate holders and may be guaranteed
up to certain amounts by letters of credit issued by a financial institution
affiliated or unaffiliated with the trustee or originator of the trust.

DERIVATIVE INSTRUMENTS

B-9
<PAGE>

The Fund considers derivative instruments to consist of securities or other
instruments whose value is derived from or related to the value of some other
instrument or asset, and not to include those securities whose payment of
principal and/or interest depend upon cash flows from underlying assets, such as
mortgage or asset-backed securities. The value of some derivative instruments in
which the Fund invests may be particularly sensitive to changes in prevailing
interest rates, and, like the other investments of the Fund, its ability to
successfully utilize these instruments may depend in part upon the ability of
Blairlogie Capital Management ("Blairlogie") to forecast interest rates and
other economic factors correctly. If Blairlogie incorrectly forecasts such
factors and has taken positions in derivative instruments contrary to prevailing
market trends, the Fund could be exposed to the risk of loss.

B-10
<PAGE>

The purchase and writing of options involves certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but, as long as its obligation as a writer
continues, has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying securities at the exercise price. If a put or call
option purchased by the Fund is not sold when it has remaining value, and if the
market price of the underlying security remains equal to or greater than the
exercise price (in the case of a put), or remains less than or equal to the
exercise price (in the case of a call), the Fund will lose its entire investment
in the option. Also, where a put or call option on a particular security is
purchased to hedge against price movements in a related security, the price of
the put or call option may move more or less than the price of the related
security. There can be no assurance that a liquid market will exist when the
Fund seeks to close out an option position. Furthermore, if trading restrictions
or suspension are imposed on the options markets, the Fund may be unable to
close out a position.

Most swap agreements entered into by the Fund would calculate the obligations of
the parties to the agreement on a "net basis." Consequently, the Fund's current
obligations

B-11
<PAGE>

(or rights) under a swap agreement will generally be equal to the net amount to
be paid or received under the agreement based on the relative values of the
positions held by each party to the agreement (the "net amount"). The Fund's
current obligations under a swap agreement will be accrued daily (offset against
amounts owed to the Fund), and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of liquid assets such as cash, U.S. Government securities, or high
grade debt obligations, to avoid any potential leveraging of the Fund's
portfolio. Obligations under swap agreements so covered will not be construed to
be "senior securities" for purposes of the Funds' investment restriction
concerning senior securities. The Fund will not enter into a swap agreement with
any single party if the net amount owed or to be received under existing
contracts with that party would exceed 5% of the Fund's assets.

B-12
<PAGE>

prices during a single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a price beyond that
limit. In addition, certain of these instruments are relatively new and without
a significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent the Fund from liquidating an unfavorable position, and
the Fund would remain obligated to meet margin requirements until the position
is closed.

The Fund will only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. The Fund will use
financial futures contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of the Commodity
Futures Trading Commission ("CFTC"), or, with respect to positions in financial
futures and related options that do not qualify as "bona fide hedging"
positions, will enter such positions only to the extent that aggregate initial
margin deposits plus premium paid by it for open futures option positions, less
the amount by which any such positions are "in-the-money" would not exceed 5% of
the Fund's net assets.

B-13
<PAGE>

BORROWING

As a temporary measure for extraordinary or emergency purposes, such as to
facilitate redemptions, the High Quality Stock Fund, the International Active
Fund and the Money Market Fund may borrow money from a bank, but only if
immediately after each such borrowing and continuing thereafter the Fund would
have asset coverage of 300 percent. Any such borrowings will exaggerate the
effect of any increase or decrease in the value of portfolio securities on a
Fund's net asset value; money borrowed will be subject to interest and other
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances), which may or may not exceed the income received from the
securities purchased with borrowed funds. The use of borrowing tends to result
in a faster than average movement, up or down, in the net asset value of a
Fund's shares. A Fund also may be required to maintain minimum average balances
in connection with such borrowing or to pay a commitment or other fee to
maintain a line of credit; either of these requirements would increase the cost
of borrowing over the stated interest rate.

FOREIGN SECURITIES

B-14
<PAGE>

Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. These
include: differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which can
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. In addition, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and therefore may
exhibit greater price volatility. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.

LENDING OF PORTFOLIO SECURITIES

Each Underlying Fund may seek to increase its income by lending portfolio
securities. Under present regulatory policies, such loans may be made to
institutions, such as broker-dealers, and would be required to be secured
continuously by collateral in cash, cash equivalents or liquid assets, including
equity securities and debt securities of any grade, maintained on a current
basis at an amount at least equal to the market value of the securities loaned.
A Fund would have the right to call a loan and obtain the securities loaned at
any time on five days' notice. For the duration of a loan, a Fund would continue

B-15
<PAGE>

to receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation from the investment of the
collateral. A Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but a Fund would call the
loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material matter
affecting the investment. As with other extensions of credit, there are risks of
delay in recovery of, or even loss of rights in, the collateral should the
borrower of the securities fail financially. However, the loans would be made
only to firms deemed by the appropriate Sub-Adviser to be of good standing, and
when, in the judgment of the Sub-Adviser, the consideration which can be earned
currently from securities loans of this type justifies the attendant risk. If
the Sub-Adviser determines to make securities loans, it is intended that the
value of the securities loaned would not exceed 50% of the value of the total
assets of the lending Fund (33 1/3% in the case of the Money Market Fund).

REPURCHASE AGREEMENTS

The Underlying Funds may enter into repurchase agreements with any member bank
of the Federal Reserve System or a member firm of the National Association of
Securities Dealers, Inc. A repurchase agreement, which provides a means for a
Fund to earn income on uninvested cash for periods as short as overnight, is an
arrangement under which the purchaser (i.e., a Fund) purchases a U.S. Government
or other high quality short-term debt obligation (the "Obligation") and the
seller agrees, at the time of sale, to repurchase the Obligation at a specified
time and price. The custody of the Obligation will be maintained by the Fund's
Custodian. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price upon repurchase. In either case, the income to a Fund is
unrelated to the interest rate on the Obligation subject to the repurchase
agreement.

For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
a Fund to the seller of the Obligation. It is not clear whether a court would
consider the Obligation purchased by a Fund subject to a repurchase agreement as
being owned by the Fund or as being collateral for a loan by the Fund to the
seller. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, a Fund may encounter delays and incur costs before
being able to sell the security. Delays may involve loss of interest or decline
in price of the Obligation. If the court characterizes the transaction as a loan
and a Fund has not perfected a security interest in the Obligation, the Fund may
be required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt instrument purchased for a Fund, the
Fund's Sub-Adviser seeks to minimize the risk of loss from repurchase agreements
by analyzing the creditworthiness

B-16
<PAGE>

of the obligor, in this case the seller of the Obligation. Apart from the risk
of bankruptcy or insolvency proceedings, there is also the risk that the seller
may fail to repurchase the security. However, if the market value of the
Obligation subject to the repurchase agreement becomes less than the repurchase
price (including accrued interest), the Fund will direct the seller of the
Obligation to deliver additional securities so that the market value of all
securities subject to the repurchase agreement equals or exceeds the repurchase
price.

REVERSE REPURCHASE AGREEMENTS

WHEN-ISSUED SECURITIES

B-17
<PAGE>

may be more or less than the purchase price payable at the settlement date. The
Trustees do not believe that a Fund's net asset value or income will be exposed
to additional risk by the purchase of securities on a when-issued basis. A Fund
will establish a segregated account in which it will maintain cash, U.S.
Government securities or other liquid assets at least equal in value to
commitments for when-issued securities. Such segregated securities either will
mature or, if necessary, be sold on or before the settlement date. The Money
Market Fund does not intend to engage in when-issued transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.

VARIABLE OR FLOATING-RATE SECURITIES

Variable-rate demand notes include master demand notes that are obligations that
permit a Fund to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between a Fund, as lender, and the
borrower. The interest rates on these notes fluctuate from time to time. The
issuer of such obligations normally has a corresponding right after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders of such obligations. The interest rate on a floating-rate demand
obligation is based on a known lending rate, such as a bank's prime rate, and is
adjusted automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments will generally be traded. There generally is
not an established secondary

B-18
<PAGE>

market for these obligations, although they are redeemable at face value.
Accordingly, where these obligations are not secured by letters of credit or
other credit support arrangements, a Fund's right to redeem is dependent on the
ability of the borrower to pay principal and interest on demand. Such
obligations frequently are not rated by credit rating agencies and, if not so
rated, a Fund may invest in them only if the appropriate Sub-Adviser determines
that at the time of investment the obligations are of comparable quality to the
other obligations in which the Fund may invest. The Sub-Adviser, on behalf of a
Fund, will consider on an ongoing basis the creditworthiness of the issuers of
the floating and variable-rate demand obligations in the Fund's portfolio.

In determining the Fund's weighted average portfolio maturity, the Fund will
consider a floating or variable-rate security to have a maturity equal to its
stated maturity (or redemption date if it has been called for redemption),
except that it may consider (i) variable-rate securities to have a maturity
equal to the period remaining until the next readjustment in the interest rate,
unless subject to a demand feature, (ii) variable rate securities subject to a
demand feature to have a remaining maturity equal to the longer of (a) the next
readjustment in the interest rate or (b) the period remaining until the
principal can be recovered through demand, and (iii) floating-rate securities
subject to a demand feature to have a maturity equal to the period remaining
until the principal can be recovered through demand. Variable and floating-rate
securities generally are subject to less principal fluctuation than securities
without these attributes since the securities usually trade at par following the
readjustment in the interest rate.

ILLIQUID SECURITIES

The Underlying Funds may invest in illiquid securities (i.e., securities that
are not readily marketable). However, an Underlying Fund will not acquire
illiquid securities if, as a result, they would comprise more than 15%, or 10%
with respect to the Money Market Fund, of the value of the Fund's net assets (or
such other amounts as may be permitted under the 1940 Act).

B-19
<PAGE>

transactions exempt from registration under the Securities Act of 1933 (the
"Securities Act"), such as securities that may be resold to institutional
investors under Rule 144A of the Securities Act and Section 4(2) commercial
paper, may be considered liquid under guidelines adopted by the Board of
Trustees.

The Board of Trustees has delegated to the respective Sub-Advisers the day-to-
day determination of the liquidity of a security, although it has retained
oversight and ultimate responsibility for such determinations. The Board of
Trustees has directed each Sub-Adviser to look to such factors as (i) the
frequency of trades or quotes for a security, or (ii) the number of dealers
willing to purchase or sell the security and number of potential buyers, (iii)
the willingness of dealers to undertake to make a market in the security, (iv)
the nature of the security and nature of the marketplace trades, such as the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer, (v) the likelihood that the security's marketability will
be maintained throughout the anticipated holding period, and (vi) any other
relevant factors. A Sub-Adviser may determine 4(2) commercial paper to be liquid
if (i) the 4(2) commercial paper is not traded flat or in default as to
principal and interest, (ii) the 4(2) commercial paper is rated in one of the
two highest rating categories by at least two NRSROs, or if only one NRSRO rates
the security, by that NRSRO, or is determined by the Sub-Adviser to be of
equivalent quality and (iii) the Sub-Adviser considers the trading market for
the specific security taking into account all relevant factors. A foreign
security may be considered liquid by a Sub-Adviser (despite its restricted
nature under the Securities Act) if the security can be freely traded in a
foreign securities market and all the facts and circumstances support a finding
of liquidity.

RESTRICTED SECURITIES

TEMPORARY DEFENSIVE POSITION

B-20
<PAGE>

OTHER INVESTMENT POLICIES OF THE FIXED INCOME FUND

Corporate debt securities may bear fixed, contingent, or variable rates of
interest and may involve equity features, such as conversion or exchange rights
or warrants for the acquisition of stock of the same or a different issuer,
participations based on revenues, sales or profits, or the purchase of common
stock in a unit transaction (where corporate debt securities and common stock
are offered as a unit).

When and if available, debt securities may be purchased at a discount from face
value. However, the Fund does not intend to hold such securities to maturity for
the purpose of achieving potential capital gains, unless yields to maturity on
these securities remain attractive. From time to time the Fund may purchase
securities not paying interest or dividends at the time acquired if, in the
opinion of Atlanta Capital such securities have the potential for future income
(or capital appreciation).

OTHER INVESTMENT POLICIES OF THE MONEY MARKET FUND

RULE 2A-7: MATURITY QUALITY AND DIVERSIFICATION RESTRICTIONS

The Money Market Fund is subject to certain maturity restrictions pursuant to
Rule 2a-7 under the 1940 Act for money market funds that use the amortized cost
method of valuation to maintain a stable net asset value of $1.00 per share.
Accordingly, the Fund will (i) maintain a dollar weighted average portfolio
maturity of 90 days or less, and (ii) will purchase securities with a remaining
maturity of no more than 13 months (397 calendar days). Further, the Fund will
limit its investments to U.S. dollar-denominated securities which present
minimal credit risks and meet certain credit quality and diversification
requirements. For purposes of calculating the maturity of portfolio instruments,
the Fund will follow the requirements of Rule 2a-7. Under Rule 2a-7, the
maturity of portfolio instruments is calculated as indicated below.

Generally, the maturity of a portfolio security shall be deemed to be the period
remaining (calculated from the trade date or such other date on which the Fund's
interest in the security is subject to market action) until the date on which,
in accordance with the terms of the security, the principal amount must
unconditionally be paid, or in the case of a security called for redemption, the
date on which the redemption payment must be made, except that:

(7) A portfolio lending agreement shall be treated as having a maturity equal to
the period remaining until the date on which the loaned securities are scheduled
to be returned, or, where the agreement is subject to demand, the notice period
applicable to a demand for the return of the loaned securities.

The Money Market Fund is subject to certain credit quality restrictions pursuant
to Rule 2a-7 under the 1940 Act. The Fund will invest at least 95% of its
assets in instruments that are determined to present minimal credit risks and at
the time of acquisition, that are (i) obligations issued or guaranteed by the
U.S. government, its agencies, or instrumentalities; (ii) rated by at least two
nationally recognized rating agencies (or by one agency if only one agency has
issued a rating) (the "required rating agencies") in the highest rating category
for short-term debt obligations; (iii) unrated but whose issuer is rated in the
highest category by the required rating agencies with respect to a class of
short-term debt obligations or any security within that class that is comparable
in priority and security with the instrument; (iv) unrated (other than the type
described in (iii)) but determined by the Board of Trustees to be of comparable
quality to the foregoing (provided the unrated security has not received a
short-term rating, and with respect to a long-term security with a remaining
maturity within the Fund's maturity restrictions, has not received a long-term
rating from any agency that is other than in its highest rating category); or
(v) a security issued by a registered investment company that is a money market
fund. The foregoing are referred to as "first-tier securities."

The balance of the securities in which the Fund may invest are instruments
determined to present minimal credit risks, which do not qualify as first-tier
securities, and at the time of acquisition, are (i) rated by the required rating
agencies in one of the two highest rating categories for short-term debt
obligations; (ii) unrated but whose issuer is rated in one of the two highest
categories by the required rating agencies with respect to a class of short-term
debt obligations or any security within that class that is comparable in
priority and security with the obligation; or (iii) unrated (other than
described in (ii)) but determined by the Board of Trustees to be of comparable
quality to the foregoing (provided the unrated security has not received a
short-term rating and with respect to a long-term security with a remaining
maturity with the Fund's maturity restrictions, has not received a long-term
rating from any agency that is other than in one of its highest two rating
categories). The foregoing are referred to as "second-tier securities."

In addition to the foregoing guidelines, the Fund is subject to certain
diversification restrictions pursuant to Rule 2a-7 under the 1940 Act, which
include (i) the Fund will not acquire a second-tier security of an issuer if,
after giving effect to the acquisition, the Fund would have invested more than
the greater of 1% of its total assets or one million dollars in second-tier
securities issued by that issuer, and (ii) the Fund will not invest more than 5%
of the Fund's assets in the securities (other than securities issued by the U.S.
government or any agency or instrumentality thereof) issued by a single issuer,
except for certain investments held for not more than 3 business days.

As used herein, all capitalized but undefined terms shall have the meaning such
terms have in Rule 2a-7.

Set forth below are descriptions of certain instruments in which the Money
Market Fund may invest and certain investment risks, policies and restrictions
applicable to the Money Market Fund.

(1) Eurodollar Certificates of Deposit ("ECDs") issued by foreign branches of
U.S. or foreign banks;

(2) Eurodollar Time Deposits ("ETDs"), which are U.S. dollar-denominated
deposits in foreign branches of U.S. or foreign banks;

(3) Canadian Time Deposits, which are U.S. dollar-denominated deposits issued
by branches of major Canadian banks located in the U.S.; and

(4) Yankee Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-
denominated certificates of deposit issued by U.S. branches of foreign
banks and held in the U.S.

RATINGS. An NRSRO's two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated A-1+,
A-1 or A-2 by Standard & Poor's Ratings Group ("S&P"), Prime-1 or Prime-2 by
Moody's Investors Service, Inc. ("Moody's"), or F-1 (+ or -) or F-2 (+ or -) by
Fitch Investors Service, Inc. ("Fitch") are all considered rated in one of the
two highest short-term rating categories. The Money Market Fund will limit its
investments in securities rated in the second highest short-term rating category
(e.g., A-2 by S&P, Prime-2 by Moody's or F-2 (+ or -) by Fitch) to not more than
5% of its total assets, with not more than 1% invested in the securities of any
one issuer. The Fund will follow applicable regulations in determining whether a
security rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be rated
by two NRSROs in one of their two highest rating categories.

(1) the full faith and credit of the U.S. Treasury;

(2) the issuer's right to borrow from the U.S. Treasury;

(3) the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or

(4) the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:

(1) Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives;

(2) Federal Home Loan Banks;

(3) Federal Home Loan Mortgage Corporation;

(4) Federal National Mortgage Association; and

(5) Student Loan Marketing Association.

PORTFOLIO TURNOVER AND SECURITIES TRANSACTIONS

A portfolio turnover rate is, in general, the percentage computed by taking the
lesser of purchases or sales of portfolio securities (excluding certain short-
term securities) for a year and dividing it by the monthly average of the market
value of such securities during the year. The Portfolios do not have a
predetermined rate of portfolio turnover since such turnover will be incidental
to transactions taken with a view to achieving their respective objectives.

High turnover and short-term trading involve correspondingly greater commission
expenses and transaction costs. If a Portfolio derives more than 30 percent of
its gross income from the sale of securities held less than three months, the
Portfolio may fail to qualify under the tax laws as a regulated investment
company in particular years and thereupon would lose certain beneficial tax
treatment of its income (see "Dividends, Distributions and Taxes" in the
Prospectus).

B-21
<PAGE>

Each Underlying Fund Sub-Adviser is responsible for decisions to buy and sell
securities, broker-dealer selection, and negotiation of its brokerage commission
rates. The Sub-Adviser's primary consideration in effecting a securities
transaction will be execution at the most favorable price. In certain instances,
the Sub-Adviser may make purchases of underwritten issues at prices which
include underwriting fees, and, in selecting a broker-dealer to execute each
particular transaction, the Sub-Adviser will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; and the size of contribution of the
broker-dealer to the investment performance of the Funds on a continuing basis.
The Sub-Adviser shall not be deemed to have acted unlawfully or to have breached
any duty created by the Investment Advisory Agreements in question or otherwise
solely by reason of its having caused the Trust to pay a broker-dealer that
provides brokerage and research services to the Sub-Adviser an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Trust.

Each Sub-Adviser allocates the orders placed by it on behalf of a Fund to such
broker-dealers who also provide research or statistical material, or other
services to the Funds, the Sub-Adviser or its clients. Such allocation shall be
in such amounts and proportions as the Sub-Adviser shall determine and the Sub-
Adviser will report on said allocations regularly to the Trust indicating the
broker-dealers to whom such allocations have been made and the basis therefor.
Broker-dealers may be selected who provide brokerage and/or research services to
the Funds and/or other accounts over which the Sub-Adviser exercises investment
discretion. Such services may include advice concerning the value of securities
(including providing quotations as to securities); the advisability of investing
in, purchasing or selling securities; the availability of securities or the
purchasers or sellers of securities; furnishing analysis and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto, such as clearance and settlement.

The receipt of research from broker-dealers may be useful to the Sub-Adviser in
rendering investment management services to the Trust and/or the Sub-Adviser's
other clients; conversely, such information provided by broker-dealers who have
executed transaction orders on behalf of other clients may be useful to the Sub-
Adviser in carrying out its obligations to the Trust. The receipt of such
research will not be substituted for the independent research of the Sub-
Adviser. It does enable the Sub-Adviser to reduce costs to less than those which
would have been required to develop comparable information through its own
staff. The use of broker-dealers who supply research may result in the payment
of higher commissions than those available from other broker-dealers who

B-22
<PAGE>

provide only the execution of portfolio transactions. Orders on behalf of the
Trust may be bunched with orders on behalf of other clients of the Sub-Adviser.

The Board of Trustees periodically reviews each Sub-Adviser's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of the Trust.

MANAGEMENT

Providian Investment Advisors, Inc. (the "Adviser") in general supervises the
Trust's management and investment program, prepares reports for the Trust,
monitors compliance by the Trust in its investment activities and pays all
compensation of officers and Trustees of the Trust who are affiliated persons of
the Adviser. The Trust pays all other expenses incurred in the operation of the
Trust, including fees and expenses of unaffiliated Trustees of the Trust.
Although the Portfolios do not pay an investment management fee in connection
with management of the Portfolios, the Portfolios will indirectly bear their pro
rata share of the fees and expenses incurred by the Underlying Funds. The
Adviser has agreed to waive operating expenses for each Portfolio for three
years and to limit the operating expenses (excluding advisory fees) of each
Underlying Fund so that the ratio of expenses of net assets on an annual basis
incurred does not exceed 0.25%.

Subject to the supervision and direction of the Board of Trustees, Atlanta
Capital will determine how each Portfolio's assets will be invested in the
Underlying Funds and in money market instruments and U.S. government securities
pursuant to the investment objective and policies of each Portfolio set forth in
this Prospectus and make recommendations to the Board of Trustees concerning
changes in (a) the Underlying Funds in which the Portfolios may invest, (b) the
percentage range of assets that may be invested by each Portfolio in any one
Underlying Fund and (c) the percentage range of assets of any Portfolio that may
be invested in equity funds and fixed income funds (including money market
funds). The Trustees of the Trust will periodically monitor the allocations made
and the basis upon which such allocations were made or maintained.

Pursuant to the Sub-Advisory Agreements with the Adviser, subject to the
supervision of the Trustees of the Trust, and in conformity with the stated
policies of the Funds, Atlanta Capital manages the investment operations of the
High Quality Stock Fund and the Fixed Income Fund, Blairlogie Capital Management
manages the investment operations of the International Active Fund, and
Federated Investment Counseling manages the investment operations of the Money
Market Fund. The Sub-Advisers also manage the composition of each respective
Fund's portfolio, including the purchase, retention, disposition and loan of
securities.

Each Investment Advisory and Sub-Advisory Agreement will remain in effect for
two years following its effective date, and will continue in effect thereafter
only if such

B-23
<PAGE>

TRUSTEES AND OFFICERS

<TABLE>
<CAPTION>
Positions(s) Held Principal Occupation(s)
Name and Address Age With Registrant During Past Five Years
<S> <C> <C> <C>

Kris A. Robbins* 37 President and Chief Group Sales and
Trustee Product Development
Officer of Providian
Corporation since
September 1996; Manager,
Institutional Marketing of
Providian Corporation, from
1994 to September 1996;
Director, Managed Funds of
Providian Corporation, from
1992 to 1994; Director and
Vice President of Providian
Investment Advisors, Inc.

Thomas J. Hartlage* 44 Chief Financial Director, Product Management
Officer of Providian Corporation since
1995; Director, Institutional
Marketing of Providian
Corporation from 1993 to 1995;
Director, New Initiatives of
Providian Corporation from
1992-1993; Director, Business
Planning of Providian
Corporation from 1991-1992;
Vice President of Providian
Investment Advisors, Inc.

</TABLE>

B-24
<PAGE>

NET ASSET VALUES OF THE SHARES OF THE PORTFOLIOS AND THE MONEY MARKET FUND

As set forth in the Prospectus under the caption "Net Asset Value and Pricing,"
the net asset value of each Portfolio and the Money Market Fund will be
determined as of the close of trading on each day the NYSE is open for trading
(currently 4:00 P.M. Eastern Time). The New York Stock Exchange is open for
trading Monday through Friday except New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Additionally, if any of the aforementioned holidays falls on a
Saturday, the NYSE will not be open for trading on the preceding Friday, and
when any such holiday falls on a Sunday, the NYSE will not be open for trading
on the succeeding Monday, unless unusual business conditions exist, such as the
ending of a monthly or yearly accounting period.

Securities held by all Portfolios will be valued as follows: Underlying Fund
shares held by Portfolios are valued at the net asset value per share determined
as of the close of business (4:00 P.M. Eastern Time) on the day the securities
are being valued. Short-term debt securities with 61 days or more to maturity at
time of purchase are valued, through the 61st day prior to maturity, at market
value based on quotations obtained from market makers or other appropriate
sources; thereafter, the value on the 61st day is amortized on a straight-line
basis over the remaining number of days to maturity. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of Trustees of
the Trust. Debt securities with maturities of 60 days or less are valued
at amortized cost.

B-25
<PAGE>

INVESTMENT PERFORMANCE

YIELD CALCULATIONS
- ------------------

The Trust may from time to time disclose the current annualized yield of the
Portfolios for 30-day periods. The annualized yield of a Portfolio refers to the
income generated by the Portfolio over a specified 30-day period. Because the
yield is annualized, the yield generated by the Portfolio during the 30-day
period is assumed to be generated each 30-day period. The yield is computed by
dividing the net investment income per share earned during the period by the
price per share on the last day of the period, according to the following
formula:

YIELD = 2[(a-b + 1)/6/ - 1]
---
cd

Where: a = net investment income earned during the period by the Portfolio.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the period.

d = the maximum offering price per share on the last day of the
period.

Because of the charges and deductions imposed by the separate accounts and, in
certain cases, by series of the Trust which invest in the Underlying Funds
described in this SAI, the yield realized by Contract Owners in the investment
divisions of the separate accounts will be lower than the yield for the
corresponding Fund of the Trust. The yield on amounts held in the Portfolios
normally will fluctuate over time. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates of
return. Each of the Portfolios yield will be affected by the types and quality
of Underlying Fund securities held by the respective Underlying Fund, and its
operating expenses.

CURRENT YIELD
- -------------

B-26
<PAGE>

constant at $1.00) at the beginning of the period ("based period return"). The
result is then divided by 7 and multiplied by 365 and the resulting yield figure
is carried to the nearest one-hundredth of one percent. Realized capital gains
or losses and unrealized appreciation or depreciation of investments are not
included in the calculation.

EFFECTIVE YIELD
- ---------------

The Money Market Fund's effective yield is determined by taking the base period
return (computed as described above) and calculating the effect of assumed
compounding. The formula for the effective yield is:
(base period return + 1)/(365/7)/ - 1.

STANDARDIZED TOTAL RETURN CALCULATIONS
- --------------------------------------

The Trust may from time to time also disclose average annual total returns for
the Portfolios for various periods of time. Average annual total return
quotations are computed by finding the average annual compounded rates of return
over one, five and ten year periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:

P (1 + T)/n/ = ERV

Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the one, five, or ten-year period at the end of the
one, five, or ten-year period (or fractional portion thereof).

All recurring fees that are charged to all shareholder accounts are recognized
in the ending redeemable value. The average annual total return calculations for
the Portfolio will not reflect the effect of charges that may be applicable to a
particular policy.

NON-STANDARDIZED PERFORMANCE. In addition, in order to more completely represent
a Portfolio's performance or more accurately compare such performance to other
measures of investment return, a Portfolio also may include in advertisements,
sales literature and shareholder reports other total return performance data
("Non-Standardized Return"). Non-Standardized Return may be quoted for the same
or different periods as those for which Standardized Return is quoted; it may
consist of an aggregate or average annual percentage rate of return, actual
year-by-year rates or any combination thereof. Non-Standardized Return will be
accompanied by Standardized Return. Non-Standardized Return may or may not take
sales charges into account; performance data calculated without taking the
effect of sales charges into account will be higher than data including

B-27
<PAGE>

the effect of such charges. All non-standardized performance will be advertised
only if the standard performance data for the same period, as well as for the
required periods, is also presented.

GENERAL INFORMATION. From time to time, the Portfolios may advertise their
performance compared to similar funds using certain unmanaged indices, reporting
services and publications. Descriptions of some of the indices which may be used
are listed below.

The Standard & Poor's 500 Composite Stock Price Index is a well diversified list
of 500 companies representing the U.S. stock market.

The Standard & Poor's 400 Midcap Index tracks the stock price movement of 400
companies with mid-size capitalization of $300 million to $5 billion. Stocks are
chosen for market size, liquidity and industry group representation.

The Standard and Poor's Small Cap 600 index is designed to represent price
movements in the small cap U.S. equity market. It contains companies chosen by
the Standard & Poors Index Committee for their size, industry, characteristics,
and liquidity. None of the companies in the S&P 600 overlap with the S&P 500 or
the S&P 400 (MidCap Index). The S&P 600 is weighted by market capitalization.
REITs are not eligible for inclusion.

The NASDAQ Composite OTC Price Index is a market value-weighted and unmanaged
index showing the changes in the aggregate market value of approximately 3,500
stocks.

The Lehman Brothers Aggregate Bond Index is an index consisting of the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers Mortgage-Backed
Securities Index, and the Lehman Brothers Assets-Backed Securities Index. The
Government/Corporate Bond Index is described below. The Mortgage-Backed
Securities Index consists of 15 and 30-year fixed rate securities backed by
mortgage pools of GNMA, FHLMC and FNMA (excluding buy downs, manufactured homes
and graduated equity mortgages). The Asset-Backed Securities Index consists of
credit card, auto and home equity loans (excluding subordinated tranches) with
an average life of one year. Each Index includes income and distributions but
does not reflect fees, brokerage commissions or other expenses of investing.

The Lehman Brothers Intermediate Aggregate Index consists of 1-10 year
government bonds, 1-10 year corporate bonds rated A or higher by an NRSRO, all
mortgages, and all asset backed securities within the Aggregate Index (i.e., the
Lehman Brothers Aggregate Index less the Long Government/Corporate Index). This
Index offers a broad based benchmark with a shorter duration than the Lehman
Brothers Aggregate Index.

The Lehman Brothers Government Bond Index is a measure of the market value of
all public obligations of the U.S. Treasury; all publicly issued debt of all
agencies of the U.S.

B-28
<PAGE>

Government and all quasi-federal corporations; and all corporate debt guaranteed
by the U.S. Government; mortgage backed securities, bonds and foreign targeted
issues are not included in the Lehman Government Index.

The Lehman Brothers Government/Corporate Bond Index is a measure of the market
value of approximately 5,300 bonds with a face value currently in excess of $1.3
trillion. To be included in the Lehman Government/Corporate Index, an issue must
have amounts outstanding in excess of $1 million, have at least one year to
maturity and be rated "Baa" or higher ("investment grade") by a nationally
recognized rating agency.

The Russell 3000 Index is composed of the 3,000 largest U.S. companies ranked by
market capitalization representing approximately 98% of the U.S. equity market.

The Russell 2000 Index represents the bottom two thirds of the largest 3000
publicly traded companies domiciled in the U.S. Russell uses total market
capitalization to sort its universe to determine the companies that are included
in the index. Only common stocks are included in the Index. REITs are eligible
for inclusion.

The Wilshire Mid Cap 750 Index is a subset of the Wilshire 5000 Index of common
stocks. The Mid Cap 750 Index consists of those Wilshire 5000 companies ranked
between 501 and 1,250 according to market capitalization.

The Wilshire 5000 Equity Index represents the return on the market value of all
common equity securities for which daily pricing is available.

In addition, from time to time in reports and promotions, a Portfolio's
performance may be compared to (i) other groups of mutual funds tracked by: (a)
Lipper Analytical Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets; (b)
Morningstar, Inc., another widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets; or (c)
other financial or business publications, such as Business Week, Money Magazine,
Forbes and Barron's which provide similar information; (2) the Consumer Price
Index (measure of inflation) may be used to assess the real rate of return from
an investment in a Portfolio; (3) other statistics such as GNP, and net import
and export figures derived from governmental publications, e.g., The Survey of
Current Business or other independent parties, e.g., the Investment Company
Institute, may be used to illustrate investment attributes of a Fund or the
general economic, business, investment, or financial environment in which a Fund
operates; (4) various financial economic and market statistics developed by
brokers, dealers and other persons may be used to illustrate aspects of a
Portfolio's performance; (5) the effect of tax-deferred compounding on a
Portfolio's investment returns, or on returns in general, may be illustrated by
graphs, charts, etc. where such graphs or charts would compare, at various
points in time, the return from an investment in a Portfolio (or returns in
general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the return on a taxable
basis; and (6) the sectors or industries in which the Portfolio invests may be
compared to relevant indices or surveys (e.g., S&P Industry Surveys) in order to
evaluate the Portfolio's historical performance or current or potential value
with respect to the particular industry or sector.

B-29
<PAGE>

TAXES

The following is a summary of certain Federal income tax considerations that may
affect the Portfolios and their shareholders. The summary is not intended as a
substitute for individual tax advice, and investors are urged to consult their
tax advisors as to the tax consequences of an investment in any Portfolio.

Tax Status of the Portfolios and the Money Market Fund
- ------------------------------------------------------

Each Portfolio and the Money Market Fund will be treated as a separate taxable
entity for Federal income tax purposes.

Each Portfolio and the Money Market Fund intend to qualify separately each year
as a "regulated investment company" under the Code. A qualified Portfolio and
the Money Market Fund will not be liable for Federal income taxes to the extent
that its taxable net investment income and net realized capital gains are
distributed to its shareholders, provided that each Portfolio and the Money
Market Fund distribute at least 90% of its net investment income.

Each Portfolio and the Money Market Fund intend to accrue dividend income for
Federal income tax purposes in accordance with the rules applicable to regulated
investment companies. In some cases, these rules may have the effect of
accelerating (in comparison to other recipients of the dividend) the time at
which the dividend is taken into account by a Portfolio and the Money Market
Fund as taxable income.

Distributions of an Underlying Fund's investment company taxable income are
taxable as ordinary income to a Portfolio which invests in the Underlying Fund.
Distributions of the excess of an Underlying Fund's net long-term capital gain
over its net short-term capital loss, which are properly designated as "capital
gain dividends," are taxable as long-term capital gain to a Portfolio which
invests in the Fund, regardless of how long the Portfolio held the Fund's
shares, and are not eligible for the corporate dividends-received deduction.
Upon the sale or other disposition by a Portfolio of shares of any Underlying
Fund, the Portfolio generally will realize a capital gain or loss which will be
long-term or short-term, generally depending upon the Portfolio's holding period
for the shares.

Tax Treatment of Shareholders
- -----------------------------

The Portfolios and the Money Market Fund have been informed that the life
insurance company offering Contracts intends to qualify the Separate Account as
a "segregated asset account" within the meaning of the Code. For a Separate
Account to qualify as a segregated asset account, the underlying investment
company in which such Separate Account holds shares must meet the
diversification requirements of Section 817(h) of the Code and the regulations
promulgated thereunder. To meet those requirements, an underlying investment
company must, after a one year start-up period, on the last day of

B-30
<PAGE>

each calendar quarter, or during a 30 day grace period thereafter, invest no
more than certain specified percentages of its assets in the securities of any
one, two, three or four issuers. For these purposes, all obligations of the
United States Treasury and each instrumentality are treated as securities of
separate issuers.

Income on assets of a Separate Account qualified as a segregated asset account
whose underlying investments are adequately diversified will not be taxable to
Contract Owners. However, in the event a Separate Account is not so qualified,
all annuities allocating any amount of premiums to such Separate Account will
not qualify as annuities for federal income tax purposes and the holders of such
annuities would be taxed on any income on the annuities during the period of
disqualification.

The Portfolios have undertaken to meet the diversification requirements of
Section 817(h) of the Code. This undertaking may limit the ability of a
particular Portfolio to make certain otherwise permitted investments. For
purposes of asset diversification testing, the regulations under the Code set
forth a "look through" rule. Providian Life and Health Insurance Company and
First Providian Life and Health Insurance Company believe that under this rule,
the Separate Account must be tested for compliance with the percentage
limitations by "looking through" both the shares in Portfolios that are held by
the Separate Account and the shares in the Underlying Funds that are held by the
Portfolios to the investment assets held by the Underlying Funds.

Taxation of the Underlying Funds
- --------------------------------

Each Underlying Fund intends to qualify annually and elect to be treated as a
regulated investment company under Subchapter M of the Code. In any year in
which an Underlying Fund qualifies as a regulated investment company and timely
distributes all of its taxable income, the Underlying Fund generally will not
pay any federal income or excise tax.

If more than 50% in value of an Underlying Fund's assets at the close of any
taxable year consists of stocks or securities of foreign corporations, that
Underlying Fund may elect to treat certain foreign taxes paid by it as paid by
its shareholders. The shareholders would then be required to include their
proportionate share of the electing Fund's foreign income and related foreign
taxes in income even if the shareholder does not receive the amount representing
foreign taxes. Shareholders itemizing deductions could then deduct the foreign
taxes, or, whether or not deductions are itemized but subject to certain
limitations, claim a direct dollar for dollar tax credit against their U.S.
federal income tax liability attributable to foreign income. In many cases, a
foreign tax credit will be more advantageous than a deduction for foreign taxes.
Each of the Portfolios may invest in some Underlying Funds that expect to be
eligible to make the above-described election. While a Portfolio will be able to
deduct the foreign taxes that it will be treated as receiving if the election is
made, the Portfolio will not itself be able to elect to treat its foreign taxes
as paid by its shareholders. Accordingly, the shareholders of the Portfolio will
not have an option of claiming a foreign tax credit for foreign taxes paid by
the Underlying Funds.

B-31
<PAGE>

GENERAL INFORMATION

The Trustees themselves have the power to alter the number and terms of office
of the Trustees, and they may at any time lengthen their own terms or make their
terms of unlimited duration (subject to certain removal procedures) and appoint
their own successors, provided that always at least a majority of the Trustees
have been elected by the shareholders of the Trust. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of the
shares voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any Trustees. The Trust
is not required to hold Annual Meetings of Shareholders for action by
shareholders' vote except as may be required by the 1940 Act or the Declaration
of Trust. The Declaration of Trust provides that shareholders can remove
Trustees by a vote of two-thirds of the vote of the outstanding shares. The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the holders of 10 percent of the Trust's shares. In
addition, 10 or more shareholders meeting certain conditions and holding the
lesser of $25,000 worth or one percent of the Trust's shares may advise the
Trustees in writing that they wish to communicate with other shareholders for
the purpose of requesting a meeting to remove a Trustee. The Trustees will then
either give those shareholders access to the shareholder list or, if requested
by those shareholders, mail at the shareholders' expense the shareholders'
communication to all other shareholders. See the Contract Prospectus for
information as to the voting of shares by Contract Owners.

Each issued and outstanding share of each Fund is entitled to participate
equally in dividends and distributions of the respective Fund and in the net
assets of such Fund upon liquidation or dissolution remaining after satisfaction
of outstanding liabilities. The shares of each Fund have no preference,
preemptive, conversion, exchange or similar rights, and are freely transferable.

Under Rule 18f-2 under the 1940 Act, as to any investment company which has two
or more series (such as the Funds) outstanding and as to any matter required to
be submitted to shareholder vote, such matter is not deemed to have been
effectively acted upon unless approved by the holders of a "majority" (as
defined in that Rule) of the voting securities of each series affected by the
matter. Such separate voting requirements do not apply to the election of
Trustees or the ratification of the selection of accountants. The Rule contains
special provisions for cases in which an advisory contract is approved by one or
more, but not all, series. A change in investment policy may go into effect as
to one or more series whose holders so approve the change even though the
required vote is not obtained as to the holders of other affected series.

B-32
<PAGE>

each agreement, obligation or instrument entered into or executed by the Trust
or its Trustees. The Declaration of Trust provides for indemnification and
reimbursement of expenses out of Trust property for any shareholder held
personally liable for its obligations. The Declaration of Trust also provides
that the Trust shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Trust and satisfy any judgment
thereon. Thus, while Massachusetts law permits a shareholder of a trust such as
the Trust to be held personally liable as a partner under certain circumstances,
the risk of a Contract Owner incurring financial loss on account of shareholder
liability is highly unlikely and is limited to the relatively remote
circumstances in which the Trust would be unable to meet its obligations.

The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.

The Trust has Codes of Ethics governing the personal securities transactions of
officers and employees, its Adviser and Sub-Advisers.

INDEPENDENT ACCOUNTANTS

The financial statements of the Trust included in the Prospectus and the
Statement of Additional Information have been examined by Ernst & Young, L.L.P.,
independent accountants, for the periods indicated in their reports as stated in
their opinion and have been so included in reliance upon such opinion given upon
the authority of the firm as experts in accounting and auditing.

FINANCIAL STATEMENTS

B-33
<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements:

None

(b) Exhibits:

(1) Agreement and Declaration of Trust/1/

(2) By-laws/1/

(3) Not Applicable

(4) Not Applicable

(5)(a) Investment Advisory Agreement between Providian Series Trust
and Providian Investment Advisors, Inc./2/

(5)(b) Sub-Advisory Agreement between Providian Investment Advisors,
Inc. and Atlanta Capital Management Company, LLC/2/

(5)(c) Sub-Advisory Agreement between Providian Investment Advisors,
Inc. and Blairlogie Capital Management/2/

(5)(d) Sub-Advisory Agreement between Providian Investment Advisors,
Inc. and Federated Investment Counseling /2/

(6) Not Applicable

(7) Not Applicable

(8) Custody Agreement/2/

(9)(a) Administrative Agreement/2/

(9)(b) Transfer Agency Agreement/2/

(10) Opinion and Consent of Counsel as to the Legality of the
Securities being Registered/2/

(11)(a) Consent of Ernst & Young, L.L.P./2/

(11)(b) Consent of Jorden Burt Berenson & Johnson LLP/2/

<PAGE>

(12) Not Applicable

(13) Not Applicable

(14) Not Applicable

(15) Not Applicable

(16) Not Applicable

(17) Not Applicable

(18) Not Applicable

____________________

/1/ Previously filed with Registrant's Initial Registration Statement on
Form N-1A on November 5, 1996.
/2/ To be filed by amendment.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

None.

ITEM 27. INDEMNIFICATION.

Reference is made to Articles II and V of the Agreement and Declaration of
Trust filed herewith.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Certain of the officers and directors of the Registrant's investment
adviser also serve as officers and/or directors for other subsidiaries of
Providian Corporation. For additional information, please see Parts A and B.

ITEM 29. PRINCIPAL UNDERWRITERS.

Not Applicable
<PAGE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

The accounts, books and other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of the Adviser or the
Custodian.

ITEM 31. MANAGEMENT SERVICES.

None.

ITEM 32. UNDERTAKINGS.

1. Registrant hereby undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months from
the effective date of Registrant's 1933 Act Registration Statement.

2. Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THIS PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
REGISTRATION STATEMENT HAS BEEN SIGNED ON BEHALF OF THE REGISTRANT IN THE CITY
OF LOUISVILLE AND COMMONWEALTH OF KENTUCKY ON THE 10TH DAY OF JANUARY, 1997.

Providian Series Trust

By: /s/ Kris A. Robbins
---------------------
Kris A. Robbins
President and Trustee

AS REQUIRED BY THE SECURITIES ACT OF 1933, THIS PRE-EFFECTIVE AMENDMENT NO.
1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES WITH THE REGISTRANT AND ON THE DATES INDICATED ON THIS 10TH DAY
OF JANUARY, 1997.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Kris A. Robbins President and Trustee January 10, 1997
--------------------
Kris A. Robbins

/s/ Thomas Hartlage Principal Financial Officer January 10, 1997
--------------------
Thomas Hartlage

</TABLE>