DFA INVESTMENT DIMENSIONS GROUP INC, 497, 1996-04-15

DFA INVESTMENT DIMENSIONS GROUP INC
497, 1996-04-15

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<PAGE>

PROSPECTUS

MARCH 29, 1996

DFA INVESTMENT DIMENSIONS GROUP INC.

DFA INVESTMENT DIMENSIONS GROUP INC. (the "Fund"), 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401, (310) 395-8005, is an open-end
management investment company.

The Fund issues twenty-eight series of shares, each of which represents
a separate class of the Fund's common stock, having its own investment
objective and policies. This prospectus describes only VA Small Value
Portfolio, VA Large Value Portfolio, VA International Value Portfolio, VA
International Small Portfolio, VA Short-Term Fixed Portfolio and VA Global
Bond Portfolio (individually, a "Portfolio" and collectively, the
"Portfolios"). Shares of the Portfolios are offered only to separate accounts
of insurance companies to fund variable life and variable annuity contracts.

The investment objective of each of the Domestic Equity and
International Equity Portfolios is to achieve long-term capital appreciation.
The investment objectives of the Fixed Income Portfolios are: VA Short-Term
Fixed Portfolio, to achieve stable real value of capital with a minimum of
risk by investing in high quality obligations; and VA Global Bond Portfolio,
to provide a market rate of return for a global fixed income portfolio with
low relative volatility of returns.

DOMESTIC EQUITY PORTFOLIOS

VA SMALL VALUE PORTFOLIO VA LARGE VALUE PORTFOLIO

INTERNATIONAL EQUITY PORTFOLIOS

VA INTERNATIONAL VALUE PORTFOLIO VA INTERNATIONAL SMALL PORTFOLIO

FIXED INCOME PORTFOLIOS

VA SHORT-TERM FIXED PORTFOLIO VA GLOBAL BOND PORTFOLIO

This prospectus sets forth concisely information about the Portfolios that
prospective investors should know before investing and should be read carefully
and retained for future reference. You should read this prospectus in
conjunction with the prospectus describing the related insurance company
separate account. A statement of additional information about the Portfolios,
dated March 29, 1996, which is incorporated herein by reference, has been filed
with the Securities and Exchange Commission and is available upon request,
without charge, by writing or calling the Fund at the above address or telephone
number.

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

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 5

DOMESTIC EQUITY PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . 7
Portfolio Characteristics and Policies. . . . . . . . . . . . . . . . 7
Portfolio Structure . . . . . . . . . . . . . . . . . . . . . . . . . 7
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . 8

INTERNATIONAL EQUITY PORTFOLIOS. . . . . . . . . . . . . . . . . . . . . . 8

VA INTERNATIONAL VALUE PORTFOLIO . . . . . . . . . . . . . . . . . . . . . 8
Investment Objective and Policies . . . . . . . . . . . . . . . . . . 8
Portfolio Structure . . . . . . . . . . . . . . . . . . . . . . . . . 9
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . 10

VA INTERNATIONAL SMALL PORTFOLIO . . . . . . . . . . . . . . . . . . . . . 10
Investment Objective and Policies . . . . . . . . . . . . . . . . . . 10
Portfolio Structure . . . . . . . . . . . . . . . . . . . . . . . . . 12
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . 13

SECURITIES LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

FIXED INCOME PORTFOLIOS -
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . 13
VA Short-Term Fixed Portfolio . . . . . . . . . . . . . . . . . . . . 13
VA Global Bond Portfolio. . . . . . . . . . . . . . . . . . . . . . . 14
Description of Investments. . . . . . . . . . . . . . . . . . . . . . 14
Investments in the Banking Industry . . . . . . . . . . . . . . . . . 15
Portfolio Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . 15

RISK FACTORS - ALL PORTFOLIOS. . . . . . . . . . . . . . . . . . . . . . . 16
Small Company Securities. . . . . . . . . . . . . . . . . . . . . . . 16
Foreign Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Currencies and Related Transactions . . . . . . . . . . . . . 17
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Portfolio Strategies. . . . . . . . . . . . . . . . . . . . . . . . . 17
Futures Contracts and Options on Futures. . . . . . . . . . . . . . . 18
Banking Industry Concentrations . . . . . . . . . . . . . . . . . . . 18
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . 18

MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Investment Services - VA International Small Portfolio. . . . . . . . 19
Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . 20

DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . 20

PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . 20

VALUATION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>

<PAGE>

HIGHLIGHTS

PAGE
THE PORTFOLIOS

Each Portfolio, in effect, represents a separate mutual fund with its own
investment objective and policies. The investment objective of each Portfolio
is a fundamental policy and may not be changed without the affirmative vote of a
majority of its outstanding securities. Shares of the Portfolios are sold only
to separate accounts of insurance companies. Proceeds from the sale of shares
of a Portfolio will be invested in accordance with that Portfolio's investment
objective and policies. A Portfolio will pay its shareholders all dividends and
distributions arising from the assets of the Portfolio.

INVESTMENT OBJECTIVES - DOMESTIC EQUITY PORTFOLIOS 7

The investment objective of both the VA Small Value Portfolio and VA Large
Value Portfolio (collectively the "Domestic Equity Portfolios") is to achieve
long-term capital appreciation. The VA Small Value Portfolio and the VA Large
Value Portfolio will invest in common stocks of U.S. companies that have a high
book value in relation to their market value. The Domestic Equity Portfolios
operate as diversified investment companies.

INVESTMENT OBJECTIVE - VA INTERNATIONAL VALUE PORTFOLIO 8

The investment objective of the VA International Value Portfolio is to
achieve long-term capital appreciation. The Portfolio seeks to achieve its
objective by investing in the stocks of large non-U.S. companies that have a
high book value in relation to their market value. The VA International Value
Portfolio operates as a diversified investment company.

INVESTMENT OBJECTIVE - VA INTERNATIONAL SMALL PORTFOLIO 10

The investment objective of the VA International Small Portfolio is to
achieve long-term capital appreciation by investing in marketable stocks of
small non-U.S. companies. The Portfolio will be structured by generally basing
the amount of each security purchased on the issuer's relative market
capitalization, applied on a basis of descending values, with a view to
achieving a reasonable reflection of the relative market capitalization of its
portfolio companies. The Portfolio operates as a diversified investment
company.

INVESTMENT OBJECTIVES - FIXED INCOME PORTFOLIOS 13

The investment objective of VA Short-Term Fixed Portfolio is to achieve
stable real value of capital with a minimum of risk. Generally, the Portfolio
will acquire high quality obligations which mature within one year from the date
of settlement; however, when greater returns are available substantial
investments may be made in securities maturing within two years from the date of
settlement as well. The VA Short-Term Fixed Portfolio operates as a diversified
investment company. The Portfolio intends to concentrate investments in the
banking industry under certain circumstances. (See "FIXED INCOME PORTFOLIOS -
INVESTMENT OBJECTIVES AND POLICIES" and "Investments in the Banking Industry.")

The investment objective of VA Global Bond Portfolio is to provide a market
rate of return for a fixed income portfolio with low relative volatility of
returns. The Portfolio invests in obligations issued or guaranteed by the U.S.
and foreign governments and their agencies, obligations of other foreign issuers
rated AA or better and supranational organizations. The VA Global Bond
Portfolio operates as a non-diversified investment company. (See "FIXED INCOME
PORTFOLIOS - INVESTMENT OBJECTIVES AND POLICIES" and "Portfolio Strategy.")

2
<PAGE>

RISK FACTORS 16

VA International Small Portfolio and VA International Value Portfolio
(collectively, the "International Equity Portfolios") and VA Global Bond
Portfolio invest in foreign securities which are traded abroad. VA Short-Term
Fixed Portfolio is authorized to invest in dollar-denominated obligations of
U.S. subsidiaries and branches of foreign banks and dollar-denominated
obligations of foreign issuers traded in the U.S. and also is authorized to
concentrate investments in the banking industry in certain circumstances. The
Domestic Equity Portfolios and the VA International Value Portfolio may purchase
and sell index futures contracts and options thereon. All of the Portfolios are
authorized to invest in repurchase agreements. All of the above described
policies involve certain risks. (See "RISK FACTORS - ALL PORTFOLIOS.")

MANAGEMENT OF THE FUND 18

Dimensional Fund Advisors Inc. (the "Advisor") serves as investment advisor
to each Portfolio. Dimensional Fund Advisors Ltd. and DFA Australia Pty Limited
each serve as a sub-advisor to VA International Small Portfolio. (See
"MANAGEMENT OF THE FUND.")

DIVIDEND POLICY 20

The International Equity and Domestic Equity Portfolios, except for VA
Large Value Portfolio, each distribute substantially all of their net
investment income in November and December of each year. VA Large Value
Portfolio and VA Global Bond Portfolio distribute dividends from their net
investment income quarterly. VA Short-Term Fixed Portfolio distributes
dividends from its net investment income monthly. The Portfolios will make any
distributions from realized net capital gains on an annual basis. (See
"DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES.")

PURCHASE, VALUATION AND REDEMPTION OF SHARES 20

Shares of the Portfolios are sold only to separate accounts of insurance
companies to fund variable life and variable annuity insurance contracts.
Purchases and redemptions are made at net asset value. To invest in a
Portfolio, please see the prospectus of the insurance company's separate account
which offers variable life and variable annuity insurance contracts to
investors.

The value of the shares issued by the Portfolios will fluctuate in relation
to their own investment experience. Unlike money market funds, the shares of VA
Short-Term Fixed Portfolio will tend to reflect fluctuations in interest rates
because the Portfolio does not seek to stabilize the price of its shares by use
of the "amortized cost" method of securities valuation. (See "PURCHASE AND
REDEMPTION OF SHARES" and "VALUATION OF SHARES.")

3
<PAGE>

The expenses in the following table are estimates based on expenses
incurred by the Portfolios for the fiscal periods ended November 30, 1995.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES MANAGEMENT OTHER TOTAL
(AS A PERCENTAGE OF AVERAGE NET ASSETS) FEE EXPENSES OPERATING EXPENSES
---------- -------- ------------------
<S> <C> <C> <C>
VA Small Value(2) 0.50% 0.70% 1.20%
VA Large Value(1) 0.25% 0.95% 1.20%
VA International Value(2) 0.40% 0.93% 1.33%
VA International Small(2) 0.50% 0.91% 1.41%
VA Short-Term Fixed(2) 0.25% 0.59% 0.84%
VA Global Bond(1) 0.25% 1.06% 1.31%
</TABLE>
- --------------
(1) Annualized, based on fees and expenses incurred from January 13, 1995 (date
of initial investment) to November 30, 1995.
(2) The Portfolio is new and, therefore, the expenses of the portfolio included
in the table are the estimated annualized expenses that are expected to be
incurred through the fiscal year ending November 30, 1996.

EXAMPLE

You would pay the following transaction and annual operating expenses on a
$1,000 investment in each Portfolio, assuming a 5% annual return over each of
the following time periods and redemption at the end of each time period:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
VA Small Value* $12 $38 n/a n/a
VA Large Value 12 38 $66 $145
VA International Value* 14 42 n/a n/a
VA International Small* 14 45 n/a n/a
VA Short-Term Fixed* 9 27 n/a n/a
VA Global Bond 13 42 $72 $158
</TABLE>
- --------------
* The Portfolio is new and the above example is based on estimated expenses
for the current and next two fiscal years and does not extend those
estimates over five and ten year periods.

The purpose of the above expense table and example is to assist investors
in understanding the various costs and expenses that an investor in the
Portfolios will bear directly or indirectly. The sales charges and expenses of
the separate account are not shown above and should be considered before
investing. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.

4
<PAGE>

CONDENSED FINANCIAL INFORMATION

The following financial highlights are part of the Portfolios' audited
financial statements for the fiscal year ended November 30, 1995. The financial
statements, related notes, and the report of the independent auditors covering
such financial information and financial highlights for the Portfolios' fiscal
year ended November 30, 1995, are incorporated by reference into the Portfolios'
Statement of Additional Information. Further information about the Portfolios'
performance is contained in the Fund's Annual Report to shareholders relating to
the Portfolios for the year ended November 30, 1995. A copy of the Annual
Report (including the report of the independent auditors) may be obtained from
the Fund upon request at no charge.

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
VA
VA SMALL VA LARGE INTERNATIONAL
VALUE VALUE VALUE
PORTFOLIO(a) PORTFOLIO(b) PORTFOLIO(a)
------------ ------------ -------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period . . $10.00 $10.00 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . 0.01 0.19 --
Net Gains (Losses) on Securities
(Realized and Unrealized) . . . . . . (0.31) 1.85 0.03
------ ------ ------
Total from Investment Operations . . (0.30) 2.04 0.03
------ ------ ------
LESS DISTRIBUTIONS
Net Investment Income. . . . . . . . . (0.01) (0.16) --
Net Realized Gains . . . . . . . . . . -- (0.59) --
------ ------ ------
Total Distributions. . . . . . . . . (0.01) (0.75) --
------ ------ ------
Net Asset Value, End of Period . . . . . $ 9.69 $11.29 $10.03
------ ------ ------
------ ------ ------
Total Return . . . . . . . . . . . . . . (3.04)%# 20.41%# 0.30%#
Net Assets, End of Period (thousands). . $4,848 $6,562 $5,014
Ratio of Expenses to Average Net Assets. 0.99%*(c) 1.20%*(c) 1.32%*(c)
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . 0.91%*(c) 2.03%*(c) (0.20)*(c)
Portfolio Turnover Rate. . . . . . . . . 0.00%* 65.38%*(d) 0.00%*
</TABLE>
- --------------
*Annualized
#Non-Annualized

(a) For the period October 3 (commencement of operations) to November 30, 1995.
(b) For the period January 13 (commencement of operations) to November 30,
1995.
(c) Because of commencement of operations and related preliminary transaction
costs, these ratios are not necessarily indicative of future ratios.
(d) On September 15, 1995, the shareholders of DFA Global Value Portfolio
approved a change of investment policy providing for investment of
substantially all of DFA Global Value Portfolio's assets in the stocks of
U.S. companies and the sale of DFA Global Value Portfolio's foreign
securities to VA International Value Portfolio. Effective September 18,
1995, DFA Global Value Portfolio changed its name to VA Large Value
Portfolio. This resulted in turnover that is not indicative of expected
future results.

5
<PAGE>

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout each period)

<TABLE>
<CAPTION>
VA VA
INTERNATIONAL SHORT-TERM VA GLOBAL
SMALL FIXED BOND
PORTFOLIO(a) PORTFOLIO(a)(1) PORTFOLIO(b)(1)
------------- --------------- ---------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . $10.00 $10.00 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . (0.01) 0.08 0.48
Net Gains (Losses) on Securities
(Realized and Unrealized) . . . . . . . . (0.28) -- 0.81
------ ------ ------
Total from Investment Operations . . . . (0.29) 0.08 1.29
------ ------ ------
LESS DISTRIBUTIONS
Net Investment Income. . . . . . . . . . . -- (0.04) (0.57)
Net Realized Gains . . . . . . . . . . . . -- -- (0.11)
------ ------ ------
Total Distributions. . . . . . . . . . . -- (0.04) (0.68)
------ ------ ------
Net Asset Value, End of Period . . . . . . . $ 9.71 $10.04 $10.61
------ ------ ------
------ ------ ------
Total Return . . . . . . . . . . . . . . . . (2.90)%# 0.81%# 13.09%#
Net Assets, End of Period (thousands). . . . $4,856 $5,041 $3,393
Ratio of Expenses to Average Net Assets. . . 2.52%*(c) 0.63%*(c) 1.31%*(c)
Ratio of Net Investment Income to Average
Net Assets. . . . . . . . . . . . . . . . . (0.39)%*(c) 5.11%*(c) 5.08%*(c)
Portfolio Turnover Rate. . . . . . . . . . . 0.00%* 0.00%* 60.09%*
</TABLE>
- --------------
(1) (Adjusted to reflect a 900% stock dividend as of January 2, 1996)

*Annualized
#Non-Annualized

The total return information shown in the Financial Highlights tables does
not reflect the expenses that apply to a separate account or the related
insurance policies, and inclusion of these charges would reduce the total return
figures for all periods shown. Until October 1995, VA Large Value Portfolio
invested approximately 50% of its total assets in the stocks of large non-U.S.
companies and approximately 50% of its total assets in the stocks of U.S.
companies. The total return information presented in the Financial Highlights
table for VA Large Value Portfolio reflects the performance of the Portfolio
when it invested in the stocks of both U.S. and non-U.S. companies. The total
return information of VA Large Value Portfolio for the period ended November 30,
1995 should not be considered indicative of its future performance.

6
<PAGE>

DOMESTIC EQUITY PORTFOLIOS

PORTFOLIO CHARACTERISTICS AND POLICIES

The investment objective of each of the Domestic Equity Portfolios is to
achieve long-term capital appreciation. VA Large Value Portfolio and VA Small
Value Portfolio will invest in common stocks of U.S. companies with shares that
have a high book value in relation to their market value (a "book to market
ratio"). A company's shares will be considered to have a high book to market
ratio if the ratio equals or exceeds the ratios of any of the 30% of companies
with the highest positive book to market ratios whose shares are listed on the
New York Stock Exchange ("NYSE") and, except as described under "Portfolio
Structure," will be considered eligible for investment. VA Large Value
Portfolio will purchase common stocks of companies whose market capitalizations
equal or exceed that of the company having the median market capitalization of
companies whose shares are listed on the NYSE, and the VA Small Value Portfolio
will purchase common stocks of companies whose market capitalizations are
smaller than such company.

PORTFOLIO STRUCTURE

Each Domestic Equity Portfolio will operate as a "diversified" investment
company. Further, neither Portfolio will invest more than 25% of its total
assets in securities of companies in a single industry. Ordinarily, at least
80% of the assets of each Portfolio will be invested in a broad and diverse
group of readily marketable common stocks of U.S. companies with high book to
market ratios, as described above. The Portfolios may invest a portion of their
assets, ordinarily not more than 20%, in high quality, highly liquid fixed
income securities such as money market instruments, including short-term
repurchase agreements. The Portfolios also may invest in index futures
contracts and options on index futures contracts provided that, in accordance
with current regulations, not more than 5% of the Portfolio's total assets are
then invested as initial margin deposits on such contracts or options. The
Portfolios will purchase securities that are listed on the principal U.S.
national securities exchanges and traded in the over-the-counter market ("OTC").

Each Domestic Equity Portfolio will be structured on a market
capitalization basis, by generally basing the amount of each security purchased
on the issuer's relative market capitalization, with a view to creating in each
Portfolio a reasonable reflection of the relative market capitalizations of its
portfolio companies. However, the Advisor may exclude the securities of a
company that otherwise meets the applicable criteria described above if the
Advisor determines in its best judgment that other conditions exist that make
the inclusion of such security inappropriate.

Deviation from strict market capitalization weighting will also occur in
the Domestic Equity Portfolios because they intend to purchase round lots only.
Furthermore, in order to retain sufficient liquidity, the relative amount of any
security held by a Portfolio may be reduced, from time to time, from the level
which strict adherence to market capitalization weighting would otherwise
require. A portion, but generally not in excess of 20%, of a Portfolio's assets
may be invested in interest-bearing obligations, as described above, thereby
causing further deviation from strict market capitalization weighting. The
Portfolios may make block purchases of eligible securities at opportune prices
even though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, the Portfolios may acquire securities
eligible for purchase or otherwise represented in the Portfolios at the time of
the exchange in exchange for the issuance of their shares. While such purchases
and acquisitions might cause a temporary deviation from market capitalization
weighting, they would ordinarily be made in anticipation of further growth of
the assets of a Portfolio.

On not less than a semi-annual basis, for each Portfolio the Advisor will
calculate the book to market ratio necessary to determine those companies whose
stocks are eligible for investment.

7
<PAGE>

PORTFOLIO TRANSACTIONS

The Domestic Equity Portfolios do not intend to purchase or sell securities
based on the prospects for the economy, the securities markets or the individual
issuers whose shares are eligible for purchase. As described under "Portfolio
Structure," investments will be made in virtually all eligible securities on a
market capitalization weighted basis. This is a passive approach to investment
management that does not entail taking steps to reduce risk by replacing
portfolio equity securities with other securities that appear to have the
potential to provide better investment performance.

Generally, securities will be purchased with the expectation that they will
be held for longer than one year. VA Large Value Portfolio may sell portfolio
securities when the issuer's market capitalization falls substantially below
that of the issuer with the minimum market capitalization which is then eligible
for purchase by the Portfolio, and VA Small Value Portfolio may sell portfolio
securities when the issuer's market capitalization increases to a level that
substantially exceeds that of the issuer with the largest market capitalization
which is then eligible for investment by the Portfolio. However, securities may
be sold at any time when, in the Advisor's judgment, circumstances warrant their
sale.

In addition, VA Large Value Portfolio may sell portfolio securities when
their book to market ratio falls substantially below that of the security with
the lowest such ratio that is then eligible for purchase by the Portfolio. VA
Small Value Portfolio may also sell portfolio securities in the same
circumstances; however, that Portfolio anticipates generally to retain
securities of issuers with relatively smaller market capitalizations for longer
periods, despite any decrease in the issuer's book to market ratio.

INTERNATIONAL EQUITY PORTFOLIOS

VA INTERNATIONAL VALUE PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of VA International Value Portfolio is to achieve
long-term capital appreciation. The Portfolio operates as a diversified
investment company and seeks to achieve its investment objective by investing in
the stocks of large non-U.S. companies that have a high book to market ratio. A
company's shares will be considered eligible for investment if such shares (i)
first, have a book to market ratio that equals or exceeds the ratios of any of
the 30% of companies in that country with the highest positive book to market
ratios and (ii) second, are shares of a company having a market capitalization
of at least $500 million and are listed on a major exchange in such country.
The Portfolio will be approximately market capitalization weighted. Although it
does not presently intend to do so, the Portfolio reserves the right to invest
in companies that have market capitalizations of less than $500 million.

Under normal market conditions, the Portfolio will invest at least 65% of
the value of its assets in issuers organized or having a majority of their
assets in or deriving a majority of their operating income in at least three
non-U.S. countries. The Portfolio will not invest more than 25% of its total
assets in securities of companies in a single industry.

The Portfolio reserves the right to invest in index futures contracts and
options on index futures contracts to commit funds awaiting investment or to
maintain liquidity. The Portfolio will not purchase futures contracts if as a
result more than 5% of its total assets would then consist of initial margin
deposits on such contracts. Such investments entail certain risks. (See "RISK
FACTORS - ALL PORTFOLIOS.")

A portion, but generally not in excess of 20% of the Portfolio's assets,
may be invested in the nine categories of interest-bearing obligations described
in "FIXED INCOME PORTFOLIOS - INVESTMENT OBJECTIVES AND POLICIES - Description
of Investments."

8
<PAGE>

The Portfolio intends to invest in the stocks of large companies in
countries with developed markets. Initially, the Portfolio will invest in the
stocks of large companies in Japan, the United Kingdom, Germany, France,
Switzerland, Italy, Belgium, Spain, the Netherlands, Sweden, Hong Kong,
Singapore and Australia. As the Portfolio's growth permits, it may invest in
the stocks of large companies in other developed markets.

In determining market capitalization weights, the Advisor, using its best
judgment, will seek to eliminate the effect of cross holdings on the individual
country weights. As a result, the weighting of certain companies in the
Portfolio may vary from their weighting in international indices such as those
published by The Financial Times, Morgan Stanley Capital International or
Salomon/Russell. The Advisor, however, will not attempt to account for cross
holding within the same country. The Advisor may exclude the stock of a company
that otherwise meets the applicable criteria if the Advisor determines in its
best judgment that other conditions exist that make the purchase of stock for
the Portfolio inappropriate.

Changes in the composition and relative ranking (in terms of market
capitalization and book to market ratio) of the stocks which are eligible for
purchase by the Portfolio take place with every trade when the securities
markets are open for trading due, primarily, to price fluctuations of such
securities. On at least a semi-annual basis, the Advisor will prepare lists of
non-U.S. large companies (those with market capitalizations of $500 million or
more) with high book to market ratios. Only common stocks whose market
capitalizations are not less than the minimum on such list will be purchased by
the Portfolio. Additional investments will not be made in securities which have
depreciated in value to such an extent that they are not then considered by the
Advisor to be large companies. This may result in deviation from market
capitalization weighting, and such deviation could be substantial if a
significant amount of the Portfolio's holdings decrease in value sufficiently to
be excluded from the then current market capitalization requirement for eligible
securities, but not by a sufficient amount to warrant their sale.

PORTFOLIO STRUCTURE

The Advisor may exclude the securities of a company that otherwise meets
the criteria described above if the Advisor determines in its best judgment that
other conditions exist that make the inclusion of such security inappropriate.
This will result in some deviation from strict market capitalization weighting.
Deviation from strict market capitalization weighting will also occur in the
Portfolio because it intends to purchase round lots only. Furthermore, in order
to retain sufficient liquidity, the relative amount of any security held by the
Portfolio may be reduced, from time to time, from the level which strict
adherence to market capitalization weighting would otherwise require. Any
portion of the Portfolio's assets invested in interest-bearing obligations would
cause a further deviation from strict market capitalization weighting. The
Portfolio may make block purchases of eligible securities at opportune prices
even though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, the Portfolio may acquire securities
eligible for purchase or otherwise represented in the Portfolio at the time of
the exchange in exchange for the issuance of its shares. While such purchases
might cause a temporary deviation from market capitalization weighting, they
would ordinarily be made in anticipation of further growth of the assets of the
Portfolio. If securities must be sold in order to obtain funds to make
redemption payments, such securities may be repurchased by the Portfolio as
additional cash becomes available to it. However, the Portfolio has retained
the right to borrow to make redemption payments and is also authorized to redeem
its shares in kind.

It is management's belief that the stocks of large companies with high book
to market ratios offer, over a long term, a prudent opportunity for capital
appreciation, but, at the same time, selecting a limited number of such issues
for inclusion in the Portfolio involves greater risk than including a large
number of them. The Advisor does not anticipate that a significant number of
securities which meet the market capitalization criteria will be selectively
excluded from the Portfolio.

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The Portfolio does not seek current income as an investment objective, and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be included in the
Portfolio do pay dividends. It is anticipated, therefore, that the Portfolio
will receive dividend income.

PORTFOLIO TRANSACTIONS

The Portfolio does not intend to purchase or sell a security based on the
prospects for an individual country's economy, the securities markets in that
country or the individual issuer whose shares are eligible for purchase. As
described above, investments will be made in virtually all eligible securities
on a market capitalization weighted basis. This is a passive approach to
investment management that does not entail taking steps to reduce risk by
replacing portfolio equity securities with other securities that appear to have
the potential to provide better investment performance. The Portfolio may sell
securities when the issuer's market capitalization falls substantially below
that of the issuer with the minimum market capitalization which is then eligible
for purchase by the Portfolio. In addition, the Portfolio may sell portfolio
securities when their book to market ratio falls substantially below that of the
security with the lowest such ratio that is then eligible for purchase by the
Portfolio. Generally, securities will be purchased with the expectation that
they will be held for longer than one year.

VA INTERNATIONAL SMALL PORTFOLIO

INVESTMENT OBJECTIVE AND POLICIES

VA International Small Portfolio operates as a diversified investment
company whose investment objective is to achieve long-term capital appreciation
and provides investors with access to securities portfolios consisting of small
Japanese, United Kingdom, Continental and Pacific Rim companies. The VA
International Small Portfolio will seek to achieve its investment objective by
investing its assets in a broad and diverse group of marketable stocks of (1)
Japanese small companies which are traded in the Japanese securities markets;
(2) United Kingdom small companies which are traded principally on the
International Stock Exchange of the United Kingdom and the Republic of Ireland
("ISE"); (3) small companies organized under the laws of certain European
countries; and (4) small companies located in Australia, New Zealand and Asian
countries whose shares are traded principally on the securities markets located
in those countries. The Advisor will determine the initial allocation of assets
among the four segments of VA International Small Portfolio and will
periodically review and adjust such allocation, all in its sole discretion.

Company size will be determined for purposes of this Portfolio solely on
the basis of a company's market capitalization. "Market capitalization" will be
calculated by multiplying the price of a company's stock by the number of its
shares of that stock outstanding. Each segment of VA International Small
Portfolio will be structured to reflect reasonably the relative market
capitalizations of the portfolio companies in that segment. The Advisor
believes that over the long term the investment performance of small companies
in developed countries is superior to large companies, and that investment in
the Portfolio is an effective way to improve global diversification.

JAPANESE SMALL COMPANY SEGMENT

Reference in this prospectus to the term "Japanese small company" means a
company located in Japan whose market capitalization is not larger than the
largest of those in the smaller one-half (deciles 6 through 10) of companies
whose securities are listed on the First Section of the Tokyo Stock Exchange
("TSE"). While the Portfolio will invest primarily in the stocks of small
companies which are listed on the TSE, it may acquire the stocks of Japanese
small companies which are traded in other Japanese securities markets as well.

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UNITED KINGDOM SMALL COMPANY SEGMENT

Reference in this prospectus to a "United Kingdom small company" means a
company organized in the United Kingdom, with shares listed on the ISE whose
market capitalization is not larger than the largest of those in the smaller
one-half (deciles 6 through 10) of companies included in the Financial
Times-Actuaries All Share Index ("FTA").

The FTA is an index of stocks traded on the ISE, which is similar to the
Standard & Poor's 500 Composite Stock Index ("S&P 500 Index"), and is used by
investment professionals in the United Kingdom for the same purposes as
investment professionals in the U.S. use the S&P 500 Index. While the FTA will
be used by the Portfolio to determine the maximum market capitalization of any
company whose stock the Portfolio will purchase, Portfolio acquisitions will not
be limited to stocks which are included in the FTA. The Portfolio will not,
however, purchase shares of any investment trust or of any company whose market
capitalization is less than $5,000,000.

CONTINENTAL SMALL COMPANY SEGMENT

The Portfolio is authorized to invest in readily marketable stocks of a
broad and diverse group of small companies organized under the laws of certain
European countries; specifically, France, Germany, Italy, Switzerland, the
Netherlands, Sweden, Belgium, Norway, Spain, Austria, Finland and Denmark, whose
shares are traded principally in securities markets located in those countries.
Company size will be determined by the Advisor in a manner that will compare the
market capitalizations of companies in all countries of this segment in which
the Portfolio invests (i.e., on a European basis). The Advisor will use the
appropriate country indices of the Financial Times-Actuaries World Index ("FTW")
converted to a common currency, the United States dollar, and aggregated to
define "small companies." The FTW consists of a series of country indices which
contain generally the largest companies in the major industry sectors in
proportion to their market capitalization whose shares are available for
purchase by non-resident investors. Its constituents represent about 70% of the
total market capitalization of the respective markets. Companies with publicly
traded stock whose market capitalizations are not greater than the largest of
those in the smallest 20% (9th and 10th deciles) of companies listed in the FTW
as combined for the countries in this segment will be considered to be
"Continental small companies" and will be eligible for purchase by the
Portfolio.

While the Advisor will use the aggregated FTW indices to determine the
maximum size of eligible portfolio companies, portfolio acquisitions will not be
limited to stocks listed on the FTW for any country. The Portfolio does not
intend, however, to purchase shares of any company whose market capitalization
is less than the equivalent of $5,000,000. The Advisor may in its discretion
either limit further investments in a particular country or divest the Portfolio
of holdings in a particular country. (See "Portfolio Structure.")

PACIFIC RIM SMALL COMPANY SEGMENT

The Portfolio is authorized to invest in stocks of small companies located
in Australia, New Zealand and Asian countries whose shares are traded
principally on the securities markets located in those countries. Company size
will be determined by the Advisor in a manner that will compare the market
capitalizations of the companies in all countries of this segment in which the
Portfolio invests (i.e., on a Pacific Rim basis). The Advisor will use the
appropriate country indices of the FTW converted to a common currency and
aggregated to define "small companies." Companies with publicly traded stock
whose market capitalizations are not greater than the largest of those in the
smallest 30% (8th, 9th and 10th deciles) of companies listed in the FTW as
combined for the countries in this segment will be considered to be "Pacific Rim
small companies" and will be eligible for purchase by the Portfolio.

While the Advisor will use the aggregated FTW indices to determine the
maximum size of eligible portfolio companies, portfolio acquisitions will not be
limited to stocks listed on the FTW for any country. The Portfolio does not
intend to purchase shares of any company whose market capitalization is less
than $5,000,000. The Advisor may in its discretion either limit further
investments in a particular country or divest the Portfolio of holdings in a
particular country.

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PORTFOLIO STRUCTURE

With respect to each segment, VA International Small Portfolio intends to
acquire a portion of the stock of each eligible company on a market
capitalization basis. The Portfolio also may invest up to 5% of its assets in
convertible debentures issued by Japanese, United Kingdom, Continental and
Pacific Rim small companies.

VA International Small Portfolio is structured by generally basing the
amount of each security purchased in each segment on the issuer's relative
market capitalization within that segment with a view to creating in the
Portfolio a reasonable reflection of the relative market capitalizations of the
portfolio companies segment by segment. The decision to include or exclude the
shares of an issuer will be made on the basis of such issuer's relative market
capitalization determined by reference to other companies located in the same
country, except with respect to Continental and Pacific Rim small companies,
such determination shall be made by reference to other companies located in all
countries in the respective segment. Company size is measured in terms of local
currencies in order to eliminate the effect of variations in currency exchange
rates, except with respect to Continental and Pacific Rim small company
segments, in which segments company size will be measured in terms of a common
currency. Even though a company's stock may meet the applicable market
capitalization criterion, it may not be purchased if, (i) in the Advisor's
judgment, the issuer is in extreme financial difficulty, (ii) the issuer is
involved in a merger or consolidation or is the subject of an acquisition or
(iii) a significant portion of the issuer's securities are closely held.
Further, securities of real estate investment trusts will not be acquired
(except as a part of a merger, consolidation or acquisition of assets). In
addition, the Advisor may exclude the stock of a company that otherwise meets
applicable market capitalization criterion if the Advisor determines in its best
judgment that other conditions exist that make the purchase of such stock
inappropriate.

When, in the judgment of the Advisor, the indices described herein are no
longer appropriate benchmarks for determining company size or eligibility, the
Advisor may, in its sole discretion, utilize other indices that it considers
appropriate.

Deviation from strict market capitalization weighting will also occur
because the Advisor intends to purchase round lots only. Furthermore, in order
to retain sufficient liquidity, the relative amount of any security held may be
reduced from time to time from the level which strict adherence to market
capitalization weighting would otherwise require. A portion, but generally not
in excess of 20%, of the Portfolio's assets may be invested in interest-bearing
obligations, such as money-market instruments for this purpose, thereby causing
further deviation from strict market capitalization weighting.

Block purchases of eligible securities may be made at opportune prices even
though such purchases exceed the number of shares which, at the time of
purchase, strict adherence to the policy of market capitalization weighting
would otherwise require. In addition, the Portfolio may acquire securities
eligible for purchase or otherwise represented in the Portfolio at the time of
the exchange in exchange for the issuance of shares. While such purchases and
acquisitions might cause a temporary deviation from market capitalization
weighting, they would ordinarily be made in anticipation of further growth of
assets.

If securities must be sold in order to obtain funds to make redemption
payments, they may be repurchased as additional cash becomes available. In most
instances, however, management would anticipate selling securities which had
appreciated sufficiently to be eligible for sale and, therefore, would not need
to repurchase such securities. (See "Portfolio Transactions.")

Changes in the composition and relative ranking (in terms of market
capitalization) of the stocks which are eligible for purchase take place with
every trade when the securities markets are open for trading due, primarily, to
price fluctuations of such securities. On a not less than semi-annual basis,
the Advisor will determine the market capitalization of the largest small
company eligible for investment in each segment. Common stocks whose market
capitalizations are not greater than such company will be purchased. Additional
investments generally will not be made in securities which have appreciated in
value sufficiently to be excluded from the Advisor's then current market
capitalization limit for eligible portfolio securities. This may result in
further deviation from strict market capitalization weighting, and such
deviation could be substantial if a significant amount of holdings increase in
value sufficiently to be excluded from the limit for eligible securities,

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but not by a sufficient amount to warrant their sale. (See "Portfolio
Transactions.") A further deviation from market capitalization weighting may
occur if the Portfolio invests a portion of its assets in convertible
debentures.

It is management's belief that the stocks of small companies offer, over a
long term, a prudent opportunity for capital appreciation but, at the same time,
selecting a limited number of such issues for investment involves greater risk
than investing in a large number of them. The Portfolio intends to invest at
least 80% of its assets in equity securities of Japanese, United Kingdom,
Continental and Pacific Rim small companies.

Generally, current income is not sought as an investment objective, and
investments will not be based upon an issuer's dividend payment policy or
record. However, many of the companies whose securities will be selected for
investment do pay dividends. It is anticipated, therefore, that dividend income
will be received.

PORTFOLIO TRANSACTIONS

On a periodic basis, the Advisor will review each Portfolio's holdings and
determine which, at the time of such review, are no longer considered small
Japanese, United Kingdom, Continental or Pacific Rim companies. The present
policy of the Advisor is to consider portfolio securities for sale when they
have appreciated sufficiently to rank, on a market capitalization basis, more
than one full decile higher than the company with the largest market
capitalization that is eligible for purchase by the Portfolio as determined
periodically by the Advisor. The Advisor may, from time to time, revise that
policy if, in the opinion of the Advisor, such revision is necessary to maintain
appropriate market capitalization weighting.

Securities which have depreciated in value since their acquisition will not
be sold solely because prospects for the issuer are not considered attractive,
or due to an expected or realized decline in securities prices in general.
Securities may be disposed of, however, at any time when, in the Advisor's
judgment, circumstances, such as (but not limited to) tender offers, mergers and
similar transactions, or bids made for block purchases at opportune prices,
warrant their sale. Generally, securities will not be sold to realize
short-term profits, but when circumstances warrant, they may be sold without
regard to the length of time held. Generally, securities will be purchased with
the expectation that they will be held for longer than one year and will be held
until such time as they are no longer considered an appropriate holding in light
of the policy of maintaining portfolios of companies with small market
capitalizations.

SECURITIES LOANS

All of the Portfolios are authorized to lend securities to qualified
brokers, dealers, banks and other financial institutions for the purpose of
earning additional income. While a Portfolio may earn additional income from
lending securities, such activity is incidental to the investment objective
of a Portfolio. The value of securities loaned may not exceed 33 1/3% of the
value of a Portfolio's total assets. In connection with such loans, a
Portfolio will receive collateral consisting of cash or U.S. Government
securities, which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. In addition,
the Portfolios will be able to terminate the loan at any time, will receive
reasonable compensation on the loan, as well as amounts equal to any
dividends, interest or other distributions on the loaned securities. In the
event of the bankruptcy of the borrower, the Fund could experience delay in
recovering the loaned securities. Management believes that this risk can be
controlled through careful monitoring procedures.

FIXED INCOME PORTFOLIOS - INVESTMENT OBJECTIVES AND POLICIES

VA SHORT-TERM FIXED PORTFOLIO

The investment objective of VA Short-Term Fixed Portfolio is to achieve a
stable real value (i.e., a return in excess of the rate of inflation) of
invested capital with a minimum of risk. The Portfolio will invest in U.S.
government obligations, U.S. government agency obligations, dollar-denominated
obligations of foreign

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issuers issued in the U.S., bank obligations, including U.S. subsidiaries and
branches of foreign banks, corporate obligations, commercial paper,
repurchase agreements and obligations of supranational organizations.
Generally, the Portfolio will acquire obligations which mature within one
year from the date of settlement, but substantial investments may be made in
obligations maturing within two years from the date of settlement when
greater returns are available. It is the Portfolio's policy that the weighted
average length of maturity of investments will not exceed one year. The
Portfolio principally invests in certificates of deposit, commercial paper,
bankers' acceptances, notes and bonds. The Portfolio will invest more than
25% of its total assets in obligations of U.S. and/or foreign banks and bank
holding companies when the yield to maturity on these instruments exceeds the
yield to maturity on all other eligible portfolio investments of similar
quality for a period of five consecutive days when the NYSE is open for
trading. (See "Investments in the Banking Industry.")

VA GLOBAL BOND PORTFOLIO

The investment objective of VA Global Bond Portfolio is to provide a market
rate of return for a fixed income portfolio with low relative volatility of
returns. The Portfolio will invest primarily in obligations issued or
guaranteed by the U.S. and foreign governments, their agencies and
instrumentalities, obligations of other foreign issuers rated AA or better and
supranational organizations, such as the World Bank, the European Investment
Bank, European Economic Community, and European Coal and Steel Community and
corporate debt obligations. At the present time, the Advisor expects that most
investments will be made in the obligations of issuers which are developed
countries, such as those countries which are members of the Organization of
Economic Cooperation and Development (OECD). However, in the future, the
Advisor anticipates investing in issuers located in other countries as well.
Under normal market conditions, the Portfolio will invest at least 65% of the
value of its assets in issuers organized or having a majority of their assets
in, or deriving a majority of their operating income in, at least three
different countries, one of which may be the United States. The Portfolio will
acquire obligations which mature within ten years from the date of settlement.
Because many of the Portfolio's investments will be denominated in foreign
currencies, the Portfolio will also enter into forward foreign currency
contracts solely for the purpose of hedging against fluctuations in currency
exchange rates. Inasmuch as VA Global Bond Portfolio intends to continually
hedge against the risk of variations in currency exchange rates, the Advisor
believes that the variation of the Portfolio's investment performance in
relation to fluctuations in currency exchange rates will be minimized.

DESCRIPTION OF INVESTMENTS

The following is a description of the categories of investments which may
be acquired by the Fixed Income Portfolios. VA Short-Term Fixed Portfolio may
invest in all of the securities and obligations listed in categories 1-6 and 8,
and VA Global Bond Portfolio may invest in the securities and obligations listed
in categories 1-3 and 6-9.

1. U.S. GOVERNMENT OBLIGATIONS - Debt securities issued by the U.S.
Treasury which are direct obligations of the U.S. government, including bills,
notes and bonds.

2. U.S. GOVERNMENT AGENCY OBLIGATIONS - Issued or guaranteed by U.S.
government-sponsored instrumentalities and federal agencies, including the
Federal National Mortgage Association, Federal Home Loan Bank and the Federal
Housing Administration.

3. CORPORATE DEBT OBLIGATIONS - Non-convertible corporate debt securities
(e.g., bonds and debentures) which are issued by companies whose commercial
paper is rated Prime-1 by Moody's Investors Services, Inc. ("Moody's") or A-1 by
Standard & Poor's Corporation ("S&P") and dollar-denominated obligations of
foreign issuers issued in the U.S. If the issuer's commercial paper is unrated,
then the debt security would have to be rated at least AA by S&P or Aa2 by
Moody's. If there is neither a commercial paper rating nor a rating of the debt
security, then the Advisor must determine that the debt security is of
comparable quality to equivalent issues of the same issuer rated at least AA or
Aa2.

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4. BANK OBLIGATIONS - Obligations of U.S. banks and savings and loan
associations and dollar-denominated obligations of U.S. subsidiaries and
branches of foreign banks, such as certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances. Bank
certificates of deposit will only be acquired from banks with assets in excess
of $1,000,000,000.

5. COMMERCIAL PAPER - Rated, at the time of purchase, A-1 or better by
S&P or Prime-1 by Moody's, or, if not rated, issued by a corporation having an
outstanding unsecured debt issue rated Aaa by Moody's or AAA by S&P, and having
a maximum maturity of nine months.

6. REPURCHASE AGREEMENTS - Instruments through which the Portfolios
purchase securities ("underlying securities") from a bank, or a registered U.S.
government securities dealer, with an agreement by the seller to repurchase the
security at an agreed price, plus interest at a specified rate. The underlying
securities will be limited to U.S. government and agency obligations described
in (1) and (2) above. The Portfolios will not enter into a repurchase agreement
with a duration of more than seven days if, as a result, more than 10% of the
value of the Portfolio's total assets would be so invested. The Portfolios will
also only invest in repurchase agreements with a bank if the bank has at least
$1,000,000,000 in assets and is approved by the Investment Committee of the
Advisor. The Advisor will monitor the market value of the securities plus any
accrued interest thereon so that they will at least equal the repurchase price.

7. FOREIGN GOVERNMENT AND AGENCY OBLIGATIONS - Bills, notes, bonds and
other debt securities issued or guaranteed by foreign governments, or their
agencies and instrumentalities.

8. SUPRANATIONAL ORGANIZATION OBLIGATIONS - Debt securities of
supranational organizations such as the European Coal and Steel Community, the
European Economic Community and the World Bank, which are chartered to promote
economic development.

9. FOREIGN ISSUER OBLIGATIONS - Debt securities of non-U.S. issuers rated
AA or better by S&P and Aa2 or better by Moody's.

INVESTMENTS IN THE BANKING INDUSTRY

VA Short-Term Fixed Portfolio will invest more than 25% of its total assets
in obligations of U.S. and/or foreign banks and bank holding companies when the
yield to maturity on these investments exceeds the yield to maturity on all
other eligible portfolio investments for a period of five consecutive days when
the NYSE is open for trading. For the purpose of this policy, which is a
fundamental policy of the Portfolio that can only be changed by a vote of
shareholders of the Portfolio, banks and bank holding companies are considered
to constitute a single industry, the banking industry. When investment in such
obligations exceeds 25% of the total net assets of the Portfolio, the Portfolio
will be considered to be concentrating its investments in the banking industry.

The types of bank and bank holding company obligations in which VA Short-
Term Fixed Portfolio may invest include: dollar-denominated certificates of
deposit, bankers' acceptances, commercial paper and other debt obligations
issued in the United States and which mature within two years of the date of
settlement, provided such obligations meet the Portfolio's established credit
rating criteria as stated under "Description of Investments." In addition, the
Portfolio is authorized to invest more than 25% of its total assets in U.S.
Treasury bonds, bills and notes and obligations of federal agencies and
instrumentalities.

PORTFOLIO STRATEGY

VA Short-Term Fixed Portfolio will be managed with a view to capturing
credit risk premiums and term or maturity premiums. As used herein, the term
"credit risk premium" means the anticipated incremental return on investment for
holding obligations considered to have greater credit risk than direct
obligations of the U.S. Treasury, and "maturity risk premium" means the
anticipated incremental return for holding securities

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having maturities of longer than one month compared to securities having a
maturity of one month. The Advisor believes that credit risk premiums are
available largely through investment in high grade commercial paper,
certificates of deposit and corporate obligations. The holding period for
assets of the Portfolio will be chosen with a view to maximizing anticipated
monthly returns, net of trading costs.

VA Global Bond Portfolio will be managed with a view to capturing maturity
risk premiums. Ordinarily the Portfolio will invest primarily in obligations
issued or guaranteed by foreign governments and their agencies and
instrumentalities, obligations of other foreign issuers rated AA or better and
supranational organizations. Supranational issuers include the European
Economic Community, the European Coal and Steel Community, the Nordic Investment
Bank, the World Bank and the Japanese Development Bank. The Portfolio will own
obligations issued or guaranteed by the U.S. government and its agencies and
instrumentalities also. At times when, in the Advisor's judgment, eligible
foreign securities do not offer maturity risk premiums that compare favorably
with those offered by eligible U.S. securities, the Portfolio will be invested
primarily in the latter securities.

VA Global Bond Portfolio is "non-diversified," as defined in the Investment
Company Act of 1940, which means that, as to 75% of its total assets, more than
5% may be invested in the securities of a single issuer. However, for purposes
of the Internal Revenue Code, the Portfolio is "diversified" because as to 50%
of its total assets, no more than 5% may be invested in the securities of a
single issuer, and the Portfolio intends to invest no more than 55% of the value
of its total assets in cash, cash items, government securities and other
regulated investment companies. The Portfolio will not invest more than 25% of
its assets in securities of companies in any one industry. Management does not
consider securities which are issued by the U.S. government or its agencies or
instrumentalities to be investments in an "industry." However, management
currently considers securities issued by a foreign government to be subject to
the 25% limitation, with the effect that not more than 25% of the Portfolio's
total assets will be invested in securities issued by any one foreign
government. The Portfolio will not invest more than 25% of its total assets in
obligations of supranational organizations. Finally, the Portfolio might invest
in certain securities issued by companies, such as Caisse Nationale des
Telecommunication, a communications company, whose obligations are guaranteed by
a foreign government. Management considers such a company to be within a
particular industry (in this case, the communications industry) and, therefore,
the Portfolio will invest in the securities of such a company only if it can do
so under the Portfolio's policy of not being concentrated in any single
industry.

VA Short-Term Fixed Portfolio is expected to have a high portfolio turnover
rate due to the relatively short maturities of the securities to be acquired.
It is anticipated that the annual rate of VA Short-Term Fixed Portfolio could be
0% to 200%. The annual portfolio turnover rate of VA Global Bond Portfolio is
not expected to exceed 100%. The rate of portfolio turnover will depend upon
market and other conditions; it will not be a limiting factor when management
believes that portfolio changes are appropriate. While the Fixed Income
Portfolios acquire securities in principal transactions and, therefore, do not
pay brokerage commissions, the spread between the bid and asked prices of a
security may be considered to be a "cost" of trading. Such costs ordinarily
increase with trading activity. However, as stated above, securities ordinarily
will be sold when, in the Advisor's judgment, the monthly return of a Portfolio
will be increased as a result of portfolio transactions after taking into
account the cost of trading. It is anticipated that securities will be acquired
in the secondary markets for short term instruments.

RISK FACTORS - ALL PORTFOLIOS

SMALL COMPANY SECURITIES

Typically, securities of small companies are less liquid than securities of
large companies. Recognizing this factor, VA International Small Portfolio and
VA Small Value Portfolio will endeavor to effect securities transactions in a
manner to avoid causing significant price fluctuations in the market for these
securities.

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FOREIGN SECURITIES

The International Equity Portfolios and Fixed Income Portfolios invest in
foreign issuers. Such investments involve risks that are not associated with
investments in U.S. public companies. Such risks may include legal, political
and or diplomatic actions of foreign governments, such as imposition of
withholding taxes on interest and dividend income payable on the securities
held, possible seizure or nationalization of foreign deposits, establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the value of the assets held by the Portfolios.
Further, foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards comparable to those of U.S. public
companies and there may be less publicly available information about such
companies than comparable U.S. companies. Certain of the foreign markets in
which the Portfolios may invest have recently transitioned from or are in the
process of transitioning from centrally controlled to market-based economies.
There can be no assurance that such transitions will be successful. The Fixed
Income Portfolios may invest in obligations of supranational organizations. The
value of the obligations of these organizations may be adversely affected if one
or more of their supporting governments discontinue their support. Also, there
can be no assurance that any of the Portfolios will achieve its investment
objective.

FOREIGN CURRENCIES AND RELATED TRANSACTIONS

Investments of the International Equity Portfolios and VA Global Bond
Portfolio will be denominated in foreign currencies. Changes in the relative
values of foreign currencies and the U.S. dollar, therefore, will affect the
value of investments of these Portfolios. These Portfolios may purchase foreign
currency futures contracts and options in order to hedge against changes in the
level of foreign currency exchange rates, provided not more than 5% of each
Portfolio's assets are then invested as initial margin deposits on such
contracts or options. Such contracts involve an agreement to purchase or sell a
specific currency at a future date at a price set in the contract and enable the
Portfolios to protect against losses resulting from adverse changes in the
relationship between the U.S. dollar and foreign currencies occurring between
the trade and settlement dates of Portfolio securities transactions, but they
also tend to limit the potential gains that might result from a positive change
in such currency relationships.

BORROWING

Each Portfolio has reserved the right to borrow amounts not exceeding 33%
of its net assets for the purposes of making redemption payments. When
advantageous opportunities to do so exist, each Portfolio may also purchase
securities when borrowings exceed 5% of the value of its net assets. Such
purchases can be considered to be "leveraging" and, in such circumstances, the
net asset value of the Portfolio may increase or decrease at a greater rate than
would be the case if the Portfolio had not leveraged. The interest payable on
the amount borrowed would increase the Portfolio's expenses and, if the
appreciation and income produced by the investments purchased when the Portfolio
has borrowed are less than the cost of borrowing, the investment performance of
the Portfolio will be reduced as a result of leveraging.

PORTFOLIO STRATEGIES

The method employed by the Advisor to manage the Domestic Equity and
International Equity Portfolios will differ from the process employed by many
other investment advisors in that the Advisor will rely on fundamental analysis
of the investment merits of securities to a limited extent to eliminate
potential portfolio acquisitions rather than rely on this technique to select
securities. Further, because securities generally will be held long-term and
will not be eliminated based on short-term price fluctuations, the Advisor
generally will not act upon general market movements or short-term price
fluctuations of securities to as great an extent as many other investment
advisors.

17
<PAGE>

FUTURES CONTRACTS AND OPTIONS ON FUTURES

The Domestic Equity Portfolios and VA International Value Portfolio may
invest in index futures contracts and options on index futures contracts,
provided that, in accordance with current regulations, not more than 5% of each
Portfolio's total assets are then invested as initial margin deposits on such
contracts or options. In addition, to the extent that a Portfolio invests in
futures contracts and options thereon for other than bona fide hedging purposes,
no Portfolio will enter into such transactions if, immediately thereafter, the
sum of the amount of initial margin deposits and premiums paid for open futures
options would exceed 5% of the Portfolio's total assets, after taking into
account unrealized profits and unrealized losses on such contracts it has
entered into; provided, however, that, in the case of an option that is in-the-
money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. These investments entail the risk that an imperfect
correlation may exist between changes in the market value of the stocks owned by
the Portfolios, and the prices of such futures contracts and options, and, at
times, the market for such contracts and options might lack liquidity, thereby
inhibiting a Portfolio's ability to close a position in such investments. Gains
or losses on investments in options and futures depend on the direction of
securities prices, interest rates and other economic factors, and the loss from
investing in futures contracts is potentially unlimited. Certain restrictions
imposed by the Internal Revenue Code may limit the ability of a Portfolio to
invest in futures contracts and options on futures contracts.

BANKING INDUSTRY CONCENTRATIONS

Concentrating in obligations of the banking industry may involve additional
risk by foregoing the safety of investing in a variety of industries. Changes
in the market's perception of the riskiness of banks relative to non-banks could
cause more fluctuations in the net asset value of VA Short-Term Fixed Portfolio
than might occur in less concentrated portfolios.

REPURCHASE AGREEMENTS

In addition, all of the Portfolios may invest in repurchase agreements. In
the event of the bankruptcy of the other party to a repurchase agreement, the
Fund could experience delay in recovering the securities underlying such
agreements. Management believes that this risk can be controlled through
stringent security selection criteria and careful monitoring procedures.

MANAGEMENT OF THE FUND

Dimensional Fund Advisors Inc. (the "Advisor") serves as investment advisor
to each of the Portfolios. As such, the Advisor is responsible for the
management of their respective assets. Investment decisions for all Portfolios
of the Fund are made by the Investment Committee of the Advisor which meets on a
regular basis and also as needed to consider investment issues. The Investment
Committee is composed of certain officers and directors of the Advisor who are
elected annually. The Advisor provides the Portfolios with a trading department
and selects brokers and dealers to effect securities transactions. Portfolio
securities transactions are placed with a view to obtaining best price and
execution and, subject to this goal, may be placed with brokers which have
assisted in the sale of the Portfolios' shares. Brokerage transactions may be
placed with securities firms that are affiliated with an affiliate of the
Advisor.

For the fiscal year ended November 30, 1995, (i) the Advisor received a fee
for its services which, on an annual basis, equaled the following percentage of
the average net assets of each Portfolio; and (ii) the total expenses of each
Portfolio were the following percentages of respective average net assets:

18
<PAGE>

<TABLE>
<CAPTION>
Management Fee Annualized Total Expenses
-------------- -------------------------
<S> <C> <C>
VA Small Value Portfolio 0.50% 0.99%

VA Large Value Portfolio 0.25% 1.20%

VA International Value Portfolio 0.40% 1.32%

VA International Small Portfolio 0.50% 2.52%

VA Short-Term Fixed Portfolio 0.25% 0.63%

VA Global Bond Portfolio 0.25% 1.31%
</TABLE>

The Fund bears all of its own costs and expenses, including: services of
its independent accountants, legal counsel, brokerage fees, commissions and
transfer taxes in connection with the acquisition and disposition of portfolio
securities, taxes, insurance premiums, costs incidental to meetings of its
shareholders and directors, the cost of filing its registration statements under
federal and state securities laws, reports to shareholders, and transfer and
dividend disbursing agency, administrative services and custodian fees.
Expenses allocable to a particular Portfolio are so allocated and expenses which
are not allocable to a particular Portfolio are borne by each Portfolio on the
basis of the fees paid by the Fund to PFPC Inc., the accounting services,
dividend disbursing and transfer agent for each Portfolio.

The Advisor was organized in May 1981 and is engaged in the business of
providing investment management services to institutional investors. Assets
under management total approximately $14 billion. David G. Booth and Rex A.
Sinquefield, directors and officers of both the Fund and the Advisor, together
own approximately 63% of the Advisor's outstanding stock and may be deemed
controlling persons of the Advisor. The Advisor owns 100% of the outstanding
shares of Dimensional Fund Advisors Ltd. ("DFAL") and DFA Australia Pty Limited
("DFA Australia") (see "Investment Services - VA International Small Portfolio).

INVESTMENT SERVICES - VA INTERNATIONAL SMALL PORTFOLIO

Pursuant to a Sub-Advisory Agreement with the Advisor, DFAL, 14 Berkeley
Street, London, W1X 5AD, England, a company that is organized under the laws of
England, has the authority and responsibility to select brokers or dealers to
execute securities transactions for the United Kingdom and Continental small
company segments of VA International Small Portfolio. Pursuant to a Sub-
Advisory Agreement with the Advisor, DFA Australia, Suite 4403 Gateway, 1
MacQuarie Place, Sydney, New South Wales 2000, Australia, the successor to
Dimensional Fund Advisors Asia Inc., has the authority and responsibility to
select brokers and dealers to execute securities transactions for the Japanese
and Pacific Rim small company segments of VA International Small Portfolio. The
duties of DFAL with respect to the United Kingdom and Continental small company
segments of the Portfolio and DFA Australia with respect to the Japanese and
Pacific Rim small company segments of the Portfolio include the maintenance of a
trading desk for the Portfolio and the determination of the best and most
efficient means of executing securities transactions. The Advisor is
responsible for determining those securities which are eligible for purchase and
sale by the Portfolio and may delegate this task, subject to its own review, to
DFAL and DFA Australia. On at least a semi-annual basis, the Advisor reviews
the holdings of United Kingdom, Continental, Japanese and Pacific Rim small
company segments and reviews the trading process and the execution of securities
transactions.

DFAL maintains and furnishes to the Advisor information and reports on
United Kingdom and Continental small companies, including its recommendations
of securities to be added to the securities in those segments that are eligible
for purchase by the Portfolio. The Advisor pays DFAL a fee equal to 50,000
pounds sterling total per year, payable on a quarterly basis, for services to
the Portfolio. DFAL is a member of the Investment Management Regulatory
Organization Limited ("IMRO"), a self regulatory organization for investment
managers operating under the laws of England. If a shareholder of VA
International Small Portfolio wishes to register a complaint against DFAL, that
shareholder may either make the complaint in writing to the Compliance Officer
of DFAL or may complain directly to IMRO.

19
<PAGE>

DFA Australia maintains and furnishes to the Advisor information and
reports on Japanese and Pacific Rim small companies, including its
recommendations of securities to be added to the securities in those segments
that are eligible for purchase by the Portfolio. The Advisor pays DFA Australia
a fee equal to 100,000 Hong Kong dollars total per year, payable on a quarterly
basis, for services to VA International Small Portfolio.

DIRECTORS AND OFFICERS

The Board of Directors is responsible for establishing Fund policies and
for overseeing the management of the Fund. Information as to the Directors and
Officers of the Fund is set forth in the Statement of Additional Information
under "DIRECTORS AND OFFICERS."

DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES

Each Portfolio intends to qualify each year as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"), so
that it will not be liable for federal income taxes to the extent that its net
investment income and net realized capital gains are distributed. The policy of
VA Small Value and the International Equity Portfolios is to distribute
substantially all of their net investment income together with any net realized
capital gains in November and December of each year. Dividends from net
investment income of VA Large Value Portfolio are distributed quarterly and any
net realized capital gains are distributed in November and December of each
year. Net investment income, which is accrued daily, will be distributed
monthly (except for January) by VA Short-Term Fixed Portfolio and quarterly by
VA Global Bond Portfolio. Any net realized capital gains of the Fixed Income
Portfolios will be distributed in November and December of each year.

If a Portfolio purchases shares in certain foreign investment entities,
called "passive foreign investment companies" ("PFIC"), such Portfolio may be
subject to U.S. federal income tax and a related interest charge on a portion of
any "excess distribution" or gain from the disposition of such shares even if
such income is distributed as a taxable dividend by the Portfolio to its
shareholders.

Also, dividends and interest received on investments made by the Portfolios
may be subject to foreign withholding taxes on income from certain of their
foreign securities.

Shareholders of the Portfolios will automatically receive all income
dividends and capital gains distributions in additional shares of the Portfolio
whose shares they hold at net asset value (as of the business date following the
dividend record date). Shareholders are notified annually by the Fund as to the
federal tax status of dividends and distributions paid by the Portfolio whose
shares they own.

Shares of the Portfolio must be purchased through variable annuity
contracts. As a result, it is anticipated that any dividend or capital gains
distributions from a Portfolio of the Fund will be exempt from current taxation
if left to accumulate within a variable annuity contract. Withdrawals from such
contracts may be subject to ordinary income tax plus a 10% penalty tax if made
before age 59 1/2.

The tax status of your investment in the Portfolios depends upon the
features of your variable life or variable annuity contract. For further
information, please refer to the prospectus of the insurance company separate
account that offers your contract.

PURCHASE AND REDEMPTION OF SHARES

Shares of the Portfolios are sold only to insurance company separate
accounts. Purchases and redemptions of shares of each Portfolio by a separate
account will be effected at the net asset value per share. (See "VALUATION OF
SHARES.") Contract owners do not deal directly with the Fund with respect to
the acquisition or redemption of shares of the Portfolios. Please see the
prospectus of the insurance company separate account for information regarding
the purchase and redemption of shares of the Portfolios.

20
<PAGE>

VALUATION OF SHARES

The net asset value per share of each Portfolio is calculated as of the
close of the NYSE by dividing the total market value of the Portfolio's
investments and other assets, less any liabilities, by the total outstanding
shares of the stock of the Portfolio. The value of the shares of each Portfolio
will fluctuate in relation to its own investment experience. Securities held by
the Domestic Equity and International Equity Portfolios which are listed on the
securities exchange and for which market quotations are available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
such securities are valued at the mean between the most recent quoted bid and
asked prices. Price information on listed securities is taken from the exchange
where the security is primarily traded. Unlisted securities for which market
quotations are readily available are valued at the mean between the most recent
bid and asked prices. The value of other assets and securities for which no
quotations are readily available (including restricted securities) are
determined in good faith at fair value in accordance with procedures adopted by
the Board of Directors. The net asset values per share of the International
Equity Portfolios and VA Global Bond Portfolio are expressed in U.S. dollars by
translating the net assets of each Portfolio using the bid price for the dollar
as quoted by generally recognized reliable sources.

The value of the shares of the Fixed Income Portfolios will tend to
fluctuate with interest rates because, unlike money market funds, these
Portfolios do not seek to stabilize the value of their respective shares by use
of the "amortized cost" method of asset valuation. Net asset value includes
interest on fixed income securities which is accrued daily. Securities which
are traded OTC and on a stock exchange will be valued according to the broadest
and most representative market, and it is expected that for bonds and other
fixed-income securities this ordinarily will be the OTC market. Securities held
by the Fixed Income Portfolios may be valued on the basis of prices provided by
a pricing service when such prices are believed to reflect the current market
value of such securities. Other assets and securities for which quotations are
not readily available will be valued in good faith at fair value using methods
determined by the Board of Directors.

Generally, trading in foreign securities markets is completed each day at
various times prior to the close of the NYSE. The values of foreign securities
held by the International Equity Portfolios and VA Global Bond Portfolio are
determined as of such times for the purpose of computing the net asset values of
these Portfolios. If events which materially affect the value of the
investments of a Portfolio occur subsequent to the close of the securities
market on which such securities are primarily traded, the investments affected
thereby will be valued at "fair value" as described above.

DISTRIBUTION

The Fund acts as distributor of each series of its own shares of stock. It
has, however, entered into an agreement with DFA Securities Inc., a wholly owned
subsidiary of the Advisor, pursuant to which DFA Securities Inc. is responsible
for supervising the sale of each series of shares. No compensation is paid by
the Fund to DFA Securities Inc. under this agreement.

GENERAL INFORMATION

The Fund was incorporated under Maryland law on June 15, 1981. Until June
1983, the Fund was named DFA Small Company Fund Inc. Until September 18, 1995,
VA Large Value Portfolio was named DFA Global Value Portfolio and VA Global Bond
Portfolio was named DFA Global Bond Portfolio. The shares of each Portfolio,
when issued and paid for in accordance with the Fund's prospectus, will be fully
paid and non-assessable shares, with equal, non-cumulative voting rights and no
preferences as to conversion, exchange, dividends, redemption or any other
feature.

21
<PAGE>

The Portfolios may disseminate reports of their investment performance
from time to time. Investment performance is calculated on a total return
basis; that is by including all net investment income and any realized and
unrealized net capital gains or losses during the period for which investment
performance is reported. If dividends or capital gains distributions have
been paid during the relevant period, the calculation of investment
performance will include such dividends and capital gains distributions as
though reinvested in shares of the Portfolio. Standard quotations of total
return, which include deductions of any applicable reimbursement fees, are
computed in accordance with Securities and Exchange Commission ("SEC")
Guidelines and are presented whenever any non-standard quotations are
disseminated to provide comparability to other investment companies.
Non-standardized total return quotations may differ from the SEC Guideline
computations by covering different time periods, excluding deduction of
reimbursement fees charged to investors and paid to the Portfolios which
would otherwise reduce returns quotations, and linking actual Portfolio
return with simulated data for periods prior to a Portfolio's inception. In
all cases, disclosures are made when performance quotations differ from the
SEC Guidelines which were established effective May 1, 1988. Performance data
is based on historical earnings and is not intended to indicate future
performance. Rates of return expressed on an annual basis will usually not
equal the sum of returns expressed for consecutive interim periods due to the
compounding of the interim yields. The Fund's Annual Report to shareholders
relating to the Portfolios for the fiscal periods ended November 30, 1995
contains additional performance information. A copy of the Annual Report is
available upon request and without charge.

With respect to the International Equity Portfolios and VA Global Bond
Portfolio, rates of return expressed as a percentage of U.S. dollars will
reflect applicable currency exchange rates at the beginning and ending dates of
the investment periods presented. The return expressed in terms of U.S. dollars
is the return one would achieve by investing dollars in the Portfolio at the
beginning of the period and liquidating the investment in dollars at the end of
the period. Hence, the return expressed as a percentage of U.S. dollars
combines the investment performance of the Portfolio as well as the performance
of the local currency or currencies of the Portfolio.

Pursuant to an exemptive order from the SEC, shares of the Portfolios may
be sold to registered separate accounts of various insurance companies offering
variable annuity and variable life products. At present, the Board of Directors
of the Fund does not foresee any disadvantage arising from the fact that each
Portfolio may offer its shares to separate accounts of various insurance
companies to serve as an investment vehicle for their variable separate
accounts. However, a material conflict could arise between the interest of the
different participating separate accounts. The Fund's Board of Directors would
monitor events in order to identify any material irreconcilable conflicts that
may possibly arise and to determine what action, if any, should be taken in
response to such conflicts of interest. If such conflicts were to occur, one or
more insurance companies' separate accounts might be required to withdraw its
investments in one or more Portfolios, or shares of another Portfolio may be
substituted by the Fund. As a result, a Portfolio might be forced to sell a
portion of its securities at a disadvantageous price. In the event of such a
material conflict, the affected insurance companies agree to take any necessary
steps, including removing its separate account from the Portfolio if required by
law, to resolve the matter.

As of February 29, 1996, the following persons owned more than 25% of the
voting securities of the following Portfolios:

VA LARGE VALUE PORTFOLIO

(formerly National Home Life) Providian Life
and Health Separate Account* 78.74%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

22
<PAGE>

VA GLOBAL BOND PORTFOLIO

(formerly National Home Life) Providian Life
and Health Separate Account* 62.04%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health General Account* 37.96%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

VA SMALL VALUE PORTFOLIO

(formerly National Home Life) Providian Life
and Health General Account* 53.40%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health Separate Account* 46.60%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

VA INTERNATIONAL VALUE PORTFOLIO

(formerly National Home Life) Providian Life
and Health Separate Account* 75.49%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

VA INTERNATIONAL SMALL PORTFOLIO

(formerly National Home Life) Providian Life
and Health General Account* 50.51%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health Separate Account* 49.49%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

VA SHORT-TERM FIXED PORTFOLIO

(formerly National Home Life) Providian Life
and Health General Account* 67.33%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

23
<PAGE>

(formerly National Home Life) Providian Life
and Health Separate Account* 32.67%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232
- --------------
* Owner of record only.

Shareholder inquiries may be made by writing or calling the Fund at the
address or telephone number appearing on the cover of this prospectus.

24
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

DFA INVESTMENT DIMENSIONS GROUP INC.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Tel. No. (310) 395-8005

Investment Advisor
- ------------------
DIMENSIONAL FUND ADVISORS INC.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Tel. No. (310) 395-8005

Sub-Advisors
- ------------
DIMENSIONAL FUND ADVISORS LTD.
14 Berkeley Street
London, W1X 5AD
England
Tel. No. (171) 495-2343

DFA AUSTRALIA PTY LIMITED
Suite 4403 Gateway
1 MacQuarie Place
Sydney, New South Wales 2000
Australia
Tel No. (61) 2-247-7822

Custodian - International
- -------------------------
BOSTON SAFE DEPOSIT AND TRUST COMPANY
Princess House
1 Suffolk Lane
London EC4R 0AN
England

Custodian - Domestic
- --------------------
PNC BANK, National Association
200 Stevens Drive, Airport Business Center
Lester, PA 19113

Transfer and Dividend Disbursing Agent
- --------------------------------------
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809

Legal Counsel
- -------------
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098

Independent Accountants
- -----------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103

<PAGE>

DFA INVESTMENT DIMENSIONS GROUP INC.

1299 OCEAN AVENUE, 11TH FLOOR, SANTA MONICA, CALIFORNIA 90401
TELEPHONE: (310) 395-8005

STATEMENT OF ADDITIONAL INFORMATION

March 29, 1996

DFA Investment Dimensions Group Inc. (the "Fund") offers twenty-eight
series of shares. This statement of additional information describes six of
those series: VA SMALL VALUE PORTFOLIO, VA LARGE VALUE PORTFOLIO, VA
INTERNATIONAL VALUE PORTFOLIO, VA INTERNATIONAL SMALL PORTFOLIO, VA
SHORT-TERM FIXED PORTFOLIO and VA GLOBAL BOND PORTFOLIO (individually, a
"Portfolio" and collectively, the "Portfolios"). The shares of the
Portfolios are sold only to separate accounts of insurance companies in
conjunction with variable life and variable annuity contracts. This
statement of additional information is not a prospectus but should be read in
conjunction with the Portfolios' prospectus dated March 29, 1996, which can
be obtained from the Fund by writing to the Fund at the above address or by
calling the above telephone number.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
PORTFOLIO CHARACTERISTICS AND POLICIES.. . . . . . . . . . . . . . . . . 1

BROKERAGE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2

INVESTMENT LIMITATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . 3

FUTURES CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS . . . . . . . . . . . . . . . 6

DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 7

ADMINISTRATIVE SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . 9

OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . . . . . . . . . 10

PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . 12

CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . 13

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>

<PAGE>

PORTFOLIO CHARACTERISTICS AND POLICIES

The following information supplements the information set forth in the
prospectus under the captions "DOMESTIC EQUITY PORTFOLIOS," "VA INTERNATIONAL
VALUE PORTFOLIO," "VA INTERNATIONAL SMALL PORTFOLIO," and "FIXED INCOME
PORTFOLIOS - INVESTMENT OBJECTIVES AND POLICIES." The following information
applies to all of the Portfolios.

Because the structure of the Domestic Equity and International Equity
Portfolios is based on the relative market capitalizations of eligible
holdings, it is possible that the Portfolios might include at least 5% of the
outstanding voting securities of one or more issuers. In such circumstances,
the Fund and the issuer would be deemed "affiliated persons" under the
Investment Company Act of 1940 (the "1940 Act") and certain requirements of
the Act regulating dealings between affiliates might become applicable.
However, based on the present capitalizations of the groups of companies
eligible for inclusion in the Portfolios and the anticipated amount of a
Portfolio's assets intended to be invested in such securities, management
does not anticipate that a Portfolio will include as much as 5% of the voting
securities of any issuer.

VA International Small Portfolio may invest up to 5% of its assets in
convertible debentures issued by non-U.S. companies. Convertible debentures
include corporate bonds and notes that may be converted into or exchanged for
common stock. These securities are generally convertible either at a stated
price or a stated rate (that is, for a specific number of shares of common
stock or other security). As with other fixed income securities, the price
of a convertible debenture to some extent varies inversely with interest
rates. While providing a fixed-income stream (generally higher in yield than
the income derived from a common stock but lower than that afforded by a
non-convertible debenture), a convertible debenture also affords the investor
an opportunity, through its conversion feature, to participate in the capital
appreciation of the common stock into which it is convertible. As the market
price of the underlying common stock declines, convertible debentures tend to
trade increasingly on a yield basis and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the price of a convertible
debenture tends to rise as a reflection of the value of the underlying common
stock. To obtain such a higher yield, the Portfolio may be required to pay
for a convertible debenture an amount in excess of the value of the
underlying common stock. Common stock acquired by the Portfolio upon
conversion of a convertible debenture will generally be held for so long as
the Advisor anticipates such stock will provide the Portfolio with
opportunities which are consistent with the Portfolio's investment objective
and policies.

The annual portfolio turnover rates of VA Small Value and VA Large Value
Portfolios are expected to be 15% and 20%, respectively. The annual
portfolio turnover rate of the VA International Value Portfolio is not
expected to exceed 20%. Because the relative market capitalizations of small
companies compared with larger companies generally do not change
substantially over short periods of time, the portfolio turnover rate of VA
International Small Portfolio ordinarily is anticipated to be low and is not
expected to exceed 25% per year. Generally, securities will be purchased with
the expectation that they will be held for longer than one year. Generally,
securities will be held until such time as, in the Advisor's judgment, they
are no longer considered an appropriate holding in light of the policy of
maintaining portfolios of companies with small market capitalization.

1
<PAGE>

BROKERAGE TRANSACTIONS

The following table depicts brokerage commissions paid by the Portfolios
during the fiscal year ended November 30, 1995.

BROKERAGE COMMISSIONS
FISCAL YEAR ENDED NOVEMBER 30, 1995

<TABLE>
<CAPTION>
<S> <C>
VA Small Value $ 30,469

VA Large Value $ 7,331

VA International Value $ 8,171

VA International Small $ 53,043

VA Short-Term Fixed $ 0

VA Global Bond $ 0
</TABLE>

The Fixed Income Portfolios acquire and sell securities on a net basis
with dealers which are major market markers in such securities. The
Investment Committee of the Advisor selects dealers on the basis of their
size, market making and credit analysis ability. When executing portfolio
transactions, the Advisor seeks to obtain the most favorable price for the
securities being traded among the dealers with whom the Fixed Income
Portfolios effect transactions.

Portfolio transactions will be placed with a view to receiving the best
price and execution. The Portfolios will seek to acquire and dispose of
securities in a manner which would cause as little fluctuation in the market
prices of stocks being purchased or sold as possible in light of the size of
the transactions being effected, and brokers will be selected with this goal
in view. The Advisor monitors the performance of brokers which effect
transactions for the Portfolios to determine the effect that their trading
has on the market prices of the securities in which they invest. The Advisor
also checks the rate of commission being paid by the Portfolios to their
brokers to ascertain that they are competitive with those charged by other
brokers for similar services. Transactions also may be placed with brokers
who provide the Advisor with investment research, such as reports concerning
individual issuers, industries and general economic and financial trends and
other research services. Brokerage transactions may be placed with securities
firms that are affiliated with an affiliate of the Advisor. Commission paid
on such transactions would be commensurate with the rate of commissions paid
on similar transactions to brokers that are not so affiliated.

The over-the-counter market ("OTC") companies eligible for purchase by
VA Small Value Portfolio are thinly traded securities. Therefore, the
Advisor believes it needs maximum flexibility to effect OTC trades on a best
execution basis. To that end, the Advisor places buy and sell orders with
market makers, third market brokers, Instinet and with brokers on an agency
basis when the Advisor determines that the securities may not be available
from other sources at a more favorable price. Third market brokers enable
the Advisor to trade with other institutional holders directly on a net
basis. This allows the Advisor to sometimes trade larger blocks than would
be possible by going through a single market maker.

Instinet is an electronic information and communication network whose
subscribers include most market makers as well as many institutions.
Instinet charges a commission for each trade executed on its system. On any
given trade, the Domestic Equity Portfolios, by trading through Instinet,
would pay a spread to a dealer on the other side of the trade plus a
commission to Instinet. However, placing a buy (or sell) order on Instinet
communicates to many (potentially all) market makers and institutions at once.

2
<PAGE>

This can create a more complete picture of the market and thus increase the
likelihood that the Portfolios can effect transactions at the best available
prices.

During the fiscal year ended November 30, 1995, the Portfolios paid
commissions for securities transactions to brokers which provided market
price monitoring services, market studies and research services to the
Portfolios as set forth in the following table:

<TABLE>
<CAPTION>
Value of Brokerage
Securities Transactions Commissions
----------------------- -----------
<S> <C> <C>
VA Small Value $ 3,365,563 $ 17,502

VA Large Value $ 2,990,187 $ 4,259

VA International Value $ 0 $ 0

VA International Small $ 0 $ 0

VA Short-Term Fixed $ 0 $ 0

VA Global Bond $ 0 $ 0
</TABLE>

The investment advisory agreements permit the Advisor knowingly to pay
commissions on securities transactions which are greater than another broker
might charge if the Advisor, in good faith, determines that the commissions
paid are reasonable in relation to the research or brokerage services
provided by the broker or dealer when viewed in terms of either a particular
transaction or the Advisor's overall responsibilities to the Fund. Research
services furnished by brokers through whom securities transactions are
effected may be used by the Advisor in servicing all of its accounts and not
all such services may be used by the Advisor with respect to the Fund.

Brokerage commissions for transactions in securities listed on the Tokyo
Stock Exchange ("TSE") and other Japanese securities exchanges are fixed.
Under the current regulations of the TSE and the Japanese Ministry of
Finance, member and non-member firms of Japanese exchanges are required to
charge full commissions to all customers other than banks and certain
financial institutions, but members and licensed non-member firms may confirm
transactions to banks and financial institution affiliates located outside
Japan with institutional discounts on brokerage commissions. The
International Equity Portfolios expect to be able to avail themselves of
institutional discounts. The Portfolios' ability to effect transactions at a
discount from fixed commission rates depends on a number of factors,
including the size of the transaction, the relation between the cost to the
member or the licensed non-member firm of effecting such transaction and the
commission receivable, and the law, regulation and practice discussed above.
There can be no assurance that the Portfolios will be able to realize the
benefit of discounts from fixed commissions.

INVESTMENT LIMITATIONS

Each of the Portfolios has adopted certain limitations which may not be
changed with respect to any Portfolio without the approval of a majority of
the outstanding voting securities of the Portfolio. A "majority" is defined
as the lesser of: (1) at least 67% of the voting securities of the Portfolio
(to be affected by the proposed change) present at a meeting if the holders
of more than 50% of the outstanding voting securities of the Portfolio are
present or represented by proxy, or (2) more than 50% of the outstanding
voting securities of such Portfolio.

3
<PAGE>

The Portfolios will not:

(1) invest in commodities or real estate, including limited partnership
interests therein, although they may purchase and sell securities of
companies which deal in real estate and securities which are secured by
interests in real estate, and all Portfolios, may purchase or sell financial
futures contracts and options thereon;

(2) make loans of cash, except through the acquisition of repurchase
agreements and obligations customarily purchased by institutional investors;

(3) as to 75% of the total assets of a Portfolio, invest in the securities of
any issuer (except obligations of the U.S. Government and its
instrumentalities) if, as a result, more than 5% of the Portfolio's total
assets, at market, would be invested in the securities of such issuer;
provided that the VA Global Bond Portfolio is not subject to this limitation;

(4) purchase or retain securities of an issuer if those officers and
directors of the Fund or the Advisor owning more than 1/2 of 1% of such
securities together own more than 5% of such securities;

(5) borrow, except that each Portfolio may borrow, for temporary or emergency
purposes, amounts not exceeding 33% of their net assets from banks and pledge
not more than 33% of such assets to secure such loans;

(6) pledge, mortgage, or hypothecate any of its assets to an extent greater
than 10% of its total assets at fair market value, except as described in (5)
above;

(7) invest more than 15% of the value of the Portfolio's total assets in
illiquid securities which include certain restricted securities, repurchase
agreements with maturities of greater than seven days, and other illiquid
investments;

(8) engage in the business of underwriting securities issued by others;

(9) invest for the purpose of exercising control over management of any
company;

(10) invest its assets in securities of any investment company, except in
connection with a merger, acquisition of assets, consolidation or
reorganization;

(11) acquire any securities of companies within one industry if, as a result
of such acquisition, more than 25% of the value of the Portfolio's total
assets would be invested in securities of companies within such industry;
except VA Short-Term Fixed Portfolio shall invest more than 25% of its total
assets in obligations of banks and bank holding companies in the
circumstances described in the prospectus under "Investments in the Banking
Industry" and as otherwise described under "Portfolio Strategy";

(12) write or acquire options (except as described in (1) above) or interests
in oil, gas or other mineral exploration, leases or development programs;

(13) purchase warrants, however, the Portfolios may acquire warrants as a
result of corporate actions involving holdings of other securities;

(14) purchase securities on margin or sell short; or

(15) acquire more than 10% of the voting securities of any issuer and provided
that this limitation applies only to 75% of the assets of the Domestic Equity
Portfolios and VA International Value Portfolio.

4
<PAGE>

The investment limitation described in (1) above, does not prohibit the
Portfolios from making margin deposits in connection with the purchase or
sale of financial futures contracts and options thereon to the extent
permitted under applicable regulations.

Although (2) above prohibits cash loans, the Portfolios are authorized
to lend portfolio securities.

For the purposes of (7) above, VA Short-Term Fixed Portfolio may invest
in commercial paper that is exempt from the registration requirements of the
Securities Act of 1933 (the "1933 Act") subject to the requirements regarding
credit ratings stated in the prospectus under "Description of Investments."
Further, pursuant to Rule 144A under the 1933 Act, the Portfolios may
purchase certain unregistered (i.e., restricted) securities upon a
determination that a liquid institutional market exists for the securities.
If it is decided that a liquid market does exist, the securities will not be
subject to the 15% limitation on holdings of illiquid securities stated in
(7) above. While maintaining oversight, the Board of Directors has delegated
the day-to-day function of making liquidity determinations to the Advisor.
For 144A securities to be considered liquid, there must be at least two
dealers making a market in such securities. After purchase, the Board of
Directors and the Advisor will continue to monitor the liquidity of Rule 144A
securities.

For the purposes of (11) above, utility companies will be divided
according to their services; e.g., gas, gas transmission, electric and gas,
electric, water and telephone will each be considered a separate industry.

The International Equity Portfolios and VA Global Bond Portfolio may
acquire and sell forward foreign currency exchange contracts in order to
hedge against changes in the level of future currency rates. Such contracts
involve an obligation to purchase or sell a specific currency at a future
date at a price set in the contract. While each Domestic Equity Portfolio
and VA International Value Portfolio have retained authority to buy and sell
financial futures contracts and options thereon, they have no present
intention to do so.

Unless otherwise indicated, all limitations applicable to the
Portfolios' investments apply only at the time that a transaction is
undertaken. Any subsequent change in a rating assigned by any rating service
to a security or change in the percentage of a Portfolio's assets invested in
certain securities or other instruments resulting from market fluctuations or
other changes in a Portfolio's total assets will not require a Portfolio to
dispose of an investment until the Advisor determines that it is practicable
to sell or close out the investment without undue market or tax consequences.
In the event that ratings services assign different ratings to the same
security, the Advisor will determine which rating it believes best reflects
the security's quality and risk at that time, which may be the higher of the
several assigned ratings.

FUTURES CONTRACTS

All Portfolios may enter into futures contracts and options on futures
contracts for the purpose of remaining fully invested and to maintain liquidity
to pay redemptions. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of defined securities at a
specified future time and at a specified price. Futures contracts which are
standardized as to maturity date and underlying financial instrument are traded
on national futures exchanges. The Portfolios will be required to make a margin
deposit in cash or government securities with a broker or custodian to initiate
and maintain positions in futures contracts. Minimal initial margin
requirements are established by the futures exchange, and brokers may establish
margin requirements which are higher than the exchange requirements. After a
futures contract position is opened, the value of the contract is marked to
market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy margin requirements, payment of additional
"variation" margin will be required. Conversely, reduction in the contract
value may reduce the required margin resulting in a repayment of excess margin
to the Portfolio. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Portfolios expect to earn
income on their margin deposits. Pursuant to current regulations,

5
<PAGE>

a Portfolio will not enter into futures contract transactions if, immediately
thereafter, its margin deposits on open contracts exceed 5% of the market
value of its total assets. In addition, to the extent that a Portfolio
invests in futures contracts and options thereon for other than bona fide
hedging purposes, the Portfolio will not enter into such transaction if,
immediately thereafter, the sum of the amount of initial margin deposits and
premiums paid for open futures options would exceed 5% of the Portfolio's
total assets, after taking into account unrealized profits and unrealized
losses on such contracts it has entered into; provided, however, that in the
case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. Pursuant to
published positions of the SEC, the Portfolios may be required to maintain
segregated accounts consisting of liquid assets such as cash, U.S. government
securities, or other high grade debt obligations (or, as permitted under
applicable regulation, enter into offsetting positions) in connection with
its futures contract transactions in order to cover its obligations with
respect to such contracts.

Positions in futures contracts may be closed out only on an exchange
which provides a secondary market. However, there can be no assurance that a
liquid secondary market will exist for any particular futures contract at any
specific time. Therefore, it might not be possible to close a futures
position and, in the event of adverse price movements, the Portfolio would
continue to be required to continue to make variation margin deposits. In
such circumstances, if the Portfolio has insufficient cash, it might have to
sell portfolio securities to meet daily margin requirements at a time when it
might be disadvantageous to do so. Management intends to minimize the
possibility that it will be unable to close out a futures contract by only
entering into futures which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS

Except for transactions a Portfolio has identified as hedging
transactions, the Portfolio is required for federal income tax purposes to
recognize as income for each taxable year its net unrealized gains and losses
on certain futures contracts as of the end of the year as well as those
actually realized during the year. In most cases, any gain or loss
recognized with respect to a futures contract is considered to be 60%
long-term gain or loss and 40% short-term capital gain or loss, without
regard to the holding period of the contract. Furthermore, sales of futures
contracts which are intended to hedge against a change in the value of
securities held by the Portfolio may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such
securities upon disposition.

In order for a Portfolio to continue to qualify for federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, gains from the sale of
securities and other income derived with respect to the Portfolio's business
of investing in securities. In addition, gains realized on the sale or other
disposition of securities held for less than three months must be limited to
less than 30% of the Portfolio's annual gross income. It is anticipated that
any net gain realized from closing futures contracts will be considered gain
from the sale of securities and, therefore, constitute qualifying income for
purposes of the 90% requirement. In order to avoid realizing excessive gains
on securities held less than three months, the Portfolio may be required to
defer the closing out of futures contracts beyond the time when it would
otherwise be advantageous to do so. It is anticipated that unrealized gains
on futures contracts which have been open for less than three months as of
the end of the Portfolio's fiscal year and which are recognized for tax
purposes, will not be considered gains on sales of securities held less than
three months for the purpose of the 30% test. The Portfolios will distribute
to shareholders annually any net capital gains which have been recognized for
federal income tax purposes (including unrealized gains at the end of each
Portfolio's fiscal year) on futures transactions. Such distributions will be
combined with distributions of capital gains realized on each Portfolio's
other investments.

6
<PAGE>

DIRECTORS AND OFFICERS

The names, addresses and ages of the directors and officers of the Fund
and a brief statement of their present positions and principal occupations
during the past five years is set forth below.

DIRECTORS

David G. Booth, Director*, 49, President and Chairman-Chief Executive
Officer, Santa Monica, CA. President, Chairman-Chief Executive Officer and
Director, of the following companies: Dimensional Fund Advisors Inc., DFA
Securities Inc., Dimensional Fund Advisors Asia Inc., DFA Investment
Dimensions Group Inc. (registered investment company) and Dimensional
Emerging Markets Fund Inc. (registered investment company). Trustee,
President and Chairman-Chief Executive Officer of The DFA Investment Trust
Company. Chairman and Director, Dimensional Fund Advisors Ltd.

George M. Constantinides, 48, Director, Chicago, IL. Leo Melamed
Professor of Finance, Graduate School of Business, University of Chicago.
Trustee, The DFA Investment Trust Company. Director, DFA Investment
Dimensions Group Inc. and Dimensional Emerging Markets Fund Inc.

John P. Gould, 57, Director, Chicago, IL. Steven G. Rothmeier
Distinguished Service Professor of Economics, Graduate School of Business,
University of Chicago. Trustee, The DFA Investment Trust Company and First
Prairie Funds (registered investment companies). Director, DFA Investment
Dimensions Group Inc., Dimensional Emerging Markets Fund Inc. and Harbor
Investment Advisors. Executive Vice President, Lexecon Inc. (economics, law,
strategy and finance consulting).

Roger G. Ibbotson, 52, Director, New Haven, CT. Professor in Practice
of Finance, Yale School of Management. Trustee, The DFA Investment Trust
Company. Director, DFA Investment Dimensions Group Inc., Dimensional Emerging
Markets Fund Inc., Hospital Fund, Inc. (investment management services) and
BIRR Portfolio Analysis, Inc. (software products). Chairman and President,
Ibbotson Associates, Inc. (software, data, publishing and consulting).

Merton H. Miller, 72, Director, Chicago, IL. Robert R. McCormick
Distinguished Service Professor, Graduate School of Business, University of
Chicago. Trustee, The DFA Investment Trust Company. Director, DFA
Investment Dimensions Group Inc., Dimensional Emerging Markets Fund Inc. and
Public Director, Chicago Mercantile Exchange.

Myron S. Scholes, 54, Director, Greenwich, CT. Limited Partner,
Long-Term Capital Management L.P. (money manager). Frank E. Buck Professor
of Finance, Graduate School of Business and Professor of Law, Law School,
Senior Research Fellow, Hoover Institution, (all) Stanford University (on
leave). Trustee, The DFA Investment Trust Company. Director, DFA Investment
Dimensions Group Inc., Dimensional Emerging Markets Fund Inc., Benham Capital
Management Group of Investment Companies and Smith Breedon Group of
Investment Companies.

Rex A. Sinquefield, 51, Director*, Chairman-Chief Investment Officer,
Santa Monica, CA. Chairman-Chief Investment Officer and Director,
Dimensional Fund Advisors Inc., DFA Securities Inc., DFA Australia Pty
Limited, DFA Investment Dimensions Group Inc. and Dimensional Emerging
Markets Fund Inc. Trustee, Chairman-Chief Investment Officer of The DFA
Investment Trust Company. Chairman, Chief Executive Officer and Director,
Dimensional Fund Advisors Ltd.

*Interested Director of the Fund.

7
<PAGE>

OFFICERS

Each of the officers listed below hold the same office in the following
entities: Dimensional Fund Advisors Inc., DFA Securities Inc., DFA Australia
Pty Limited, DFA Investment Dimensions Group Inc., The DFA Investment Trust
Company, Dimensional Fund Advisors Ltd., and Dimensional Emerging Markets
Fund Inc.

Arthur Barlow, 40, Vice President, Santa Monica, CA.

Truman Clark, 54, Vice President, Santa Monica, CA. Consultant until
October 1995 and Principal and Manager of Product Development, Wells Fargo
Nikko Investment Advisors, San Francisco, CA from 1990-1994.

Maureen Connors, 59, Vice President, Santa Monica, CA.

Robert Deere, 38, Vice President, Santa Monica, CA.

Irene R. Diamant, 45, Vice President and Secretary, Santa Monica, CA.

Eugene Fama, Jr., 35, Vice President, Santa Monica, CA.

David Plecha, 34, Vice President, Santa Monica, CA.

George Sands, 40, Vice President, Santa Monica, CA. Managing Director,
Asset Strategy Consulting, Los Angeles, CA from 1991 to 1992 and previously
Vice President, Wilshire Associates, Santa Monica, CA.

Michael T. Scardina, 40, Vice President, Chief Financial Officer,
Controller and Treasurer, Santa Monica, CA.

Cem Severoglu, 32, Vice President, Santa Monica, CA.

Jeanne C. Sinquefield, Ph.D., 49, Executive Vice President, Santa
Monica, CA.

Rex A. Sinquefield and Jeanne C. Sinquefield are husband and wife.

Set forth below is a table listing, for each director entitled to
receive compensation, the compensation received from the Fund during the
fiscal year ended November 30, 1995, and the total compensation received from
all four registered investment companies for which the Advisor serves as
investment advisor during that same fiscal year.

<TABLE>
<CAPTION>
Aggregate Total Compensation
Compensation from Fund
Director from Fund and Fund Complex
- -------- ------------ ------------------
<S> <C> <C>
George M. Constantinides $15,000 $30,000
John P. Gould $15,000 $30,000
Roger G. Ibbotson $15,000 $30,000
Merton H. Miller $12,000 $24,000
Myron S. Scholes $15,000 $30,000
</TABLE>

8
<PAGE>

ADMINISTRATIVE SERVICES

PFPC Inc. ("PFPC") serves as the accounting services, dividend
disbursing and transfer agent for each Portfolio. The services provided by
PFPC are subject to supervision by the executive officers and the Board of
Directors of the Fund, and include day-to-day keeping and maintenance of
certain records, calculation of the offering price of the shares, preparation
of reports, liaison with its custodians, and transfer and dividend disbursing
agency services. For its services, each Portfolio pays PFPC fees at the
annual rates set forth in the following table:

DOMESTIC EQUITY PORTFOLIOS
.1025% of the first $300 million of net assets
.0769% of the next $300 million of net assets
.0513% of the next $250 million of net assets
.0205% of the net assets over $850 million

INTERNATIONAL EQUITY PORTFOLIOS
.1230% of the first $300 million of net assets
.0615% of the next $300 million of net assets
.0410% of the next $250 million of net assets
.0205% of net assets over $850 million

VA SHORT-TERM FIXED PORTFOLIO
.0513% of the first $100 million of net assets
.0308% of the next $100 million of net assets
.0205% of the next $200 million of net assets

VA GLOBAL BOND PORTFOLIO
.1230% of the first $150 million of net assets
.0820% of net assets between $150 million and $300 million
.0615% of net assets between $300 million and $600 million
.0410% of net assets between $600 million and $850 million
.0205% of net assets over $850 million

PFPC also charges minimum fees at the rates of $54,000 per year for VA Large
Value and the Fixed Income Portfolios and $75,000 per year for VA Small Value
and the International Equity Portfolios. The minimums are phased in on a pro
rata basis during each Portfolio's first 12-14 months of operation.

OTHER INFORMATION

For the services it provides as investment advisor to each Portfolio, the
Advisor is paid a monthly fee calculated as a percentage of average net assets
of the Portfolio. For the fiscal periods ended November 30, 1995, the
Portfolios paid advisory fees as set forth in the following table:

<TABLE>
<CAPTION>
1995
(000)
-----
<S> <C>
VA Small Value $ 4

VA Large Value $ 18

VA International Value $ 3

VA International Small $ 4

VA Short-Term Fixed $ 2

VA Global Bond $ 7
</TABLE>

9
<PAGE>

Because of current federal securities law requirements, the Fund expects
that its life insurance company shareholders will offer their contract owners
the opportunity to instruct them as to how Portfolio shares allocable to
their variable contracts will be voted with respect to certain matters, such
as approval of investment advisory agreements. Generally, an insurance
company will vote all Portfolio shares held in a separate account in the same
proportion as it receives instructions from contract owners in that separate
account. Under certain circumstances described in the insurance company
separate account prospectus, the insurance company may not vote in accordance
with the contract owner's instructions.

With respect to matters which require shareholder approval, shareholders
are entitled to vote only with respect to matters which affect the interest
of the class of shares (Portfolio) which they hold, except as otherwise
required by applicable law. If liquidation of the Fund should occur,
shareholders would be entitled to receive on a per class basis the assets of
the particular Portfolio whose shares they own, as well as a proportionate
share of Fund assets not attributable to any particular class. Ordinarily,
the Fund does not intend to hold annual meetings of shareholders, except as
required by the 1940 Act or other applicable law. The Fund's by-laws provide
that special meetings of shareholders shall be called at the written request
of at least 10% of the votes entitled to be cast at such meeting. Such
meeting may be called to consider any matter, including the removal of one or
more directors. Shareholders will receive shareholder communications with
respect to such matters as required by the 1940 Act, including semi-annual
and annual financial statements of the Fund, the latter being audited at
least once each year.

Boston Safe Deposit and Trust Company serves as the custodian for the
International Equity Portfolios and VA Global Bond Portfolio. PNC Bank,
National Association serves as custodian for the Domestic Equity Portfolios
and VA Short-Term Fixed Portfolio. The custodians maintain a separate
account or accounts for the Portfolios; receive, hold and release portfolio
securities on account of the Portfolios; make receipts and disbursements of
money on behalf of the Portfolios; and collect and receive income and other
payments and distributions on account of the Portfolios' portfolio securities.

Coopers & Lybrand L.L.P., the Fund's independent accountants, audits the
Fund's financial statements.

PRINCIPAL HOLDERS OF SECURITIES

As of February 29, 1996, the following stockholders owned at least 5% of
the outstanding stock of the Portfolios, as set forth below.

VA LARGE VALUE PORTFOLIO

(formerly National Home Life) Providian Life
and Health Separate Account* 78.74%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health General Account* 21.26%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

10
<PAGE>

VA GLOBAL BOND PORTFOLIO

(formerly National Home Life) Providian Life
and Health Separate Account* 62.04%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health General Account* 37.96%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

VA SMALL VALUE PORTFOLIO

(formerly National Home Life) Providian Life
and Health General Account* 53.40%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health Separate Account* 46.60%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

VA INTERNATIONAL VALUE PORTFOLIO

(formerly National Home Life) Providian Life
and Health Separate Account* 75.49%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health General Account* 24.51%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

VA INTERNATIONAL SMALL PORTFOLIO

(formerly National Home Life) Providian Life
and Health General Account* 50.51%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health Separate Account* 49.49%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

11
<PAGE>

VA SHORT-TERM FIXED PORTFOLIO

(formerly National Home Life) Providian Life
and Health General Account* 67.33%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232

(formerly National Home Life) Providian Life
and Health Separate Account* 32.67%
400 West Market Street
P.O. Box 32830
Louisville, KY 40232
- --------------
*Owner of record only.

PURCHASE AND REDEMPTION OF SHARES

The following information supplements the information set forth in the
prospectus under the caption "PURCHASE AND REDEMPTION OF SHARES."

The Fund will accept purchase and redemption orders on each day that the
New York Stock Exchange ("NYSE") is open for business, regardless of whether
the Federal Reserve System is closed. However, no purchases by wire may be
made on any day that the Federal Reserve System is closed. The Fund will
generally be closed on days that the NYSE is closed. The New York Stock
Exchange is scheduled to be open Monday through Friday throughout the year
except for days closed to recognize New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day. The Federal Reserve System is closed on the same days as the NYSE,
except that is open on Good Friday and closed on Martin Luther King, Jr. Day,
Columbus Day and Veterans' Day. Orders for redemptions and purchases will
not be processed if the Fund is closed.

Management believes that any dilutive effect of the cost of investing
the proceeds of the sale of the shares of the Portfolios is minimal and,
therefore, the shares of the Portfolios are currently sold at net asset
value, without imposition of a reimbursement fee. Reimbursement fees may be
charged prospectively from time to time based upon the future experience of
the Portfolios. Any such charges will be described in the prospectus.

The Fund reserves the right, in its sole discretion, to suspend the
offering of shares of any or all Portfolios or reject purchase orders when,
in the judgment of management, such suspension or rejection is in the best
interest of the Fund or a Portfolio.

The Fund may suspend redemption privileges or postpone the date of
payment: (1) during any period when the NYSE is closed, or trading on the
NYSE is restricted as determined by the Securities and Exchange Commission
(the "Commission"), (2) during any period when an emergency exists as defined
by the rules of the Commission as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it, or fairly to
determine the value of its assets and (3) for such other periods as the
Commission may permit.

If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of any Portfolio to make payment
wholly or partly in cash, any Portfolio may pay the redemption price in whole
or in part by a distribution of portfolio securities from the Portfolio of
the shares being redeemed in lieu of cash. Any such redemption by a
Portfolio would be in accordance with Rule 18f-1 under the 1940 Act.
Investors may incur brokerage charges and other transaction costs selling
securities that were received in payment of redemptions. The International
Equity Portfolios and the VA Global Bond Portfolio reserve the right to
redeem their shares in the currencies in which their investments

12
<PAGE>

are denominated. Investors may incur charges in converting such securities
to dollars and the value of the securities may be affected by currency
exchange fluctuations.

CALCULATION OF PERFORMANCE DATA

Following are quotations of the Portfolios' annualized percentage total
returns from the Portfolios' date of initial investment, as indicated below,
through November 30, 1995, using the standardized method of calculation
required by the Commission:

<TABLE>
<S> <C>
VA Small Value Portfolio -16.91%*

VA Large Value Portfolio 22.46%**

VA International Value Portfolio 1.83%*

VA International Small Portfolio -16.17%*

VA Short-Term Fixed Portfolio 4.97%*

VA Global Bond Portfolio 14.37%***
</TABLE>
- --------------
* For the period from October 3, 1995 (date of initial investment) to
November 30, 1995.
** For the period from January 13, 1995 (date of initial investment) to
November 30, 1995. Until October 1995, VA Large Value Portfolio invested
approximately 50% of its total assets in the stocks of large non-U.S.
companies and approximately 50% of its total assets in the stocks of U.S.
companies. The total return information for VA Large Value Portfolio
reflects the performance of the Portfolio when it invested in the stocks of
both U.S. and non-U.S. companies. The total return of the Portfolio for
the period ended November 30, 1995 should not be considered indicative of
its future performance.
*** For the period January 13, 1995 (date of initial investment) to November
30, 1995.

Each Portfolio determines its average annual total return by finding the
average annual compounded rates of return over the stated time period that
would equate a hypothetical initial purchase order of $1,000 to its
redeemable value (including capital appreciation/depreciation and dividends
and distributions paid and reinvested less any fees charged to a shareholder
account) at the end of the stated time period. The calculation assumes that
all dividends and distributions are reinvested at the public offering price
on the reinvestment dates during the period. The quotation assumes the
account was completely redeemed at the end of each period and the deduction
of all applicable charges and fees. According to the Commission's formula:

n
P(1 + T) = 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-, and ten-year periods at the end of the
one-, five-, and ten-year periods (or fractional portion thereof).

13
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The Portfolios may compare their investment performance to appropriate
market and mutual fund indices.

FINANCIAL STATEMENTS

The audited financial statements and financial highlights of the
Portfolios for the fiscal year ended November 30, 1995, as set forth in the
Fund's Annual Report to stockholders relating to the Portfolios, and the
report thereon of Coopers & Lybrand L.L.P., independent accountants, also
appearing therein, are incorporated herein by reference.

An investor may obtain a copy of the Annual Report, upon request and
without charge, by contacting the Fund at the address or telephone number
appearing on the cover of the Statement of Additional Information.