PROVIDIAN LIFE & HEALTH INSURANCE CO SEPARATE ACCOUNT V, 497, 1998-07-30

PROVIDIAN LIFE & HEALTH INSURANCE CO SEPARATE ACCOUNT V
497, 1998-07-30

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PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT V
PROSPECTUS
FOR THE
ADVISOR'S EDGE SELECT VARIABLE ANNUITY
OFFERED BY
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(A MISSOURI STOCK COMPANY)
ADMINISTRATIVE OFFICES
4333 EDGEWOOD ROAD N.E.
CEDAR RAPIDS, IOWA 52499

The Advisor's Edge Select variable annuity contract (the "Contract"), offered
through Providian Life and Health Insurance Company (the "Company", "us", "we"
or "our"), provides a vehicle for investing on a tax-deferred basis in 17
investment company Portfolios and our General Account. The Contract is an
individual variable annuity contract and is intended for retirement savings or
other long-term investment purposes.

The minimum initial Purchase Payment for Non-Qualified Contracts is $25,000.
The minimum initial purchase payment for Qualified Contracts is $1,000 (or $50
monthly by payroll deduction). The Contract is a flexible-premium deferred
variable annuity that provides for a Right to Cancel Period of 10 days (30
days or more in some instances) plus a 5 day grace period to allow for mail
delivery during which you may cancel your investment in the Contract.

You may allocate your Net Purchase Payments for the Contract among 17
Subaccounts of Providian Life and Health Insurance Company's Separate Account
V and four fixed options available under the Company's General Account. Assets
of each Subaccount are invested in one of the following Portfolios (which are
contained within seven open-end, diversified investment companies):

.DREYFUS SMALL CAP VALUE .MONTGOMERY EMERGING MARKETS PORTFOLIO
PORTFOLIO .STEIN ROE SPECIAL VENTURE FUND,
.ENDEAVOR ENHANCED INDEX VARIABLE SERIES
PORTFOLIO .STRONG INTERNATIONAL STOCK FUND II
.FEDERATED AMERICAN LEADERS .STRONG SCHAFER VALUE FUND II
FUND II .T. ROWE PRICE INTERNATIONAL STOCK
.FEDERATED UTILITY FUND II PORTFOLIO
.FEDERATED PRIME MONEY FUND .WANGER U.S. SMALL CAP ADVISOR
II .WANGER INTERNATIONAL SMALL CAP ADVISOR
.FEDERATED HIGH INCOME BOND .WARBURG PINCUS INTERNATIONAL EQUITY
FUND II PORTFOLIO
.FEDERATED FUND FOR U.S. .WARBURG PINCUS SMALL COMPANY GROWTH
GOVERNMENT SECURITIES II PORTFOLIO
.MONTGOMERY GROWTH PORTFOLIO

Depending upon the state of issue and provisions of your Contract, your
initial Net Purchase Payment(s) will, when your Contract is issued, either be
(i) invested in the Federated Prime Money Fund II during your Right to Cancel
Period and/or invested immediately in your chosen Guaranteed Rate Options or
(ii) invested immediately in your chosen Portfolios and fixed options (other
than the Guaranteed Equity Option).

The Contract's Accumulated Value varies with the investment performance of the
Portfolios you select. You bear all investment risk associated with the
Portfolios. Investment results for your Contract are not guaranteed except to
the extent you have allocated a portion of the Accumulated Value to the
General Account.

The Contract offers a number of ways of withdrawing monies at a future date,
including a lump sum payment and several Annuity Payment Options. You may make
full or partial withdrawals of the Contract's Surrender Value at any time,
although in many instances withdrawals made prior to age 59 1/2 are subject to
a 10% penalty tax (and a portion may be subject to ordinary income taxes). If
you elect an Annuity Payment Option, Annuity Payments may be received on a
fixed and/or variable basis. You also have significant flexibility in choosing
the Annuity Date on which Annuity Payments begin.

This Prospectus sets forth the information you should know before investing in
the Contract. It must be accompanied by a current Prospectus for each Fund.
Please read the Prospectuses carefully and retain them for future reference. A
Statement of Additional Information for the Contract Prospectus, which has the
same date as this Prospectus, has also been filed with the Securities and
Exchange Commission, is incorporated herein by reference and is available free
by calling our Administrative Offices at 1-800-866-6007. The Table of Contents
of the Statement of Additional Information is included at the end of this
Prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

The Contract is not available in all States.

THIS PROSPECTS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION WHERE IT
WOULD BE UNLAWFUL TO MAKE AN OFFERING LIKE THIS. WE HAVE NOT AUTHORIZED ANYONE
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS ABOUT THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY ON ANY OTHER
INFORMATION OR REPRESENTATIONS.

The date of this Prospectus is August 3, 1998.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
GLOSSARY................................................................... 3
HIGHLIGHTS................................................................. 6
FEE TABLE.................................................................. 8
Financial Statements....................................................... 10
Performance Measures....................................................... 10
Additional Performance Measures............................................ 11
Yield and Effective Yield.................................................. 11
The Company and the Separate Account....................................... 12
Endeavor Series Trust...................................................... 12
The Federated Insurance Series............................................. 13
The Montgomery Funds III................................................... 13
SteinRoe Variable Investment Trust......................................... 13
Strong Variable Insurance Funds, Inc. ..................................... 13
Wanger Advisors Trust...................................................... 13
Warburg Pincus Trust....................................................... 13
The Portfolios............................................................. 13
CONTRACT FEATURES.......................................................... 16
Contract Purchase and Purchase Payments.................................. 16
Purchasing by Wire....................................................... 17
Right to Cancel Period................................................... 17
Allocation of Purchase Payments.......................................... 17
Exchanges Among the Portfolios........................................... 18
Asset Rebalancing........................................................ 18
Dollar Cost Averaging Options............................................ 18
Accumulated Value........................................................ 19
Charges and Deductions................................................... 19
Minimum Balance Requirement.............................................. 21
DISTRIBUTIONS UNDER THE CONTRACT........................................... 21
Full and Partial Withdrawals............................................. 21
Lump Sum Payment Option.................................................. 22
Systematic Withdrawal Option............................................. 22
Annuity Date............................................................. 22
Annuity Payment Options.................................................. 23
Death Benefit............................................................ 24
Deferment of Payment..................................................... 26
FEDERAL TAX CONSIDERATIONS................................................. 26
GENERAL INFORMATION........................................................ 31
APPENDIX A--The General Account............................................ A-1
</TABLE>

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GLOSSARY

Accumulation Unit - A measure of your ownership interest in the Contract prior
to the Annuity Date.

Accumulation Unit Value - The value of each Accumulation Unit which is
calculated each Valuation Period.

Accumulated Value - The value of all amounts accumulated under the Contract
prior to the Annuity Date.

Adjusted Death Benefit - The sum of all Net Purchase Payments made during the
first six Contract Years, less any partial withdrawals taken. During each
subsequent six-year period beginning before age 81, the Adjusted Death Benefit
will be the Death Benefit on the last day of the previous six-year period plus
any Net Purchase Payments made, less any partial withdrawals taken during the
current six-year period. For any six-year period after the one in which the
Annuitant attains age 81, the Adjusted Death Benefit will be equal to the
Death Benefit on the last day of the six-year period before age 81 occurs plus
any Net Purchase Payments subsequently made, less any partial withdrawals
subsequently taken.

Annuitant - The person whose life is used to determine the duration of any
Annuity Payments and upon whose death, prior to the Annuity Date, benefits
under the Contract are paid.

Annuitant's Beneficiary - The person(s) to whom any benefits are due upon the
Annuitant's death prior to the Annuity Date.

Annuity Date - The date on which Annuity Payments begin. The Annuity Date is
always the first day of the month you specify.

Annuity Payment - One of a series of payments made under an Annuity Payment
Option.

Annuity Payment Option - One of several ways in which the Accumulated Value of
this Contract can be paid. Under a Fixed Annuity Option (see "Annuity Payment
Options," page 23), the dollar amount of each Annuity Payment does not change
over time. Under a Variable Annuity Option (see "Annuity Payment Options,"
page 23), the dollar amount of each Annuity Payment may change over time,
depending upon the investment experience of the Portfolio or Portfolios you
choose. Annuity Payments are based on the Contract's Accumulated Value as of
10 Business Days prior to the Annuity Date less any applicable Premium Tax.

Annuity Unit - Unit of measure used to calculate Variable Annuity Payments
(see "Annuity Payment Options," page 23).

Annuity Unit Value - The value for each Annuity Unit.

Business Day - A day when the New York Stock Exchange is open for trading.

Code -- The Internal Revenue Code of 1986, as amended.

Company ("we", "us", "our") - Providian Life and Health Insurance Company, a
Missouri stock company.

Contract Anniversary - Any anniversary of the Contract Date.

Contract Date - The date of issue of this Contract.

Contract Owner ("you", "your") - The person or persons designated as the
Contract Owner in the Contract. The term shall also include any person named
as Joint Owner. A Joint Owner shares ownership in all respects with the
Contract Owner. Prior to the Annuity Date, the Contract Owner has the right to
assign ownership, designate beneficiaries, make permitted withdrawals and
Exchanges among Subaccounts and Guaranteed Rate Options.

Contract Year - A period of 12 months starting with the Contract Date or any
Contract Anniversary.

Death Benefit - The greater of the Contract's Accumulated Value on the date
the Company receives due Proof of Death of the Annuitant or the Adjusted Death
Benefit. If any portion of the Contract's Accumulated Value on the date

3
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we receive proof of the Annuitant's death is derived from the Multi-Year
Guaranteed Rate Option, that portion of the Accumulated Value will be adjusted
by a positive Market Value Adjustment Factor (see "Multi-Year Guaranteed Rate
Option," at Appendix A), if applicable.

Exchange - One Exchange will be deemed to occur with each voluntary transfer
from any Subaccount or General Account Guaranteed Option.

Funds - Each of (i) Endeavor Series Trust (advised by Endeavor Investment
Advisers), (ii) Federated Insurance Series (advised by Federated Advisers),
(iii) The Montgomery Funds III (advised by Montgomery Asset Management, L.P.),
(iv) SteinRoe Variable Investment Trust (advised by Stein Roe & Farnham,
Incorporated), (v) Strong Variable Insurance Funds, Inc. (advised by Strong
Capital Management, Inc.), (vi) Wanger Advisors Trust (advised by Wanger Asset
Management, L.P.) and (vii) Warburg Pincus Trust (advised by Warburg Pincus
Asset Management, Inc.).

General Account - The account which contains all of our assets other than
those held in our separate accounts.

General Account Guaranteed Option - Any of the following four General Account
options offered by your Contract and to which you may allocate your Net
Purchase Payments: the Dollar Cost Averaging Fixed Account Option, the Dollar
Cost Averaging Fixed Account Option, the One-Year Guaranteed Rate Option, the
Multi-Year Guaranteed Rate Option, and the Guaranteed Equity Option. The
General Account Guaranteed Options are available for sale in most, but not
all, states. (See "The General Account," at Appendix A.)

Guaranteed Rate Options - The One-Year Guaranteed Rate Option and the Multi-
Year Guaranteed Rate Option.

Market Value Adjustment Factor - The formula applied to the Accumulated Value
in order to determine the net amount of any transfer or surrender under the
Multi-Year Guaranteed Rate Option (see "Multi-Year Guaranteed Rate Option," at
Appendix A).

Net Purchase Payment - Any Purchase Payment less the applicable Premium Tax,
if any.

Non-Qualified Contract - Any Contract other than those described under the
Qualified Contract reference in this Glossary.

Owner - The purchaser of the Contract. Any Joint Owner shares ownership in all
respects with the Owner. The Owner has the right to assign ownership to a
person or party other than himself or herself.

Owner's Designated Beneficiary - The person to whom ownership of this Contract
passes upon the Contract Owner's death, unless the Contract Owner was also the
Annuitant--in which case the Annuitant's Beneficiary is entitled to the Death
Benefit. (Note: this transfer of ownership to the Owner's Designated
Beneficiary will generally not be subject to probate, but will be subject to
estate and inheritance taxes. Consult with your tax and estate adviser to be
sure which rules will apply to you.)

Payee - The Contract Owner, Annuitant, Annuitant's Beneficiary, Owner's
Designated Beneficiary, or any other person, estate, or legal entity to whom
benefits are to be paid.

Portfolio - A separate investment series of the Funds. The Funds currently
offer 17 Portfolios in the Advisor's Edge Select: Dreyfus Small Cap Value
Portfolio ("Dreyfus Small Cap Value Portfolio"), Endeavor Enhanced Index
Portfolio ("Endeavor Enhanced Index Portfolio") and T. Rowe Price
International Stock Portfolio ("T. Rowe Price International Stock Portfolio")
of Endeavor Series Trust; Federated American Leaders Fund II ("Federated
American Leaders Portfolio"), Federated Utility Fund II ("Federated Utility
Portfolio"), Federated Prime Money Fund II ("Federated Prime Money
Portfolio"), Federated Fund for U.S. Government Securities II ("Federated U.S.
Government Securities Portfolio") and Federated High Income Bond Fund II
("Federated High Income Bond Portfolio") of Federated Insurance Series; the
Montgomery Variable Series: Growth Fund (the "Montgomery Growth Portfolio")
and the Montgomery Variable Series: Emerging Markets Fund (the "Montgomery
Emerging Markets Portfolio") of The Montgomery Funds III; the Stein Roe
Special Venture Fund, Variable Series (the "Stein Roe Special Venture
Portfolio") of the SteinRoe Variable Investment Trust; the Strong
International Stock Fund II (the "Strong International Stock Portfolio") and
Strong Schafer Value Fund II ("Strong Schafer Value Portfolio") of the Strong
Variable Insurance Funds, Inc.; the Wanger U.S. Small Cap Advisor (the "Wanger
U.S. Small Cap Advisor Portfolio"), the Wanger International Small Cap Advisor
(the

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"Wanger International Small Cap Advisor Portfolio") of Wanger Advisors Trust;
and the Warburg Pincus International Equity Portfolio (the "Warburg Pincus
International Equity Portfolio") and the Warburg Pincus Small Company Growth
Portfolio (the "Warburg Pincus Small Company Growth Portfolio") of the Warburg
Pincus Trust; (each, a "Portfolio" and collectively, the "Portfolios"). In
this Prospectus, Portfolio will also be used to refer to the Subaccount that
invests in the corresponding Portfolio.

Premium Tax - A regulatory tax that may be assessed by certain states on the
Purchase Payments you make to this Contract. The amount which we must pay as
Premium Tax will be deducted from each Purchase Payment or from your
Accumulated Value as it is incurred by us.

Proof of Death - (a) A certified death certificate; (b) a certified decree of
a court of competent jurisdiction as to the finding of death; (c) a written
statement by a medical doctor who attended the deceased; or (d) any other
proof of death satisfactory to the Company.

Purchase Payment - Any premium payment. The minimum initial Purchase Payment
is $25,000 for Non-Qualified Contracts and $1,000 for Qualified Contracts (or
$50 monthly by payroll deduction for Qualified Contracts); each additional
Purchase Payment must be at least $500 for Non-Qualified Contracts or $50 for
Qualified Contracts. Purchase Payments may be made at any time prior to the
Annuity Date as long as the Annuitant is living.

Qualified Contract - An annuity contract as defined under Sections 401(a),
403(b), 408(b), and 408A of the Code.

Right to Cancel Period - The period during which the Contract can be canceled
and treated as void from the Contract Date.

Separate Account - That portion of Providian Life and Health Insurance
Company's Separate Account V dedicated to the Contract. The Separate Account
consists of assets that are segregated by Providian Life and Health Insurance
Company and, for Contract Owners, invested in the Portfolios. The Separate
Account is independent of the general assets of the Company. The Separate
Account invests in the Portfolios.

Subaccount - That portion of the Separate Account that invests in shares of
the Funds' Portfolios. Each Subaccount will only invest in a single Portfolio.
The investment performance of each Subaccount is linked directly to the
investment performance of one of the 17 Portfolios.

Surrender Value - The Accumulated Value, adjusted to reflect any applicable
Market Value Adjustment (see "Multi-Year Guaranteed Rate Option," at Appendix
A) for amounts allocated to the Multi-Year Guaranteed Rate Option, less any
early withdrawal charges for amounts allocated to the One-Year Guaranteed Rate
Option, less any amount allocated to the Guaranteed Equity Option, less any
Premium Taxes incurred but not yet deducted.

Valuation Period - The relative performance of your Contract is measured by
the Accumulation Unit Value. This value is calculated each Valuation Period. A
Valuation Period is defined as the period of time between the close of
business on one Business Day and the close of business on the following
Business Day.

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<PAGE>

HIGHLIGHTS

YOU CAN FIND DEFINITIONS OF IMPORTANT TERMS IN THE GLOSSARY (PAGE 3).

THE ADVISOR'S EDGE SELECT

The Contract provides a vehicle for investing on a tax-deferred basis in 17
investment company Portfolios offered by the Funds and four General Account
Guaranteed Options offered by the Company. You may subsequently withdraw
monies from the Contract either as a lump sum or as annuity income as
permitted under the Contract. Accumulated Values and Annuity Payments depend
on the investment experience of the selected Portfolios and/or the guarantees
of the General Account Guaranteed Options. The investment performance of the
Portfolios is not guaranteed. Thus, you bear all investment risk for monies
invested under the Contract except to the extent of the portion of your
Accumulated Value allocated to the General Account. The General Account
Guaranteed Options are available for sale in most, but not all, states.

WHO SHOULD INVEST

The Contract is designed for investors seeking long term, tax-deferred
accumulation of funds, generally for retirement but also for other long-term
investment purposes. The tax-deferred feature of the Contract is most
attractive to investors in high federal and state marginal income tax
brackets. The Contract is offered as both a Qualified Contract and a Non-
Qualified Contract. Both Qualified and Non-Qualified Contracts offer tax-
deferral on increases in the Contract's value prior to withdrawal or
distribution; however, Purchase Payments made by Contract Owners of Qualified
Contracts may be excludible or deductible from gross income in the year such
payments are made, subject to certain statutory restrictions and limitations.
(See "Federal Tax Considerations," page 26).............................Page 26

INVESTMENT CHOICES

Your investment in the Contract may be allocated among 17 Subaccounts of the
Separate Account and/or the General Account Guaranteed Options. The
Subaccounts in turn invest exclusively in the following 17 Portfolios offered
by the Funds: the Dreyfus Small Cap Value Portfolio, the Endeavor Enhanced
Index Portfolio, the Federated American Leaders Portfolio, the Federated
Utility Portfolio, the Federated Prime Money Portfolio, the Federated U.S.
Government Securities Portfolio, the Federated High Income Bond Portfolio, the
Montgomery Growth Portfolio, the Montgomery Emerging Markets Portfolio, the
Stein Roe Special Venture Portfolio, the Strong International Stock Portfolio,
the Strong Schafer Value Portfolio, the T. Rowe Price International Stock
Portfolio, the Wanger U.S. Small Cap Advisor Portfolio, the Wanger
International Small Cap Advisor Portfolio, the Warburg Pincus International
Equity Portfolio and the Warburg Pincus Small Company Growth Portfolio. The
assets of each Portfolio are separate, and each Portfolio has distinct
investment objectives and policies as described in the corresponding Fund
Prospectus. The General Account Guaranteed Options are available for sale in
most, but not all, states...............................................Page 13

HOW TO INVEST

To invest in the Contract, please consult your advisor, who will provide the
necessary information to us in a customer order form. You will need to select
an Annuitant. The Annuitant may not be older than age 75. The minimum initial
Purchase Payment is $25,000 for Non-Qualified Contracts, and $1,000 for
Qualified Contracts (or $50 monthly by payroll deduction for Qualified
Contracts); subsequent Purchase Payments must be at least $500 for Non-
Qualified Contracts or $50 for Qualified Contracts. You may make subsequent
Purchase Payments at any time before the Contract's Annuity Date, as long as
the Annuitant specified in the Contract is living.......................Page 16

ALLOCATION OF PURCHASE PAYMENTS

If the state of issue of your Contract is GA, ID, LA, MI, MO, NE, NH, NC, OK,
OR, SC, UT, VA or WV, then your initial Net Purchase Payment(s) will, when
your Contract is issued, be invested in the Federated Prime Money Portfolio
until the expiration of the Right to Cancel Period of 10 to 30 days, or more
in some instances as specified in your contract when issued (plus a 5 day
grace period to allow for mail delivery) and then invested according to your
initial allocation instructions (except that any accrued interest will remain
in the Federated Prime Money Portfolio if it is selected as an initial
allocation option), provided that portions of your initial Net Purchase
Payment(s) allocated to the Guaranteed

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Rate Options will be invested immediately upon our receipt thereof in order to
lock in the rates then applicable to such options. (Please note that immediate
investment is not applicable with respect to any amounts allocated to the
Guaranteed Equity Option.)

If the state of issue of your Contract is any other state, your initial Net
Purchase Payment(s) will, unless you indicate otherwise, be invested in your
Portfolios and Guaranteed Rate Options immediately upon our receipt thereof,
IN WHICH CASE YOU WILL BEAR FULL INVESTMENT RISK FOR ANY AMOUNTS ALLOCATED TO
THE PORTFOLIOS DURING THE RIGHT TO CANCEL PERIOD. (Please note that immediate
investment is not available with respect to any amounts allocated to THE
GUARANTEED EQUITY OPTION, WHICH IS ILLIQUID FOR THE GUARANTEE PERIOD.) You
must fill out and send us the appropriate form or comply with other designated
Company procedures if you would like to change how subsequent Net Purchase
Payments are allocated..................................................Page 17

RIGHT TO CANCEL PERIOD

The Contract provides for a Right to Cancel Period of 10 days (30 or more days
in some instances as specified in your Contract) plus a 5 day grace period to
allow for mail delivery, during which you may cancel your investment in the
Contract. To cancel your investment, please return your Contract to us or to
the advisor from whom you purchased the Contract. When we receive the
Contract, (1) if the state of issue of your Contract is GA, ID, LA, MI, MO,
NE, NH, NC, OK, OR, SC, UT, VA or WV, then for any amount of your initial
Purchase Payment(s) invested in Federated's Prime Money Portfolio, we will
return the Accumulated Value of the amount of your Purchase Payment(s) so
invested, or if greater, the amount of your Purchase Payment(s) so invested,
(2) for any amount of your initial Purchase Payment(s) invested in the
Portfolios immediately following receipt by us, we will return the Accumulated
Value of your Purchase Payment(s) so invested plus any fees and/or Premium
Taxes that may have been subtracted from such amount, and (3) for any amount
of your initial Purchase Payment(s) invested in the Guaranteed Rate Options
immediately following receipt by us, we will refund the Accumulated Value of
your Purchase Payment(s) so invested....................................Page 17

EXCHANGES

You may make unlimited Exchanges among Portfolios or into the General Account
Guaranteed Options, provided that you maintain a minimum balance of $250 in
each Subaccount or $1,000 in each General Account Guaranteed Option (except
the Dollar Cost Averaging Fixed Account), respectively, to which you have
allocated a portion of your Accumulated Value. However, prior to the Annuity
Date, no Exchanges (except through Dollar Cost Averaging) will be allowed from
the Dollar Cost Averaging Fixed Account. No fee is currently imposed for such
Exchanges; however, we reserve the right to charge a $15 fee for Exchanges in
excess of 12 per Contract Year. Exchanges must not reduce the value of any
allocation to any Subaccount or General Account Guaranteed Option (except the
Dollar Cost Averaging Fixed Account Option) below $250 or $1,000,
respectively, or that remaining amount will be transferred to your other
Subaccounts or General Account Guaranteed Options on a pro rata basis. The
Guaranteed Equity Option is illiquid for the entire guarantee period, and
transfers from the Guaranteed Rate Options (where permitted) may be subject to
additional limitations and charges. (See also "Charges and Deductions," page
20, and "The General Account," at Appendix A.)..........................Page 18

DEATH BENEFIT

If the Annuitant specified in your Contract dies prior to the Annuity Date,
your named Annuitant's Beneficiary will receive the Death Benefit under the
Contract. The Death Benefit is the greater of your Accumulated Value (plus any
positive Market Value Adjustment applicable under the Multi-Year Guaranteed
Rate Option) or the Adjusted Death Benefit on the date we receive due proof of
the Annuitant's death. During the first six Contract Years, the Adjusted Death
Benefit will be the sum of all Net Purchase Payments made, less any partial
withdrawals taken. During each subsequent six-year period beginning before age
81, the Adjusted Death Benefit will be the Death Benefit on the last day of
the previous six-year period plus any Net Purchase Payments made, less any
partial withdrawals taken during the current six-year period. For any six-year
period after the one in which the Annuitant attains age 81, the Adjusted Death
Benefit will be equal to the Death Benefit on the last day of the six-year
period before age 81 occurs plus any Net Purchase Payments subsequently made,
less any partial withdrawals subsequently taken. The Annuitant's Beneficiary
may elect to receive these proceeds as a lump sum or as Annuity Payments. If
the Annuitant dies on or after the Annuity Date, any unpaid payments certain
will be paid, generally to the Annuitant's Beneficiary, in accordance with the
Contract................................................................Page 24

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ANNUITY PAYMENT OPTIONS

In addition to the full and partial withdrawal privileges, you may also choose
to create an income stream by requesting an annuity income from us. As the
Contract Owner, you may elect one of several Annuity Payment Options. By
electing an Annuity Payment Option, you are asking us to systematically
liquidate your Contract. We provide you with a variety of payment options. At
your discretion, payments may be either fixed or variable or both. Fixed
payouts are guaranteed for a designated period or for life (either single or
joint). Variable payments will vary depending on the performance of the
underlying Portfolio or Portfolios selected.............................Page 23

CONTRACT AND POLICYHOLDER INFORMATION

If you have questions about your Contract, please telephone our Administrative
Offices at 1-800-866-6007 between the hours of 7:30 A.M. to 5:30 P.M. Central
time. Please have the Contract number and the Contract Owner's name ready when
you call. As Contract Owner you will receive periodic statements confirming
any financial transactions that take place, as well as quarterly statements
and an annual statement.

CHARGES AND DEDUCTIONS UNDER THE CONTRACT

The Contract has no sales charges and has an annual mortality and expense risk
charge of 1.35%. Contract Owners may withdraw up to 100% of the Accumulated
Value without incurring a surrender charge. The Contract also includes
administrative charges which pay for administering the Contract, and
management, advisory and other fees, which reflect the costs of the
Funds...................................................................Page 19

FULL AND PARTIAL WITHDRAWALS

You may withdraw all or part of the Surrender Value of the Contract before the
earlier of the Annuity Date or the Annuitant's death. Withdrawals made prior
to age 59 1/2 may be subject to a 10% penalty tax (and a portion thereof may
be subject to ordinary income taxes)....................................Page 21

FEE TABLE

The following table illustrates all expenses (except for Premium Taxes that
may be assessed by your state) that you would incur as an owner of a Contract
(see page 19). The purpose of this table is to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as a
purchaser of the Contract. The fee table reflects all expenses for both the
Separate Account and the Funds. For a complete discussion of Contract costs
and expenses, including charges applicable to General Account Guaranteed
Options, see "Charges and Deductions," page 19.

<TABLE>
<CAPTION>
CONTRACTOWNER TRANSACTION EXPENSES
<S> <C>
Sales Load Imposed on Purchases........................................ None
Contingent Deferred Sales Load (surrender charge)...................... None
Exchange Fees.......................................................... None
ANNUAL CONTRACT FEE.................................................... None
<CAPTION>
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of assets in the
Separate Account)
<S> <C>
Mortality and Expense Risk Charge...................................... 1.35%
Administrative Charge.................................................. .15%
-----
Total Annual Separate Account Expenses................................. 1.50%*
</TABLE>
*Separate Account Annual Expenses are not charged against the General
Account Guaranteed Options.

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PORTFOLIO ANNUAL EXPENSES

Except as may be indicated, the figures below are based on actual expenses for
fiscal year 1997 (as a percentage of each Portfolio's average net assets after
fee waiver and/or expense reimbursement, if applicable).

<TABLE>
<CAPTION>
TOTAL
MANAGEMENT PORTFOLIO
AND ADVISORY OTHER ANNUAL
EXPENSES EXPENSES EXPENSES
------------ -------- ---------
<S> <C> <C> <C>
Dreyfus Small Cap Value Portfolio/1/........... 0.80% 0.11% 0.91%
Endeavor Enhanced Index Portfolio/2/........... 0.75% 0.55% 1.30%
Federated American Leaders Portfolio/3/........ 0.66% 0.19% 0.85%
Federated Utility Portfolio/3/................. 0.48% 0.37% 0.85%
Federated Prime Money Portfolio/3/............. 0.30% 0.50% 0.80%
Federated U.S. Government Securities
Portfolio/3/.................................. 0.15% 0.65% 0.80%
Federated High Income Bond Portfolio/3/........ 0.51% 0.29% 0.80%
Montgomery Growth Portfolio/4/................. 0.00% 0.34% 0.34%
Montgomery Emerging Markets Portfolio/4/....... 1.25% 0.50% 1.75%
Stein Roe Special Venture Portfolio/5/......... 0.50% 0.23% 0.73%
Strong International Stock Portfolio/6/........ 1.00% 0.51% 1.51%
Strong Schafer Value Portfolio/7/.............. 1.00% 0.20% 1.20%
T. Rowe Price International Stock Portfolio/8/. 0.90% 0.17% 1.07%
Wanger U.S. Small Cap Advisor Portfolio/9/..... 0.97% 0.09% 1.06%
Wanger International Small Cap Advisor
Portfolio/9/.................................. 1.28% 0.32% 1.60%
Warburg Pincus International Equity
Portfolio/1//0/............................... 1.00% 0.36% 1.36%
Warburg Pincus Small Company Growth
Portfolio/1//0/............................... 0.90% 0.24% 1.14%
</TABLE>

/1/Endeavor Investment Advisers has agreed, until terminated by Endeavor
Investment Advisers, to assume expenses of the Dreyfus Small Cap Value
Portfolio that exceed 1.30%.

/2/Endeavor Investment Advisers has agreed, until terminated by Endeavor
Investment Advisers, to assume expenses of the Endeavor Enhanced Index
Portfolio that exceed 1.30%. Total Portfolio Annual Expenses before waiver
or reimbursement of fees by Endeavor Investment Advisers and custody fee
credits for the period ended December 31, 1997 amounted to 1.56%.

/3/The expense figures shown reflect actual expenses for fiscal year 1997
including voluntary waivers of a portion of the management fees and/or
assumption of expenses. The maximum Management and Advisory Expenses and
Total Portfolio Annual Expenses absent the voluntary waivers would have
been as follows: 0.75% and 0.94%, respectively, for the Federated American
Leaders Portfolio; 0.75% and 1.12%, respectively, for the Federated Utility
Portfolio; 0.50% and 1.00%, respectively, for the Federated Prime Money
Portfolio; and 0.60% and 1.26%, respectively, for the Federated U.S.
Government Securities Portfolio; and 0.60% and 0.89%, respectively, for the
Federated High Income Bond Portfolio.

/4/The figures above are based on actual expenses for fiscal year 1997 (as
a percentage of each Portfolio's average net assets after deferment of fees
and/or expense reimbursement). The expense figures shown reflect voluntary
deferment of a portion of the management fees and/or assumption of
expenses. Absent the voluntary deferment, the maximum Management and
Advisory Expenses, Other Expenses, and Total Portfolio Annual Expenses
would have been as follows: 1.00%, 0.97%, and 1.97%, respectively, for the
Montgomery Growth Portfolio and 1.25%, 0.56%, and 1.81%, respectively, for
the Montgomery Emerging Markets Portfolio. For the Montgomery Growth
Portfolio, the applicable expense limitation for the current year is 1.25%,
and Total Portfolio Annual Expenses are expected to be 1.25%.

/5/The figures shown reflect actual expenses for fiscal year 1997. The
advisor has voluntarily agreed until April 30, 1998 to reimburse all
expenses, including management and administrative fees, incurred by Stein
Roe Special Venture Portfolio in excess of 0.80% of average net assets.

/6/The figures shown reflect actual expenses for fiscal year 1997.

/7/The expense figures shown reflect actual expenses for fiscal year 1997
(as a percentage of the Portfolio's average net assets after fee waiver
and/or expense reimbursement). The expense figures shown reflect voluntary
waivers of a portion of the management fees and/or assumption of expenses.
In the absence of these voluntary waivers, the Management and Advisory
Expenses, Other Expenses, and Total Portfolio Annual Expenses are estimated
to be as follows: 1.00%, 0.54%, and 1.54%, respectively.

9
<PAGE>

/8/Endeavor Investment Advisers has agreed, until terminated by Endeavor
Investment Advisers, to assume expenses of the T. Rowe Price International
Stock Portfolio that exceed 1.53%. Total Portfolio Annual Expenses before
credits allowed by the custodian for the year ended December 31, 1997
amounted to 1.12%.

/9/As required by the Securities and Exchange Commission rules, "Other
Expenses" reflects gross custodian fees. Net of custodian fees paid
indirectly, Other Expenses would have been 0.07% for U.S. Small Cap Advisor
Portfolio and 0.31% for International Small Cap Advisor Portfolio; Total
Portfolio Annual Expenses would have been 1.04% and 1.59%, respectively.

/1//0/Management and Advisory Expenses, Other Expenses and Total Portfolio
Annual Expenses are based on actual expenses for the fiscal year ended
December 31, 1997, net of any fee waivers or expense reimbursements.
Without such waivers or reimbursements, Management and Advisory Expenses
would have equaled 1.00% and 0.90%, Other Expenses would have equaled 0.40%
and 0.25% and Total Portfolio Annual Expenses would have equaled 1.40% and
1.15% for the Warburg Pincus International Equity and Small Company Growth
Portfolios, respectively. The investment adviser and co-administrator have
undertaken to limit Total Portfolio Annual Expenses to the limits shown in
the table above through December 31, 1998.

The following example illustrates the expenses that you would incur on a
$1,000 Purchase Payment over various periods, assuming (1) a 5% annual rate of
return and (2) redemption at the end of each period. As noted in the table
above, the Contract imposes no surrender or withdrawal charges of any kind.
Your expenses are identical whether you continue the Contract or withdraw the
entire value of your Contract at the end of the applicable period as a lump
sum or under one of the Contract's Annuity Payment Options. In some states,
the Company will deduct Premium Taxes as incurred by the Company.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Dreyfus Small Cap Value Portfolio......................... $24.41 $ 75.15
Endeavor Enhanced Index Portfolio......................... $28.31 $ 86.81
Federated American Leaders Portfolio...................... $23.81 $ 73.34
Federated Utility Portfolio............................... $23.81 $ 73.34
Federated Prime Money Portfolio........................... $23.31 $ 71.84
Federated U.S. Government Securities Portfolio............ $23.31 $ 71.84
Federated High Income Bond Portfolio...................... $23.31 $ 71.84
Montgomery Growth Portfolio............................... $18.69 $ 57.86
Montgomery Emerging Markets Portfolio..................... $32.78 $100.08
Stein Roe Special Venture Portfolio....................... $22.61 $ 69.72
Strong International Stock Portfolio...................... $30.40 $ 93.03
Strong Schafer Value Portfolio............................ $27.31 $ 83.83
T. Rowe Price International Stock Portfolio............... $26.01 $ 79.95
Wanger U.S. Small Cap Advisor Portfolio................... $25.91 $ 79.65
Wanger International Small Cap Advisor Portfolio.......... $31.29 $ 95.68
Warburg Pincus International Equity Portfolio............. $28.91 $ 88.59
Warburg Pincus Small Company Growth Portfolio............. $26.71 $ 82.04
</TABLE>

This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be higher or lower than those
shown, subject to the guarantees in the Contract.

FINANCIAL STATEMENTS

The audited statutory-basis financial statements of the Company (as well as
the Independent Auditors' Report thereon) are included in the Statement of
Additional Information. No financial statements are included for the Separate
Account because, as of the date of this Prospectus, the Subaccounts that
invest in the Portfolios offered by the Advisor's Edge Select variable annuity
had not commenced operations with respect to the Portfolios and consequently
had no assets or liabilities.

PERFORMANCE MEASURES

Performance for the Subaccounts of the Separate Account, including the yield
and effective yield of Federated's Prime Money Portfolio, the yield of the
other Subaccounts, and the total return of all Subaccounts may appear in
reports and promotional literature to current or prospective Contract Owners.

10
<PAGE>

Please refer to the discussion below and to the Statement of Additional
Information for a more detailed description of the method used to calculate a
Portfolio's yield and total return, and a list of the indexes and other
benchmarks used in evaluating a Portfolio's performance.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN

When advertising performance of the Subaccounts, the Company will show the
Standardized Average Annual Total Return for a Subaccount which, as prescribed
by the rules of the Securities and Exchange Commission ("SEC"), is the
effective annual compounded rate of return that would have produced the cash
redemption value over the stated period had the performance remained constant
throughout. The Standardized Average Annual Total Return assumes a single
$1,000 payment made at the beginning of the period and full redemption at the
end of the period. It reflects the deduction of all Portfolio, Separate
Account and Contract level charges except Premium Taxes, if any.

ADDITIONAL PERFORMANCE MEASURES

NON-STANDARDIZED ACTUAL TOTAL RETURN

The Company may show actual Total Return (i.e., the percentage change in the
value of an Accumulation Unit) for one or more Subaccounts with respect to one
or more periods, including Total Return Year-to-Date ("YTD") with respect to
certain periods.

NON-STANDARDIZED HYPOTHETICAL CUMULATIVE RETURN AND NON-STANDARDIZED
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURN

The Company may show Non-Standardized Hypothetical Cumulative Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios, and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which
produce the resulting Accumulated Values.

NON-STANDARDIZED CUMULATIVE TOTAL RETURN, AVERAGE ANNUAL TOTAL RETURN AND
YEAR-TO-DATE TOTAL RETURN

The Non-Standardized Annual Cumulative Return for a Subaccount is the
effective annual rate of return that would have produced the ending
Accumulated Value for the stated period.

The Non-Standardized Average Annual Total Return for a Subaccount is the
effective annual compounded rate of return that would have produced the ending
Accumulated Value over the stated period had the performance remained constant
throughout.

The Non-Standardized Year-to-Date Total Return for a Subaccount is the rate of
return for a specific period beginning on January 1st.

NON-STANDARDIZED ONE YEAR RETURN

The Company may show the Non-Standardized One-Year Return for each Subaccount
for calendar year periods, calculated on the basis of the historical
performance of the Portfolios, and may assume the Contract was in existence
prior to its inception date, (which it was not).

The additional performance measures reflect a deduction for the Separate
Account and Portfolio expenses (see "Fee Table") but do not include the annual
Contract Fee or Premium Taxes, (if any), which if included would reduce the
percentages reported by the Company.

YIELD AND EFFECTIVE YIELD

The Company may also show yield and effective yield figures for the Subaccount
investing in shares of the Federated Prime Money Portfolio. "Yield" refers to
the income generated by an investment in the Federated Prime Money Portfolio
over a seven-day period, which is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Federated Prime Money
Portfolio is assumed to be reinvested. Therefore the effective yield will be
slightly higher than the yield because of the compounding effect of this
assumed reinvestment. These figures do not reflect Premium Taxes (if any)
which, if included, would reduce the yields reported.

From time to time a Portfolio of a Fund may advertise its yield and total
return investment performance. For each Subaccount other than the Federated
Prime Money Market for which the Company advertises yield, the Company shall

11
<PAGE>

furnish a yield quotation referring to the Portfolio computed in the following
manner: the net investment income per Accumulation Unit earned during a recent
one month period is divided by the Accumulation Unit Value on the last day of
the period.

Please refer to the Statement of Additional Information for a description of
the method used to calculate a Portfolio's yield and total return, and a list
of the indexes and other benchmarks used in evaluating a Portfolio's
performance.

The performance measures discussed above reflect results of the Portfolios and
are not intended to indicate or predict future performance. For more detailed
information, see the Statement of Additional Information.

Performance information for the Subaccounts may be contrasted with other
comparable variable annuity separate accounts or other investment products
surveyed by Lipper Analytical Services, a nationally recognized independent
reporting service which ranks mutual funds and other investment companies by
overall performance, investment objectives and assets. Performance may also be
tracked by other ratings services, companies, publications or persons who rank
separate accounts or other investment products on overall performance or other
criteria. Performance figures will be calculated in accordance with
standardized methods established by each reporting service.

THE COMPANY AND THE SEPARATE ACCOUNT

PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY

The Company is a stock life insurance company incorporated under the laws of
Missouri on August 6, 1920. The Company is principally engaged in offering
life insurance, annuity contracts, and accident and health insurance and is
admitted to do business in all states except for New York, as well as the
District of Columbia and Puerto Rico. As of December 31, 1997, the Company had
assets of approximately $11 billion. The Company is a wholly owned indirect
subsidiary of AEGON USA, Inc., which conducts substantially all of its
operations through subsidiary companies engaged in the insurance business or
in providing non-insurance financial services. All of the stock of AEGON USA,
Inc. is indirectly owned by AEGON n.v. of the Netherlands. AEGON n.v., a
holding company, conducts its business through subsidiary companies engaged
primarily in the insurance business.

PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY SEPARATE ACCOUNT V

The Separate Account was established by the Company as a separate account
under the laws of Missouri on February 14, 1992, pursuant to a resolution of
the Company's Board of Directors. The Separate Account is a unit investment
trust registered with the SEC under the Investment Company Act of 1940 (the
"1940 Act"). Such registration does not signify that the SEC supervises the
management or the investment practices or policies of the Separate Account.
The Separate Account meets the definition of a "separate account" under the
federal securities laws.

The assets of the Separate Account are owned by the Company and the
obligations under the Contract are obligations of the Company. These assets
are held separately from the other assets of the Company and are not
chargeable with liabilities incurred in any other business operation of the
Company (except to the extent that assets in the Separate Account exceed the
reserves and other liabilities of the Separate Account). Income, gains and
losses incurred on the assets in the Separate Account, whether or not
realized, are credited to or charged against the Separate Account without
regard to other income, gains or losses of the Company. Therefore, the
investment performance of the Separate Account is entirely independent of the
investment performance of the General Account assets or any other separate
account maintained by the Company.

The Separate Account has dedicated 17 Subaccounts to the Contract, each of
which invests solely in a corresponding Portfolio of the Funds. Additional
Subaccounts may be established at the discretion of the Company. The Separate
Account also includes other subaccounts which are not available under the
Contract.

ENDEAVOR SERIES TRUST (ADVISED BY ENDEAVOR INVESTMENT ADVISERS)

Endeavor Series Trust is a diversified, open-end management investment company
that offers a selection of managed investment portfolios. Each portfolio
constitutes a separate mutual fund with its own investment objectives and
policies. The Fund is organized as a Massachusetts business trust and is
registered under the 1940 Act. The Fund currently issues shares of eleven
portfolios, of which the T. Rowe Price International Stock Portfolio, the
Dreyfus Small Cap Value Portfolio, and the Endeavor Enhanced Index Portfolio
are available as part of the Advisor's Edge Select. Endeavor Investment
Advisers serves as the Fund's investment adviser. Rowe Price-Fleming
International, Inc. serves as the subadviser to the T. Rowe Price
International Stock Portfolio. The Dreyfus Corporation serves as the
subadviser to the Dreyfus Small Cap Value Portfolio. J.P. Morgan Investment
Management Inc. serves as the subadviser to the Endeavor Enhanced Index
Portfolio.

12
<PAGE>

THE FEDERATED INSURANCE SERIES (ADVISED BY FEDERATED ADVISERS)

The Federated Insurance Series is an open-end management investment company
organized as a Massachusetts business trust and registered under the 1940 Act.
The Fund consists of eight investment portfolios, five of which are available
as part of the Advisor's Edge Select: Federated American Leaders Portfolio,
the Federated Utility Portfolio, the Federated Prime Money Portfolio, the
Federated U.S. Government Securities Portfolio and the Federated High Income
Bond Portfolio. Federated Advisers serves as this Fund's investment adviser.

THE MONTGOMERY FUNDS III (ADVISED BY MONTGOMERY ASSET MANAGEMENT, LLC)

The Montgomery Funds III, an open-end management investment company, was
organized as a Delaware business trust in 1994 and is registered under the
1940 Act. The Fund consists of three professionally managed investment
portfolios, two of which are available as part of the Advisor's Edge Select:
the Montgomery Growth Portfolio and the Montgomery Emerging Markets Portfolio.
Montgomery Asset Management, LLC ("MAM") was organized as a Delaware limited
liability company in 1997 and is the Fund's investment advisor. On July 31,
1997, Montgomery Asset Management, L.P., formed in 1990, completed the sale of
substantially all of its assets to MAM.

STEINROE VARIABLE INVESTMENT TRUST (ADVISED BY STEIN ROE & FARNHAM
INCORPORATED)

The SteinRoe Variable Investment Trust is an open-end, diversified management
investment company organized as a Massachusetts business trust and registered
under the 1940 Act. The Fund currently consists of five investment portfolios,
including the Stein Roe Special Venture Portfolio, which is the only portfolio
available as part of the Advisor's Edge Select. Stein Roe & Farnham
Incorporated serves as the Fund's investment adviser.

STRONG VARIABLE INSURANCE FUNDS, INC. (ADVISED BY STRONG CAPITAL MANAGEMENT,
INC.)

Strong Variable Insurance Funds, Inc. is an open-end management investment
company organized under Wisconsin law and is registered under the 1940 Act.
The two series issued by the Fund are available as part of the Advisor's Edge
Select: the Strong International Stock Portfolio and the Strong Schafer Value
Portfolio. Strong Capital Management, Inc. serves as the Fund's investment
adviser. Schafer Capital Management serves as the subadviser to the Strong
Schafer Value Portfolio.

WANGER ADVISORS TRUST (ADVISED BY WANGER ASSET MANAGEMENT, L.P.)

Wanger Advisors Trust, an open-end management investment company, was
organized as a Massachusetts business trust in 1994 and is registered under
the 1940 Act. The Fund consists of two series available as part of the
Advisor's Edge Select: the Wanger U.S. Small Cap Advisor Portfolio and the
Wanger International Small Cap Advisor Portfolio. Wanger Asset Management,
L.P., a limited partnership managed by its general partner, Wanger Asset
Management, Ltd., serves as this Fund's investment adviser.

WARBURG PINCUS TRUST (ADVISED BY WARBURG PINCUS ASSET MANAGEMENT, INC.)

Warburg Pincus Trust, an open-end management investment company, was organized
as a Massachusetts business trust in 1995 and is registered under the 1940
Act. The Fund currently offers four investment portfolios, two of which are
available as part of the Advisor's Edge Select: the Warburg Pincus
International Equity Portfolio and the Warburg Pincus Small Company Growth
Portfolio. Warburg Pincus Asset Management, Inc. serves as the Fund's
investment adviser.

THE PORTFOLIOS (SEE ACCOMPANYING PROSPECTUSES)

For more information concerning the risks associated with each Portfolio's
investments, please refer to the applicable underlying Fund prospectus.

DREYFUS SMALL CAP VALUE PORTFOLIO ("DREYFUS SMALL CAP VALUE PORTFOLIO")

The investment objective of the Dreyfus Small Cap Value Portfolio (formerly
known as the Value Small Cap Portfolio) is capital appreciation through
investment in a diversified portfolio of equity securities of companies with a
median

13
<PAGE>

market capitalization of approximately $750 million, provided that under
normal market conditions at least 75% of the Portfolio's investments will be
in equity securities of companies with capitalizations at the time of purchase
between $150 million and $1.5 billion.

ENDEAVOR ENHANCED INDEX PORTFOLIO ("ENDEAVOR ENHANCED INDEX PORTFOLIO")

The investment objective of the Endeavor Enhanced Index Portfolio is to earn a
return modestly in excess of the total return performance of the S&P 500
Composite Stock Price Index (including the reinvestment of dividends) ("S&P
500 Index") while maintaining a volatility of return similar to the S&P 500
Index.

FEDERATED AMERICAN LEADERS FUND II ("FEDERATED AMERICAN LEADERS PORTFOLIO")

The primary investment objective of the Federated American Leaders Portfolio
is to achieve long-term growth of capital. The Portfolio's secondary objective
is to provide income. The Portfolio pursues its investment objectives by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue-chip" companies. This Portfolio was formerly known as
the Federated Equity Growth & Income Portfolio.

FEDERATED UTILITY FUND II ("FEDERATED UTILITY PORTFOLIO")

The investment objective of the Federated Utility Portfolio is to achieve high
current income and moderate capital appreciation. The Portfolio endeavors to
achieve its objective by investing primarily in a professional managed and
diversified portfolio of equity and debt securities of utility companies.

FEDERATED PRIME MONEY FUND II ("FEDERATED PRIME MONEY PORTFOLIO")

The investment objective of the Federated Prime Money Portfolio is to provide
current income consistent with stability of principal and liquidity. The
Portfolio pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II ("FEDERATED U.S. GOVERNMENT
SECURITIES PORTFOLIO")

The investment objective of the Federated U.S. Government Securities Portfolio
is to provide current income. Under normal circumstances, the Portfolio
pursues its investment objective by investing at least 65% of the value of its
total assets in securities issued or guaranteed as to payment of principal and
interest by the U.S. government, its agencies or instrumentalities. This
Portfolio was formerly known as the Federated U.S. Government Bond Portfolio.

FEDERATED HIGH INCOME BOND FUND II ("FEDERATED HIGH INCOME BOND PORTFOLIO")

The investment objective of the Federated High Income Bond Portfolio is to
seek high current income. The Portfolio endeavors to achieve its investment
objective by investing primarily in a diversified portfolio of professionally
managed fixed income securities. The fixed income securities in which the
Portfolio intends to invest are lower-rated corporate debt obligations, which
are commonly referred to as "junk-bonds." Some of these fixed income
securities may involve equity features. Capital growth will be considered, but
only when consistent with the investment objective of high current income.
This Portfolio was formerly known as the Federated Corporate Bond Portfolio.

MONTGOMERY VARIABLE SERIES: GROWTH FUND ("MONTGOMERY GROWTH PORTFOLIO")

The investment objective of the Montgomery Growth Portfolio is capital
appreciation, which, under normal conditions it seeks by investing at least
65% of its total assets in the equity securities of domestic companies. The
Portfolio emphasizes investments in common stocks but also invests in other
types of equity securities. In addition to capital appreciation, the Portfolio
emphasizes value.

MONTGOMERY VARIABLE SERIES: EMERGING MARKETS FUND ("MONTGOMERY EMERGING
MARKETS PORTFOLIO")

The investment objective of the Montgomery Emerging Markets Portfolio is
capital appreciation, which, under normal conditions it seeks by investing at
least 65% of its total assets in equity securities of companies in countries
having

14
<PAGE>

emerging markets. For these purposes, the Portfolio defines an emerging market
country as having an economy that is or would be considered by the World Bank
or the United Nations to be emerging or developing. The Portfolio invests
primarily in common stock but may also invest in other types of equity
securities, and in certain types of debt securities issued by the governments
of emerging market countries that are or may be eligible for conversion into
investments in emerging market companies under debt conversion programs
sponsored by such governments.

STEIN ROE SPECIAL VENTURE FUND, VARIABLE SERIES ("STEIN ROE SPECIAL VENTURE
PORTFOLIO")

The investment objective of the Stein Roe Special Venture Portfolio is to
achieve growth of capital. This Portfolio seeks to achieve its investment
objective by investing primarily in common stocks, securities convertible into
common stocks and securities having common stock characteristics, including
rights and warrants, selected primarily for prospective capital growth. The
Portfolio invests in both domestic and foreign companies.

STRONG INTERNATIONAL STOCK FUND II ("STRONG INTERNATIONAL STOCK PORTFOLIO")

The investment objective of the Strong International Stock Portfolio is to
achieve capital growth. This Portfolio seeks to achieve its investment
objective by investing primarily in the equity securities of issuers located
outside the United States. This Portfolio will invest at least 65% of its
total assets in foreign equity securities, including common stocks, preferred
stocks, and securities that are convertible into common or preferred stocks,
such as warrants and convertible bonds, that are issued by companies whose
principal headquarters are located outside the United States. Under normal
market conditions, this Portfolio expects to invest at least 90% of its net
assets in foreign equity securities. This Portfolio will normally invest in
securities of issuers located in at least three different countries.

STRONG SCHAFER VALUE FUND II ("STRONG SCHAFER VALUE PORTFOLIO")

The primary objective of the Strong Schafer Value Portfolio is long-term
capital appreciation. The Portfolio seeks to achieve its objective by
investing in stocks that offer attractive growth potential but which, for a
variety of reasons, are either undervalued or have gone unnoticed by the
market. The Fund is managed with a long-term perspective, and stocks are
typically held for two or more years, giving the Fund the ability to take full
advantage of a company's growth potential.

T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ("T. ROWE PRICE INTERNATIONAL
STOCK PORTFOLIO")

The investment objective of the T. Rowe Price International Stock Portfolio is
long-term growth of capital through investments primarily in common stocks and
other equity-related securities of established non-U.S. companies.

WANGER U.S. SMALL CAP ADVISOR ("WANGER U.S. SMALL CAP ADVISOR PORTFOLIO")

The investment objective of the Wanger U.S. Small Cap Advisor Portfolio is to
seek long-term growth of capital. The Portfolio pursues its investment
objective by investing primarily in stocks of small and medium size United
States companies. The Portfolio may also invest in debt securities, including
lower-rated debt securities, which may be regarded as having speculative
characteristics and are commonly referred to as "junk bonds."

WANGER INTERNATIONAL SMALL CAP ADVISOR ("WANGER INTERNATIONAL SMALL CAP
ADVISOR PORTFOLIO")

The investment objective of the Wanger International Small Cap Advisor
Portfolio is to seek long-term growth of capital. The Portfolio pursues its
investment objective by investing primarily in stocks of small and medium size
foreign companies. The Portfolio may also invest in debt securities, including
lower-rated debt securities, which may be regarded as having speculative
characteristics and are commonly referred to as "junk bonds."

WARBURG PINCUS INTERNATIONAL EQUITY PORTFOLIO ("WARBURG PINCUS INTERNATIONAL
EQUITY PORTFOLIO")

The investment objective of the Warburg Pincus International Equity Portfolio
is to achieve long-term capital appreciation. This Portfolio seeks to achieve
its investment objective by investing primarily in equity securities of
companies, wherever organized, that in the judgment of the Portfolio's
adviser, have their principal business activities and interests outside of the
United States. This Portfolio will ordinarily invest substantially all its
assets--but no less

15
<PAGE>

than 65% of its total assets--in common stocks, warrants and securities
convertible into or exchangeable for common stocks. Generally this Portfolio
will hold no less than 65% of its total assets in at least three countries
other than the United States. Investment may be made in equity securities of
companies of any size, whether traded on or off a national securities
exchange.

WARBURG PINCUS SMALL COMPANY GROWTH PORTFOLIO ("WARBURG PINCUS SMALL COMPANY
GROWTH PORTFOLIO")

The investment objective of the Warburg Pincus Small Company Growth Portfolio
is to achieve capital growth. This Portfolio seeks to achieve its investment
objective by investing in a portfolio of equity securities of small-sized
domestic companies. This Portfolio will ordinarily invest at least 65% of its
total assets in common stocks or warrants of small companies that present
attractive opportunities for capital growth. The Portfolio considers a "small"
company to be one that has a market capitalization, measured at the time the
Portfolio purchases a security of that company, within the range of
capitalizations of companies represented in the Russell 2000 Index. (As of
January 31, 1998, the Russell 2000 Index included companies with market
capitalizations between $23.7 million and $2.7 billion.) It is anticipated
that this Portfolio will invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market. This
Portfolio's investment will be made on the basis of equity characteristics and
securities ratings generally will not be a factor in the selection process.

OTHER PORTFOLIO INFORMATION

There is no assurance that a Portfolio will achieve its stated investment
objective.

Additional information concerning the investment objectives and policies of
the Portfolios and the investment advisory services, total expenses and
charges can be found in the current prospectuses for the corresponding Funds.
THE FUNDS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF NET PURCHASE PAYMENTS TO A PORTFOLIO.

The Portfolios may be made available to registered separate accounts offering
variable annuity and variable life products of the Company as well as other
insurance companies or to a person or plan, including a pension or retirement
plan receiving favorable tax treatment under the Code, that qualifies to
purchase shares of the Funds under Section 817(h) of the Code. Although we
believe it is unlikely, a material conflict could arise among the interests of
the Separate Account and one or more of the other participating separate
accounts and other qualified persons or plans. In the event of a material
conflict, the affected insurance companies agree to take any necessary steps,
including removing their separate accounts from the Funds if required by law,
to resolve the matter.

CONTRACT FEATURES

The rights and benefits under the Contract are described below; however, the
description of the Contract contained in this Prospectus is qualified in its
entirety by the Contract itself, including any endorsements to it, a copy of
which is available from the Company. The Company reserves the right to make
any modification to conform the Contract to, or give the Contract Owner the
benefit of, any federal or state statute or any rule or regulation of the
United States Treasury Department.

CONTRACT PURCHASE AND PURCHASE PAYMENTS

If you wish to purchase a Contract, you should consult your advisor, who will
provide the necessary information to the Company in a customer order form and
forward the initial Purchase Payment to such address as the Company may from
time to time designate. If you wish to make personal delivery by hand or
courier to the Company of the initial Purchase Payment (rather than through
the mail), you must do so at our Administrative Offices at 4333 Edgewood Road
N.E., Cedar Rapids, IA 52499. The initial Purchase Payment for a Non-Qualified
Contract must be equal to at least the $25,000 minimum investment requirement.
The Initial Purchase Payment for a Qualified Contract must be equal to at
least $1,000 (or you may establish a payment schedule of $50 a month by
payroll deduction).

The Contract will be issued and the initial Purchase Payment less any Premium
Taxes will be credited within two Business Days after receipt of the customer
order form and the initial Purchase Payment in good order. The Company
reserves the right to reject any customer order form or initial Purchase
Payment. The Company will then mail the

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<PAGE>

Contract to you along with a Contract acknowledgement form, which you should
complete, sign and return in accordance with its instructions. Please note
that until the Company receives the acknowledgement form signed by the Owner
and any Joint Owner, the Owner and any Joint Owner must obtain a signature
guarantee on their written signed request in order to exercise any rights
under the Contract.

If the initial Purchase Payment cannot be credited because the customer order
form is incomplete, we will contact the applicant, explain the reason for the
delay and refund the initial Purchase Payment within five Business Days,
unless the applicant instructs us to retain the initial Purchase Payment and
credit it as soon as the necessary requirements are fulfilled.

You may make Additional Purchase Payments at any time before the Annuity Date,
as long as the Annuitant is living. Additional Purchase Payments must be for
at least $500 for Non-Qualified Contracts, or $50 for Qualified Contracts.
Additional Purchase Payments received prior to the close of the New York Stock
Exchange (generally 4:00 P.M. Eastern time) are credited to the Accumulated
Value at the close of business that same day. Additional Purchase Payments
received after the close of the New York Stock Exchange are processed the next
Business Day.

Total Purchase Payments may not exceed $1,000,000 without our prior approval.

The Company reserves the right to refuse to issue this Contract in cases
involving an exchange for another Contract. In cases where a Contract Owner or
former Contract Owner requests the Company to reverse a surrender or
withdrawal transaction, whether full or partial, the Company reserves the
right to refuse such requests or grant such requests on condition that the
Contracts' Accumulated Value be adjusted to reflect appropriate investment
results, administrative costs or loss of interest during the relevant period.

PURCHASING BY WIRE

For wiring instructions please contact our Administrative Offices at 1-800-
866-6007.

RIGHT TO CANCEL PERIOD

A Right to Cancel Period exists for a minimum of 10 days after you receive the
Contract (30 or more days in some instances as set forth in your Contract)
plus a 5 day grace period to allow for mail delivery. The Contract permits you
to cancel the Contract during the Right to Cancel Period by returning the
Contract to our Administrative Offices, 4333 Edgewood Road N.E., Cedar Rapids,
Iowa 52499 or to the advisor from whom you purchased the Contract. Upon
cancellation, the Contract is treated as void from the Contract Date and when
we receive the Contract, (1) if the state of issue of your Contract is GA, ID,
LA, MI, MO, NE, NH, NC, OK, OR, SC, UT, VA or WV, then for any amount of your
initial Purchase Payment(s) invested in the Federated Prime Money Portfolio,
we will return the Accumulated Value of the amount of your Purchase Payment(s)
so invested, or if greater, the amount of your Purchase Payment(s) so
invested, (2) for any amount of your initial Purchase Payment(s) invested in
the Portfolios immediately following receipt by us, we will return the
Accumulated Value of your Purchase Payment(s) so invested plus any fees and/or
Premium Taxes that may have been subtracted from such amount, and (3) for any
amount of your initial Purchase Payment(s) invested in the Guaranteed Rate
Options immediately following receipt by us, we will refund the Accumulated
Value of your Purchase Payment(s) so invested.

ALLOCATION OF PURCHASE PAYMENTS

You instruct your advisor how your Net Purchase Payments will be allocated.
You may allocate each Net Purchase Payment to one or more of the Portfolios or
General Account Guaranteed Options as long as such portions are whole number
percentages provided that each allocation to a General Account Guaranteed
Option is at least $1,000 and that no Portfolio or General Account Guaranteed
Option may contain a balance of less than $250 and $1,000, respectively
(except the Dollar Cost Averaging Fixed Account Option). You may choose not to
allocate any monies to a particular Portfolio. You may change allocation
instructions for future Net Purchase Payments by sending us the appropriate
Company form or by complying with other designated Company procedures. The
General Account Guaranteed Options are available for sale in most, but not
all, states.

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<PAGE>

to your initial allocation instructions (except that any accrued interest will
remain in the Federated Prime Money Portfolio if it is selected as an initial
allocation option), provided that portions of your initial Net Purchase
Payment(s) allocated to the Guaranteed Rate Options will be invested
immediately upon our receipt thereof in order to lock in the rates then
applicable to such options. (Please note that immediate investment is not
applicable to amounts allocated to the Guaranteed Equity Option.)

EXCHANGES AMONG THE PORTFOLIOS

Should your investment goals change, you may exchange Accumulated Value among
the Portfolios of the Funds and, as permitted, the General Account Guaranteed
Options. Requests for Exchanges, received by mail or by telephone, prior to
the close of the New York Stock Exchange (generally 4:00 P.M. Eastern time)
are processed at the close of business that same day. Requests received after
the close of the New York Stock Exchange are processed the next Business Day.
If you experience difficulty in making a telephone Exchange, your Exchange
request may be made by regular or express mail. It will be processed on the
date received.

To take advantage of the privilege of initiating transactions by telephone,
you must first elect the privilege by completing the appropriate section of
the Contract acknowledgement form, which you will receive with your Contract.
You may also complete a separate telephone authorization form at a later date.
To take advantage of the privilege of authorizing a third party to initiate
transactions by telephone, you must first complete a third party authorization
form or the appropriate section of the Contract acknowledgement form.

The Company will undertake reasonable procedures to confirm that instructions
communicated by telephone are genuine. Prior to the acceptance of any request,
a customer service representative will ask the caller for his or her Contract
number and social security number. In addition, telephone communications from
a third party authorized to transact in an account will undergo reasonable
procedures to confirm that instructions are genuine. The third party caller
will be asked for his or her name, company affiliation (if appropriate), the
Contract number to which he or she is referring, and the social security
number of the Contract Owner. All calls will be recorded, and this information
will be verified with the Contract Owner's records prior to processing a
transaction. Furthermore, all transactions performed by a customer service
representative will be verified with the Contract Owner through a written
confirmation statement. Neither the Company nor the Funds shall be liable for
any loss, cost or expense for action on telephone instructions that are
believed to be genuine in accordance with these procedures.

For information concerning Exchanges to and from the General Account
Guaranteed Options, see "The General Account," at Appendix A.

ASSET REBALANCING

Prior to the Annuity Date, you may instruct us to automatically exchange
amounts among the Portfolios to maintain a desired allocation of the
Accumulated Value among those Portfolios. Rebalancing will occur monthly,
quarterly, semi-annually, or annually, beginning on the date you select. You
must select the percentage of the Accumulated Value you desire in each of the
various Portfolios offered (totaling 100%). Rebalancing can be started,
stopped or changed at any time, except that rebalancing will not be available
when Dollar Cost Averaging is in effect or when any other Exchange is
requested.

DOLLAR COST AVERAGING OPTIONS

DOLLAR COST AVERAGING MONEY MARKET OPTION

If you have at least $5,000 of Accumulated Value in the Federated Prime Money
Portfolio, you may choose to have a specified dollar amount transferred from
this Portfolio to other Portfolios in the Separate Account or to the General

18
<PAGE>

Account Guaranteed Options on a monthly basis. The main objective of Dollar
Cost Averaging is to shield your investment from short term price
fluctuations. Since the same dollar amount is transferred to other Portfolios
each month, more units are purchased in a Portfolio if the value per unit is
low and less units are purchased if the value per unit is high. Therefore, a
lower average cost per unit may be achieved over the long term. This plan of
investing allows investors to take advantage of market fluctuations but does
not assure a profit or protect against a loss in declining markets.

This Dollar Cost Averaging Option may be elected on the customer order form or
at a later date. The minimum amount that may be transferred each month into
any Portfolio or General Account Guaranteed Option is $250. The maximum amount
which may be transferred is equal to the Accumulated Value in the Federated
Prime Money Portfolio when elected, divided by 12.

The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Portfolios in the proportions
you specify on the appropriate Company form, or, if none are specified, in
accordance with your original investment allocation. If, on any transfer date,
the Accumulated Value is equal to or less than the amount you have elected to
have transferred, the entire amount will be transferred and the option will
end. You may change the transfer amount once each Contract Year, or cancel
this option, by sending the appropriate Company form to our Administrative
Offices which must be received at least seven days before the next transfer
date.

DOLLAR COST AVERAGING FIXED ACCOUNT OPTION

For information about the Dollar Cost Averaging Fixed Account Option, see
Appendix A.

ACCUMULATED VALUE

At the commencement of the Contract, the Accumulated Value equals the initial
Net Purchase Payment. Thereafter, the Accumulated Value equals the Accumulated
Value from the previous Business Day increased by: (i) any additional Net
Purchase Payments received by the Company and (ii) any increase in the
Accumulated Value due to investment results of the selected Portfolio(s) and
the interest credited to the General Account Guaranteed Options during the
Valuation Period: and reduced by: (i) any decrease in the Accumulated Value
due to investment results of the selected Portfolio(s), (ii) a daily charge to
cover the mortality and expense risks assumed by the Company, (iii) any charge
to cover the cost of administering the Contract, (iv) any partial withdrawals,
(v) any Market Value Adjustment or other deduction due to early Exchanges from
the Guaranteed Rate Options and (vi) if exercised by the Company, any charges
for any Exchanges made after the first 12 in any Contract Year.

CHARGES AND DEDUCTIONS

There are no sales charges for the Contracts (although certain charges or
restrictions may apply to your Contract's General Account Guaranteed Options).

MORTALITY AND EXPENSE RISK CHARGE

We impose a charge as compensation for bearing certain mortality and expense
risks under the Contracts. The annual charge is assessed daily based on the
net asset value of the Separate Account. The annual mortality and expense risk
charge is 1.35% of the net asset value of the Separate Account.

We guarantee that this annual charge will never increase. If this charge is
insufficient to cover actual costs and assumed risks, the loss will fall on
us. Conversely, if the charge proves more than sufficient, any excess will be
added to the Company surplus and will be used for any lawful purpose,
including any shortfall on the costs of distributing the Contracts.

The mortality risk borne by us under the Contracts, where one of the life
Annuity Payment Options is selected, is to make monthly Annuity Payments
(determined in accordance with the annuity tables and other provisions
contained in the Contract) regardless of how long all Annuitants may live. We
also assume mortality risk as a result of our guarantee of a Death Benefit in
the event the Annuitant dies prior to the Annuity Date.

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<PAGE>

The expense risk borne by us under the Contracts is the risk that the charges
for administrative expenses which are guaranteed for the life of the Contract
may be insufficient to cover the actual costs of issuing and administering the
Contract.

ADMINISTRATIVE CHARGE

An administrative charge equal to .15% annually of the net asset value of the
Separate Account is assessed daily. This deduction represents reimbursement
for the costs expected to be incurred over the life of the Contract for
issuing and maintaining each Contract and the Separate Account.

EXCHANGE FEE

Each Contract Year you may make an unlimited number of Exchanges between
Portfolios and/or General Account Guaranteed Options, provided that after an
Exchange no Portfolio or General Account Guaranteed Option may contain a
balance less than $250 or $1,000, respectively (except the Dollar Cost
Averaging Fixed Account Option). No fee is currently imposed for such
Exchanges; however, we reserve the right to charge a $15 fee for Exchanges in
excess of 12 per Contract Year.

TAXES

We will, where such taxes are imposed on the Company by state law, deduct
Premium Taxes that currently range up to 3.5%. These taxes will be deducted
from the Accumulated Value or Purchase Payments in accordance with applicable
law.

As of the date of this Prospectus, the following state assesses a Premium Tax
on all initial and additional Purchase Payments on Non-Qualified Contracts:

<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
South Dakota................................ 1.25%
</TABLE>

In addition, a number of states currently impose Premium Taxes at the time an
Annuity Payment Option (other than a Lump Sum Payment Option) is selected. As
of the date of this Prospectus, the following states assess a Premium Tax
against the Accumulated Value if the Contract Owner chooses an Annuity Payment
Option instead of receiving a lump sum distribution:

<TABLE>
<CAPTION>
NON-
QUALIFIED QUALIFIED
--------- ---------
<S> <C> <C>
California.................................................. .50% 2.35%
District of Columbia........................................ 2.25% 2.25%
Kentucky.................................................... 2.00% 2.00%
Maine....................................................... 0% 2.00%
Nevada...................................................... 0% 3.50%
West Virginia............................................... 1.00% 1.00%
Wyoming..................................................... 0% 1.00%
</TABLE>

Under present laws, the Company will incur state or local taxes (in addition
to the Premium Taxes described above) in several states. At present, the
Company does not charge the Contract Owner for these taxes. If there is a
change in state or local tax laws, charges for such taxes may be made. The
Company does not expect to incur any federal income tax liability attributable
to investment income or capital gains retained as part of the reserves under
the Contracts. (See "Federal Tax Considerations," page 26.) Based upon these
expectations, no charge is currently being made to the Separate Account for
corporate federal income taxes that may be attributable to the Separate
Account.

The Company will periodically review the question of a charge to the Separate
Account for federal income taxes related to the Separate Account. Such a
charge may be made in future years for any federal income taxes incurred by
the Company. This might become necessary if the tax treatment of the Company
is ultimately determined to be other than what the Company currently believes
it to be, if there are changes made in the federal income tax treatment of
annuities at the corporate level, or if there is a change in the Company's tax
status. In the event that the Company

20
<PAGE>

should incur federal income taxes attributable to investment income or capital
gains retained as part of the reserves under the Contracts, the Accumulated
Value of the Contract would be correspondingly adjusted by any provision or
charge for such taxes.

PORTFOLIO EXPENSES

The value of the assets in the Separate Account reflect the fees and expenses
paid by the Portfolios. A complete description of these expenses is found in
the "Fee Table" section of this Prospectus and in each Fund's Prospectus and
Statement of Additional Information.

EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS

The administrative charges may be reduced for sales of Contracts to a trustee,
employer or similar entity representing a group where the Company determines
that such sales result in savings of administrative expenses. In addition,
directors, officers and bona fide full-time employees (and their spouses and
minor children) of the Company, its ultimate parent company, and certain of
their affiliates are permitted to purchase Contracts with substantial
reduction of administrative charges or with a waiver or modification of
certain minimum or maximum purchase and transaction amounts or balance
requirements. Contracts so purchased are for investment purposes only and may
not be resold except to the Company.

In no event will reduction or elimination of charges or waiver or modification
of transaction or balance requirements be permitted where such reduction,
elimination, waiver or modification will be unfairly discriminatory to any
person. Additional information about reductions in charges is contained in the
Statement of Additional Information.

MINIMUM BALANCE REQUIREMENT

We will transfer the balance in any Portfolio that falls below $250 (or $1,000
in the case of any General Account Guaranteed Option balance, except the
Dollar Cost Averaging Fixed Account Option), due to a partial withdrawal or
Exchange, to the remaining Portfolios held under that Contract on a pro rata
basis. In the event that the Accumulated Value of the Contract falls below
$1,000, the Company reserves the right to terminate the Contract and pay you
the Accumulated Value. You will be notified that the Accumulated Value of your
account is below the Contract's minimum requirement. You would then be allowed
60 days to make an additional investment before the account is liquidated.
Proceeds would be promptly paid to the Contract Owner. The full proceeds would
be taxable as a withdrawal. We will not exercise this right with respect to
Qualified Contracts.

DISTRIBUTIONS UNDER THE CONTRACT

FULL AND PARTIAL WITHDRAWALS

At any time before the Annuity Date and while the Annuitant is living, you may
make a partial or full withdrawal of the Contract to receive all or part of
the Surrender Value by sending a written request to our Administrative
Offices. Full or partial withdrawals may only be made before the Annuity Date
and all partial withdrawal requests must be for at least $500. The amount
available for full or partial withdrawal is the Surrender Value at the end of
the Valuation Period during which the written request for withdrawal is
received. The Surrender Value is an amount equal to the Accumulated Value,
adjusted to reflect any applicable Market Value Adjustment for amounts
allocated to the Multi-Year Guaranteed Rate Option, less any early withdrawal
charges for amounts allocated to the One-Year Guaranteed Index Rate Option,
less any amount allocated to the Guaranteed Equity Option less any Premium
Taxes incurred but not yet deducted. The withdrawal amount may be paid in a
lump sum to you, or if elected, all or any part may be paid out under an
Annuity Payment Option. (See "Annuity Payment Options," page 23.)

You can make a withdrawal by sending the appropriate Company form to our
Administrative Offices. You may not make any full or partial withdrawals from
the Guaranteed Equity Option before the end of the guarantee period. Your
proceeds will normally be processed and mailed to you within two Business Days
after the receipt of the request but in no event will it be later than seven
calendar days, subject to postponement in certain circumstances. (See
"Deferment of Payment," page 26.)

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<PAGE>

Partial withdrawals from the Dollar Cost Averaging Fixed Account Option are
made on a first-in, first-out basis, so that amounts put into the Dollar Cost
Averaging Fixed Account Option first will be withdrawn first. For federal
income tax purposes, however, partial withdrawals are generally taken out of
earnings first and then purchase payments. (See "Federal Tax Considerations,"
page 26.)

Payments under the Contract of any amounts derived from premiums paid by check
may be delayed until the check has cleared your bank. If, at the time the
Contract Owner requests a full or partial withdrawal, he has not provided the
Company with a written election not to have federal income taxes withheld, the
Company must by law withhold 10% from the taxable portion of any full or
partial withdrawal and remit that amount to the federal government. Moreover,
the Code provides that a 10% penalty tax may be imposed on certain early
withdrawals. (See "Federal Tax Considerations," page 26.)

Since the Contract Owner assumes the investment risk with respect to amounts
allocated to the Separate Account, the total amount paid upon withdrawal of
the Contract (taking into account any prior withdrawals) may be more or less
than the total Net Purchase Payments made.

LUMP SUM PAYMENT OPTION

You may surrender the Contract at any time while the Annuitant is living and
before the Annuity Date. The Surrender Value is equal to the Accumulated
Value, adjusted for any Market Value Adjustment or other deductions applicable
to amounts allocated to a General Account Guaranteed Option, less any amount
allocated to the Guaranteed Equity Option, less any Premium Taxes incurred but
not yet deducted.

SYSTEMATIC WITHDRAWAL OPTION

You may choose to have a specified dollar amount provided to you on a regular
basis from the portion of your Contract's Accumulated Value that is allocated
to the Portfolios. By electing the Systematic Withdrawal Option, withdrawals
may be made on a monthly, quarterly, semi-annual or annual basis. The minimum
amount for each withdrawal is $100.

This option may be elected by completing the Systematic Withdrawal Request
Form. This form must be received by us at least 30 days prior to the date
systematic withdrawals will begin. Each withdrawal will be processed on the
day and at the frequency indicated on the Systematic Withdrawal Request Form.
The start date for the systematic withdrawals must be between the first and
twenty-eighth day of the month. You may discontinue the Systematic Withdrawal
Option at any time by notifying us in writing at least 30 days prior to your
next scheduled withdrawal date. We will forward the withdrawal amount to you
within 10 Business Days of the process date.

Like any other partial withdrawal, each systematic withdrawal is subject to
taxes on earnings. If the owner has not provided the Company with a written
election not to have federal income taxes withheld, the Company must by law
withhold 10% from the taxable portion of the systematic withdrawal and remit
that amount to the federal government. Moreover, the Code provides that a 10%
penalty tax may be imposed on certain early withdrawals. (See "Federal Tax
Considerations," page 26.) You may wish to consult a tax advisor regarding any
tax consequences that might result prior to electing the Systematic Withdrawal
Option.

We reserve the right to discontinue offering the Systematic Withdrawal Option
upon 30 days' written notice.

ANNUITY DATE

You may specify an Annuity Date, which can be no later than the first day of
the month after the Annuitant's 85th birthday, without the Company's prior
approval. The Annuity Date is the date that Annuity Payments are scheduled to
commence under the Contract unless the Contract has been surrendered or an
amount has been paid as proceeds to the designated Annuitant's Beneficiary
prior to that date.

You may advance or defer the Annuity Date. However, except as otherwise
permitted by us, a new Annuity Date must be a date which is: (1) at least
thirty days after the date on which notice of the change is received by us and
(2) not later than the last day of the month starting after the Annuitant's
85th birthday. In no event will an Annuity Date be permitted to be later than
the last day of the month following the month of the Annuitant's 95th
birthday. The Annuity

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<PAGE>

Date may also be changed by the Annuitant's Beneficiary's election of an
Annuity Option after the Annuitant's death. The Annuity Date may be changed
only by written request during the Annuitant's lifetime and must be made at
least 30 days before the then-scheduled Annuity Date. The Annuity Date and the
Annuity Payment options available for Qualified Contracts may also be
controlled by endorsements, the plan or applicable law.

On the Annuity Date, the proceeds to be applied under a Payment Option will be
equal to the Contract's Accumulated Value 10 Business Days prior to the
Annuity Date less any applicable Premium Tax. Any Accumulated Value
attributable to General Account Guaranteed Options will become a portion of
the proceeds to be applied under a Payment Option. No market value adjustment
or interest penalty will apply on the Annuity Date.

Once proceeds become payable and an Annuity Payment Option has been selected,
the Company will issue a Supplementary Contract in exchange for the Contract
setting forth the terms of the Annuity Payment Option selected. The
Supplementary Contract will name the Payee(s) and will describe the payment
schedule.

ANNUITY PAYMENT OPTIONS

All Annuity Payment Options (except for the Designated Period Annuity Option)
are offered as "Variable Annuity Options." This means that Annuity Payments,
after the initial payment, will reflect the investment experience of the
Portfolio or Portfolios you have chosen. All Annuity Payment Options are also
offered as "Fixed Annuity Options." This means that the amount of each payment
will be set on the Annuity Date and will not change. The following Annuity
Payment Options are available under the Contract:

Life Annuity--Annuity Payments are paid for the life of an Annuitant, ceasing
with the last Annuity Payment due prior to the Annuitant's death.

Joint and Last Survivor Annuity--Annuity Payments are paid for the life of two
Annuitants and thereafter for the life of the survivor, ceasing with the last
Annuity Payment due prior to the survivor's death. Payments to be made
following the death of one of the Annuitants may be the same amount or may be
reduced to a percentage of the original Annuity Payment. Such percentage must
be chosen at the time you selected a Payment Option.

Joint and Last Survivor Life with 60, 120, 180 or 240 Monthly Payments
Certain--Monthly Annuity Payments are paid as long as either the Annuitant or
the Joint Annuitant is living. If both the Annuitant and the Joint Annuitant
die prior to the end of the certain period elected, payments will continue for
the remainder of the 60, 120, 180 or 240 months.

Life Annuity with 60, 120, 180 or 240 Monthly Payments Certain--Monthly
Annuity Payments are paid for the life of an Annuitant, or if the Annuitant
dies prior to the end of the certain period elected, payments will continue
for the remainder of the 60, 120, 180, or 240 months.

Installment or Unit Refund Life Annuity--Available as either a Fixed
(Installment Refund) or Variable (Unit Refund) Annuity Option. Annuity
Payments are paid for the life of an Annuitant, with a Period Certain
determined by dividing the Accumulated Value by the first Annuity Payment.

Designated Period Annuity--Only available as a Fixed Annuity Option. Annuity
Payments are paid for a Period Certain as elected, which may be from 10 to 30
years.

Before the Annuity Date and while the Annuitant is living, you may change the
Annuity Payment Option by written request. The request for change must be made
at least 30 days prior to the Annuity Date and is subject to the approval of
the Company. If an Annuity Payment Option is chosen that depends on the
continuation of the life of the Annuitant, proof of birth date may be required
before Annuity Payments begin. For Annuity Payment Options involving life
income, the actual age of the Annuitant will affect the amount of each
payment. Since payments to older Annuitants are expected to be fewer in
number, the amount of each Annuity Payment will generally be greater.

All or part of the Accumulated Value may be placed under one or more Annuity
Payment Options. If Annuity Payments are to be paid under more than one
option, the Company must be told what part of the Accumulated Value is to be
paid under each option.

Annuity Payments are made monthly, quarterly, semi-annually or annually
starting on the Annuity Date. We may require all monthly and quarterly
payments to be made by Electronic Funds Transfer.

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<PAGE>

If at the time of any Annuity Payment you have not provided the Company with a
written election not to have federal income taxes withheld, the Company must
by law withhold such taxes from the taxable portions of such Annuity Payment
and remit that amount to the federal government.

In the event that an Annuity Payment Option is not selected, the Company will
make monthly Annuity Payments that will go on for as long as the Annuitant
lives (120 payments guaranteed) in accordance with the Life Annuity with 120
Monthly Payments Certain Option and the annuity benefit sections of the
Contract. That portion of the Accumulated Value that has been held in a
Portfolio prior to the Annuity Date will be applied under a Variable Annuity
Option based on the performance of that Portfolio. Subject to approval by the
Company, you may select any other Annuity Payment Option then being offered by
the Company. All Fixed Annuity Payments and the initial Variable Annuity
Payment are guaranteed to be not less than as provided by the Annuity Tables
and the Annuity Payment Option elected by the Contract Owner. The minimum
payment, however, is $100. If the Accumulated Value is less than $2,000, the
Company has the right to pay that amount in a lump sum. From time to time, the
Company may require proof that the Annuitant or Contract Owner is living.
Annuity Payment Options are not available to: (1) an assignee; or (2) any
other than a natural person, except with the consent of the Company.

We may, at the time of election of an Annuity Payment Option, offer more
favorable rates in lieu of the guaranteed rates specified in the Annuity
Tables found in the Contract for Fixed Annuity Payments.

The value of Variable Annuity Payments will reflect the investment experience
of the chosen Portfolio. Only one Variable Annuity Option may be chosen from
among those made available by the Company for each Portfolio. The Annuity
Tables, which are contained in the Contract and are used to calculate the
value of the initial Variable Annuity Payment, are based on an assumed
interest rate of 4%. If the actual net investment experience exactly equals
the assumed interest rate, then the Variable Annuity Payments will remain the
same (equal to the first Annuity Payment). However, if actual investment
experience exceeds the assumed interest rate, the Variable Annuity Payments
will increase; conversely, they will decrease if the actual experience is
lower. The method of computation of Variable Annuity Payments is described in
more detail in the Statement of Additional Information.

You may exchange all or part of the value of Variable Annuity Units to Fixed
Annuity Payments. If you exchange Variable Annuity Units to Fixed Annuity
Payment, the Fixed Annuity Payments will be a continuation of the benefit
option under which your Variable Annuity Payments were being made.

You may exchange between Portfolios while receiving Variable Annuity Payments.
We reserve the right to limit Exchanges to no more than 12 in any one Contract
Year. Any Exchanges in excess of 12 per Contract Year may be charged a $15 fee
per Exchange.

The value of all payments, both fixed and variable, will be greater for
shorter guaranteed periods than for longer guaranteed periods, and greater for
life annuities than for joint and survivor annuities, because they are
expected to be made for a shorter period.

After the Annuity Date, you may change the Portfolio funding the Variable
Annuity Payments on the appropriate Company form or by calling our
Administrative Offices at 1-800-866-6007.

If you choose an Annuity Payment Option and the postal or other delivery
service is unable to deliver checks to the Payee's address of record, no
interest will accrue on amounts represented by uncashed Annuity Payment
checks. It is the Payee's responsibility to keep the Company informed of the
Payee's current address of record.

DEATH BENEFIT

Generally, federal tax law requires that if any Contract Owner is a natural
person and dies before the Annuity Date, then the entire value of the Contract
must be distributed within five years of the date of death of the Contract
Owner. If the Contract Owner is not a natural person, the death of the Primary
Annuitant triggers the same distribution requirement. Special rules may apply
to a surviving spouse.

DEATH OF ANNUITANT BEFORE ANNUITY DATE

If the Annuitant dies prior to the Annuity Date, an amount will be paid as
proceeds to the Annuitant's Beneficiary. The Death Benefit is calculated and
is payable upon receipt of due Proof of Death of the Annuitant as well as
proof that

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the Annuitant died prior to the Annuity Date. Upon receipt of this proof, the
Death Benefit will be paid within seven days, or as soon thereafter as the
Company has sufficient information about the Annuitant's Beneficiary to make
the payment. The Annuitant's Beneficiary may receive the amount payable in a
lump sum cash benefit or under one of the Annuity Payment Options.

The Death Benefit is the greater of:

(1) The Accumulated Value on the date we receive due Proof of Death; or

(2) The Adjusted Death Benefit.

During the first six Contract Years, the Adjusted Death Benefit will be the
sum of all Net Purchase Payments made, less any partial withdrawals taken.
During each subsequent six-year period beginning before age 81, the Adjusted
Death Benefit will be the Death Benefit on the last day of the previous six-
year period plus any Net Purchase Payments made, less any partial withdrawals
taken during the current six-year period. For any six-year period after the
one in which the Annuitant attains age 81, the Adjusted Death Benefit will be
equal to the Death Benefit on the last day of the six-year period before age
81 occurs plus any Net Purchase Payments subsequently made, less any partial
withdrawals subsequently taken.

DEATH OF ANNUITANT ON OR AFTER ANNUITY DATE

The Death Benefit, if any, payable if the Annuitant dies on or after the
Annuity Date depends on the Annuity Payment Option selected. Upon the
Annuitant's death, the remaining portion of the value of the Contract will be
distributed to the Annuitant's Beneficiary at least as rapidly as under the
method of distribution being used on the date of the Annuitant's death.

DESIGNATION OF AN ANNUITANT'S BENEFICIARY

The Contract Owner may select one or more Annuitant's Beneficiaries and name
them in the customer order form. Thereafter, while the Annuitant is living,
the Contract Owner may change the Annuitant's Beneficiary by sending us the
appropriate Company form. Such change will take effect on the date such form
is signed by the Contract Owner but will not affect any payment made or other
action taken before the Company acknowledges such form. You may also make the
designation of Annuitant's Beneficiary irrevocable by sending us the
appropriate Company form and obtaining approval from the Company. Changes in
the Annuitant's Beneficiary may then be made only with the consent of the
designated irrevocable Annuitant's Beneficiary.

If the Annuitant dies prior to the Annuity Date, the following will apply
unless the Contract Owner has made other provisions.

(a) If there is more than one Annuitant's Beneficiary, each will share in
the Death Benefits equally;

(b) If one or two or more Annuitant's Beneficiaries have already died, that
share of the Death Benefit will be paid equally to the survivor(s);

(d) If an Annuitant's Beneficiary dies at the same time as the Annuitant,
the proceeds will be paid as though the Annuitant's Beneficiary had
died first. If an Annuitant's Beneficiary dies with 15 days after the
Annuitant's death and before the Company receives due proof of the
Annuitant's death, proceeds will be paid as though the Annuitant's
Beneficiary had died first.

If an Annuitant's Beneficiary who is receiving Annuity Payments dies, any
remaining payments certain will be paid to that Annuitant's Beneficiary's
named beneficiary(ies) when due. If no Annuitant's Beneficiary survives the
Annuitant, the right to any amount payable will pass to the Contract Owner. If
the Contract Owner is the Annuitant, this right will pass to his or her
estate. If a Life Annuity with 60, 120, 180 or 240 Monthly Payments Certain
option was elected, and if the Annuitant dies on or after the Annuity Date,
any unpaid payments certain will be paid to the Annuitant's Beneficiary or
your designated Payee.

DEATH OF CONTRACT OWNER

DEATH OF CONTRACT OWNER BEFORE ANNUITY DATE. With two exceptions, federal tax
law requires that when either the Contract Owner or the Joint Owner (if any)
dies before the Annuity Date, the entire value of the Contract must be

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distributed within five years of the date of death. First exception: If the
entire interest is to be distributed to the Owner's Designated Beneficiary,
who is a natural person, he or she may elect to have it paid as an annuity
over his or her life or over a period certain not to exceed his or her life
expectancy as long as the payments begin within one year of the date of death.
Second exception: If the Owner's Designated Beneficiary is the spouse of the
Contract Owner (or Joint Owner), the spouse may elect to continue the Contract
in his or her name as Contract Owner indefinitely and to continue deferring
tax on the accrued and future income under the Contract. If the Contract Owner
and the Annuitant are the same person, then upon that person's death the
Annuitant's Beneficiary is entitled to the Death Benefit. In this regard, see
"Death of Annuitant Before Annuity Date," page 24.

DEATH OF CONTRACT OWNER ON OR AFTER ANNUITY DATE. Federal tax law requires
that when either the Contract Owner or the Joint Owner (if any) dies on or
after the Annuity Date, the remaining portions of the value of the Contract
must be distributed at least as rapidly as under the method of distribution
being used on the date of death.

NON-NATURAL PERSON AS CONTRACT OWNER. Where the Contract Owner is not a
natural person, the death of the "primary Annuitant" is treated as the death
of the Contract Owner for purposes of federal tax law. (The Code defines a
primary Annuitant as the individual who is of primary importance in affecting
the timing or the amount of payout under a Contract.) In addition, where the
Contract Owner is not a natural person, a change in the identity of the
primary Annuitant is also treated as the death of the Contract Owner for
purposes of federal tax law.

DEFERMENT OF PAYMENT

Payment of any cash withdrawal or lump sum Death Benefit due from the Separate
Account will occur within seven days from the date the election becomes
effective except that the Company may be permitted to defer such payment if:
(1) the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the New York Stock Exchange is otherwise restricted;
or (2) an emergency exists as defined by the SEC, or the SEC requires that
trading be restricted; or (3) the SEC permits a delay for the protection of
Contract Owners.

As to amounts allocated to the General Account, we may, at any time, defer
payment of the Surrender Value for up to six months after we receive a request
for it. We will allow interest of at least 4% annually on any Surrender Value
payment derived from the General Account that we defer 30 days or more.

FEDERAL TAX CONSIDERATIONS

INTRODUCTION

The ultimate effect of federal income taxes on the amounts paid for the
Contract, on the investment return on assets held under a Contract, on Annuity
Payments, and on the economic benefits to the Contract Owner, Annuitant or
Annuitant's Beneficiary, depends on the terms of the Contract, the Company's
tax status and upon the tax status of the individuals concerned. The following
discussion is general in nature and is not intended as tax advice. You should
consult a tax adviser regarding the tax consequences of purchasing a Contract.
No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion is based upon the Company's understanding of the
federal income tax laws as they are currently interpreted. No representation
is made regarding the likelihood of continuation of the federal income tax
laws, the Treasury regulations or the current interpretations by the Internal
Revenue Service. We reserve the right to make uniform changes in the Contract
to the extent necessary to continue to qualify the Contract as an annuity. For
a discussion of federal income taxes as they relate to the Funds, please see
the accompanying Prospectuses for the Funds.

TAXATION OF ANNUITIES IN GENERAL

GENERAL RULE OF TAX DEFERRAL

Section 72 of the Code governs taxation of annuities. In general, a Contract
Owner is not taxed on increases in value under a Contract until some form of
withdrawal or distribution is made under it. However, under certain
circumstances, the increase in value may be subject to current federal income
tax. (See "Annuity Contracts Owned by Non-Natural Persons," page 28 and
"Diversification Standards," page 29.)

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TAXATION OF FULL OR PARTIAL WITHDRAWALS

Section 72 provides that the proceeds of a full or partial withdrawal from a
Contract prior to the Annuity Date will be treated as taxable income to the
extent the amounts held under the Contract exceed the "investment in the
Contract," as that term is defined in the Code. The "investment in the
Contract" can generally be described as the cost of the Contract, and
generally constitutes all Purchase Payments paid for the Contract less any
amounts received under the Contract that are excluded from the individual's
gross income. The taxable portion is taxed at ordinary income tax rates. For
purposes of this rule, a pledge or assignment of a Contract is treated as a
payment received on account of a partial withdrawal of a Contract.

Upon receipt of a full or partial withdrawal or an Annuity Payment under the
Contract, you will be taxed if the value of the Contract exceeds the
investment in the Contract. Generally, the taxable portion of such payments
will be taxed at ordinary income tax rates. Partial withdrawals are generally
taken out of earnings first and then investment in the Contract.

TAXATION OF ANNUITY PAYMENTS

For Fixed Annuity Payments, in general, the taxable portion of each payment is
determined by using a formula known as the "exclusion ratio," which
establishes the ratio that the investment in the Contract bears to the total
expected amount of Annuity Payments for the term of the Contract. That ratio
is then applied to each payment to determine the non-taxable portion of the
payment. The remaining portion of each payment is taxed at ordinary income tax
rates. For Variable Annuity Payments, in general, the taxable portion is
determined by a formula that establishes a specific dollar amount of each
payment that is not taxed. The dollar amount is determined by dividing the
investment in the Contract by the total number of expected periodic payments.
The remaining portion of each payment is taxed at ordinary income tax rates.
Once the excludible portion of Annuity Payments to date equals the investment
in the Contract, the balance of the Annuity Payments will be fully taxable.

Generally, the entire amount distributed from a Qualified Contract is taxable
to the Contract Owner. In the case of Qualified Contracts with after tax
contributions, the Contract Owner is entitled to exclude the portion of each
withdrawal or annuity payment constituting a return of after tax
contributions. Once all of your after tax contributions have been returned to
you on a non-taxable basis, subsequent withdrawals or annuity payments are
fully taxable as ordinary income. Since the Company has no knowledge of the
amount of after tax contributions you have made, you will need to make the
computation in the preparation of your federal income tax return.

TAX WITHHOLDING

Withholding of federal income taxes on all distributions is required unless
the recipient elects not to have any amounts withheld and properly notifies
the Company of that election. In certain situations, taxes will be withheld on
distributions to non-resident aliens at a 30% flat rate unless an exemption
from withholding applies under the applicable tax treaty.

PENALTY TAXES

With respect to amounts withdrawn or distributed before the taxpayer reaches
age 59 1/2, a penalty tax is imposed equal to 10% of the taxable portion of
amounts withdrawn or distributed. However, the penalty tax will not apply to
withdrawals (i) made on or after the death of the Contract Owner or, where the
Contract Owner is not an individual, the death of the Annuitant, who is
defined as the individual the events in whose life are of primary importance
in affecting the timing and payment under the Contracts; (ii) attributable to
the taxpayer's becoming disabled within the meaning of Code Section 72(m)(7);
(iii) that are part of a series of substantially equal periodic payments made
at least annually for the life (or life expectancy) of the taxpayer, or joint
lives (or joint life expectancies) of the taxpayer and his or her beneficiary;
(iv) from a qualified plan (note, however, other penalties may apply); (v)
under a qualified funding asset (as defined in Code Section 130(d)); (vi)
under an immediate annuity contract as defined in Section 72(u)(4); (vii)
allocable to the investment in the contract prior to August 14, 1982; or
(viii) that are purchased by an employer on termination of certain types of
qualified plans and that are held by the employer until the employee separates
from service. Other tax penalties may apply to certain distributions as well
as to certain contributions and other transactions under Qualified Contracts.

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If the penalty tax does not apply to a withdrawal as a result of the
application of item (iii) above, and the series of payments are subsequently
modified (other than by reason of death or disability), the tax for the year
in which the modification occurs will be increased by an amount (as determined
under Treasury Regulations) equal to the penalty tax that would have been
imposed but for item (iii) above, plus interest for the deferral period. The
foregoing rule applies if the modification takes place (a) before the close of
the period that is five years from the date of the first payment and after the
taxpayer attains age 59 1/2, or (b) before the taxpayer reaches age 59 1/2.
The tax penalty may also not apply to distributions from Qualified Contracts
issued under Section 408(b) or 408A of the Code used to pay qualified higher
education expenses or the acquisition costs (up to $10,000) involved in the
purchase of a principal residence by a first-time homebuyer.

ANNUITY CONTRACTS OWNED BY NON-NATURAL PERSONS

Where the Contract is held by a non-natural person (for example, a
corporation), the Contract is generally not treated as an annuity contract for
federal income tax purposes, and the income on that Contract (generally the
increase in the net Accumulated Value less the payments) is includible in
taxable income each year. The rule does not apply where the non-natural person
is only a nominal owner such as a trust or other entity acting as an agent for
a natural person. If an employer is the nominal owner of a Qualified Contract,
and the beneficial owners are employees, then the Contract is not treated as
being held by a non-natural person. The rule also does not apply where the
Qualified Contract is acquired by the estate of a decedent, where the Contract
is a qualified funding asset for structured settlements, where the Contract is
purchased by an employer on behalf of an employee upon termination of a
qualified plan, and in the case of an immediate annuity, as defined under
Section 72(u)(4) of the Code.

MULTIPLE-CONTRACTS RULE

All non-qualified annuity contracts issued by the same company (or affiliate)
to the same Contract Owner during any calendar year are to be aggregated and
treated as one contract for purposes of determining the amount includible in
the taxpayer's gross income. Thus, any amount received under any Contract
prior to the Contract's Annuity Date, such as a partial withdrawal, will be
taxable (and possibly subject to the 10% federal penalty tax) to the extent of
the combined income in all such contracts. The Treasury Department has
specific authority to issue regulations that prevent the avoidance of Code
Section 72(e) through the serial purchase of annuity contracts or otherwise.
In addition, there may be other situations in which the Treasury Department
may conclude that it would be appropriate to aggregate two or more Contracts
purchased by the same Contract Owner. The aggregation rules do not apply to
immediate annuities as defined under Section 72(u)(4) of the Code.
Accordingly, a Contract Owner should consult a tax advisor before purchasing
more than one Contract or other annuity contracts.

TRANSFERS OF ANNUITY CONTRACTS

Any transfer of a Non-Qualified Contract prior to the Annuity Date for less
than full and adequate consideration will generally trigger income tax (and
possibly the 10% federal penalty tax) on the gain in the Contract to the
Contract Owner at the time of such transfer. The investment in the Contract of
the transferee will be increased by any amount included in the Contract
Owner's income. This provision, however, does not apply to those transfers
between spouses or former spouses incident to a divorce which are governed by
Code Section 1041(a).

ASSIGNMENTS OF ANNUITY CONTRACTS

A transfer of ownership of a Contract, a collateral assignment or the
designation of an Annuitant or other beneficiary who is not also the Contract
Owner may result in tax consequences to the Contract Owner, Annuitant or
beneficiary that are not discussed herein. A Contract Owner contemplating such
a transfer or assignment of a Contract should contact a tax advisor with
respect to the potential tax effects of such a transaction.

THE COMPANY'S TAX STATUS

The Company is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the Separate Account is not a separate entity from the
Company and its operations form a part of the Company, it will not be taxed
separately as a "regulated investment company" under Subchapter M of the Code.

Investment income and realized capital gains on the assets of the Separate
Account are reinvested and taken into account in determining the Accumulated
Value. Under existing federal income tax law, the Separate Account's
investment income, including realized net capital gains, is not taxed to the
Company. The Company reserves the right to make a deduction for taxes should
they be imposed with respect to such items in the future.

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DIVERSIFICATION STANDARDS

To comply with certain diversification regulations (the "Regulations") under
Code Section 817(h), after a start up period, each Subaccount of the Separate
Account will be required to diversify its investments. The Regulations
generally require that on the last day of each quarter of a calendar year, no
more than 55% of the value of each Subaccount is represented by any one
investment, no more than 70% is represented by any two investments, no more
than 80% is represented by any three investments, and no more than 90% is
represented by any four investments. A "look-through" rule applies that
suggests that each Subaccount of the Separate Account will be tested for
compliance with the percentage limitations by looking through to the assets of
the Portfolios in which each such Subaccount invests. All securities of the
same issuer are treated as a single investment. Each government agency or
instrumentality will be treated as a separate issuer for purposes of those
limitations.

In connection with the issuance of temporary diversification regulations in
1986, the Treasury Department announced that such regulations did not provide
guidance concerning the extent to which Contract Owners may direct their
investments to particular divisions of a separate account. It is possible that
regulations or revenue rulings may be issued in this area at some time in the
future. It is not clear, at this time, what these regulations or rulings would
provide. It is possible that when the regulations or ruling are issued, the
Contracts may need to be modified in order to remain in compliance. For these
reasons, the Company reserves the right to modify the Contracts, as necessary,
to prevent the Contract Owner from being considered the owner of assets of the
Separate Account.

We intend to comply with the Regulations to assure that the Contracts continue
to be treated as annuity contracts for federal income tax purposes.

403(B) CONTRACTS

Contracts will be offered in connection with retirement plans adopted by
public school systems and certain tax-exempt organizations (Code Section
501(c)(3) organizations) for their employees under Section 403(b) of the Code
except, as discussed below and subject to any conditions in an employer's
plan, a Contract used in connection with a Section 403(b) Plan offers the same
benefits and is subject to the same charges described in this Prospectus.

The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from your gross income. Such limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. In addition, Purchase
Payments will be excluded from your gross income only if the 403(b) Plan meets
certain Code non-discrimination requirements.

The Code imposes restrictions on full or partial surrenders from 403(b)
individual accounts attributable to Purchase Payments under a salary reduction
agreement and to any earnings on the entire 403(b) individual account credited
on and after January 1, 1989. Surrenders of these amounts are allowed only if
the Contract Owner (a) has died, (b) has become disabled, as defined in the
Code, (c) has attained age 59 1/2, or (d) has separated from service.
Surrenders are also allowed if the Contract Owner can show "hardship," as
defined by the Internal Revenue Service, but the surrender is limited to the
lesser of Purchase Payments made on or after January 1, 1989 or the amount
necessary to relieve the hardship. Even if a surrender is permitted under
these provisions, a 10% federal tax penalty may be assessed on the withdrawn
amount if it does not otherwise meet the exceptions to the penalty tax
provisions. (See "Taxation of Annuities in General," page 26.)

Under the Code, you may request a full or partial surrender of an amount equal
to the individual account cash value as of December 31, 1988 (the
"grandfathered" amount), subject to the terms of the 403(b) Plan. Although the
Code surrender restrictions do not apply to this amount, a 10% federal penalty
tax may be assessed on the withdrawn amount if it does not otherwise meet the
exceptions to the penalty tax provisions. (See "Taxation of Annuities in
General," page 26.)

The Company believes that the Code surrender restrictions do not apply to tax-
free transfers pursuant to Revenue Ruling 90-24. The Company further believes
that the surrender restrictions will not apply to any "grandfathered" amount
transferred pursuant to Revenue Ruling 90-24 into another 403(b) Contract.

LOANS UNDER 403(B) CONTRACTS

Under your 403(b) Contract, you may borrow against your Contract's Surrender
Value after the first Contract Year. No additional loans will be extended
until prior loan balances are paid in full. The loan amount must be at least
$1,000

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and your Contract must have a minimum vested Accumulated Value of $2,000. The
loan amount may not exceed the lesser of (a) or (b), where (a) is 50% of the
Contract's vested Accumulated Value on the date on which the loan is made, and
(b) is $50,000 reduced by the excess, if any, of the highest outstanding
balance of loans during the one-year period ending on the day before the
current loan is made over the outstanding balance of loans on the date the
current loan is made. If you are married, your spouse must consent in writing
to a loan request. This consent must be given within the 90-day period before
the loan is to be made.

On the first Business Day of each calendar month, the Company will determine a
loan interest rate. The loan interest rate for the calendar month in which the
loan is effective will apply for one year from the loan effective date.
Annually on the anniversary of the loan effective date, the rate will be
adjusted to equal the loan interest rate determined for the month in which the
loan anniversary occurs.

Principal and interest on loans must be repaid in substantially level
payments, not less frequently than quarterly, over a five year term except for
certain loans for the purchase of a principal residence. If the loan interest
rate is adjusted,
future payments will be adjusted so that the outstanding loan balance is
amortized in equal quarterly installments over the remaining term. A $40
processing fee is charged for each loan. The remainder of each repayment will
be credited to the individual account.

If a loan payment is not made when due, interest will continue to accrue. The
defaulted payment plus accrued interest will be deducted from any future
distributions under the Contract and paid to us. Any loan payment which is not
made when due, plus interest, will be treated as a distribution, as permitted
by law. The loan payment may be taxable to the borrower, and may be subject to
the early withdrawal tax penalty. When a loan is made, unless instructed to
the contrary by the Annuitant, the number of Accumulation Units equal to the
loan amount will be withdrawn from the individual account and placed in the
Collateral Fixed Account. Accumulation Units taken from the individual account
to provide a loan do not participate in the investment experience of the
related Portfolios or the guarantees of the General Account Guaranteed
Options. The loan amount will be withdrawn on a pro rata basis first from the
Portfolios to which Accumulated Value has been allocated, and if that amount
is insufficient, collateral will then be transferred from the General Account
Guaranteed Options--except the Guaranteed Equity Option. As with any
withdrawal, Market Value Adjustments or other deductions applicable to amounts
allocated to General Account Guaranteed Options may be applied and no amounts
may be withdrawn from the Guaranteed Equity Option. Until the loan is repaid
in full, that portion of the Collateral Fixed Account shall be credited with
interest at a rate of 2% less than the loan interest rate applicable to the
loan--however, the interest rate credited will never be less than the General
Account Guaranteed Option's guaranteed rate of 3%.

A bill in the amount of the quarterly principal and interest will be mailed
directly to you in advance of the payment due date. The initial quarterly
repayment will be due three months from the loan date. The loan date will be
the date that the Company receives the loan request form in good order.
Payment is due within 30 calendar days after the due date. Subsequent
quarterly installments are based on the first due date.

When repayment of principal is made, Accumulation Units will be reallocated on
a current value basis among the same investment Portfolios and/or General
Account Guaranteed Options and in the same proportion as when the loan was
initially made, unless the Annuitant specifies otherwise. If a repayment in
excess of a billed amount is received, the excess will be applied towards the
principal portion of the outstanding loan. Payments received which are less
than the billed amount will not be accepted and will be returned to you.

If a partial surrender is taken from your individual account due to nonpayment
of a billed quarterly installment, the date of the surrender will be the first
Business Day following the 30 calendar day period in which the repayment was
due.

Prepayment of the entire loan is allowed. At the time of prepayment, the
Company will bill you for any accrued interest. The Company will consider the
loan paid when the loan balance and accrued interest are paid.

If the individual account is surrendered or if the Annuitant dies with an
outstanding loan balance, the outstanding loan balance and accrued interest
will be deducted from the Surrender Value or the Death Benefit, respectively.
If the individual account is surrendered, with an outstanding loan balance,
due to the Contract Owner's death or the election of an Annuity Payment
Option, the outstanding loan balance and accrued interest will be deducted.

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The Company may require that any outstanding loan be paid if the individual
account value falls below an amount equal to 25% of total loans outstanding.

The Code requires the aggregation of all loans made to an individual employee
under a single employer-sponsored 403(b) Plan. However, since the Company has
no information concerning the outstanding loans that you may have with other
companies, if will only use the information available under Contracts issued
by the Company.

GENERAL INFORMATION

ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS

The Company retains the right, subject to any applicable law, to make certain
changes. The Company reserves the right to eliminate the shares of any of the
Portfolios (or Subaccounts) and to substitute shares of another Portfolio of
the Funds (or Subaccount), or of another registered, open-end management
investment company, if the shares of the Portfolios are no longer available
for investment, or, if in the Company's judgment, investment in any Portfolio
would be inappropriate in view of the purposes of the Separate Account. To the
extent required by the 1940 Act, substitutions of shares attributable to a
Contract Owner's interest in a Portfolio will not be made until SEC approval
has been obtained and the Contract Owner has been notified of the change.

New Portfolios (or Subaccounts) may be established at the discretion of the
Company. Any new Portfolios (or Subaccounts) will be made available to
existing Contract Owners on a basis to be determined by the Company. The
Company may also eliminate one or more Portfolios (or Subaccounts) if
marketing, tax, investment or other conditions so warrant.

In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contracts as may be
necessary or appropriate to reflect such substitution or change. Furthermore,
if deemed to be in the best interests of persons having voting rights under
the Contracts, the Separate Account may be operated as a management company
under the 1940 Act or any other form permitted by law, may be deregistered
under the 1940 Act in the event such registration is no longer required, or
may be combined with one or more other separate accounts.

We reserve the right to manage the Separate Account under the direction of a
committee at any time. We also reserve the right to exchange assets of the
Separate Account, which we determine to be associated with the class of
policies to which this Contract belongs to another separate account. If this
type of exchange is made, the term "Separate Account", as used in this
Prospectus, shall mean the separate account to which the assets were
exchanged.

VOTING RIGHTS

The Funds do not hold regular meetings of shareholders. The Directors/Trustees
of each Fund may call special meetings of shareholders as may be required by
the 1940 Act or other applicable law. To the extent required by law, the
Portfolio shares held in the Separate Account will be voted by the Company at
shareholder meetings of each Fund in accordance with instructions received
from persons having voting interests in the corresponding Portfolio. Fund
shares as to which no timely instructions are received or shares held by the
Company as to which Contract Owners have no beneficial interest will be voted
in proportion to the voting instructions that are received with respect to all
Contracts participating in that Portfolio. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.

The number of votes that are available to a Contract Owner will be calculated
separately for each Portfolio. That number will be determined by applying his
or her percentage interest, if any, in a particular Portfolio to the total
number of votes attributable to the Portfolio.

Prior to the Annuity Date, a Contract Owner holds a voting interest in each
Portfolio to which the Accumulated Value is allocated. The number of votes
which are available to a Contract Owner will be determined by dividing the
Accumulated Value attributable to a Portfolio by the net asset value per share
of the applicable Portfolio. After the Annuity Date, the person receiving
Annuity Payments has the voting interest. The number of votes after the
Annuity Date will be determined by dividing the reserve for such Contract
allocated to the Portfolio by the net asset value per share of the
corresponding Portfolio. After the Annuity Date, the votes attributable to a
Contract decrease as the reserves allocated to the Portfolio decrease. In
determining the number of votes, fractional shares will be recognized.

31
<PAGE>

The number of votes of the Portfolio that are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the corresponding
Fund. Voting instructions will be solicited by written communication prior to
such meeting in accordance with procedures established by such Fund.

YEAR 2000 MATTERS

In March 1997, the Company adopted and currently has in place a Year 2000
Assessment and Planning Project (the "Plan") to review and analyze existing
hardware and software systems, as well as voice and data communications
systems, to determine if they are Year 2000 compatible. The Plan provides for
a management process that ensures that when a particular system, or software
application, is determined to be "non-compliant" the proper steps are in place
to either remedy the "non-compliance" or cease using the particular system or
software. The Plan also provides that the Chief Information Officer report to
the Board of Directors as to the status of the efforts under the Plan on a
regular and routine basis. The Company has engaged the services of a third-
party provider that is specialized in Year 2000 issues to work on the project.

The Plan has four specific objectives: (1) to develop an inventory of all
applications; (2) to evaluate all applications in the inventory to determine
the most prudent manner to move them to Year 2000 compliance, if required; (3)
to estimate budgets, resources and schedules for the migration of the
"affected" applications to Year 2000 compliance; and (4) to define testing and
development requirements to successfully manage validation and re-deployment
of any changed code. It is anticipated that all compliance issues will be
resolved by December 1998.

As of the date of this Prospectus, the Company has identified and made
available what it believes are the appropriate resources of hardware, people,
and dollars, including the engagement of outside third parties, to ensure that
the Plan will be completed.

The Year 2000 computer problem, and its resolution, is complex and
multifaceted, and the success of a response plan cannot be conclusively known
until the Year 2000 is reached (or an earlier date to the extent that the
systems or equipment addresses Year 2000 data prior to the Year 2000). Even
with appropriate and diligent pursuit of a well conceived response plan,
including testing procedures, there is no certainty that any company will
achieve complete success. Further, notwithstanding its efforts or results, the
Company's ability to function unaffected to and through the Year 2000 may be
adversely affected by actions (or failures to act) of third parties beyond its
knowledge or control.

AUDITORS

Ernst & Young LLP serves as independent auditors for the Separate Account and
the Company and will audit their financial statements annually.

LEGAL MATTERS

Jorden Burt Boros Cicchetti Berenson & Johnson LLP of Washington, D.C. has
provided legal advice relating to the federal securities laws applicable to
the issue and sale of the Contracts. All matters of Missouri law pertaining to
the validity of the Contract and the Company's right to issue such Contracts
have been passed upon by Gregory E. Miller-Breetz, Esquire, on behalf of the
Company.

32
<PAGE>

TABLE OF CONTENTS FOR THE ADVISOR'S EDGE SELECT VARIABLE ANNUITY

STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CONTRACT.............................................................. 2
Computation of Variable Annuity Income Payments......................... 2
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 3
GENERAL MATTERS........................................................... 3
Non-Participating....................................................... 3
Misstatement of Age or Sex.............................................. 3
Assignment.............................................................. 4
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 4
PERFORMANCE INFORMATION................................................... 5
Federated Prime Money and Money Market Portfolio Yields................. 5
30-Day Yield for Non-Money Market Subaccounts........................... 5
Standardized Average Annual Total Return for Subaccounts................ 5
ADDITIONAL PERFORMANCE MEASURES........................................... 7
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 7
Non-Standardized Total Return Year-to-Date.............................. 8
Non-Standardized One Year Return........................................ 9
Non-Standardized Hypothetical Cumulative Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 9
Individualized Computer Generated Illustrations......................... 10
PERFORMANCE COMPARISONS................................................... 10
SAFEKEEPING OF ACCOUNT ASSETS............................................. 12
THE COMPANY............................................................... 12
STATE REGULATION.......................................................... 12
RECORDS AND REPORTS....................................................... 13
DISTRIBUTION OF THE CONTRACTS............................................. 13
LEGAL PROCEEDINGS......................................................... 13
OTHER INFORMATION......................................................... 13
FINANCIAL STATEMENTS...................................................... 13
Audited Financial Statements............................................ 13
</TABLE>

33
<PAGE>

APPENDIX A

THE GENERAL ACCOUNT

Because of applicable exemptive and exclusionary provisions, interests in the
General Account have not been registered under the Securities Act of 1933
("1933 Act"), nor under the 1940 Act. Thus, neither our General Account, nor
any interest therein are generally subject to regulation under the provisions
of the 1933 Act or the 1940 Act. Accordingly, the Company has been advised
that the staff of the SEC has not reviewed the disclosure in this Appendix
relating to the General Account. These disclosures regarding the General
Account may, however, be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.

Note: The General Account Guaranteed Options, or certain of them, are
currently available for sale in most, but not all, states. Please check with
your sales representative for details of the availability of these features
before purchasing.

The General Account contains all of the assets of the Company other than those
in the separate accounts we establish. The Company has sole discretion to
invest the assets of the General Account, subject to applicable law.
Allocation of any amounts to the General Account does not entitle you to share
directly in the investment experience of these assets.

There are four fixed options under the General Account: the Dollar Cost
Averaging Fixed Account Option, the One-Year Guaranteed Rate Option, the
Multi-Year Guaranteed Rate Option, and the Guaranteed Equity Option, each
described below:

The Dollar Cost Averaging Fixed Account Option

The Dollar Cost Averaging Fixed Account Option may not be available in all
states. Please see your sales representative for details of the availability
of this option before purchasing.

The Dollar Cost Averaging Fixed Account Option has a one-year interest rate
guarantee. The current interest rate the Company credits may vary on different
portions of the Dollar Cost Averaging Fixed Account Option. The credited
interest rate will never be less than the minimum effective annual interest
rate of 3%.

If prior to the Annuity Date you have at least $5,000 in the Dollar Cost
Averaging Fixed Account, you may choose to have a specified dollar amount
transferred from this Account to any Portfolios in the Separate Account on a
monthly basis. The automatic transfer will occur monthly on a first-in, first-
out basis, so that amounts put into the Account first will be transferred out
of the Account first.

The main objective of Dollar Cost Averaging is to shield your investment from
short-term price fluctuations. Since the same dollar amount is transferred to
Portfolios each month, more units are purchased in a Portfolio if the value
per unit is low and fewer units are purchased if the value per unit is high.
Therefore, a lower average cost per unit may be achieved over the long term.
This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in
declining markets.

This Dollar Cost Averaging Option may be elected on the customer order form or
at a later date. The minimum amount that may be transferred each month into
any Portfolio is $250. The maximum amount that may be transferred is equal to
the Accumulated Value in the Dollar Cost Averaging Fixed Account Option when
elected, divided by 12.

If the Company receives a Dollar Cost Averaging Fixed Account Option request
prior to the 28th day of any month, the first transfer from the Dollar Cost
Averaging Fixed Account Option will occur on the 28th day of that month. If
the Company receives a Dollar Cost Averaging Fixed Account Option request on
or after the 28th day of any month, the first transfer will occur on the 28th
day of the following month. The dollar amount will be allocated to the
Portfolios in the proportions you specify (in whole percentages only) on the
appropriate Company form. If, on any transfer date, the

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Accumulated Value is equal to or less than the amount you have elected to have
transferred, the entire amount will be transferred and the option will end.
You may change the transfer amount once each Contract Year. You may change the
choice of Portfolios to which transfers are allocated at any time. The Company
must receive notice of any change on the appropriate Company form or by
telephone at least seven days before the next transfer date. Transfers must be
scheduled for at least six, but not more than twenty-four, months each time
the Dollar Cost Averaging Fixed Account Option is elected.

Prior to the Annuity Date, no Exchanges (except through Dollar Cost Averaging)
will be allowed from the Dollar Cost Averaging Fixed Account. On the Annuity
Date, any funds remaining in the Dollar Cost Averaging Fixed Account will be
applied to the Annuity Payment Option selected.

You may discontinue automatic transfers from the Dollar Cost Averaging Fixed
Account Option after satisfying the minimum number of required transfers by
contacting the Company by phone or by written notice at least seven days
before the next transfer date. If for any reason you terminate automatic
transfers from the Dollar Cost Averaging Fixed Account, any remaining value
attributable to the Dollar Cost Averaging Fixed Account will remain in the
Dollar Cost Averaging Fixed Account and will continue to earn interest until
such time as you either restart automatic transfers or make a full withdrawal
of the funds. If you wish to restart automatic transfers but have less than
$5,000 in the Dollar Cost Averaging Fixed Account, an exception will be made
and automatic transfers will continue until the value in the Dollar Cost
Averaging Fixed Account is depleted. After such a resumption of automatic
transfers, you will not be able to discontinue the automatic transfers until
the value in the Dollar Cost Averaging Fixed Account is depleted.

The Company may defer payment of a partial or full withdrawal from the Dollar
Cost Averaging Fixed Account Option for up to six months from its receipt of
written notice.

One-Year Guaranteed Rate Option

You may allocate your Accumulated Value to this option at any time. Any
allocations you make to the one-year guarantee period must be at least $1,000
and you must maintain a minimum balance of $1,000 in each one-year guarantee
period. The Accumulated Value you allocate under this option earns interest at
a rate declared by the Company at the time your allocation is made with a
guarantee that the Accumulated Value in this General Account Guaranteed Option
will not be less than the amounts allocated, plus 3% annually.

You may allocate any or all of your Accumulated Value from this General
Account Guaranteed Option to any of the Subaccounts or other General Account
Guaranteed Options at any time before the end of the one-year guarantee
period. However, for any amounts so transferred and for full and partial
withdrawals of amounts allocated to this General Account Guaranteed Option
prior to the end of the one-year guarantee period, we will deduct an amount
equal to the interest earned on the amount transferred or withdrawn during the
previous 90 days at the applicable one-year rate, subject to a guarantee that
any amounts allocated to this General Account Guaranteed Option will earn
interest of at least 3% annually.

If you have more than one allocation in this option, you may choose which
allocation or allocations any exchanges or surrenders are to be made from. If
you do not specify which allocation or allocations to take the exchanges or
surrenders from, we will first take from the allocation with the shortest time
remaining until the end of its guarantee period and then from the allocation
or allocations with the next shortest time remaining until the amount of the
exchange or withdrawal is reached.

At the end of the one-year guarantee period, you may, without loss of
interest, elect to transfer all or part of your Accumulated Value under this
option to any of the Subaccounts or transfer to another General Account
Guaranteed Option or renew your participation in this option. Notice of such
an election must be provided to the Company by phone or in writing no later
than 10 days after the end of the one-year guarantee period (and each
subsequent one-year guarantee period). If no such election is made, your
Accumulated Value will automatically be renewed under this option for the next
one-year guarantee period.

Multi-Year Guaranteed Rate Option

You may allocate your Accumulated Value to this option at any time. You may
select any guarantee period then offered. The Company currently expects to
offer guarantee periods of two to ten years, inclusive but reserves the right
to change such offerings in its discretion. Any allocations you make to a
guarantee period must be at least $1,000 and you must maintain a minimum
balance of $1,000 in each guarantee period. The Accumulated Value you allocate
under

A-2
<PAGE>

this option earns interest at a rate declared by the Company applicable to the
guarantee period you select at the time your allocation is made with a
guarantee that the Accumulated Value in this General Account Guaranteed Option
will not be less than the amount initially allocated, plus 3%, compounded
annually.

You may allocate any or all of your Accumulated Value from this General
Account Guaranteed Option to any of the Subaccounts or other General Account
Guaranteed Options at any time before the end of the selected guarantee
period. However, for any amounts so transferred we will apply a Market Value
Adjustment (as described below) against such amounts. For full and partial
withdrawals of amounts allocated to this General Account Guaranteed Option
prior to the end of the selected guarantee period, we will apply a Market
Value Adjustment (as described below) against such amounts withdrawn.

The Market Value Adjustment ("MVA") Factor for the Multi-Year Guaranteed Rate
Option will be as follows:

N X (B--E)
12

where N=the number of months left in the guarantee period at the time of the
transfer or surrender (including any partial months which will count as
full months for purposes of this calculation).

B=the interest rate in effect for the applicable guarantee period which was
declared on the date of the applicable allocation.

E=the constant maturity Treasury rate for the duration equal to that of the
applicable guarantee period (or, if not published, the published constant
maturity rate of the next longest maturity).

The MVA is applied to the Accumulated Value in order to determine the net
amount of the transfer or surrender under this option. Generally, if the
declared interest rate at the beginning of the guarantee period is lower than
the applicable constant maturity Treasury rate prevailing at the time of the
transfer or surrender, then the application of the MVA will result in a lower
payment upon transfer or surrender. Similarly, if the declared rate at the
beginning of the guarantee period is higher than the prevailing applicable
constant maturity Treasury rate at the time of transfer or surrender, then the
application of the MVA will result in a higher payment upon transfer or
surrender.

The following is an example of how your Accumulated Value under the Multi-Year
Guaranteed Rate Option with a five-year guarantee period is affected by a
positive Market Value Adjustment:

Assume an initial allocation of $100,000 when the declared interest rate of a
five-year guarantee period is 8%. At the end of 12 months, your Accumulated
Value is $108,000. Assume also you surrender at the end of one year with 48
months of the guarantee period remaining and the five-year constant maturity
Treasury rate is 7%.

Accumulated Value = $108,000

MVA Factor = 48 X (.08 - .07) = 4 X .01 = .04
12

Adjustment = $108,000 x .04 = $4,320

= $108,000 + $4,320 = $112,320 = Net amount of transfer or
surrender

The following is an example of how your Accumulated Value under the Multi-Year
Guaranteed Rate Option with a five year guarantee period is affected by a
negative Market Value Adjustment:

Assume an initial allocation of $100,000 when the declared interest rate for a
five-year guarantee period is 8%. At the end of 12 months, your Accumulated
Value is $108,000. Assume also you surrender at the end of one year with 48
months remaining in the guarantee period and the five-year constant maturity
Treasury rate is 9%.

Accumulated Value = $108,000

MVA Factor = 48 X (.08 - .09) = 4 X -.01 = -.04
12

Adjustment = $108,000 x -.04 = -$4,320

= $108,000 - $4,320 = $103,680 = Net amount of transfer or
surrender

Notwithstanding application of a negative Market Value Adjustment, any Net
Purchase Payments allocated to this General Account Guaranteed Option will
earn interest of at least 3%, compounded annually.

A-3
<PAGE>

At the end of the selected guarantee period and within a ten-day period
starting on the first day of any automatic renewal (as described below), you
may, without loss of interest, elect to transfer any or all of your
Accumulated Value under this option to any of the Subaccounts or transfer to
another General Account Guaranteed Option or renew your participation in this
option for any guarantee period then available whose ending date is not later
than the Annuity Date at a rate the Company declares at the time of renewal.
Such election may also be provided in writing to the Company before the end of
the guarantee period (and each subsequent guarantee period). If no election is
made, your Accumulated Value will automatically be renewed under this option
for another guarantee period of the same duration as the one just ended at a
rate we declare at the time of the renewal. In cases where such a renewal
would result in a guarantee period whose ending date is later than the Annuity
Date, we will transfer the value of that allocation to the Federated Money
Market Portfolio.

Guaranteed Equity Option

You may allocate your Accumulated Value to this option as of the first
business day of each month. Any allocations you make must be at least $1,000.

On the date you make an allocation to this option the Company will declare:
(a) the duration of the guarantee period applicable to the allocation; (b) the
duration of the Averaging Period and (c) the Participation Rate. (The
Averaging Period and the Participation Rate are described below.) Each
allocation will have its own guarantee period, Averaging Period and
Participation Rate.

During the guarantee period applicable to Accumulated Value allocated to this
option, the Company will credit interest at a guaranteed annual effective rate
of 3%, compounded annually. At the end of the guarantee period we will credit
additional interest in an amount equal to the amount by which (x) exceeds (y),
where (x) equals a declared portion of the percentage change in the S&P 500
Composite Stock Price Index ("S&P 500 Index") from its value on the date
Accumulated Value is allocated to a value determined at the end of the
guarantee period multiplied by the amount allocated (all calculated as
described below); and (y) equals the total amount of interest credited during
the guarantee period.

The amount (x) in the preceding paragraph is equal to the amount allocated to
the applicable guarantee period multiplied by the following factor:

PR x [(EV/SV)-1]

where PR = the Participation Rate;

EV = the average closing values of the S&P 500 Index on the last business
day of each month during the Averaging Period; and

SV = the closing value of the S&P 500 Index on the date Accumulated Value
is allocated to this option.

The "Participation Rate" is the rate at which you participate in the
percentage change of the S&P 500 Index for an allocation as used in the
calculation above. It will be declared by the Company with respect to each
allocation to this option. In no event will the Participation Rate be less
than 0%.

The "Averaging Period" is the number of months prior to the end of an
allocation's guarantee period that we will use to determine the ending value
of the S&P 500 Index for that allocation's guarantee period for purposes of
this option as used in the calculation above. It will be declared by the
Company with respect to each allocation to this option. In no event will the
Averaging Period be less than one.

("S&P" is a trademark of The McGraw-Hill Companies, Inc. and has been licensed
for use by the Company.)

THIS OPTION IS ILLIQUID FOR THE ENTIRE GUARANTEE PERIOD AND, ACCORDINGLY, DOES
NOT PERMIT ANY EXCHANGES OR REALLOCATIONS OF ACCUMULATED VALUE TO THE
SUBACCOUNTS OR OTHER GENERAL ACCOUNT GUARANTEED OPTIONS OR FULL OR PARTIAL
WITHDRAWALS DURING SUCH GUARANTEE PERIOD. However, during such guarantee
period, the Accumulated Value allocated under this option may be annuitized
under any of the Annuity Payment Options.

(The S&P 500 Index is a stock price index. Its composition and calculation
does not include dividends, if any, paid upon component stocks of the index
nor reinvestment, if any, or such dividends.)

At the end of the guarantee period, you may, without loss of earnings, elect
to transfer all or part of your Accumulated Value under this option to any of
the Subaccounts, transfer into another General Account Guaranteed Option or
renew your participation in this option. Such election must be received by the
Company no later than 30 days prior to the end of the guarantee period. If no
election is received, your Accumulated Value will automatically be transferred
to the Federated Prime Money Portfolio. This option may not be available at
all times.

A-4
<PAGE>

DISCLAIMER REGARDING STANDARD & POOR'S 500 INDEX

The Guaranteed Equity Option (the "GEO") is not sponsored, endorsed, sold or
promoted by Standard & Poor's Corporation ("S&P"). S&P makes no representation
or warranty, express or implied, to investors in the GEO or any member of the
public regarding the advisability of investing in securities generally or in
the GEO particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P's only relationship to Providian Life and Health
Insurance Company is the licensing of certain trademarks and trade names of
S&P and the S&P 500 Index which is determined, composed and calculated by S&P
without regard to Providian Life and Health Insurance Company or the GEO. S&P
has no obligation to take the needs of Providian Life and Health Insurance
Company or the Investors in the GEO into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for and has
not participated in the determination of the timing of the issuance or sale of
the GEO or in the determination or calculation of the equation by which the
GEO is to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the GEO.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY, INVESTORS IN THE GEO, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO
EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.

A-5
<PAGE>

PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
SEPARATE ACCOUNT V
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
ADVISOR'S EDGE SELECT VARIABLE ANNUITY
OFFERED BY
PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY
(A MISSOURI STOCK COMPANY)
ADMINISTRATIVE OFFICES
4333 EDGEWOOD ROAD, N.E.
CEDAR RAPIDS, IOWA 52449

This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Advisor's Edge Select variable annuity contract (the
"Contract") offered by Providian Life and Health Insurance Company (the
"Company"). You may obtain a copy of the Prospectus dated August 3, 1998, by
calling 1-800-866-6007 or by writing to our Administrative Offices, 4333
Edgewood Road, N.E., Cedar Rapids, Iowa 52449. Terms used in the current
Prospectus for the Contract are incorporated in this Statement.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.

August 3, 1998

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
THE CONTRACT.............................................................. 2
Computation of Variable Annuity Income Payments......................... 2
Exchanges............................................................... 3
Exceptions to Charges and to Transaction or Balance Requirements........ 3
GENERAL MATTERS........................................................... 3
Non-Participating....................................................... 3
Misstatement of Age or Sex.............................................. 3
Assignment.............................................................. 4
Annuity Data............................................................ 4
Annual Statement........................................................ 4
Incontestability........................................................ 4
Ownership............................................................... 4
PERFORMANCE INFORMATION................................................... 5
Federated Prime Money Yield............................................. 5
30-Day Yield for Non-Money Market Subaccounts........................... 5
Standardized Average Annual Total Return for Subaccounts................ 5
ADDITIONAL PERFORMANCE MEASURES........................................... 7
Non-Standardized Cumulative Total Return and Non-Standardized Average
Annual Total Return.................................................... 7
Non-Standardized Total Return Year-to-Date.............................. 8
Non-Standardized One Year Return........................................ 9
Non-Standardized Hypothetical Cumulative Return and Non-Standardized
Hypothetical Average Annual Total Return............................... 9
Individualized Computer Generated Illustrations......................... 10
PERFORMANCE COMPARISONS................................................... 10
SAFEKEEPING OF ACCOUNT ASSETS............................................. 12
THE COMPANY............................................................... 12
STATE REGULATION.......................................................... 12
RECORDS AND REPORTS....................................................... 13
DISTRIBUTION OF THE CONTRACT.............................................. 13
LEGAL PROCEEDINGS......................................................... 13
OTHER INFORMATION......................................................... 13
FINANCIAL STATEMENTS...................................................... 13
</TABLE>
<PAGE>

THE CONTRACT

In order to supplement the description in the Prospectus and Appendix A thereto,
the following provides additional information about the Contract which may be of
interest to Contract Owners.

COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS

Variable annuity income payments are computed as follows. First, the Accumulated
Value (or the portion of the Accumulated Value used to provide variable
payments) is applied under the Annuity Tables for Payment Options Applied on a
Variable Basis contained in your Contract corresponding to the Annuity Payment
Option elected by the Contract Owner and based on an assumed interest rate of
4%. This will produce a dollar amount which is the first monthly payment. The
Company may, at the time annuity income payments are computed, offer more
favorable rates in lieu of the guaranteed rates specified in the Annuity
Tables.

The amount of each Annuity Payment after the first is determined by means of
Annuity Units. The number of Annuity Units is determined by dividing the first
Annuity Payment by the Annuity Unit Value for the selected Subaccount ten
Business Days prior to the Annuity Date. The number of Annuity Units for the
Subaccount then remains fixed, unless an Exchange of Annuity Units (as set
forth below) is made. After the first Annuity Payment, the dollar amount of
each subsequent Annuity Payment is equal to the number of Annuity Units
multiplied by the Annuity Unit Value for the Subaccount ten Business Days
before the due date of the Annuity Payment.

The Annuity Unit Value for each Subaccount was initially established at $10.00
on the date money was first deposited in that Subaccount. The Annuity Unit
Value for any subsequent Business Day is equal to (a) times (b) times (c),
where

(a) = the Annuity Unit Value for the immediately preceding Business Day;

(b) = the Net Investment Factor for the day;

(c) = the investment result adjustment factor (.99989255 per day), which
recognizes an assumed interest rate of 4% per year used in determining
the Annuity Payment amounts.

The Net Investment Factor is a factor applied to a Subaccount that reflects
daily changes in the value of the Subaccount due to:

(a) = any increase or decrease in the value of the Subaccount due to
investment results;

(b) = a daily charge assessed at an annual rate of 1.35% for the mortality and
expense risks assumed by the Company;

(c) = a daily charge for the cost of administering the Contract corresponding
to an annual charge of .15% of the value of the Subaccount;

(d) = a daily change or credit for any taxes reserved for, which the Company
determines to have resulted from the investment operations of the
Subaccount.

The Annuity Tables for Payment Options Applied on a Variable Basis contained in
the Contracts are based on the 1983 Table "A" Mortality Table projected for
mortality improvement to the year 2000 using Projection Scale G and an interest
rate of 4% a year;

2
<PAGE>

except that in Massachusetts and Montana, the Annuity Tables contained in the
Contract are based on a 60% female/40% male blending of the above for all
annuitants of either gender.

EXCHANGES

After the Annuity Date you may, by making a written request, exchange the
current value of an existing Subaccount to Annuity Units of any other
Subaccount(s) then available. The written request for an Exchange must be
received by us, however, at least 10 Business Days prior to the first payment
date on which the Exchange is to take effect. This Exchange shall result in the
same dollar amount as that of the Annuity Payment on the date of Exchange (the
"Exchange Date"). Each year you may make an unlimited number of free Exchanges
between Subaccounts. The Company reserves the right to impose a $15 fee for
Exchanges in excess of twelve per Contract Year.

Exchanges will be made using the Annuity Unit Value for the Subaccounts on the
date the written request for Exchange is received. On the Exchange Date, the
Company will establish a value for the current Subaccounts by multiplying the
Annuity Unit Value by the number of Annuity Units in the existing Subaccounts
and compute the number of Annuity Units for the new Subaccounts by dividing the
Annuity Unit Value of the new Subaccounts into the value previously calculated
for the existing Subaccounts.

EXCEPTIONS TO CHARGES AND TO TRANSACTION OR BALANCE REQUIREMENTS

The Company may impose reduced administrative charges, risk charges, or other
deductions from Purchase Payments in certain situations where the Company
expects to realize significant economies of scale or other economic benefits
with respect to the sale of Contracts. This is possible because sales costs do
not increase in proportion to the dollar amount of the Contracts sold. For
example, the per-dollar transaction cost for a sale of a Contract equal to
$5,000 is generally much higher than the per-dollar cost for a sale of a
Contract equal to $1,000,000. As a result, the applicable sales charge declines
as a percentage of the dollar amount of Contracts sold as the dollar amount
increases.

The Company may also impose reduced administrative charges and fees on sales to
directors, officers and bona fide full-time employees (and their spouses and
minor children) of the Company, its ultimate parent company, and their
affiliates and certain sales representatives for the Contract. The Company may
also grant waivers or modifications of certain minimum or maximum purchase or
transaction amounts or balance requirements in these circumstances.

Notwithstanding the above, any variations in the administrative charges, risk
charges, or other deductions from Purchase Payments or in the minimum or maximum
transaction or balance requirements shall reflect differences in costs or
services and shall not be unfairly discriminatory against any person.

GENERAL MATTERS

NON-PARTICIPATING

The Contracts are non-participating. No dividends are payable and the Contracts
will not share in the profits or surplus earnings of the Company.

MISSTATEMENT OF AGE OR SEX

The Company may require proof of age and sex before making Annuity Payments. If
the Annuitant's stated age, sex or both in the Contract are incorrect, the
Company will change the annuity benefits payable to those benefits which the
Purchase Payments would have purchased for the correct age and

<PAGE>

sex. In the case of correction of the stated age and/or sex after payments have
commenced, the Company will (1) in the case of underpayment, pay the full amount
due with the next payment; (2) in the case of overpayment, deduct the amount due
from one or more future payments.

ASSIGNMENT

Any Non-Qualified Contract may be assigned by you prior to the Annuity Date and
during the Annuitant's lifetime. The Company is not responsible for the validity
of any assignment. No assignment will be recognized until the Company receives
the appropriate Company form notifying the Company of such assignment. The
interest of any beneficiary which the assignor has the right to change shall be
subordinate to the interest of an assignee. Any amount paid to the assignee
shall be paid in one sum notwithstanding any settlement agreement in effect at
the time assignment was executed. The Company shall not be liable as to any
payment or other settlement made by the Company before receipt of the
appropriate Company form.

ANNUITY DATA

The Company will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to the Company.

ANNUAL STATEMENT

Once each Contract Year, the Company will send you an annual statement of the
current Accumulated Value allocated to each Subaccount and/or the General
Account Guaranteed Options; and any Purchase Payments, charges, Exchanges or
withdrawals during the year. This report will also give you any other
information required by law or regulation. You may ask for an annual statement
like this at any time. We will also send you quarterly statements. However, we
reserve the right to discontinue quarterly statements at any time.

INCONTESTABILITY

This Contract is incontestable from the Contract Date, subject to the
"Misstatement of Age or Sex" provision.

OWNERSHIP

The Contract Owner on the Contract Date is the Annuitant, unless otherwise
specified in the application. The Contract Owner may specify a new Contract
Owner by sending us the appropriate Company form at any time thereafter. The
term Contract Owner also includes any person named as a Joint Owner. A Joint
Owner shares ownership in all respects with the Contract Owner. During the
Annuitant's lifetime, all rights and privileges under this Contract may be
exercised solely by the Contract Owner. Upon the death of the Contract Owner,
ownership is retained by the surviving Joint Owner or passes to the Owner's
Designated Beneficiary, if one has been designated by the Contract Owner. If no
Owner's Designated Beneficiary has been selected or if no Owner's Designated
Beneficiary is living, then the Owner's Designated Beneficiary is the Contract
Owner's estate. From time to time the Company may require proof that the
Contract Owner is still living.

<PAGE>

PERFORMANCE INFORMATION

Performance information for the Subaccounts including the yield and effective
yield of the Federated Prime Money Subaccount, the yield of the remaining
Subaccounts, and the total return of all Subaccounts, may appear in reports or
promotional literature to current or prospective Contract Owners.

Where applicable in calculating performance information, the Annual Contract Fee
is reflected as a percentage equal to the total amount of fees collected during
a calendar year divided by the total average net assets of the Portfolios during
the same calendar year. The fee is assumed to remain the same in each year of
the applicable period. (With respect to partial year periods, if any, in the
examples, the Annual Contract Fee is pro-rated to reflect only the applicable
portion of the partial year period.)

As of the date of this Statement of Additional Information, the Subaccounts had
not commenced operations. Therefore, there was no Subaccount performance
available to calculate.

Where applicable, the following Fund inception dates are used in the calculation
of performance figures: 11/21/94 for Federated Prime Money Portfolio; 2/10/94
for Federated American Leaders Portfolio; 2/10/94 for Federated Utility
Portfolio; 3/28/94 for Federated U.S. Government Securities Portfolio; 2/2/94
for Federated High Income Bond Portfolio; 2/12/96 for Montgomery Growth
Portfolio; 2/5/96 for Montgomery Emerging Markets Portfolio; 5/3/95 for Wanger
U.S. Small Cap Advisor Portfolio; 5/3/95 for Wanger International Small Cap
Advisor Portfolio; 10/31/95 for Strong International Stock Portfolio; 6/30/95
for Warburg Pincus International Equity Portfolio; 6/30/95 for Warburg Pincus
Small Company Growth Portfolio; 10/31/97 for Strong Schafer Value Portfolio;
4/8/91 for T. Rowe Price International Stock Portfolio; 5/4/93 for Dreyfus Small
Cap Value Portfolio; and 5/1/97 for Endeavor Enhanced Index Portfolio.

FEDERATED PRIME MONEY PORTFOLIO SUBACCOUNT YIELDS

Current yield for the Federated Prime Money Subaccount will be based on the
change in the value of a hypothetical investment (exclusive of capital changes)
over a particular 7-day period, less a pro-rata share of Subaccount expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.

Calculation of "effective yield" begins with the same "base period return" used
in the calculation of yield, which is then annualized to reflect weekly
compounding pursuant to the following formula:

Effective Yield = [((Base Period Return)+1)/365/7/] - 1

30-DAY YIELD FOR NON-MONEY MARKET SUBACCOUNTS

Quotations of yield for the remaining Subaccounts will be based on all
investment income per Unit earned during a particular 30-day period, less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of a Unit on the last
day of the period, according to the following formula:

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

Where:

[a] equals the net investment income earned during the period by the
Portfolio attributable to shares owned by a Subaccount

[b] equals the expenses accrued for the period (net of reimbursement)

[c] equals the average daily number of Units outstanding during the period

[d] equals the maximum offering price per Accumulation Unit on the last
day of the period

Yield on the Subaccount is earned from the increase in net asset value of
shares of the Portfolio in which the Subaccount invests and from dividends
declared and paid by the Portfolio, which are automatically reinvested in
shares of the Portfolio.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR SUBACCOUNTS

When advertising performance of the Subaccounts, the Company will show the
"Standardized Average Annual Total Return," calculated as prescribed by the
rules of the SEC, for each Subaccount. The Standardized Average Annual Total
Return is the effective annual compounded rate of return that would have
produced the cash redemption value over the stated period had the performance
remained constant throughout. The calculation assumes a single $1,000 payment
made at the beginning of the period and full redemption at the end of the
period. It reflects the deduction of all applicable sales loads

5
<PAGE>

(including the contingent deferred sales load), the Annual Contract Fee and all
other Portfolio, Separate Account and Contract level charges except Premium
Taxes, if any.

Quotations of average annual total return for any Subaccount will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in a Contract over a period of one, five and ten years (or, if less,
up to the life of the Subaccount), calculated pursuant to the formula:

P(1 + T)/n/ = ERV

Where:
(1) [P] equals a hypothetical initial Purchase Payment of $1,000

(2) [T] equals an average annual total return

(3) [n] equals the number of years

(4) [ERV] equals the ending redeemable value of a hypothetical $1,000
Purchase Payment made at the beginning of the period (or fractional
portion thereof)

The following table shows the Standardized Average Annual Total Return for the
Subaccounts for the period beginning at the inception of each Subaccount and
ending on December 31, 1997.

STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 12/31/97

<TABLE>
<CAPTION>
Subaccount One Year Since Subaccount Inception*
---------- -------- ---------------------------
<S> <C> <C>
Federated Prime Money N/A N/A
Federated American Leaders N/A N/A
Federated US Govt Securities N/A N/A
Federated Utility N/A N/A
Federated High Income Bond N/A N/A
Wanger Intl Smll Cap N/A N/A
Wanger US Smll Cap N/A N/A
Montgomery Emerg Mkt N/A N/A
Montgomery Growth N/A N/A
Strong Internatl Stk N/A N/A
Warburg Pincus Intl Equity N/A N/A
Warburg Pincus Smll Co Growth N/A N/A
Dreyfus Small Cap Value N/A N/A
Endeavor Enchanced Index N/A N/A
Strong Schafer Value N/A N/A
T. Rowe Price Int'l N/A N/A
</TABLE>

* As of 12/31/97, the Subaccount had not commenced operations.

6
<PAGE>

ADDITIONAL PERFORMANCE MEASURES
- -------------------------------

NON-STANDARDIZED CUMULATIVE TOTAL RETURN AND NON-STANDARDIZED AVERAGE ANNUAL
TOTAL RETURN

The Company may show Non-Standardized Cumulative Total Return (i.e., the
percentage change in the value of an Accumulation Unit) for one or more
Subaccounts with respect to one or more periods. The Company may also show Non-
Standardized Average Annual Total Return (i.e., the average annual change in
Accumulation Unit Value) with respect to one or more periods. For one year, the
Non-Standardized Cumulative Total Return and the Non-Standardized Average Annual
Total Return are effective annual rates of return and are equal. For periods
greater than one year, the Non-Standardized Average Annual Total Return is the
effective annual compounded rate of return for the periods stated. Because the
value of an Accumulation Unit reflects the Separate Account and Portfolio
expenses (See Fee Table in the Prospectus), the Non-Standardized Cumulative
Total Return and Non-Standardized Average Annual Total Return also reflect these
expenses. However, these percentages do not reflect the Annual Contract Fee, any
sales loads or Premium Taxes (if any), which if included would reduce the
percentages reported by the Company.

NON-STANDARDIZED CUMULATIVE TOTAL RETURN FOR PERIOD ENDING 12/31/97

<TABLE>
<CAPTION>
Since Subaccount
Subaccount One Year Inception*
---------- -------- ----------------
<S> <C> <C>
Federated Prime Money N/A N/A
Federated American Leaders N/A N/A
Federated US Govt Security N/A N/A
Federated Utility N/A N/A
Federated High Income Bond N/A N/A
Wanger Intl Smll Cap N/A N/A
Wanger US Smll Cap N/A N/A
Montgomery Emerg Mkt N/A N/A
Montgomery Growth N/A N/A
Strong Internatl Stock N/A N/A
Warburg Pincus Intl Equity N/A N/A
Warburg Pincus Smll Co Growth N/A N/A
Dreyfus Small Cap Value N/A N/A
Endeavor Enhanced Index N/A N/A
Strong Schafer Value N/A N/A
T. Rowe Price Int'l N/A N/A
</TABLE>

* As of 12/31/97, the Subaccount had not commenced operations.

7
<PAGE>

NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDING 12/31/97

<TABLE>
<CAPTION>
Subaccount One Year Since Subaccount Inception*
---------- -------- ---------------------------
<S> <C> <C>
Federated Prime Money N/A N/A
Federated American Leaders N/A N/A
Federated US Govt Securities N/A N/A
Federated Utility N/A N/A
Federated High Income Bond N/A N/A
Wanger Intl Smll Cap N/A N/A
Wanger US Smll Cap N/A N/A
Montgomery Emerg Mkt N/A N/A
Montgomery Growth N/A N/A
Strong Internatl Stock N/A N/A
Warburg Pincus Intl Equity N/A N/A
Warburg Pincus Smll Co Growth N/A N/A
Dreyfus Small Cap Value N/A N/A
Endeavor Enhanced Index N/A N/A
Strong Schafer Value N/A N/A
T. Rowe Price Int'l N/A N/A
</TABLE>

* As of 12/31/97, the Subaccount had not commenced operations.

NON-STANDARDIZED TOTAL RETURN YEAR-TO-DATE

The Company may show Non-Standardized Total Return Year-to-Date as of a
particular date, or simply Total Return YTD, for one or more Subaccounts with
respect to one or more non-standardized base periods commencing at the beginning
of a calendar year. Total Return YTD figures reflect the percentage change in
actual Accumulation Unit Values during the relevant period. These percentages
reflect a deduction for the Separate Account and Portfolio expenses, but do not
include the Annual Contract Fee, any sales loads or Premium Taxes (if any),
which if included would reduce the percentages reported by the Company.

<TABLE>
<CAPTION>
Total Return
Subaccount as of 12/31/97*
---------- --------------
<S> <C>
Federated Prime Money N/A
Federated American Leaders N/A
Federated US Govt Securities N/A
Federated Utility N/A
Federated High Income Bond N/A
Wanger Intl Smll Cap N/A
Wanger US Smll Cap N/A
Montgomery Emerg Mkt N/A
Montgomery Growth N/A
Stein Roe Special Venture N/A
Strong Internatl Stock N/A
Warburg Pincus Intl Equity N/A
Warburg Pincus Smll Co Growth N/A
Dreyfus Small Cap Value N/A
Endeavor Enhanced Index N/A
Strong Schafer Value N/A
T. Rowe Price Int'l N/A
</TABLE>

* As of 12/31/97, the Subaccounts had not commenced operations.

8
<PAGE>

NON-STANDARDIZED ONE YEAR RETURN

The Company may show Non-Standardized One Year Return for one or more
Subaccounts with respect to one or more non-standardized base periods commencing
at the beginning of a calendar year (or date of Portfolio inception, if during
the relevant year) and ending at the end of such calendar year. One Year Return
figures reflect the historical performance of the Portfolios as if the Contract
were in existence before its inception date (which it was not). After the
Contract's inception date, the figures reflect the percentage change in actual
accumulation Unit Values during the relevant period. These percentages reflect a
deduction for the Separate Account and Portfolio expenses but do not include the
Annual Contract Fee, any sales loads or Premium Taxes (if any), which if
included would reduce the percentages reported by the Company.

<TABLE>
<CAPTION>
Subaccount 1997 1996 1995
- ---------- ---- ---- ----
<S> <C> <C> <C>
Federated Prime Money 3.37% 3.20% 3.64%
Federated American Leaders 30.39% 19.77% 31.75%
Federated US Govt Securities 6.97% 2.25% 7.29%
Federated Utility 24.77% 9.91% 22.36%
Federated High Income Bond 12.14% 12.63% 18.62%
Wanger Int'l Small Cap -5.16% 29.75% N/A
Wanger U.S. Small Cap 24.59% 44.18% N/A
Montgomery Emerging Markets -2.06% N/A N/A
Montgomery Growth 26.68% N/A N/A
Strong Int'l Stock -14.97% 8.76% N/A
Warburg Pincus Int'l Equity -4.06% 8.31% N/A
Warburg Pincus Small Co. Growth 13.96% 12.24% N/A
Dreyfus Small Cap Value 23.62% 23.84% 12.37%
Endeavor Enhanced Value N/A N/A N/A
Strong Schafer Value N/A N/A N/A
T. Rowe Price Int'l 1.10% 13.52% 8.93%
</TABLE>

NON-STANDARDIZED HYPOTHETICAL CUMULATIVE RETURN AND NON-STANDARDIZED
HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURN

The Company may show Non-Standardized Hypothetical Cumulative Return and Non-
Standardized Hypothetical Average Annual Total Return, calculated on the basis
of the historical performance of the Portfolios (calculated beginning from the
end of the year of inception for each Portfolio) and may assume the Contract
was in existence prior to its inception date (which it was not). After the
Contract's inception date, the calculations will reflect actual Accumulation
Unit Values. These returns are based on specified premium patterns which produce
the resulting Accumulated Values are used for the calculations. However, they
reflect a deduction for the Separate Account expenses and Portfolio expenses.
They do not include the Annual Contract Fee, any sales loads or Premium Taxes
(if any), which if included would reduce the percentages reported.

The Non-Standardized Hypothetical Cumulative Return for a Subaccount is the
effective annual rate of return that would have produced the ending Accumulated
Value of the stated one-year period.

9
<PAGE>

The Non-Standardized Hypothetical Average Annual Total Return for a Subaccount
is the effective annual compounded rate of return that would have produced the
ending Accumulated Value over the stated period had the performance remained
constant throughout.

HYPOTHETICAL CUMULATIVE RETURNS FOR PERIODS ENDING 12/31/97
(BASED ON SINGLE INITIAL PURCHASE)

<TABLE>
<CAPTION>
Total
Since Subaccount
Subaccount One-Year Three-Year Inception Year-End
---------- ------- --------- ------------------
<S> <C> <C> <C>
Federated Prime Money 3.37% 10.56% 10.90%
Federated American Leaders 30.39% 105.76% 99.16%
Federated U.S. Gov't Securities 6.97% 17.35% 19.42%
Federated Utility 24.77% 67.81% 60.10%
Federated High Income Bond 12.14% 49.82% 41.30%
Wanger Int'l Small Cap -5.16% N/A 63.93%
Wanger U.S. Small Cap 24.59% N/A 106.35%
Montgomery Emerging Markets -2.06% N/A 31.19%
Montgomery Growth 26.68% N/A 59.07%
Strong Int'l Stock -14.97% N/A -6.18%
Warburg Pincus Int'l Equity -4.06% N/A 10.66%
Warburg Pincus Small Co. Growth 13.96% N/A 58.87%
Dreyfus Small Cap Value 23.62% 72.03% 84.27%
Endeavor Enhanced Index N/A N/A 21.69%
Strong Schafer Value N/A N/A 0.48%
T. Rowe Price Int'l 1.10% 25.01% 33.75%
</TABLE>

HYPOTHETICAL AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/97
(BASED ON SINGLE INITIAL PURCHASE)

<TABLE>
<CAPTION>
Total
Since Subaccount
Subaccount One-Year Three-Year Inception Year-End
---------- ------- --------- ------------------
<S> <C> <C> <C>
Federated Prime Money 3.37% 3.40% 3.38%
Federated American Leaders 30.39% 27.19% 19.39%
Federated U.S. Gov't Securities 6.97% 5.48% 4.83%
Federated Utility 24.77% 18.83% 12.87%
Federated High Income Bond 12.14% 14.43% 9.24%
Wanger Int'l Small Cap -5.16% N/A 20.39%
Wanger U.S. Small Cap 24.59% N/A 31.25%
Montgomery Emerging Markets -2.06% N/A 1.66%
Montgomery Growth 26.68% N/A 27.94%
Strong Int'l Stock -14.97% N/A -2.90%
Warburg Pincus Int'l Equity -4.06% N/A 4.13%
Warburg Pincus Small Co. Growth 13.96% N/A 20.30%
Dreyfus Small Cap Value 23.62% 19.82% 14.02%
Endeavor Enhanced Index N/A N/A 21.69%
Strong Schafer Value N/A N/A 0.48%
T. Rowe Price Int'l 1.10% 7.72% 4.41%
</TABLE>

Note: Advertisements and other sales literature for the Portfolios may quote
total returns that are calculated on non-standardized base periods. These total
returns also represent historical change in the value of an investment in the
Portfolios based on monthly reinvestment of dividends over a specific period of
time.

FEDERATED PRIME MONEY PORTFOLIO FEDERATED PRIME MONEY PORTFOLIO