NATIONAL VARIABLE ANNUITY ACCOUNT II, 497, 2000-12-01

NATIONAL VARIABLE ANNUITY ACCOUNT II
497, 2000-12-01

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<PAGE> 1
Sentinel Advantage Variable Annuity
P R O S P E C T U S
Dated May 1, 2000, as amended December 1, 2000

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National Life Insurance Company - Home Office:
National Life Drive, Montpelier, Vermont 05604 - 1-800-537-7003
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The Sentinel Advantage Contracts described in this prospectus are
individual flexible premium variable annuity contracts supported by National
Variable Annuity Account II (the "Variable Account"), a separate account of
National Life Insurance Company ("National Life, "we, "our, or "us"). We
allocate net Premium Payments to either the Fixed Account or to the Variable
Account. The Variable Account is currently divided into 28 Subaccounts. Each
Subaccount invests in shares of a corresponding underlying Fund option (each a
"Fund") described below:

<TABLE>
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<S> <C> <C>
SENTINEL VARIABLE PRODUCTS ALGER AMERICAN FUND AMERICAN CENTURY VARIABLE DREYFUS SOCIALLY
TRUST PORTFOLIOS, INC. RESPONSIBLE GROWTH FUND,
INC.
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COMMON STOCK FUND GROWTH PORTFOLIO VP INCOME & GROWTH PORTFOLIO SOCIALLY RESPONSIBLE GROWTH
MID CAP GROWTH FUND LEVERAGED ALLCAP PORTFOLIO VP VALUE PORTFOLIO FUND, INC.
SMALL COMPANY FUND SMALL CAPITALIZATION PORTFOLIO
GROWTH INDEX FUND .
MONEY MARKET FUND

Managed by National Life Managed by Fred Alger Managed by American Century
Investment Management Company, Inc. Management, Inc Investment Management, Inc. Managed by The Dreyfus
Corporation
-----------------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE FIDELITY VARIABLE INSURANCE INVESCO VARIABLE
PRODUCTS FUND PRODUCTS FUND II INSURANCE FUNDS, INC. J.P. MORGAN SERIES TRUST II
-----------------------------------------------------------------------------------------------------------------------------------
EQUITY-INCOME PORTFOLIO CONTRAFUND PORTFOLIO VIF - DYNAMICS FUND INTERNATIONAL OPPORTUNITIES
GROWTH PORTFOLIO INDEX 500 PORTFOLIO VIF - HEALTH SCIENCES FUND PORTFOLIO
HIGH INCOME PORTFOLIO INVESTMENT GRADE BOND PORTFOLIO VIF TECHNOLOGY FUND SMALL COMPANY PORTFOLIO
OVERSEAS PORTFOLIO

Managed by INVESCO Funds Managed by J.P. Morgan
Managed by Fidelity Investments Managed by Fidelity Investments Group, Inc. Investment Management, Inc.
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MARKET STREET FUND, INC. NEUBERGER BERMAN ADVISERS STRONG VARIABLE INSURANCE STRONG OPPORTUNITY FUND II.
MANAGEMENT TRUST FUNDS, INC.
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BOND PORTFOLIO PARTNERS PORTFOLIO MID CAP GROWTH FUND II OPPORTUNITY FUND II
MANAGED PORTFOLIO

Managed by Sentinel Advisors Managed by Neuberger Berman Managed by Strong Capital Managed by Strong Capital
Company Management, Inc. Management, Inc. Management, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

This Prospectus provides you with the basic information you should
know before investing. You should read it and keep it for future reference. A
Statement of Additional Information dated May 1, 2000 containing further
information about the Contracts and the Variable Account is filed with the
Securities and Exchange Commission. You can obtain a copy without charge from
National Life Insurance Company by calling 1-800-537-7003, or writing to
National Life at the address above. You may also obtain prospectuses for each
of the underlying Fund options identified above without charge by calling or
writing to the same telephone number or address. This Prospectus must be
accompanied by current prospectuses or profiles for the Funds.

Investments in these contracts are not deposits or obligations of,
and are not guaranteed or endorsed by, the adviser of any of the underlying
funds identified above, the U.S. government, or any bank or bank affiliate.
Investments are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other governmental agency. It
may not be a good decision to purchase a Contract as a replacement for another
type of variable annuity if you already own another flexible premium deferred
variable annuity.

The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the accuracy or adequacy of the
Prospectus. Any representation to the contrary is a criminal offense.

The Statement of Additional Information, dated May 1, 2000, is
incorporated herein by reference. The Table of Contents for the Statement of
Additional Information appears on page 53 of the Prospectus.

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
SUMMARY.........................................................................1
SUMMARY OF CONTRACT EXPENSES....................................................4
UNDERLYING FUND ANNUAL EXPENSES.................................................5
ACCUMULATION UNIT VALUES........................................................8
NATIONAL LIFE INSURANCE COMPANY, THE VARIABLE ACCOUNT, AND
THE FUNDS..................................................................9
National Life Insurance Company........................................9
The Variable Account...................................................9
Underlying Fund Options................................................9
Other Information......................................................16
DETAILED DESCRIPTION OF CONTRACT PROVISIONS.......................................17
Issuance of a Contract.................................................17
Premium Payments.......................................................17
The Initial Premium Payment...................................17
Subsequent Premium Payments...................................17
Allocation of Net Premium Payments............................18
Transfers..............................................................18
Value of a Variable Account Accumulation Unit..........................19
Net Investment Factor.........................................19
Determining the Contract Value.........................................20
Annuitization..........................................................20
Maturity Date.................................................20
Election of Payment Options...................................20
Frequency and Amount of Annuity Payments......................20
Annuitization - Variable Account.......................................21
Value of an Annuity Unit......................................21
Assumed Investment Rate.......................................21
Annuitization - Fixed Account..........................................21
Annuity Payment Options................................................22
Death of Owner.........................................................22
Death of Annuitant Prior to the Annuitization Date.....................23
Generation-Skipping Transfers..........................................23
Ownership Provisions...................................................23
CHARGES AND DEDUCTIONS............................................................24
Deductions from the Variable Account...................................25
Contingent Deferred Sales Charge.......................................25
Annual Contract Fee....................................................26
Transfer Charge........................................................26
Premium Taxes..........................................................27
Charge for Optional Enhanced Death Benefit Rider.......................27
Other Charges..........................................................27
CONTRACT RIGHTS AND PRIVILEGES....................................................27
Free Look..............................................................27
Loan Privilege -Tax Sheltered Annuities................................28
Surrender and Withdrawal...............................................30
Payments...............................................................31
Surrenders and Withdrawals Under a Tax-Sheltered Annuity Contract......31
Telephone Transaction Privilege........................................32
Available Automated Fund Management Features...........................32
Dollar Cost Averaging.......................................32
Portfolio Rebalancing.......................................32
Systematic Withdrawals......................................33
Contract Rights Under Certain Plans....................................34
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
Page
<S> <C>
THE FIXED ACCOUNT.................................................................34
Minimum Guaranteed and Current Interest Rates..........................34
Enhanced Fixed Account.................................................35
OPTIONAL ENHANCED DEATH BENEFIT RIDER.............................................36
FEDERAL INCOME TAX CONSIDERATIONS.................................................37
Taxation of Non-Qualified Contracts....................................37
Taxation of Qualified Contracts........................................38
Possible Tax Law Changes...............................................40
GENDER NEUTRALITY.................................................................40
VOTING RIGHTS.....................................................................40
CHANGES TO VARIABLE ACCOUNT.......................................................41
ADVERTISING.......................................................................41
Yield..................................................................41
Performance............................................................41
DISTRIBUTION OF THE CONTRACTS.....................................................48
INSURANCE MARKETPLACE STANDARDS ASSOCIATION.......................................49
FINANCIAL STATEMENTS..............................................................49
STATEMENTS AND REPORTS............................................................49
OWNER INQUIRIES...................................................................49
LEGAL PROCEEDINGS.................................................................49
GLOSSARY..........................................................................50
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION..........................53
</TABLE>

<PAGE> 4

SUMMARY

This summary provides a brief description of some of the features and
charges of the Contract. You will find more detailed information in the rest
of this Prospectus, the Statement of Additional Information and the Contract.
Please keep the Contract and its riders or endorsements, if any, together with
the application. Together they are the entire agreement between you and us.

HOW DO I PURCHASE A CONTRACT?

Generally, you may purchase a Contract if you are age 85 and younger.
See "Issuance of a Contract," page 17. The initial Premium Payment must be at
least $5,000 for Non-Qualified Contracts, and at least $1500 for Qualified
Contracts. We may at our discretion permit initial Premium Payments lower than
these minimums.

CAN I MAKE ADDITIONAL PREMIUM PAYMENTS?

You may make additional Premium Payments at any time (except for
Contracts purchased in Oregon and Massachusetts- see page 18 but must be at
least $100 ($50 for IRA's). We may accept lower Premium Payments at our
discretion if the Premium Payments are remitted electronically. The total of
all Premium Payments under Contracts issued on the life of any one Owner (or
Annuitant if the owner is not a natural person) may not exceed $1,000,000
without our prior consent (see "Premium Payments," page 17).

HOW DOES THE "FREE LOOK" RIGHT TO EXAMINE THE CONTRACT WORK?

To be sure that you are satisfied with the Contract, you have a ten
day free look right to examine the Contract. Some states may require a longer
period. Within ten days of the day you receive the Contract, you may return
the Contract to our Home Office at the address shown on the cover page of this
Prospectus. When we receive the Contract, we will void the Contract and refund
the Contract Value plus any charges assessed when the Contract was issued,
unless otherwise required by state and/or federal law. In the case of IRA's
and Contracts issued in states that require the return of Premium Payments,
you may revoke the Contract during the free look period and we will refund
Premium Payments.

WHAT IS THE PURPOSE OF THE VARIABLE ACCOUNT?

The Variable Account is a separate investment account that consists
of 28 Subaccounts. Amounts in the Variable Account will vary according to the
investment performance of the Fund(s) in which your elected Subaccounts are
invested. You may allocate Net Premium Payments among the Fixed Account and
the 28 Subaccounts of the Variable Account. The assets of each Subaccount are
invested in the corresponding portfolios of the Funds that are listed on the
cover page of this Prospectus (see "The Variable Account" and "Underlying Fund
Options," pages 9-16).

We cannot give any assurance that any Subaccount will achieve its
investment objectives. You bear the entire investment risk on the value of
your Contract which you allocate to the Variable Account. The value your
Contract may be more or less than the premiums paid.

HOW DOES THE FIXED ACCOUNT WORK?

You may allocate all or part of your Net Premium Payments or make
transfers from the Variable Account to the Fixed Account. Contract Value held
in the Fixed Account will earn an effective annual interest rate of at least
3.0% (see "The Fixed Account", page 34).

<PAGE> 5

WHEN WILL I RECEIVE PAYMENTS?

After the Contract Value is transferred to a payment option, we will
pay proceeds according to the Annuity Payment Option you select. If the
Contract Value at the Annuitization Date is less than $3,500, the Contract
Value may be distributed in one lump sum instead of annuity payments. If any
annuity payment would be less than $100, we have the right to change the
frequency of payments to intervals that will result in payments of at least
$100. In no event will annuity payments be less frequent than annually (see
"Annuitization - Frequency and Amount of Annuity Payments," page 20).

WHAT HAPPENS IF THE OWNER DIES BEFORE ANNUITIZATION?

If (1) any Owner dies before the Contract Value is transferred to a
payment option ("Annuitization"); (2) the Enhanced Death Benefit Rider is not
elected; and (3) the Owner has not reached age 81, we will pay the Beneficiary
the greater of (a) the Contract Value, or (b) the Net Premium Payments made to
the Contract (less all withdrawals, and less all outstanding loans and accrued
interest). The amount paid will be reduced by premium tax charges, if any. For
more information, see "Death of Owner," page 21.

WHAT HAPPENS IF THE ANNUITANT DIES BEFORE ANNUITIZATION?

If the Annuitant (who is not an Owner) dies before the Contract Value
is transferred to a payment option, we will pay the Beneficiary a Death
Benefit equal to the Cash Surrender Value, unless the Owner selects another
available option (see "Death of Annuitant Prior to the Annuitization Date,"
page 22).

CAN I MAKE A WITHDRAWAL FROM MY CONTRACT?

You may withdraw part or all of the Cash Surrender Value at any time
before the Contract is Annuitized (see "Surrender and Withdrawal," page 30). A
Withdrawal or a surrender may result in federal income tax, including a
federal penalty tax (see "Federal Income Tax Considerations," page 37).

WHAT CHARGES WILL I PAY?

Contingent Deferred Sales Charge: We do not deduct a sales charge
from Premium Payments. However, if you surrender the Contract or make a
Withdrawal, we will generally deduct from the Contract Value a Contingent
Deferred Sales Charge not to exceed 7% of the lesser of the total of all Net
Premium Payments made within 84 months prior to the date of the request to
surrender or the amount surrendered (see "Contingent Deferred Sales Charge,"
page 25).

Annual Contract Fee: We deduct an Annual Contract Fee of $30.00
payable on each Contract Anniversary as long as the Contract Value is less
than $50,000 (see "Annual Contract Fee," page 26).

Administration Charge: We also deduct an Administration Charge each
day at an annual rate of 0.15% from the assets of the Variable Account (see
"Deductions from the Variable Account," page 25).

Mortality and Expense Risk Charge: We deduct a mortality and expense
risk charge each day from the assets of the Variable Account at an annual rate
of 1.25% (see "Deductions from the Variable Account," page 25).

Charge for Optional Enhanced Death Benefit Rider: If elected, we
deduct an annual charge of 0.20% of the Contract Value for this option (see
"Charge for Optional Enhanced Death Benefit Rider," page 27).

Premium Taxes: If a governmental entity imposes premium taxes, we
will make a deduction for premium taxes in a corresponding amount. Certain
states impose a premium tax. Premium taxes

<PAGE> 6

may range up to 3.5% (see "Premium Taxes," page 27).

Investment Management Fees: Charges for investment management
services and operating expenses are deducted daily from each portfolio of each
Fund (see "Underlying Fund Annual Expenses," page 5, and the accompanying Fund
prospectuses).

ARE THERE ANY OTHER CONTRACT PROVISIONS?

For information concerning other important Contract provisions, see
"Contract Rights and Privileges," page 27, and the remainder of this
Prospectus.

HOW WILL THE CONTRACT BE TAXED?

For a brief discussion of our current understanding of the federal
tax laws concerning us and the Contract, see "Federal Income Tax
Considerations," page 37.

WHAT IF I HAVE QUESTIONS?

We will be happy to answer your questions about the Contract or our
procedures. Call or write to us at the phone number or address on the cover
page. All inquiries should include the Contract number and the names of the
Owner and the Annuitant.

If you have questions concerning your investment strategies, please
contact your registered representative.

<PAGE> 7

SUMMARY OF CONTRACT EXPENSES

TRANSACTION EXPENSES

<TABLE>
<S> <C>
Sales Load Imposed on Purchases.........................................................................None
Premium Taxes ......................................................................................See below(1)
Contingent Deferred Sales Charge (as a percentage of Net Premium Payments surrendered or withdrawn)(2)
Number of Completed Years from Date of Premium Payment
0............................................................................7%
1............................................................................6%
2............................................................................5%
3............................................................................4%
4............................................................................3%
5............................................................................2%
6............................................................................1%
7............................................................................0%
</TABLE>

VARIABLE ACCOUNT ANNUAL EXPENSES (DEDUCTED DAILY AS A PERCENTAGE OF VARIABLE
ACCOUNT CONTRACT VALUE)

<TABLE>
<S> <C>
Mortality and Expense Risk Charge.......................................................................1.25%
Administration Charge...................................................................................0.15%
-----
Total Basic Variable Account Annual Percentage Expenses.................................................1.40%

ANNUAL CONTRACT FEE(3).................................................................................. $30

CHARGE FOR OPTIONAL ENHANCED DEATH BENEFIT RIDER(4).....................................................0.20%
</TABLE>

(1) States may assess premium taxes on premiums paid under the Contract.
Where National Life is required to pay this premium tax when a Premium
Payment is made, it may deduct an amount equal to the amount of premium
tax paid from the Premium Payment. National Life currently intends to
make this deduction from Premium Payments only in South Dakota. In the
remaining states which assess premium taxes, a deduction will be made
only upon Annuitization, death of the Owner, or surrender. See "Premium
Taxes", page 27.

(2) Each Contract Year, the Owner may withdraw without a Contingent Deferred
Sales Charge (CDSC) an amount equal to 15% of the Contract Value as of
the most recent Contract Anniversary. In addition, any amount withdrawn
in order for the Contract to meet minimum Distribution requirements under
the Code shall be free of CDSC. Withdrawals may be restricted for
Contracts issued pursuant to the terms of a Tax-Sheltered Annuity. This
CDSC-free Withdrawal privilege does not apply in the case of full
surrenders and is non-cumulative; that is, free amounts not taken during
any given Contract Year cannot be taken as free amounts in a subsequent
Contract Year; in addition, New Jersey and Washington do not permit this
CDSC-free Withdrawal provision, in which case a different CDSC-free
Withdrawal provision will apply (see "Contingent Deferred Sales Charge",
page 25).

(3) The Annual Contract Fee is assessed only upon Contracts which as of the
or applicable Contract Anniversary, have a Contract Value of less than
$50,000 and is not assessed on Contract Anniversaries after the
Annuitization Date.

(4) This charge, which applies to the Contract Value, is assessed only if the
Owner has elected the Enhanced Death Benefit Rider. See "Optional
Enhanced Death Benefit Rider", page 36.

<PAGE> 8

UNDERLYING FUND ANNUAL EXPENSES(5) (AS A PERCENTAGE OF UNDERLYING
FUND AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
Management Other Total Mutual
Fees, Expenses, Fund Expenses,
after expense after expense after expense
reimbursement reimbursement reimbursement
<S> <C> <C> <C>
Sentinel Variable Products Trust
Common Stock Fund 0.00% 0.48% 0.48%
Mid Cap Growth Fund 0.19% 0.52% 0.71%
Small Company Fund 0.05% 0.52% 0.57%
Growth Index Fund 0.04% 0.56% 0.60%
Money Market Fund 0.00% 0.40% 0.40%

Alger American Fund:
Alger American Growth Portfolio 0.75% 0.04% 0.79%
Alger American Leveraged AllCap Portfolio 0.85% 0.08% 0.93%
Alger American Small Capitalization 0.85% 0.05% 0.90%

American Century Variable Portfolios, Inc.
VP Value Portfolio 1.00% 0.00% 1.00%
VP Income & Growth Portfolio 0.70% 0.00% 0.70%

Dreyfus Socially Responsible Growth Fund, Inc.
Socially Responsible Growth Fund, Inc. 0.75% 0.04% 0.79%

Fidelity: Variable Insurance Products Fund I
Equity Income Portfolio 0.48% 0.08% 0.56%
Growth Portfolio 0.58% 0.07% 0.65%
High Income Portfolio 0.58% 0.11% 0.69%
Overseas Portfolio 0.73% 0.14% 0.87%

Fidelity: Variable Insurance Products Fund II
Contrafund Portfolio 0.58% 0.07% 0.65%
Index 500 Portfolio 0.24% 0.04% 0.28%
Investment Grade Bond Portfolio 0.43% 0.11% 0.54%

INVESCO Variable Insurance Funds, Inc.
VIF Dynamics Fund 0.75% 0.51% 1.26%
VIF Health Sciences Fund 0.75% 0.73% 1.48%
VIF Technology Fund 0.75% 0.56% 1.31%

J.P. Morgan Series Trust II
International Opportunities Portfolio 0.60% 0.60% 1.20%
Small Company Portfolio 0.60% 0.55% 1.15%

Market Street Fund, Inc.:
Bond Portfolio 0.35% 0.17% 0.52%
Managed Portfolio 0.40% 0.16% 0.57%

Neuberger Berman Advisers Management Trust
Partners Portfolio 0.80% 0.07% 0.87%

Strong Variable Insurance Funds, Inc.
Mid Cap Growth Fund II 1.00% 0.10% 1.10%

Strong Opportunity Fund II 1.00% 0.10% 1.10%
</TABLE>

<PAGE> 9

(5) The Fund expenses shown above are assessed at the underlying Fund level
and are not direct charges against Variable Account assets or reductions from
Contract Values. These underlying Fund expenses are taken into consideration
in computing each underlying Fund's net asset value, which is the share price
used to calculate the unit values of the Variable Account. The management fees
and other expenses are more fully described in the prospectuses for each
individual underlying Fund. The information relating to the underlying Fund
expenses was provided by the underlying Fund and was not independently
verified by National Life. In the absence of any voluntary fee waivers or
expense reimbursements, the Management Fees, Other Expenses, and Total
Expenses of the Funds listed below would have been as follows:

<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL MUTUAL
FEES EXPENSES FUND EXPENSES
<S> <C> <C> <C>
Sentinel Variable Products Trust:
Common Stock Fund 0.47% 0.52% 0.99%
Mid Cap Growth Fund 0.49% 0.52% 1.01%
Small Company Fund 0.50% 0.52% 1.02%
Growth Index Fund 0.30% 0.56% 0.86%
Money Market Fund 0.25% 0.52% 0.77%
Fidelity VIP Fund-Equity Income Portfolio 0.48% 0.09% 0.57%
Fidelity VIP Fund-Growth Portfolio 0.58% 0.08% 0.66%
Fidelity VIP Fund-Overseas Portfolio 0.73% 0.18% 0.91%
Fidelity VIP Fund II-Contrafund Portfolio 0.58% 0.09% 0.67%
Fidelity VIP Fund II-Index 500 Portfolio 0.24% 0.10% 0.34%
INVESCO Variable Insurance Funds, Inc.:
VIF Dynamics Fund 0.75% 1.53% 2.28%
VIF Health Sciences Fund 0.75% 2.11% 2.86%
VIF Technology Fund 0.75% 0.78% 1.53%
J.P. Morgan International Opportunities 0.60% 1.38% 1.98%
J.P. Morgan Small Company 0.60% 1.97% 2.57%
Strong Mid Cap Growth Fund II 1,00% 0.20% 1.20%
Strong Opportunity Fund II 1.00% 0.20% 1.20%
</TABLE>

It is anticipated that these reimbursement arrangements will continue, but
there are no legal obligations to continue these arrangements for any
particular period of time; if they are terminated the affected Fund's expenses
may increase.

EXAMPLE

The following charts depict the dollar amount of expenses that would be
incurred under this Contract assuming a $1000 investment and 5% annual return,
and no election of the optional Enhanced Death Benefit Rider. THESE DOLLAR
FIGURES ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN BELOW.

<TABLE>
<CAPTION>
If you surrender your If you do not surrender If you annuitize your
Contract at the end of your Contract at the end of Contract at the end of
the applicable time period. the applicable time period. the applicable time period.

Subaccount* 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr.** 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sentinel VPT Common Stock 90 110 134 224 20 60 104 224 20 60 104 224
Sentinel VPT Mid Cap Growth 92 117 145 247 22 67 115 247 22 67 115 247
Sentinel VPT Small Company 90 113 138 233 20 63 108 233 20 63 108 233
Sentinel VPT Growth Index 91 114 140 236 21 64 110 236 21 64 110 236
Sentinel VPT Money Market 89 108 130 215 19 58 100 215 19 58 100 215
Alger American Growth 93 119 149 255 23 69 119 255 23 69 119 255
Alger American Leveraged AllCap 94 124 156 269 24 74 126 269 24 74 126 269
Alger American Small Capitalization 94 123 154 266 24 73 124 266 24 73 124 266
American Century VP Income & Growth 92 117 145 246 22 67 115 246 22 67 115 246
American Century VP Value 95 126 159 275 25 76 129 275 25 76 129 275
Dreyfus Socially Responsible Growth 93 119 149 255 23 69 119 255 23 69 119 255
</TABLE>

<PAGE> 10

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP Fund-Equity Income 90 113 138 232 20 63 108 232 20 63 108 232
Fidelity VIP Fund-Growth 91 115 142 241 21 65 112 241 21 65 112 241
Fidelity VIP Fund-High Income 92 117 144 245 22 67 114 245 22 67 114 245
Fidelity VIP Fund - Overseas 93 122 153 263 23 72 123 263 23 72 123 263
Fidelity VIP Fund II-Contrafund 91 115 142 241 21 65 112 241 21 65 112 241
Fidelity VIP Fund II-Index 500 88 104 123 203 18 54 93 203 18 54 93 203
Fidelity VIP Fund II-Investment Grade
Bond 90 112 137 230 20 62 107 230 20 62 107 230
INVESCO VIF - Dynamics 97 133 172 300 27 83 142 300 27 83 142 300
INVESCO VIF - Health Sciences 99 140 182 320 29 90 152 320 29 90 152 320
INVESCO VIF - Technology 98 135 174 305 28 85 144 305 28 85 144 305
J.P. Morgan International Opportunities 97 131 169 294 27 81 139 294 27 81 139 294
J.P. Morgan Small Company 96 130 167 290 26 80 137 290 26 80 137 290
Market Street Bond 90 111 136 228 20 61 106 228 20 61 106 228
Market Street Managed 90 113 138 233 20 63 108 233 20 63 108 233
Neuberger Berman AMT Partners 93 122 153 263 23 72 123 263 23 72 123 263
Strong Mid Cap Growth Fund II 96 129 164 285 26 79 134 285 26 79 134 285
Strong Opportunity Fund II, Inc. 96 129 164 285 26 79 134 285 26 79 134 285
</TABLE>

*For purposes of computing the Annual Contract Fee, the Annual Contract Fee
has been converted into a per-dollar per-day charge. The per-dollar per-day
charge has been calculated by taking the total Annual Contract Fees received
during 1999 and dividing by the average assets in the Variable Account. This
works out to 0.06% per annum. The Annual Contract Fee is waived for Contracts
with Contract Values of $50,000 or more.

**The Contract may not be annuitized in the first two years from the Date of
Issue.

For an Owner who has elected the Enhanced Death Benefit Rider (see "Optional
Enhanced Death Benefit Rider", page 36), and again assuming a $1000 investment
and 5% annual return, the chart below depicts the annual expenses that would
be incurred under this Contract:

Subaccount* 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr.** 3 Yrs. 5 Yrs. 10 Yrs.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sentinel VPT Common Stock 91 116 144 244 21 66 114 244 21 66 114 244
Sentinel VPT Mid Cap Growth 94 123 155 267 24 73 125 267 24 73 125 267
Sentinel VPT Small Company 92 119 148 253 22 69 118 253 22 69 118 253
Sentinel VPT Growth Index 93 120 149 256 23 70 119 256 23 70 119 256
Sentinel VPT Money Market 91 114 140 236 21 64 110 236 21 64 110 236
Alger American Growth 95 125 159 274 25 75 129 274 25 75 129 274
Alger Leveraged AllCap 96 129 166 288 26 79 136 288 26 79 136 288
Alger American Small Capitalization 96 129 164 285 26 79 134 285 26 79 134 285
American Century VP Income & Growth 94 123 154 266 24 73 124 266 24 73 124 266
American Century VP Value 97 131 169 294 27 81 139 294 27 81 139 294
Dreyfus Socially Responsible Growth 95 125 159 274 25 75 129 274 25 75 129 274
Fidelity VIP Fund-Equity Income 92 119 147 252 22 69 117 252 22 69 117 252
Fidelity VIP Fund-Growth 93 121 152 261 23 71 122 261 23 71 122 261
Fidelity VIP Fund-High Income 94 122 154 265 24 72 124 265 24 72 124 265
Fidelity VIP Fund-Overseas 95 128 163 282 25 78 133 282 25 78 133 282
Fidelity VIP Fund II-Contrafund 93 121 152 261 23 71 122 261 23 71 122 261
Fidelity VIP Fund II-Index 500 90 110 134 224 20 60 104 224 20 60 104 224
Fidelity VIP Fund II-Investment Grade Bond 92 118 147 250 22 68 117 250 22 68 117 250
INVESCO VIF - Dynamics 99 139 181 319 29 89 151 319 29 89 151 319
INVESCO VIF - Health Sciences 101 145 192 339 31 95 162 339 31 95 162 339
INVESCO VIF - Technology 100 140 184 323 30 90 154 323 30 90 154 323
J.P. Morgan International Opportunities 98 137 179 313 28 87 149 313 28 87 149 313
J.P. Morgan Small Company 98 136 176 309 28 86 146 309 28 86 146 309
Market Street Bond 92 117 146 248 22 67 116 248 22 67 116 248
</TABLE>

<PAGE> 11

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Street Managed 92 119 148 253 22 69 118 253 22 69 118 253
Neuberger Berman AMT Partners 95 128 163 282 25 78 133 282 25 78 133 282
Strong Mid Cap Growth Fund II 98 134 174 304 28 84 144 304 28 84 144 304
Strong Opportunity Fund II, Inc. 98 134 174 304 28 84 144 304 28 84 144 304
</TABLE>

**The Contract may not be annuitized in the first two years from the Date of
Issue.

The purpose of the Summary of Contract Expenses and Example is to
assist you in understanding the various costs and expenses that will be borne
directly or indirectly when investing in the Contract. The expenses of the
Variable Account as well as those of the underlying Funds are reflected in the
Example. For more complete descriptions of the expenses of the Variable
Account, see "Charges and Deductions", page 24. For more complete information
regarding expenses paid out of the assets of the underlying Funds, see the
underlying Fund prospectuses. Deductions for premium taxes may also apply but
are not reflected in the Example shown above (see "Premium Taxes", page 27).
Certain states impose a premium tax, currently ranging up to 3.5%.

ACCUMULATION UNIT VALUES

The following table sets forth, for each of the Subaccounts which
began operations on June 20, 1997, the accumulation unit value at June 20,
1997, the accumulation unit values at December 31, 1997, 1998 and 1999, and
the number of accumulation units outstanding at December 31, 1999.

<TABLE>
<CAPTION>
Number of
Accumulation Accumulation Accumulation Accumulation Accumulation Units
Unit Value at Unit Value at Unit Value at Unit Value at Outstanding at
6/20/97 12/31/97 12/31/98 12/31/99 12/31/99
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sentinel VPT Common Stock Fund 10.00 10.68 11.96 12.14 1,054,556
-------------------------------------------------------------------------------------------------------------------------------
Sentinel VPT Mid Cap Growth Fund 10.00 11.16 12.71 17.40 351,290
-------------------------------------------------------------------------------------------------------------------------------
Sentinel VPT Small Company Fund 10.00 10.74 11.43 13.07 95,954
-------------------------------------------------------------------------------------------------------------------------------
Sentinel VPT Money Market Fund 10.00 10.20 10.59 10.96 874,549
-------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 10.00 10.65 15.55 20.51 620,993
-------------------------------------------------------------------------------------------------------------------------------
Alger American Small Capitalization Portfolio 10.00 11.00 12.53 17.73 243,153
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity Income Portfolio 10.00 10.84 11.93 12.51 704,688
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth Portfolio 10.00 10.71 14.74 19.97 558,722
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income Portfolio 10.00 10.83 10.22 10.90 398,907
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Overseas Portfolio 10.00 9.45 10.51 14.78 238,593
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 10.00 10.95 14.04 17.20 495,265
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Index 500 Portfolio 10.00 10.88 13.77 16.37 1,479,594
-------------------------------------------------------------------------------------------------------------------------------
Market Street Bond 10.00 10.42 11.12 10.60 454,241
-------------------------------------------------------------------------------------------------------------------------------
Market Street Managed 10.00 10.64 11.80 11.74 555,721
-------------------------------------------------------------------------------------------------------------------------------
Strong Mid Cap Growth Fund 10.00 11.26 14.29 26.76 318,572
-------------------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 10.00 11.16 12.50 16.63 200,977
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The following table sets forth, for each of the Subaccounts which began
operations on August 3, 1998, the accumulation unit value on August 3, 1998,
the accumulation unit values on December 31, 1998 and 1999, and the number of
accumulation units outstanding on December 31, 1999.

<PAGE> 12

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Accumulation Accumulation Accumulation Number of
Unit Value at Unit Value at Unit Value at Accumulation
8/3/98 12/31/98 12/31/99 Units
Outstanding
at 12/31/99
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century VP Income & Growth 10.00 10.96 12.76 183,236
-----------------------------------------------------------------------------------------------------------
American Century VP Value 10.00 10.41 10.18 63,007
-----------------------------------------------------------------------------------------------------------
J.P. Morgan International Opportunities 10.00 9.69 13.06 25,478
-----------------------------------------------------------------------------------------------------------
J.P. Morgan Small Company 10.00 9.98 14.21 30,934
-----------------------------------------------------------------------------------------------------------
Neuberger Berman Partners 10.00 10.19 10.79 47,306
-----------------------------------------------------------------------------------------------------------
</TABLE>

NATIONAL LIFE INSURANCE COMPANY,
THE VARIABLE ACCOUNT, AND THE FUNDS

NATIONAL LIFE INSURANCE COMPANY

National Life is authorized to transact life insurance and annuity
business in Vermont and in 50 other jurisdictions. National Life was
originally chartered as a mutual life insurance company in 1848 under Vermont
law. It is now a stock life insurance company, all of the outstanding stock of
which is indirectly owned by National Life Holding Company, a mutual insurance
holding company established under Vermont law on January 1, 1999. All
policyholders of National Life, including all the Owners of the Contracts, are
voting members of National Life Holding Company. National Life assumes all
mortality and expense risks under the Contracts and its assets support the
Contract's benefits. Financial Statements for National Life are contained in
the Statement of Additional Information.

THE VARIABLE ACCOUNT

The Variable Account was established by National Life on November 1,
1996, pursuant to the provisions of Vermont law. National Life has caused the
Variable Account to be registered with the Securities and Exchange Commission
as a unit investment trust pursuant to the provisions of the Investment
Company Act. Such registration does not involve supervision of the management
of the Variable Account or National Life by the Securities and Exchange
Commission.

The Variable Account is a separate investment account of National
Life and, as such, is not chargeable with liabilities arising out of any other
business National Life may conduct. National Life does not guarantee the
investment performance of the Variable Account. Obligations under the
Contracts are obligations of National Life. Income, gains and losses, whether
or not realized, from the assets of the Variable Account are credited to or
charged against the Variable Account without regard to other income, gains, or
losses of National Life.

Net Premium Payments are allocated within the Variable Account among
one or more Subaccounts made up of shares of the Fund options designated by
the Owner. A separate Subaccount is established within the Variable Account
for each of the Fund options.

UNDERLYING FUND OPTIONS

You may choose from among a number of different Subaccount options.
However, National Life reserves the right to limit the number of different
Subaccounts, other than the Sentinel Variable Products Money Market
Subaccount, used in any Contract over its entire life to 16.

Summary information, including the investment objectives for each of
the underlying Funds held in the Subaccounts is set forth below. THERE CAN BE
NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE ACHIEVED.

<PAGE> 13

The investment objectives and policies of certain Funds are similar to
the investment objectives and policies of other mutual fund portfolios that may
be managed by the same investment adviser or manager. The investment results of
the Funds, however, may be higher or lower than the results of such other
portfolios. There can be no assurance, and no representation is made, that the
investment results of any of the Funds will be comparable to the investment
results of any other portfolios, even if the other portfolio has the same
investment adviser or manager.

SENTINEL VARIABLE PRODUCTS TRUST

The Common Stock, Mid Cap Growth, Small Company, Growth Index and Money
Market Subaccounts of the Variable Account invest in shares of Sentinel
Variable Products Trust, a "series" type of mutual fund which is registered
with the SEC under the 1940 Act as a diversified open-end management
investment company. Each series of Sentinel Variable Products Trust shares
represents an interest in a separate portfolio within the Trust. They are
purchased and redeemed by the corresponding Subaccounts of the Variable
Account. Sentinel Variable Products Trust sells and redeems its shares at
net asset value without a sales charge.

The investment objectives of Sentinel Variable Products Trust's Funds
are set forth below. The investment experience of each of the Subaccounts of
the Variable Account depends on the investment performance of the
corresponding Fund. There is no assurance that any Fund will achieve its
stated objective.

The Common Stock Fund. The Common Stock Fund seeks a combination of
growth of capital, current income, growth of income and relatively low risk as
compared with the stock market as a whole, by investing in a diverse group of
common stocks of well-established companies.

The Mid Cap Growth Fund. The Mid Cap Growth Fund seeks growth of
capital, by focusing its investments on common stocks of mid-sized growing
companies. Income is not a factor in selecting stocks.

The Small Company Fund. The Small Company Fund seeks growth of
capital, by investing mainly in common stocks of small companies that National
Life Investment Management believes have attractive growth potential and are
attractively valued. Income is not a factor in selecting stocks.

The Growth Index Fund. The Growth Index Fund seeks to match, as
closely as possible before expenses, the performance of the S&P 500/BARRA
Growth Index, by investing in common stocks of the companies comprising the
Index in approximately the same weightings as the Index.

The Money Market Fund. The Money Market Fund seeks as high a level of
current income as is consistent with stable principal values and liquidity
by investing exclusively in dollar-denominated money market instruments,
including U.S. government securities, bank obligations, repurchase
agreements, commercial paper, and other corporate debt obligations.

National Life Investment Management Company, Inc. ("NLIMC") manages each
of the Funds of Sentinel Variable Products Trust. NLIMC is registered with
the SEC as an investment adviser under the Investment Advisers Act of 1940.
NLIMC is a wholly owned subsidiary of National Life.

A full description of Sentinel Variable Products Trust, its investment
objectives and policies, its risks, expenses, and other aspects of its
operation is contained in the attached Prospectus for Sentinel Variable
Products Trust, which you should read together with this Prospectus.

ALGER AMERICAN FUND

The Separate Account has three Subaccounts which invest exclusively in
shares of Portfolios of the Alger American Fund. The Alger American Fund is a
"series" type mutual fund registered with

<PAGE> 14

the SEC as a diversified open-end management investment company issuing a
number of series of shares, each of which represents an interest in a
Portfolio of the Alger American Fund. Shares of these Portfolios are purchased
and redeemed by the Separate Account at net asset value without a sales
charge.

The investment objectives of the Portfolios of the Alger American Fund
in which the Subaccounts invest are set forth below. The investment experience
of each Subaccount depends upon the investment performance of the
corresponding Portfolio. There is no assurance that either Portfolio will
achieve its stated objective.

Alger American Growth Portfolio. This Portfolio seeks long-term capital
appreciation by focusing on growing companies that generally have broad
product lines, markets, financial resources and depth of management. Under
normal circumstances, the portfolio invests primarily in the equity securities
of large companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater.

Alger American Leveraged AllCap Portfolio. This Portfolio seeks
long-term capital appreciation. It invests in the equity securities of
companies of any size which demonstrate promising growth potential. This
Portfolio can leverage, that is, borrow money, up to one-third of its total
assets to buy additional securities.

Alger American Small Capitalization Portfolio. This Portfolio seeks
long-term capital appreciation by focusing on small, fast-growing companies
that offer innovative products, services or technologies to a rapidly
expanding marketplace. Under normal circumstances, the portfolio invests
primarily in the equity securities of small capitalization companies. A small
capitalization company is one that has a market capitalization within the
range of the Russell(R) 2000 Growth Index or the S&P(R) SmallCap 600 Index.

The Alger American Alger American Growth Portfolio, the Alger American
Leveraged AllCap Portfolio and the Alger American Small Capitalization
Portfolio are managed by Fred Alger Management, Inc.

A full description of the Alger American Fund, the investment objectives
and policies of the Portfolios, the risks, expenses and other aspects of their
operation is contained in the attached Prospectuses for the Alger American
Small Capitalization Portfolio, the Alger American Growth Portfolio and the
Alger American Leveraged AllCap Portfolio.

AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.

The Separate Account has one Subaccount which invests exclusively in
shares of the VP Value portfolio, and one Subaccount which invests exclusively
in shares of VP Income & Growth portfolio, each of which are series of
American Century Variable Portfolios, Inc. American Century Variable
Portfolios, Inc. is a "series" type mutual fund registered with the SEC as a
diversified open-end management investment company issuing a number of series
or classes of shares. Shares of these Portfolios will be purchased and
redeemed by the Separate Account at net asset value without a sales charge.

The investment objectives of the Portfolios of American Century Variable
Portfolios, Inc. in which the Subaccounts are expected to invest are set forth
below. The investment experience of each Subaccount depends upon the
investment performance of the underlying Portfolio. There is no assurance that
either Portfolio will achieve its stated objective.

VP Income & Growth. To seek dividend growth, current income and capital
appreciation. The Portfolio will seek to achieve its investment objective by
investing in common stocks.

VP Value. To seek long-term capital growth. Income is a secondary
objective. The Portfolio will

<PAGE> 15

seek to achieve its investment objective by investing in securities that
management believes to be undervalued at the time of purchase.

The VP Value Portfolio and the VP Income & Growth Portfolio of the
American Century Variable Portfolios, Inc. are managed by American Century
Investment Management, Inc. A full description of these Portfolios, their
investment objectives and policies, and the risks, expenses and other aspects
of their operation is contained in the attached Prospectuses for VP Value and
VP Income & Growth.

THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.

The Variable Account has one Subaccount which invests exclusively in
shares of The Dreyfus Socially Responsible Growth Fund, Inc. This Fund is
registered with the SEC as a diversified open-end management investment
company.

The investment objective of The Dreyfus Socially Responsible Growth
Fund, Inc. is set forth below. The investment experience of each Subaccount
depends upon the investment performance of the underlying Fund. There is no
assurance that the Fund will achieve its stated objective.

The Dreyfus Socially Responsible Growth Fund, Inc. The Fund seeks to
provide capital growth, with current income as a secondary goal. To pursue
these goals, the Fund invests primarily in the common stock of companies
that, in the opinion of the Fund's management, meet traditional investment
standards and conduct their business in a manner that contributes to the
enhancement of the quality of life in America.

The Dreyfus Socially Responsible Growth Fund, Inc. is managed by The
Dreyfus Corporation. A full description of this Fund, its investment
objectives and policies, and the risks, expenses and other aspects of its
operation is contained in the attached Prospectus for The Dreyfus Socially
Responsible Growth Fund, Inc.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS
FUND II

The Separate Account has four Subaccounts which invest exclusively in
shares of Portfolios of the Variable Insurance Products Fund (the "VIP Fund")
and three Subaccounts which invest exclusively in shares of Portfolios of the
Variable Insurance Products Fund II ("VIP Fund II"). Like the Market Street
Fund, the VIP Fund and the VIP II Fund are "series" type mutual funds
registered with the SEC as diversified open-end management investment
companies issuing a number of series or classes of shares, each of which
represents an interest in a Portfolio of the VIP Fund or VIP Fund II. Shares
of these Portfolios are purchased and redeemed by the Separate Account at net
asset value without a sales charge.

The Equity-Income, Growth, High Income, and Overseas Portfolios of the
VIP Fund and the Contrafund, Index 500 and Investment Grade Bond Portfolios of
the VIP Fund II are managed by Fidelity Management and Research Company
("FMR"). Bankers Trust Company currently serves as sub-advisor to the Index
500 Portfolio. FMR has entered into sub-advisory agreements with FMR U.K., FMR
Far East, and Fidelity International Investment Advisors for the Overseas
Portfolio.

The investment objectives of the Portfolios of the VIP Fund and the VIP
Fund II in which the Subaccounts invest are set forth below. The investment
experience of each Subaccount depends upon the investment performance of the
corresponding Portfolio. There is no assurance that any Portfolio will achieve
its stated objective.

Equity-Income Portfolio. This Portfolio seeks reasonable income. The
Portfolio will also consider the potential for capital appreciation. The
Portfolio seeks a yield which exceeds the composite yield on the securities
comprising the Standard and Poor's 500 Composite Index of 500

<PAGE> 16

Stocks ("S&P 500"). FMR normally invests at least 65% of the Portfolio's
assets in income-producing equity securities.

Growth Portfolio. This Portfolio seeks capital appreciation. FMR
normally invests the Portfolio's assets primarily in common stocks. FMR
invests the Portfolio's assets in companies FMR believes have above-average
growth potential.

High Income Portfolio. This Portfolio seeks a high level of current
income while also considering growth of capital. FMR normally invests at least
65% of the Portfolio's total assets in income producing debt securities,
preferred stocks, and convertible securities, with an emphasis on
lower-quality debt securities. The risks of investing in these high-yielding,
high-risk securities is described in the attached Prospectus for the VIP Fund,
which should be read carefully before investing.

Overseas Portfolio. This Portfolio seeks long term growth of capital.
FMR normally invests at least 65% of the Portfolio's total assets in foreign
securities. FMR normally invests the Portfolio's assets primarily in common
stocks.

Contrafund Portfolio. This Portfolio seeks long-term capital
appreciation. FMR normally invests the Portfolio's assets primarily in common
stocks. FMR invests the Portfolio's assets in securities of companies whose
value FMR believes is not fully recognized by the public.

Index 500 Portfolio. This Portfolio seeks investment results that
correspond to the total return of common stocks publicly traded in the United
States, as represented by the S&P 500. Bankers Trust Company normally invests
at least 80% of the Portfolio's assets in common stocks included in the S&P
500.

Investment Grade Bond Portfolio. This Portfolio seeks as high a level
of current income as is consistent with the preservation of capital. It
normally invests in U.S. dollar-denominated investment-grade bonds (those of
medium and high quality).

A full description of the VIP Fund and VIP Fund II, the investment
objectives and policies of the Portfolios, the risks, expenses and other
aspects of their operation is contained in the attached Prospectuses for the
VIP Fund and VIP Fund II.

INVESCO VARIABLE INVESTMENT FUNDS, INC.

The Variable Account has three Subaccounts which invests exclusively in
shares of the following three series of INVESCO Variable Investment Funds,
Inc.:

INVESCO VIF - Dynamics Fund
INVESCO VIF - Health Sciences Fund
INVESCO VIF - Technology Fund

INVESCO Variable Investment Funds, Inc. is a mutual fund registered
with the SEC as a diversified open-end management investment company issuing
shares of a number of Funds. Shares of these Funds are purchased and
redeemed by the Variable Account at net asset value without a sales charge.

The investment objectives of the INVESCO Variable Investment Funds,
Inc. Funds in which the Subaccounts invest are set forth below. The
investment experience of each Subaccount depends upon the investment
performance of the underlying Fund. There is no assurance that any of these
Funds will achieve its stated objective.

INVESCO VIF - Dynamics Fund. This Fund seeks to make an investment
grow. It is actively managed. The Fund invests primarily in equity
securities that INVESCO believes will rise in price faster than other
securities, as well as in options and other investments whose values are
based upon the values of equity securities. The Fund invests primarily in
common stocks of mid-sized U.S.

<PAGE> 17

companies - those with market capitalizations between $2 billion and $15
billion at the time of purchase - but also has the flexibility to invest in
other types of securities, including preferred stocks, convertible
securities and bonds.

INVESCO VIF - Health Sciences Fund. This Fund seeks to make an
investment grow. It is aggressively managed. Although the Fund can invest in
debt securities, it primarily invests in equity securities that INVESCO
believes will rise in price faster than other securities, as well as in
options and other investments whose values are based upon the values of
equity securities. The Fund invests primarily in equity securities of
companies that develop, produce or distribute products or services related
to health care. These companies include, but are not limited to, medical
equipment or supplies, pharmaceuticals, health care facilities, and applied
research and development of new products or services.

INVESCO VIF - Technology Fund. This Fund seeks to make an investment
grow. It is aggressively managed. Although the Fund can invest in debt
securities, it primarily invests in equity securities that INVESCO believes
will rise in price faster than other securities, as well as in options and
other investments whose values are based upon the values of equity
securities. The Fund invests primarily in equity securities of companies
engaged in technology-related industries. These include, but are not limited
to, applied technology, biotechnology, communications, computers,
electronics, Internet, IT services and consulting, oceanography, office and
factory automation, networking, robotics, and video.

The INVESCO VIF Dynamics Fund, Health Sciences Fund and Technology Fund
are managed by INVESCO Funds Group, Inc. A full description of these Funds,
their investment objectives and policies, and the risks, expenses and other
aspects of their operation is contained in the attached Prospectuses for the
INVESCO VIF - Dynamics Fund, the INVESCO VIF - Health Sciences Fund, and the
INVESCO VIF - Technology Fund.

J.P. MORGAN SERIES TRUST II

The Separate Account has one Subaccount which invests exclusively in
shares of the J.P. Morgan International Opportunities Portfolio, and one
Subaccount which invests exclusively in shares of J.P. Morgan Small Company
Portfolio, each of which are series of J.P. Morgan Series Trust II. J.P.
Morgan Series Trust II is a "series" type mutual fund registered with the SEC
as a diversified open-end management investment company issuing a number of
series or classes of shares. Shares of these Portfolios will be purchased and
redeemed by the Separate Account at net asset value without a sales charge.

The investment objectives of the J.P. Morgan Series Trust II Portfolios
in which the Subaccounts invest are set forth below. The investment experience
of each Subaccount depends upon the investment performance of the underlying
Portfolio. There is no assurance that either Portfolio will achieve its stated
objective.

J.P. Morgan International Opportunities Portfolio. Seeks to provide a
high total return from a portfolio comprised of equity securities of foreign
corporations. The Portfolio is designed for investors with a long-term
investment horizon who want to diversify their investments by adding
international equities and take advantage of investment opportunities outside
the U.S. As an international investment, the Portfolio is subject to foreign
market, political, and currency risks.

J.P. Morgan Small Company Portfolio. Seeks to provide a high total
return from a portfolio comprised of equity securities of small companies. The
Portfolio invests at least 65% of the value of its total assets in the common
stock of small U.S. companies primarily with market capitalizations of less
than $1 billion. The Portfolio is designed for investors who are willing to
assume the somewhat higher risk of investing in small companies in order to
seek a higher return over time than might be expected from a portfolio of
large companies.

<PAGE> 18

The J.P. Morgan International Opportunities Portfolio and the J.P.
Morgan Small Company Portfolio of the J.P. Morgan Series Trust II are managed
by J.P. Morgan Investment Management Inc. A full description of these
Portfolios, their investment objectives and policies, and the risks, expenses
and other aspects of their operation is contained in the attached Prospectuses
for the J.P. Morgan International Opportunities Portfolio and the J.P. Morgan
Small Company Portfolio.

THE MARKET STREET FUND

The Bond and Managed Subaccounts of the Separate Account invest in
shares of The Market Street Fund, Inc., a "series" type of mutual fund which
is registered with the SEC under the 1940 Act as a diversified open-end
management investment company. Each series of Market Street Fund shares
represents an interest in a separate portfolio within the Fund. They are
purchased and redeemed by the corresponding Subaccounts of the Separate
Account. The Market Street Fund sells and redeems its shares at net asset
value without a sales charge.

The investment objectives of the Market Street Fund's Portfolios you
may choose for your Policy are set forth below. The investment experience of
each of the Subaccounts of the Separate Account depends on the investment
performance of the corresponding Portfolio. There is no assurance that any
Portfolio will achieve its stated objective.

The Bond Portfolio. The Bond Portfolio seeks to generate a high level
of current income consistent with prudent investment risk by investing in a
diversified portfolio of marketable debt securities.

The Managed Portfolio. The Managed Portfolio seeks to realize as high
a level of long-term total rate of return as is consistent with prudent
investment risk by investing in stocks, bonds, money market instruments or a
combination thereof.

Sentinel Advisors Company ("SAC") manages the Bond and Managed
Portfolios. SAC is registered as an investment adviser under the Investment
Advisers Act of 1940. SAC is a partnership whose partners are affiliates of
National Life, Provident Mutual Life Insurance Company ("Provident Mutual"),
and The Penn Mutual Life Insurance Company. National Life's affiliate is
currently the managing partner of SAC and is entitled to the majority share of
SAC's profit or loss. It is expected that SAC will be replaced as investment
advisor to these two Portfolios in the near future.

A full description of the Market Street Fund, its investment objectives
and policies, its risks, expenses, and other aspects of its operation is
contained in the attached Prospectus for the Market Street Fund, which you
should read together with this Prospectus.

NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST

The Separate Account has one Subaccount which invests exclusively in
shares of the Partners Portfolio, a series of Neuberger Berman Advisers
Management Trust. Neuberger Berman Advisers Management Trust ("AMT") is
registered with the SEC as a diversified open-end management investment
company. AMT has nine separate series, which are called Portfolios. Shares of
each Portfolio represent an interest in that Portfolio.

The investment objectives of the Partners Portfolio are set forth below.
The investment experience of each Subaccount depends upon the investment
performance of the underlying Portfolio. There is no assurance that the
Portfolio will achieve its stated objective.

Partners Portfolio. To seek growth of capital. This Portfolio invests
mainly in common stock of mid-to large-capitalization companies. Its
investment co-managers seek securities believed to be undervalued based on
fundamentals such as low price-to-earnings ratios, consistent cash flows, and
the

<PAGE> 19

company's track record through all points of the market cycle. The Portfolio
generally considers selling a stock when it reaches the managers' target
price, when it fails to perform as expected, or when other opportunities
appear more attractive. The Portfolio has the ability to change its goal
without shareholder approval, although it does not currently intend to do so.

The Partners Portfolio of Neuberger Berman Advisers Management Trust
is managed by Neuberger Berman Management Inc. Neuberger Berman, LLC is the
sub-adviser. A full description of this Portfolio, its investment objectives
and policies, and the risks, expenses and other aspects of its operation is
contained in the attached Prospectus for the Partners Portfolio of Neuberger
Berman Advisers Management Trust.

STRONG VARIABLE INSURANCE FUNDS, INC. AND STRONG OPPORTUNITY FUND II, INC.

The Separate Account has one Subaccount which invests exclusively in
shares of the Mid Cap Growth Fund II series of Strong Variable Insurance
Funds, Inc., and one Subaccount which invests exclusively in shares of Strong
Opportunity Fund II, Inc. Strong Variable Insurance Funds, Inc. is a "series"
type mutual fund registered with the SEC as a diversified open-end management
investment company issuing a number of series or classes of shares, and Strong
Opportunity Fund II is a single series mutual fund also registered with the
SEC as a diversified open-end management investment company. Shares of these
Funds will be purchased and redeemed by the Separate Account at net asset
value without a sales charge.

The investment objectives of the Strong Funds in which the Subaccounts
invest are set forth below. The investment experience of each Subaccount
depends upon the investment performance of the underlying Portfolio. There is
no assurance that either Portfolio will achieve its stated objective.

Mid Cap Growth Fund II . This Portfolio seeks capital growth. It invests
primarily in equity securities that the advisor believes have above-average
growth prospects.

Strong Opportunity Fund II, Inc. This Fund seeks capital appreciation
through investments in a diversified portfolio of equity securities.

The Mid Cap Growth Fund II series of Strong Variable Insurance Funds,
Inc., and Strong Opportunity Fund, Inc. are managed by Strong Capital
Management, Inc.

A full description of the Mid Cap Growth Fund II series of Strong
Variable Insurance Funds, Inc., and Strong Opportunity Fund, Inc. their
investment objectives and policies, and the risks, expenses and other aspects
of their operation is contained in the attached Prospectuses for the Mid Cap
Growth Fund II and Strong Opportunity Fund II, Inc.

OTHER INFORMATION

Contractual Arrangements. National Life has entered into or may enter
into agreements with Funds pursuant to which the adviser or distributor pays
National Life a fee based upon an annual percentage of the average net asset
amount invested on behalf of the Variable Account and our other separate
accounts. These percentages may differ and we may be paid a greater percentage
by some investment advisers or distributors than other advisers or
distributors. These agreements reflect administrative services we provide.
National Life receives compensation from the adviser or distributor of the
Funds in connection with administration, distribution, or other services
provided with respect to the Fund and its availability through the Contract.
The amount of this compensation with respect to the Contract during 1999,
which is based upon the indicated percentages of assets of each Fund
attributable to the Contract, is shown below:

<PAGE> 20

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Portfolios of the % of Assets Revenues National Life
Received During 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alger American Fund 0.10% $ 9,460.60
---------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. 0.20% 2,903.77
---------------------------------------------------------------------------------------------------------------
J.P. Morgan Series Trust II 0.20% 658.53
---------------------------------------------------------------------------------------------------------------
Neuberger Berman Advisers Management Trust 0.15% 359.78
---------------------------------------------------------------------------------------------------------------
Strong VIF and Opportunity Fund II 0.20% 10,457.91
---------------------------------------------------------------------------------------------------------------
</TABLE>

With respect to Fidelity VIPF and VIPF II Funds, an agreement was
reached during 2000 under which National Life would receive compensation equal
to 0.10% of assets (except 0.05% with respect to the Index 500 Portfolio).
National Life will receive compensation equal to 0.20% for assets in Dreyfus
Socially Responsible Growth Fund, Inc. and equal to 0.25% for assets in
INVESCO Variable Insurance Funds, Inc. These arrangements may change from time
to time, and may include more Funds in the future.

Conflicts of Interest. The Funds may also be available to registered
separate accounts offering variable annuity and variable life products of
other participating insurance companies, as well as to the Variable Account
and other separate accounts of National Life. Although we do not anticipate
any disadvantages to this, there is a possibility that a material conflict may
arise between the interest of the Variable Account and one or more of the
other separate accounts participating in the underlying Funds. A conflict may
occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
the Owners and those of other companies, or some other reason. In the event of
conflict, we will take any steps necessary to protect Owners and variable
annuity payees, including withdrawal of the Variable Account from
participation in the underlying Fund or Funds which are involved in the
conflict.

DETAILED DESCRIPTION OF CONTRACT PROVISIONS

ISSUANCE OF A CONTRACT

The Contract is available to Owners up to and including age 85 on the
Date of Issue. If the Contract is issued to Joint Owners, then the oldest
Joint Owner must be 85 years of age or younger on the Date of Issue. If the
Owner is not a natural person, then the age of the Annuitant must meet the
requirements for Owners. At our discretion, we may issue Contracts at ages
higher than age 85.

In order to purchase a Contract, an individual must forward an
application to us through a licensed National Life agent who is also a
registered representative of Equity Services, Inc. ("ESI"), the principal
underwriter of the Contracts or another broker/dealer having a Selling
Agreement with ESI or a broker/dealer having a Selling Agreement with such a
broker/dealer.

A tax-favored arrangement, including an IRA and a Roth IRA, should
carefully consider the costs and benefits of the Contract (such as
annuitization benefits) before purchasing a Contract since the tax-favored
arrangement itself provides for tax-sheltered growth.

PREMIUM PAYMENTS

The Initial Premium Payment. The initial Premium Payment must be at
least $5,000 for Non-Qualified Contracts, and must be at least $1500 for
Qualified Contracts. We may at our discretion permit initial Premium Payments
lower than these minimums. For Contracts purchased in South Carolina, the
initial Premium Payment for Qualified Contracts must be at least $3000.

Subsequent Premium Payments. Subsequent Premium Payments may be made
at any time, but must be at least $100 ($50 for Individual Retirement
Annuities). We may accept lower Premium

<PAGE> 21

Payments at our discretion if the Premium Payments are remitted
electronically. Subsequent Premium Payments to the Variable Account will
purchase Accumulation Units at the price next computed for the appropriate
Subaccount after we receive the additional Premium Payment. For Contracts
purchased in the States of Oregon and Massachusetts, we are not permitted to
accept subsequent Premium Payments on or after the third Contract Anniversary.

The total of all Premium Payments under Contracts issued on the life
of any one Owner (or Annuitant if the owner is not a natural person) Annuitant
may not exceed $1,000,000 without our prior consent.

Transactions will not be processed on the following days: New Year's
Day, Presidents' Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, the day after Thanksgiving and
Christmas Day. In addition, Premium Payments will not be allocated and
transactions will not be effected to the Money Market Subaccount on Columbus
Day and Veterans Day.

Allocation of Net Premium Payments. In the application for the
Contract, the Owner will indicate how Net Premium Payments are to be allocated
among the Subaccounts of the Variable Account and/or the Fixed Account. These
allocations may be changed at any time by the Owner by written notice to us at
our Home Office or, if the telephone transaction privilege has been elected,
by telephone instructions (see "Telephone Transaction Privilege", page 32).

The percentages of Net Premium Payments that may be allocated to any
Subaccount or the Fixed Account must be in whole numbers of not less than 5%,
and the sum of the allocation percentages must be 100%. We allocate the
initial Net Premium Payment within two business days after receipt, if the
application and all information necessary for processing the order are
complete.

If the application is not properly completed, we retain the initial
Premium Payment for up to five business days while attempting to complete the
application. If the application is not complete at the end of the five day
period, we inform the applicant of the reason for the delay and the initial
Premium Payment will be returned immediately, unless the applicant
specifically consents to our retaining the initial Premium Payment until the
application is complete. Once the application is complete, we allocate the
initial Net Premium Payment as designated by the Owner within two business
days.

We allocate subsequent Net Premium Payments as of the Valuation Date
we receive Net Premium Payments, based on your allocation percentages then in
effect. At the time of allocation, we apply Net Premium Payments to the
purchase of Fund shares. The net asset value of the shares purchased are
converted into Accumulation units.

We reserve the right to limit the number of Variable Account
Subaccounts, other than the Market Street Money Market Subaccount, used in a
single Contract over the entire life of the Contract to 16.

The Subaccount values will vary with their investment experience, and
you bear the entire investment risk. You should periodically review your
allocation percentages in light of market conditions and your overall
financial objectives.

We offer a one-time credit in the amount of 3% of the initial Net
Premium Payment to Owners whose initial Net Premium Payment comes from the
surrender of an annuity contract issued by National Life's affiliate, Life
Insurance Company of the Southwest. We pay this credit after the free look
right with respect to the Contract has expired.

TRANSFERS

You may transfer the Contract Value among the Subaccounts of the
Variable Account and between the Variable Account and the Fixed Account
(subject to the limitations set forth below) by

<PAGE> 22

making a written transfer request. If you elect the telephone transaction
privilege, you may make transfers by telephone. See "Telephone Transaction
Privilege", page 32. Transfers are made as of the Valuation Day that the
request for transfer is received at the Home Office. Transfers to or from the
Subaccounts may be postponed under certain circumstances. See "Payments," page
31.

We currently allow transfers to the Fixed Account of all or any part
of the Variable Account Contract Value, without charge or penalty. We reserve
the right to restrict transfers to the Fixed Account to 25% of the Variable
Account Contract Value during any Contract Year.

You may, (only one each year and within 45 days after the end of the
calendar year) transfer a portion of the unloaned value in the Fixed Account
to the Variable Account. Prior to the end of the calendar year, we determine
the maximum percentage that may be transferred from the Fixed Account. This
percentage will be at least 10% of the Contract Value in the Fixed Account
(25% in New York). After a transfer from the Fixed Account to the Variable
Account, we reserve the right to require that the value transferred remain in
the Variable Account for at least one year before it may be transferred back
to the Fixed Account.

We do not permit transfers between the Variable Account and the Fixed
Account after the Annuitization Date.

We have no current intention to impose a transfer charge in the
foreseeable future. However, we reserve the right, upon prior notice, to
impose a transfer charge of $25 for each transfer in excess of twelve
transfers in any one Contract Year. See "Transfer Charge", page 26.

VALUE OF A VARIABLE ACCOUNT ACCUMULATION UNIT

We set the value of a Variable Account Accumulation Unit for each
Subaccount at $10 when the Subaccounts commenced operations. We determine the
value for any subsequent Valuation Period by multiplying the value of an
Accumulation Unit for each Subaccount for the immediately preceding Valuation
Period by the Net Investment Factor for the Subaccount during the subsequent
Valuation Period. The value of an Accumulation Unit may increase or decrease
from Valuation Period to Valuation Period. No minimum value of an Accumulation
Unit is guaranteed. The number of Accumulation Units will not change as a
result of investment experience.

Net Investment Factor. Each Subaccount of the Variable Account has
its own Net Investment Factor.

- The Net Investment Factor measures the daily investment
performance of that Subaccount.

- The Net Investment Factor may be greater or less than one;
therefore, the value of an Accumulation Unit may increase or
decrease.

- Changes in the Net Investment Factor may not be directly
proportional to changes in the net asset value of Fund shares,
because of the deduction for the Mortality and Expense Risk
Charge and Administration Charge.

Fund shares are valued at their net asset value. The Net Investment
Factor allows for the monthly reinvestment of daily dividends that are
credited by some Funds (the Market Street Money Market Portfolio).

<PAGE> 23

DETERMINING THE CONTRACT VALUE

The Contract Value is the sum of:

1) the value of all Variable Account Accumulation Units, and

2) amounts allocated and credited to the Fixed Account, minus any
outstanding loans on the Contract and accrued interest on such loans.

When charges or deductions are made against the Contract Value, we
deduct an appropriate number of Accumulation Units from the Subaccounts and an
appropriate amount from the Fixed Account in the same proportion that the your
interest in the Subaccounts and the unloaned value in the Fixed Account bears
to the total Contract Value. Value held in the Fixed Account is not subject to
Variable Account charges (Mortality and Expense Risk and Administration
Charges), but may be subject to Contingent Deferred Sales Charges, the Annual
Contract Fee, optional Enhanced Death Benefit Rider charge, and premium taxes,
if applicable.

ANNUITIZATION

Maturity Date. The Maturity Date is the date on which annuity
payments are scheduled to begin. You select the Maturity Date on the
application. The earliest Maturity Date must be at least 2 years after the
Date of Issue, unless otherwise approved (10 years after the Date of Issue in
the States of Oregon and Massachusetts). If no specific Maturity Date is
selected, the Maturity Date will be the date you reach age 90 (the Annuitant's
age 90 if the Owner is not a natural person); or, if later, 10 years after the
Date of Issue. You may elect a single payment equal to the cash Surrender
Value on the Maturity Date, rather than annuity payments.

If you request in writing (see "Ownership Provisions", page 23), and
we approve the request, the Maturity Date may be accelerated or deferred.

Election of Payment Options. You may, with prior written notice and,
at any time prior to the Annuitization Date, elect one of the Annuity Payment
Options. We apply the Contract Value in each Subaccount (less any premium tax
previously unpaid) to provide a Variable Annuity payment. We apply the
Contract Value in the Fixed Account (less any premium tax previously unpaid)
to provide a Fixed Annuity payment.

If an election of an Annuity Payment Option is not on file with
National Life on the Annuitization Date, we will pay the proceeds as Option 3
- Payments for Life with 120 months certain. You may elect, revoke or change
an Annuity Payment Option at any time before the Annuitization Date with 30
days prior written notice. The Annuity Payment Options available are described
below.

Frequency and Amount of Annuity Payments. We pay annuity payments as
monthly installments, unless you select annual, semi-annual or quarterly
installments. If the amount to be applied under any Annuity Payment Option is
less than $3,500, we have the right to pay such amount in one lump sum in lieu
of the payments otherwise selected. In addition, if the payments selected
would be or become less than $100, we have the right to change the frequency
of payments that will result in payments of at least $100. In no event will we
make payments under an annuity option less frequently than annually.

<PAGE> 24

ANNUITIZATION - VARIABLE ACCOUNT

We will determine the dollar amount of the first Variable Annuity
payment by dividing the Variable Account Contract Value on the Annuitization
Date by 1,000 and applying the result as set forth in the applicable Annuity
Table. The amount of each Variable Annuity payment depends on the age of the
Chosen Human Being on his or her birthday nearest the Annuitization Date, and
the sex of the Chosen Human Being, if applicable, unless otherwise required by
law.

- Variable Annuity payments vary in amount in accordance with the
investment performance of the Variable Account;

- To establish the number of Annuity Units representing each
monthly annuity payment, the dollar amount of the first annuity
payment as determined above is divided by the value of an
Annuity Unit on the Annuitization Date;

- The number of Annuity Units remains fixed during the annuity
payment period;

- The dollar amount of the second and subsequent payments is not
predetermined and may change from payment to payment; and

- The dollar amount of each subsequent payment is determined by
multiplying the fixed number of Annuity Units by the value of an
Annuity Unit for the Valuation Period in which the payment is
due.

Once payments have begun, future payments will not reflect any
changes in mortality experience.

Value of an Annuity Unit. The value of an Annuity Unit for a
Subaccount is set at $10 when the first Fund shares are purchased. The value
of an Annuity Unit for a Subaccount for any subsequent Valuation Period is
determined by multiplying the value of an Annuity Unit for the immediately
preceding Valuation Period by the applicable Net Investment Factor for the
Valuation Period for which the value of an Annuity Unit is being calculated
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum (see "Net Investment Factor", page 19).

Assumed Investment Rate. A 3.5% Assumed Investment Rate is built into
the Annuity Tables contained in the Contracts. We may make assumed investment
rates available at rates other than 3.5%. A higher assumption would mean a
higher initial payment but more slowly rising or more rapidly falling
subsequent payments. A lower assumption would have the opposite effect. If the
actual investment return, as measured by the Net Investment Factor, is at a
constant annual rate of 3.5%, the annuity payments will be level.

ANNUITIZATION - FIXED ACCOUNT

A Fixed Annuity is an annuity with payments which are guaranteed as
to dollar amount during the annuity payment period. We determine the amount of
the periodic Fixed Annuity payments by applying the Fixed Account Contract
Value to the applicable Annuity Table in accordance with the Annuity Payment
Option elected. This is done at the Annuitization Date using the age of the
Chosen Human Being on his or her nearest birthday, and the sex of the Chosen
Human Being, if applicable. The applicable Annuity Table will be based on our
expectation of investment earnings, expenses and mortality (if payments depend
on whether the Chosen Human Being is alive) on the Annuitization Date. The
applicable Annuity Table will provide a periodic Fixed Annuity payment at
least as great as the guarantee described in your Contract.

We do not credit discretionary interest to Fixed Annuity payments
during the annuity payment period for annuity options based on life
contingencies. The Annuitant must rely on the Annuity Tables applicable to the
Contracts to determine the amount of Fixed Annuity payments.

<PAGE> 25

ANNUITY PAYMENT OPTIONS

Any of the following Annuity Payment Options may be elected:

Option 1-Payments for a Stated Time. We will make monthly payments
for the number of years selected, which may range from 5 years to 30
years.

Option 2-Payments for Life-An annuity payable monthly during the
lifetime of a Chosen Human Being (who may be named at the time of
election of the Payment Option), ceasing with the last payment due
prior to the death of the Chosen Human Being. It would be possible
under this option for the payee to receive only one annuity payment
if the annuitant dies before the second annuity payment date, two
annuity payments if the Annuitant dies before the third annuity
payment date, and so on.

Option 3-Payments for Life with Period Certain-Guaranteed - An
annuity that if at the death of the Chosen Human Being payments have
been made for less than 10 or 20 years, as selected, we guarantee to
continue annuity payments during the remainder of the selected
period.

We may allow other Annuity Payment Options.

Some of the stated Annuity Payment Options may not be available in
all states. You may request an alternative non-guaranteed option by giving
notice in writing prior to Annuitization. If a request is approved by us, it
will be permitted under the Contract.

Qualified Contracts (except Roth IRA's before the Owner's death) are
subject to the minimum Distribution requirements set forth in the Code.

Under Payment Option 1, you may change to any other Payment Option at
any time. At the time of the change, remaining value will be applied to the
new Payment Option to determine the amount of the new payments. Under Payment
Option 1, you may also fully surrender the Contract at any time. A surrender
is subject to any applicable Contingent Deferred Sales Charge at the time of
the surrender.

DEATH OF OWNER

If you or a Joint Owner dies prior to the Annuitization Date, then we
will pay (unless the Enhanced Death Benefit Rider has been elected) a Death
Benefit to the Beneficiary.

If you or a Joint Owner dies prior to attaining age 81, the Death
Benefit will be equal to the greater of:

(a) the Contract Value, or

(b) the Net Premium Payments made to the Contract, minus all
Withdrawals (including any CDSC deducted in connection with such Withdrawals),
and minus any outstanding loans on the Contract and accrued interest, and

in each case minus any applicable premium tax charge to be assessed upon
distribution.

If you or a Joint Owner dies after attaining age 81, then the Death
Benefit shall be equal to the Contract Value, minus any applicable premium tax
charge.

Unless the Beneficiary is the deceased Owner's (or Joint Owner's)
spouse, the Death Benefit must be distributed within five years of such
Owner's death. The Beneficiary may, elect to receive Distribution in the form
of a life annuity or an annuity for a period not exceeding his or her life
expectancy. Such annuity must begin within one year following the date of the
Owner's death and is currently available only as a Fixed Annuity. If the
Beneficiary is the spouse of the deceased Owner (or

<PAGE> 26

Joint Owner), then the Contract may be continued without any required
Distribution. If the deceased Owner (or Joint Owner) and the Annuitant are the
same person, the death of that person will be treated as the death of the
Owner for purposes of determining the Death Benefit payable.

Qualified Contracts may be subject to specific rules set forth in the
Plan, Contract, or Code concerning Distributions upon the death of the Owner.

DEATH OF ANNUITANT PRIOR TO THE ANNUITIZATION DATE

If an Annuitant who is not an Owner dies prior to the Annuitization
Date, a Death Benefit equal to the Cash Surrender Value of the Contract will
be payable to the Beneficiary. If the Owner is a natural person and a
contingent Annuitant has been named or the Owner names a contingent Annuitant
within 90 days of the Annuitant's death, the Contract may be continued without
any required Distribution. If no Beneficiary is named (or if the Beneficiary
predeceases the Annuitant), then the Death Benefit will be paid to the Owner.
If the Owner is not a natural person, then the death of the Annuitant will be
treated as if it were the death of the Owner, and the disposition of the
Contract will follow the death of the Owner provisions set forth above.

In any case where a Death Benefit is paid, the value of the Death
Benefit will be determined as of the Valuation Day coinciding with or next
following the date we receive in writing:

(1) due proof of the Annuitant's or an Owner's (or Joint Owner's)
death;

(2) an election for either a single sum payment or an Annuity Payment
Option (currently only Fixed Annuities are available in these
circumstances); and

(3) any form required by state insurance laws.

If a single sum payment is requested, we will make payment in
accordance with any applicable laws and regulations governing the payment of
Death Benefits. If an Annuity Payment Option is requested, the Beneficiary
must make an election during the 90-day period commencing with the date we
receive written notice and as otherwise required by law. If no election has
been made by the end of such 90-day period commencing with the date we receive
written notice or as otherwise required by law the Death Benefit will be paid
in a single sum payment.

GENERATION-SKIPPING TRANSFERS

We may determine whether the Death Benefit or any other payment
constitutes a direct skip as defined in Section 2612 of the Code, and the
amount of the tax on the generation-skipping transfer resulting from such
direct skip. If applicable, the payment will be reduced by any tax National
Life is required to pay by Section 2603 of the Code.

A direct skip may occur when property is transferred to or a Death
Benefit is paid to an individual two or more generations younger than the
Owner.

OWNERSHIP PROVISIONS

Unless otherwise provided, the Owner has all rights under the
Contract. If the purchaser names someone other than himself or herself as
owner, the purchaser will have no rights under the contract. If Joint Owners
are named, each Joint Owner possesses an undivided interest in the Contract.
The death of any Joint Owner triggers the provisions of the Contract relating
to the death of the Owner. Unless otherwise provided, when Joint Owners are
named, the exercise of any ownership right in the Contract (including the
right to surrender the Contract or make a Withdrawal, to change the Owner, the
Annuitant, a Contingent Annuitant, the Beneficiary, the Annuity Payment Option
or the Maturity Date) requires a written indication of an intent to exercise
that right, signed by all Joint Owners.

<PAGE> 27

Prior to the Annuitization Date, the Owner may name a new Owner. Such
change may be subject to state and federal gift taxes, and may also result in
current federal income taxation (see "Federal Income Tax Considerations", page
37). Any change of Owner will automatically revoke any prior Owner
designation. Any request for change of Owner must be (1) made by proper
written application, (2) received and recorded by National Life at its Home
Office, and (3) may include a signature guarantee as specified in the
"Surrender and Withdrawal" provision on page 30. The change is effective on
the date the written request is signed. A new choice of Owner will not apply
to any payment made or action we take prior to the time it was received and
recorded.

The Owner may request a change in the Annuitant or contingent
Annuitant before the Annuitization Date. Such a request must be made in
writing on a form acceptable to us and must be signed by the Owner, and the
person to be named as Annuitant or contingent Annuitant. Any such change is
subject to underwriting and approval by us.

CHARGES AND DEDUCTIONS

All of the charges described in this section apply to Variable
Account allocations. Allocations to the Fixed Account are subject to
Contingent Deferred Sales Charges, the Annual Contract Fee and Premium Tax
deductions and the charge for the Enhanced Death Benefit Rider, if applicable.
The Fixed Account is not subject to the Mortality and Expense Risk Charge and
the Administration Charge. We may realize a profit from any of these charges.
Any such profit may be used for any purpose, including payment of distribution
expenses.

We deduct the charges described below to cover our costs and
expenses, services provided and risks assumed under the Contracts. We incur
certain costs and expenses for the distribution and administration of the
Contracts and for providing the benefits payable thereunder. More
particularly, the administrative services include:

- processing applications for and issuing the Contracts;

- processing purchases and redemptions of Fund shares as required
(including automatic withdrawal services);

- maintaining records;

- administering annuity payouts;

- furnishing accounting and valuation services (including the
calculation and monitoring of daily Subaccount values);

- reconciling and depositing cash receipts;

- providing Contract confirmations;

- providing toll-free inquiry services; and

- furnishing telephone transaction privileges.

The risks we assume include:

(1) the risk that the actual life-span of persons receiving annuity
payments under Contract guarantees will exceed the assumptions
reflected in our guaranteed rates (these rates are incorporated in
the Contract and cannot be changed);

(2) the risk that Death Benefits, or the Enhanced Death Benefit under the
optional Enhanced Death Benefit Rider, will exceed the actual
Contract Value;

<PAGE> 28

(3) the risk that more Owners than expected will qualify for and exercise
waivers of the Contingent Deferred Sales Charge; and

(4) the risk that our costs in providing the services will exceed our
revenues from the Contract charges (which we cannot change).

The amount of a charge will not necessarily correspond to the costs
associated with providing the services or benefits indicated by the
designation of the charge. For example, the Contingent Deferred Sales Charge
collected may not fully cover all of the distribution expenses we incur. We
may also realize a profit on one or more of these charges. We may use any
profits for any corporate purpose, including sales expenses.

DEDUCTIONS FROM THE VARIABLE ACCOUNT

We deduct from the Variable Account an amount, computed daily, which is
equal to an annual rate of 1.40% of the daily net asset value. The charge
consists of a 0.15% Administration Charge and a 1.25% Mortality and Expense
Risk Charge.

CONTINGENT DEFERRED SALES CHARGE

We may pay a commission up to 6.5% (7.0% during certain promotional
periods) for the sale of a Contract; however, we make no deduction for a sales
charge from the Premium Payments for these Contracts. However, if a Withdrawal
is made or a Contract is surrendered, we will with certain exceptions, deduct
a Contingent Deferred Sales Charge ("CDSC") not to exceed 7% of the lesser of
the total of all Net Premium Payments made within 84 months prior to the date
of the request to surrender or the amount withdrawn.

The CDSC is calculated by multiplying the applicable CDSC percentages
noted below by the Net Premium Payments that are withdrawn or surrendered. For
purposes of calculating the CDSC Withdrawals or surrenders are considered to
come first from the oldest Net Premium Payment made to the Contract, then the
next oldest Net Premium Payment and so forth, and last from earnings on Net
Premium Payments. No CDSC is ever assessed with respect to a Withdrawal or
surrender of earnings on Net Premium Payments. For tax purposes, a surrender
is usually treated as a withdrawal of earnings first. This charge will apply
in the amounts set forth below to Net Premium Payments within the time periods
set forth.

The CDSC applies to Net Premium Payments as follows:

<TABLE>
<CAPTION>
NUMBER OF COMPLETED CONTINGENT DEFERRED NUMBER OF COMPLETED CONTINGENT DEFERRED
YEARS FROM DATE OF SALES CHARGE YEARS FROM DATE OF SALES CHARGE
NET PREMIUM PAYMENT PERCENTAGE NET PREMIUM PAYMENT PERCENTAGE
------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>

In any Contract Year after the first Contract Year (except in the
states referred to in the last sentence of this paragraph) you may make
Withdrawals without a CDSC of an aggregate amount equal to 15% of the Contract
Value as of the most recent Contract Anniversary. This CDSC-free Withdrawal
privilege does not apply to full surrenders of the Contract, and if a full
surrender is made within one year of exercising a CDSC-free Withdrawal, then
the CDSC which would have been assessed at the time of the Withdrawal will be
assessed at the time of surrender. The CDSC-free feature is also
non-cumulative. This means that free amounts not taken during any given
Contract Year cannot be taken as free amounts in a subsequent Contract Year.
In addition, any amount withdrawn in order to meet minimum Distribution
requirements under the Code shall be free of CDSC. In the first Contract Year

<PAGE> 29

a CDSC-free Withdrawal is available only by setting up a monthly systematic
Withdrawal program for an amount not exceeding the annual CDSC-free Withdrawal
amount (see "Available Automated Fund Management Features-Systematic
Withdrawals", page 32), or by making a Withdrawal which is part of a series of
substantially equal periodic payments over the life of the Owner or the joint
lives of the Owner and his or her spouse, to which section 72(t)(2)(A)(iv) of
the Code applies. You may be subject to a tax penalty if you take Withdrawals
prior to age 59 1/2 (see "Federal Income Tax Considerations", page 37). In New
Jersey and Washington, the CDSC-free provision will apply to full surrenders
and Withdrawals but will be limited to 10% of the Contract Value as of the
most recent Contract Anniversary for both Withdrawals and full surrenders.

In addition, no CDSC will be deducted:

(1) upon the Annuitization of Contracts,

(2) upon payment of a death benefit pursuant to the death of the
Owner, or

(3) from any values which have been held under a Contract for at
least 84 months.

No CDSC applies upon the transfer of value among the Subaccounts or
between the Fixed Account and the Variable Account.

When a Contract is held by a charitable remainder trust, the amount
which may be withdrawn from this Contract without application of a CDSC after
the first Contract Year, shall be the larger of (a) or (b), where

(a) is the amount which would otherwise be available for Withdrawal
without application of a CDSC; and where

(b) is the difference between the Contract Value as of the last
Contract Anniversary and the Net Premium Payments made to the
Contract, less all Withdrawals and less any outstanding loan and
accrued interest, as of the last Contract Anniversary.

We will waive the CDSC if the Owner dies or if the Owner annuitizes.
However, if the Owner elects a settlement under Payment Option 1, and
subsequently surrenders the Contract prior to seven years after the date of
the last Premium Payment, the surrender will be subject to a CDSC.

We will also waive the CDSC if, following the first Contract
Anniversary, you are confined to an eligible nursing home for at least the 90
consecutive days ending on the date of the Withdrawal request. This waiver is
not available in the States of New Jersey and New York.

ANNUAL CONTRACT FEE

For Contracts with a Contract Value of less than $50,000 as of any
Contract Anniversary prior to the Annuitization Date, we will assess an Annual
Contract Fee of $30.00. This fee will be assessed annually on each Contract
Anniversary on which the Contract Value is less than $50,000. No Annual
Contract Fee will be assessed after the Annuitization Date. This fee will be
taken pro rata from all Subaccounts of the Variable Account and the unloaned
portion of the Fixed Account.

TRANSFER CHARGE

Currently, unlimited free transfers are permitted among the Subaccounts,
and transfers between the Fixed Account and the Variable Account are permitted
free of charge within the limits described on page 18. We have no present
intention to impose a transfer charge in the foreseeable future. However, we
reserve the right to impose in the future a transfer charge of $25 on each
transfer in excess of twelve transfers in any Contract Year. We would not
anticipate making a profit on any future transfer charge.

<PAGE> 30

If we impose a transfer charge, we will deduct it from the amount being
transferred. All transfers requested on the same Valuation Day are treated as
one transfer transaction. Any future transfer charge will not apply to
transfers made pursuant to the Dollar Cost Averaging and Portfolio Rebalancing
features, transfers resulting from loans, or if there has been a material
change in the investment policy of the Fund from which the transfer is being
made. These transfers will not count against the twelve free transfers in any
Contract Year.

PREMIUM TAXES

If a governmental entity imposes premium taxes, we make a deduction
for premium taxes in a corresponding amount. Certain states impose a premium
tax, currently ranging up to 3.5%. We will pay premium taxes at the time
imposed under applicable law. Where we are required to pay this premium tax,
we may deduct an amount equal to premium taxes from the Premium Payment. We
currently intend to make this deduction from Premium Payments only in South
Dakota. In the remaining states which assess premium taxes, we currently
expect to make deductions for premium taxes at the time of Annuitization,
death of the Owner, or surrender, although we also reserve the right to make
such a deduction at the time we pay premium taxes to the applicable taxing
authority.

CHARGE FOR OPTIONAL ENHANCED DEATH BENEFIT RIDER

Annual charges are made if you elect the optional Enhanced Death
Benefit Rider. See "Optional Enhanced Death Benefit Rider," page 36. The
annual charge for the Enhanced Death Benefit Rider is 0.20% of Contract Value
as of the date the charge is deducted. The annual charge will be deducted at
issue (or at the time of election, if elected after issue), and then on each
Contract Anniversary thereafter, up to and including age 80 on an
age-nearest-birthday basis as of the relevant Contract Anniversary. After age
80, we will discontinue the charge. We will make the charge pro rata from the
Subaccounts of the Variable Account and the unloaned portion of the Fixed
Account.

OTHER CHARGES

The Variable Account purchases shares of the Funds at net asset
value. The net asset value of those shares reflect management fees and
expenses already deducted from the assets of the Funds. Information on the
fees and expenses for the Funds is set forth in "Underlying Fund Annual
Expenses" on page 5.

More detailed information is contained in the Funds' prospectuses
which accompany this prospectus.

CONTRACT RIGHTS AND PRIVILEGES

FREE LOOK

You may revoke the Contract at any time between the Date of Issue and
the date 10 days after receipt of the Contract and receive a refund of the
Contract Value plus any charges assessed at issue, including the Annual
Contract Fee, charge for the optional Enhanced Death Benefit Rider, and any
premium tax, unless otherwise required by state and/or federal law. Some
states may require a longer free look period. Where the Contract Value is
refunded, you will have borne the investment risk and been entitled to the
benefit of the investment performance of the chosen Subaccounts during the
time the Contract was in force.

In the case of IRA's and states that require the return of Premium
Payments, you may revoke the Contract during the free look period and we will
refund Premium Payments.

In order to revoke the Contract, it must be mailed or delivered to
our Home Office. Mailing or delivery must occur on or before 10 days after
receipt of the Contract for revocation to be effective. In order to revoke the
Contract, if it has not been received, written notice must be mailed or
delivered to the Home Office.

<PAGE> 31

The liability of the Variable Account under this provision is limited
to the Contract Value in each Subaccount on the date of revocation. Any
additional amounts refunded to you will be paid by us.

LOAN PRIVILEGE - TAX SHELTERED ANNUITIES

Subject to approval in your state, if you own a section 403(b)
Tax-Sheltered Annuity Contract, loans will be available on your Contract.
Loans will be subject to the terms of the Contract and the Code.

If a loan provision is included in your Tax-Sheltered Annuity
Contract, loans will be available anytime prior to the Annuitization Date. We
may limit the number of loans available on a single contract. You will be able
to borrow a minimum of $1500 (we may permit lower amounts). The maximum loan
balance which may be outstanding at any time on your Contract is 90% of the
sum of Contract Value, outstanding loans and accrued interest on loans minus
the CDSC that would apply if you surrendered your Contract. In no event may
the aggregate amount borrowed from all your Tax-Sheltered Annuities or other
Qualified Contracts, including this Contract, exceed the lesser of:

(a) 50% of the combined nonforfeitable account balances of all
your Tax-Sheltered Annuities or other Qualified Contracts
(or in the case of non-ERISA Plans, $10,000 if greater); and

(b) $50,000.

The $50,000 limit will be reduced by the excess (if any) of the highest loan
balances owed during the prior one-year period over the loan balance on the
date the loan is made. The highest loan balance owed during the prior one-year
period may be more than the amount outstanding at the time of the loan, if an
interest payment or principal repayment has been made.

All loans will be made from the Collateral Fixed Account. When a loan
is taken an amount equal to the principal amount of the loan will be
transferred to the Collateral Fixed Account. We will transfer to the
Collateral Fixed Account an amount equaling the loan from the Subaccounts of
the Variable Account and unloaned portion of the Fixed Account in the same
proportion that such amounts bear to the total Contract Value. No CDSC is
deducted at the time of the loan or on any transfers to the Collateral Fixed
Account.

Until the loan is repaid in full, that portion of the Collateral
Fixed Account equal to the outstanding loan balance shall be credited with
interest at an annual rate we declare from time to time, but will never be
less than an annual rate of 3.0%. On each Contract Anniversary and on each
date that a loan repayment is received, any amount of interest credited on the
Collateral Fixed Account will be allocated among the Fixed Account and the
Subaccounts of the Variable Account in accordance with the allocation of Net
Premium Payments then in effect.

Loans must be repaid in substantially level payments, not less
frequently than quarterly, within five years. Loans used to purchase your
principal residence must be repaid within 20 years. During the loan term, the
outstanding balance of the loan will continue to accrue interest at annual
rates specified in the loan agreement or an amendment to the loan agreement.
The maximum interest rate will be the greater of :

- the Moody's Corporate Bond Yield Average - Monthly Average
Corporates, as published by Moody's Investors Service, Inc., or
its successor, (or if that average is no longer published, a
substantially similar average), for the calendar month ending
two months before the date the rate is determined; or

- 4%.

The loan interest rate is subject to change on each Contract
Anniversary. If the loan interest rate changes, we will send you a notice of
the new loan interest rate and new level payment amount.

<PAGE> 32

We must reduce the loan interest if on a Contract Anniversary the maximum loan
interest rate is lower than the interest rate for the previous Contract Year
by 0.50% or more. We may increase the loan interest rate if the maximum loan
interest rate is at least 0.50% higher than the loan interest rate for the
previous Contract Year. The loan interest rate we charge will be equal to or
less than the maximum loan interest rate at the time it is determined, and
will never be higher than 15%.

Twenty days prior to the due date of each loan repayment, as set
forth in the loan agreement or an amendment to the loan agreement, we will
send you a notice of the amount due. Corresponding to the due date of each
loan repayment, we will establish a "billing window" defined as the period
beginning on the date that we mail the repayment notice (20 days prior to the
payment due date) and extending 31 days after the due date.

Loan repayments received within the billing window that are
sufficient to satisfy the amount due will be applied to the Contract as
interest and repayment of principal. The amounts of principal and interest set
forth in the loan agreement or an amendment to the loan agreement, are the
amounts if all loan repayments are made exactly on the due date. The actual
amount of a repayment allocated to interest will be determined based on the
actual date the repayment is received, the amount of the outstanding loan, and
the number of days since the last repayment date. The amount of principal will
be the repayment amount minus the interest. The loan principal repayment will,
on the date it is received, be allocated among the Fixed Account and
Subaccounts of the Variable Account in accordance with the allocation of Net
Premium Payments then in effect.

Loan repayments received outside of the billing window will be
processed as a repayment of principal only. Only repayments received within
the billing window may satisfy the amount due. If a payment received within
the billing window is less than the amount due, it will be returned to you.

If a loan repayment that is sufficient to satisfy the amount due is
not made within the billing window, then the entire balance of the loan will
be considered in default. This amount may be taxable to the borrower, and may
be subject to the early withdrawal tax penalty. If you are not eligible to
take a distribution pursuant to the Contract or plan provisions, the deemed
distribution will be reportable for tax purposes, but will not be offset
against the Contract Value until such time as a distribution may be made. On
each Contract Anniversary, while a loan is in default, interest accrued on
loans will be added to the outstanding loans.

If you surrender your Contract while a loan is outstanding, you will
receive the Cash Surrender Value, which is reduced to reflect the loan
outstanding plus accrued interest. If the Owner/Annuitant dies while the loan
is outstanding, the Death Benefit will also be reduced to reflect the amount
of the loan outstanding plus accrued interest. If annuity payments start while
the loan is outstanding, the Contract Value will be reduced by the amount of
the outstanding loan plus accrued interest. Until the loan is repaid, we may
restrict any transfer of the Contract which would otherwise qualify as a
transfer as permitted in the Code.

Loans may also be subject to additional limitations or restrictions
under the terms of the employer's plan. Loans permitted under this Contract
may still be taxable in whole or part if the participant has additional loans
from other plans or contracts. We will calculate the maximum nontaxable loan
based on the information provided by the participant or the employer. In
addition, if the section 403(b) Tax-Sheltered Annuity Contract is subject to
the Employee Retirement Income Security Act of 1974 ("ERISA"), a loan will be
treated as a "prohibited transaction" subject to certain penalties unless
additional ERISA requirements are satisfied. You should seek competent legal
advice before requesting a loan.

If a loan is outstanding, all payments received from you will be
considered loan repayments. Any payments received from your employer will be
considered premium payments. We reserve the right to modify the terms or
procedures associated with the loan privilege in the event of a change in the
laws or regulations relating to the treatment of loans. We also reserve the
right to assess a loan processing fee. IRA's, Non-Qualified Contracts and
Qualified Contracts other than section 403(b) Tax-Sheltered Annuity Contracts
are not eligible for loans.

<PAGE> 33

SURRENDER AND WITHDRAWAL

At any time prior to the Annuitization Date (or thereafter if Payment
Option 1 has been elected) you may, upon proper written application deemed by
us to be in good order, surrender the Contract. "Proper written application"
means that you must request the surrender in writing and include the Contract.
We may require that the signature(s) be guaranteed by a member firm of a major
stock exchange or other depository institution qualified to give such a
guaranty.

We will, upon receipt of any such written request, pay to you the
Cash Surrender Value. The Cash Surrender Value will reflect any applicable
CDSC (see "Contingent Deferred Sales Charge", page 25), any outstanding loan
and accrued interest, and, in certain states, a premium tax charge (see
"Premium Taxes", page 27). The Cash Surrender Value may be more or less than
the total of Premium Payments you made, depending on the market value of the
underlying Fund shares, the amount of any applicable CDSC, and other factors.

We will normally not permit Withdrawal or Surrender of Premium
Payments made by check within the 15 calendar days prior to the date the
request for Withdrawal or Surrender is received.

At any time before the death of the Owner and after 30 days from the
Date of Issue, the Owner may make a Withdrawal of a portion of the Contract
Value. The minimum Withdrawal is $500, except where the Withdrawal is part of
an automated process of paying investment advisory fees to the Owner's
investment advisor. At least $3500 in Contract Value must remain after any
Withdrawal.

Generally, Withdrawals in the first Contract Year and Withdrawals in
excess of 15% (10% in New Jersey and Washington) of Contract Value as of the
most recent Contract Anniversary in any Contract Year are subject to the CDSC.
See "Contingent Deferred Sales Charge", page 25. However, see "Available
Automated Fund Management Features-Systematic Withdrawals" page 33, for
information on a limited means of making systematic Withdrawals in the first
year free of the CDSC. Another limited way to make a Withdrawal in the first
year without paying a CDSC is to make a Withdrawal which is part of a series
of substantially equal periodic payments made for the life of the Owner or the
joint lives of the Owner and his or her spouse, under section 72(t)(2)(a)(iv)
of the Code. Withdrawals will be deemed to be taken from Net Premium Payments
in chronological order, with the oldest Net Premium Payment being withdrawn
first. This method will tend to minimize the amount of the CDSD.

The Withdrawal will be taken from the Subaccounts based on your
instructions at the time of the Withdrawal. If you provide specific
instructions, amounts must be deducted first from the Variable Account and may
only be deducted from the unloaned portion of the Fixed Account to the extent
that the Contract Value in the Variable Account is insufficient to accomplish
the Withdrawal. If specific allocation instructions are not provided, the
Withdrawal will be deducted pro rata from the Subaccounts and from the
unloaned portion of the Fixed Account. Any CDSC associated with a Withdrawal
will be deducted from the Subaccounts and from the Fixed Account based on the
allocation percentages of the Withdrawal. Any amount of CDSC that we deduct
from a Subaccount which is in excess of the available value in that Subaccount
will be deducted pro rata among the remaining Subaccounts and the unloaned
portion of the Fixed Account. If the Withdrawal cannot be processed in
accordance with your instructions, then we will not process it until we
receive further instructions.

A Surrender or a Withdrawal may have tax consequences. See "Federal
Income Tax Considerations", page 37.

<PAGE> 34

PAYMENTS

We will pay any funds surrendered or withdrawn from the Variable
Account within 7 days of receipt of such request. However, we reserve the
right to suspend or postpone the date of any payment or transfer of any
benefit or values for any Valuation Period:

(1) when the New York Stock Exchange ("Exchange") is closed,

(2) when trading on the Exchange is restricted,

(3) when an emergency exists as a result of which disposal of
securities held in the Variable Account is not reasonably
practicable or it is not reasonably practicable to determine the
value of the Variable Account's net assets, or

(4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of security
holders.

The rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (2) and (3) exist.

We reserve the right to delay payment of any amounts allocated to the
Fixed Account which are payable as a result of a Surrender, Withdrawal or loan
for up to six months after we receive a written request in a form satisfactory
to us.

SURRENDERS AND WITHDRAWALS UNDER A TAX-SHELTERED ANNUITY CONTRACT

Where the Contract has been issued as a Tax-Sheltered Annuity, the
Owner may surrender or make a Withdrawal of part or all of the Contract Value
at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Designated Annuitant except as provided
below:

(a) The surrender or Withdrawal of Contract Value attributable
to contributions made pursuant to a salary reduction
agreement (within the meaning of Code Section 402(g)(3)(A)
or (C)), or transfers from a Custodial Account described in
Section 403(b)(7) of the Code, may be executed only:

1. when the Owner attains age 59 1/2, separates from
service, dies, or becomes disabled (within the
meaning of Code Section 72(m)(7)); or

2. in the case of hardship (as defined for purposes of
Code Section 401 (k)), provided that any surrender
of Contract Value in the case of hardship may not
include any income attributable to salary reduction
contributions.

(b) The surrender and Withdrawal limitations described in (a)
above for Tax-Sheltered Annuities apply to:

1. salary reduction contributions to Tax-Sheltered
Annuities made for plan years beginning after
December 31, 1988;

2. earnings credited to such contracts after the last
plan year beginning before January 1, 1989, on
amounts attributable to salary reduction
contributions; and

3. all amounts transferred from 403(b)(7) Custodial
Accounts (except that earnings, and employer
contributions as of December 31, 1988 in such
Custodial Accounts may be withdrawn in the case of
hardship).

(c) Any Distribution other than the above, including exercise of
a contractual ten-day free look provision (when available)
may result in the immediate application of taxes and

<PAGE> 35

penalties and/or retroactive disqualification of a Qualified
Contract or Tax-Sheltered Annuity.

A premature Distribution may not be eligible for rollover treatment.
To assist in preventing disqualification in the event of a ten-day free look,
National Life will agree to transfer the proceeds to another contract which
meets the requirements of Section 403(b) of the Code, upon proper direction by
the Owner. The foregoing is National Life's understanding of the withdrawal
restrictions which are currently applicable under Section 403(b)(11) and
Revenue Ruling 90-24. Such restrictions are subject to legislative change
and/or reinterpretation from time to time. Distributions pursuant to Qualified
Domestic Relations Orders will not be considered to be a violation of the
restrictions stated in this provision.

The Contract surrender and Withdrawal provisions may also be modified
pursuant to the plan terms and Code tax provisions for Qualified Contracts.

TELEPHONE TRANSACTION PRIVILEGE

If you elect the telephone transaction privilege, you may make changes
in Net Premium Payment allocations, transfers, or initiate or make changes in
dollar cost averaging or portfolio rebalancing, and in the case of section
403(b) Tax Sheltered Annuities, take loans up to $10,000, by providing
instructions to us at our Home Office over the telephone. You can make the
election either on the application for the Contract or by providing a proper
written authorization to us. We reserve the right to suspend telephone
transaction privileges at any time and for any reason. You may, on the
application or by a written authorization, authorize your National Life agent
to provide telephone instructions on your behalf.

We employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If we follow these procedures we will
not be liable for any losses due to unauthorized or fraudulent instructions.
We may be liable for any such losses if those reasonable procedures are not
followed. The procedures followed for telephone transfers will include one or
more of the following:

(1) requiring some form of personal identification prior to acting on
instructions received by telephone,

(2) providing written confirmation of the transaction, and

(3) making a tape recording of the instructions given by telephone.

AVAILABLE AUTOMATED FUND MANAGEMENT FEATURES

We currently offer the following free automated fund management
features. However, we are not legally obligated to continue to offer these
features and we may cease offering one or more of such features at any time,
after providing 60 days prior written notice to all Owners who are currently
utilizing the features being discontinued. Only one automated fund management
feature is available under any single Contract at one time.

Dollar Cost Averaging. This feature permits you to automatically
transfer funds from the Money Market Subaccount to any other Subaccounts on a
monthly basis. You may elect it at issue by marking the appropriate box on the
initial application and completing the appropriate instruction or after issue
by filling out similar information on a change request form and sending it to
us.

If you elect this feature, each month on the Monthly Contract Date we
will take the amount to be transferred from the Money Market Subaccount and
transfer it to the Subaccount or Subaccounts designated to receive the funds.
This procedure starts with the Monthly Contract Date next succeeding the Date
of Issue or next succeeding the date of an election subsequent to purchase and
stops when the amount in the Money Market Subaccount is depleted. The minimum
monthly transfer by Dollar Cost Averaging is $100, except for the transfer
which reduces the amount in the Money Market Subaccount

<PAGE> 36

to zero. You may discontinue Dollar Cost Averaging at any time by sending an
appropriate change request form to us.

This feature allows you to move funds into the various investment
classes on a more gradual and systematic basis than the frequency on which
Premium Payments ordinarily are made. The dollar cost averaging method of
investment is designed to reduce the risk of making purchases only when the
price of units is high. The periodic investment of the same amount will result
in higher numbers of units being purchased when unit prices are lower and
lower numbers of units being purchased when unit prices are higher. This
technique will not assure a profit or protect against a loss in declining
markets. For the dollar cost averaging technique to be effective, amounts
should be available for allocation from the Money Market Subaccount through
periods of low price levels as well as higher price levels.

Portfolio Rebalancing. This feature permits you to automatically
rebalance the value in the Subaccounts on a quarterly, semi-annual or annual
basis, based on the premium allocation percentages in effect at the time of
the rebalancing. You may elect it at issue by marking the appropriate box on
the initial application or after issue by completing a change request form and
sending it to us.

In Contracts utilizing Portfolio Rebalancing from the Date of Issue, an
automatic transfer takes place which causes the percentages of the current
values in each Subaccount to match the current premium allocation percentages.
This procedure starts with the Monthly Contract Date three, six or twelve
months after the Date of Issue and continues on each Monthly Contract Date
three, six or twelve months thereafter. Contracts electing Portfolio
Rebalancing after issue will have the first automated transfer occur as of the
Monthly Contract Date on or next following the date that the election is
received. Subsequent rebalancing transfers occur every three, six or twelve
months thereafter. You may discontinue Portfolio Rebalancing at any time by
submitting an appropriate change request form.

If you change the Contract's premium allocation percentages, Portfolio
Rebalancing will automatically be discontinued unless you specifically direct
otherwise.

Portfolio Rebalancing results in periodic transfers out of Subaccounts
that have had relatively favorable investment performance and into Subaccounts
which have had relatively unfavorable investment performance. Portfolio
rebalancing does not guarantee a profit or protect against a loss.

Systematic Withdrawals. At any time after one year from the Date of
Issue, if the Contract Value at the time of initiation of the program is at
least $15,000, you may elect in writing to take systematic Withdrawals of a
specified dollar amount (of at least $100) on a monthly, quarterly,
semi-annual or annual basis. You may provide specific instructions as to how
the systematic Withdrawals are to be taken, but the Withdrawals must be taken
first from the Subaccounts and may only be taken from the unloaned portion of
the Fixed Account to the extent that the Contract Value in the Variable
Account is insufficient to accomplish the Withdrawal. If you have not provided
specific instructions or if specific instructions cannot be carried out, we
process the Withdrawals by taking Accumulation Units from all of the
Subaccounts in which you have an interest and the unloaned portion of the
Fixed Account on a pro rata basis. Each systematic Withdrawal is subject to
federal income taxes. In addition, a 10% federal penalty tax may be assessed
on systematic Withdrawals if you are under age 59 1/2. If you direct, we will
withhold federal income taxes from each systematic Withdrawal. A systematic
Withdrawal program terminates automatically when a systematic Withdrawal would
cause the remaining Contract Value to be $3,500 or less. If this happens, then
the systematic Withdrawal transaction causing the Contract Value to fall below
$3500 will not be processed. You may discontinue systematic Withdrawals at any
time by notifying us in writing.

A CDSC may apply to systematic Withdrawals in accordance with the
considerations set forth in "Contingent Deferred Sales Charge", page 25. If
you withdraw amounts pursuant to a systematic Withdrawal program, then, in
most states, you may withdraw in each Contract Year after the first Contract
Year without a CDSC an amount up to 15% of the Contract Value as of the most
recent Contract Anniversary (a 10% CDSC-free Withdrawal provision applies in
New Jersey and Washington

<PAGE> 37

- see "Contingent Deferred Sales Charge," page 25). Both Withdrawals you
request and Withdrawals pursuant to a systematic Withdrawal program will count
toward the limit of the amount that may be withdrawn in any Contract Year free
of the CDSC. In addition, any amount withdrawn in order to meet minimum
Distribution requirements under the Code shall be free of CDSC.

Limited systematic Withdrawals are also available in the first
Contract Year (but after 30 days from issue). These systematic Withdrawals are
limited to monthly systematic Withdrawal programs only. The maximum aggregate
amount for the remaining months of the first Contract Year is the annual
amount that may be withdrawn in Contract Years after the first Contract Year
free of a CDSC (i.e., either 15% or 10% of the Contract Value, depending on
the state). These systematic Withdrawals will not be subject to a CDSC. The
other rules for systematic Withdrawals made after the first Contract Year,
including the $15,000 minimum Contract Value, minimum $100 payment, and
allocation rules, will apply to these systematic Withdrawals.

CONTRACT RIGHTS UNDER CERTAIN PLANS

Contracts may be purchased in connection with a plan sponsored by an
employer. In such cases, all rights under the Contract rest with the Owner,
which may be the employer or other obligor under the plan, and benefits
available to participants under the plan are governed solely by the provisions
of the plan. Accordingly, some of the options and elections under the Contract
may not be available to participants under the provisions of the plan. In such
cases, participants should contact their employers for information regarding
the specifics of the plan.

THE FIXED ACCOUNT

Net Premium Payments under the Fixed Account portion of the Contract
and transfers to the Fixed Account portion are part of our general account,
which supports insurance and annuity obligations. Because of exemptive and
exclusionary provisions, interests in the general account are not registered
under the Securities Act of 1933 ("Securities Act"), nor is the general
account registered as an investment company under the Investment Company Act.
Accordingly, neither the general account nor any interest therein are
generally subject to the provisions of the Securities Act or Investment
Company Act, and we have been advised that the staff of the Securities and
Exchange Commission has not reviewed the disclosures in this prospectus which
relate to the guaranteed interest portion. Disclosures regarding the Fixed
Account portion of the Contract and the general account, however, may be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.

The Fixed Account is made up of all our general assets, other than those
in the Variable Account and any other segregated asset account. Fixed Account
Net Premium Payments will be allocated to the Fixed Account by election of the
Owner at the time of purchase or by a later change in allocation of Net Premium
Payments. We will invest the assets of the Fixed Account in those assets we
choose and allowed by applicable law.

MINIMUM GUARANTEED AND CURRENT INTEREST RATES

The Contract Value held in the Fixed Account which is not held in a
Collateral Fixed Account is guaranteed to accumulate at a minimum effective
annual interest rate of 3.0%. We may credit the Contract Value in the
unloaned portion of the Fixed Account with current rates in excess of the
minimum guarantee but we are not obligated to do so. We have no specific
formula for determining current interest rates. Since we, in our sole
discretion, anticipate changing the current interest rate from time to time,
allocations to the Fixed Account made at different times are likely to be
credited with different current interest rates. We declare an interest rate
each month to apply to amounts allocated or transferred to the Fixed Account
in that month. The rate declared on such amounts remains in effect for
twelve months. At the end of the 12-month period, we reserve the right to
declare a new current interest rate on such amounts and accrued interest
thereon (which may be a different current interest rate than the current
interest rate on new allocations to the Fixed Account on

<PAGE> 38

that date). We determine any interest credited on the amounts in the Fixed
Account in excess of the minimum guaranteed rate of 3.0% per year in our
discretion. You assume the risk that interest credited may not exceed the
guaranteed minimum rate. Amounts allocated to the Fixed Account do not share
in the investment performance of our general account or any portion thereof.

Amounts deducted from the unloaned portion of the Fixed Account for
the charge for the optional Enhanced Death Benefit Rider, the Annual
Contract Fee or transfers to the Variable Account are, for the purpose of
crediting interest, accounted for on a last in, first out basis. Amounts
deducted from the unloaned portion of the Fixed Account for Withdrawals are
accounted for on a first in, first out basis for such purpose.

National Life reserves the right to change the method of crediting
interest from time to time, provided that such changes do not have the
effect of reducing the guaranteed rate of interest below 3.0% per annum or
shorten the period for which the interest rate applies to less than 12
months.

For Contracts purchased in the State of Washington, no Premium
Payments or Contract Value may be allocated to the Fixed Account.

ENHANCED FIXED ACCOUNT

During special promotional periods (the "offer period"), we may make
available to the Contracts a special Fixed Account Option, called the
"Enhanced Fixed Account". The Enhanced Fixed Account, when available, allows
you to move value into the Variable Account on a gradual and systematic basis,
while earning interest at a higher fixed rate that that otherwise offered on
the Fixed Account on your value while it awaits transfer into the Variable
Account.

During an offer period (which will be from time to time at our
discretion), the Enhanced Fixed Account will be available to new and existing
Contract Owners who make a one-time new Premium Payment of at least a minimum
dollar amount we specify at the time of the offer. Contract Value in the
Enhanced Fixed Account will accumulate at an effective annual interest rate in
excess of the current rates then being credited to Contract Value in the Fixed
Account. We will declare the interest rate for the Enhanced Fixed Account at
the time of the offer in our discretion, and this interest rate will apply for
the entire offer period. When we set an offer period, we will announce all the
terms of the Enhanced Fixed Account, and post this information on our web site
at www.nationallife.com.

We will require that the Contract Value in the Enhanced Fixed Account
be systematically transferred on a monthly basis from the Enhanced Fixed
Account to the Subaccounts. The required monthly transfer amount will be a
percentage of the Premium Payment allocated to the Enhanced Fixed Account. We
will declare this percentage at the time of the offer, in our discretion. Each
month on the Monthly Contract Date, the monthly transfer amount will be
transferred from the Enhanced Fixed Account to the Subaccounts and in the
percentage amounts selected by the Owner (other than the Money Market
Subaccount), until the Contract Value in the Enhanced Fixed Account is
exhausted.

The Enhanced Fixed Account will be part of the Fixed Account described
above.

Transfers into the Enhanced Fixed Account will not be allowed. The
Owner may transfer Contract Value out of the Enhanced Fixed Account at any
time, by making a transfer request. If the entire Contract Value in the
Enhanced Fixed Account is transferred out, the program ends. If less than the
entire Contract Value in the Enhanced Fixed Account is transferred out, the
scheduled monthly transfers will continue until the Enhanced Fixed Account is
exhausted.

Withdrawals from the Enhanced Fixed Account will be allowed, in the
same manner as for other Withdrawals, but will be subject to any applicable
CDSC.

For Contracts utilizing the Enhanced Fixed Account, National Life
reserves the right to reduce the number of different Subaccounts, other than
the Money Market Subaccount, that may be used by

<PAGE> 39

the Contract over its entire lifetime from 16 to 15. There is no charge for
participating in an offer period.

This program is not available simultaneously with Dollar Cost
Averaging, Portfolio Rebalancing or Systematic Withdrawals. If you elect
Systematic Withdrawals while you have Contract Value in the Enhanced Fixed
Account, your Contract Value in the Enhanced Fixed Account will immediately be
transferred to your selected Subaccounts.

During the offer period we may permit, in our discretion, additional
Premium Payments on the same Contract to be allocated to the Enhanced Fixed
Account. If we do so, we will add a declared percentage of the new Premium
Payment to the original monthly transfer amount, the same instructions for
allocating to the Subaccounts will apply, and the program will continue to
operate until the Contract Value in the Enhanced Fixed Account is exhausted.

We may need to refund Premium Payments intended for the Enhanced Fixed
Account if they are less than the minimum required, if they are received after
the end of the offer period, or if, for any other reason, the written
instructions of the Owner cannot be carried out. We may hold these Premium
Payments for up to 20 days before refunding them. Any amounts refunded will be
credited with interest at 5%.

This program will not be available in the State of Washington.

OPTIONAL ENHANCED DEATH BENEFIT RIDER

You may choose to include the Enhanced Death Benefit Rider in your
Contract. The Rider is subject to the restrictions and limitations set forth
in it. Election of this optional benefit involves an additional cost. This
Rider is not available in Texas. If you elected the Enhanced Death Benefit
Rider, then the following enhanced death benefit will be payable to the
Beneficiary if you (or the first of Joint Owners, or the Annuitant if the
Owner is not a natural person) die prior to reaching age 81 (on an age nearest
birthday basis) the highest of:

(a) Contract Value;

(b) the total of all Net Premium Payments, less all Withdrawals
(including any CDSC deducted in connection with such Withdrawals)
and less any outstanding loan and accrued interest, and

(c) the largest Contract Value as of any prior Contract Anniversary
after the Enhanced Death Benefit Rider was applicable to the
Contract, plus Net Premium Payments, minus any Withdrawals (including
any CDSC deducted in connection with such Withdrawals), and minus any
loan taken and accrued interest thereon, in each case since such
Contract Anniversary.

We calculate this as of the date we receive due proof of death. Any
applicable premium tax charge payable on your death will be applied to reduce
the value of the determined enhanced death benefit (see "Premium Taxes, page
27).

If you (or the first of Joint Owners, or the Annuitant if the Owner
is not a natural person) die at age 81 or later, the death benefit will not be
enhanced and will be an amount equal to Contract Value, less any applicable
premium tax charge.

The Enhanced Death Benefit Rider is available at issue if you are age
75 or younger. It is available after issue if you are age 75 or younger only
on a Contract Anniversary and only if at the time of the Rider is requested
the Contract Value is greater than the total of all Net Premium Payments less
all Withdrawals, and any outstanding loan on the Contract and accrued interest
on such loan.

<PAGE> 40

The annual charge for this Rider is 0.20% of Contract Value. After
you reach ago 80, on an age nearest birthday basis, we discontinue the charge.
See "Charge for Optional Enhanced Death Benefit Rider", page 27.

We distribute the Enhanced Death Benefit in the same manner as the
normal Death Benefit. See "Death of Owner", page 22.

FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is general in nature and is not intended as
tax advice. Each person concerned should consult a competent tax advisor. No
attempt is made to consider any applicable state tax or other tax laws.

If you invest in a variable annuity as part of a pension plan or
employer-sponsored retirement program, your contract is called a Qualified
Contract. If your annuity is independent of any formal retirement or pension
plan, it is termed a Non-Qualified Contract. The tax rules applicable to
Qualified Contracts vary according to the type of retirement plan and the
terms and conditions of the plan.

TAXATION OF NON-QUALIFIED CONTRACTS

Non-Natural Person. If a non-natural person (e.g., a corporation or a
trust) owns a Non-Qualified Contract, the taxpayer generally must include in
income any increase in the excess of the account value over the investment in
the Contract (generally, the premiums or other consideration paid for the
contract) during the taxable year. There are some exceptions to this rule and
a prospective owner that is not a natural person should discuss these with a
tax adviser.

The following discussion generally applies to Contracts owned by
natural persons.

Withdrawals. When a withdrawal from a Non-Qualified Contract occurs,
the amount received will be treated as ordinary income subject to tax up to an
amount equal to the excess (if any) of the account value immediately before
the distribution over the Owner's investment in the Contract (generally, the
premiums or other consideration paid for the Contract, reduced by any amount
previously distributed from the Contract that was not subject to tax) at that
time. In the case of a surrender under a Non-Qualified Contract, the amount
received generally will be taxable only to the extent it exceeds the Owner's
investment in the Contract.

Penalty Tax on Certain Withdrawals. In the case of a distribution
from a Non-Qualified Contract, there may be imposed a federal tax penalty
equal to ten percent of the amount treated as income. In general, however,
there is no penalty on distributions:

-- made on or after the taxpayer reaches age 59 1/2

-- made on or after the death of an Owner;

-- attributable to the taxpayer's becoming disabled; or

-- made as part of a series of substantially equal periodic
payments for the life (or life expectancy) of the taxpayer.

Other exceptions may be applicable under certain circumstances and special
rules may be applicable in connection with the exceptions enumerated above.
You should consult a tax adviser with regard to exceptions from the penalty
tax.

Annuity Payments. Although tax consequences may vary depending on the
payout option elected under an annuity contract, a portion of each annuity
payment is generally not taxed and the

<PAGE> 41

remainder is taxed as ordinary income. The non-taxable portion of an annuity
payment is generally determined in a manner that is designed to allow you to
recover your investment in the contract ratably on a tax-free basis over the
expected stream of annuity payments, as determined when annuity payments
start. Once your investment in the contract has been fully recovered, however,
the full amount of each annuity payment is subject to tax as ordinary income.

Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of your death or the death of the Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a surrender of
the Contract, or (ii) if distributed under a payout option, they are taxed in
the same way as annuity payments.

Transfers, Assignments or Exchanges of a Contract. A transfer or
assignment of ownership of a Contract, the designation of an annuitant, the
selection of certain maturity dates, or the exchange of a Contract may result
in certain tax consequences to you that are not discussed herein. An owner
contemplating any such transfer, assignment or exchange, should consult a tax
advisor as to the tax consequences.

Withholding. Annuity distributions are generally subject to
withholding for the recipient's federal income tax liability. Recipients can
generally elect, however, not to have tax withheld from distributions.

Multiple Contracts. All annuity contracts that are issued by us (or
our affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in such
owner's income when a taxable distribution occurs.

TAXATION OF QUALIFIED CONTRACTS

The tax rules applicable to Qualified Contracts vary according to the
type of retirement plan and the terms and conditions of the plan. Your rights
under a Qualified Contract may be subject to the terms of the retirement plan
itself, regardless of the terms of the Qualified Contract. Adverse tax
consequences may result if you do not ensure that contributions, distributions
and other transactions with respect to the Contract comply with the law.

Individual Retirement Accounts (IRAs), as defined in Section 408 of
the Internal Revenue Code (Code), permit individuals to make annual
contributions of up to the lesser of $2,000 or 100% of adjusted gross income.
The contributions may be deductible in whole or in part, depending on the
individual's income. Distributions from certain pension plans may be "rolled
over" into an IRA on a tax-deferred basis without regard to these limits.
Amounts in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. A 10% penalty tax generally applies to distributions
made before age 59 1/2, unless certain exceptions apply. The Internal Revenue
Service has not reviewed the Contract for qualification as an IRA, and has not
addressed in a ruling of general applicability whether a death benefit
provision such as the optional Enhanced Death Benefit provision in the
Contract comports with IRA qualification requirements.

SIMPLE IRAs permit certain small employers to establish SIMPLE plans
as provided by Section 408(p) of the Code, under which employees may elect to
defer to a SIMPLE IRA a percentage of compensation up to $6,000 (as increased
for cost of living adjustments). The sponsoring employer is required to make
matching or non-elective contributions on behalf of employees. Distributions
from SIMPLE IRAs are subject to the same restrictions that apply to IRA
distributions and are taxed as ordinary income. Subject to certain exceptions,
premature distributions prior to age 59 1/2 are subject to a 10 percent
penalty tax, which is increased to 25 percent if the distribution occurs
within the first two years after the commencement of the employee's
participation in the plan.

Roth IRAs, as described in Code section 408A, permit certain eligible
individuals to contribute to make non-deductible contributions to a Roth IRA
in cash or as a rollover or transfer from another Roth IRA or other IRA. A
rollover from or conversion of an IRA to a Roth IRA is generally subject to

<PAGE> 42

tax and other special rules apply. The Owner may wish to consult a tax adviser
before combining any converted amounts with any other Roth IRA contributions,
including any other conversion amounts from other tax years. Distributions
from a Roth IRA generally are not taxed, except that, once aggregate
distributions exceed contributions to the Roth IRA, income tax and a 10%
penalty tax may apply to distributions made (1) before age 59 1/2 (subject to
certain exceptions) or (2) during the five taxable years starting with the
year in which the first contribution is made to any Roth IRA. A 10% penalty
tax may apply to amounts attributable to a conversion from an IRA if they are
distributed during the five taxable years beginning with the year in which the
conversion was made.

Corporate pension and profit-sharing plans under Section 401(a) of
the Code allow corporate employers to establish various types of retirement
plans for employees, and self-employed individuals to establish qualified
plans for themselves and their employees. Adverse tax consequences to the
retirement plan, the participant or both may result if the Contract is
transferred to any individual as a means to provide benefit payments, unless
the plan complies with all the requirements applicable to such benefits prior
to transferring the Contract. The Contract includes an Enhanced Death Benefit
that in some cases may exceed the greater of the premium payments or the
account value. The Death Benefit could be characterized as an incidental
benefit, the amount of which is limited in any pension or profit-sharing plan.
Because the Death Benefit may exceed this limitation, employers using the
Contract in connection with such plans should consult their tax adviser.

Tax Sheltered Annuities under section 403(b) of the Code allow
employees of certain Section 501(c)(3) organizations and public schools to
exclude from their gross income the premium payments made, within certain
limits, on a contract that will provide an annuity for the employee's
retirement. These premium payments may be subject to FICA (social security)
tax. Distributions of (1) salary reduction contributions made in years
beginning after December 31, 1988; (2) earnings on those contributions; and
(3) earnings on amounts held as of the last year beginning before January 1,
1989, are not allowed prior to age 59 1/2, separation from service, death or
disability. Salary reduction contributions may also be distributed upon
hardship, but would generally be subject to penalties. The Contract includes
an Enhanced Death Benefit that in some cases may exceed the greater of the
premium payments or the account value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity. Because the Death Benefit may exceed this limitation,
employers using the Contract in connection with such plans should consult
their tax adviser.

Section 457 Plans, while not actually providing for a qualified plan
as that term is normally used, provides for certain deferred compensation
plans with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax exempt organizations. The Contract can be used with
such plans. Under such plans a participant may specify the form of investment
in which his or her participation will be made. For non-governmental Section
457 plans, all such investments are owned by and are subject to, the claims of
the general creditors of the sponsoring employer. In general, all amounts
received under a section 457 plan are taxable and are subject to federal
income tax withholding as wages.

Other Tax Issues. Qualified Contracts have minimum distribution rules
that govern the timing and amount of distributions. You should refer to your
retirement plan, adoption agreement, or consult a tax advisor for more
information about these distribution rules.

Distributions from Qualified Contracts generally are subject to
withholding for the Owner's federal income tax liability. The withholding rate
varies according to the type of distribution and the Owner's tax status. The
Owner will be provided the opportunity to elect not have tax withheld from
distributions.

"Eligible rollover distributions" from section 401(a) plans, Section
403(a) annuities and Section 403(b) plans are subject to a mandatory federal
income tax withholding of 20%. An eligible rollover distribution is the
taxable portion of any distribution from such a plan, except certain
distributions such as distributions required by the Code or distributions in a
specified annuity form.

<PAGE> 43

The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.

POSSIBLE TAX LAW CHANGES

Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Contract could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Contract.

We have the right to modify the contract in response to legislative
changes that could otherwise diminish the favorable tax treatment that annuity
contract owners currently receive. We make no guarantee regarding the tax
status of any contact and do not intend the above discussion as tax advice.

GENDER NEUTRALITY

In 1983, the United States Supreme Court held that optional annuity
benefits provided under an employee's deferred compensation plan could not,
under Title VII of the Civil Rights Act of 1964 vary between men and women on
the basis of sex. The Court applied its decision to benefits derived from
contributions made on or after August 1, 1983. Lower federal courts have since
held that the Title VII prohibition of sex-distinct benefits may apply at an
earlier date. In addition, some states prohibit using sex-distinct mortality
tables.

The Contract uses sex-distinct actuarial tables, unless state law
requires the use of sex-neutral actuarial tables. As a result, the Contract
generally provides different benefits to men and women of the same age.
Employers and employee organizations which may consider buying Contracts in
connection with any employment-related insurance or benefits program should
consult their legal advisors to determine whether the Contract is appropriate
for this purpose.

VOTING RIGHTS

Voting rights under the Contracts apply only with respect to Net
Premium Payments or accumulated amounts allocated to the Variable Account.

In accordance with our view of present applicable law, we vote the
shares of the Funds held in the Variable Account at regular and special
meetings of the shareholders of the Funds. These shares are voted in
accordance with instructions received from you if you have an interest in the
Variable Account. If the Investment Company Act or any regulation thereunder
should be amended or if the present interpretation thereof should change, and
as a result we determine that we are permitted to vote the shares of the Funds
in our own right, we may elect to do so.

The person having the voting interest under a Contract is the Owner.
The number of Fund shares attributable to each Owner is determined by dividing
the Owner's interest in each Subaccount by the net asset value of the Fund
corresponding to the Subaccount.

We determine the number of shares which a person has the right to
vote on a date we choose not more than 90 days prior to the meeting of the
Fund. We solicit voting instructions by written communication at least 21 days
prior to such meeting.

We vote Fund shares held in the Variable Account as to which no
timely instructions are received in the same proportions as the voting
instructions we receive with respect to all contracts participating in the
Variable Account.

Each person having a voting interest will receive periodic reports
relating to the Funds, proxy material and a form with which to give such
voting instructions.

<PAGE> 44

CHANGES TO VARIABLE ACCOUNT

We reserve the right to create one or more new separate accounts,
combine or substitute separate accounts, or to add new investment Funds for
use in the Contracts at any time. In addition, if the shares of the Funds
described in this Prospectus should no longer be available for investment by
the Variable Account or, if in our judgment further investment in such Fund
shares should become inappropriate, we may eliminate Subaccounts, combine two
or more Subaccounts or substitute one or more Funds for other Fund shares
already purchased or to be purchased in the future under the Contract. No
substitution of securities in the Variable Account may take place without
prior approval of the Securities and Exchange Commission and under such
requirements as it may impose. We may also operate the Variable Account as a
management investment company under the Investment Company Act, deregister the
Variable Account under the Investment Company Act (if such registration is no
longer required), transfer all or part of the assets of the Variable Account
to another separate account or to the Fixed Account (subject to obtaining all
necessary regulatory approvals), and make any other changes reasonably
necessary under the Investment Company Act or applicable state law.

ADVERTISING
YIELD

A "yield" and "effective yield" may be advertised for the Market
Street Money Market Portfolio Subaccount. "Yield" is a measure of the net
dividend and interest income earned over a specific seven-day period (which
period will be stated in the advertisement) expressed as a percentage of the
offering price of the Subaccount's units. Yield is an annualized figure, which
means that it is assumed that the Subaccount generates the same level of net
income over a 52-week period. The "effective yield" is calculated similarly
but includes the effect of assumed compounding, calculated under rules
prescribed by the Securities and Exchange Commission. The effective yield will
be slightly higher than yield due to this compounding effect.

PERFORMANCE

We may also from time to time advertise the performance of the
Subaccounts of the Variable Account relative to the performance of other
variable annuity subaccounts or funds with similar or different objectives, or
the investment industry as a whole. Other investments to which the Subaccounts
may be compared include, but are not limited to: precious metals; real estate;
stocks and bonds; closed-end funds; CDs; bank money market deposit accounts
and passbook savings; and the Consumer Price Index.

Market Comparisons. The Subaccounts of the Variable Account may also
be compared to certain market indexes, which may include, but are not limited
to: S&P 500; Shearson/Lehman Intermediate Government/Corporate Bond Index;
Shearson/Lehman Long-Term Government/Corporate Bond Index; Donoghue Money Fund
Average; U.S. Treasury Note Index; Bank Rate Monitor National Index of 2 Year
CD Rates; and Dow Jones Industrial Average.

Normally these rankings and ratings are published by independent
tracking services and publications of general interest including, but not
limited to: Lipper Analytical Services, Inc., CDA/ Wiesenberger, Morningstar,
Donoghue's; magazines such as Money, Forbes, Kiplinger's Personal Finance
Magazine, Financial World, Consumer Reports, Business Week, Time, Newsweek,
National Underwriter, U.S. News and World Report; rating services such as
LIMRA, Value, Best's Agent Guide, Western Annuity Guide, Comparative Annuity
Reports; and other publications such as the Wall Street Journal, Barron's,
Investor's Daily, and Standard & Poor's Outlook. In addition, Variable Annuity
Research & Data Service (The VARDS Report) is an independent rating service
that ranks over 500 variable annuity funds based upon total return
performance. These rating services and publications rank the performance of
the Funds against all funds over specified periods and against funds in
specified categories. The rankings may or may not include the effects of sales
or other charges.

<PAGE> 45

Rating Services. We are also ranked and rated by independent
financial rating services, among which are Moody's, Standard & Poor's and A.M.
Best. The purpose of these ratings is to reflect our financial strength or
claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the Variable Account. We may advertise
these ratings from time to time. In addition, we may include in certain
advertisements, endorsements in the form of a list of organizations,
individuals or other parties which recommend us or the Contracts. Furthermore,
we may occasionally include in advertisements comparisons of currently taxable
and tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic
conditions.

Historical Performance. We may from time to time advertise several
types of historical performance for the Subaccounts of the Variable Account.
We may advertise for the Subaccounts standardized "average annual total
return," calculated in a manner prescribed by the Securities and Exchange
Commission, and nonstandardized "adjusted historic average annual total
return."

Standardized Average Annual Total Return. Standardized Average Annual
Total Return will show the percentage rate of return of a
hypothetical initial investment of $1,000 for at least the most
recent one, five and ten year period, or for a period covering the
time the Subaccount has been in existence, if the Subaccount has not
been in existence for one of the prescribed periods. This calculation
reflects the deduction of all applicable charges made to the
Contracts except for premium taxes, which may be imposed by certain
states.

The charts below show Standardized Average Annual Total
Return for the Subaccounts for the indicated periods. For the
purposes of calculating Standardized Average Annual Total Return, the
Mortality and Expense Risk Charge of 1.25%, the Administration Charge
of 0.15%, the Annual Contract Fee of $30.00, the applicable CDSC, the
optional Enhanced Death Benefit Rider charge of 0.20% were deducted.
For purposes of computing the Annual Contract Fee, the Annual
Contract Fee has been converted into a per-dollar per-day charge. The
per-dollar per-day charge has been converted based on the actual
average Accumulated Value of the Contracts as of December 31, 1999.
The charge works out to 0.04 % per annum.

Based on the method of calculation described above, the
Standardized Average Annual Total Returns for the Subaccounts for the
periods ending December 31, 1999 were:

<TABLE>
<CAPTION>
Standardized Average Annual Total Return
(Assuming the Enhanced Death Benefit Rider Is Elected)

<PAGE> 46

<TABLE>
<S> <C> <C> <C> <C> <C>
Fidelity VIP Fund II-Index 500 11.56% N/A N/A 20.38% 7/2/1997
Fidelity VIP Fund II-Investment Grade Bond N/A N/A N/A N/A 11/30/2000
INVESCO VIF Dynamics N/A N/A N/A N/A 12/1/2000
INVESCO VIF Health Sciences N/A N/A N/A N/A 12/1/2000
INVESCO VIF Technology N/A N/A N/A N/A 12/1/2000
J.P. Morgan International Opportunities 27.46% N/A N/A 15.06% 8/3/1998
J.P. Morgan Small Company 35.07% N/A N/A 22.63% 8/3/1998
Market Street Bond -11.88% N/A N/A 0.94% 7/2/1997
Market Street Managed -7.74% N/A N/A 5.22% 7/2/1997
Neuberger Berman AMT Partners -1.37% N/A N/A 0.58% 8/3/1998
Strong Mid Cap Growth Fund 79.83% N/A N/A 47.24% 7/2/1997
Strong Opportunity Fund II, Inc. 25.73% N/A N/A 21.14% 7/2/1997
</TABLE>

(1) Prior to December 1, 2000, this Subaccount invested in shares of Market
Street Growth Portfolio.

(2) Prior to December 1, 2000, this Subaccount invested in shares of Market
Street Sentinel Growth Portfolio.

(3) Prior to December 1, 2000, this Subaccount invested in shares of Market
Street Money Market Portfolio.

(4) Prior to December 1, 2000, this Subaccount invested in shares of Market
Street Aggressive Growth Portfolio.

<PAGE> 47

The chart below shows Standardized Average Annual Total Returns for a Contract
which does not elect the optional Enhanced Death Benefit:

<TABLE>
<CAPTION>
Standardized Average Annual Total Return
(Assuming the Enhanced Death Benefit Rider Is Not Elected)

1 Year to 5 Years to 10 Years to Life of Date
12/31/1999 12/31/1999 12/31/1999 Subaccount Subaccount
to 12/31/99 Effective
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sentinel VPT Common Stock(1) -5.50% N/A N/A 7.13% 7/2/97
Sentinel VPT Growth Index N/A N/A N/A N/A 12/1/2000
Sentinel VPT Mid Cap Growth(2) 29.84% N/A N/A 23.85% 7/2/97
Sentinel VPT Money Market(3) -3.59% N/A N/A 1.77% 7/2/97
Sentinel VPT Small Company(4) 7.27% N/A N/A 9.72% 7/2/97
Alger American Growth 24.84% N/A N/A 32.45% 7/2/1997
Alger American Leveraged All-cap N/A N/A N/A N/A 12/1/2000
Alger American Small Capitalization 34.38% N/A N/A 24.24% 7/2/1997
American Century VP Income & Growth 9.34% N/A N/A 14.26% 8/3/1998
American Century VP Value -9.26% N/A N/A -3.76% 8/3/1998
Dreyfus Socially Responsible Growth Fund N/A N/A N/A N/A 12/1/2000
Fidelity VIP Fund-Equity Income -2.18% N/A N/A 7.95% 7/2/1997
Fidelity VIP Fund-Growth 28.49% N/A N/A 30.84% 7/2/1997
Fidelity VIP Fund-High Income -0.38% N/A N/A 1.61% 7/2/1997
Fidelity VIP Fund-Overseas 33.60% N/A N/A 15.61% 7/2/1997
Fidelity VIP Fund II-Contrafund 15.49% N/A N/A 23.18% 7/2/1997
Fidelity VIP Fund II-Index 500 11.80% N/A N/A 20.63% 7/2/1997
Fidelity VIP Fund II-Investment Grade Bond N/A N/A N/A N/A 11/30/2000
INVESCO VIF Dynamics N/A N/A N/A N/A 12/1/2000
INVESCO VIF Health Sciences N/A N/A N/A N/A 12/1/2000
INVESCO VIF Technology N/A N/A N/A N/A 12/1/2000
J.P. Morgan International Opportunities 27.72% N/A N/A 15.29% 8/3/1998
J.P. Morgan Small Company 35.34% N/A N/A 22.88% 8/3/1998
Market Street Bond -11.69% N/A N/A 1.15% 7/2/1997
Market Street Managed -7.54% N/A N/A 5.44% 7/2/1997
Neuberger Berman AMT Partners -1.16% N/A N/A 0.79% 8/3/1998
Strong Mid Cap Growth Fund 80.19% N/A N/A 47.53% 7/2/1997
Strong Opportunity Fund II, Inc. 25.99% N/A N/A 21.38% 7/2/1997
</TABLE>

(1) Prior to December 1, 2000, this Subaccount invested in shares of Market
Street Growth Portfolio.

(2) Prior to December 1, 2000, this Subaccount invested in shares of Market
Street Sentinel Growth Portfolio.

(3) Prior to December 1, 2000, this Subaccount invested in shares of Market
Street Money Market Portfolio.

(4) Prior to December 1, 2000, this Subaccount invested in shares of Market
Street Aggressive Growth Portfolio.

Nonstandardized Adjusted Historic Average Annual Total Return. In
addition, historic performance data may be presented for the Funds
since their inception, reduced by some or all of the fees and charges
under the Contracts. Such adjusted historic Fund performance includes
data that precedes the inception date of the Subaccounts. This data
is designed to show performance that would have resulted if the
Contract had been in existence during that time. Adjusted historic
Fund performance data will be shown only if standard performance data
for the Subaccounts is also shown.

The charts below show nonstandardized adjusted historic
average annual total returns for the Funds for the indicated periods.
For the purposes of calculating nonstandardized

<PAGE> 48

Adjusted Historic Fund Average Annual Total Return, the Mortality and
Expense Risk Charge of 1.25%, the Administration Charge of 0.15%, the
Annual Contract Fee of $30.00, and (if so indicated) the applicable
CDSC and/or the optional Enhanced Death Benefit Rider Charge of 0.20%
were deducted. For purposes of computing the Annual Contract Fee, the
Annual Contract Fee has been converted into a per-dollar per-day
charge. The per-dollar per-day charge has been converted based on the
actual average Accumulated Value of the Contracts as of December 31,
1999. The charge works out to 0.04% per annum.

Based on the method of calculation described above, the
nonstandardized Adjusted Historic Average Annual Total Returns for
the Funds for the periods ending December 31, 1999 were:

<TABLE>
<CAPTION>
Nonstandardized Adjusted Historic Average Annual Total Return
(Assuming the Enhanced Death Benefit Rider is Not Elected and
the Contingent Deferred Sales Charge Is Not Deducted)

1 Year to 5 Years to 10 Years to Life of Fund Date Fund
12/31/1999 12/31/1999 12/31/1999 to 12/31/99 Effective
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sentinel VPT Common Stock N/A N/A N/A N/A 12/1/2000
Sentinel VPT Growth Index N/A N/A N/A N/A 12/1/2000
Sentinel VPT Mid Cap Growth N/A N/A N/A N/A 12/1/2000
Sentinel VPT Money Market N/A N/A N/A N/A 12/1/2000
Sentinel VPT Small Company N/A N/A N/A N/A 12/1/2000
Alger American Growth 31.84% 29.09% 21.16% 21.33% 1/9/1989
Alger American Leveraged All-cap 75.63% N/A N/A 44.44% 1/25/1995
Alger American Small Capitalization 41.38% 20.91% 16.54% 19.16% 9/21/1988
American Century VP Income & Growth 16.34% N/A N/A 22.93% 10/30/1997
American Century VP Value -2.26% N/A N/A 9.52% 5/1/1996
Dreyfus Socially Responsible Growth Fund 28.26% 26.86% N/A 22.36% 10/7/1993
Fidelity VIP Fund-Equity Income 4.82% 16.93% 12.87% 12.18% 10/9/1986
Fidelity VIP Fund-Growth 35.49% 27.91% 18.24% 17.09% 10/9/1986
Fidelity VIP Fund-High Income 6.62% 9.31% 10.85% 9.32% 9/19/1985
Fidelity VIP Fund-Overseas 40.60% 15.69% 9.84% 9.33% 1/28/1987
Fidelity VIP Fund II Contrafund 22.49% N/A N/A 25.95% 1/3/1995
Fidelity VIP Fund II-Index 500 18.80% 26.35% N/A 19.37% 8/27/1992
Fidelity VIP Fund II-Investment Grade Bond -2.47% 5.77% 5.66% 5.90% 12/5/1988
INVESCO VIF Dynamics 53.45% N/A N/A 30.16% 8/25/1997
INVESCO VIF Health Sciences 3.37% N/A N/A 19.56% 5/22/1997
INVESCO VIF Technology 155.49% N/A N/A 63.35% 5/21/1997
J.P. Morgan International Opportunities 34.72% N/A N/A 12.32% 1/3/1995
J.P. Morgan Small Company 42.34% N/A N/A 20.32% 1/3/1995
Market Street Bond -4.69% 5.43% 5.09% 6.40% 2/24/1984
Market Street Managed -0.54% 12.08% 8.32% 8.03% 12/12/1985
Neuberger Berman AMT Partners 5.84% 19.32% N/A 15.82% 3/22/1994
Strong Mid Cap Growth Fund 87.19% N/A N/A 44.86 12/31/1996
Strong Opportunity Fund II, Inc. 32.99% 21.61% N/A 19.32% 5/8/1992
</TABLE>

<PAGE> 49

<TABLE>
<CAPTION>
Nonstandardized Adjusted Historic Average Annual Total Return
(Assuming the Enhanced Death Benefit Rider is Not Elected and
the Contingent Deferred Sales Charge Is Deducted)

1 Year to 5 Years to 10 Years to Life of Fund Date Fund
12/31/1999 12/31/1999 12/31/1999 to 12/31/99 Effective
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sentinel VPT Common Stock N/A N/A N/A N/A 12/1/2000
Sentinel VPT Growth Index N/A N/A N/A N/A 12/1/2000
Sentinel VPT Mid Cap Growth N/A N/A N/A N/A 12/1/2000
Sentinel VPT Money Market N/A N/A N/A N/A 12/1/2000
Sentinel VPT Small Company N/A N/A N/A N/A 12/1/2000
Alger American Growth 24.84% 28.88% 21.16% 21.33% 1/9/1989
Alger American Leveraged All-cap 68.63% N/A N/A 44.30% 1/25/1995
Alger American Small Capitalization 34.38% 20.63% 16.54% 19.16% 9/21/1988
American Century VP Income & Growth 9.34% N/A N/A 21.10% 10/30/1997
American Century VP Value -9.26% N/A N/A 8.66% 5/1/1996
Dreyfus Socially Responsible Growth Fund 21.26% 26.63% N/A 22.31% 10/7/1993
Fidelity VIP Fund-Equity Income -2.18% 16.61% 12.87% 12.18% 10/9/1986
Fidelity VIP Fund-Growth 28.49% 27.68% 18.24% 17.09% 10/9/1986
Fidelity VIP Fund-High Income -0.38% 8.89% 10.85% 9.32% 9/19/1985
Fidelity VIP Fund-Overseas 33.60% 15.36% 9.84% 9.33% 1/28/1987
Fidelity VIP Fund II-Contrafund 15.49% N/A N/A 25.71% 1/3/1995
Fidelity VIP Fund II-Index 500 11.80% 26.12% N/A 19.37% 8/27/1992
Fidelity VIP Fund II-Investment Grade Bond -9.47% 5.29% 5.66% 5.90% 12/5/1988
INVESCO VIF Dynamics 46.45% N/A N/A 28.66% 8/25/1997
INVESCO VIF Health Sciences -3.63% N/A N/A 18.10% 5/22/1997
INVESCO VIF Technology 148.49% N/A N/A 62.48% 5/21/1997
J.P. Morgan International Opportunities 27.72% N/A N/A 11.94% 1/3/1995
J.P. Morgan Small Company 35.34% N/A N/A 20.03% 1/3/1995
Market Street Bond -11.69% 4.94% 5.09% 6.40% 2/24/1984
Market Street Managed -7.54% 11.70% 8.32% 8.03% 12/12/1985
Neuberger Berman AMT Partners -1.16% 19.02% N/A 15.65% 3/22/1994
Strong Mid Cap Growth Fund 80.19% N/A N/A 44.22% 12/31/1996
Strong Opportunity Fund II, Inc. 25.99% 21.34% N/A 19.32% 5/8/1992
</TABLE>

<PAGE> 50

<TABLE>
<CAPTION>
Nonstandardized Adjusted Historic Average Annual Total Return
(Assuming the Enhanced Death Benefit Rider is Elected and
the Contingent Deferred Sales Charge Is Not Deducted)

1 Year to 5 Years to 10 Years to Life of Fund Date Fund
12/31/1999 12/31/1999 12/31/1999 to 12/31/99 Effective
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sentinel VPT Common Stock N/A N/A N/A N/A 12/1/2000
Sentinel VPT Growth Index N/A N/A N/A N/A 12/1/2000
Sentinel VPT Mid Cap Growth N/A N/A N/A N/A 12/1/2000
Sentinel VPT Money Market N/A N/A N/A N/A 12/1/2000
Sentinel VPT Small Company N/A N/A N/A N/A 12/1/2000
Alger American Small Capitalization 41.11% 20.67% 16.31% 18.92% 9/21/1988
Alger American Growth 31.59% 28.84% 20.92% 21.09% 1/9/1989
Alger American Leveraged All-cap 75.29% N/A N/A 44.16% 1/25/1995
American Century VP Income & Growth 16.11% N/A N/A 22.69% 10/30/1997
American Century VP Value -2.46% N/A N/A 9.31% 5/1/1996
Dreyfus Socially Responsible Growth Fund 28.01% 26.61% N/A 22.12% 10/7/1993
Fidelity VIP Fund-Equity Income 4.61% 16.70% 12.64% 11.95% 10/9/1986
Fidelity VIP Fund-Growth 35.22% 27.66% 18.00% 16.86% 10/9/1986
Fidelity VIP Fund-High Income 6.41% 9.10% 10.63% 9.10% 9/19/1985
Fidelity VIP Fund-Overseas 40.33% 15.47% 9.62% 9.11% 1/28/1987
Fidelity VIP Fund II-Contrafund 22.25% N/A N/A 25.70% 1/3/1995
Fidelity VIP Fund II-Index 500 18.56% 26.11% N/A 19.14% 8/27/1992
Fidelity VIP Fund II-Investment Grade Bond -2.66% 5.56% 5.45% 5.69% 12/5/1988
INVESCO VIF Dynamics 53.15% N/A N/A 29.91% 8/25/1997
INVESCO VIF Health Sciences 3.16% N/A N/A 19.32% 5/22/1997
INVESCO VIF Technology 155.01% N/A N/A 63.04% 5/21/1997
J.P. Morgan International Opportunities 34.46% N/A N/A 12.10% 1/3/1995
J.P. Morgan Small Company 42.07% N/A N/A 20.09% 1/3/1995
Market Street Bond -4.88% 5.22% 4.88% 6.19% 2/24/1984
Market Street Managed -0.73% 11.86% 8.11% 7.81% 12/12/1985
Neuberger Berman Partners 5.63% 19.08% N/A 15.59% 3/22/1994
Strong Mid Cap Growth Fund 86.83% N/A N/A 44.58% 12/31/1996
Strong Opportunity Fund II, Inc. 32.73% 21.38% N/A 19.08% 5/8/1992
</TABLE>

<PAGE> 51

<TABLE>
<CAPTION>
Nonstandardized Adjusted Historic Average Annual Total Return
(Assuming the Enhanced Death Benefit Rider is Elected and
the Contingent Deferred Sales Charge Is Deducted)
Life of
1 Year to 5 Years to 10 Years to Fund Date Fund
12/31/1999 12/31/1999 12/31/1999 to 12/31/99 Effective
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sentinel VPT Common Stock N/A N/A N/A N/A 12/1/2000
Sentinel VPT Growth Index N/A N/A N/A N/A 12/1/2000
Sentinel VPT Mid Cap Growth N/A N/A N/A N/A 12/1/2000
Sentinel VPT Money Market N/A N/A N/A N/A 12/1/2000
Sentinel VPT Small Company N/A N/A N/A N/A 12/1/2000
Alger American Small Capitalization 34.11% 20.39% 16.31% 18.92% 9/21/1988
Alger American Growth 24.59% 28.62% 20.92% 21.09% 1/9/1989
Alger American Leveraged All-cap 68.29% N/A N/A 44.02% 1/25/1995
American Century VP Income & Growth 9.11% N/A N/A 20.86% 10/30/1997
American Century VP Value -9.46% N/A N/A 8.44% 5/1/1996
Dreyfus Socially Responsible Growth Fund 21.01% 26.38% N/A 22.07% 10/7/1993
Fidelity VIP Fund-Equity Income -2.39% 16.38% 12.64% 11.95% 10/9/1986
Fidelity VIP Fund-Growth 28.22% 27.43% 18.00% 16.86% 10/9/1986
Fidelity VIP Fund-High Income -0.59% 8.67% 10.63% 9.10% 9/19/1985
Fidelity VIP Fund-Overseas 33.33% 15.13% 9.62% 9.11% 1/28/1987
Fidelity VIP Fund II-Contrafund 15.25% N/A N/A 25.46% 1/3/1995
Fidelity VIP Fund II-Index 500 11.56% 25.87% N/A 19.14% 8/27/1992
Fidelity VIP Fund II-Investment Grade Bond -9.66% 5.07% 5.45% 5.69% 12/5/1988
INVESCO VIF Dynamics 46.15% N/A N/A 28.40% 8/25/1997
INVESCO VIF Health Sciences -3.84% N/A N/A 17.86% 5/22/1997
INVESCO VIF Technology 148.01% N/A N/A 62.16% 5/21/1997
J.P. Morgan International Opportunities 27.46% N/A N/A 11.72% 1/3/1995
J.P. Morgan Small Company 35.07% N/A N/A 19.79% 1/3/1995
Market Street Bond -11.88% 4.72% 4.88% 6.19% 2/24/1984
Market Street Managed -7.74% 11.47% 8.11% 7.81% 12/12/1985
Neuberger Berman AMT Partners -1.37% 18.78% N/A 15.42% 3/22/1994
Strong Mid Cap Growth Fund 79.83% N/A N/A 43.94% 12/31/1996
Strong Opportunity Fund II, Inc. 25.73% 21.10% N/A 19.08% 5/8/1992
</TABLE>

All performance information and comparative material advertised by
National Life is historical in nature and is not intended to represent or
guarantee future results. An Owner's Contract Value at redemption may be more
or less than original cost.

DISTRIBUTION OF THE CONTRACTS

The principal underwriter for the contracts is ESI, which is an
SEC-registered broker-dealer firm and is a member of the National Association
of Securities Dealers, Inc. ESI is a wholly-owned subsidiary of National Life.
It distributes a full line of securities products, including mutual funds,
unit investment trusts, and variable insurance contracts, and provides
individual securities brokerage services. The maximum commission payable for
selling the Contracts will generally be 6.5%; however, during certain
promotional periods the commission may vary. These promotional periods will be
determined by National Life and the maximum commission paid during these
periods will not exceed 7.0%.

<PAGE> 52

INSURANCE MARKETPLACE STANDARDS ASSOCIATION

National Life Insurance Company is a member of the Insurance
Marketplace Standards Association ("IMSA"), and as such may include the IMSA
logo and information about IMSA membership in its advertisements. Companies
that belong to IMSA subscribe to a set of ethical standards covering the
various aspects of sales and services for individually sold life insurance and
annuities.

FINANCIAL STATEMENTS

National Life's financial statements as of and for the years ended
December 31, 1999 and 1998, which are included in the Statement of Additional
Information, should be considered only as bearing on National Life's ability
to meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Variable
Account.

STATEMENTS AND REPORTS

National Life will mail to Owners, at their last known address of
record, any statements and reports required by applicable laws or regulations.
Owners should therefore give National Life prompt notice of any address
change. National Life will send a confirmation statement to Owners each time a
transaction is made affecting the Owner's Variable Account Contract Value,
such as making additional Premium Payments, transfers, exchanges or
Withdrawals. Quarterly statements are also mailed detailing the Contract
activity during the calendar quarter. Instead of receiving an immediate
confirmation of transactions made pursuant to some types of periodic payment
plans (such as a dollar cost averaging program) or salary reduction
arrangement, the Owner may receive confirmation of such transactions in their
quarterly statements. The Owner should review the information in these
statements carefully. All errors or corrections must be reported to National
Life immediately to assure proper crediting to the Owner's Contract. National
Life will assume all transactions are accurately reported on quarterly
statements or confirmation statements unless the Owner notifies National Life
otherwise within 30 days after receipt of the statement.

OWNER INQUIRIES

Owner inquiries may be directed to National Life Insurance Company by
writing to us at National Life Drive, Montpelier, Vermont 05604, or calling
1-800-537-7003.

LEGAL PROCEEDINGS

The Company, like other life insurance companies, is
involved in lawsuits, including class action lawsuits. In some class action
and other lawsuits involving insurance companies, substantial damages have
been sought and/or material settlement payments have been made. Although the
Company cannot predict the outcome of any litigation with certainty, the
Company believes that at the present time, there are no pending or threatened
lawsuits that are reasonably likely to have a material adverse impact on it or
the Variable Account. ESI is not engaged in any litigation of any material
nature.

<PAGE> 53

GLOSSARY

ACCUMULATION UNIT - An accounting unit of measure used to calculate the
Variable Account Contract Value prior to the Annuitization Date.

ANNUITANT - A person named in the Contract who is expected to become, at
Annuitization, the person upon whose continuation of life any annuity payments
involving life contingencies depends. Unless the Owner is a different
individual who is age 85 or younger, this person must be age 85 or younger at
the time of Contract issuance unless National Life has approved a request for
an Annuitant of greater age. The Owner may change the Annuitant prior to the
Annuitization Date, as set forth in the Contract.

ANNUITIZATION - The period during which annuity payments are received.

ANNUITIZATION DATE - The date on which annuity payments commence.

ANNUITY PAYMENT OPTION - The chosen form of annuity payments. Several options
are available under the Contract.

ANNUITY UNIT - An accounting unit of measure used to calculate the value of
Variable Annuity payments.

BENEFICIARY - The Beneficiary is the person designated to receive certain
benefits under the Contract upon the death of the Owner or Annuitant prior to
the Annuitization Date. The Beneficiary can be changed by the Owner as set
forth in the Contract.

CASH SURRENDER VALUE - An amount equal to Contract Value, minus any applicable
Contingent Deferred Sales Charge, minus any applicable premium tax charge.

CHOSEN HUMAN BEING - An individual named at the time of Annuitization upon
whose continuance of life any annuity payments involving life contingencies
depends.

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

COLLATERAL FIXED ACCOUNT - The portion of the Fixed Account which holds value
that secures a loan on the Contract.

CONTRACT ANNIVERSARY - An anniversary of the Date of Issue of the Contract.

CONTRACT VALUE - The sum of the value of all Variable Account Accumulation
Units attributable to the Contract, plus any amount held under the Contract in
the Fixed Account, and minus any outstanding loan and accrued interest on such
loans.

CONTRACT YEAR - Each year the Contract remains in force commencing with the
Date of Issue.

DATE OF ISSUE - The date shown as the Date of Issue on the Data Page of the
Contract.

DEATH BENEFIT - The benefit payable to the Beneficiary upon the death of the
Owner or the Annuitant.

DISTRIBUTION - Any payment of part or all of the Contract Value.

FIXED ACCOUNT - The Fixed Account is made up of all assets of National Life
other than those in the Variable Account or any other segregated asset account
of National Life.

FIXED ANNUITY - An annuity providing for payments which are guaranteed by
National Life as to dollar amount during Annuitization.

<PAGE> 54

FUND - A registered management investment company in which the assets of a
Subaccount of the Variable Account will be invested.

INDIVIDUAL RETIREMENT ANNUITY (IRA) - An annuity which qualifies for favorable
tax treatment under Section 408 of the Code.

INVESTMENT COMPANY ACT - The Investment Company Act of 1940, as amended from
time to time.

JOINT OWNERS - Two or more persons who own the Contract as tenants in common
or as joint tenants. If joint owners are named, references to "Owner" in this
prospectus will apply to both of the Joint Owners.

MATURITY DATE - The date on which annuity payments are scheduled to commence.
The Maturity Date is shown on the Data Page of the Contract, and is subject to
change by the Owner, within any applicable legal limits, subject to National
Life's approval.

MONTHLY CONTRACT DATE - The day in each calendar month which is the same day
of the month as the Date of Issue, or the last day of any month having no such
date, except that whenever the Monthly Contract Date would otherwise fall on a
date other than a Valuation Day, the Monthly Contract Date will be deemed to
be the next Valuation Day.

NON-QUALIFIED CONTRACT - A Contract which does not qualify for favorable tax
treatment under the provisions of Sections 401 or 403(a) (Qualified Plans),
408 (IRA's) or 403(b) (Tax-Sheltered Annuities) of the Code.

OWNER ("YOU") - The Owner is the person who possesses all rights under the
Contract, including the right to designate and change any designations of the
Owner, Annuitant, Beneficiary, Annuity Payment Option, and the Maturity Date.

PAYEE - The person who is designated at the time of Annuitization to receive
the proceeds of the Contract upon Annuitization.

PREMIUM PAYMENT - A deposit of new value into the Contract. The term "Premium
Payment" does not include transfers between the Variable Account and Fixed
Account or among the Subaccounts.

NET PREMIUM PAYMENTS - The total of all Premium Payments made under the
Contract, less any premium tax deducted from premiums.

QUALIFIED CONTRACT - A Contract which qualifies for favorable tax treatment
under the provisions of Sections 401 or 403(a) (Qualified Plans), 408 (IRA's),
403(b) (Tax-Sheltered Annuities) or 457 of the Code.

QUALIFIED PLANS - Retirement plans which receive favorable tax treatment under
section 401 or 403(a) of the Code.

SUBACCOUNTS - Separate and distinct divisions of the Variable Account that
purchase shares of underlying Funds. Separate Accumulation Units and Annuity
Units are maintained for each Subaccount.

TAX-SHELTERED ANNUITY - An annuity which qualifies for favorable tax treatment
under section 403(b) of the Code.

VALUATION DAY - Each day the New York Stock Exchange is open for business
other than the day after Thanksgiving and any day on which trading is
restricted. Unless otherwise indicated, when an event occurs or a transaction
is to be effected on a day that is not a Valuation Day, it will be effected on
the next Valuation Day.

<PAGE> 55

VALUATION PERIOD - The time between two successive Valuation Days.

VARIABLE ACCOUNT -The National Variable Annuity Account II, a separate
investment account of National Life into which Net Premium Payments under the
Contracts are allocated. The Variable Account is divided into Subaccounts,
each of which invests in the shares of a separate underlying Fund.

VARIABLE ANNUITY - An annuity the accumulated value of which varies with the
investment experience of a separate account.

WITHDRAWAL - A payment made at the request of the Owner pursuant to the right
to withdraw a portion of the Contract Value of the Contract.

52
<PAGE> 56

TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

National Life Insurance Company.........................................3
Additional Contract Provisions..........................................3
The Contract...................................................3
Misstatement of Age or Sex.....................................3
Dividends......................................................3
Assignment.....................................................3
Calculation of Yields and Total Returns.................................4
Money Market Subaccount........................................4
Other Subaccounts..............................................5
Total Returns..................................................6
Other Total Returns............................................7
Effect of the Annual Contract Fee on Performance Data..........8
Tax Status of the Contracts.............................................8
Distribution of the Contracts...........................................9
Safekeeping of Account Assets...........................................10
State Regulation........................................................10
Records and Reports.....................................................10
Legal Matters...........................................................10
Experts.................................................................10
Other Information.......................................................11
Financial Statements....................................................11
Financial Statements:...................................................F-1
National Life Holding Company
National Life Insurance Company
National Variable Annuity Account II: