SAGE VARIABLE ANNUITY ACCOUNT A, 497, 1999-06-22

SAGE VARIABLE ANNUITY ACCOUNT A
497, 1999-06-22

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<PAGE>

PROFILE DATED MAY 1, 1999
ASSET I, FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND
VARIABLE ANNUITY CONTRACTS
Issued By
THE SAGE VARIABLE ANNUITY ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.

This Profile is a summary of some important points that you
should know and consider before purchasing a Contract. The
Contract is more fully described in the full Prospectus that
accompanies this Profile. Please read that Prospectus carefully.

"We," "us," "our", "Sage Life" or the "Company" refer to Sage Life Assurance
of America, Inc. "You" and "your" refer to the Owner of a Contract.

1. What Are The Contracts?

The Contracts are flexible payment fixed and variable annuity contracts
offered by Sage Life Assurance of America, Inc. Your Contract is a contract
between you, the Owner, and us, Sage Life.

We designed the Contract for use in your long-term financial and retirement
planning. It provides a means for allocating amounts on a tax-deferred basis
to our Variable Account and our Fixed Account.

Investment Flexibility. You can invest among 33 subdivisions of our Variable
Account, known as "Variable Sub-Accounts," each corresponding to a different
Fund. These Funds, listed in Section 4, are professionally managed and use a
broad range of investment strategies (growth and income, aggressive growth,
etc.), styles (growth, value, etc.) and asset classes (stocks, bonds,
international, etc.). You can select a mix of Funds to meet your financial and
retirement needs and objectives, tolerance for risk, and view of the market.
Amounts you invest in these Funds will fluctuate daily based on underlying
investment performance. So, the value of your investment may increase or
decrease.

Through our Fixed Account, you can invest to receive guaranteed rates of
interest for periods of 1, 2, 3, 4, 5, 7, and 10 years ("Guarantee Periods").
We also guarantee your principal while it remains in our Fixed Account.
However, if you decide to surrender your Contract, or transfer or access
amounts in the Fixed Account before the end of a Guarantee Period you have
chosen, we ordinarily will apply a Market Value Adjustment. This adjustment
reflects changes in prevailing interest rates since your allocation to the
Fixed Account. The Market Value Adjustment may result in an increase or
decrease in the amounts surrendered, transferred, or accessed.

As your needs or financial or retirement goals change, your investment mix
can change with them. You may transfer amounts among any of the investment
choices in our Fixed or Variable Accounts while continuing to defer current
income taxes.

Safety of Separate Accounts. Significantly, both our Fixed and Variable
Accounts are separate investment accounts of Sage Life. This provides you with
an important safety feature: we cannot charge the assets supporting your
allocations to these Accounts with liabilities arising out of any other
business we may conduct.

The Contract also provides you with other important features, including a
death benefit, access to your money, and income plan options.

Access to Amounts Invested. The Contract provides access to your investment
should you need it. During the savings, or Accumulation Phase, your investment
grows tax-free until withdrawn. You decide how much to take and when to take
it (certain restrictions apply after the Accumulation Phase).

Ordinarily, once you access earnings, they are taxed as income. If you
access earnings before you are 59 1/2 years old, you may have to pay an
additional 10% federal tax penalty. Amounts you surrender or withdraw may be
subject to a surrender charge, and a Market Value Adjustment (positive or
negative) may apply if you take the amount from the Fixed Account before the
end of the applicable Guarantee Period.

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Protection for Your Beneficiaries. The Contract also provides a death
benefit feature to protect your family should you die during the Accumulation
Phase. In the event of your untimely death, the Beneficiary of your choice
will never receive less than you have invested in the Contract, and may even
receive more. Your Beneficiary may within certain federal tax required
limitations decide how he or she wishes to receive the death benefit.

Income Payments. The payout, or Income Phase, of your Contract begins when
you inform us you want to start receiving regular income payments under one of
the various income plans we offer. The amount you accumulated during the
Accumulation Phase determines the amount of income payments you receive during
the Income Phase. You can use your Account Value to provide income payments
that are guaranteed, or income payments that vary with underlying investment
performance, or a combination of both. The income payments can be for life,
which means you can't outlive them!

A portion of each income payment is ordinarily considered a return of your
investment in the Contract. So, until you recover all of your investment in
the Contract, only the portion in excess of this amount is taxed as income.

2. What Are My Income Payment Options?

Once the Income Phase of your Contract begins, we apply your Account Value
to provide you with regular income payments.

You can tailor your income to meet your needs by choosing from five
different income plans described below. In explaining the income plans, we are
assuming that you designate yourself as the Annuitant. Of course, you always
can designate someone other than yourself as Annuitant.

Income Plan 1--Life Annuity: You will receive payments for your life.

Income Plan 2--Life Annuity with 10 or 20 Years Certain: You will receive
payments for your life. However, if you die before the end of the
guaranteed certain period you select (10 or 20 years), your Beneficiary
will receive the payments for the remainder of that period.

Income Plan 3--Joint and Last Survivor Life Annuity: We will make
payments as long as either you or a second person you select (such as your
spouse) is alive.

Income Plan 4--Payments for a Specified Period Certain: You will receive
payments for the number of years you select. However, if you die before the
end of that period, your Beneficiary will receive the payments for the
remainder of the guaranteed certain period.

Income Plan 5--Annuity Plan: You can use your Account Value to purchase
any other income plan we offer at the time you want to begin receiving
regular income payments for which you and the Annuitant are eligible.

You tell us how much of your Account Value to apply to fixed income payments
and to variable income payments. During the Income Phase, you still have all
of the investment choices you had during the Accumulation Phase. However, we
currently limit transfers among your investment choices.

We will allocate the amount of Account Value you apply to provide fixed
income payments to the Fixed Account and invest it in the Guarantee Periods
you select. We guarantee the amount of each income payment, and the amount of
each payment will remain level throughout the period you select.

We will allocate the amount of Account Value you apply to provide variable
income payments to the Variable Account and invest it in the Funds you select.
The amount of each income payment will vary according to the investment
performance of those Funds.

3. How Do I Purchase A Contract?

In most cases, you may purchase a Contract with $5,000 or more through an
authorized registered representative.

In addition, subject to limitations for tax-qualified Contracts, you can
make additional purchase payments of $250 or more to your Contract at any time
during the Accumulation Phase.

4. What Are My Investment Options?

There are 40 investment options under the Contracts available through our
Variable and Fixed Accounts. These choices are professionally managed and
allow for a broad range of investment strategies, styles and asset classes.
Additional investment options may be available in the future.

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Through our Variable Account you can choose to have your money invested in
one or more of the Variable Sub-Accounts investing in the following 33 Funds:

AIM Variable Insurance Funds, Inc.

. AIM V.I. Government Securities Fund

. AIM V.I. Growth and Income Fund

. AIM V.I. International Equity Fund

. AIM V.I. Value Fund

The Alger American Fund

. Alger American MidCap Growth Portfolio

. Alger American Income and Growth Portfolio

. Alger American Small Capitalization Portfolio

Liberty Variable Investment Trust

. Colonial High Yield Securities Fund, Variable Series

. Colonial Small Cap Value Fund, Variable Series

. Colonial Strategic Income Fund, Variable Series

. Colonial U.S. Stock Fund, Variable Series

. Liberty All-Star Equity Fund, Variable Series

. Newport Tiger Fund, Variable Series

. Stein Roe Global Utilities Fund, Variable Series

SteinRoe Variable Investment Trust

. Stein Roe Growth Stock Fund, Variable Series

. Stein Roe Balanced Fund, Variable Series

MFS(R) Variable Insurance Trust SM

. MFS Growth With Income Series

. MFS High Income Series

. MFS Research Series

. MFS Total Return Series

. MFS Capital Opportunities Series (formerly MFS Value Series)

Morgan Stanley Dean Witter Universal Funds, Inc.

. Global Equity Portfolio

. Mid Cap Value Portfolio

. Value Portfolio

Oppenheimer Variable Account Funds

. Oppenheimer Bond Fund/VA

. Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Growth Fund)

. Oppenheimer Small Cap Growth Fund/VA

Sage Life Investment Trust

. EAFE(R) Equity Index Fund

. S&P 500 Equity Index Fund

. Money Market Fund

T. Rowe Price Equity Series, Inc.

. T. Rowe Price Equity Income Portfolio

. T. Rowe Price Mid-Cap Growth Portfolio

. T. Rowe Price Personal Strategy Balanced Portfolio

The prospectuses for the Trusts describe the Funds in detail. These Funds do
not provide any performance guarantees, and their values will increase or
decrease depending upon investment performance.

Through our Fixed Account you can choose to invest your money in one or more
of 7 different Guarantee Periods. We guarantee your principal and interest
rate when your investment is left in the Guarantee Period until it ends. You
currently can choose periods of 1, 2, 3, 4, 5, 7, and 10 years. However, if
you decide to surrender your Contract, or transfer or access amounts before
the end of a period you have chosen, we ordinarily will apply a Market Value
Adjustment. This Adjustment may be positive or negative depending upon current
interest rates.

5. What Are The Expenses Under A Contract?

The Contract has insurance and investment features. Each has related costs.
Below is a brief summary of the Contract's charges:

Annual Administration Charge--During the first seven Contract Years only, we
will deduct an annual $40 administration charge. However, there is no charge
if, at the time of deduction, your Account Value is at least $50,000.

Asset-Based Charges--Each month, we deduct Asset-Based Charges for mortality
and expense risks and for certain administrative costs from the amounts you
allocate to the Variable Account. The maximum charges equal, on an annual
basis, 1.40% of your Variable Account Value, decreasing to 1.25% after the
seventh Contract Year.

Surrender Charge--During the first seven Contract Years only, we ordinarily
will deduct a surrender charge when you surrender your Contract or withdraw
amounts in excess of the Free Withdrawal Amount. The maximum applicable
percentage is 7% in the first Contract Year. It

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declines to 0% after the seventh Contract Year. We calculate the surrender
charge as a percentage of the purchase payment(s) you surrender or withdraw.

Purchase Payment Tax Charge--During the first seven Contract Years only, we
will deduct any state premium tax that we incur if you surrender your Contract
or begin receiving regular income payments. This tax charge currently ranges
from 0% to 3.5% depending upon the state. We currently do not intend to deduct
this charge on or after the eighth Contract Year.

Fund Fees and Expenses--There are also Fund fees and expenses that are based
on the average daily value of the Funds. Currently, these fund fees and
expenses range on an annual basis from 0.55% to 1.30%, depending upon the
Fund.

Sage Life's business philosophy rewards our long-term customers. So, after
the seventh Contract Year we

--eliminate Surrender Charges,

--eliminate the Annual Administration Charge,

--eliminate the Purchase Payment Tax Charge, if any, and

--reduce Asset-Based Charges.

This means more of your investment is working for you over the long-term!

The following chart is designed to help you understand expenses under the
Contract.

<TABLE>
<CAPTION>
Total Total Examples of Examples of
Annual Annual Total Total Expenses Total Expenses as
Insurance Fund Annual Paid at the End Paid at the End
Fund Charges Charges Charges of 1 Year of 10 Years
---- --------- ------- ------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
AIM VARIABLE INSURANCE
FUNDS, INC.:
AIM V.I. Government
Securities Fund...... 1.53% 0.76% 2.29% $23 $292
AIM V.I. Growth and
Income Fund.......... 1.53 0.65 2.18 22 276
AIM V.I. International
Equity Fund.......... 1.53 0.91 2.44 25 311
AIM V.I. Value Fund... 1.53 0.66 2.19 22 280
THE ALGER AMERICAN FUND:
Alger American MidCap
Growth Portfolio..... 1.53 0.84 2.37 24 302
Alger American Income
and Growth
Portfolio............ 1.53 0.70 2.23 23 284
Alger American Small
Capitalization
Portfolio............ 1.53 0.89 2.42 25 309
LIBERTY VARIABLE
INVESTMENT TRUST:
Colonial High Yield
Securities Fund,
Variable Series...... 1.53 0.80 2.33 24 297
Colonial Small Cap
Value Fund, Variable
Series............... 1.53 1.00 2.53 26 322
Colonial Strategic
Income Fund, Variable
Series............... 1.53 0.78 2.31 24 294
Colonial U.S. Stock
Fund, Variable
Series............... 1.53 0.90 2.43 25 310
Liberty All-Star
Equity Fund, Variable
Series............... 1.53 1.00 2.53 26 322
Newport Tiger Fund,
Variable Series...... 1.53 1.30 2.83 29 360
Stein Roe Global
Utilities Fund,
Variable Series...... 1.53 0.82 2.35 24 294
STEINROE VARIABLE
INVESTMENT TRUST:
Stein Roe Growth Stock
Fund, Variable
Series............... 1.53 0.70 2.23 23 284
Stein Roe Balanced
Fund, Variable
Series............... 1.53 0.65 2.18 22 276
MFS(R) VARIABLE
INSURANCE TRUST SM:
MFS Growth With Income
Series............... 1.53 0.88 2.41 25 308
MFS High Income
Series............... 1.53 1.03 2.56 26 326
MFS Research Series... 1.53 0.86 2.39 24 304
MFS Total Return
Series............... 1.53 0.91 2.44 25 311
MFS Capital
Opportunities Series
(formerly, MFS Value
Series).............. 1.53 1.02 2.55 26 325
</TABLE>

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<TABLE>
<CAPTION>
Total Total Examples of Examples of
Annual Annual Total Total Expenses Total Expenses
Insurance Fund Annual Paid at the Paid at the
Fund Charges Charges Charges End of 1 Year End of 10 Year
---- --------- ------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C>
MORGAN STANLEY DEAN
WITTER UNIVERSAL FUNDS,
INC.:
Global Equity
Portfolio............ 1.53% 1.15% 2.68% $27 $342
Mid Cap Value
Portfolio............ 1.53 1.05 2.58 26 328
Value Portfolio....... 1.53 0.85 2.38 24 303
OPPENHEIMER VARIABLE
ACCOUNT FUNDS:
Oppenheimer Bond
Fund/VA.............. 1.53 0.74 2.27 23 289
Oppenheimer Capital
Appreciation Fund/VA
(formerly Oppenheimer
Growth Fund)......... 1.53 0.75 2.28 23 290
Oppenheimer Small Cap
Growth Fund/VA....... 1.53 0.87 2.40 25 307
SAGE LIFE INVESTMENT
TRUST:
EAFE(R) Equity Index
Fund................. 1.53 0.90 2.43 25 310
S&P 500 Equity Index
Fund................. 1.53 0.55 2.08 21 263
Money Market Fund..... 1.53 0.65 2.18 22 276
T. ROWE PRICE EQUITY
SERIES, INC.:
T. Rowe Price Equity
Income Portfolio..... 1.53 0.85 2.38 24 303
T. Rowe Price Mid-Cap
Growth Portfolio..... 1.53 0.85 2.38 24 303
T. Rowe Price Personal
Strategy Balanced
Portfolio............ 1.53 0.90 2.43 25 310
</TABLE>

- -------------------------------------------------------------------------------

Below is an explanation of what we included in each column of the chart:

The column "Total Annual Insurance Charges" shows the sum of the Asset-
Based Charges and the Annual Administration Charge (for purposes of the
chart, we assume the average Account Value is $30,000 and the Annual
Administration Charge to be 0.13% of the value of an average Contract).

The column "Total Annual Fund Charges" shows the fees and expenses for
each Fund.

The charges shown for the following funds reflect any expense
reimbursement or waiver:

. Liberty Variable Investment Trust

Colonial High Yield Securities Fund, Variable Series

Colonial Small Cap Value Fund, Variable Series

Liberty All-Star Equity Fund, Variable Series

. MFS(R) Variable Insurance TrustSM

MFS Capital Opportunity Series

. Morgan Stanley Dean Witter Universal Funds, Inc.

Global Equity Portfolio

Mid Cap Value Portfolio

Value Portfolio

. Sage Life Investment Trust

EAFE(R) Equity Index Fund

S&P 500 Equity Index Fund

Money Market Fund

Sage Life Investment Trust's EAFE(R) Equity Index Fund, S&P 500 Equity
Index Fund and Money Market Fund did not commence operations until February
1999. The figures shown for those Funds are based on estimates.

The column "Total Annual Charges" shows the sum of "Total Annual
Insurance Charges" and "Total Annual Fund Charges."

The last two columns show you examples of the charges, in dollars, you
could pay under a Contract for each $1,000 you invested in that Fund. The
example assumes that your Contract earns 5% annually before charges.

For more information about expenses under a Contract, please refer to the
"Fee Table" in the full Prospectus that accompanies this Profile.

6. How Will My Contract Be Taxed?

During the Accumulation Phase, your earnings are not taxed unless you take
them out. If you take money out, earnings come out first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you also may
be charged a 10% federal tax penalty on the withdrawn earnings.

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Income payments during the Income Phase are considered partly a return of
your original investment. That part of each payment is not taxable as income.
However, once you have recovered all of your original investment, income
payments will then be fully taxable.

Special tax rules apply to withdrawals from a new type of IRA called the
Roth IRA.

7. How Do I Access My Money?

There are a number of ways to withdraw money from your Contract. You can
tailor your income to meet your near-term or lifelong liquidity needs.

During the Accumulation Phase, if you want to take money out of your
Contract, you can choose among several different options.

--You can withdraw some of your money.

--You can surrender your Contract and take all of your money.

--You can withdraw money using our systematic partial withdrawal program.

--You can apply your Account Value to an Income Plan.

Keep in mind that amounts you surrender or withdraw may be subject to a
surrender charge if taken during the first seven Contract Years. However,
during that period, the Contract does provide a Free Withdrawal Amount (an
amount not subject to a surrender charge), each year equal to your cumulative
earnings, or if greater, 10% of total purchase payments you have invested. In
addition, if you access amounts from the Fixed Account, we ordinarily will
apply a Market Value Adjustment. If you are younger than 59 1/2 when you take
money out, you may owe a 10% federal tax penalty in addition to the income tax
that will apply to any gain in your Contract. Please remember that withdrawals
will reduce your death benefit.

Once you start receiving regular income payments and if you selected the
"payments for a specified period certain" income plan, you may request a full
or partial withdrawal.

8. How Is Contract Performance Presented?

Because our Variable Sub-Accounts have been in operation for less than a
year, we cannot show you how the Funds performed in the Variable Account. When
they have been in operation for a year or more, we will show you the Funds'
performance using standard methods prescribed by the SEC.

Please remember that the performance data represents past performance.
Amounts you invest in the Variable Account will fluctuate daily based on
underlying Fund investment performance, so the value of your investment may
increase or decrease.

9. Does The Contract Have A Death Benefit?

Your Contract provides two different types of death benefits for your
Beneficiary. There is the basic death benefit and the accidental death
benefit.

Basic Death Benefit. We will pay the basic death benefit to the Beneficiary
of your choice in the event of your untimely death prior to the Income Phase.
This provides comfort knowing your Beneficiary will receive the greatest of
the following:

--the current Account Value on the date we receive proof of death;

--the sum of all purchase payments you have invested in your Contract, less
any withdrawals you have made (including any associated surrender charge
and Market Value Adjustment incurred); or

--the highest anniversary value on or before you reach age 80.

We determine the highest anniversary value in the following manner. When we
receive proof of death, we will calculate an anniversary value for each
Contract Anniversary before the date of the Owner's death, but not beyond the
Owner's attained age 80. An anniversary value for a Contract Anniversary
equals (1) the Account Value on that Contract Anniversary, (2) increased by
the dollar amount of any purchase payments made since the Contract
Anniversary, and (3) reduced proportionately by any withdrawals (including any
associated surrender charge and Market Value Adjustment incurred) taken since
that Contract Anniversary. (By proportionately, we take the percentage by
which the withdrawal decreases the Account Value and we reduce the sum of (1)
and (2) by that percentage.) The greatest of these anniversary values is your
highest anniversary value.

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Accidental Death Benefit. If permitted in your state, the Contract also
provides an accidental death benefit during the Accumulation Phase at no
additional cost. If you die as a direct result of an accident before reaching
age 81, we will pay an additional death benefit to the Beneficiary of your
choice. This additional benefit is equal to 100% of the sum of all purchase
payments you have invested in your Contract, less any withdrawals you have
made (including any associated surrender charge and Market Value Adjustment
incurred) up to a maximum of $250,000.

10. What Other Information Should I Know?

The Contract has several additional features available to you at no
additional charge:

Free Look Right: You have the right to return your Contract to us at our
Customer Service Center or to the registered representative who sold it to
you, and have us cancel the Contract within a certain number of days (usually
10 days from the date you receive the Contract, but some states require
different periods).

If you exercise this right, we will cancel your Contract as of the Business
Day we receive it. We will send you a refund equal to your Account Value plus
any charges we have deducted on or before the date we received the returned
Contract. If required by the law of your state, we will refund your initial
purchase payment (less any withdraws previously taken). In the states where we
are required to return purchase payment less withdrawals, if you allocated
amounts to the Variable Account, we will temporarily allocate those amounts to
the Money Market Sub-Account (that is, the Variable Sub-Account investing in
the Money Market Fund of Sage Life Investment Trust) until the Free Look
Period ends.

Dollar-Cost Averaging Program: Under our optional Dollar-Cost Averaging
Program, you may transfer a set dollar amount systematically from the Money
Market Sub-Account and/or from specially designated Fixed Sub-Accounts to any
other Variable Sub-Account, subject to certain limitations. By investing the
same amount on a regular basis, you don't have to worry about timing the
market. Since you invest the same amount each period, you automatically
acquire more units when market values fall and fewer units when they rise. The
potential benefit is to lower your average cost per unit. This strategy does
not guarantee that any Fund will gain in value. It also will not protect
against a decline in value if market prices fall. However, if you can continue
to invest regularly throughout changing market conditions, this program can be
an effective way to help meet your long-term or retirement goals. Due to the
effect of interest that continues to be paid on the amount remaining in the
Money Market Sub-Account or the specially designated Fixed Sub-Account, the
amounts that we transfer will vary slightly from month to month.

Asset Allocation Program: An optional Asset Allocation Program is available
if you do not wish to make your own particular investment decisions. This
investment planning tool is designed to find an asset mix that attempts to
achieve the highest expected return based upon your tolerance for risk, and
consistent with your needs and objectives. Bear in mind that the use of an
asset-allocation model does not guarantee investment results.

Automatic Portfolio Rebalancing Program: Our optional Automatic Portfolio
Rebalancing Program can help prevent a well-conceived investment strategy from
becoming diluted over time. Investment performance will likely cause the
allocation percentages you originally selected to shift. With this program,
you can instruct us to automatically rebalance your Contract to your original
percentages on a quarterly basis. Money invested in the Fixed Account is not
part of this program.

Waiver of Surrender Charge Rider: This rider, which is automatically
included in your Contract at no additional cost, permits you to withdraw money
from your Contract without a surrender charge if you need it while you are
confined to a nursing care facility or hospital, or if you have a terminal
illness. Certain restrictions apply, and this feature may not be available in
all states.

11. How Can I Make Inquiries?

If you need further information about the Contracts, please write or call us
at our Customer Service Center (877) TEL-SAGE (835-7243), or contact an
authorized registered representative. The address of our Customer Service
Center office is 1290 Silas Deane Highway, Wethersfield, CT 06109.

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<PAGE>

PROSPECTUS DATED MAY 1, 1999

ASSET I, FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED
AND VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE SAGE VARIABLE ANNUITY ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.

Executive Office: Customer Service Center:
300 Atlantic Street 1290 Silas Deane Highway
Stamford, CT 06901 Wethersfield, CT 06109
Telephone: (877) 835-7243 (Toll
Free)

This Prospectus describes flexible payment deferred combination fixed and
variable annuity contracts for individuals and groups offered by Sage Life
Assurance of America, Inc. We designed the Contracts for use in your long-term
financial and retirement planning. The Contracts provide a means for investing
on a tax-deferred basis in our Variable Account and our Fixed Account. You can
purchase a Contract by making a minimum initial purchase payment. After
purchase, you determine the amount and timing of any additional purchase
payments.

You may allocate purchase payments and transfer Account Value to our
Variable Account and/or our Fixed Account within certain limits. The Variable
Account has 33 Sub-Accounts. Through our Fixed Account, you can choose to
invest your money in one or more of 7 different Guarantee Periods.

Each Variable Sub-Account invests in a corresponding Fund of AIM Variable
Insurance Funds, Inc., The Alger American Fund, Liberty Variable Investment
Trust, SteinRoe Variable Investment Trust, MFS(R) Variable Insurance Trust SM,
Morgan Stanley Dean Witter Universal Funds, Inc., Oppenheimer Variable Account
Funds, Sage Life Investment Trust, or T. Rowe Price Equity Series, Inc.
(collectively, the "Trusts").

Your Account Value will vary daily with the investment performance of the
Variable Sub-Accounts and any interest we credit under our Fixed Account. We
do not guarantee any minimum Account Value for amounts you allocate to the
Variable Account. We do guarantee principal and a minimum fixed rate of
interest for specified periods of time on amounts you allocate to the Fixed
Account. However, amounts you withdraw, surrender, transfer, or apply to an
income plan from the Fixed Account before the end of an applicable Guarantee
Period ordinarily will be subject to a Market Value Adjustment, which may
increase or decrease these amounts.

The Contracts provide additional benefits, including five alternative income
plan options, a death benefit upon any Owner's death before the Income Date,
and optional programs including dollar-cost averaging, asset allocation,
automatic portfolio rebalancing, and systematic partial withdrawals.

The Statement of Additional Information contains more information about the
Contracts and the Variable Account, is dated the same as this Prospectus, and
is incorporated herein by reference. The Table of Contents for the Statement
of Additional Information is on page 50 of this Prospectus. We filed it with
the Securities and Exchange Commission. You may obtain a copy of the Statement
of Additional Information free of charge by contacting our Customer Service
Center, or by accessing the Securities and Exchange Commission's website at
http://www.sec.gov.

This Prospectus includes basic information about the Contracts that you
should know before investing. Please read this Prospectus carefully and keep
it for future reference. This Prospectus must be accomplished by the current
prospectus for each of the Trusts.

The Securities and Exchange Commission has not approved these Contracts or
determined if this Prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.

Variable annuity contracts are not deposits or obligations of, or endorsed
or guaranteed by, any bank, nor are they federally insured or otherwise
protected by the FDIC, the Federal Reserve Board, or any other agency; they
are subject to investment risks, including possible loss of principal.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Index of Terms............................................................. 1
Fee Table.................................................................. 3
1. What Are the Contracts?................................................. 7
2. What Are My Income Payment Options?..................................... 7
3. How Do I Purchase A Contract?........................................... 8
Initial Purchase Payment............................................... 8
Issuance of a Contract................................................. 9
Free Look Right to Cancel Contract..................................... 9
Making Additional Purchase Payments.................................... 9
4. What Are My Investment Options?......................................... 9
Purchase Payment Allocations........................................... 9
Variable Sub-Account Investment Options................................ 9
Fixed Account Investment Options....................................... 13
Market Value Adjustment................................................ 14
Transfers.............................................................. 15
Telephone Transactions................................................. 15
Power of Attorney...................................................... 16
Dollar-Cost Averaging Program.......................................... 16
Asset Allocation Program............................................... 17
Automatic Portfolio Rebalancing Program................................ 17
Account Value.......................................................... 17
Surrender Value........................................................ 17
Variable Account Value................................................. 18
Accumulation Unit Value................................................ 18
Net Investment Factor.................................................. 18
Fixed Account Value.................................................... 18
5.What Are the Expenses Under A Contract?.................................. 18
Surrender Charge....................................................... 19
Annual Administration Charge........................................... 20
Transfer Charge........................................................ 20
Asset-Based Charges.................................................... 20
Purchase Payment Tax Charge............................................ 20
Fund Annual Expenses................................................... 20
Additional Information................................................. 21
6. How Will My Contract Be Taxed?.......................................... 21
Introduction........................................................... 21
Tax Status of the Contract............................................. 21
Tax Treatment of Annuities............................................. 22
Taxation of a Non-Qualified Contract................................... 22
Taxation of a Qualified Contract....................................... 23
Other Tax Consequences................................................. 24
7. How Do I Access My Money?............................................... 24
Withdrawals............................................................ 24
Systematic Partial Withdrawal Program.................................. 25
IRA Partial Withdrawal Program......................................... 25
Requesting Payments.................................................... 26
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
8. How Is Contract Performance Presented?................................. 26
9. Does the Contract Have a Death Benefit?................................ 27
Basic Death Benefit................................................... 27
Accidental Death Benefit.............................................. 28
Proof of Death........................................................ 29
10. What Other Information Should I Know?................................. 29
Separate Accounts..................................................... 29
Modification.......................................................... 30
Distribution of the Contracts.......................................... 30
Experts............................................................... 30
Legal Proceedings..................................................... 30
Reports to Contract Owners............................................ 30
Assignment............................................................ 31
Change of Owner, Beneficiary, or Annuitant............................ 31
Misstatement and Proof of Age, Sex, or Survival....................... 31
Incontestability...................................................... 31
Authority to Make Agreements.......................................... 31
Preparing for the Year 2000........................................... 31
Financial Statements.................................................. 32
11. How Can I Make Inquiries?............................................. 32
12.Additional Information About Sage Life Assurance of America, Inc....... 32
History and Business.................................................. 32
Selected Financial Data............................................... 33
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 33
Competition........................................................... 35
Transactions with Sage Insurance Group................................ 36
Employees............................................................. 36
Properties............................................................ 36
State Regulation...................................................... 36
Directors and Executive Officers...................................... 38
Compensation.......................................................... 39
Financial Statements of Sage Life Assurance of America, Inc............... 40
Table of Contents of The Statement of Additional Information.............. 50
Appendix A--Market Value Adjustment....................................... A-1
Appendix B--Dollar-Cost Averaging Program................................. B-1
</TABLE>

This Prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made.

i
<PAGE>

INDEX OF TERMS

We have tried to make this Prospectus as readable and understandable as
possible. To help you to understand how the Contract works, we have used
certain terms that have special meanings. We define these terms below.

Account Value--The Account Value is the entire amount we hold under your
Contract during the Accumulation Phase. It equals the sum of the values in the
Variable Account and Fixed Account.

Accumulation Phase--The Accumulation Phase is the period during which you
accumulate savings under your Contract.

Accumulation Unit--An Accumulation Unit is the unit of measure we use before
the Income Date to keep track of the value of each Variable Sub-Account.

Annuitant--The Annuitant is the natural person whose age determines the
maximum Income Date and the amount and duration of income payments involving
life contingencies. The Annuitant may also be the person to whom we will make
any payment starting on the Income Date.

Asset-Based Charges--The Asset-Based Charges are charges for mortality and
expense risks and for administrative costs assessed monthly against the assets
of the Variable Account. After the Income Date, we call these charges Variable
Sub-Account Charges and deduct them daily from the assets of the Variable
Account.

Beneficiary--The Beneficiary is the person or persons to whom we pay a death
benefit if any Owner dies before the Income Date.

Business Day--A Business Day is any day the New York Stock Exchange ("NYSE")
is open for trading and we are open for business, exclusive of (i) Federal
holidays, (ii) any day on which an emergency exists making the disposal or
fair valuation of assets in the Variable Account not reasonably practicable,
and (iii) any day on which the Securities and Exchange Commission ("SEC")
permits a delay in the disposal or valuation of assets in the Variable
Account.

Contracts--The Contracts are flexible payment deferred combination fixed and
variable annuity contracts. In some jurisdictions, we issue the Contracts
directly to individuals. In most jurisdictions, however, the Contracts are
only available as a group contract. We issue a group Contract to or on behalf
of a group. Individuals who are part of a group to which we issue a Contract
receive a certificate that recites substantially all of the provisions of the
group Contract. Throughout this Prospectus and unless otherwise stated, the
term "Contract" refers to individual contracts, group Contracts, and
certificates for group Contracts.

Contract Anniversary--A Contract Anniversary is each anniversary of the
Contract Date.

Contract Date--The Contract Date is the date an individual Contract or a
certificate for a group Contract is issued at our Customer Service Center.

Contract Year--A Contract Year is each consecutive twelve-month period
beginning on the Contract Date and the anniversaries thereof.

Excess Withdrawal--An Excess Withdrawal is a withdrawal of Account Value
that exceeds the Free Withdrawal Amount.

Expiration Date--The Expiration Date is the last day in a Guarantee Period.
In the Contract, this is referred to as the "Expiry Date."

Fixed Account--The Fixed Account is The Sage Fixed Interest Account A. It is
a separate investment account of ours into which you may invest purchase
payments or transfer Account Value. In certain states we refer to the Fixed
Account as the Interest Account or Interest Separate Account.

Free Withdrawal Amount--A Free Withdrawal Amount is the maximum amount that
you can withdraw within a Contract Year during the Accumulation Phase without
being subject to a surrender charge.

Fund--A Fund is an investment portfolio in which a Variable Sub-Account
invests.

General Account--The General Account consists of all our assets other than
those held in any separate investment accounts.

Income Date--The Income Date is the date you select for your income payments
to begin.
1
<PAGE>

Income Phase--The Income Phase starts on the Income Date and is the period
during which you receive income payments.

Income Unit--An Income Unit is the unit of measure we use to calculate the
amount of income payments under a variable income plan option.

Market Value Adjustment--A Market Value Adjustment is a positive or negative
adjustment that may apply to a surrender, withdrawal, or transfer, and to
amounts applied to an income plan from a Fixed Sub-Account before the end of
its Guarantee Period.

Net Asset Value--Net Asset Value is the price of one share of a Fund.

Owner--The Owner is the person or persons who owns (or own) a Contract.
Provisions relating to action by the Owner mean, in the case of joint Owners,
both Owners acting jointly. In the context of a Contract issued on a group
basis, Owners refer to holders of certificates under the group Contract.

Satisfactory Notice--Satisfactory Notice is a notice or request you make or
authorize, in a form satisfactory to us, received at our Customer Service
Center.

Surrender Value--The Surrender Value is the amount we pay you upon surrender
of your Contract before the Income Date. It reflects the calculation of any
applicable charge, including the surrender charge and Market Value Adjustment.

Valuation Period--The Valuation Period is the period between one calculation
of an Accumulation Unit value and the next calculation.

Variable Account--The Variable Account is The Sage Variable Annuity Account
A. It is a separate investment account of ours into which you may invest
purchase payments or transfer Account Value.

"We", "us", "our", "Sage Life" or the "Company" is Sage Life Assurance of
America, Inc.

"You" or "your" is the Owner of a Contract.

2
<PAGE>

FEE TABLE

The purpose of this Fee Table is to assist you in understanding the expenses
that you will pay directly or indirectly when you invest in the Contract.

Transaction Expenses

<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of purchase payments) .. None
Surrender Charge(/1/) (as a percentage of purchase payments withdrawn or
surrendered)............................................................
</TABLE>

<TABLE>
<CAPTION>
Applicable Applicable Surrender
Contract Year Charge Percentage
- ------------- --------------------
<S> <C>
1.......................................................... 7%
2.......................................................... 7%
3.......................................................... 6%
4.......................................................... 5%
5.......................................................... 4%
6.......................................................... 3%
7.......................................................... 1%
8 and thereafter........................................... 0%
Transfer Charge(/2/)....................................... $ 0
Annual Administration Charge
Contract Years 1-7(/3/)................................... $40
After Contract Year 7..................................... $ 0
</TABLE>

In addition, we may deduct the amount of any state and local taxes on
purchase payments from your Account Value when we incur such taxes. We reserve
the right to defer collection of this charge and deduct it against your
Account Value when you surrender your Contract on an Excess Withdrawal, or
apply your Account Value to provide income payments. We refer to this as the
Purchase Payment Tax Charge.

Variable Account Annual Expenses(/4/) (deducted monthly as a percentage of the
Variable Account Value)

Contract Years
---------------
1-7 8 +
------- -------
Mortality and
Expense Risk
Charge........ 1.25% 1.10%
Asset-Based
Administrative
Charge........ 0.15% 0.15%
Total Asset-
Based
Charges....... 1.40% 1.25%

Fund Charges. The fees and expenses for each of the Funds (as a percentage
of net assets) for the year ended December 31, 1998 are shown in the following
table. For more information on these fees and expenses, see the prospectuses
for the Trusts that accompany this Prospectus. Certain figures shown are net
of fee waivers or expense reimbursements. We cannot guarantee that these fee
waivers or reimbursements will continue.

Fund Annual Expenses (as a percentage of average daily net assets of a Fund)

3
<PAGE>

<TABLE>
<CAPTION>
Total Expenses
(after fee
Management Fees Other Expenses waivers and
(after fee waiver, (after reimbursement, reimbursements,
Fund as applicable) as applicable) as applicable)
---- ------------------ --------------------- ---------------
<S> <C> <C> <C>
MFS(R) VARIABLE INSUR-
ANCE TRUSTSM:
MFS Growth with Income
Series................ 0.75 0.13 0.88
MFS High Income
Series................ 0.75 0.28 1.03
MFS Research Series.... 0.75 0.11 0.86
MFS Total Return
Series................ 0.75 0.16 0.91
MFS Capital
Opportunities Series
(formerly MFS Value
Series)............... 0.75 0.27(/6/) 1.02(/6/)
MORGAN STANLEY DEAN
WITTER UNIVERSAL FUNDS,
INC.:
Global Equity Portfo-
lio................... 0.32(/7/) 0.83 1.15(/7/)
Mid Cap Value Portfo-
lio................... 0.23(/7/) 0.82 1.05(/7/)
Value Portfolio........ 0.08(/7/) 0.77 0.85(/7/)
OPPENHEIMER VARIABLE
FUNDS:
Oppenheimer Bond
Fund/VA............... 0.72 0.02 0.74
Oppenheimer Capital
Appreciation Fund/VA
(formerly Oppenheimer
Growth Fund).......... 0.72 0.03 0.75
Oppenheimer Small Cap
Growth Fund/VA........ 0.75 0.12 0.87
SAGE LIFE INVESTMENT
TRUST:
EAFE(R) Equity Index
Fund*................. 0.73(/8/) 0.17 0.90(/8/)
S&P 500 Equity Index
Fund**................ 0.38(/8/) 0.17 0.55(/8/)
Money Market Fund...... 0.48(/8/) 0.17 0.65(/8/)
T. ROWE PRICE EQUITY SE-
RIES, INC.:
T. Rowe Price Equity
Income Portfolio...... 0.85% 0.00% 0.85%
T. Rowe Price Mid-Cap
Growth Portfolio...... 0.85 0.00 0.85
T. Rowe Price Personal
Strategy Balanced
Portfolio............. 0.90 0.00 0.90
</TABLE>
- --------
(1) You may withdraw a portion of your Account Value without incurring a
surrender charge. This amount is called the Free Withdrawal Amount and is
equal to the greater of (i) 10% of your total purchase payments less all
prior withdrawals (including any associated surrender charge and Market
Value Adjustment incurred) in that Contract Year, or (ii) cumulative
earnings (i.e., the excess of the Account Value on the date of withdrawal
over unliquidated purchase payments).
(2) Currently, we do not assess a transfer charge. However, we reserve the
right to charge up to $25 for the 13th and each subsequent transfer during
a Contract Year.
(3) We waive the Annual Administration Charge if the Account Value is at least
$50,000 on the date of deduction.

(4) We call the Asset-Based Charges Variable Sub-Account Charges and deduct
them on a daily basis after the Income Date. See "What Are the Expenses
under the Contract?"

(5) Without fee waivers and expense reimbursements, the management fees, the
other expenses and total expenses for each of the following Liberty
Variable Investment Trust Funds' during 1998 would have been: Colonial
High Yield Securities Fund, Variable Series 60%, 1.24%, and 1.84%;
Colonial Small Cap Value Fund, Variable Series .80%, 3.54%, and 4.34%;
and Liberty All-Star Equity Fund, Variable Series .80%, .24%, and 1.04%.

(6) Without reimbursements, the management fees, the other expenses, and
total expenses for MFS' Capital Opportunities Series would have been
0.75%, 0.45%, and 1.20%.

(7) Without fee waivers, the management fees, the other expenses, and total
expenses for each of the following Morgan Stanley Dean Witter Universal
Funds, Inc. portfolios would have been: Global Equity Portfolio, 0.80%,
0.83%, and 1.63%; Mid Cap Value Portfolio, 0.75%, 0.82%, and 1.57%; Value
Portfolio, 0.55%, 0.77%, and 1.32%.

4
<PAGE>

(8) These Funds commenced operations in February 1999. The figures shown are
based on estimates. Without fee waivers, the management fees, the other
expenses, and total expenses for each of the Funds would have been:
EAFE(R) Equity Index Fund, 0.90%, 0.17%, and 1.07%; S&P 500 Equity Index
Fund, 0.55%, 0.17%, and 0.72%; and Money Market Fund, 0.65%, 0.17%, and
0.82%.

* The EAFE(R) Index is the exclusive property of Morgan Stanley Capital
International ("MSCI"). This fund is not sponsored, endorsed, sold or
promoted by MSCI or any affiliate of MSCI.

** S&P 500(R) is a trademark of the McGraw-Hill Companies, Inc. and has been
licensed for use by Sage Advisors, Inc. The S&P 500 Equity Index Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's, and
Standard and Poor's makes no representation regarding the advisability of
investing in the Fund.

Examples

The purpose of the following examples is to demonstrate the expenses that
you would pay on a $1,000 investment in the Variable Account. We calculate the
examples based on the fees and charges shown in the tables above. For a more
complete description of these expenses, see "What Are The Expenses Under A
Contract?" and see the prospectuses for the Trusts. The Examples assume that
the initial purchase payment is $30,000, and that you have invested all your
money in the Variable Account.

You should not consider the Examples a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In
addition, we do not reflect Purchase Payment Tax Charges. These charges may
apply depending on the state where the Contract is sold. You might also incur
transfer fees if you make more than twelve transfers in a Contract Year. See
"Transfer Charge."

The assumed 5% annual rate of return is hypothetical. You should not
consider it to be a representation of past or future annual returns; both may
be greater or less than this assumed rate.

You would pay the following expenses on a $1,000 initial purchase payment,
assuming a 5% annual return on assets and the charges listed in the Fee Table
above.

5
<PAGE>

<TABLE>
<CAPTION>
1. If you surrender your 2. If you do not surrender
Contract at the end of each your Contract at the end of
time period each time period
--------------------------- ------------------------------
Fund 1 Year 3 Years 5 Year 10 Years 1 Year 3 Years 5 Year 10 Years
---- ------ ------- ------ -------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Colonial U.S. Stock
Fund, Variable
Series............... $95 $138 $177 $310 $25 $78 $137 $310
Liberty All-Star
Equity Fund, Variable
Series............... 96 141 182 322 26 81 142 322
Newport Tiger Fund,
Variable Series...... 99 151 199 360 29 91 159 360
Stein Roe Global
Utilities Fund,
Variable Series...... 94 135 172 299 24 75 132 299
STEINROE VARIABLE
INVESTMENT TRUST:
Stein Roe Growth Stock
Fund, Variable
Series............... 93 132 165 284 23 72 125 284
Stein Roe Balanced
Fund, Variable
Series............... 92 129 162 276 22 69 122 276
MFS(R) VARIABLE
INSURANCE TRUSTSM:
MFS Growth With Income
Series............... 95 138 176 308 25 78 136 308
MFS High Income
Series............... 96 142 184 326 26 82 144 326
MFS Research Series... 94 137 174 304 24 77 134 304
MFS Total Return
Series............... 95 138 177 311 25 78 137 311
MFS Capital
Opportunities Series
(formerly, MFS Value
Series).............. 96 142 183 325 26 82 143 325
MORGAN STANLEY DEAN
WITTER UNIVERSAL FUNDS,
INC.:
Global Equity
Portfolio............ 97 146 191 342 27 86 151 342
Mid Cap Value
Portfolio............ 96 143 185 328 26 83 145 328
Value Portfolio....... 94 137 174 303 24 77 134 303
OPPENHEIMER VARIABLE
ACCOUNT FUNDS:
Oppenheimer Bond
Fund/VA.............. 93 133 168 289 23 73 128 289
Oppenheimer Capital
Appreciation Fund/VA
(formerly Oppenheimer
Growth Fund)......... 93 133 168 290 23 73 128 290
Oppenheimer Small Cap
Growth Fund/VA....... 95 138 176 307 25 78 136 307
SAGE LIFE INVESTMENT
TRUST:
EAFE(R) Equity Index
Fund................. 95 138 177 310 25 78 137 310
S&P 500 Equity Index
Fund................. 91 126 156 263 21 66 116 263
Money Market Fund..... 92 129 162 276 22 69 122 276
T. ROWE PRICE EQUITY
SERIES, INC.:
T. Rowe Price Equity
Income Portfolio..... 94 137 174 303 24 77 134 303
T. Rowe Price Mid-Cap
Growth Portfolio..... 94 137 174 303 24 77 134 303
T. Rowe Price Personal
Strategy Balanced
Portfolio............ 95 138 177 310 25 78 137 310
</TABLE>

6
<PAGE>

1. What Are The Contracts?

The Contracts are flexible payment deferred combination fixed and variable
annuity Contracts offered by us. We designed the Contracts for use in your
long-term financial and retirement planning. They provide a means for
investing amounts on a tax-deferred basis in our Variable Account and our
Fixed Account.

Under the terms of the Contract, we promise to pay you (or the Annuitant, if
the Owner is other than an individual) regular income payments after the
Income Date. Until the Income Date, you may make additional purchase payments
under the Contract, and will ordinarily not be taxed on increases in the value
of your Contract as long as you do not take distributions. When you use the
Contract in connection with tax-qualified retirement plans, federal income
taxes may be deferred on your purchase payments, as well as on increases in
the value of your Contract. See "How Will My Contract be Taxed?" The Contracts
may not be available in all states or all markets.

When you make purchase payments, you can allocate those purchase payments to
one or more of the 33 subdivisions of the Variable Account, known as "Variable
Sub-Accounts." We will invest purchase payments you allocate to a Variable
Sub-Account solely in its corresponding Fund. Your Account Value in a Variable
Sub-Account will vary according to the investment performance of that Fund.
Depending on market conditions, your value in each Variable Sub-Account could
increase or decrease. We do not guarantee a minimum value. You bear the risk
of investing in the Variable Account. We call the total of the values in the
Variable Sub-Accounts the "Variable Account Value."

You can also allocate purchase payments to our Fixed Account. See "Fixed
Account Investment Option." The Fixed Account includes "Fixed Sub-Accounts" to
which we credit fixed rates of interest for the Guarantee Periods you select.
We call the total of the values in the Fixed Sub-Accounts, the "Fixed Account
Value." We currently offer Guarantee Periods with durations of 1, 2, 3, 4, 5,
7, and 10 years. If any amount allocated or transferred remains in a Guarantee
Period until the Expiration Date, its value will equal the amount originally
allocated or transferred, multiplied, on an annually compounded basis, by its
guaranteed interest rate. We will ordinarily apply a Market Value Adjustment
to any surrender, withdrawal, transfer, or amount applied to an income plan
from a Fixed Sub-Account before its Expiration Date. The Market Value
Adjustment may increase or decrease the value of the Fixed Sub-Account (or
portion thereof) being surrendered, withdrawn, transferred, or applied to an
income plan. See "Market Value Adjustment."

Subject to certain conditions (See "Transfers."), you can transfer Account
Value three ways:

--From one Variable Sub-Account to another;

--From a Fixed Sub-Account to a Variable Sub-Account; or

--From a Variable Sub-Account to a Fixed Sub-Account.

We may offer other variable annuity contracts that also invest in the same
Funds offered under the Contracts. These contracts may have different charges
and they may offer different benefits.

2. What Are My Income Payment Options?

You choose the Income Date when you want regular income payments to begin.
The Income Date you choose must be on or before the first calendar month
following the Annuitant's 95th birthday. We reserve the right to require that
your Income Date be at least two years after the Contract Date. After you
choose the Income Date, you select an income plan from the list below, and
indicate whether you want your income payments to be fixed or variable or a
combination of fixed and variable. You must give Satisfactory Notice of your
choices at least 30 days prior to the Income Date, and you must have at least
$5,000 of Account Value to apply to a variable or fixed income option.

On the Income Date, we will use the Account Value under the Contract
(adjusted for any Market Value Adjustment, if applicable) to provide income
payments. Unless you request otherwise, we will use any Variable Account Value
to provide variable income payments, and we will use any Fixed Account Value
to provide fixed income payments. If you have not chosen an income plan by the
Income Date, a "life annuity with 10 years certain" (described below) will be
used.

7
<PAGE>

The available income plans are:

--Income Plan 1--Life Annuity. You will receive payments for your life.

--Income Plan 2--Life Annuity with 10 or 20 Years Certain. You will receive
payments for your life. However, if you die before the end of the
guaranteed certain period you select (10 or 20 years), your Beneficiary
will receive the payments for the remainder of that period.

--Income Plan 3--Joint and Last Survivor Life Annuity. We will make
payments as long as either you or a second person you select (such as your
spouse) is alive.

--Income Plan 4--Payments for a Specified Period Certain. You will receive
payments for the number of years you select. However, if you die before
the end of that period, your Beneficiary will receive the payments for the
remainder of the guaranteed certain period.

--Income Plan 5--Annuity Plan. You can use your Account Value to purchase
any other income plan we offer at the time you want to begin receiving
regular income payments for which you and the Annuitant are eligible.

We will base your first income payment, whether fixed or variable, on the
amount of proceeds applied under the income plan you have selected and on the
"annuity purchase rates." These rates vary based on the Annuitant's age and
sex, and if applicable upon the age and sex of a second designated person. The
annuity purchase rate we apply will never be lower than the rate shown in your
Contract.

If you told us you want fixed income payments, we guarantee the amount of
each income payment, and it remains level throughout the period you selected.

If you told us you want variable income payments, the amount of each payment
will vary according to the investment performance of the Funds you selected.

Variable Income Payments. To calculate your initial and future variable
income payments, we need to make an assumption regarding the investment
performance of the Funds you select. We call this your assumed investment
rate. This rate is simply the total return, after expenses, you need to earn
to keep your variable income payments level. Rather than building in our own
estimate, we will allow you to tailor your variable income payments to meet
your needs by giving you a choice of rates. Currently, you may select either
3% or 6%; if you do not select a rate, we will apply the 3% rate. (We may
offer other rates in the future). The lower the rate, the lower your initial
variable income payment, but the better your payments will keep pace with
inflation (assuming positive investment performance). Conversely, the higher
the rate, the higher your initial variable income payment, but the less likely
your payments will keep pace with inflation (assuming positive investment
performance).

For example, if you select 6%, this means that if the investment
performance, after expenses, of your Funds is less than 6%, then the dollar
amount of your variable income payment will decrease. Conversely, if the
investment performance, after expenses, of your Funds is greater than 6%, then
the dollar amount of your income payments will increase.

If you told us that you want a life annuity, it is possible that you could
only receive one payment.

Your income payments will be made monthly, unless you choose quarterly,
semi-annual or annual payments by giving us Satisfactory Notice at least 30
days before the Income Date. Payments start on the Income Date. Each payment
must be at least $100. If any payment would be less than $100, we may change
the payment frequency to the next longer interval, but in no event less
frequent than annual. Also, if on the Income Date, the Account Value is less
than $5,000, we may pay the Surrender Value on that date in one sum.

3. How Do I Purchase A Contract?

Initial Purchase Payment. You may purchase a Contract for use in connection
with tax-qualified plans ("Qualified Contracts") or on a non-tax qualified
basis ("Non-Qualified Contracts"). To purchase a Contract, you and the
Annuitant you select may not be more than 85 years old on the Contract Date.
We require a different minimum initial purchase payment depending on whether
you are purchasing a Non-Qualified or Qualified Contract, as shown in the
following table:

<TABLE>
<CAPTION>
Minimum Initial
Purchase Payment
Required
----------------
<S> <C>
Non-Qualified Contract........................................ $5,000
Qualified Contract............................................ $2,000
</TABLE>
8
<PAGE>

Issuance of a Contract. Once we receive your initial purchase payment and
your application at our Customer Service Center, we will usually issue your
Contract within two Business Days. However, if you did not give us all the
information we need, we will try to contact you to get the needed information.
If we cannot complete the application within five Business Days, we will
either send your money back or obtain your permission to keep your money until
we receive the necessary information. Your Contract Date will be the date we
issue your Contract at our Customer Service Center.

Free Look Right to Cancel Contract. During your "Free Look" Period, you may
cancel your Contract. The Free Look Period usually ends 10 days after you
receive your Contract. Some states may require a longer period. If you decide
to cancel your Contract, you must return it to our Customer Service Center or
to one of our authorized registered representatives. We will send you a refund
equal to your Account Value plus any charges we have deducted on or before the
date we receive your returned Contract at our Customer Service Center. If
required by the law of your state, we will refund your initial purchase
payment (less any withdrawals previously taken). In those latter states where
this requirement exists, we will temporarily invest amounts you allocated to
the Variable Account to the Money Market Sub-Account until we deem the Free
Look Period to end. See "What Are My Investment Options."

Making Additional Purchase Payments. You may make additional purchase
payments of $250 or more at any time before the Income Date, subject to the
following conditions. We will accept additional purchase payments under a Non-
Qualified Contract until the earlier of the year in which you attain age 85 or
the year in which the Annuitant attains age 85. We will accept additional
purchase payments under a Qualified Contract until the year in which you
attain 70 1/2, except contributions to a Roth IRA or rollover contributions
may be made until the year in which you attain age 85. You must obtain our
prior approval before you make a purchase payment that causes the Account
Value of all annuities that you maintain with us to exceed $1,000,000. We will
credit any purchase payment received after the Contract Date to your Contract
as of the Business Day on which we receive it at our Customer Service Center.
We will deem purchase payments received on other than a Business Day as
received on the next following Business Day.

If you have not made a purchase payment for more than two years and your
Account Value is less than $2,000 on a Contract Anniversary, we may cancel
your Contract and pay you the Surrender Value as though you had surrendered.
We will give you written notice at your address of record. However, we will
allow you 61 days from the date of that notice to submit an additional
purchase payment in an amount sufficient to maintain your Account Value at
$2,000 or more. If we have not received the required additional purchase
payment by the end of this period, we may cancel your Contract.

4. What Are My Investment Options?

Purchase Payment Allocations. When you apply for a Contract, you specify the
percentage of your purchase payment to be allocated to each Variable Sub-
Account and/or to each Fixed Sub-Account. You can change the allocation
percentages at any time by sending Satisfactory Notice to our Customer Service
Center. The change will apply to all purchase payments we receive on or after
the date we receive your request. Purchase payment allocations must be in
percentages totaling 100%, and each allocation percentage must be a whole
number.

We may, however, require that an initial purchase payment allocated to a
Variable Sub-Account be temporarily invested in the Money Market Sub-Account
during the Free Look Period. We will require this if the law of your state
requires us to refund your full initial purchase payment less any withdrawals
previously taken, should you cancel your Contract during the Free Look Period.
At the end of the Free Look Period, if we temporarily allocated your initial
purchase payment to the Money Market Sub-Account, we will transfer the value
of what is in the Money Market Sub-Account to the Variable Sub-Account(s) you
specified in your application. Solely for the purpose of processing this
transfer from the Money Market Sub-Account, we will deem the Free Look Period
to end 15 days after the Contract Date. This transfer from the Money Market
Sub-Account to the Variable Sub-Accounts at the end of the Free Look Period
does not count as a transfer for any other purposes under the Contract.

Variable Sub-Account Investment Options. The Variable Account has 33 Sub-
Accounts, each

9
<PAGE>

investing in a specific Fund. Each of the Funds is either an open-end
diversified management investment company or a separate investment portfolio
of such a company, and is managed by a registered investment adviser. The
Funds, as well as brief descriptions of their investment objectives, are
provided below. There is no assurance that these objectives will be met. Not
every fund may be available in every state or in every market.

AIM VARIABLE INSURANCE FUNDS, INC.

AIM V.I. Government Securities Fund. This Fund seeks to achieve high current
income consistent with reasonable concern for safety of principal by investing
in debt securities issued, guaranteed or otherwise backed by the United States
Government.

AIM V.I. Growth and Income Fund. This Fund's primary objective is growth of
capital with a secondary objective of current income.

AIM V.I. International Equity Fund. This Fund seeks to provide long-term
growth of capital by investing in a diversified portfolio of international
equity securities whose issuers are considered to have strong earnings
momentum.

AIM V.I. Value Fund. This Fund seeks to achieve long-term growth of capital
by investing primarily in equity securities judged by the Fund's investment
advisor to be undervalued relative to the investment adviser's appraisal of
the current or projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies issuing the
securities or relative to the equity market generally. Income is a secondary
objective.

A I M Advisors, Inc. advises the AIM Variable Insurance Funds, Inc.

THE ALGER AMERICAN FUND

Alger American Midcap Growth Portfolio. This Fund seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities, primarily of companies with total market capitalization
within the range included in the S&P MidCap 400 Index(R).

Alger American Income and Growth Portfolio. This Fund seeks primarily to
provide a high level of dividend income through investments in dividend-paying
equity securities. Capital appreciation is a secondary goal of this Fund.

Alger American Small Capitalization Portfolio. This Fund seeks long-term
capital appreciation through investment primarily in equity securities that,
at the time of purchase, have total market capitalization within the range of
companies included in the Russell 2000 Growth Index(R) or the S&P SmallCap 600
Index(R).

Fred Alger Management, Inc. advises The Alger American Fund.
LIBERTY VARIABLE INVESTMENT TRUST

Colonial High Yield Securities Fund, Variable Series ("High Yield Securities
Fund"). This Fund seeks high current income and total return by investing
primarily in lower rated corporate debt securities (commonly referred to as
"junk bonds").

Colonial Small Cap Value Fund, Variable Series ("Small Cap Value
Fund"). This Fund seeks long-term growth by investing primarily in smaller
capitalization equity securities.

Colonial Strategic Income Fund, Variable Series ("Strategic Income
Fund"). This Fund seeks a high level of current income, as is consistent with
prudent risk and maximizing total return, by diversifying investments
primarily in U.S. and foreign government and lower rated corporate debt
securities.

Colonial U.S. Stock Fund, Variable Series ("U.S. Stock Fund"). This Fund
seeks long-term

10
<PAGE>

growth by investing primarily in large capitalization equity securities.

Liberty All-Star Equity Fund, Variable Series ("All-Star Fund"). This Fund
seeks total investment return, comprised of long-term capital appreciation and
current income, through investment primarily in a diversified portfolio of
equity securities.

Newport Tiger Fund, Variable Series ("Tiger Fund"). This Fund seeks long-
term capital growth by investing primarily in equity securities of companies
located in the nine Tigers of Asia (Hong Kong, Singapore, South Korea, Taiwan,
Malaysia, Thailand, Indonesia, China and the Philippines).

Stein Roe Global Utilities Fund, Variable Series ("Global Utilities
Fund"). This Fund seeks current income and long-term growth of capital. The
Global Utilities Fund normally invests at least 65% of its total assets in
U.S. and foreign equity and debt securities of companies engaged in the
manufacture, production, generation, transmission, sale or distribution of
electricity, natural gas or other types of energy, or water or other sanitary
services, and companies engaged in telecommunication, including telephone,
telegraph, satellite, microwave and other communications media.

Liberty Advisory Services Corp. (formerly "Keyport Advisory Services Corp.")
provides investment management and advisory services to the Liberty Variable
Investment Trust. Colonial Management Associates, Inc. subadvises the High
Yield Securities Fund, the U.S. Stock Fund, the Small Cap Value Fund, and the
Strategic Income Fund. Stein Roe & Farnham Incorporated subadvises the Global
Utility Fund. Newport Fund Management, Inc. subadvises the Tiger Fund. Liberty
Asset Management Company subadvises the All-Star Fund.

STEINROE VARIABLE INVESTMENT TRUST

Stein Roe Growth Stock Fund. This Fund seeks long-term growth of capital
through investment primarily in common stocks.

Stein Roe Balanced Fund. This Fund seeks high total investment return
through a changing mix of equities, debt securities, and cash.

Stein Roe & Farnham Incorporated advises the SteinRoe Variable Investment
Trust.

MFS(R) VARIABLE INSURANCE TRUST SM

MFS Growth with Income Series. This Fund seeks to provide reasonable current
income and long-term growth of capital and income.

MFS High Income Series. This Fund seeks high current income by investing
primarily in a professionally managed diversified portfolio of fixed income
securities, some of which may involve equity features.

MFS Research Series. This Fund seeks to provide long-term growth of capital
and future income.

MFS Total Return Series. This Fund seeks primarily to provide above-average
income (compared to a portfolio invested entirely in equity securities)
consistent with the prudent employment of capital, and secondarily to provide
a reasonable opportunity for growth of capital and income.

MFS Capital Opportunities Series (formerly MFS Value Series). This Fund
seeks capital appreciation. Dividend income, if any, is a consideration
incidental to the Fund's objective of capital appreciation.

MFS Investment Management(R) advises the MFS(R) Variable Insurance Trust. SM

11
<PAGE>

MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Global Equity Portfolio. This Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers throughout the world,
including U.S. issuers, using an approach that is oriented to the selection of
individual stocks that the Fund's investment adviser believes are undervalued.

Mid Cap Value Portfolio. This Fund seeks above-average total return over a
market cycle of three to five years by investing in common stocks and other
equity securities of issuers with equity capitalizations in the range of
companies represented in the S&P MidCap 400 Index.

Value Portfolio. This Fund seeks above-average return over a market cycle of
three to five years by investing primarily in a diversified portfolio of
common stocks and other equity securities that are deemed by the Fund's
investment adviser to be relatively undervalued based on the market as a
whole, as measured by the S&P 500 Index.

Morgan Stanley Dean Witter Investment Management, Inc. advises the Global
Equity Portfolio. Miller Anderson & Sherrerd, LLP advises the Value Portfolio
and the Mid Cap Value Portfolio.
OPPENHEIMER VARIABLE ACCOUNT FUNDS

Oppenheimer Bond Fund/VA. This Fund seeks a high level of current income.
Secondarily, this Fund seeks capital growth when consistent with its primary
objective. The Fund will, under normal market conditions, invest at least 65%
of its total assets in investment grade debt securities.

Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Growth
Fund). This Fund seeks to achieve capital appreciation by investing in
securities of well-known, established companies.

Oppenheimer Small Cap Growth Fund/VA. This Fund seeks capital appreciation.
Current income is not an objective. In seeking its investment objective, the
Fund emphasizes investments in securities of "growth type" companies with
market capitalizations of less than $1 billion, including common stocks,
preferred stocks, convertible securities, rights, warrants and options, in
proportions which may vary from time to time.

Oppenheimer Funds, Inc. manages Oppenheimer Variable Account Funds.
SAGE LIFE INVESTMENT TRUST
EAFE(R) Equity Index Fund. This Fund seeks to replicate as closely as
possible the performance of the Morgan Stanley Capital International Europe,
Australasia, Far East Index before the deduction of Fund expenses.

S&P 500 Equity Index Fund. This Fund seeks to replicate as closely as
possible the performance of the S&P 500 Composite Stock Price Index before the
deduction of Fund expenses.

Money Market Fund. This Fund seeks to provide high current income consistent
with the preservation of capital and liquidity. Although the Fund seeks to
maintain a constant net asset value of $1.00 per share, there can be no
assurance that the Fund can do so on a continuous basis. An investment in the
Money Market Fund is not guaranteed.

Sage Advisors, Inc. is the investment manager to the Sage Life Investment
Trust. State Street Global Advisors subadvises the EAFE(R) Equity Index Fund
and S&P 500 Equity Index Fund. Conning Asset Management Company subadvises the
Money Market Fund.
T. ROWE PRICE EQUITY SERIES, INC.

T. Rowe Price Equity Income Portfolio. This Fund seeks to provide
substantial dividend income as well as long-term growth of capital through
investments in the common stocks of established companies.

T. Rowe Price Mid-Cap Growth Portfolio. This Fund seeks to provide long-term
capital appreciation by investing in mid-cap stocks with potential for above-
average earnings.

T. Rowe Price Personal Strategy Balanced Portfolio. The Fund seeks to
provide the highest total return over time, with an emphasis on both capital
growth and income. The Personal Strategy Balanced Portfolio invests in a
diversified portfolio of stocks, bonds, and money market securities.

T. Rowe Price Associates, Inc. provides investment management to the T. Rowe
Price Equity Series, Inc.

12
<PAGE>

The investment objectives and policies of certain Funds may be similar to
those of other retail mutual funds which can be purchased outside of a
variable insurance product, and that are 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 retail mutual funds. 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
retail mutual fund, even if the other retail mutual fund has the same
investment adviser or manager.

Shares of the Funds may be sold to separate accounts of insurance companies
that are not affiliated with us or each other, a practice known as "shared
funding." They also may be sold to separate accounts to serve as the
underlying investment for both variable annuity contracts and variable life
insurance contracts, a practice known as "mixed funding." As a result, there
is a possibility that a material conflict may arise between the interests of
Owners who allocate Account Values to the Variable Account, and owners of
other contracts who allocate contract values to one or more other separate
accounts investing in any of the Funds. Shares of some of the Funds may also
be sold directly to certain qualified pension and retirement plans qualifying
under Section 401 of the Internal Revenue Code of 1986, as amended (the
"Code"). As a result, there is a possibility that a material conflict may
arise between the interest of Owners or owners of other contracts (including
contracts issued by other companies), and such retirement plans or
participants in such retirement plans. In the event of any such material
conflicts, we will consider what action may be appropriate, including removing
a Fund from the Variable Account or replacing the Fund with another Fund.
There are certain risks associated with mixed and shared funding and with the
sale of shares to qualified pension and retirement plans, as disclosed in each
Trust's prospectus.

We have entered into agreements with either the investment adviser or
distributor for each of the Funds in which the adviser or distributor pays us
a fee ordinarily based upon an annual percentage of the average aggregate net
amount we have invested on behalf of the Variable Account and other separate
accounts. These percentages differ, and some investment advisers or
distributors pay us a greater percentage than other advisers or distributors.
These agreements reflect administrative services we provide.

More detailed information concerning the investment objectives, policies,
and restrictions of the Funds, the expenses of the Funds, the risks attendant
to investing in the Funds and other aspects of their operations is found in
the current prospectus for each Trust which accompanies this Prospectus. You
should read the Trusts' prospectuses carefully before you decide to allocate
amounts to the Variable Sub-Accounts.

Fixed Account Investment Options. Each time you allocate purchase payments
or transfer funds to the Fixed Account, we establish a Fixed Sub-Account. We
guarantee an interest rate (the "Guaranteed Interest Rate") for each Fixed
Sub-Account for a period of time (a "Guarantee Period"). When you make an
allocation to the Fixed Sub-Account, we apply the Guaranteed Interest Rate
then in effect. We may establish specially designated Fixed Sub-Accounts ("DCA
Fixed Sub-Accounts") for our Dollar-Cost Averaging Program.

We have no specific formula for establishing the Guaranteed Interest Rates
for the different Guarantee Periods. The determination we make will be
influenced by, but not necessarily correspond to, interest rates available on
fixed income investments that we may acquire with the amounts we receive as
purchase payments or transfers of Account Value under the Contracts. We will
invest these amounts primarily in investment-grade fixed income securities
including: securities issued by the U.S. Government or its agencies or
instrumentalities, which issues may or may not be guaranteed by the U.S.
Government; debt securities that have an investment grade, at the time of
purchase, within the four highest grades assigned by Moody's Investor
Services, Inc., Standard & Poor's Corporation, or any other nationally
recognized rating service; mortgage-backed securities collateralized by real
estate mortgage loans, or securities collateralized by other assets, that are
insured or guaranteed by the Federal Home Loan Mortgage Association, the
Federal National Mortgage Association, or the Government National Mortgage
Association, or that have an investment grade at the time of purchase within
the four highest grades described above; other debt instruments; commercial
paper; cash or cash equivalents. You will have no direct or indirect interest

13
<PAGE>

in these investments, and you do not share in the investment performance of
the assets of the Fixed Account. We will also consider other factors in
determining the Guaranteed Interest Rates, including regulatory and tax
requirements, sales commissions, administrative expenses borne by us, general
economic trends, and competitive factors. The Company's management will make
the final determination of the Guaranteed Interest Rates it declares. We
cannot predict or guarantee the level of future interest rates. However, our
Guaranteed Interest Rates will be at least 3% per year. Guaranteed Interest
Rates do not depend upon and do not reflect the performance of the Fixed
Account.

We measure the length of a Guarantee Period from the end of the calendar
month in which you allocated or transferred the amount to the Fixed Sub-
Account. This means that the Expiration Date of any Guarantee Period will
always be the last day of a calendar month. The currently available Guarantee
Periods are 1, 2, 3, 4, 5, 7, and 10 years. We may offer different Guarantee
Periods in the future. Not all Guarantee Periods may be available in all
states. Any Guarantee Period you select cannot be longer than the number of
full years remaining until your Income Date.

We will notify you of your options for renewal at least thirty days before
an Expiration Date of a Fixed Sub-Account in which you are invested. Your
options are:

--Take no action and we will transfer the value of the expiring Fixed Sub-
Account to the Fixed Sub-Account with the same Guarantee Period, but not
longer than five years or extending beyond the Income Date, as of the day
the previous Fixed Sub-Account expires. If such Guarantee Period is not
currently available, we will transfer your value to the next shortest
Guarantee Period. If there is no shorter Guarantee Period, we will
transfer your value to the Money Market Sub-Account.

--Elect a new Guarantee Period(s) from among those we offer as of the day
the previous Fixed Sub-Account expires.

--Elect to transfer the value of the Fixed Sub-Account to one or more
Variable Sub- Accounts.

Any amounts surrendered, withdrawn, transferred or applied to an income plan
other than during the thirty days before the Expiration Date of the Guarantee
Period are subject to a Market Value Adjustment with the exception of the
following transactions:

--Transfers from DCA Fixed Sub-Accounts made automatically under our Dollar
Cost Averaging Program, and

--Withdrawals of earned interest made automatically under our Systematic
Partial Withdrawal Program.

We currently waive any Market Value Adjustment on withdrawals you take to
satisfy IRS minimum distribution requirements.

Market Value Adjustment. A Market Value Adjustment reflects the change in
interest rates since we established a Fixed Sub-Account. It compares: (1) the
current Index Rate for a period equal to the time remaining in the Guarantee
Period, and (2) the Index Rate at the time we established the Fixed Sub-
Account for a period equal to the Guarantee Period.

Ordinarily, if the current Index Rate for a period equal to the time
remaining in the Guarantee Period is higher than the applicable Index Rate at
the time we established the Fixed Sub-Account, the Market Value Adjustment
will be negative. Similarly, if the current Index Rate for a period equal to
the time remaining in the Guarantee Period is lower than the applicable Index
Rate at the time we established the Fixed Sub-Account, the Market Value
Adjustment will be positive.

We will apply a Market Value Adjustment as follows:

--For a surrender, withdrawal, transfer, or amount applied to an income
plan, we will calculate the Market Value Adjustment on the total amount
(including any applicable surrender charge) that must be surrendered,
withdrawn, transferred or applied to an income plan to provide the amount
requested.

--If the Market Value Adjustment is negative, it reduces any remaining
value in the Fixed Sub-Account, or amount of Surrender Value. Any
remaining Market Value Adjustment then reduces the amount withdrawn,
transferred, or applied to an income plan.

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<PAGE>

--If the Market Value Adjustment is positive, it increases any remaining
value in the Fixed Sub-Account. In the case of surrender, or if you
withdraw, transfer or apply to an income plan, the full amount of the
Fixed Sub-Account, the Market Value Adjustment increases the amount
surrendered, withdrawn, transferred, or applied to an income plan.

We will compute the Market Value Adjustment by multiplying the factor below
by the total amount (including any applicable surrender charge) that must be
surrendered, withdrawn, transferred, or applied to an income plan from the
Fixed Sub-Account to provide the amount you requested.

[(1+I)/(1+J+.0025)]N//365/ - 1

Where

I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period at the time we established the Sub-Account;

J is the Index Rate for a maturity equal to the time remaining (rounded
up to the next full year) in the Fixed Sub-Account's Guarantee Period at
the time of calculation; and

N is the remaining number of days in the Guarantee Period at the time of
calculation.

We currently base the Index Rate for a calendar week on the reported rate
for the preceding calendar week. We reserve the right to set it less
frequently than weekly but in no event less often than monthly. If there is no
Index Rate for the maturity needed to calculate I or J, we will use straight-
line interpolation between the Index Rate for the next highest and next lowest
maturities to determine that Index Rate. If the maturity is one year or less,
we will use the Index Rate for a one-year maturity.

In the states of Maryland and Washington, state insurance law requires that
the Market Value Adjustment be computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to an income plan, by the
greater of the factor above and the following factor: [(1.03)/(1+K)] ((G-
N)/365)) - 1, where N is as defined above, K equals the Guaranteed Interest
Rate for the Guarantee Period, and G equals the initial number of days in the
Guarantee Period.

Examples of how the Market Value Adjustment works are shown in Appendix A.

Transfers. Before the Income Date and while the Annuitant is living, you may
transfer Account Value from and among the Variable and Fixed Sub-Accounts at
any time, subject to certain conditions. However, in certain states, your
right to transfer Account Value is restricted until after the end of the Free
Look Period. See "What Are My Investment Options? " page . The minimum amount
of Account Value that you may transfer from a Sub-Account is $250, or, if
less, the entire remaining Account Value held in that Sub-Account. You must
give us Satisfactory Notice of the Sub-Accounts from which and to which we are
to make the transfers. Otherwise, we will not transfer your Account Value. A
transfer from a Fixed Sub-Account ordinarily will be subject to a Market Value
Adjustment. There is currently no limit on the number of transfers from and
among the Sub-Accounts.

A transfer ordinarily takes effect on the Business Day we receive
Satisfactory Notice at our Customer Service Center. We will deem requests
received on other than a Business Day as received on the next following
Business Day. We may, however, defer transfers to, from, and among the
Variable Sub-Accounts under the same conditions that we may delay paying
proceeds.

We reserve the right to impose a transfer charge of up to $25 on each
transfer in a Contract Year in excess of twelve, and to limit, upon notice,
the maximum number of transfers you may make per calendar month or per
Contract Year. For purposes of assessing any transfer charge, we will consider
each transfer request to be one transfer, regardless of the number of Sub-
Accounts affected by the transfer.

After the Income Date, you must have our prior consent to transfer value
from the Fixed Account to the Variable Account or from the Variable Account to
the Fixed Account. A Market Value Adjustment ordinarily will apply to
transfers from the Fixed Account. We reserve the right to limit the number of
transfers among the Variable Sub-Accounts to one transfer per Contract Year
after the Income Date.

Telephone Transactions. You may request transfers or withdrawals by
telephone. We will not be liable for following instructions communicated by
telephone that we reasonably believe to be genuine. To request transfers or
withdrawals by telephone, you must elect the option on our authorization form.
We will employ reasonable

15
<PAGE>

procedures to confirm that instructions communicated by telephone are genuine.
We may only be liable for any losses due to unauthorized or fraudulent
instructions where we fail to follow our procedures properly. These procedures
include: (a) asking you or your authorized representative to provide certain
identifying information; (b) tape recording all such conversations; and (c)
sending you a confirmation statement after all such telephone transactions.

Our telephone transaction authorization form also allows you to create a
power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, we will treat such power as a
durable power of attorney. The Owner's subsequent incapacity, disability, or
incompetency will not affect the power of attorney. We may cease to honor the
power by sending written notice to you at your last known address. Neither we
nor any person acting on our behalf shall be subject to liability for any act
done in good faith reliance upon your power of attorney.

Power of Attorney. As a general rule and as a convenience to you, we allow
the use of powers of attorney whereby you can give a third party the right to
make transfers on your behalf. However, when the same third party possesses
powers of attorney executed by many Owners, the result can be simultaneous
transfers involving large amounts of Account Value. Such transfers can disrupt
the orderly management of the Funds, can result in higher costs to Owners, and
are ordinarily not compatible with the long-range goals of purchasers of the
Contracts. We believe that such simultaneous transfers made by such third
parties are not in the best interest of all shareholders of the Funds. The
managements of the Funds share this position.

Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, we may not honor such powers of attorney and have instituted or will
institute procedures to assure that the transfer requests that we receive
have, in fact, been made by the Owners in whose names they are submitted.
However, these procedures will not prevent you from making your own transfer
requests.

Dollar-Cost Averaging Program. Our optional dollar-cost averaging program
permits you to systematically transfer (monthly, or as frequently as we
allow), a set dollar amount from the Money Market Sub-Account to any
combination of Variable Sub-Accounts. We also allow dollar-cost averaging from
DCA Fixed Sub-Accounts. These DCA Fixed Sub-Accounts may have different
Guarantee Periods and different Guaranteed Interest Rates than the Fixed Sub-
Accounts.

The dollar-cost averaging method of investment is designed to reduce the
risk of making purchases only when the price of Accumulation Units is high.
However, you should carefully consider your financial ability to continue the
program over a long enough period of time to purchase units when their value
is low as well as when high. Dollar-cost averaging does not assure a profit or
protect against a loss. Due to the effect of interest that continues to be
earned on the balance in the Money Market Sub-Account or a DCA Fixed Sub-
Account, the amounts we transfer will vary slightly from month to month. An
example of how our dollar-cost averaging program works is shown in Appendix B.

You may elect to participate in the dollar-cost averaging program at any
time before the Income Date by sending us Satisfactory Notice. The minimum
transfer amount is $250 from the Money Market Sub-Account or from a DCA Fixed
Sub-Account. We will make all dollar-cost averaging transfers on the day of
each month that corresponds to your Contract Date unless that date is not a
Business Day. Otherwise, we will make the transfer on the next following
Business Day. If you want to dollar-cost average from more than one DCA Fixed
Sub-Account at the same time, certain restrictions may apply.

Once elected, dollar-cost averaging remains in effect from the date we
receive your request until the Income Date, until you surrender the Contract,
until the value of the Sub-Account from which transfers are being made is
depleted, or until you cancel the program by written request. If you request
to cancel dollar-cost averaging from a DCA Fixed Sub-Account before the end of
the selected period, we reserve the right to treat this request as a transfer
request, and we ordinarily will assess a Market Value Adjustment on the amount
canceled. You can request changes by writing us at our Customer Service
Center. There is no additional charge for dollar-cost averaging. We do not
consider a transfer under this program a transfer for purposes of assessing a
transfer charge. We reserve the right to discontinue

16
<PAGE>

offering this program at any time and for any reason. Dollar-cost averaging is
not available while you are participating in the systematic partial withdrawal
program.

Asset Allocation Program. You may select from six asset allocation model
portfolios, or you may use these models as a guide to help you develop your
own asset allocation model. The models are as follows:

<TABLE>
<CAPTION>
Investment and
Model Risk Profile
- ----- -----------------
<S> <C>
I............................................................. Stable Capital
II............................................................ Stable Income
III........................................................... Moderate Income
IV............................................................ Moderate Growth
V............................................................. Capital Growth
VI............................................................ Aggressive Growth
</TABLE>

If you participate in the asset allocation program, we will automatically
allocate all initial and additional purchase payments among the Variable Sub-
Accounts indicated by the model you select. The models do not include
allocations to the Fixed Account. Although you may only use one model at a
time, you may elect to change your selection as your tolerance for risk,
and/or your needs and objectives change. Bear in mind, the use of an asset
allocation model does not guarantee investment results. You may use a
questionnaire that is offered to determine the model that best meets your risk
tolerance and time horizons.

Because each Variable Sub-Account performs differently over time, your
portfolio mix may vary from its initial allocations. We will automatically
rebalance your Fund mix quarterly to bring your portfolio back to its original
allocation percentages.

From time to time the models are reviewed. It may be found that allocation
percentages among the Variable Sub-Accounts or even some of the Variable Sub-
Accounts within a particular model need to be changed. You will be sent notice
at least 30 days before any such change is made, and you will be given an
opportunity not to make the change.

If you participate in the asset allocation program, the transfers made under
the program are not taken into account in determining any transfer charge.
There is no additional charge for this program. We reserve the right to
discontinue offering this program at any time and for any reason.

Automatic Portfolio Rebalancing Program. Once you allocate your money among
the Variable Sub-Accounts, the investment performance of each Variable Sub-
Account may cause your allocation to shift. Before the Income Date, you may
instruct us to automatically rebalance (on a calendar quarter, semi-annual, or
annual basis) Variable Account Value to return to your original allocation
percentages. Your request will be effective on the Business Day on which we
receive your request at our Customer Service Center. We will deem requests
received on other than a Business Day as received on the next following
Business Day. Your allocation percentages must be in whole percentages. You
may start and stop automatic portfolio rebalancing at any time and make
changes to your allocation percentages by written request. There is no
additional charge for using this program. We do not consider a transfer under
this program a transfer for purposes of assessing any transfer charge. We
reserve the right to discontinue offering this program at any time and for any
reason. We do not include any money allocated to the Fixed Account in the
rebalancing.

Account Value. The Account Value is the entire amount we hold under your
Contract for you. The Account Value serves as a starting point for calculating
certain values under your Contract. It equals the sum of your Variable Account
Value and your Fixed Account Value. We first determine your Account Value on
the Contract Date, and after that, on each Business Day. The Account Value
will vary to reflect:

--the performance of the Variable Sub-Accounts you have selected;

--interest credited on amounts you allocated to the Fixed Account;

--any additional purchase payments; and

--charges, transfers, withdrawals, and surrenders.

Your Account Value may be more or less than purchase payments you made.

Surrender Value. The Surrender Value on a Business Day before the Income
Date is the Account Value, plus or minus any applicable Market Value
Adjustment, reduced by any applicable surrender charge that would be deducted
if your Contract were surrendered that day, less any applicable annual
administration charge and any applicable Purchase Payment Tax Charge.

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<PAGE>

Variable Account Value. On any Business Day, the Variable Account Value
equals the sum of the values in each Variable Sub-Account. The value in each
Variable Sub-Account equals the number of Accumulation Units attributable to
that Variable Sub-Account multiplied by the Accumulation Unit value for that
Variable Sub-Account on that Business Day. When you allocate a purchase
payment or transfer Account Value to a Variable Sub-Account, we credit your
Contract with Accumulation Units in that Variable Sub-Account. We determine
the number of Accumulation Units by dividing the dollar amount allocated or
transferred to the Variable Sub-Account by the Sub-Account's Accumulation Unit
value for that Business Day. Similarly, when you transfer, withdraw, or
surrender an amount from a Variable Sub-Account, we cancel Accumulation Units
in that Variable Sub-Account. We determine the number of Accumulation Units
canceled by dividing the dollar amount you transferred, withdrew, or
surrendered by the Variable Sub-Account's Accumulation Unit value for that
Business Day.

Accumulation Unit Value. An Accumulation Unit value varies to reflect the
investment experience of the underlying Fund, and may increase or decrease
from one Business Day to the next. We arbitrarily set the Accumulation Unit
value for each Variable Sub-Account at $10 when we established the Sub-
Account. For each Valuation Period after the date of establishment, we
determine the Accumulation Unit value by multiplying the Accumulation Unit
value for a Sub-Account for the prior Valuation Period by the net investment
factor for the Variable Sub-Account for the Valuation Period.

Net Investment Factor. The net investment factor is an index we use to
measure the investment performance of a Variable Sub-Account from one
Valuation Period to the next during the Accumulation Phase. We determine the
net investment factor for any Valuation Period by dividing (a) by (b) where:

(a) is the net result of:

(i) the Net Asset Value of the Fund in which the Variable Sub-Account
invests determined at the end of the current Valuation Period; plus

(ii) the per share amount of any dividend or capital gain
distributions made by the Fund on shares held in the Variable Sub-
Account if the "ex-dividend" date occurs during the current Valuation
Period; and plus or minus

(iii) a per share charge or credit for any taxes reserved for, which
we determine to have resulted from the operations of the Variable Sub-
Account; and

(b) is the Net Asset Value of the Fund in which the Variable Sub-Account
invests determined at the end of the immediately preceding Valuation
Period.

The net investment factor may be more or less than, or equal to, one.

Fixed Account Value. The Fixed Account Value is the sum of the Fixed Account
Value in each Fixed Sub-Account (including a DCA Fixed Sub-Account) on any
particular day. The value in each Fixed Sub-Account equals:

--the portion of the purchase payment(s) allocated or amount transferred to
the Sub-Account; plus

--interest at the Guaranteed Interest Rate; minus

--any transfers from the Sub-Account; minus

--any withdrawals (including any associated surrender charges) from the
Sub-Account; and minus

--any charges allocated to the Sub-Account.

We also adjust the Fixed Sub-Account Value for any Market Value Adjustment,
the value of which could be positive or negative.

5. What Are The Expenses Under A Contract?

We deduct the charges described below. The charges are for the services and
benefits we provide, costs and expenses we incur, and risks we assume under
the Contracts. Services and benefits we provide include:

--the ability of Owners to make withdrawals and surrenders under the
Contracts;

--the death benefit paid on the death of the Owner;

--the available investment options, including dollar-cost averaging, asset
allocation, automatic portfolio rebalancing, and systematic partial
withdrawal programs;

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<PAGE>

--administration of the income plan options available under the Contracts;
and

--the distribution of various reports to Owners.

Costs and expenses we incur include:

--those related to various overhead and other expenses associated with
providing the services and benefits guaranteed by the Contracts;

--sales and marketing expenses; and

--other costs of doing business.

Risks we assume include:

--the risks that Annuitants may live longer than we estimated when we
established the annuity purchase rates under the Contracts;

--that the amount of the death benefit will be greater than Account Value;
and

--that the costs of providing the services and benefits under the Contracts
will exceed the charges deducted.

We may also deduct a charge for taxes. See "Fee Table."

We may realize a profit or loss on one or more of the charges. We may use
any such profits for any corporate purpose, including, among other things,
payment of sales expenses.

Unless we otherwise specify, we will deduct charges proportionately from all
Variable Sub-Accounts and Fixed Sub-Accounts in which you are invested.

We may reduce or eliminate charges under the Contracts when sales result in
savings, reduction of expenses and/or risks to the Company. Generally, we will
make such reductions based on the following factors:

--the size of the group;

--the total amount of purchase payments to be received from the group;

--the purposes for which the Contracts are purchased;

--the nature of the group for which the Contracts are purchased; and

--any other circumstances that could reduce Contract costs and expenses.

We may also sell the Contracts with lower or no charges to a person who is
an officer, director or employee of Sage Life or of certain affiliates of
ours. Reductions in Contract charges will not be unfairly discriminatory
against any person. Please contact our Customer Service Center for more
information about these cost reductions.

Surrender Charge

If you make an Excess Withdrawal or surrender your Contract during the first
seven Contract Years, we may deduct a surrender charge calculated as a
percentage of the amount of purchase payment(s) withdrawn or surrendered. The
applicable percentage is 7% in the first Contract Year, and declines until it
reaches 0% in the eighth Contract Year.

If you surrender your Contract, we deduct the surrender charge from the
Account Value in determining the Surrender Value. If you take an Excess
Withdrawal, we deduct the surrender charge from your Account Value remaining
after we pay you the amount requested. We include any surrender charge we
assess in the calculation of any applicable Market Value Adjustment for
withdrawals from the Fixed Account. Each year you may withdraw a "Free
Withdrawal Amount" without incurring a surrender charge. For a table of
surrender charges and a description of the Free Withdrawal Amount, see the
"Fee Table."

With an Excess Withdrawal, we will liquidate purchase payments in whole or
in part on a "first-in, first-out" basis. This means we liquidate purchase
payments in the order you made them: the oldest unliquidated purchase payment
first, the next oldest unliquidated purchase payment second, until all
purchase payments have been liquidated.

The total surrender charge will be the sum of the surrender charges for each
purchase payment being liquidated. The amount you request from a Sub-Account
may not exceed the value of that Sub-Account less any applicable surrender
charge.

Example of Calculation of Surrender Charge. Assume the applicable surrender
charge is 7%, you have requested a withdrawal of $1,000, and no Market Value
Adjustment is applicable. Your initial purchase payment was $5,000, your
current Account Value is $5,250, and you made no prior withdrawals

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<PAGE>

during that Contract Year. Your Free Withdrawal Amount is the greater of (a)
or (b), where:

(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals (including any associated surrender charge and Market
Value Adjustment incurred) in that Contract Year (10% x $5,000 = $500); and

(b) is the excess of the Account Value on the date of withdrawal over the
unliquidated purchase payments ($5,250 - $5,000 = $250).

Therefore, the Free Withdrawal Amount is $500. A surrender charge will apply
to the excess of $1,000 over $500. The surrender charge equals $35 (7% x
$500).

Waiver of Surrender Charge. We will not deduct a surrender charge if, at the
time we receive your request for a withdrawal or a surrender, we have also
received due proof that you (or the Annuitant, if the Owner is not an
individual) have a "Qualifying Terminal Illness" or have been confined
continuously to a "Qualifying Hospital or Nursing Care Facility" for at least
45 days in a 60 day period. We define "Qualifying Terminal Illness" and
"Qualifying Hospital or Nursing Care Facility" in your Contract.

Annual Administration Charge

We will deduct an annual administration charge of $40 for the first seven
Contract Years (i) on each Contract Anniversary, and (ii) on the day of any
surrender if the surrender is not on the Contract Anniversary. We will waive
this charge on and after the eighth Contract Anniversary, or if the Account
Value is at least $50,000 when we would have otherwise deducted the annual
administration charge.

Transfer Charge

We currently do not deduct this charge. However, we reserve the right to
deduct a transfer charge of up to $25 for the 13th and each subsequent
transfer during a Contract Year. For the purpose of assessing the transfer
charge, we consider each written or telephone request to be one transfer,
regardless of the number of Sub-Accounts affected by the transfer. In the
event that the transfer charge becomes applicable, we will deduct it
proportionately from the Sub-Accounts from which you made the transfer.
Transfers made in connection with the dollar-cost averaging, asset allocation,
and automatic portfolio rebalancing programs will not count as transfers for
purposes of assessing this charge.

Asset-Based Charges

We assess Asset-Based Charges against your Contract for assuming mortality
and expense risks and administrative costs we assume. Before the Income Date,
we deduct Asset-Based Charges monthly and calculate the charges as a
percentage of the Variable Account Value on the date of deduction. On the
Contract Date and monthly thereafter, we deduct the Asset-Based Charges
proportionately from the Variable Sub-Accounts in which you are invested.
After the Income Date, however, these charges are called Variable Sub-Account
Charges and we deduct them daily from the assets in each Variable Sub-Account
supporting variable income payments. The maximum charges are:

<TABLE>
<CAPTION>
Combined
Asset-Based Charges
------------------------
Annual Monthly Daily
Charge Charge Charge
------ ------- --------
<S> <C> <C> <C>
Contract Years
1-7............ 1.40% .116667% .0038626%
Contract Years
8+............. 1.25% .104167% .0034462%
</TABLE>

We reserve the right to deduct Asset-Based Charges on the effective date of
any transfer from the Fixed Account, or allocation of purchase payment to the
Variable Account, based on the amount transferred or allocated and based on
the number of days remaining until the next date of deduction. These charges
do not apply to any Fixed Account Value.

Purchase Payment Tax Charge

During the first seven Contract Years only, we will deduct any state premium
tax that we incur if you surrender your Contract or begin receiving regular
income payments. This tax charge currently ranges from 0% to 3.5% depending
upon the state. We currently do not intend to deduct this charge in or after
the eighth Contract Year.

Fund Annual Expenses

Because the Variable Account purchases shares of the various Funds you
choose, the net assets of the Variable Account will reflect the investment
management fees and other operating expenses incurred by those Funds. A table
of each Fund's

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<PAGE>

management fees and other expenses can be found in the front of this
Prospectus in the Fee Table. For a description of each Fund's expenses,
management fees, and other expenses, see the Trusts' prospectuses.

Additional Information

The Contracts are sold by broker-dealers through registered representatives
of such broker-dealers who are also appointed and licensed as insurance agents
of Sage Life. See "Distribution of the Contracts." These broker-dealers
receive commissions for selling Contracts calculated as a percentage of
purchase payments (up to a maximum of 6%). You do not pay these commissions.
We do. Broker-dealers who meet certain productivity and profitability
standards may be eligible for additional compensation.

6. How Will My Contract Be Taxed?

This discussion is not intended as tax advice. Please consult counsel or
other competent tax advisers for more complete information.

Introduction

The following summary provides a general description of the federal income
tax considerations associated with the Contract and does not purport to be
complete or to cover all tax situations. This discussion is based upon our
understanding of the present federal income tax laws as they are currently
interpreted by the Internal Revenue Service (the "IRS"). No representation is
made as to the likelihood of continuation of the present federal income tax
laws or of the current interpretations by the IRS.

The Contract may be purchased on a non-tax-qualified basis, as a Non-
Qualified Contract, or purchased on a tax-qualified basis, as a Qualified
Contract. A Qualified Contract is designed for use by individuals whose
purchase payments are comprised solely of proceeds from and/or contributions
under retirement plans that are intended to qualify as plans entitled to
special income tax treatment under Sections 408 or 408A of the Code. The
ultimate effect of federal income taxes on the amounts held under a Contract,
or income payments, depends on the type of retirement plan, on the tax and
employment status of the individual concerned, and on our tax status. In
addition, certain requirements must be satisfied in purchasing a Qualified
Contract with proceeds from a tax-qualified plan and receiving distributions
from a Qualified Contract in order to continue receiving favorable tax
treatment. Some retirement plans are subject to distribution and other
requirements that are not incorporated into our Contract administration
procedures. Owners, participants, and Beneficiaries are responsible for
determining whether contributions, distributions, and other transactions with
respect to the Contract comply with applicable law.

Therefore, purchasers of a Qualified Contract should seek competent legal
and tax advice regarding the suitability of a Contract for their situation.
The following discussion assumes that the Qualified Contract is purchased with
proceeds from and/or contributions under retirement plans that qualify for the
intended special federal income tax treatment.

Tax Status of the Contract

Diversification Requirements. The Code requires that the investments of the
Variable Account be "adequately diversified" in order for the Contract to be
treated as an annuity contract for federal income tax purposes. It is intended
that the Variable Account, through the Funds, will satisfy these
diversification requirements.

In certain circumstances, owners of variable annuity contracts have been
considered for federal income tax purposes to be the owners of the assets of
the variable account supporting their contracts due to their ability to
exercise investment control over those assets. When this is the case, the
contract owners have been currently taxed on income and gains attributable to
the variable account assets. There is little guidance in this area, and some
features of the Contract, such as the flexibility of an Owner to allocate
purchase payments and transfer Account Values, have not been explicitly
addressed in published rulings. While we believe that the Contract does not
give an Owner investment control over Variable Account assets, we reserve the
right to modify the Contract as necessary to prevent an Owner from being
treated as the owner of the Variable Account assets supporting the Contract.

Required Distributions. To be treated as an annuity contract for federal
income tax purposes, the Code requires a Non-Qualified Contract to contain

21
<PAGE>

certain provisions specifying how your interest in the Contract will be
distributed in the event of your death. The Non-Qualified Contracts contain
provisions that are intended to comply with these Code requirements, although
no regulations interpreting these requirements have yet been issued. We intend
to review such provisions and modify them if necessary to assure that they
comply with the applicable requirements when such requirements are clarified
by regulation or otherwise. For a further discussion of the required
distribution provisions, see "Does The Contract Have A Death Benefit?"

Other rules may apply to a Qualified Contract.

The following discussion assumes that the Contract will qualify as an
annuity contract for federal income tax purposes.

Tax Treatment of Annuities

In General. We believe that if you are a natural person you will not be
taxed on increases in the value of a Contract until a distribution occurs or
until income payments begin. (An agreement to assign or pledge any portion of
the Account Value, and, in the case of a Qualified Contract, any portion of an
interest in the qualified plan, ordinarily will be treated as a distribution.)

Taxation of a Non-Qualified Contract

Non-Natural Person. The Owner of any annuity contract who is not a natural
person ordinarily must include in income any increase in the excess of the
Account Value over the "investment in the contract" (ordinarily, the purchase
payments 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 may wish to discuss these with a tax adviser.

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

Withdrawals. When a withdrawal (including Systematic Withdrawals) 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 at that time. It is possible that a positive Market Value
Adjustment at the time of a withdrawal may be treated as part of the Account
Value immediately before the distribution. You may want to consult a tax
adviser on the tax consequences of market value adjustments that may result
upon withdrawal.

Please read carefully.

We understand that it is the position of the Internal Revenue Service that
when withdrawals (other than income payments) are taken from the cash value of
an immediate variable annuity contract, such as that offered by this
Prospectus under the term certain option (Income Plan 4. See "What Are My
Income Payment Options?"), then all amounts received by the taxpayer are
taxable at ordinary income rates as amounts "not received as an annuity." In
addition, such amounts are taxable to the recipient without regard to the
owner's investment in the contract or any investment gain which might be
present in the current annuity value. For example, under this view, an Owner
with a cash value of $100,000 seeking to obtain $20,000 of the cash value
immediately after annuitization under a term certain payout, would pay income
taxes on the entire $20,000 amount in that tax year. For some taxpayers, such
as those under age 59 1/2, additional tax penalties may also apply. This
adverse tax result means that Owners of Non-Qualified Contracts should
consider carefully the tax implications of any withdrawal requests and their
need for Contract funds prior to the exercise of this right. Owners should
also contact their tax adviser prior to making withdrawals.

Surrenders. In the case of a surrender under a Non-Qualified Contract, the
amount received ordinarily will be taxable only to the extent it exceeds the
Owner's investment in the Contract.

Penalty Tax on Surrender and Certain Withdrawals. In the case of a
distribution from a Non-Qualified Contract, a federal tax penalty equal to 10%
of the amount treated as income ordinarily will be imposed. 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.

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<PAGE>

Other exceptions may be applicable under certain circumstances and special
rules may be applicable in connection with the exceptions enumerated above. A
tax adviser should be consulted regarding exceptions from the penalty tax.

Income Payments. Although tax consequences may vary depending on the payment
option elected under an annuity contract, a portion of each income payment is
ordinarily not taxed and the remainder is taxed as ordinary income. The non-
taxable portion of an income payment is ordinarily 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 income payments, as determined
when income payments start. Once your investment in the Contract has been
fully recovered, however, the full amount of each income 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. Ordinarily, 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 an income payment option, they are
taxed in the same way as income payments.

Transfers, Assignments and Income Dates of a Contract. A transfer or
assignment of ownership of a Contract, the designation of an Annuitant, the
designation of a payee other than yourself, the selection of certain Income
Dates, or the exchange of a Contract may result in certain tax consequences to
you that are not discussed herein. If you are considering any such transfer or
assignment, you should consult a tax adviser as to the tax consequences.

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

Multiple Contracts. All non-qualified deferred annuity contracts that we or
our affiliates issue 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 a Qualified Contract

The Contract is designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions
and distributions. Adverse tax consequences may result from contributions in
excess of specified limits; distributions prior to age 59 1/2 (subject to
certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; and in other specified
circumstances. Therefore, no attempt is made to provide more than general
information about the use of the Contract with the various types of qualified
retirement plans. Owners, Annuitants, and Beneficiaries are cautioned that the
rights of any person to any benefits under these qualified retirement plans
may be subject to the terms and conditions of the plans themselves, regardless
of the terms and conditions of the Contract, but we shall not be bound by the
terms and conditions of such plans to the extent such terms contradict the
Contract, unless we consent. For IRAs under Section 408 of the Code (described
below), distributions generally must commence no later than April 1 of the
calendar year following the calendar year in which the Owner reaches age 70
1/2. Roth IRAs under Section 408A of the Code do not require distributions at
any time prior to the Owner's death.

Withdrawals. When you take a withdrawal from a Qualified Contract, a pro-
rata portion of the amount you receive is taxable, ordinarily based on the
ratio of your investment in the contract (ordinarily, any non-deductible
purchase payments or other consideration paid for the Contract) to your total
accrued benefit balance under the retirement plan. For a Qualified Contract,
the investment in the contract can be zero. Special tax rules apply to
withdrawals from Roth IRAs (see below). 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. We will provide you the opportunity to elect not
to have tax withheld from distributions.

Brief descriptions follow of the various types of qualified retirement plans
in connection with a Contract. We will endorse the Contract as necessary to
conform it to the requirements of such plan.

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<PAGE>

Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA." These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible, and on
the time when distributions may commence. IRA contributions may be deductible
in whole or in part depending on the Owner's income and whether the Owner is a
participant in a qualified plan. Earnings in the IRA are not taxed until
distributed. Also, distributions from certain other types of qualified
retirement plans may be rolled over on a tax-deferred basis into an IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are
subject to a 10% federal penalty tax. The form of the Contract and its IRA
rider has been approved by the IRS for use as an IRA. IRS approval does not
relate to the merits of the IRA as an investment.

Simple IRAs. Certain small employers may 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% federal penalty tax,
which is increased to 25% if the distribution occurs within the first two
years after the commencement of the employee's participation in the plan. The
form of the Contract and its IRA rider has been approved by the IRS for use as
an IRA. IRS approval does not relate to the merits of the IRA as an
investment.

Roth IRAs. Section 408A of the Code permits certain eligible individuals to
contribute to a Roth IRA. Contributions to a Roth IRA, which are subject to
certain limitations, are not deductible and must be made in cash or as a
rollover or transfer from another Roth IRA or other IRA. A conversion of an
IRA to a Roth IRA may be subject to tax and other special rules may apply. You
should 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 ordinarily are not taxed, except that, once
aggregate distributions exceed contributions to the Roth IRA, income tax and a
10% federal 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 the Roth IRA. A 10%
federal 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.

Other Tax Consequences

As noted above, the foregoing comments about the federal tax consequences
under the Contract are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in this Prospectus. Federal
estate and state and local estate, inheritance and other tax consequences of
ownership or receipt of distributions under a Contract depend on your
individual circumstances or those of the recipient of the distribution. A
competent tax adviser should be consulted for further information.

Further, the federal income tax consequences discussed herein reflect our
understanding of current law, and the law may change. Although the likelihood
of legislative change is uncertain, there is always the possibility that the
tax treatment of the Contracts could change by legislation or other means. It
is also possible that any change could be retroactive, that is, made effective
prior to the date of the change. A tax adviser should be consulted with
respect to legislative developments and their effect on the Contract.

7. How Do I Access My Money?

You may access the money in your Contract by partially withdrawing from or
surrendering your Contract. When you surrender your Contract, you can take the
proceeds in a single sum, or you can request that we pay the proceeds over a
period of time under one of our income plans. See "What are My Income Payment
Options?"

Withdrawals

You may withdraw all or part of your Surrender Value at any time before the
Income Date. (If you have elected the "payments for a specified period

24
<PAGE>

certain" income plan option, you may request a full or partial withdrawal
after the Income Date; otherwise, no withdrawals are permitted after the
Income Date.) There may be adverse tax consequences if you make a withdrawal
from or surrender your Contract. Also, there may be adverse tax consequences
if you make a partial withdrawal during the Income Phase. See "How Will My
Contract Be Taxed?" You may make your withdrawal request in writing or by
telephone. See "Requesting Payments." Any withdrawal must be at least $250. If
a withdrawal request would reduce your Account Value remaining in a Sub-
Account below $250, we will treat the withdrawal request as a request to
withdraw the entire amount. We will pay you the withdrawal amount in one sum.
Under certain circumstances, we may delay this payment. See "Requesting
Payments."

When you request a withdrawal, you can direct how we deduct the withdrawal
from your Account Value. If you provide no directions, we will deduct the
withdrawal from your Account Value in the Sub-Accounts on a pro-rata basis.

A partial withdrawal will reduce your death benefit and may be subject to a
surrender charge and market value adjustment. See "What Are The Expenses Under
A Contract?" and "Does The Contract Have A Death Benefit?"

Please note that if your requested withdrawal would reduce your Account
Value below $2,000, we reserve the right to treat the request as a withdrawal
of only the excess over $2,000.

Systematic Partial Withdrawal Program

The systematic partial withdrawal program provides automatic monthly,
quarterly, semi-annual, or annual payments to you from the amounts you have
accumulated in the Sub-Accounts. You select the day we take withdrawals, but
this day can be no later than the 28th day of the month. If you do not select
a day, we will use the day of each month that corresponds to your Contract
Date. If that date is not a Business Day, we will use the next following
Business Day. The minimum payment is $100. You can elect to withdraw either
earnings in a prior period (for example, prior month for monthly withdrawals
or prior quarter for quarterly withdrawals) or a specified dollar amount.

--If you elect earnings, we will deduct the withdrawals from the Sub-
Accounts in which you are invested on a pro-rata basis.

--If you elect a specified dollar amount, we will deduct the withdrawals
from the Sub-Accounts in which you are invested on a pro-rata basis unless
you tell us otherwise. Any amount in excess of the Free Withdrawal Amount
may be subject to a surrender charge See "Surrender Charge." Also, any
amount in excess of interest earned on a Fixed Sub-Account in the prior
period ordinarily will be subject to a Market Value Adjustment See "Market
Value Adjustment."

You may participate in the systematic partial withdrawal program at any time
before the Income Date by providing Satisfactory Notice. Once we receive your
request, the program will begin and will remain in effect until your Account
Value drops to zero. You may cancel or make changes in the program at any time
by providing us with Satisfactory Notice. We do not deduct any other charges
for this program. We reserve the right to discontinue the systematic partial
withdrawal program at any time and for any reason. Systematic partial
withdrawals are not available while you are participating in the dollar-cost
averaging program.

IRA Partial Withdrawal Program

If your Contract is an IRA Contract and you will attain age 70 1/2 in the
current calendar year, distributions may be made to satisfy requirements
imposed by federal tax law. An IRA partial withdrawal provides payout of
amounts required to be distributed by the IRS rules governing mandatory
distributions under qualified plans. We will send a notice before
distributions must commence, and you may elect this program at that time, or
at a later date.

You may not elect the IRA Partial Withdrawal program while you are
participating in the systematic partial withdrawal program. You may take IRA
partial withdrawals on a monthly, quarterly, semi-annual, or annual basis. We
require a minimum withdrawal of $100. You select the day we make the
withdrawals, but this day can be no later than the 28th day of the month. If
you do not elect a day, we will use the day of each month that corresponds to
your Contract date.

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<PAGE>

Requesting Payments

You must provide us with Satisfactory Notice of your request for payment. We
will ordinarily pay any death benefit, withdrawal, or surrender proceeds
within seven days after receipt at our Customer Service Center of all the
requirements for payment. We will determine the amount as of the date our
Customer Service Center receives all requirements.

We may delay making a payment, applying Account Value to an income plan, or
processing a transfer request if:

--the disposal or valuation of the Variable Account's assets is not
reasonably practicable because the New York Stock Exchange is closed for
other than a regular holiday or weekend, trading is restricted by the SEC,
or the SEC declares that an emergency exists; or

--the SEC, by order, permits postponement of payment to protect our Owners.

We also may defer making payments attributable to a check that has not
cleared (which may take up to 15 days), and we may defer payment of proceeds
from the Fixed Account for a withdrawal, surrender, or transfer request for up
to six months from the date we receive the request.

If we defer payment 30 days or more, the amount deferred will earn interest
at a rate not less than the minimum required in the jurisdiction in which we
delivered the Contract.

8. How Is Contract Performance Presented?

We may advertise or include in sales literature yields, effective yields,
and total returns for the Variable Sub-Accounts. Effective yields and total
returns for the Variable Sub-Accounts are based on the investment performance
of the corresponding Funds. We base these figures on historical performance,
and they do not indicate or project future results. We may also advertise or
include in sales literature a Variable Sub-Account's performance compared to
certain performance rankings and indexes compiled by independent
organizations, and we may present performance rankings and indexes without
such a comparison.

The yield of the Money Market Sub-Account refers to the annualized income
generated by an investment in the Sub-Account over a specified seven-day
period. We calculate the yield by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period. We
calculate the effective yield similarly but, when annualized, the income
earned by an investment in the Money Market Sub-Account is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.

The yield of a Variable Sub-Account (except the Money Market Sub-Account)
refers to the annualized income generated by an investment in the Variable
Sub-Account over a specified 30-day or one-month period. We calculate the
yield by assuming that the income generated by the investment during that 30-
day or one-month period is generated each period over a 12-month period.

The total return of a Variable Sub-Account refers to return quotations
assuming an investment under a Contract has been held in the Variable Sub-
Account for the stated times. Average annual total return of a Variable Sub-
Account tells you the return you would have experienced if you allocated a
$1,000 purchase payment to a Variable Sub-Account for the specified period.
Standardized average annual total return reflects all historical investment
results for the Variable Sub-Account, less all charges and deductions applied
against the Variable Sub-Account, including any surrender charge that would
apply if you surrendered your Contract at the end of each period indicated,
but excluding any deductions for purchase payment taxes. Standardized total
return may be quoted for various periods including 1 year, 5 years, and 10
years, or from inception of the Variable Sub-Account if any of those periods
are not available. "Non-Standard" average annual total return information may
be presented, computed on the same basis as described above, except that
deductions will not include the Surrender Charge. In addition, we may from
time to time disclose average annual total return for non-standard periods and
cumulative total return for a Variable Sub-Account.

We may, from time to time, also disclose yield, standard total returns, and
non-standard total returns for the Funds. We may also disclose yield, standard
total returns, and non-standard total returns of funds or other accounts
managed by the Adviser or Subadviser with investment objectives similar to
those of the Funds, and Variable Sub-Account

26
<PAGE>

performance based on that performance data. We will accompany non-standard
performance by standard performance.

In advertising and sales literature, we may compare the performance of each
Variable Sub-Account to the performance of other variable annuity issuers in
general or to the performance of particular types of variable annuities
investing in mutual funds, or investment series of mutual funds with
investment objectives similar to each of the Variable Sub-Accounts.
Advertising and sales literature may also compare the performance of a
Variable Sub-Account to the S&P 500 Composite Stock Price Index, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any deduction for the expense of operating or
managing an investment portfolio. Other independent ranking services and
indexes may also be used as a source of performance comparison. We may also
report other information, including the effect of tax-deferred compounding on
a Variable Sub-Account's investment returns, or returns in general, which may
be illustrated by tables, graphs, or charts.

9. Does The Contract Have A Death Benefit?

Your Contract provides two different types of death benefits for your
Beneficiary. There is the basic death benefit and the accidental death
benefit.

Basic Death Benefit. If any Owner dies before the Income Date, we will pay
the Beneficiary the greatest of:

--the Account Value determined as of the Business Day we receive proof of
death (if proof of death is received on other than a Business Day, we will
deem the proof as received on the next following Business Day);

--100% of the sum of all purchase payments made under the Contract, reduced
by the amount of any prior withdrawal (including any associated surrender
charge and Market Value Adjustment incurred); or

--the highest anniversary value (the "Highest Anniversary Value").

The Highest Anniversary Value is the greatest anniversary value attained in
the following manner. When we receive proof of death, we will calculate an
anniversary value for each Contract Anniversary prior to the date of the
Owner's death, but not beyond the Owner's attained age 80. An anniversary
value for a Contract Anniversary equals:

(1) the Account Value on that Contract Anniversary;

(2) increased by the dollar amount of any purchase payments made since
the Contract Anniversary; and

(3) reduced proportionately by any withdrawals (including any associated
surrender charge and Market Value Adjustment incurred) taken since that
Contract Anniversary. (By proportionately, we take the percentage by which
the withdrawal decreases the Account Value and we reduce the sum of (1) and
(2) by that percentage.)

If there are multiple Owners, we will use the age of the oldest Owner to
determine the applicable death benefit. If there is an Owner who is not a
natural person (that is, an individual), we will treat the Annuitant as an
Owner for the purpose of determining when an Owner dies and the Annuitant's
age will determine the death benefit payable to the Beneficiary in the event
of such Annuitant's death.

Owner's Death Before the Income Date. If an Owner dies before the Income
Date, the Beneficiary has up to five years from the Owner's date of death to
request that the death benefit be paid in one lump sum. If the Beneficiary
elects the lump sum and we pay it, the Contract will terminate, and we will
have no further obligations under the Contract. Alternatively, the Beneficiary
may provide us with Satisfactory Notice and request that the Contract
continue, in which case we will continue the Contract subject to the following
conditions:

--If there are joint Owners, the surviving Owner becomes the new Owner.
Otherwise, the Beneficiary becomes the new Owner.

--Unless the new Owner otherwise tells us, we will allocate any excess of
the death benefit over the Account Value to and among the Variable and
Fixed Accounts in proportion to their values as of the date on which we
determine the death benefit. We will establish a new Fixed Sub-Account for
any allocation to the Fixed Account based on the Guarantee Period the new
Owner then elects.

27
<PAGE>

--No additional purchase payments may be applied to the Contract.

However, certain distribution rules will apply to the continued Contract. If
the sole new Owner is not the deceased Owner's spouse, we must distribute the
entire interest in the Contract either: (i) over the life of the new Owner,
but not extending beyond the life expectancy of the new Owner, with
distributions beginning within one year of the prior Owner's death; or (ii)
within five years of the deceased Owner's death. These distributions, if from
the Fixed Account, are subject to our Market Value Adjustment rules.

Alternatively, if the sole new Owner is the deceased Owner's spouse, the
Contract will continue with the surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary. If no Beneficiary is named, the
surviving spouse's estate will be the Beneficiary. Upon the death of the
surviving spouse, the death benefit will equal the Account Value as of the
Business Day we receive proof of the spouse's death. We will distribute the
entire interest in the Contract to the new Beneficiary in accordance with the
provisions that apply in the case when the new Owner is not the surviving
spouse.

If there is more than one Beneficiary, the distribution provisions will
apply independently to each Beneficiary.

If no Owner of the Contract is an individual, we will treat the death or
change of any Annuitant under the Contract as the death of an Owner.

In all events, for Non-Qualified Contracts we will make death benefit
distributions in accordance with section 72(s) of the Code, or any applicable
successor provision. Other rules may apply to a Qualified Contract.

Owner's Death After the Income Date. If any Owner dies on or after the
Income Date, but before the time we have distributed the entire interest in
the Contract, we will distribute the remaining portion at least as rapidly as
under the method of distribution being used as of the date of the Owner's
death.

If income payments have been selected based on an income plan providing for
payments for a guaranteed period and the Annuitant dies on or after the Income
Date, we will make the remaining guaranteed payments to the Beneficiary. We
will make any remaining payments as rapidly as under the method of
distribution being used as of the date of the Annuitant's death. If no
Beneficiary is living, we will commute any unpaid guaranteed payments to a
single sum (on the basis of the interest rate used in determining the
payments) and pay that single sum to the estate of the last to die of the
Annuitant or the Beneficiary.

Accidental Death Benefit. Under certain circumstances, if the Owner dies
before the Income Date, we will provide an additional death benefit called the
accidental death benefit. This additional benefit will equal the purchase
payments made minus any withdrawals (including any associated surrender charge
or Market Value Adjustment incurred), determined as of the date of the Owner's
death (or the next Business Day if the Owner dies on other than a Business
Day), up to a maximum of $250,000.

To qualify for this benefit, the Owner's death must: (i) occur before the
first Contract Anniversary after the Owner attains age 80; and (ii) be a
direct result of accidental bodily injury, independent of all other causes. If
there is no Owner who is a natural person (that is, an individual), we will
treat the Annuitant as Owner and use the Annuitant's age for purposes of
determining whether the accidental death benefit is payable.

Further, all the terms and conditions described in the Contract must be
satisfied, including the requirement that we receive satisfactory proof of
accidental death at our Customer Service Center within 30 days after an
accidental death or as soon thereafter as reasonably possible. We will pay the
accidental death benefit to the Beneficiary or the person entitled to receive
the death benefit under the Contract, after receipt of satisfactory proof of
accidental death.

We terminate the accidental death benefit provision:

--when we pay the benefit;

--when you surrender the Contract or apply the entire Account Value to an
income plan;

--when we distribute the interest in the Contract due to the death of an
Owner; or

28
<PAGE>

--when you request termination of the benefit.

Proof of Death. We must receive satisfactory proof of death at our Customer
Service Center before we will pay any death benefit. We will accept one of the
following items:

1. An original certified copy of an official death certificate; or

2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or

3. Any other proof satisfactory to us.

10. What Other Information Should I Know?

Separate Accounts

The Sage Variable Annuity Account A. We established the Variable Account as
a separate investment account under Delaware law on December 3, 1997. The
Variable Account may invest in mutual funds, unit investment trusts, and other
investment portfolios. We own the assets in the Variable Account and are
obligated to pay all benefits under the Contracts. We use the Variable Account
to support the Contracts as well as for other purposes permitted by law. We
registered the Variable Account with the SEC as a unit investment trust under
the 1940 Act and it qualifies as a "separate account" within the meaning of
the federal securities laws. Such registration does not involve any
supervision by the SEC of the management of the Variable Account or Sage Life.

We divided the Variable Account into Variable Sub-Accounts, each of which
currently invests in shares of a specific Fund of AIM Variable Insurance
Funds, Inc., The Alger American Fund, Liberty Variable Investment Trust,
SteinRoe Variable Investment Trust, MFS(R) Variable Investment Trust SM,
Morgan Stanley Dean Witter Universal Funds, Inc., Oppenheimer Variable Account
Funds, Sage Life Investment Trust, and T. Rowe Price Equity Series, Inc.
Variable Sub-Accounts buy and redeem Fund shares at net asset value without
any sales charge. We reinvest any dividends from net investment income and
distributions from realized gains from security transactions of a Fund at net
asset value in shares of the same Fund. Income, gains and losses, realized or
unrealized, of the Variable Account are credited to or charged against the
Variable Account without regard to any other income, gains or losses of Sage
Life. Assets equal to the reserves and other Contract liabilities with respect
to the Variable Account are not chargeable with liabilities arising out of any
other business or account of Sage Life. If the assets exceed the required
reserves and other liabilities, we may transfer the excess to our General
Account.

The Sage Fixed Interest Account A. The Fixed Account is a separate
investment account under state insurance law. We maintain it separate from our
General Account and separate from any other separate account that we may have.
We own the assets in the Fixed Account, and may offer the Fixed Account in our
variable life products. Assets equal to the reserves and other liabilities of
the Fixed Account will not be charged with liabilities that arise from any
other business that we conduct. Thus, the Fixed Account represents pools of
assets that provide an additional measure of assurance that Owners will
receive full payment of benefits under the Contracts. We may transfer to our
General Account assets that exceed the reserves and other liabilities of the
Fixed Account. Notwithstanding the foregoing, our obligations under (and
values and benefits under) the Fixed Account do not vary as a function of the
investment performance of the Fixed Account. Owners and Beneficiaries with
rights under the Contracts do not participate in the investment gains or
losses of the assets of the Fixed Account. These gains or losses accrue solely
to us. We retain the risk that the value of the assets in the Fixed Account
may fall below the reserves and other liabilities that we must maintain in
connection with our obligations under the Fixed Account. In such an event, we
will transfer assets from our General Account to the Fixed Account to make up
the difference. We are not required to register the Fixed Account as an
investment company under the 1940 Act.

Voting of Fund Shares. We are the legal owner of shares held by the Variable
Sub-Accounts and as such, have the right to vote on all matters submitted to
shareholders of the Funds. However, as required by law, we will vote shares
held in the Variable Sub-Accounts at regular and special meetings of
shareholders of the Funds according to instructions received from Owners with
Account Value in the Variable Sub-Accounts. To obtain your voting instructions
before a Fund shareholder meeting, we will send you voting instruction
materials, a voting instruction form, and any other

29
<PAGE>

related material. We will vote shares held by a Variable Sub-Account for which
we received no timely instructions in the same proportion as those shares for
which we received voting instructions. Should the applicable federal
securities laws, regulations, or interpretations thereof change so as to
permit us to vote shares of the Funds in our own right, we may elect to do so.

Modification

When permitted by applicable law, we may modify the Contracts as follows:

--deregister the Variable Account under the 1940 Act;

--operate the Variable Account as a management company under the 1940 Act
if it is operating as a unit investment trust;

--operate the Variable Account as a unit investment trust under the 1940
Act if it is operating as a managed separate account;

--restrict or eliminate any voting rights of Owners, or other persons who
have voting rights as to the Variable Account;

--combine the Variable Account with other separate accounts; and

--combine a Variable Sub-Account with another Variable Sub-Account.

We also reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions of shares of a Fund that are held by the
Variable Account or that the Variable Account may purchase; and to establish
additional Variable Sub-Accounts or eliminate Variable Sub-Accounts, if
marketing, tax, or investment conditions so warrant. Subject to any required
regulatory approvals, we reserve the right to transfer assets of a Variable
Sub-Account that we determine to be associated with the class of Contracts to
which the Contract belongs, to another separate account or to another separate
account sub-account.

If the actions we take result in a material change in the underlying
investments of a Variable Sub-Account in which you are invested, we will
notify you of the change. You may then make a new choice of Variable Sub-
Accounts.

Distribution of the Contracts

Sage Distributors, Inc. ("Sage Distributors"), acts as the distributor
(principal underwriter) of the Contracts. Sage Distributors is a corporation
organized under Delaware law in 1997, is registered as a broker-dealer under
the Securities Exchange Act of 1934, and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"). Sage Distributors is a
wholly owned subsidiary of Sage Insurance Group Inc. We compensate Sage
Distributors for acting as principal underwriter under a distribution
agreement. We offer the Contracts on a continuous basis, and do not anticipate
discontinuing their sale. The Contracts may not be available in all states.

Experts

Ernst & Young LLP, independent auditors, have audited our financial
statements for the years ended December 31, 1998 and 1997, as set forth in
their report, which is included in this Prospectus. We included our financial
statements in this Prospectus in reliance on their report, given on their
authority as experts in accounting and auditing.

Legal Proceedings

Sage Life and its subsidiaries, as of the date of this Prospectus, are not
involved in any lawsuits. However, Sage Life's direct and indirect parent
companies, like other companies, are involved in lawsuits. In some lawsuits
involving insurers, substantial damages have been sought and/or material
settlement payments have been made. Although the outcome of any litigation
cannot be predicted with certainty, Sage Life believes that at the present
time there are no pending or threatened lawsuits that are reasonably likely to
have a material adverse impact on the Variable Account, the Fixed Account, the
General Account, or Sage Life.

Reports to Contract Owners

We maintain records and accounts of all transactions involving the
Contracts, the Variable Account, and the Fixed Account at our Customer Service
Center. Each year, or more often if required by law, we will send you a report
showing information about your Contract for the period covered by the report.
We will also send you an annual and a semi-annual report for each Fund
underlying a Variable Sub-Account in which you are

30
<PAGE>

invested as required by the 1940 Act. In addition, when you make purchase
payments, or if you make transfers or withdrawals, we will send you a
confirmation of these transactions.

Assignment

You may assign your Contract at any time before the Income Date. No
assignment will be binding on us unless we receive Satisfactory Notice. We
will not be liable for any payments made or actions we take before we accept
the assignment. An absolute assignment will revoke the interest of any
revocable Beneficiary. We are not responsible for the validity of any
assignment. An assignment may be a taxable event.

Change of Owner, Beneficiary, or Annuitant

During your lifetime and while your Contract is in force, you can transfer
ownership of your Contract, change the Beneficiary, or change the Annuitant.
However, you cannot change the Annuitant after the Income Date. To make any of
these changes, you must send us Satisfactory Notice. If accepted, any change
in Owner, Beneficiary, or Annuitant will take effect on the date you signed
the notice. Any of these changes will not affect any payment made or action we
took before our acceptance. A change in Owner may be a taxable event and may
also affect the amount of death benefit payable under your Contract.

Misstatement and Proof of Age, Sex or Survival

We may require proof of age, sex, or survival of any person upon whose age,
sex, or survival any payments depend. If the age or sex of the Annuitant has
been misstated, or if the age of the Owner has been misstated, the benefits
will be those that the Account Value applied would have provided for the
correct age and sex. If we have made incorrect income payments, we will pay
the amount of any underpayment. We will deduct the amount of any overpayment
from future income payments.

Incontestability

Your Contract is incontestable from its Contract Date.

Authority to Make Agreements

One of our officers must sign all agreements we make. No other person,
including an insurance agent or registered representative, can change the
terms of your Contract or make changes to it without our consent.

Preparing for the Year 2000

Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the year
2000. This potential problem has become known as the "Year 2000 issue." The
Year 2000 issue affects virtually all companies and organizations.

Computer applications that are affected by the Year 2000 issue could impact
our business functions in various ways, ranging from a complete inability to
perform critical business functions to a loss of productivity in varying
degrees. Likewise, the failure of some computer applications could have no
impact on critical business functions. We used these issues as critical
components in the evaluation and selection of in-house systems and of third
party administrators.

Since we outsource most of our operating functions, there are only a limited
number of in-house systems utilized. At present, the only in-house system we
utilize is the accounting system. This system was certified as Year 2000
compliant before we selected and installed it for operation. We also intend to
purchase a reserve valuation system and a reinsurance system. Year 2000
compliance will be a critical component in the evaluation and selection
process for those two systems.

We have various third party administrators (including investment advisors,
brokers, transfer agents, and other financial services institutions) for the
processing of such tasks as contract administration, fund administration,
underwriting and investment administration. The quality of these third party
administrators was of paramount importance in the selection process.

Although we have received assurances from all of our third party
administrators, we are currently working with them to assess all Year 2000
issues associated with the processing of our applications.

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<PAGE>

This assessment involves the testing of the data being processed by third
party administrators and electronically interfaced into our accounting system.
As to outside organizations from which we will not be relying on electronic
interface, we will be relying on responses to questionnaires supplied to these
service providers as to their status on Year 2000 compliance. Based upon the
responses received from these third party administrators, we will develop a
plan to assure Year 2000 compliance by all third party administrators. We
anticipate completing all testing well in advance of January 1, 2000. As this
testing has and continues to be done in the normal course of system
development, we have not budgeted any costs associated with the Year 2000
issue. In addition, Year 2000 costs have been deemed immaterial.

If any of our third party administrators fail to achieve complete
compliance, it could have a material adverse effect on our ability to conduct
our business, including delays in calculating unit values, redeeming shares,
delivering account statements and providing other information, communication
and servicing to Owners. We believe that we have taken the necessary
provisions, both through selection and testing, to assure that we will not
experience any material adverse effects on our ability to conduct our
business. We do, however, realize the importance of this issue, and we are
currently developing a detailed contingency plan for operations in the
unlikely event one or more of our third party administrators is unable to
fulfill its obligations.

Financial Statements

No financial statements are presented for the Variable Account because it
just began operations in February, 1999.

We included the audited financial statements for Sage Life for the years
ended December 31, 1998 and 1997 in this Prospectus. You should consider these
financial statements only as bearing on the ability of Sage Life to meet its
obligations under the Contracts. You should not consider them as bearing on
the investment performance of the assets held in the Variable Account.

11. How Can I Make Inquiries?

You may make inquiries about your Contract by writing to us at our Customer
Service Center, by calling us at 877-835-7243 (Toll Free), or by contacting
one of our authorized registered representatives.

12. Additional Information About Sage Life Assurance of America, Inc.

History and Business

Ownership

Sage Life was incorporated under the laws of the state of Delaware in 1981.
The Company is authorized to write general life insurance and fixed and
variable annuity contracts in all states except New York, and also is licensed
to conduct variable life insurance business in a majority of states.

Fidelity Mutual Life Insurance Company, a Pennsylvania insurer, sponsored
the Company's formation in 1981 under the name of Fidelity Standard Life
Insurance Company ("Fidelity Life"). Security First Life Insurance Company
("Security First") of Los Angeles, California acquired Fidelity Life in
December 1984. In January 1997, Sage Insurance Group Inc. ("Sage Insurance
Group") (formerly Finplan Investment Corp.), a Delaware corporation and a
wholly owned indirect subsidiary of Sage Group Limited ("Sage Group"), a South
African corporation and the Company's ultimate parent, acquired Fidelity Life.
The Company changed to its present name in September 1997. In December 1998,
Sage Insurance Group formed a new company, Sage Life Holdings of America, Inc.
("Sage Life Holdings"), to act as the new immediate parent of the Company. The
transaction is discussed more fully in the section below entitled "Holding
Company Structure and Background."

Prior Business Operations

As a Security First subsidiary, the Company specialized in the marketing of
annuities qualifying under Section 403(b) of the Code. Under an assumption
reinsurance agreement, Fidelity Life's annuity business was irrevocably
transferred to Security First in January 1997 except for a small number of
contracts. During 1998, Security First assumption reinsured all of the
remaining annuity business of Fidelity Life. Security First is now a
subsidiary of The Metropolitan Life Insurance Company.

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<PAGE>

Holding Company Structure and Background

We are an indirect, wholly owned subsidiary of Sage Insurance Group, which
is a holding company for us and affiliated entities conducting life and
annuity insurance business in the United States. We also are an indirect,
wholly owned subsidiary of Sage Group, a corporation quoted on the
Johannesburg Stock Exchange. Sage Group is a holding company with a thirty-
year history of extensive operating experience in mutual funds, life assurance
and investment management. Sage Group has directly and indirectly engaged in
insurance marketing activities in the United States since 1977 through its
financial interests in Independent Financial Marketing Group Inc., a financial
planning and bank insurance marketing company. Sage Group sold its interest in
Independent Financial Marketing Group in March 1996 to the Liberty Financial
Companies of Boston.

Sage Group entered into an agreement with Swiss Re Life and Health America,
Inc. ("Swiss Re") on December 1, 1998, whereby Swiss Re will enter into
reinsurance arrangements with us. In addition, Swiss Re invested $12.5 million
in non-voting non-redeemable cumulative preferred stock in a newly formed
company, Sage Life Holdings, that became our immediate parent and a wholly-
owned subsidiary of Sage Insurance Group. It is anticipated that, during the
second quarter of 1999, Swiss Re will exchange part of its preferred stock for
a voting interest of not more that 9.9% in Sage Life Holdings. Swiss Re's
ultimate parent is Swiss Reinsurance Company, Switzerland, one of the world's
largest life and health reinsurance groups. The arrangements contemplated by
the agreement may be subject to regulatory approval.

Selected Financial Data

We cannot compare our historical financial results for the calendar year
1996 and all prior years, to the results for the years 1997 and 1998 due to
the substantial change in our business operations. We effectively disposed of
all in-force business existing as of December 31, 1996 and, therefore, on
January 1, 1997, had no insurance liabilities under any of our policies other
than the small number of policies that were not 100% assumption reinsured to
our former parent company. We subsequently novated these insurance liabilities
during 1998. Effectively, therefore, since January 1997, we became comparable
to a new company that had not yet begun its business activities.

We present the following selected financial data as of December 31, 1998 and
1997 and for the years then ended, taken from our audited financial
statements. Please read the information below along with the financial
statements, including related notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" we included
elsewhere in this Prospectus.

Selected Financial Data
(in thousands)

<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Income Statement Data:
Revenues:
Net investment income................................ $ 1,244 $ 989
Expenses:
Amortization expense................................. 549 325
General and administrative expenses.................. 1,264 1,016
------- -------
Total expenses........................................ 1,813 1,341
Loss before taxes..................................... (569) (352)
Income tax expense.................................... -- --
------- -------
Net loss.............................................. $ (569) $ (352)
======= =======
Balance Sheet Data:
Total Assets......................................... $36,542 $36,689
Stockholder's Equity................................. $36,472 $33,202
</TABLE>

Management's Discussion and Analysis of Financial Condition
and Results of Operations

Introduction

The following discussion highlights the significant factors that influence
our operations. Please read this discussion along with our financial
statements and the related notes included in this Prospectus.

History and Business Overview

During February 1999, we began to market our new variable insurance
products. Sage Insurance Group acquired the Company on December 31, 1996, and
since that date, we have prepared for the recommencement of our insurance
underwriting and marketing activities. (Before the acquisition of the

33
<PAGE>

Company, all new business production and marketing ended in October 1996.) We
totally reengineered our products, systems and administration since the change
of ownership. All of our current senior management are experienced in the
insurance industry (either in the United States or in South Africa). We
recruited most of them since January 1997. Our ongoing business strategy is to
focus on the development, underwriting, and marketing of variable insurance
products. Our obligations under these contracts are supported by (1) variable
accounts--determined by the value of investments held in separate accounts,
and (2) fixed accounts--backed by investments held in separate accounts. We
may not use the assets of these separate accounts that equal the reserves and
other liabilities supporting the contracts to which they relate, to pay any of
our other obligations or creditors. Currently, we distribute the contracts
through banks. We anticipate that, over the long-term, our distribution
channels will expand to include wirehouses, regional broker-dealers, and
financial planners.

Results of Operations

Net losses for the year ended December 31, 1998 were $568,974 and were
$351,786 for the year ended December 31, 1997. As the Company was not
underwriting or marketing insurance products, all revenue for 1998 and 1997 is
derived from investing activities. Effective investment yields for our General
Account were 5.1% for the year ended December 31, 1998, and 5.4% for the year
ended December 31, 1997. General expenses incurred in financing our daily
activities more than offset investment revenue. As we recommence business in
1999, we anticipate that our revenues will increase primarily by charges and
fees associated with products we offer, while our expenses will increase by
acquisition expenses, the cost of administering this new business and the
payment of benefits.

We have capitalized certain costs that have been incurred in the development
and registration of our insurance products and have been paid for by Sage
Insurance Group. We are amortizing these development costs on a straight line
basis over fifteen years. Accumulated amortization at December 31, 1998 and
December 31, 1997 was $405,287 and $93,637, respectively.

In April 1998, Statement of Position 98-5, "Reporting on the Costs of Start-
Up Activities" (SOP 98-5) was issued. SOP 98-5 requires entities to charge to
expense all start-up costs as incurred. SOP 98-5 is effective for years
beginning after December 15, 1998 (i.e., January 1, 1999). In addition, SOP
98-5 requires entities upon adoption to write-off as the cumulative effect of
a change in accounting principle any previously unamortized capitalized start-
up costs. Accordingly, we wrote-off any unamortized capitalized development
costs on January 1, 1999.

Liquidity and Capital Resources

Since the beginning of 1997, we have needed money primarily to develop our
insurance products and related infrastructure, and to fund our daily
operations. We have met our cash needs through interest income and capital
contributions from Sage Insurance Group.

During 1999, we expect our cash needs will continue to increase as our
underwriting and marketing activities begin. As discussed below, we intend to
enter into a reinsurance arrangement with Swiss Re that will provide an
additional source of cash. We still anticipate that we will be unable to meet
all of our liquidity requirements in 1999 without capital contributions from
Sage Insurance Group. However, as discussed above, Swiss Re has made an equity
investment in a newly formed holding company that will provide an additional
source of funds to us for new business expenses. In addition, although not
required to do so, we believe that Sage Insurance Group will continue to
provide capital to us for our non-recurring costs associated with new products
and business development during 1999. Our future marketing efforts could be
hampered in the unlikely event that Swiss Re, Sage Insurance Group and/or
their affiliates are unwilling to commit additional funding.

Segment Information

We currently plan to conduct our business as a single segment, and
anticipate that this segment will eventually include all of the following
products:

--Combination fixed and variable deferred annuities.

--Combination fixed and variable immediate annuities.

--Combination fixed and variable life insurance products.

34
<PAGE>

Reinsurance

We intend to enter into a coinsurance reinsurance arrangement with Swiss Re,
pursuant to which Swiss Re will reinsure a significant portion of our
liabilities under our variable insurance contracts. This arrangement will
provide additional capacity for growth of our variable insurance business.

In addition, we intend to reinsure certain mortality risks associated with
the guaranteed minimum death benefit and accidental death benefit features of
the Contracts. We intend to use only highly rated reinsurance companies to
reinsure these risks.

Reinsurance does not relieve us from our obligations to Owners. We remain
primarily liable to our Owners to the extent that any reinsurer does not meet
its obligations under the reinsurance agreements.

Reserves

The insurance laws and regulations under which we operate obligate us to
carry on our books, as liabilities, actuarially determined reserves to meet
our obligations on outstanding Contracts. We base our reserves involving life
contingencies on mortality tables in general use in the United States. Where
applicable, we compute our reserves to equal amounts which, together with
interest on such reserves computed annually at certain assumed rates, will be
sufficient to meet our Contract obligations at their maturities or in the
event of the Owner's death. In the financial statements included in this
Prospectus, all reserves have been determined in accordance with generally
accepted accounting principles. As previously noted, all of Fidelity Life's
existing annuity business has been irrevocably transferred to Security First,
resulting in no remaining contract obligations at December 31, 1998.

Investments

We invested our General Account cash and invested assets of $25.5 million
and $25.3 million at December 31, 1998 and December 31, 1997, respectively,
entirely in investment grade securities and money market funds. It is our
stated policy to refrain from investing in securities having speculative
characteristics. Our entire portfolio is classified as available-for-sale, and
is reported at fair value, with resulting unrealized gains or losses included
as a separate component of stockholder's equity.

Dividend Restrictions

We are subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions described below, we must obtain approval of the Insurance
Commissioner of the State of Delaware to pay, in any 12-month period,
"extraordinary" dividends which are defined as those in excess of the greater
of 10% of surplus as regard to shareholders as of the prior year-end and
statutory net income less realized capital gains for such prior year. We may
pay dividends only out of unassigned surplus. In addition, we must provide
notice to the Insurance Commissioner of the State of Delaware of all dividends
and other distributions to shareholders within five business days after
declaration and at least ten days prior to payment. At December 31, 1998 the
maximum amount of dividends we could have paid out to our parent without prior
approval from state regulatory authorities was $2,310,910.

New Accounting Standards

As of January 1, 1998, we adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), which
establishes new rules for the reporting and display of comprehensive income
and its components, consisting of net income and other comprehensive income.
SFAS 130 requires us to report separately in stockholder's equity the
accumulated balance of other comprehensive income. Our only component of other
comprehensive income is net unrealized gains or losses on available-for-sale
securities, which we report separately in stockholder's equity. The adoption
of SFAS 130 had no impact on our net income or stockholder's equity.

Competition

We are engaged in a business that is highly competitive due to the large
number of stock and mutual life insurance companies as well as other entities
marketing insurance products comparable to our products. There are
approximately 1,600 stock, mutual, and other types of insurers in the life
insurance business in the United States, a substantial number of which are
significantly larger than we are. We are unique in that we are one of the few
life insurers confining its activities to the marketing of separate account
variable insurance products.

35
<PAGE>

Transactions with Sage Insurance Group

In 1997, we entered into a Cost Sharing Agreement with Sage Insurance Group
to share personnel costs, office rent, and equipment costs. These costs are
allocated between the companies based upon the estimated time worked, square
footage of space utilized and upon monitored usage of the equipment,
respectively. Under this agreement, we have received $151,348 from Sage
Insurance Group for the year ended December 31, 1998, and we have paid
expenses of $76,048 for the year ended December 31, 1997. In addition, Sage
Insurance Group provides funds to us to meet various operating expenses. We
pay these amounts back to Sage Insurance Group at the end of each quarter.

Sage Insurance Group has also incurred expenditures in connection with the
costs of establishing new systems, new products, and premises for us. The
amount of these developmental costs paid for by companies affiliated with Sage
Life on December 31, 1998 and December 31, 1997 were $3,270,219 and
$1,504,558, respectively. Sage Insurance Group regards these expenditures as
being of a developmental nature and does not intend to recover these
expenditures from us. Accordingly, these expenditures have been capitalized as
development costs and reflected as contributed capital in our financial
statements.

Employees

Due to our business strategy of outsourcing our primary administrative and
investment functions to organizations that specialize in these areas, the
number of full time personnel we employ is limited. As of December 31, 1998,
we had 14 employees. As of December 31, 1997, we had 8 employees.

Properties

Our executive office is located at 300 Atlantic Street, in Stamford,
Connecticut, where we maintain our primary corporate records. We maintain
customer records at our Customer Service Center.

Sage Insurance Group leases our office space. We reimburse Sage Insurance
Group for the office space under the Cost Sharing Agreement described above.

State Regulation

We are subject to the laws of the State of Delaware governing insurance
companies and to the regulations of the Delaware Department of Insurance (the
"Insurance Department"). We file a detailed financial statement in the
prescribed form (the "Statement") with the Insurance Department each year
covering our operations for the preceding year and our financial condition as
of the end of that year. Regulation by the Insurance Department means that the
Insurance Department may examine us and our books and records to determine,
among other things, whether contract liabilities and reserves as we state them
are correct. The Insurance Department, under the auspices of the National
Association of Insurance Commissioners ("NAIC"), will periodically conduct a
full examination of our operations.

In addition, we are subject to regulation under the insurance laws of all
jurisdictions in which we operate. The laws of the various jurisdictions
establish supervisory agencies with broad administrative powers with respect
to various matters, including licensing to transact business, overseeing trade
practices, licensing agents, approving contract forms, establishing reserve
requirements, fixing maximum interest rates on life insurance contract loans
and minimum rates for accumulation of surrender values, prescribing the form
and content of required financial statements and regulating the type and
amounts of investments permitted. We must file the Statement with supervisory
agencies in each of the jurisdictions in which we do business, and our
operations and accounts are subject to examination by these agencies at
regular intervals.

The NAIC has adopted several regulatory initiatives designed to improve the
surveillance and financial analysis regarding the solvency of insurance
companies in general. These initiatives include the development and
implementation of a risk-based capital formula for determining adequate levels
of capital and surplus. Insurance companies are required to calculate their
risk-based capital in accordance with this formula and to include the results
in their Statements. We anticipate that these standards will have no
significant effect upon us.

Further, many states regulate affiliated groups of insurers like us and our
affiliates, under insurance holding company legislation. Under such laws,
inter-

36
<PAGE>

company transfers of assets and dividend payments from insurance subsidiaries
may be subject to prior notice or approval, depending on the size of the
transfers and payments in relation to the financial positions of the companies
involved.

Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed (up to prescribed limits) for contract owner losses
incurred when other insurance companies have become insolvent. Most of these
laws provide that an assessment may be excused or deferred if it would
threaten an insurer's own financial strength.

Although the federal government ordinarily does not directly regulate the
business of insurance, federal initiatives often have an impact on the
business in a variety of ways. Our insurance products are subject to various
federal securities laws and regulations. In addition, current and proposed
federal measures that may significantly affect the insurance business include:

--regulation of insurance company solvency,

--employee benefit regulation,

--removal of barriers preventing banks from engaging in the insurance
business,

--tax law changes affecting the taxation of insurance companies, and

--tax treatment of insurance products and its impact on the relative
desirability of various personal investment vehicles.

37
<PAGE>

DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
Position held with the Other Principal Positions
Name (Age) Company/Year Commenced During Past Five Years
- ---------- ---------------------- -------------------------
<S> <C> <C>
Ronald S. Scowby(/1/) Director, 1/97 Chairman and Trustee, Sage Life Investment
Age 60 to present, Trust, 7/98 to present; Director, Sage Life
Chairman, 2/98 Assurance Company of New York, 5/98 to present;
to present Deputy Chairman 2/98 to present, President, 1/97
to 2/98, Director, 1/97 to present, Sage
Insurance Group Inc.; Director, Sage Advisors,
Inc., 1/98 to present; President, Chief
Executive Officer, Sage Life Assurance of
America Inc., 1/97-2/98; Director, Sage
Distributors, Inc., 1/98 to present; Director,
President, Chief Executive Officer, Sage
Management Services (USA), Inc., 6/96 to
present; Owner, Sheldon Scowby Resources 7/95-
6/96; Executive Vice President, Mutual of
America Life Insurance Group, 6/91-7/95;
President, Mutual of America Financial Services,
6/91-7/95

Robin I. Marsden(/1/) Director, 1/97 President and Trustee, Sage Life Investment
Age 33 to present, Trust, 7/98 to present; Director, Sage Life
President and Assurance Company of New York, 5/98 to present;
Chief Executive Director, President, Sage Advisors, Inc., 1/98
Officer, 2/98 to to present; Director, Sage Distributors, Inc.,
present 1/98 to present; Director, 1/97 to present,
President and Chief Executive Officer, 2/98 to
present, Sage Insurance Group, Inc.; Chief
Investment Officer, Sage Life Holdings, Ltd.,
11/94 to 1/98; Executive-Strategic Developments,
Sage Group Ltd., 11/94 to 1/98; Partner and
Management Consultant Deloitte & Touche 1/89-
10/94

H. Louis Shill(/2/) Director, 1/97 Director, Sage Life Assurance Company of New
Age 68 to present York, 5/98 to present; Chairman, Sage Life
Assurance of America, Inc. 1/97 to 2/98;
Chairman, Sage Insurance Group, Inc., 1/97 to
present; Founder, Chairman, Sage Group Limited,
1965 to present

Paul C. Meyer(/3/) Director, 1/97 Director, Sage Life Assurance Company of New
Age 46 to present York 5/98 to present; Partner, Rogers & Wells,
1986 to present

Richard D. Starr(/4/) Director, 1/97 Director, Sage Life Assurance Company of New
Age 54 to present York, 5/98 to present; President, First
Interstate Securities, 1/95-12/95; Chairman &
Chief Executive Officer, Financial Institutions
Group, Inc., 10/78 to present

Mitchell R. Director, 12/97 Vice President, Sage Life Investment Trust, 7/98
Katcher(/1/) to present, to present; Director, Sage Life Assurance
Age 45 Senior Executive Company of New York, 5/98 to present; Director,
Vice President, Treasurer, Sage Advisors, Inc., 1/98 to present;
Chief Financial Director, Sage Distributors, Inc., 1/98 to
Officer, Chief present; Treasurer, 7/97 to present, Senior
Actuary 5/97 to Executive Vice President, 12/97 to present, Sage
present Insurance Group, Inc.; Executive Vice President,
Golden American Life Insurance Company, 7/93-
2/97.
</TABLE>
- --------
(1) The principal business address of these persons is 300 Atlantic Street,
Stamford, CT 06901.
(2) Mr. Shill's principal business address is Sage Centre, 10 Fraser Street,
Johannesburg, South Africa 2000.
(3) Mr. Meyer's principal business address is 200 Park Avenue, New York, N.Y.
10166.
(4) Mr. Starr's principal business address is 22507 SE 47th Place, Issaquah, WA
98029.

38
<PAGE>

Compensation

Our executive officers also serve as officers of our parent and of certain
affiliated companies. Cost allocations have been made to us as to the time
these individuals devoted to their duties with us. No allocation was made
during 1997 nor was any made for 1998 for the services of Mr. Shill. No
allocation was made during 1997 for the services of Mr. Marsden.

The following table includes compensation paid by us for services rendered
in all capacities for the years indicated for the Chief Executive Officer and
the other Executive Officers compensated more than $100,000 for the year ended
December 31, 1998.
<TABLE>
<CAPTION>
Annual Compensation
----------------------
All Other
Name and Principal Position Year Salary Bonus Compensation
- --------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Ronald S. Scowby........................... 1997 $337,500 $100,000
Chairman(/1/) 1998 $350,000 $100,000 $22,097

Robin I. Marsden........................... 1998 $275,000 $150,000 $20,956
President and Chief Executive Officer(/1/)

Mitchell R. Katcher........................ 1997 $114,583 $265,000
Senior Executive Vice President, 1998 $250,000 $125,000 $19,037
Chief Financial Officer
and Chief Actuary(/1/)
</TABLE>
- --------
(1) All salaries and bonuses are paid by Sage Insurance Group.

We pay outside directors $12,000 and $2,000 per meeting attended. For the
year ended December 31, 1997, we paid each outside director $20,000. We do not
compensate directors who are officers or employees of ours or our affiliates
for serving on the Board. Directors do not receive retirement benefits.

39
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Sage Life Assurance of America, Inc.

We have audited the accompanying balance sheets of Sage Life Assurance of
America, Inc. (formerly Fidelity Standard Life Insurance Company) as of
December 31, 1998 and 1997, and the related statements of operations,
stockholder's equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sage Life Assurance of
America, Inc. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

Stamford, Connecticut
February 15, 1999

40
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31
------------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at fair value
(amortized cost:
1998--$12,967,022 and 1997--$3,520,393)............ $12,992,917 $ 3,595,326
Short-term investments.............................. 10,975,402 21,530,888
----------- -----------
Total investments.................................... 23,968,319 25,126,214
Cash and cash equivalents............................ 1,531,165 228,605
Accrued investment income............................ 203,425 58,039
Receivable from affiliates........................... -- 25,941
Reinsurance recoverable.............................. -- 2,728,284
Goodwill............................................. 6,565,134 6,802,300
Development costs.................................... 4,269,488 1,310,921
Other assets......................................... 5,000 11,443
Separate account assets.............................. -- 396,992
----------- -----------
Total assets......................................... $36,542,531 $36,688,739
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued expenses.................................... $ 61,670 $ 180,442
Policy liabilities.................................. -- 2,728,284
Deferred income taxes............................... 8,804 26,227
Amounts payable to affiliates....................... -- 154,366
Separate account liabilities........................ -- 396,992
----------- -----------
Total liabilities.................................... 70,474 3,486,311
Stockholder's equity:
Common stock, $2,500 par value, 1,000 shares
authorized, issued and outstanding................. 2,500,000 2,500,000
Additional paid-in capital.......................... 34,875,727 31,005,508
Retained deficit.................................... (920,760) (351,786)
Accumulated other comprehensive income.............. 17,090 48,706
----------- -----------
Total stockholder's equity........................... 36,472,057 33,202,428
----------- -----------
Total liabilities and stockholder's equity........... $36,542,531 $36,688,739
=========== ===========
</TABLE>

See accompanying notes to financial statements.

41
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year ended December 31
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues
Investment income..................................... $ 1,243,522 $ 989,494
Expenses
Amortization expense.................................. 548,818 325,406
General and administrative expenses................... 1,263,678 1,015,874
----------- ----------
Total expenses...................................... 1,812,496 1,341,280
----------- ----------
Loss before taxes..................................... (568,974) (351,786)
Income tax expense.................................... -- --
----------- ----------
Net loss.............................................. $ (568,974) $ (351,786)
=========== ==========
</TABLE>

See accompanying notes to financial statements.

42
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
Accumulated
Additional other
Common paid-in Retained Comprehensive
stock Capital deficit Income Total
---------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... $2,500,000 $15,505,508 $18,005,508
Net loss................ $(351,786) (351,786)
Change in unrealized
gain on investments.... $ 48,706 48,706
---------- ----------- --------- -------- -----------
Comprehensive income.... (303,080)
Additional capital con-
tributions............. 15,500,000 15,500,000
---------- ----------- --------- -------- -----------
Balance at December 31,
1997................... 2,500,000 31,005,508 (351,786) 48,706 33,202,428
Net loss................ (568,974) (568,974)
Change in unrealized
gain on investments.... (31,616) (31,616)
---------- ----------- --------- -------- -----------
Comprehensive income.... (600,590)
Additional capital con-
tributions............. 3,870,219 3,870,219
---------- ----------- --------- -------- -----------
Balance at December 31,
1998................... $2,500,000 $34,875,727 $(920,760) $ 17,090 $36,472,057
========== =========== ========= ======== ===========
</TABLE>

See accompanying notes to financial statements.

43
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Operating activities
Net loss............................................ $ (568,974) $ (351,786)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Amortization expense............................. 548,818 325,406
Changes in:
Accrued investment income...................... (145,386) (29,638)
Receivable from affiliates..................... 25,941 (25,941)
Other assets................................... 6,443 (11,443)
Accrued expenses............................... (118,772) 116,216
Amounts payable to affiliates.................. (154,366) 154,366
----------- -----------
Net cash (used in) provided by operating activities.. (406,296) 177,180
Investing activities
Purchase of fixed maturity securities............... (10,295,783) --
Proceeds from sales, maturities and repayments of
fixed maturity securities.......................... 849,153 42,941
Net (purchases) sales of short-term investments..... 10,555,486 (15,507,987)
----------- -----------
Net cash provided by (used in) investing activities.. 1,108,856 (15,465,046)
Financing activities
Capital contribution from the parent............... 600,000 15,500,000
----------- -----------
Net cash provided by financing activities............ 600,000 15,500,000
----------- -----------
Increase in cash and cash equivalents................ 1,302,560 212,134
Cash and cash equivalents at beginning of year....... 228,605 16,471
----------- -----------
Cash and cash equivalents at end of year............. $ 1,531,165 $ 228,605
=========== ===========
</TABLE>

See accompanying notes to financial statements.

44
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS
December 31, 1998

1. Nature of Operations and Significant Accounting Policies

Organization and Operation

Sage Life Assurance of America, Inc. (the "Company") is a wholly-owned
subsidiary of Sage Life Holdings of America, Inc., ("SLHA") which is a wholly-
owned indirect subsidiary of Sage Group Limited, a South African company.

Description of Business

Effective December 31, 1996, Sage Insurance Group Inc. ("SIGI") purchased from
Security First Life Insurance Company ("SFLIC") all of the outstanding stock
of Fidelity Standard Life Insurance Company ("Fidelity Standard"), a Delaware
domiciled life insurance company licensed to sell fixed and variable annuity
contracts. As a result of the purchase, Fidelity Standard was renamed Sage
Life Assurance of America, Inc. Effective October 31, 1996, all new business
production and marketing was ceased and Fidelity Standard entered into a
modified coinsurance arrangement to cede all of its separate account
liabilities to its then parent, SFLIC. Assets equal to the total reserves and
related liabilities were transferred to SFLIC. The remaining general account
liabilities were ceded under a 100% coinsurance arrangement with SFLIC. In
connection with the purchase of Fidelity Standard, the Company entered into a
service agreement with SFLIC to provide all necessary administrative services
for all ceded business. Effective September 1, 1998, all of the in-force
business of the Company was novated to SFLIC. There was no gain or loss in
connection with the novation. Accordingly, no insurance liabilities exist at
December 31, 1998.

The Company is in the process of developing and preparing to market variable
annuity and variable life insurance products. The marketing of these products
began in the first quarter 1999. The Company also intends to enter into a
coinsurance reinsurance arrangement with Swiss Re Life and Health America,
Inc. ("Swiss Re"), pursuant to which Swiss Re will reinsure a significant
portion of the liabilities under the variable insurance contracts.

Basis of Presentation

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles.

New Accounting Pronouncement

As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes standards for the reporting and display of comprehensive income
and its components; however, adoption of this Statement had no impact on the
Company's net income or stockholder's equity. Comprehensive income is defined
as the change in equity during the financial reporting period of a business
enterprise resulting from non-owner sources. The primary element of
comprehensive income is the unrealized gains and losses on investments. Prior
year financial statements have been reclassified to conform to the
requirements of SFAS 130.

Investments

The Company has classified all of its fixed maturity investments as available-
for-sale. Those investments are carried at fair value and changes in
unrealized gains and losses are reported as a component of stockholder's
equity, net of applicable deferred income taxes. Fair values are determined by
quoted market prices.

45
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Short-term investments are carried at cost, which approximates fair value.

Realized gains and losses on disposal of investments are determined by the
specific identification method and are included in revenues.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity
of three months or less from the date of purchase to be cash equivalents. Cash
and cash equivalents are carried at cost, which approximates fair value.

Separate Accounts

The separate account assets and liabilities reported in the accompanying
balance sheet represent funds that are separately administered, principally
for the benefit of certain policyholders who bear the investment risk. The
separate account assets and liabilities, as reported as of December 31, 1997,
are carried at fair value. Revenues and expenses related to the separate
account assets and liabilities, to the extent of benefits paid or provided to
the separate account policyholders, are excluded from the amounts reported in
the accompanying statement of operations. The separate account balances were
novated to SFLIC effective September 1, 1998. As a result, no separate account
assets or liabilities are reported at December 31, 1998.

Policy Liabilities

Policy liabilities at December 31, 1997 consisted of deposits received plus
credited interest, less accumulated policyholder charges, assessments, and
withdrawals related to annuities of a nonguaranteed return nature. Interest
crediting rates ranged from 5.5 % to 7.0%. There were no policy liabilities at
December 31, 1998 as all in-force business was novated to SFLIC, effective
September 1, 1998.

Goodwill

Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is being amortized on a straight-line basis over
thirty years. The carrying value of goodwill is regularly reviewed for
indications of impairment in value, which, in the view of management, is other
than temporary. Accumulated amortization at December 31, 1998 and December 31,
1997 was $468,935 and $231,769, respectively.

Development Costs

The Company has capitalized certain costs that have been incurred in the
development and registration of the Company's insurance products. These
development costs are being amortized on a straight line basis over fifteen
years. Accumulated amortization at December 31, 1998 and December 31, 1997 was
$405,287 and $93,637, respectively.

In April 1998, Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities", (SOP 98-5) was issued. SOP 98-5 requires entities to charge to
expense all start-up costs as incurred. SOP 98-5 is effective for years
beginning after December 15, 1998 (i.e., January 1, 1999). In addition, SOP
98-5 requires entities upon adoption to write-off as the cumulative effect of
a change in accounting principle any previously unamortized capitalized start-
up costs. Accordingly, the Company will be required to write-off any
unamortized capitalized development costs on January 1, 1999.

46
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Estimates

The preparation of financial statements in accordance with generally accepted
accounting principles requires that management makes estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Income Taxes

Income taxes are accounted for using the liability method. Using this method,
deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse.

2. Investments

Investments in fixed maturity securities as of December 31, 1998 consist of
the following:

<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Government Obligations...... $ 9,356,479 $89,549 $54,974 $ 9,391,054
Corporate Obligations............ 3,610,543 4,282 12,962 3,601,863
----------- ------- ------- -----------
$12,967,022 $93,831 $67,936 $12,992,917
=========== ======= ======= ===========
</TABLE>

Investments in fixed maturity securities as of December 31, 1997 consisted of
the following:

<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government Obligations........ $3,520,393 $79,120 $4,187 $3,595,326
========== ======= ====== ==========
</TABLE>

The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1998 are summarized below. Actual maturities will
differ from contractual maturities because certain borrowers have the right to
call or prepay obligations.

<TABLE>
<CAPTION>
Amortized Fair
cost value
----------- -----------
<S> <C> <C>
Due after one year through five years.................. $ 4,750,473 $ 4,811,245
Due after five years through ten years................. 8,216,549 8,181,672
----------- -----------
Total................................................ $12,967,022 $12,992,917
=========== ===========
</TABLE>

47
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Investment income by major category of investment for the year ended December
31, 1998 and 1997 is summarized as follows:

<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Bonds..................................................... $ 261,781 $ 255,778
Short-term investments.................................... 787,873 720,556
Cash and cash equivalents................................. 239,700 49,035
---------- ---------
Total investment income................................... 1,289,354 1,025,369
Investment expenses....................................... 45,832 35,875
---------- ---------
Net investment income................................... $1,243,522 $ 989,494
========== =========
</TABLE>

At December 31, 1998 and 1997, investment securities with an amortized cost of
$6,678,745 and $6,128,048, respectively, and a fair value of $6,623,770 and
$6,202,980, respectively, are held by trustees in various amounts in
accordance with the statutory requirements of certain states in which the
Company is licensed to conduct business.

3. Income Taxes

The Company has filed a separate life insurance company Federal income tax
return for the period January 1, 1997 through December 31, 1997. The Company
will continue to file a separate life insurance company Federal income tax
return through the year 2001. Beginning in the year 2002, the Company will be
included in the consolidated Federal income tax return of Sage Holdings (USA),
Inc. and its subsidiaries.

The provision for income taxes varies from the amount which would be computed
using the federal statutory income tax rate as follows:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Pre-tax loss............................................. $(568,974) $(351,786)
Application of the federal statutory tax rate--34%....... (193,451) (119,607)
Tax effect of:
State income taxes..................................... -- (75)
Change in valuation allowance.......................... 193,451 119,532
--------- ---------
Total income tax provision............................... $ -- $ --
========= =========
</TABLE>

Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................... $ 1,967,528 $ 756,521
Total deferred tax assets.............................. 1,967,528 756,521
----------- ---------
Deferred tax liabilities:
Unrealized gain on appreciation of investments....... (8,804) (26,227)
Amortization of goodwill and development costs....... (1,654,545) (636,989)
----------- ---------
Total deferred tax liabilities......................... (1,663,349) (663,216)
Valuation allowance for deferred tax assets............ (312,983) (119,532)
----------- ---------
Net deferred tax liability............................. $ (8,804) $ (26,227)
=========== =========
</TABLE>

48
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Based upon the lack of historical operating results and the uncertainty of
operating earnings in the future, management has determined that it is not
more likely than not that the deferred tax assets will be fully recognized.
Accordingly, a valuation allowance has been recorded.

At December 31, 1998, the Company has net operating loss carryforwards of $3.8
million for federal income tax purposes which expire in 2018 and $2.0 million
that expire in the year 2012.

4. Retained Earnings and Dividend Restrictions

Statutory-basis net income and surplus of the Company are as follows:

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net income.............................................. $ 27,002 $ 51,133
Surplus................................................. 25,609,097 25,017,752
</TABLE>

The Company is subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions as described below, the Company must obtain approval of the
Insurance Commissioner of the State of Delaware in order to pay, in any 12-
month period, "extraordinary" dividends which are defined as those in excess
of the greater of 10% of surplus as regards policyholders as of the prior
year-end and statutory net income less realized capital gains for such prior
year. Dividends may be paid by the Company only out of earned surplus. In
addition, the Company must provide notice to the Insurance Commissioner of the
State of Delaware of all dividends and other distributions to shareholders
within five business days after declaration and at least ten days prior to
payment. At December 31, 1998, the maximum amount of dividends the Company
could pay SLHA without prior approval from state regulatory authorities is
$2,310,910.

5. Related Party Transactions

In 1997, the Company entered into a Cost Sharing Agreement with SIGI, the
parent of SLHA, to share the personnel costs, office rent and equipment costs.
These costs are allocated between the companies based upon the estimated time
worked, square footage of space utilized and upon monitored usage of the
equipment, respectively. Pursuant to this agreement, the Company has received
$151,348 from SIGI for the year ended December 31, 1998 and paid expenses of
$76,048 for the year ended December 31, 1997. In addition, SIGI provides funds
to the Company to meet various operating expenses. These amounts are paid back
to SIGI at the end of each quarter. At December 31, 1997, $100,000 of the
amounts transferred to the Company remained payable to SIGI. No amounts were
remained payable at December 31, 1998.

All non-recurring development costs of the Company are paid by SIGI or its
parent, Sage Group Limited, and treated as capital contributions. The amount
of development costs paid for by affiliated companies at December 31, 1998 and
December 31, 1997 were $3,270,219 and $1,504,558, respectively.

49
<PAGE>

TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION

Additional information about the Contracts and The Sage Variable Annuity
Account A is contained in the Statement of Additional Information. You can
obtain a free copy of the Statement of Additional Information by writing to us
at the address shown on the front cover or by calling (877) 835-7243 (Toll
Free). The following is the Table of Contents for the Statement of Additional
Information.

Statement of Additional Information
Table of Contents

<TABLE>
<CAPTION>
Page
----
<S> <C>
Participation.............................................................. S-1

Beneficiary Designation.................................................... S-1

Calculation of Historical Performance Data................................. S-1
Money Market Sub-Account Yields.......................................... S-1
Other Variable Sub-Account Yields........................................ S-2
Average Annual Total Returns............................................. S-3
Other Total Returns...................................................... S-3
Effect of the Annual Administration Charge on Performance Data........... S-4
Use of Indexes........................................................... S-4
Other Information........................................................ S-4

Income Payment Provisions.................................................. S-5
Amount of Fixed Income Payments.......................................... S-5
Amount of Variable Income Payments....................................... S-5
Income Units............................................................. S-5
Income Unit Value........................................................ S-5
Exchange of Income Units................................................. S-6

Safekeeping of Account Assets.............................................. S-6

Legal Matters.............................................................. S-6

Other Information.......................................................... S-6

Financial Statements....................................................... S-7
</TABLE>

50
<PAGE>

APPENDIX A

MARKET VALUE ADJUSTMENT

We will apply a Market Value Adjustment to amounts surrendered, withdrawn,
transferred or applied to an income plan when taken from a Fixed Sub-Account
more than 30 days before its Expiration Date. We apply a Market Value
Adjustment separately to each Fixed Sub-Account. Surrender charges also may
apply.

For a surrender, withdrawal, transfer or amount applied to an income plan,
we will calculate the Market Value Adjustment by applying the factor below to
the total amount (including any applicable surrender charge) that must be
surrendered, withdrawn, transferred or applied to an income plan in order to
provide the amount requested.

[(1+I)/(1+J+.0025)](N//365/) - 1

Where

--I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period, at the time that we established the Sub-Account;

--J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period, at the time of surrender, withdrawal, transfer, or
application to an income plan; and

--N is the remaining number of days in the Guarantee Period at the time
of calculation.

We will apply Market Value Adjustments as follows:

. If the Market Value Adjustment is negative, we first deduct it from any
remaining value in the Fixed Sub-Account. We then deduct any remaining
negative Market Value Adjustment from the amount you surrender,
withdraw, transfer, or apply to an income plan.

. If the Market Value Adjustment is positive, we add it to any remaining
value in the Fixed Sub-Account or the amount you surrender. If you
withdraw, transfer or apply to an income plan the full amount of the
Fixed Sub-Account, we add the Market Value Adjustment to the amount you
withdraw, transfer, or apply to an income plan.

MVA EXAMPLES

Example #1: Surrender--Example of a Negative Market Value Adjustment

Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of
ten years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of
7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a surrender three years into the
Guarantee Period, the Index Rate based on the U.S. Treasury Constant Maturity
Series for a seven-year Guarantee Period ("J") is 8.0% at the time of the
surrender, no prior transfers or withdrawals affecting this Fixed Sub-Account
have been made, and no surrender charge is applicable.

Calculate the Market Value Adjustment

1.The Account Value of the Fixed Sub-Account on the date of surrender is
$124,230 ($100,000 x 1.075/3/)

2.N = 2,555 (365 x 7)

3.Market Value Adjustment = $124,230 x {[(1.07)/(1.0825)] /2555///365/ -1)
=-$9,700

Therefore, the amount paid on full surrender is $114,530 ($124,230-$9,700).

A-1
<PAGE>

Example #2: Surrender--Example of a Positive Market Value Adjustment

Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of
ten years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of
7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a surrender three years into the
Guarantee Period, the Index Rate based on the U.S. Treasury Constant Maturity
Series for a seven-year Guarantee Period ("J") is 6.0% at the time of the
surrender, no prior transfers or withdrawals affecting this Fixed Sub-Account
have been made, and no surrender charge is applicable.

Calculate the Market Value Adjustment

1.The Account Value of the Fixed Sub-Account on the date of surrender is
$124,230 ($100,000 x 1.075/3/)

2.N = 2,555 (365 x 7)

3.Market Value Adjustment = $124,230 x {[(1.07)/(1.0625)]/2555///365/ -1) =
+ $6,270

Therefore, the amount paid on full surrender is $130,500 ($124,230 + $6,270).

Example #3: Withdrawal--Example of a Negative Market Value Adjustment

Assume you invest $200,000 in a Fixed Sub-Account with a Guarantee Period of
ten years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of
7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a withdrawal of $100,000 three years
into the Guarantee Period, the Index Rate based on the U.S. Treasury Constant
Maturity Series for a seven-year Guarantee Period ("J") is 8.0% at the time of
withdrawal, no prior transfers or withdrawals affecting this Fixed Sub-Account
have been made, and no surrender charge is applicable.

Calculate the Market Value Adjustment

1.The Account Value of the Fixed Sub-Account on the date of withdrawal is
$248,459 ($200,000 x 1.075/3/ ).

2.N = 2,555 (365 x 7)

3.Market Value Adjustment = $100,000 x {[(1.07)/(1.0825)]/2555///365/ -1) =
- $7,808

Therefore, the amount of the withdrawal paid is $100,000, as requested. The
Fixed Sub-Account will be reduced by the amount of the withdrawal paid
($100,000) and by the Market Value Adjustment ($7,808), for a total reduction
in the Fixed Sub-Account of $107,808.

Example #4: Withdrawal--Example of a Positive Market Value Adjustment

Assume you invest $200,000 in a Fixed Sub-Account with a Guarantee Period of
ten years, with a Guaranteed Interest Rate of 7.5% and an initial Index Rate
("I") of 7.0% based on the U.S. Treasury Constant Maturity Series at the time
we established the Sub-Account. You request a withdrawal of $100,000 three
years into the Guarantee Period, the Index Rate based on the U.S. Treasury
Constant Maturity Series for a seven-year Guarantee Period ("J") is 6.0% at
the time of the withdrawal, no prior transfers or withdrawals affecting this
Fixed Sub-Account have been made, and no surrender charge is applicable.

Calculate the Market Value Adjustment

1.The Account Value of the Fixed Sub-Account on the date of withdrawal is
$248,459 ($200,000 x 1.075/3/)

2.N = 2,555 (365 x 7)

3.Market Value Adjustment = $100,000 x {[(1.07)/(1.0625)]/2555///365/ - 1)
= + $5,047

Therefore, the amount of the withdrawal paid is $100,000, as requested. The
Fixed Sub-Account will be reduced by the amount of the withdrawal paid
($100,000) and increased by the amount of the Market Value Adjustment
($5,047), for a total reduction of $94,953.

A-2
<PAGE>

APPENDIX B

DOLLAR-COST AVERAGING PROGRAM

Below is an example of how the Dollar-Cost Averaging Program works.

Assume that the Dollar-Cost Averaging Program has been elected and that
$24,000 is invested in a DCA Fixed Sub-Account with a Guarantee Period of two
years and an annual Guaranteed Interest Rate of 6.0%.

<TABLE>
<CAPTION>
(1) (2) (4)
Beginning of Dollar Cost (3) Interest (5)
Beginning Month Averaging Amount Dollar Credited End of Month
of Month Account Value Monthly Factor Cost Averaged For Month Account Value
- --------- ------------- -------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
1 24,000 -- -- 117 24,117
2 24,117 1 / 24 1,005 112 23,224
3 23,224 1 / 23 1,010 108 22,323
4 22,323 1 / 22 1,015 104 21,412
5 21,412 1 / 21 1,020 99 20,492
6 20,492 1 / 20 1,025 95 19,562
7 19,562 1 / 19 1,030 90 18,622
8 18,622 1 / 18 1,035 86 17,673
9 17,673 1 / 17 1,040 81 16,715
10 16,715 1 / 16 1,045 76 15,746
11 15,746 1 / 15 1,050 72 14,768
12 14,768 1 / 14 1,055 67 13,780
13 13,780 1 / 13 1,060 62 12,782
14 12,782 1 / 12 1,065 57 11,774
15 11,774 1 / 11 1,070 52 10,756
16 10,756 1 / 10 1,076 47 9,727
17 9,727 1 / 9 1,081 42 8,688
18 8,688 1 / 8 1,086 37 7,639
19 7,639 1 / 7 1,091 32 6,580
20 6,580 1 / 6 1,097 27 5,510
21 5,510 1 / 5 1,102 21 4,429
22 4,429 1 / 4 1,107 16 3,338
23 3,338 1 / 3 1,113 11 2,236
24 2,236 1 / 2 1,118 5 1,124
25 1,124 1 / 1 1,124 -- --
</TABLE>

Note:

Column (3) = Column (1) x Column (2)

Column (5) = Column (1)-Column (3) + Column (4)

B-1
<PAGE>

To obtain a Statement of Additional Information for this Prospectus, please
complete the form below and mail to:

Sage Life Assurance of America, Inc.
Customer Service Center
1290 Silas Deane Highway
Wethersfield, CT 06109

Please send a Statement of Additional Information to me at the following
address:

Name ________________________________

Address _____________________________

- -------------------------------------
City/State Zip Code