SAGE VARIABLE ANNUITY ACCOUNT A, 497, 2000-05-24

SAGE VARIABLE ANNUITY ACCOUNT A
497, 2000-05-24

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Profile and Prospectus

Flexible Payment Deferred Combination
Fixed and Variable Annuity Contract
With No Surrender Charge

Issued by Sage Life Assurance of America, Inc.

Effective May 1, 2000

CW008-5-00
<PAGE>

PROFILE DATED MAY 1, 2000

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 we offer up to 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 Market Value Adjustment (positive or negative) 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 decides, within certain federal tax required
limitations, how to receive the death benefit. Or, if your Beneficiary is your
spouse, he or she may take over the Contract and continue deferring taxes on
any gain. Your spouse's starting Account Value would equal any death benefits
payable.

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.
Other tax consequences may apply to Qualified Contracts.

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 $25,000 or more through an
authorized registered representative.

In addition, subject to special rules for Contracts used in connection with
tax-qualified retirement plans, you can make additional purchase payments of
$1,000 or more to your Contract at any time during the Accumulation Phase.

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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.

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

AIM Variable Insurance Funds

. 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. Growth and Income 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 TrustSM

. MFS Growth With Income Series

. MFS High Income Series

. MFS Research Series

. MFS Total Return Series

. MFS Capital Opportunities Series

The Universal Institutional Funds, Inc.

. The Global Equity Portfolio

. The Mid Cap Value Portfolio

. The Value Portfolio

Oppenheimer Variable Account Funds

. Oppenheimer Bond Fund/VA

. Oppenheimer Capital Appreciation Fund/VA

. 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 the different Guarantee Periods we offer. 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. We
may offer different Guarantee Periods for our DCA Fixed Sub-Accounts. 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.

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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:

Surrender Charge--None! There are no surrender charges under the Contract.

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.

Purchase Payment Tax Charge--We will deduct any state and local taxes on
purchase payments from Account Value when we incur such taxes. We reserve the
right to defer the collection of this charge and deduct it against your
Account Value on the surrender of this Contract or application of the Account
Value to provide income payments. This tax charge currently ranges from 0% to
3.0% depending upon the state or locality. 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 .55% to 1.34% depending upon the Fund.

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

--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>
Examples of Examples of
Total Total Total Total
Annual Annual Total Expenses Expenses
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:
AIM V.I. Government
Securities Fund...... 1.40% 0.90% 2.30% $24 $298
AIM V.I. Growth and
Income Fund.......... 1.40 0.77 2.17 22 280
AIM V.I. International
Equity Fund.......... 1.40 0.97 2.37 24 307
AIM V.I. Value Fund... 1.40 0.76 2.16 22 278

THE ALGER AMERICAN FUND:
Alger American MidCap
Growth Portfolio..... 1.40 0.85 2.25 23 289
Alger American Income
and Growth
Portfolio............ 1.40 0.70 2.10 22 271
Alger American Small
Capitalization
Portfolio............ 1.40 0.90 2.30 24 298

LIBERTY VARIABLE
INVESTMENT TRUST:
Colonial High Yield
Securities Fund,
Variable Series...... 1.40 0.80 2.20 23 284
Colonial Small Cap
Value Fund, Variable
Series............... 1.40 1.00 2.40 25 309
Colonial Strategic
Income Fund, Variable
Series............... 1.40 0.75 2.15 22 278
Colonial U.S. Growth
and Income Fund,
Variable Series...... 1.40 0.88 2.28 23 294
Liberty All-Star
Equity Fund, Variable
Series............... 1.40 0.95 2.35 24 303
Newport Tiger Fund,
Variable Series...... 1.40 1.21 2.61 27 338
Stein Roe Global
Utilities Fund,
Variable Series...... 1.40 0.77 2.17 22 280

</TABLE>

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<TABLE>
<CAPTION>
Examples of Examples of
Total Total Total Total
Annual Annual Total Expenses 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>
STEINROE VARIABLE
INVESTMENT TRUST:
Stein Roe Growth Stock
Fund, Variable
Series............... 1.40% 0.67% 2.07% $21 $266
Stein Roe Balanced
Fund, Variable
Series............... 1.40 0.62 2.02 21 261

MFS(R) VARIABLE
INSURANCE TRUSTSM:
MFS Growth With Income
Series............... 1.40 0.88 2.28 23 294
MFS High Income
Series............... 1.40 0.91 2.31 24 298
MFS Research Series... 1.40 0.86 2.26 23 292
MFS Total Return
Series............... 1.40 0.90 2.30 24 298
MFS Capital
Opportunities
Series............... 1.40 0.91 2.31 24 298

THE UNIVERSAL
INSTITUTIONAL FUNDS,
INC.:
The Global Equity
Portfolio............ 1.40 1.15 2.55 26 329
The Mid Cap Value
Portfolio............ 1.40 1.05 2.45 25 316
The Value Portfolio... 1.40 0.85 2.25 23 289

OPPENHEIMER VARIABLE
ACCOUNT FUNDS:
Oppenheimer Bond
Fund/VA.............. 1.40 0.73 2.13 22 275
Oppenheimer Capital
Appreciation
Fund/VA.............. 1.40 0.70 2.10 22 271
Oppenheimer Small Cap
Growth Fund/VA....... 1.40 1.34 2.74 28 354

SAGE LIFE INVESTMENT
TRUST:
EAFE Equity Index
Fund................. 1.40 0.90 2.30 24 298
S&P 500 Equity Index
Fund................. 1.40 0.55 1.95 20 252
Money Market Fund..... 1.40 0.65 2.05 21 265

T. ROWE PRICE EQUITY
SERIES, INC.:
T. Rowe Price Equity
Income Portfolio..... 1.40 0.85 2.25 23 289
T. Rowe Price Mid-Cap
Growth Portfolio..... 1.40 0.85 2.25 23 289
T. Rowe Price Personal
Strategy Balanced
Portfolio............ 1.40 0.90 2.30 24 298
</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 $50,000 and therefore we do not include
the Annual Administration Charge.

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
. MFS(R) Variable Insurance TrustSM
MFS Capital Opportunity Series
MFS High Income Series

. The Universal Institutional Funds, Inc.
The Global Equity Portfolio
The Mid Cap Value Portfolio
The Value Portfolio
. Sage Life Investment Trust
EAFE(R) Equity Index Fund
S&P 500 Equity Index Fund
Money Market Fund

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

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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.

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 then will be fully taxable.

Special tax rules apply to withdrawals from Qualified Contracts, including
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 if you take the amount from the Fixed Account before the
end of a Guarantee Period, 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 by the proportion that the withdrawal reduces your Account Value.

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 as of December 31, 1999 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 a death benefit for your Beneficiary.

We will pay a 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,
reduced proportionately by the amount that any withdrawals you have made
(including any associated Market Value Adjustment incurred) reduced
Account Value; 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.

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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 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.

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. You must return the Contract within a
certain number of days specified by your state (usually 10) from the date you
received the Contract.

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 Asset-Based Charges and Purchase Payment Tax 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 you the greater of your Account Value plus
charges we have deducted or your initial purchase payment, less any
withdrawals previously taken. In the states where we are required to return
the 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 (the
"DCA 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 DCA
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 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 Variable Sub-Account
allocations to your original percentages on a quarterly, semi-annual, or
annual basis. Money invested in the Fixed Account is not part of this program.

11. How Can I Make Inquiries?

If you need further information about the Contracts, please contact an
authorized registered representative or write or call us at our Customer
Service Center. The address and telephone number of our Customer Service
Center office is P.O. Box 290680, Wethersfield, CT 06129-0680 and (877) 835-
7243 (Toll Free).

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PROSPECTUS DATED MAY 1, 2000

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

<TABLE>
<S> <C>
Executive Office: Customer Service Center:
300 Atlantic Street P.O. Box 290680
Stamford, CT 06901 Wethersfield, CT 06129-0680
Telephone: (877) 835-7243 (Toll Free)
</TABLE>
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 the following
Trusts (collectively, the "Trusts"):

. AIM Variable Insurance Funds
. The Alger American Fund
. Liberty Variable Investment Trust
. SteinRoe Variable Investment Trust
. MFS(R) Variable Insurance TrustSM
. The Universal Institutional Funds, Inc.
. Oppenheimer Variable Account Funds
. Sage Life Investment Trust
. T. Rowe Price Equity Series, Inc.

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 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 the last page 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. The Trust prospectuses contain important information
about the Funds. Your registered representative can provide these prospectuses
to you before you invest.

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
----
<C> <S> <C>
Index of Terms............................................................ 1
Fee Table................................................................. 3
1. What Are The Contracts?.............................................. 6
Your Options......................................................... 6
Transfers............................................................ 7
2. What Are My Income Payment Options?.................................. 7
Your Choices......................................................... 7
Income Payment Amounts............................................... 7
Variable Income Payments............................................. 7
3. How Do I Purchase A Contract?........................................ 8
Initial Purchase Payment............................................. 8
Issuance of a Contract............................................... 8
Free Look Right to Cancel Your Contract.............................. 8
Making Additional Purchase Payments.................................. 8
When We May Cancel Your Contract..................................... 9
4. What Are My Investment Options?...................................... 9
Purchase Payment Allocations......................................... 9
Variable Sub-Account Investment Options.............................. 9
Fixed Account Investment Options..................................... 13
Guarantee Periods.................................................... 14
Transfers............................................................ 15
Telephone Transactions............................................... 16
Third Party Transfers................................................ 16
Transfer Programs.................................................... 17
Values Under Your Contract........................................... 18
5. What Are The Expenses Under A Contract?.............................. 19
Surrender Charge..................................................... 20
Annual Administration Charge......................................... 20
Transfer Charge...................................................... 20
Asset-Based Charges.................................................. 20
Purchase Payment Tax Charge.......................................... 20
Fund Annual Expenses................................................. 21
Additional Information............................................... 21
6. How Will My Contract Be Taxed?....................................... 21
Introduction......................................................... 21
Taxation of Non-Qualified Contracts.................................. 21
Taxation of a Qualified Contract..................................... 22
Transfers, Assignments, or Exchanges of a Contract................... 23
Possible Tax Law Changes............................................. 23
</TABLE>
<TABLE>
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Page
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<C> <S> <C>
7. How Do I Access My Money?.......................................... 23
Withdrawals........................................................ 23
Systematic Partial Withdrawal Program.............................. 24
IRA Partial Withdrawal Program..................................... 24
Requesting Payments................................................ 24
8. How Is Contract Performance Presented?............................. 25
Yield.............................................................. 25
Total Return....................................................... 25
Performance/Comparisons............................................ 25
9. Does The Contract Have A Death Benefit?............................ 26
Owner's Death Before the Income Date............................... 26
Owner's Death After the Income Date................................ 27
Proof of Death..................................................... 27
10. What Other Information Should I Know?.............................. 27
Separate Accounts.................................................. 27
Modification....................................................... 28
Distribution of the Contracts...................................... 29
Experts............................................................ 29
Legal Proceedings.................................................. 29
Reports to Contract Owners......................................... 29
Authority to Make Agreements....................................... 29
Financial Statements............................................... 29
11. How Can I Make Inquiries?.......................................... 29
12. Additional Information About Sage Life Assurance of America, Inc... 30
History and Business............................................... 30
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 32
Compensation....................................................... 38

Table Of Contents Of The Statement Of Additional Information............ 51

Appendix A.............................................................. A-1

Appendix B.............................................................. B-1

Appendix C.............................................................. C-1
</TABLE>

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

INDEX OF TERMS

We 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
with special meanings. We define the 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 your Variable
Account Value and Fixed Account Value.

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 regular trading, 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.

Expiration Date--The Expiration Date is the last day in a Guarantee Period.

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.

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

General Account--An account that 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 regular income
payments to begin.

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

1
<PAGE>

Market Value Adjustment--A Market Value Adjustment is a positive or negative
adjustment that ordinarily applies 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 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 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.......................................................... None
Maximum Transfer Charge(/1/)
First 12 transfers in a Contract Year..................................... $ 0
After 12th transfer in a Contract Year.................................... $25
Annual Administration Charge
Contract Years 1-7(/2/).................................................. $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 or apply your Account Value to
provide income payments. We refer to this as the Purchase Payment Tax Charge.

Variable Account Annual Expenses(/3/) (deducted monthly as a percentage of the
Variable Account Value)

<TABLE>
<CAPTION>
Contract Years
----------------
1-7 8+
------- -------
<S> <C> <C>
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%
======= =======
</TABLE>

Fund Charges. The fees and expenses for each of the Funds (as a percentage
of net assets) for the year ended December 31, 1999 are shown in the following
table. For more information on these fees and expenses, see the prospectuses
for the Trusts. 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 Total Expenses
Management Fees Other Expenses (after fee (before fee
(after fee (after waivers and waivers and
waiver, reimbursement, reimbursements, reimbursements,
Fund as applicable) as applicable) as applicable) as applicable)
---- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
THE UNIVERSAL
INSTITUTIONAL FUNDS,
INC.:
The Global Equity
Portfolio............. 0.47(6)% 0.68(6)% 1.15(6)% N/A
The Mid Cap Value
Portfolio............. 0.43(6) 0.62(6) 1.05(6) N/A
The Value Portfolio.... 0.18(6) 0.67(6) 0.85(6) N/A
OPPENHEIMER VARIABLE
ACCOUNT FUNDS:
Oppenheimer Bond
Fund/VA............... 0.72 0.01 0.73 N/A
Oppenheimer Capital
Appreciation Fund/VA.. 0.68 0.02 0.70 N/A
Oppenheimer Small Cap
Growth Fund/VA........ 0.65 0.59 1.34 N/A
SAGE LIFE INVESTMENT
TRUST:
EAFE(R) Equity Index
Fund*................. 0.73(7) 0.17(7) 0.90(7) 1.07%
S&P 500 Equity Index
Fund**................ 0.38(7) 0.17(7) 0.55(7) 0.72
Money Market Fund...... 0.48(7) 0.17(7) 0.65(7) 0.82
T. ROWE PRICE EQUITY
SERIES, INC.:
T. Rowe Price Equity
Income Portfolio...... 0.85(8) 0.00 0.85 N/A
T. Rowe Price Mid-Cap
Growth Portfolio...... 0.85(8) 0.00 0.85 N/A
T. Rowe Price Personal
Strategy Balanced
Portfolio............. 0.90(8) 0.00 0.90 N/A
</TABLE>
- --------
(1) Currently, we do not assess a transfer charge.
(2) In some states, the charge is $30. We waive the Annual Administration
Charge if the Account Value is at least $50,000 on the date of deduction.
(3) On and after the Income Date we call the Asset-Based Charges Variable
Sub-Account Charges and deduct them on a daily basis. See "What Are The
Expenses Under A Contract?"
(4) 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 1999 would have been: Colonial
High Yield Securities Fund, Variable Series 0.60%, 1.28%, 1.88%; and
Colonial Small Cap Value Fund, Variable Series 0.80%, 3.66% and 4.46%.
(5) Without fee waivers and expense reimbursements, the management fees, the
other expenses, and total expenses for each of the following MFS Variable
Insurance Trust Funds during 1999 would have been: MFS Capital
Opportunity Series 0.75%, 0.27% and 1.02%; and MFS High Income Series
0.75%, 0.22%, and 0.97%. In addition, each Fund has an expense offset
arrangement which reduces the Fund's custodian fee based upon the amount
of cash maintained by the Fund with its custodian and dividend disbursing
agent. Each Fund may enter into such arrangements and directed brokerage
arrangements, which would also have the effect of reducing Fund expenses.
"Other Expenses" do not take into account these expense reductions, and
are therefore higher than the actual expenses of the Fund. Had these fee
reductions been taken into account, "Total Expenses (after fee waivers
and reimbursements, as applicable)" would be lower and would equal: MFS
Growth with Income Series--0.87%; MFS High Income Series--0.90%; MFS
Research Series--0.85%; MFS Total Return Series--0.89%; and MFS Capital
Opportunities Series--0.90%.
(6) Without fee waivers and expense reimbursements, the management fees, the
other expenses, and total expenses for each of the following The
Universal Institutional Funds, Inc. Funds during 1999 would have been:
Global Equity Portfolio 0.80%, 0.68%, and 1.48%; Mid Cap Value Portfolio
0.75%, 0.62%, and 1.37%; and Value Portfolio 0.55%, 0.67%, and 1.22%.
(7) Without fee waivers and expense reimbursements, the management fees, the
other expenses, and total expenses for each of the following Sage Life
Investment Trust funds during 1999 would have been: EAFE(R) Equity Index
Fund 1.07%; S&P 500 Equity Index Fund 0.72%; and Money Market Fund 0.82%.
In addition, a Rule 12b-1 Plan (the "Plan") has been adopted by each
Fund, pursuant to which up to 0.25% may be deducted from Fund assets. No
Plan payments were made during 1999, and no payments will be made under
the plan prior to May 1, 2001.
(8) For each of the portfolios in the T. Rowe Price Equity Series, management
fees include operating expenses.
* 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 & Poor's makes no representation regarding the advisability of
investing in the Fund.

4
<PAGE>

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, and we
assume that the fee waivers and reimbursements shown above will continue. 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 $50,000, 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,
however, we currently do not deduct the transfer charge. 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.

<TABLE>
<CAPTION>
If you remain in your Contract
or you annuitize at the end of
each time period
-------------------------------
Fund 1 Year 3 Years 5 Years 10 Years
- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Government Securities Fund.......... $24 $75 $131 $298
AIM V.I. Growth and Income Fund.............. 22 70 123 280
AIM V.I. International Equity Fund........... 24 77 135 307
AIM V.I. Value Fund.......................... 22 69 122 278
THE ALGER AMERICAN FUND:
Alger American MidCap Growth Portfolio....... 23 72 127 289
Alger American Income and Growth Portfolio... 22 69 120 271
Alger American Small Capitalization
Portfolio................................... 24 75 131 298
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities Fund, Variable
Series...................................... 23 72 125 284
Colonial Small Cap Value Fund, Variable
Series...................................... 25 78 136 309
Colonial Strategic Income Fund, Variable
Series...................................... 22 69 122 278
Colonial U.S. Growth and Income Fund,
Variable Series............................. 23 74 129 294
Liberty All-Star Equity Fund, Variable
Series...................................... 24 76 133 303
Newport Tiger Fund, Variable Series.......... 27 84 148 338
Stein Roe Global Utilities Fund, Variable
Series...................................... 22 70 123 280
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock Fund, Variable
Series...................................... 21 66 117 266
Stein Roe Balanced Fund, Variable Series..... 21 66 115 261
MFS(R) VARIABLE INSURANCE TRUSTSM:
MFS Growth With Income Series................ 23 74 129 294
MFS High Income Series....................... 24 75 131 298
MFS Research Series.......................... 23 73 128 292
MFS Total Return Series...................... 24 75 131 298
MFS Capital Opportunities Series............. 24 75 131 298
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
The Global Equity Portfolio.................. 26 82 144 329
The Mid Cap Value Portfolio.................. 25 79 139 316
The Value Portfolio.......................... 23 72 127 289
</TABLE>

5
<PAGE>

<TABLE>
<CAPTION>
If you remain in your Contract
or you annuitize at the end of
each time period
-------------------------------
Fund 1 Year 3 Years 5 Years 10 Years
- ---- ------ ------- ------- --------
<S> <C> <C> <C> <C>
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund/VA..................... $22 $69 $121 $275
Oppenheimer Capital Appreciation Fund/VA..... 22 69 120 271
Oppenheimer Small Cap Growth Fund/VA......... 28 88 155 354
SAGE LIFE INVESTMENT TRUST:
EAFE(R) Equity Index Fund.................... 24 75 131 298
S&P 500 Equity Index Fund.................... 20 63 110 252
Money Market Fund............................ 21 66 116 265
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity Income Portfolio........ 23 72 127 289
T. Rowe Price Mid-Cap Growth Portfolio....... 23 72 127 289
T. Rowe Price Personal Strategy Balanced
Portfolio................................... 24 75 131 298
</TABLE>

No information about Accumulation Unit Values is provided because, as of the
date of this Prospectus, we have not begun to market the Contracts.

1. What Are The Contracts?

The Contracts are flexible payment deferred combination fixed and variable
annuity Contracts. They are designed for use in your long-term financial and
retirement planning; and 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. However, if you would like to purchase a Contract
in connection with a tax-qualified retirement plan, please carefully consider
the costs and benefits of the Contract (including income payments) before your
purchase since the tax-qualified retirement plan itself provides for tax-
sheltered growth. See "How Will My Contract Be Taxed?" The Contracts may not
be available in all states or in all markets. Your Contract may differ from
the descriptions below because of the requirements of the state where we
issued your Contract. Generally Contracts purchased after May 1, 2000 will
have the provisions described in this Prospectus. However, in certain states,
the provisions described in Appendix C will apply. Please contact our Customer
Service Center to see if these provisions apply to your Contract.

Your Options. 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

6
<PAGE>

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."

Transfers. Subject to certain conditions, 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?

Your Choices. You have several choices to make concerning your Income
Payments. First, 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. Then, 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 before the Income Date, and you must have at least $5,000 of
Account Value to apply to a variable or fixed income plan.

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.

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.

Income Payment Amounts. 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 person you designate. 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

7
<PAGE>

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 2.5% or 6%; if you do not select a
rate, we will apply the 2.5% 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 retirement 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 minimum initial purchase payment of $25,000.

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 Your 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 Asset-Based Charges and Purchase Payment
Tax 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 you the greater of your Account Value plus the Asset-Based
Charges and Purchase Payment Tax Charges we have deducted or 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 $1,000 or more (a lesser minimum amount may apply to Qualified
Contracts; contact our Customer Service Center) at any time before the Income
Date, subject to the following conditions. We will accept additional purchase
payments as shown in the chart below:

<TABLE>
<CAPTION>
Restrictions on
Acceptance of Additional
Contract Type Purchase Payments
------------- ------------------------
<S> <C>
Non-Qualified Contract................................ Accepted until the
earlier of the year in
which you attain age 85
or the year in which the
Annuitant attains age
85.
Qualified Contract.................................... Accepted 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.
</TABLE>
8
<PAGE>

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.

When We May Cancel Your Contract. 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 initial and additional purchase payments 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 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

AIM V.I. Government Securities Fund. This Fund seeks to achieve a high level
of 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 Advisers, Inc. advises the AIM Variable Insurance Funds.

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THE ALGER AMERICAN FUND

Alger American MidCap Growth Portfolio. This Fund seeks long-term capital
appreciation. It focuses on midsize companies with promising growth potential.
Under normal circumstances, the portfolio invests primarily in the equity
securities of companies having a market capitalization within the range of
companies in the S&P MidCap 400 Index.

Alger American Income and Growth Portfolio. This Fund primarily seeks to
provide a high level of dividend income; its secondary goal is to provide
capital appreciation. The Portfolio invests in dividend paying equity
securities, such as common or preferred stocks, preferably those which the
Manager believes also offer opportunities for capital appreciation.

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

Fred Alger Management, Inc. advises The Alger American Fund.

LIBERTY VARIABLE INVESTMENT TRUST

Colonial High Yield Securities Fund, Variable Series. This Fund seeks
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. This Fund seeks long-term
growth by investing primarily in smaller capitalization equity securities.

Colonial Strategic Income Fund, Variable Series. 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. Growth and Income Fund, Variable Series. This Fund seeks long-
term growth and income by investing primarily in large capitalization equity
securities. Up to 10% of its assets may be invested in debt securities.

Liberty All-Star Equity Fund, Variable Series. 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. 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, The People's Republic of China and the Philippines).

Stein Roe Global Utilities Fund, Variable Series. This Fund seeks current
income and long-term growth of capital by investing primarily in U.S. and
foreign securities of utility companies.

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

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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 TRUSTSM

MFS Growth with Income Series. This Fund seeks long-term growth of capital
and income. The Fund invests, under normal market conditions, at least 65% of
its total assets in common stock and related securities, such as preferred
stocks, convertible securities and depositary receipts for those securities.
These securities may be listed on a securities exchange or traded in the over-
the-counter markets. While the Fund may invest in companies of any size, the
Fund generally focuses on companies with larger market capitalizations that
the Fund's adviser believes have sustainable growth prospects and attractive
valuations based on current and expected earnings or cash flow.

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. The Fund invests, under
normal market conditions, at least 80% of its total assets in high yield fixed
income securities. Fixed income securities offering the high current income
sought by the series generally are lower rated bonds (junk bonds).

MFS Research Series. This Fund seeks to provide long-term growth of capital
and future income. The Fund invests, under normal market conditions, at least
80% of its total assets in common stocks and related securities, such as
preferred stocks, convertible securities and depositary receipts. The Fund
focuses on companies that the Fund's adviser believes have favorable prospects
for long-term growth, attractive valuations based on current and expected
earnings or cash flow, dominant or growing market share and superior
management.

MFS Total Return Series. This Fund primarily seeks to obtain above-average
income (compared to a portfolio entirely invested in equity securities)
consistent with prudent employment of capital; its secondary objective is to
take advantage of opportunities for growth of capital and income since many
securities offering a better than average yield may also possess growth
potential. The Fund is a "balanced fund," and invests in a combination of
equity and fixed income securities. Under normal market conditions, the Fund
invests (i) at least 40%, but not more than 75%, of its net assets in common
stocks and related securities (referred to as equity securities), such as
preferred stocks, bonds, warrants or rights convertible into stock, and
depositary receipts for those securities; and (ii) at least 25% of its net
assets in non-convertible fixed income securities.

MFS Capital Opportunities Series. This Fund seeks capital appreciation. The
Fund invests, under normal market conditions, at least 65% of its total assets
in common stocks and related securities, such as preferred stocks, convertible
securities and depositary receipts for those securities. The Fund focuses on
companies which the Fund's adviser believes have favorable growth prospects
and attractive valuations based on current and expected earnings or cash flow.

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

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THE UNIVERSAL INSTITUTIONAL FUNDS, INC.

The 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.

The Mid Cap Value Portfolio. This Fund seeks above-average total return over
a market cycle of three to five years by investing primarily in common stocks
of companies with equity capitalizations in the range of companies included in
the S&P MidCap 400 Index (currently $500 million to $6 billion).

The Value Portfolio. This Fund seeks above-average return over a market
cycle of three to five years by investing primarily in a portfolio of common
stocks and other equity securities of companies with equity capitalization
greater than $2.5 billion 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 Mid Cap Value
Portfolio and The 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. 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 invests mainly in securities of "growth type" companies with market
capitalizations of less than $1 billion.

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.

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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.

The names, 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 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 for administrative services we provide. The fee is ordinarily based upon
an annual percentage of up to.25% 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.

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. 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 DCA Fixed Sub-Accounts for our Dollar-Cost
Averaging Program.

How we determine the Guaranteed Interest Rate. We have no specific formula
for establishing the Guaranteed Interest Rates for the different Guarantee

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<PAGE>

Periods. Our determination 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 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.

Guarantee Periods. 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 may offer different Guarantee Periods with special Guaranteed Interest
Rates for the DCA Fixed Sub-Accounts. In addition, we may offer special
Guaranteed Interest Rates for new purchase payments allocated to the Fixed
Sub-Accounts.

We will notify you of your renewal options at least thirty days before each
Expiration Date of your Fixed Sub-Accounts. Currently, 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: (l) the
current Index Rate for a period equal to the time remaining in the Guarantee
Period, and (2) the Index

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<PAGE>

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.

-- 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
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.

-- 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.

A Market Value Adjustment will not be applied to any amounts payable upon
death or cancellation during the free-look period.

We will compute the Market Value Adjustment by multiplying the factor below
by the total amount 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 Maryland, 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)/(l+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. In Washington,
we will not assess the Market Value Adjustment because of state insurance
law requirements. Because of these requirements, not all Guarantee Periods
are available. Contact our Customer Service Center for available Guarantee
Periods.

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 the Free Look Period ends.
See "What Are My Investment Options?" 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

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<PAGE>

in that Sub-Account. If a transfer would reduce the Account Value remaining in
a Sub-Account below $250, we will treat your transfer request as a request to
transfer the entire amount.

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.

In addition, we reserve the right to restrict transfers:

-- if any of the Variable Sub-Accounts that would be affected by the
transfer is unable to purchase or redeem shares of the Fund in which the
Sub-Account invests; or

-- if the transfer results in more than one trade involving the same Sub-
Account within a 30-day period; or

-- if the transfer would adversely affect Accumulation Unit Values (which
may occur if the transfer would affect one percent or more of the
relevant Fund's total assets).

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 reserve the right to discontinue permitting 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 use reasonable 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.

We also have a form to allow 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.

In addition to telephone transactions, we expect to be able to offer all of
these transactions via the Internet in the second quarter of 2000. We will
send Owners information about our website and transactions that may be made
through it.

Third Party Transfers. As a general rule and as a convenience to you, we
allow a third party the right to make transfers on your behalf. However, when
the same third party possesses the right to make transfers on behalf of 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

16
<PAGE>

believe that such simultaneous transfers made by 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 Owners or third parties holding the right to
make transfers on behalf of multiple parties, we may refuse to honor third
party transfers and have instituted or will institute procedures to ensure
that the transfer requests that we receive have, in fact, been made by the
Owners in whose names they are submitted. However, our procedures will not
prevent you from making your own transfer requests.

Transfer Programs

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.

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. Because interest 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 $100 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. If that date is not a
Business Day, 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, restrictions may apply.

Once elected, dollar-cost averaging remains in effect until:

-- the Income Date;

-- you surrender the Contract;

-- the value of the Sub-Account from which transfers are being made is
depleted; or

-- you cancel the program by written request.

If you cancel dollar-cost averaging from a DCA Fixed Sub-Account before the
end of the selected Guarantee 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. A transfer under this program is not a transfer for purposes of
assessing a transfer charge. We reserve the right to discontinue 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. An optional asset allocation program is available
if you do not wish to make your own 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.

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.

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<PAGE>

From time to time the models are reviewed. It may be found that allocation
percentages 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, and you may discontinue your
participation in this program by contacting our Customer Service Center. We
reserve the right to cancel the asset allocation 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. A transfer under this program is not
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.

Values Under Your Contract

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, less any applicable annual administration charge and any
applicable Purchase Payment Tax Charge.

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.

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<PAGE>

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:

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

(2) 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; plus
or minus

(3) 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 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;

-- administration of the income plans 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, the
payment of sales expenses.

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<PAGE>

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 or eliminations 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,
distributors, or service providers of ours. Reductions or eliminations in
Contract charges will not be unfairly discriminatory against any person.
Please contact our Customer Service Center for more information about these
cost reductions and eliminations.

Surrender Charge

None! There are no surrender charges under the Contracts.

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. In some states the charge is $30, and in some states it
is deducted only from your Account Value in the Variable Sub-Accounts.

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. This charge is at cost with no profit to us.
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. On
and 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

We will deduct any state or local premium tax that we incur from your
Account Value. We reserve

20
<PAGE>

the right to defer the collection of this charge and deduct it against your
Account Value when you surrender your Contract or begin receiving regular
income payments. This tax charge currently ranges from 0% to 3.0% depending
upon the state or locality.

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 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 6.25%). 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 discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax adviser. No
attempt is made to consider any applicable state tax or other tax laws, or to
address any federal estate, or state and local estate, inheritance, and other
tax consequences of ownership or receipt of distributions under a Contract.

When you invest in an annuity contract, you usually do not pay taxes on your
investment gains until you withdraw the money--generally for retirement
purposes. If you invest in a variable annuity as part of a pension plan or
employer-sponsored retirement program, your contract is called a Qualified
Contract. If your annuity is independent of any formal retirement or pension
plan, it is termed a Non-Qualified Contract.

Taxation of Non-Qualified Contracts

Non-Natural Person. A Non-Qualified Contract that is owned by a non-natural
person (such as a corporation or a trust) is generally not treated as an
annuity contract for tax purposes. There are some exceptions to this rule and
a prospective owner that is not a natural person should discuss these with a
tax adviser. The discussion in this section assumes that the Contract is owned
by a natural person.

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

Special Note on Withdrawals. Please read the following carefully and consult
with your tax adviser on these and other possible tax consequences before
making a withdrawal.

-- 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.

-- 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 income payout option, 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

21
<PAGE>

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.

Penalty Tax on Certain Withdrawals. If you make a withdrawal from or
surrender a Non-Qualified Contract, you may be subject to a federal tax
penalty equal to ten percent of the amount treated as income. However, there
usually is no penalty on distributions that are:

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

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

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

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

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

Income Payments. Although tax consequences may vary depending on the payout
option elected under an annuity contract, a portion of each income payment is
generally not taxed and the remainder is taxed as ordinary income. The non-
taxable portion of an income payment is generally determined in a manner that
is designed to allow you to recover your investment in the contract ratably on
a tax-free basis over the expected stream of 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. Generally, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a surrender of
the Contract, or (ii) if distributed under a payout option, they are taxed in
the same way as annuity payments.

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

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

Further Information. We believe that the contracts will qualify as annuity
contracts for federal income tax purposes and the above discussion is based on
that assumption. Further details can be found in the Statement of Additional
Information under the heading "Tax Status of the Contracts."

Taxation of a Qualified Contract

Qualified Contracts are subject to some of the same tax rules as Non-
Qualified Contracts, but there are a number of significant differences. Some
of these differences and other important rules are highlighted here and in the
Statement of Additional Information, but please keep in mind that this
discussion provides only general information about the tax consequences of
Qualified Contracts, and Owners, Annuitants, and Beneficiaries should consult
their tax advisers for more specific information.

Types of Qualified Contracts. A Qualified Contract can be used in connection
with the following types of retirement plans:

-- Individual Retirement Annuity (IRA)--permits eligible individuals to
make non-

22
<PAGE>

deductible or deductible annual contributions of up to $2,000.

-- SIMPLE IRA--permits certain small employers to establish a plan allowing
employees to make annual pre-tax contributions of up to $6,000, with an
employer contribution or match.

-- Roth IRA--allows eligible individuals to make after-tax contributions of
up to $2,000, with no tax on qualifying distributions.

The form of the Qualified Contract and its IRA rider have been approved by
the IRS for use as an IRA. IRS approval does not relate to the merits of the
IRA as an investment.

Contributions and Distributions. Annual contributions to Qualified Contracts
are limited by tax rules and the terms of the retirement plans. For IRAs and
SIMPLE IRAs, minimum distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner reaches
age 70 1/2. Roth IRAs do not require distributions while the Owner is alive.
Upon the Owner's death, minimum distributions are required from IRAs, SIMPLE
IRAs, and Roth IRAs. Penalty taxes may apply to distributions made before age
59 1/2 and to certain early distributions from Roth IRAs. See "Qualified
Contracts" in the Statement of Additional Information for more information on
contributions and distributions.

Distributions from Qualified Contracts generally are subject to withholding
for the Owner's federal income tax liability. The Owner will be provided the
opportunity to elect not to have tax withheld from distributions.

Terms of the Plan. Your rights under a Qualified Contract are also subject
to the terms of the retirement plan itself, although we will not be bound by
the terms of the plan if they contradict the Qualified Contract.

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

Possible Tax Law Changes

Although the likelihood of legislative changes is uncertain, there is always
the possibility that the tax treatment of the Contract could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Contract. We have the right to modify the
Contract in response to legislative changes that could otherwise diminish the
favorable tax treatment that annuity contract owners currently receive.

7. How Do I Access My Money?

You can partially withdraw from or surrender 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 while the Annuitant is still living. (If you have elected the
"payments for a specified period 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

23
<PAGE>

the withdrawal from your Account Value in the Sub-Accounts on a pro-rata
basis.

A partial withdrawal will reduce your death benefit proportionately by the
amount your withdrawal (including any applicable Market Value Adjustment)
reduces Account Value and may be subject to federal income tax. See "How Will
My Contract Be Taxed?" 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. 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 (other than a Roth 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 are, however, ultimately responsible for
determining that IRA distributions comply with applicable tax code rules.

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.

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

24
<PAGE>

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.

Yield

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 over a 12-month period.

Total Return

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.
Standard 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, but excluding any deductions for purchase
payment tax charges. Standard 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. 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.

Performance/Comparisons

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 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

25
<PAGE>

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 a death benefit for your Beneficiary if you die
before the Income Date.

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 proportionately by the amount that any prior withdrawal
(including any associated Market Value Adjustment incurred) reduced
Amount Value; 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
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. We will consider any rider benefits payable upon
death of the Owner (or Annuitant, if no natural Owner) part of the death
benefit.

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:

(1) If there are joint Owners, the surviving Owner becomes the new Owner.
Otherwise, the Beneficiary becomes the new Owner.

(2) 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.

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
26
<PAGE>

Owner's death. These distributions, if from the Fixed Account, are subject to
our Market Value Adjustment rules. In addition, no additional purchase
payments may be applied to the Contract.

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 Account
Value will be the Death Benefit that otherwise would be paid in a lump sum as
of the Business Day we receive proof of death, and the surviving spouse may
make additional purchase payments under the Contract. 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 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.

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, The Alger American Fund, Liberty Variable Investment Trust, SteinRoe
Variable Investment Trust, MFS(R) Variable Investment TrustSM, The Universal
Institutional 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

27
<PAGE>

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.

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 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.

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 insurance 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. However, 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.

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 (the shares of the new Fund may have higher fees and charges
than the Fund it replaced, and not all Funds may be available to all classes
of Contracts); 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.

28
<PAGE>

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

The financial statements of Sage Life Assurance of America, Inc. at December
31, 1999 and 1998, and for each of the three years in the period ended
December 31, 1999, and the financial statements of The Sage Variable Annuity
Account A at December 31, 1999 and for the period from February 19, 1999
(commencement of operations) through December 31, 1999, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing
elsewhere herein, and are included in reliance upon such reports given upon
the authority of such firm 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 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.

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.

Financial Statements

Financial statements are presented in the Statement of Additional
Information for the Variable Account as of December 31, 1999 and from its
commencement of operations on February 19, 1999.

We included the audited financial statements for Sage Life as of December
31, 1999 and 1998 and for each of the three years in the period ended December
31, 1999 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 contacting one of our
authorized registered representatives or by writing or calling us at our
Customer Service Center.

29
<PAGE>

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 all but five 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.

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 Limited ("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.

On December 1, 1998, Sage Group entered into a letter of intent with Swiss
Re Life and Health America, Inc. ("Swiss Re"). Swiss Re is an indirect
subsidiary of Swiss Reinsurance Company, Switzerland, one of the world's
largest reinsurance groups. This agreement contemplates two transactions: (1)
that Sage Life will enter into a reinsurance agreement with Swiss Re or its
affiliate, Life Reassurance Corporation of America ("LRCA"); and (2) that
Swiss Re or LRCA would make an investment in Sage Life Holdings, our immediate
parent. The reinsurance agreement has not been finalized. However, we
anticipate that we will enter into the reinsurance agreement with LRCA by the
end of the second quarter of 2000. As to the investment in Sage Life Holdings,
on December 31, 1998, LRCA did invest $12.5 million in non-voting, non-
redeemable, cumulative preferred stock of Sage Life Holdings, which at that
point became our immediate parent and a wholly-owned subsidiary of Sage
Insurance Group. We anticipate that, during the second quarter of 2000, LRCA
will exchange part of its preferred stock for a voting interest of not more
that 9.9% in Sage Life Holdings with a retroactive effective date of April
1999. The arrangements contemplated by the agreement may be subject to
regulatory approval.

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<PAGE>

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, 1998 and 1999 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, 1999,
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 Year ended
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Income Statement Data:
Revenues:
Net investment income................ $ 1,290 $ 1,244 $ 989
Administrative service fees.......... 38 -- --
Annuity charges and fees............. 1 -- --
------- ------- -------
Total revenues..................... 1,329 1,244 989
======= ======= =======
Benefits and Expenses:
Salaries and benefits expenses....... 972 742 497
Development expenses................. 3,828 -- --
Insurance expenses and taxes......... 721 522 518
Amortization expenses................ 235 549 326
------- ------- -------
Total benefits and expenses........ 5,756 1,813 1,341
======= ======= =======
Loss before cumulative effect
adjustment............................ (4,427) (569) (352)
Cumulative effect adjustment........... (4,269) -- --
------- ------- -------
Net loss............................. $(8,696) $ (569) $ (352)
======= ======= =======
Balance Sheet Data:
Total Assets......................... $31,737 $36,542 $36,689
Total Liabilities.................... $ 234 $ 70 $ 3,486
------- ------- -------
Stockholder's Equity................... $31,503 $36,472 $33,203
======= ======= =======
</TABLE>
31
<PAGE>

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

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, and, on a limited basis, began those
activities in 1999. (Before the acquisition of the 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. During February 1999, we began to market, on a
limited basis, our new variable insurance products. Our initial marketing
focus has been to distribute the Contracts through banks and third-party
marketing organizations working closely with 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 loss for 1999 was $8.7 million, compared to losses of $.6 million in
1998 and $.4 million in 1997. The large increase in losses for 1999 is due to
the adoption of Statement of Position 98-5, "Reporting on the Costs of Start-
Up Activities" (SOP 98-5). SOP 98-5 required the Company to charge to expense
all start-up costs incurred, as well as write-off any unamortized capitalized
development costs on January 1, 1999. The development costs incurred during
1999 of $3.8 million and the write-off of unamortized capitalized development
costs of $4.3 million produced an additional $8.1 million of losses over the
prior year results.

As the Company continued in the development phase during most of 1999,
revenues continued to be derived primarily from investment income earned on
Company investments. Net investment income earned during 1999 was $1.3
million, compared to $1.2 million and $1.0 million in 1998 and 1997,
respectively. The Company's investments consist entirely of U.S. Government
securities and highly rated corporate bonds. Investment yields of 5.4%, 5.1%
and 4.9% were earned in 1999, 1998 and 1997, respectively. The Company's other
sources of income are administrative service fees and Contract charges and
fees. Administrative service fees are asset-based charges that the Company
receives on Contract Owner funds invested with various investment fund
managers. Contract charges and fees are both asset-based fees and flat annual
per-Contract fees charged to each Contract Owner. As the Company broadens its
distribution of products during 2000, these Contract charges and fees are
anticipated to become a major source of revenue. The Contract charges and fees
earned during 1999 were minimal as there were a very limited number of
Contracts issued during the year.

With the adoption of SOP 98-5, the Company's primary expenses during 1999
were those non-recurring expenses incurred in the development of products and
systems. Expenses incurred for development costs in 1999 were $3.8 million.
Prior to 1999, these expenses were capitalized and amortized over fifteen
years. As these expenses are no longer amortized, amortization expenses
decreased to $.2 million in 1999 from $.5 million in 1998. The amortization
expenses for 1999 relate entirely to the goodwill associated with the purchase
of the Company. Salaries and benefits expenses for 1999 were $1.0 million,
compared to $.7 million and $.5 million in 1998 and 1997, respectively.
Insurance expenses and taxes were $.2 million, $.5 million and

32
<PAGE>

$.3 million in 1999, 1998 1997, respectively. These overhead expenses include
rent, professional fees, office expenses and statutory filing fees.

The Company has no federal income tax expenses for each of the three years
ended December 31, 1999. The Company has a net operating loss carryforward of
approximately $10.3 million at the end of 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 2000, we expect our cash needs to substantially increase due to our
expanded underwriting and marketing activities. We still anticipate that we
will be unable to meet all of our liquidity requirements in the coming year
without additional capital. However, Sage Insurance Group will continue to
provide capital to us for our non-recurring costs associated with new products
and business development during the year. In addition, as discussed
previously, LRCA, an indirect subsidiary of Swiss Reinsurance Corporation, has
made an equity investment in our parent company that will provide an
additional source of funds to us for new business expenses.

We also expect to enter into a coinsurance reinsurance arrangement with LRCA
that will provide an additional source of cash for operations. Our future
marketing efforts could be hampered in the unlikely event that Swiss Re, LRCA,
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; and

--Combination fixed and variable life insurance products.

Reinsurance

As discussed above in Holding Company Structure and Background, we expect to
enter into a coinsurance reinsurance arrangement with LRCA, pursuant to which
LRCA will reinsure a significant portion of our liabilities under our variable
insurance contracts with a retroactive effective date of February 1, 1999.
This arrangement will provide additional capacity for growth of our variable
insurance business.

In addition, we have entered into a reinsurance arrangement that reinsures
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. At December 31, 1999 we held $93 thousand of
reserves in our Separate Account. 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.

33
<PAGE>

Investments

Our General Account cash and invested assets of $24.1 million, $25.5 million
and $25.3 million at December 31, 1999, 1998 and 1997, respectively, was
invested 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 in 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, 1999 we
could not pay a dividend to Sage Life Holdings without prior approval from
state regulatory authorities as we currently do not have earned surplus. We
did not pay a dividend to Sage Life Holdings.

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.

Transactions with Sage Insurance Group, Inc

In 1997, the Company entered into a Cost Sharing Agreement with Sage
Insurance Group, the parent of Sage Life Holdings, 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 $.9 million and $.2 million from Sage
Insurance Group for the years ended December 31, 1999 and 1998, respectively.
The Company paid Sage Insurance Group $.1 million for the period ended
December 31, 1997. At December 31, 1999 the amount due from Sage Insurance
Group relating to this agreement was $.6 million. There was no amount due at
December 31, 1998. In addition, Sage Insurance Group provides funds to the
Company to meet various operating expenses. As these amounts are paid back to
Sage Insurance Group at the end of each quarter, no amounts remained payable
at December 31, 1999 and 1998.

All non-recurring development costs of the Company are paid by Sage
Insurance Group or its parent, Sage Group, and treated as capital
contributions. The amount of development costs paid for by affiliated
companies at December 31, 1999, 1998 and 1997 were $7.1 million, $3.3 million
and $1.5 million, respectively.

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. The Company had 27, 14 and
8 full time employees at December 31, 1999, 1998, and 1997, respectively.

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

34
<PAGE>

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-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,

--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.

35
<PAGE>

DIRECTORS AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
Position held with the Other Principal Positions
Name (Age) Company/Year Commenced During Past Five Years
---------- ----------------------------- --------------------------
<C> <C> <S>
Ronald S. Scowby(/1/) Director, 1/97 to present; Chairman and Trustee, Sage
Age 61 Chairman, 2/98 to present Life Investment Trust,
7/98 to present; Director,
Sage Life Assurance
Company of New York, 5/98
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 12/99;
President, Chief Executive
Officer, Sage Life
Assurance of America Inc.,
1/97-2/98; Director, Sage
Distributors, Inc., 1/98
to 12/99; Director,
President, Chief Executive
Officer, Sage Management
Services (USA), Inc., 6/96
to 12/99; Owner, Sheldon
Scowby Resources 7/95-
6/96.
Robin I. Marsden(/1/) Director, 1/97 to present; Director and President,
Age 34 President and Chief Executive Sage Life (Bermuda) Ltd.,
Officer, 2/98 to present 1/2000 to present;
President and Trustee,
Sage Life Investment
Trust, 7/98 to present;
Director, Sage Life
Assurance Company of New
York, 5/98 to present;
Director, President, Sage
Advisors, Inc., 1/98 to
present; Director, Sage
Distributors, Inc., 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; and
Executive-Strategic
Developments, Sage Group
Ltd., 11/94 to 1/98.
H. Louis Shill(/2/) Director, 1/97 to present Director, Sage Life
Age 69 Assurance Company of New
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 to present Director, Sage Life
Age 47 Assurance Company of New
York, 5/98 to present;
Partner, Rogers & Wells,
1986 to present.
Richard D. Starr(/4/) Director, 1/97 to present Director, Sage Life
Age 55 Assurance Company of New
York, 5/98 to present;
President, First
Interstate Securities,
1/95 to 12/95; Chairman &
Chief Executive Officer,
Financial Institutions
Group, Inc., 10/78 to
present.
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
Other Principal
Position held with the Positions
Name (Age) Company/Year Commenced During Past Five Years
---------- ---------------------------------- ------------------------
<C> <C> <S>
Mitchell R. Katcher(/1/) Director, 12/97 to present; Senior Director, Chief
Age 46 Executive Vice President, Chief Financial Officer and
Financial Officer, Chief Actuary Chief Actuary, Sage Life
5/97 to present (Bermuda), Ltd., 1/2000
to present; Vice
President, Sage Life
Investment Trust, 7/98
to present; Director,
Sage Life Assurance
Company of New York,
5/98 to present;
Director, Treasurer,
Sage Advisors, Inc.,
1/98 to present;
Director, Sage
Distributors, Inc., 1/98
to present; Treasurer,
7/97 to present, Senior
Executive Vice
President, 12/97 to
present, Sage Insurance
Group, Inc.; Executive
Vice President, Golden
American Life Insurance
Company, 7/93-2/97.
Meyer Feldberg(/5/) Director, 1/2000 to present Dean/Professor, Columbia
Age 58 University Graduate
School of Business, 7/89
to present; Director,
1/2000 to present, Sage
Life Assurance Company
of New York and Sage
Insurance Group, Inc.
</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.
(5) Dr. Feldberg's principal business address is Columbia University Graduate
School of Business, Uris Hall, Room 101, 3022 Broadway, New York, NY
10027.

37
<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, 1999.

<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 $ 22,097
Chairman(/1/) 1998 $350,000 $100,000 $100,000
1999 $350,000 $100,000
Robin I. Marsden........................... 1998 $275,000 $100,000 $ 20,956
President and Chief Executive Officer(/1/) 1999 $322,500 $150,000
Mitchell R. Katcher........................ 1997 $114,583 $265,000
Senior Executive Vice President, Chief 1998 $250,000 $125,000 $ 19,037
Financial Officer and Chief Actuary(/1/) 1999 $268,750 $150,000
</TABLE>
- --------
(1) All salaries and bonuses are paid by Sage Insurance Group.

We pay outside directors $12,000 and $2,000 per meeting attended. (Dr.
Feldberg is paid $30,000 and $8,000 per meeting attended.) For meetings
attended in the year ended December 31, 1999, we paid each outside director
$20,000. (Dr. Feldberg attended no meetings in 1999; we paid Dr. Feldberg's
Year 2000 retainer of $30,000 in 1999.) 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.

38
<PAGE>

Audited Financial Statements

Sage Life Assurance of America, Inc.

Years ended December 31, 1999, 1998 and 1997
with Report of Independent Auditors

39
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

AUDITED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

CONTENTS

<TABLE>
<S> <C>
Report of Independent Auditors.............................................. 41

Audited Financial Statements
Balance Sheets.............................................................. 42
Statements of Operations.................................................... 43
Statements of Stockholder's Equity.......................................... 44
Statements of Cash Flows.................................................... 45
Notes to Financial Statements............................................... 46
</TABLE>

40
<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. as of December 31, 1999 and 1998, and the related statements of
operations, stockholder's equity and cash flows for each of the three years in
the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. 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. at December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally accepted in the
United States.

Stamford, CT
February 24, 2000

41
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31
------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at fair value
(amortized cost: 1999--$17,296,410 and 1998--
$12,967,022)....................................... $16,179,750 $12,992,917
Short-term investments.............................. 5,972,494 10,975,402
----------- -----------
Total investments.................................... 22,152,244 23,968,319
Cash and cash equivalents............................ 1,979,985 1,531,165
Accrued investment income............................ 226,234 203,425
Receivable from affiliates........................... 671,270 --
Deferred income taxes................................ 376,461 --
Goodwill............................................. 6,228,146 6,565,134
Development costs.................................... -- 4,269,488
Other assets......................................... 9,231 5,000
Separate account assets.............................. 93,009 --
----------- -----------
Total assets......................................... $31,736,580 $36,542,531
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued expenses.................................... $ 140,426 $ 61,670
Deferred income taxes............................... -- 8,804
Separate account liabilities........................ 93,009 --
----------- -----------
Total liabilities.................................... 233,435 70,474
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.......................... 39,351,096 34,875,727
Retained deficit.................................... (9,617,174) (920,760)
Accumulated other comprehensive (loss) income....... (730,777) 17,090
----------- -----------
Total stockholder's equity........................... 31,503,145 36,472,057
----------- -----------
Total liabilities and stockholder's equity........... $31,736,580 $36,542,531
=========== ===========
</TABLE>

See accompanying notes to financial statements.

42
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year ended December 31
-----------------------------------
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Revenues
Investment income........................ $ 1,290,196 $1,243,522 $ 989,494
Administrative service fees.............. 37,671 -- --
Policy charges and fees.................. 861 -- --
----------- ---------- ----------
Total revenues.......................... 1,328,728 1,243,522 989,494
Expenses
Salaries and benefits expenses........... 972,052 741,979 497,426
Development expenses..................... 3,827,887 -- --
Amortization expense..................... 234,468 548,818 325,406
General and administrative expenses...... 721,247 521,699 518,448
----------- ---------- ----------
Total expenses.......................... 5,755,654 1,812,496 1,341,280
Loss before cumulative effect
adjustment.............................. (4,426,926) (568,774) (351,786)
Cumulative effect adjustment for change
in accounting for development costs..... (4,269,488) -- --
----------- ---------- ----------
Net loss................................. $(8,696,414) $ (568,974) $ (351,786)
=========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

43
<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 (Loss) 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,
net of taxes........... $ 48,706 48,706
-----------
Comprehensive loss...... (303,080)
Additional capital
contributions.......... 15,500,000 15,500,000
---------- ----------- ----------- --------- -----------
Balance at January 1,
1998................... 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,
net of taxes........... (31,616) (31,616)
-----------
Comprehensive loss...... (600,590)
Additional capital
contributions.......... 3,870,219 3,870,219
---------- ----------- ----------- --------- -----------
Balance at December 31,
1998................... 2,500,000 34,875,727 (920,760) 17,090 36,472,057
Net loss................ (8,696,414) (8,696,414)
Change in unrealized
loss on investments,
net of taxes........... (747,867) (747,867)
-----------
Comprehensive loss...... (9,444,281)
Purchase price
adjustment............. (102,518) (102,518)
Additional capital
contributions.......... 4,577,887 4,577,887
---------- ----------- ----------- --------- -----------
Balance at December 31,
1999................... $2,500,000 $39,351,096 $(9,617,174) $(730,777) $31,503,145
========== =========== =========== ========= ===========
</TABLE>

See accompanying notes to financial statements.

44
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Operating activities
Net loss............................. $(8,696,414) $ (568,974) $ (351,786)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Amortization expense................ 234,468 548,818 325,406
Cumulative effect adjustment for
change in accounting for
development costs.................. 4,269,488 -- --
Changes in:
Accrued investment income.......... (22,809) (145,386) (29,638)
Receivable from affiliates......... (671,270) (128,425) 128,425
Other assets....................... (4,231) 6,443 (11,443)
Accrued expenses................... 78,756 (118,772) 116,216
----------- ------------ ------------
Net cash (used in) provided by
operating activities................. (4,812,012) (406,296) 177,180
Investing activities
Purchase of fixed maturity
securities.......................... (4,319,964) (10,295,783) --
Proceeds from sales, maturities and
repayments of fixed maturity
securities.......................... -- 849,153 42,941
Net sales of short-term investments.. 5,002,909 10,555,486 (15,507,987)
----------- ------------ ------------
Net cash provided by (used in)
investing activities................. 682,945 1,108,856 (15,465,046)
Financing activities
Development costs paid by parent..... 3,827,887 -- --
Capital contribution from the
parent.............................. 750,000 600,000 15,500,000
----------- ------------ ------------
Net cash provided by financing
activities........................... 4,577,887 600,000 15,500,000
----------- ------------ ------------
Increase in cash and cash
equivalents.......................... 448,820 1,302,560 212,134
Cash and cash equivalents at beginning
of year.............................. 1,531,165 228,605 16,471
----------- ------------ ------------
Cash and cash equivalents at end of
year................................. $ 1,979,985 $ 1,531,165 $ 228,605
=========== ============ ============
</TABLE>

See accompanying notes to financial statements.

45
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1999 AND 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

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

The Company is in the process of developing and preparing to market variable
annuity and variable life insurance products. The sale of these products began
on a limited basis in the first quarter of 1999. The Company has mutually
agreed to enter into a coinsurance reinsurance arrangement with Swiss Re Life
& Health America (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.

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.

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.

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.

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, 1999,
are carried at fair value, based on quoted market prices. 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 statements of
operations.

46
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Policy Liabilities

The Company has no policy liabilities in its General Account at December 31,
1999 and 1998. All policy liabilities are in the Separate Account and are
comprised of all payments received plus credited interest, less accumulated
policyholder charges, assessments and withdrawals related to annuities of a
nonguaranteed return nature.

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, 1999 and December 31,
1998 was $703,403 and $468,935, respectively.

Development Costs

Pursuant to the adoption of Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities", (SOP 98-5), the Company is required to charge
to expense all start-up costs incurred. In addition, the Company was required
to write-off any unamortized capitalized development costs on January 1, 1999.
Development costs incurred for the year ended December 31, 1999 charged to
expense were $3,827,887. The one time write-off of the unamortized capitalized
development costs was $4,269,488.

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.

Reclassifications

Certain reclassifications have been made to prior year's financial statement
amounts to conform to the 1999 presentation.

47
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

2. Investments

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

<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
1999
U.S. Government Obligations...... $ 9,260,132 $12,577 $ 641,663 $ 8,631,046
Corporate Obligations............ 8,036,278 -- 487,574 7,548,704
----------- ------- ---------- -----------
$17,296,410 $12,577 $1,129,237 $16,179,750
=========== ======= ========== ===========
1998
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>

The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1999 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 in one year or less................................ $ 2,550,942 $ 2,563,519
Due after one year through five years.................. 5,129,073 4,896,658
Due after five years through ten years................. 9,616,395 8,719,573
----------- -----------
Total.................................................. $17,296,410 $16,179,750
=========== ===========
</TABLE>

Investment income by major category of investment for the years ended December
31, 1999 and 1998 is summarized as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Bonds......................................... $ 907,068 $ 261,781 $ 255,778
Short-term investments........................ 438,951 787,873 720,556
Cash and cash equivalents..................... 22,416 239,700 49,035
---------- ---------- ----------
Total investment income....................... 1,368,435 1,289,354 1,025,369
Investment expenses........................... 78,239 45,832 35,875
---------- ---------- ----------
Net investment income......................... $1,290,196 $1,243,522 $ 989,494
========== ========== ==========
</TABLE>

At December 31, 1999 and 1998, investment securities with an amortized cost of
$6,602,056 and $6,678,745, respectively, and a fair value of $5,960,476 and
$6,623,770, 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 files a separate life insurance company Federal income tax return
and will continue to do so through the year 2001. Beginning in the year 2002,
the Company will be included in the consolidated Federal income tax return of
Sage Holdings (U.S.A.), Inc. and its subsidiaries.

48
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

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

<TABLE>
<CAPTION>
1999 1998 1997
----------- --------- ---------
<S> <C> <C> <C>
Pre-tax loss............................... $(8,696,414) $(568,974) $(351,786)
Application of the federal statutory tax
rate--34%................................. (2,956,781) (193,451) (119,607)
Change in valuation allowance.............. 2,907,523 193,451 119,532
Other...................................... 49,258 -- (75)
----------- --------- ---------
Total income tax provision................. $ -- $ -- $ --
=========== ========= =========
</TABLE>

Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................... $ 3,501,308 $ 1,967,528
Unrealized loss on depreciation of investments...... 376,461 --
----------- -----------
Total deferred tax assets............................ 3,877,769 1,967,528
Deferred tax liabilities:
Unrealized gain on appreciation of investments...... -- (8,804)
Amortization of goodwill and development costs...... (261,185) (1,634,928)
Other............................................... (19,617) (19,617)
----------- -----------
Total deferred tax liabilities....................... (280,802) (1,663,349)
Valuation allowance for deferred tax assets.......... (3,220,506) (312,983)
----------- -----------
Net deferred tax asset (liability)................... $ 376,461 $ (8,804)
=========== ===========
</TABLE>

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.

The Company has a separate company net operating loss carryforward of
approximately $10.3 million as of December 31, 1999, of which $4.7 million
expires in the year 2019, $3.7 million which expires in 2018 and $1.9 million
which expires in the year 2012.

4. Retained Deficit and Dividend Restrictions

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

<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net (loss) income.......................... $ (389,023) $ 27,002 $ 51,133
Surplus.................................... 23,473,747 23,109,097 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.

49
<PAGE>

SAGE LIFE ASSURANCE OF AMERICA, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

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 stockholders within five
business days after declaration and at least ten days prior to payment. At
December 31, 1999, the Company could not pay a dividend to SLHA without prior
approval from state regulatory authorities as the Company currently does not
have earned surplus.

5. Related Party Transactions

In 1997, the Company entered into a Cost Sharing Agreement with Sage Insurance
Group, Inc. (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 $903,757 and $151,348 from SIGI for the
years ended December 31, 1999 and 1998, respectively. The Company paid SIGI
$76,048 for the year ended December 31, 1997. At December 31, 1999 the amount
due from SIGI relating to this agreement was $594,432. There was no amount due
at December 31, 1998. In addition, SIGI provides funds to the Company to meet
various operating expenses. As these amounts are paid back to SIGI at the end
of each quarter, no amounts remained payable at December 31, 1999 and 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
cumulative amount of development costs paid for by affiliated companies at
December 31, 1999, 1998 and 1997 were $7,098,106, $3,270,219 and $1,504,558,
respectively.

6. Impact of Year 2000 (unaudited)

In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission
critical information technology and non-information technology systems and
believes those systems successfully responded to the Year 2000 date change.
The Company expenses related to this effort were not material. The Company is
not aware of any material problems resulting from Year 2000 issues, either
with its products, its internal systems, or the products and services of third
parties. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year 2000
to ensure that any latent Year 2000 matters that may arise are addressed
promptly.

50
<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>
<S> <C>
Assignment..................................................................

Change of Owner, Beneficiary or Annuitant...................................

Misstatement and Proof of Age, Sex or Survival..............................

Incontestability............................................................

Participation...............................................................

Beneficiary Designation.....................................................

Tax Status of the Contracts.................................................
Diversification Requirements..............................................
Owner Control.............................................................
Required Distribution from Non-Qualified Contracts........................

Qualified Contracts.........................................................
Taxation of Withdrawals...................................................
Individual Retirement Accounts (IRAs).....................................
SIMPLE IRAs...............................................................
Roth IRAs.................................................................

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

Income Payment Provisions...................................................
Amount of Fixed Income Payments...........................................
Amount of Variable Income Payments........................................
Income Units..............................................................
Income Unit Value.........................................................
Exchange of Income Units..................................................

Safekeeping of Account Assets...............................................

Legal Matters...............................................................

Other Information...........................................................

Financial Statements........................................................
</TABLE>

51
<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.

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 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 and no prior transfers or withdrawals affecting this Fixed Sub-
Account have been made.

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 and no prior transfers or withdrawals affecting this Fixed Sub-
Account have been made.

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 and no prior transfers or withdrawals affecting this Fixed Sub-
Account have been made.

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 and no prior transfers or withdrawals affecting
this Fixed Sub-Account have been made.

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)] - 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) (3) (4) (5)
Beginning Beginning of Month Dollar Cost Averaging Amount Dollar Interest 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>

APPENDIX C

Generally, Contracts purchased after May 1, 2000, will have the provisions
described in the Prospectus. However, in certain states the provisions
described in this Appendix will apply. Please contact our Customer Service
Center to see if these provisions apply to your Contract.

Variable Income Benefits

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. We currently allow assumed
investment rates of 3% and 6%. If you do not specify an assumed investment
rate, we will apply the 3.0% rate.

Transfer Restrictions

We may defer transfers to, from and among the Variable Sub-Accounts under
the same conditions that we delay paying proceeds. The additional transfer
restrictions relating to the affected Variable Sub-Accounts' ability to
purchase and redeem shares of a Fund, transfers involving the same Sub-
Account, and transfers that adversely affect Accumulation Unit Values do not
apply to your Contract.

Withdrawals

A partial withdrawal will reduce your death benefit and may be subject to
federal income tax and a Market Value Adjustment. See "What Are The Expenses
Under A Contract?" "How Will My Contact Be Taxed?" and "Does The Contract Have
A Death Benefit?"

Death Benefit

If any Owner dies before the Income Date, we will pay the Beneficiary the
greatest of the following:

. the Account Value determined as of the day we receive proof of death; or

. 100% of the sum of all purchase payments made under the Contract,
reduced by any prior withdrawals (including any associated Market Value
Adjustment incurred); or

. the Highest Anniversary Value.

(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
Market Value Adjustment incurred) taken since that Contract
Anniversary. (By proportionately, we take the percentage by which the
withdrawal decrease the Account Value and we reduce the sum of (1) and
(2) by that percentage.)

C-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
P.O. Box 290680
Wethersfield, CT 06129-0680

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

- ----------------------------------------
Name

- ----------------------------------------
Address

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