CANADA LIFE OF AMERICA VARIABLE ANNUITY ACCOUNT 1
485APOS, 1996-03-01
Previous: VA I SEPARATE ACCOUNT OF UNUM LIFE INS CO OF AMERICA, 485APOS, 1996-03-01
Next: FREEDOM INVESTMENT TRUST III, 497, 1996-03-01



<PAGE>   1
   
    As Filed with the Securities and Exchange Commission on March 1, 1996.
    

                                                      Registration No. 33--28889
                                                                        811-5817



                       Securities and Exchange Commission
                             Washington, D.C. 20549


                                    FORM N-4

           Registration Statement Under the Securities Act of 1933 X
                                                                   -
                          Pre-Effective Amendment No.
   
                        Post-Effective Amendment No. 10
                                                     --
    
                                     and/or
       Registration Statement Under the Investment Company Act of 1940 X
                                                                       -
   
                                Amendment No. 11
                                              --
    

               CANADA LIFE OF AMERICA VARIABLE ANNUITY ACCOUNT 1
                           (Exact Name of Registrant)

                    CANADA LIFE INSURANCE COMPANY OF AMERICA
                              (Name of Depositor)

                             330 University Avenue
                            Toronto, Canada M5G 1R8
              (Address of Depositor's Principal Executive Office)
                 Depositor's Telephone Number:  (416) 597-1456

                                 Roy W. Linden
                             330 University Avenue
                            Toronto, Canada M5G 1R8
                    (Name and Address of Agent for Service)

                                    Copy to:
                            Stephen E. Roth, Esquire
                         Sutherland, Asbill, & Brennan
                         1275 Pennsylvania Avenue, N.W.
                          Washington, D.C. 20004-2404


            It is proposed that this filing will become effective:

                  immediately upon filing pursuant to paragraph (b)
            --
   
                  on               pursuant to paragraph (b)
            --      --------------
    
                  60 days after filing pursuant to paragraph (a)(i)
            --
   
            X     on May 1, 1996 pursuant to paragraph (a)(i)
            --       -----------
    
                  75 days after filing pursuant to paragraph (a)(ii)
            --
                  on              pursuant to paragraph (a)(ii) of Rule 485
            --      --------------

            If appropriate check the following box:

                  this Post-Effective Amendment designates a new effective
            --    date for a new effective date for a previously filed
                  Post-Effective Amendment.

   
Pursuant to Rule 24f-2(a)(1) under the Investment Company Act of 1940, the
Registrant has registered an indefinite number of shares.  The Registrant will
file a Rule 24f-2 Notice before June 30, 1996 for its most recent fiscal year
ended December 31, 1995.
    

<PAGE>   2


                             CROSS REFERENCE SHEET
                            Pursuant to Rule 481(a)

                  Showing Location in Part A (Prospectus) and
          Part B (Statement of Additional Information) of Registration
                 Statement of Information Required By Form N-4



                                     PART A


<TABLE>
<CAPTION>
ITEM OF FORM N-4                                        PROSPECTUS CAPTION
- ----------------                                        ------------------
<S>                                                     <C>
1. Cover Page                                           Cover Page

2. Definitions                                          DEFINITIONS

3. Synopsis                                             SUMMARY

4. Condensed Financial Information                      CONDENSED FINANCIAL INFORMATION

5. General Description of Registrant,
   Depositor and Portfolio Companies

   a. Depositor                                         THE COMPANY
   b. Registrant                                        The Variable Account
   c. Portfolio Company                                 The Fund
   d. Fund Prospectus                                   The Fund
   e. Voting Rights                                     VOTING RIGHTS
   f. Administrators                                    N/A

6. Deductions and Expenses                              Charges Against the Policy, Variable Account, & Fund

   a. General                                           Charges Against the Policy, Variable Account, & Fund
   b. Sales Load %                                      Charges Against the Policy, Variable Account, & Fund -
                                                        Surrender Charge
   c. Special Purchase Plan                             N/A
   d. Commissions                                       DISTRIBUTION OF POLICIES
   e. Expenses - Registrant                             Charges Against the Policy, Variable Account, & Fund
   f. Fund Expenses                                     Charges Against the Policy, Variable Account, & Fund -
                                                        Other Charges Including Investment Management Fees
   g. Organizational Expenses                           N/A

7. General Description of Variable
   Annuity Contracts

   a. Persons With Rights                               DEFINITIONS - Owner, Joint Owner;  Payment of
                                                        Proceeds; Payment Options; Partial Withdrawals; Other
                                                        Policy Provisions; VOTING RIGHTS
   b. (i)   Allocation of Premium Payments              Premiums
      (ii)  Transfers                                   Transfers; Payment of Benefits, Partial Withdrawals,
                                                        Cash Surrenders, & Transfers - Postponement
      (iii) Exchanges                                   N/A
   c. Changes                                           Reserved Rights
   d. Inquiries                                         SUMMARY - Questions
</TABLE>

<PAGE>   3

   
<TABLE>
<S>                                                     <C>
8. Annuity Period                                       Payment Options

9. Death Benefit                                        Payment of Proceeds; Payment of
                                                        Benefits, Partial Withdrawals,
                                                        Cash Surrenders, & Transfers -
                                                        Postponement; Payment Options

10. Purchases and Contract Value

    a. Purchases                                        Premiums
    b. Valuation                                        Variable Account Value
    c. Daily Calculation                                Variable Account Value
    d. Underwriter                                      DISTRIBUTION OF POLICIES

11. Redemptions

    a. - By Owners                                      Payment of Proceeds - Proceeds on Surrender;  Partial
                                                        Withdrawals; Payment of Benefits, Partial Withdrawals,
                                                        Cash Surrenders, & Transfers - Postponement
       - By Annuitant                                   Payment of Proceeds - Proceeds on Death of Last Surviving
                                                        Annuitant Before Annuity Date or Maturity Date; Payment
                                                        Options
    b. Texas ORP                                        RESTRICTIONS UNDER THE TEXAS OPTIONAL
                                                        RETIREMENT PROGRAM
    c. Check Delay                                      Payment of Benefits, Partial Withdrawals, Cash Surrenders, &
                                                        Transfers - Postponement
    d. Lapse                                            Premiums - Termination
    e. Free Look                                        Ten Day Right to Examine the Policy

12. Taxes                                               Charges Against the Policy, Variable Account, & Fund - Taxes;
                                                        FEDERAL TAX STATUS

13. Legal Proceedings                                   LEGAL PROCEEDINGS

14. Table of Contents of the Statement of               STATEMENT OF ADDITIONAL
    Additional Information                              INFORMATION TABLE OF CONTENTS
</TABLE>
    
                                     PART B


<TABLE>
<CAPTION>
ITEM OF FORM N-4                                        STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ----------------                                        -------------------------------------------
<S>                                                     <C>
15. Cover Page                                          Cover Page

16. Table of Contents                                   STATEMENT OF ADDITIONAL INFORMATION TABLE
                                                        OF CONTENTS

17. General Information and History                     See Prospectus - THE COMPANY;  THE VARIABLE ACCOUNT
                                                        AND THE FUND

18. Services

    a. Fees and Expenses of Registrant                  N/A
    b. Management Contract                              N/A
    c. Custodian                                        SAFEKEEPING OF ACCOUNT ASSETS
    d. Independent Public Accountant                    EXPERTS

</TABLE>

<PAGE>   4
<TABLE>
<S>                                                     <C>
    e. Assets of Registrant                             SAFEKEEPING OF ACCOUNT ASSETS
    f. Affiliated Persons                               N/A
    g. Principal Underwriter                            See Prospectus - DISTRIBUTION OF POLICIES

19. Purchase of Securities Being Offered                See Prospectus - DISTRIBUTION OF POLICIES

20. Underwriter                                         See Prospectus - DISTRIBUTION OF POLICIES

21. Calculation of Performance Data                     CALCULATION OF YIELDS AND TOTAL RETURNS

22. Annuity Payments                                    See Prospectus - Payment Options

23. Financial Statements                                FINANCIAL STATEMENTS
</TABLE>

<PAGE>   5




                                     PART A



                  INFORMATION REQUIRED TO BE IN THE PROSPECTUS

<PAGE>   6

                    CANADA LIFE INSURANCE COMPANY OF AMERICA
   ADMINISTRATIVE OFFICE: 6201 POWERS FERRY ROAD, NW, ATLANTA, GEORGIA 30339
                             PHONE: 1-800-905-1959



                                   PROSPECTUS
                           VARIABLE ANNUITY ACCOUNT 1
               FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY



   
This Prospectus describes the flexible premium variable deferred annuity policy
(the "policy") offered by Canada Life Insurance Company of America ("we,"
"our," or "us"), a stock life insurance company domiciled in Michigan which is
a wholly-owned subsidiary of The Canada Life Assurance Company. The policy is
designed for use in connection with retirement plans which may or may not
qualify for special federal income tax treatment. The owner ("you") may
allocate net premiums when paid and policy value among the twenty sub-accounts
of the Canada Life of America Variable Annuity Account 1 (the "Variable
Account") and the Fixed Account. The Fixed Account is part of our general
account and may not be available in all states. Assets of each sub-account are
invested in a corresponding series of the Canada Life of America Series Fund,
Inc. ("CLASF"); the Fidelity Investments Variable Insurance Products Fund
("Fidelity"); the Fidelity Investments Variable Insurance Products Fund II
("Fidelity II"); Seligman Portfolios, Inc. ("Seligman"); the Dreyfus Variable
Investment Fund ("Dreyfus"); the Dreyfus Socially Responsible Growth Fund, Inc.
("Dreyfus Socially Responsible"); the Alger American Fund (Alger); or The
Montgomery Funds III (Montgomery). Each of these Funds is registered with the
SEC as an open-end, diversified management investment company. CLASF has six
series which include: Money Market; Managed; Bond; Value Equity International
Equity Series; and the Capital Series. Fidelity has three portfolios available
for investment under the policy;: Fidelity Growth; Fidelity High Income; and
Fidelity Overseas. Fidelity II has two portfolios available for investment
under the policy: Fidelity Asset Manager; and Fidelity Index 500. Seligman has
two portfolios it offers for investment under the policy: Communications and
Information; and Frontier. The Dreyfus Corporation offers the Growth and Income
Portfolio and the Dreyfus Socially Responsible Growth Portfolio for investment
under the policy. Alger has four portfolios available for investment under the
policy: Alger American Small Capitalization; Alger American Growth; Alger
American MidCap Growth; and Alger American Leveraged AllCap. Montgomery has one
portfolio available for investment under the policy: the Montgomery Emerging
Markets Portfolio. The policy value prior to the annuity date, except for
amounts in the Fixed Account, will vary according to the investment performance
of the series or portfolio of the Funds in which your elected sub-accounts are
invested. You bear the entire investment risk on amounts allocated to the
Variable Account.
    

This Prospectus sets forth basic information about the policy and the Variable
Account that a prospective investor ought to know before investing. Additional
information about the policy and the Variable Account is contained in the
Statement of Additional Information, which has been filed with the Securities
and Exchange Commission. The Statement of Additional Information is dated the
same date as this Prospectus and is incorporated herein by reference. The Table
of Contents for the Statement of Additional Information is on page ___ of this
Prospectus. You may obtain a copy of the Statement of Additional Information
free of charge by writing or calling us at the address or phone number shown
above.

  PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
      PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUND.

   
 THE POLICIES AND SHARES OF THE FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER
     AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE
          NOT BANK GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION,
           REINVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
    

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

   
                  The date of this Prospectus is May 1, 1996.
    
<PAGE>   7
                               TABLE OF CONTENTS


   
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
DEFINITIONS...............................................................   3
SUMMARY...................................................................   4
TABLE OF EXPENSES.........................................................   8
CONDENSED FINANCIAL INFORMATION...........................................  11
THE COMPANY...............................................................  12
THE VARIABLE ACCOUNT AND THE FUNDS........................................  13
   The Variable Account...................................................  13
   The Funds..............................................................  13
     Money Market Series..................................................  14
     Managed Series.......................................................  14
     Bond Series..........................................................  14
     Value Equity Series..................................................  14
     International Equity Series..........................................  14
     Capital Series.......................................................  14
     Fidelity Growth......................................................  15
     Fidelity High Income.................................................  15
     Fidelity Overseas....................................................  15
     Fidelity Asset Manager...............................................  15
     Fidelity Index 500...................................................  15
     Seligman Communications and Information..............................  16
     Seligman Frontier....................................................  16
     Dreyfus Growth and Income............................................  16
     Dreyfus Socially Responsible Growth..................................  16
     Alger Small Capitalization...........................................  17
     Alger Growth.........................................................  17
     Alger MidCap Growth..................................................  17
     Alger Leveraged AllCap...............................................  17
     Montgomery Emerging Markets..........................................  17
   Reserved Rights........................................................  18
   Change In Investment Policy............................................  18
DESCRIPTION OF ANNUITY POLICY.............................................  18
   Ten Day Right To Examine Policy........................................  18
   Premiums...............................................................  18
     Initial Premium......................................................  18
     Additional Premiums..................................................  19
     Wire Transmittal Privilege...........................................  19
     Electronic Data Transmission
      of Application Information..........................................  19
     Net Premium Allocation...............................................  19
     Termination..........................................................  20
   Variable Account Value.................................................  20
     Units................................................................  20
     Unit Value...........................................................  20
     Net Investment Factor................................................  20
   Transfers..............................................................  21
     Transfer Privilege...................................................  21
     Telephone Transfer Privilege.........................................  21
     Dollar Cost Averaging Privilege......................................  21
     Restrictions on Transfers from Fixed Account.........................  21
     Transfer Processing Fee..............................................  22
   Payment of Proceeds....................................................  22
     Proceeds.............................................................  22
     Proceeds on Annuity Date or Maturity Date............................  22
     Proceeds on Surrender................................................  22
     Proceeds on Death of Annuitant Before
      Annuity Date or Maturity Date (The Death Benefit)...................  23
     Proceeds on Death of Any Owner Before
      or After Annuity Date or Maturity Date..............................  24
     Interest on Proceeds.................................................  24
   Partial Withdrawals....................................................  25
     Systematic Withdrawal Privilege......................................  25
   Portfolio Rebalancing..................................................  25
   Loans..................................................................  26
   Payment of Benefits, Partial Withdrawals,
    Cash Surrenders and Transfers - Postponement..........................  27
   Charges Against the Policy, Variable                                     
    Account, and Funds....................................................  27
     Surrender Charge.....................................................  27
     Policy Administration Charge.........................................  28
     Daily Administration Fee.............................................  28
     Transfer Processing Fee..............................................  28
     Annualized Mortality and Expense Risk Charge.........................  28
     Waiver of Surrender Charges..........................................  29
     Reduction or Elimination of Surrender Charges........................  29
     Reduction or Elimination of
      Policy Administration Charge........................................  29
     Taxes................................................................  30
     Other Charges Including Investment Advisory Fees.....................  30
   Payment Options........................................................  31
     Election of Options..................................................  31
     Description of Options...............................................  31
     Payment Dates........................................................  32
     Age and Survival of Payee............................................  32
     Death of Payee.......................................................  33
   Other Policy Provisions................................................  33
     Owner or Joint Owner.................................................  33
     Beneficiary..........................................................  33
     Written Notice.......................................................  33
     Periodic Reports.....................................................  33
     Assignment...........................................................  34
     Modification.........................................................  34
YIELDS AND TOTAL RETURNS..................................................  34
TAX DEFERRAL..............................................................  35
FEDERAL TAX STATUS........................................................  36
   Introduction...........................................................  36
   The Company's Tax Status...............................................  36
   Tax Status of the Policy...............................................  36
     Diversification Requirements.........................................  36
     Required Distributions...............................................  37
   Taxation of Annuities..................................................  37
     In General...........................................................  37
     Withdrawals/Distributions............................................  38
     Annuity Payments.....................................................  38
     Taxation of Death Benefit Proceeds...................................  38
     Penalty Tax on Certain Withdrawals...................................  38
   Transfers, Assignments, or Exchanges of a Policy.......................  39
   Withholding............................................................  39
   Multiple Policies......................................................  39
   Possible Tax Changes...................................................  39
   Taxation of Qualified Plans............................................  39
     Individual Retirement Annuities and
      Simplified Employee Pensions (SEP/IRAs).............................  40
     Minimum Distribution Requirements ("MDR") for IRA's..................  40
     Corporate and Self-Employed (H.R.10 and                                
      Keogh) Pension and Profit-Sharing Plans.............................  40
     Deferred Compensation Plans..........................................  40
     Tax-Sheltered Annuity Plans..........................................  41
   Other Tax Consequences.................................................  41
RESTRICTIONS UNDER THE TEXAS OPTIONAL
 RETIREMENT PROGRAM.......................................................  41
DISTRIBUTION OF POLICIES..................................................  41
LEGAL PROCEEDINGS.........................................................  42
VOTING RIGHTS.............................................................  42
FINANCIAL STATEMENTS......................................................  42
STATEMENT OF ADDITIONAL INFORMATION - TABLE
 OF CONTENTS..............................................................  43
FIXED ACCOUNT.............................................................  44
   Fixed Account Value....................................................  44
APPENDIX A: STATE PREMIUM TAXES...........................................  45

</TABLE>
    
                                       2
<PAGE>   8
                                  DEFINITIONS


ADMINISTRATIVE OFFICE: Our office at the address shown on page 1 of the
Prospectus. This is our mailing address.

ANNUITANT: Any natural person whose life is used to determine the duration of
any payments made under a payment option involving life contingencies.

   
ANNUITY DATE: The date when the policy value will be applied under Payment
Option 1, unless you have elected to receive a lump sum payment of the cash
surrender value, or Payment Option 2.
    

BENEFICIARY: The person to whom we will pay the proceeds payable on your death
or the death of the annuitant.

CASH SURRENDER VALUE: The policy value less: 1) any applicable surrender
charge; and 2) the policy administration charge.

COMPANY: Canada Life Insurance Company of America.

DUE PROOF OF DEATH: Proof of death that is satisfactory to us. Such proof may
consist of: 1) a certified copy of the death certificate; and/or 2) a certified
copy of the decree of a court of competent jurisdiction as to the finding of
death.

EFFECTIVE DATE: The date the policy is effective is the date we accept your
application and apply your initial premium.

FIXED ACCOUNT: This account is part of our general account. This account is not
part of and does not depend on the investment performance of the Variable
Account.

   
FUNDS: The Canada Life of America Series Fund, Inc.; Fidelity Investments
Variable Insurance Products Fund; Fidelity Investments Variable Insurance
Products Fund II; Seligman Portfolios, Inc.; Dreyfus Variable Investment Fund;
Dreyfus Socially Responsible Growth Fund Inc.; The Alger American Fund; and The
Montgomery Funds III, are diversified open-end investment companies that
collectively have twenty series of shares in which the corresponding
sub-accounts of the Variable Account are invested.

JOINT OWNER: A term used solely for the purpose of referring to more than one
owner. There is no other distinction between the terms owner and joint owner.

MATURITY DATE: The first day of the month after the annuitant's 100th birthday.
    

NET PREMIUMS: The premium paid less any premium tax deducted in the year the
premium is paid.

NONQUALIFIED POLICY: A policy that is not a "qualified" policy under the
Internal Revenue Code of 1986, as amended, (the "Code"). However, any increase
in policy value under a nonqualified policy is not taxable to the owner or
annuitant until received (tax deferred), subject to certain exceptions. See
"FEDERAL TAX STATUS" on page ___.

   
OWNER: The owner is entitled to exercise all rights and privileges provided the
owner in the policy. The term owner also includes any joint owner.
    

PAC: Pre-authorized check, including electronic fund transfers.

POLICY: One of the flexible premium variable deferred annuity policies offered
by this Prospectus.

POLICY VALUE: The sum of the Variable Account value and the Fixed Account
value.

POLICY DATE, YEARS, MONTHS, and ANNIVERSARIES: Are measured from the policy
date shown in the "Policy Details" of the policy.

QUALIFIED POLICY: A policy that is issued in connection with plans that receive
special federal income tax treatment under sections 401, 403(a), 403(b), 408 or
457 of the Code. See "FEDERAL TAX STATUS" on page ____.

                                       3
<PAGE>   9

   
SUB-ACCOUNT(S): The Variable Account has twenty sub-accounts: Money Market;
Managed; Bond; Value Equity; International Equity; Capital; Fidelity Growth;
Fidelity High Income; Fidelity Overseas; Fidelity Asset Manager; Fidelity Index
500; Seligman Communications and Information; Seligman Frontier; Dreyfus Growth
and Income; Dreyfus Socially Responsible Growth; Alger Small Capitalization;
Alger Growth; Alger MidCap Growth; Alger Leveraged AllCap; and Montgomery
Emerging Markets. The assets of these sub-accounts are invested in the
corresponding series of the Funds.

UNIT: A unit is a measurement used in the determination of the policy's
Variable Account value before the annuity date or maturity date.
    

VALUATION DAY: Each day on which valuation of assets is required by applicable
law, which currently is each day the New York Stock Exchange is open for
trading, except for the business day after Thanksgiving and the business day
after Christmas which are days that we will be closed although the New York
Stock Exchange may be open for trading.

VALUATION PERIOD: The period that starts at the close of business on one
valuation day and ends at the close of business on the next succeeding
valuation day. The close of business is when the New York Stock Exchange closes
(usually at 4:00 P.M. Eastern Time).

   
VARIABLE ACCOUNT: The Canada Life of America Variable Annuity Account 1, which
is not part of our general account. The Variable Account has twenty
sub-accounts, the assets of which are invested in the corresponding series of
the Funds.
    

WE, OUR, and US: Canada Life Insurance Company of America.

WRITTEN NOTICE: See the "Written Notice" provision on page ___ in the "Other
Policy Provisions" section of this Prospectus.

   
YOU or YOUR: The owner. See the definitions of "owner" and "joint owner" above.
    


                                    SUMMARY

TEN DAY RIGHT TO EXAMINE POLICY

You have ten days after you receive the policy to decide if the policy meets
your needs (except in California you have 30 days if you are over age 60, and
in Idaho and North Dakota you have 20 days), and if the policy does not meet
your needs to return the policy to our Administrative Office. We will promptly
return either the Policy Value (where allowed by law); or in states which do
not allow return of Policy Value, we will return the full premium paid, without
interest and less the amount of any partial withdrawals, within seven days.
When the policy is issued as an Individual Retirement Annuity, during the first
seven days of the ten day period, we will return all premiums if this is
greater than the amount otherwise payable.


PREMIUMS

   
The minimum initial premium is $5,000 ($2,000 if the Policy is an Individual
Retirement Annuity, but we reserve the right to lower or raise the minimum
premium for IRA's). However, the minimum initial premium is $100 ($50 if the
policy is an Individual Retirement Annuity) if submitted with a pre-authorized
check ("PAC") agreement. You may make additional premium payments during the
annuitant's lifetime and before the annuity date or maturity date. The minimum
additional premium is $1,000, or $100 per month if paid by PAC (or $50 per
month if paid by PAC if the policy is an Individual Retirement Annuity). Our
prior approval is required before your total premiums paid exceed $1,000,000.
You may allocate your net premiums among the sub-accounts of the Variable
Account and the Fixed Account. See "Premiums" on page ___.
    


THE VARIABLE ACCOUNT

   
The Variable Account is a separate investment account consisting of twenty
sub-accounts. The policy value before the annuity date or maturity date, except
for amounts in the Fixed Account, will vary according to the investment
    


                                      4
<PAGE>   10

performance of the series of the Fund in which your elected sub-accounts are
invested. See "The Variable Account" on page ___.

THE FUNDS

   
The assets of each sub-account are invested in the corresponding series or
portfolio of the Funds. The Funds currently have twenty series or portfolios
available for investment: Money Market; Managed; Bond; Value Equity (formerly
known as Equity); International Equity Series; Capital; Fidelity Growth;
Fidelity High Income; Fidelity Overseas; Fidelity Asset Manager; Fidelity Index
500; Seligman Communications and Information; Seligman Frontier; Dreyfus Growth
and Income; Dreyfus Socially Responsible Growth; Alger Small Capitalization;
Alger Growth; Alger MidCap Growth; Alger Leveraged AllCap; and Montgomery
Emerging Markets. The Funds are diversified, open-end investment companies. See
"The Funds" on page ___.
    

THE FIXED ACCOUNT

The Fixed Account is not part of and does not depend on the investment
performance of the Variable Account. We credit interest to amounts in the Fixed
Account at a guaranteed minimum rate of 3% per annum, and we may credit a
higher current interest rate. We will also credit interest to amounts in the
Fixed Account at a guaranteed rate of 4% for contracts issued prior to May 1,
1994, or such later date as applicable regulatory approvals are obtained in the
jurisdiction in which the contracts are offered. See "Fixed Account" on page
___.


TRANSFERS

You may transfer all or part of an amount in a sub-account or the Fixed Account
to another sub-account(s) or the Fixed Account, subject to certain
restrictions. See "Transfers" on page ___.


DEATH BENEFIT

   
If we receive due proof of death of the annuitant before the annuity date or
maturity date ("such due proof"), we will pay the beneficiary a death benefit.

    THE FOLLOWING APPLIES ONLY TO POLICIES ISSUED ON OR AFTER MAY 1, 1996 OR
    SUCH LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE OBTAINED IN THE
    JURISDICTION IN WHICH THE POLICIES ARE OFFERED:

    If we receive such due proof during the first five years, the death benefit
    is the greater of:

        1.   the premiums paid, less: a) any partial withdrawals,
             including applicable surrender charges; and b) any incurred
             taxes; or
        2.   the policy value on the date we receive due proof of
             the annuitant's death.

    If we receive such due proof after the first five policy years, the death
    benefit is the greatest of:

        1.   item "1" above; or
        2.   item "2" above; or
        3.   the policy value at the end of the most recent 5
             policy year period preceding the date we receive due proof of
             the annuitant's death, adjusted for any of the following
             items that occur after such last 5 policy year period: a)
             less any partial withdrawals, including applicable surrender
             charges; b)  less any incurred taxes; and c) plus any
             premiums paid. The 5 policy year periods are measured from
             the policy date (i.e., 5, 10, 15, 20, etc.).

    If on the date the policy was issued, the annuitant was attained age 80 or
    less, then after the annuitant attains age 81, the death benefit is the
    greater of items "1" or "2" above, with no further step-ups in Death
    Benefits occurring. However, if on the date the policy was issued, the
    annuitant was attained age 81 or more, then the death benefit is the policy
    value.

    THE FOLLOWING APPLIES ONLY TO POLICIES ISSUED FROM MAY 1, 1995 THROUGH
    APRIL 30, 1996, OR SUCH LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE
    OBTAINED IN THE JURISDICTIONS IN WHICH THE CONTRACTS ARE OFFERED.
    

                                      5

<PAGE>   11

    If we receive such due proof during the first seven policy years, the death
    benefit is the greater of:

        1.   the premiums paid, less: a) any partial withdrawals,
             including applicable surrender charges; and b) any incurred
             taxes; or
   
        2.   the policy value on the date we receive due proof of
             the annuitant's death.

    If we receive such due proof after the first seven policy years, the death
    benefit is the greatest of:
    

        1.   item "1." above; or
        2.   item "2." above; or
   
        3.   the policy value at the end of the most recent 7
             policy year period preceding the date we receive due proof of
             the annuitant's death, adjusted for any of the following
             items that occur after such last 7 policy year period: a)
             less any partial withdrawals, including applicable surrender
             charges; b) less any incurred taxes; and c) plus any premiums
             paid. The 7 policy year periods are measured from the policy
             date (i.e., 7, 14, 21, 28, etc.). No further step-ups in
             Death Benefits will occur after the age of 80.
    

THE FOLLOWING APPLIES ONLY TO CONTRACTS ISSUED PRIOR TO MAY 1, 1995 OR SUCH
LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE OBTAINED IN THE JURISDICTION
IN WHICH THE CONTRACTS ARE OFFERED.

  If we receive such due proof during the first five policy years, the
  death benefit is the greater of:

        1.   the premiums paid, less: a) any partial withdrawals,
             including applicable surrender charges; and b) any incurred
             taxes; or
        2.   the policy value on the date we receive due
             proof of the annuitant's death.
  If we receive such due proof after the first five policy years, the death
  benefit is the greatest of:

        1.   item "1" above; or
        2.   item "2" above; or
   
        3.   the policy value at the end of the most recent 5 year
             policy period preceding the date we receive  due proof of the
             annuitant's death, adjusted for any of the following items that
             occur after such last 5 year policy period: a) less any partial
             withdrawals, including applicable surrender charges; b) less any
             incurred taxes; and c) plus any premiums paid. The 5 year policy
             periods are measured from the policy date (i.e., 5, 10, 15, 20,
             etc.).
    

No death benefit is payable if the policy is surrendered before the annuitant's
death.

   
See "Proceeds on Death of Annuitant Before Annuity Date or Maturity Date" on
page ___.
    

PARTIAL WITHDRAWALS AND CASH SURRENDERS

   
You may withdraw part or all of the cash surrender value at any time before the
earlier of the death of the annuitant, the annuity date or maturity date,
subject to certain limitations. See "Partial Withdrawals" on page ___ and
"Proceeds On Surrender" on page ___. Partial withdrawals and cash surrenders
may be subject to federal income tax, including a penalty tax. See "Federal Tax
Status" on page ___.
    

POLICY CHARGES

No deduction for a sales charge is made when premiums are paid. However, a
surrender charge (contingent deferred sales charge) will be deducted when
certain partial withdrawals and cash surrenders are made. For the purpose of
determining if any surrender charge applies and the amount of such charge,
partial withdrawals and surrenders are taken according to these rules from
policy value attributable to premiums or investment earnings in the following
order:

<TABLE>
<S>                                                                                           <C>
  1. Up to 100% of positive investment earnings of each variable
     sub-account available at the time the request is made, once a 
     policy year, PLUS....................................................................... None
  2. Up to 100% of current policy year's interest on the FIXED ACCOUNT at
     the time the request for surrender/withdrawal is made, once a policy 
     year, PLUS.............................................................................. None
</TABLE>


                                      6
<PAGE>   12

<TABLE>
<S>                                                                                           <C>
  3.   Up to 10% of total premiums STILL SUBJECT TO A SURRENDER CHARGE, once a policy 
       year, PLUS ........................................................................... None
  4.   Up to 100% of those premiums NOT SUBJECT TO A SURRENDER CHARGE, available
       at any time........................................................................... None
  5. Premiums subject to a surrender charge:
</TABLE>

<TABLE>
<S>                                                                                           <C>
For policies issued prior to May 1, 1995 or such later date as applicable regulatory
approvals are obtained in the jurisdiction in which the contracts are offered:
(For 5 years from the date of payment, each premium is subject to a 6% surrender
    charge. After the 5th year, no surrender charge will apply to such payment) ............. 6%
For policies issued after April 30, 1995 or such later date as applicable regulatory
approvals are obtained in the jurisdiction in which the contracts are offered:
      Policy Years Since Premium Was Paid
      -----------------------------------
          Less than 1 ....................................................................... 6% 
          At least 1, but less than 2........................................................ 6% 
          At least 2, but less than 3........................................................ 5% 
          At least 3, but less than 4........................................................ 5% 
          At least 4, but less than 5........................................................ 4% 
          At least 5, but less than 6........................................................ 3% 
          At least 6, but less than 7........................................................ 2% 
          At least 7......................................................................  None 
</TABLE>


See "Surrender Charge" on page ___.

   
We deduct a policy administration charge of $30 for the prior policy year on
each policy anniversary. If the policy value on the policy anniversary is
$75,000 or more, we will waive the policy administration charge for the prior
policy year. We will also deduct this charge for the current policy year if the
policy is surrendered for its cash surrender value, unless the surrender occurs
on the policy anniversary. See "Policy Administration Charge" on page ___.
    

At each valuation period, we also deduct a daily administration fee at an
effective annual rate of 0.15% from the assets of the Variable Account. See
"Daily Administration Fee" on page ___.

The first 12 transfers during each policy year are free under our current
Company policy, which we reserve the right to change. If our current policy
changes, we guarantee that we will provide at least four free transfers during
each policy year. We assess a $25 transfer fee for each additional transfer.
See "Transfer Processing Fee" on page ___.

   
We deduct a mortality and expense risk charge at each valuation period from the
assets of the Variable Account at an effective annual rate of 1.25%. This
charge is not made after the annuity date or maturity date, or against any
amounts in the Fixed Account. See "Annualized Mortality and Expense Risk
Charge" on page ___.
    

We will incur premium taxes in some jurisdictions relating to the policies.
Depending on the jurisdiction, we deduct any such taxes from either: a) the
premium when paid; or b) the policy value when it is applied under a payment
option, cash surrender value or partial withdrawal. See "Taxes" on page ___.

   
Each series or portfolio of the Funds in which the Variable Account invests is
responsible for its own expenses. In addition, charges for investment advisory
services are charged daily from each series of each fund. See "Other Charges
Including Investment Advisory Fees" on page ___ and the attached "PROSPECTUSES
FOR THE FUNDS."
    


LOANS

The Company may in the future offer a loan privilege to owners of policies
issued in connection with Section 403(b) qualified plans that are not subject
to Title I of ERISA. If offered, owners of such policies may obtain loans using
the policy as the only security for the loan, and the effective cost of a
policy loan would be 2% per year of the amount borrowed. See "Loans" on page
___.




                                      7
<PAGE>   13
ANNUITY DATE, MATURITY DATE AND PAYMENT OPTIONS

   
On the annuity date, we will apply the policy value under a Payment Option 1,
unless you have elected to receive the cash surrender value in a lump sum, or
pursuant to a mutually agreed upon payment option, Payment Option 2. Payments
under these payment options do not depend on the Variable Account's investment
performance. The proceeds we will pay on the maturity date is the policy value.
The payment options are: 1) Life Income; and 2) Mutual Agreement. See "Payment
Options" on page ___.
    


OTHER POLICY PROVISIONS

For information concerning the owner, beneficiary, written notice, periodic
policy reports, assignment, and modification see "Other Policy Provisions" on
page ___.


FEDERAL TAX STATUS

For a brief discussion of our current understanding of the federal tax laws
concerning us and the annuity policies we issue see "Federal Tax Status" on
page ___.


QUESTIONS

We will be happy to answer your questions about the policy or our procedures.
Call or write to us at the phone number or address on page 1. All inquiries
should include the policy number, and the names of the owner and the annuitant.


                               TABLE OF EXPENSES

EXPENSE DATA



   
<TABLE>
<S>                                         <C>                            <C>                            <C>                     
The following information regarding expenses assumes that the entire policy value is in the Variable Account:
   POLICYOWNER TRANSACTION EXPENSES

   Sales load on premiums............................................................................                 0
   Maximum contingent deferred sales charge as a percentage of amount surrendered                            
   (10% of total  premiums still subject to a surrender charge are free of any sales load                    
   See "Policy Charges" on page ___).................................................................                 6%
   Transfer fee                                                                                           
         Current Policy - First 12 transfers each policy year........................................            No fee
         Guarantee - First four transfers each policy year...........................................            No fee
         Each transfer thereafter....................................................................               $25
                                                                                                                   
POLICY ADMINISTRATION CHARGE.........................................................................    $30 per policy

   (waived for the prior policy year if the policy value is $75,000 or more on the policy anniversary)                
                                                                                                                   
VARIABLE ACCOUNT ANNUAL EXPENSES                                                                                

   (as a percentage of account value)                                                                              
   Mortality and expense risk charges................................................................             1.25%
   Daily Administration Fee*.........................................................................             0.15%
                                                                                                                -------
   Total Variable Account annual expenses............................................................             1.40%
                                                                                                                =======
</TABLE>
    


                                      8
<PAGE>   14


FUND'S ANNUAL EXPENSES**
- ------------------------------------------
(as a percentage of average net assets)

   
<TABLE>
                                                                              OTHER EXPENSES
                                                   MANAGEMENT                  AFTER EXPENSE                  TOTAL ANNUAL
                                                         FEES               REIMBURSEMENT***                      EXPENSES
                                                   ----------               ----------------                  ------------
<S>                                                     <C>                            <C>                           <C>
       Money Market                                     0.50%                          0.25%                         0.75%
       Managed                                          0.50%                          0.40%                         0.90%
       Bond                                             0.50%                          0.38%                         0.88%
       Value Equity                                     0.50%                          0.40%                         0.90%
       International Equity                             0.80%                          0.40%                         1.20%
       Capital                                          0.50%                          0.38%                         0.88%
       Fidelity Growth                                  0.61%                          0.09%                         0.70%
       Fidelity High Income                             0.60%                          0.11%                         0.71%
       Fidelity Overseas                                0.76%                          0.15%                         0.91%
       Fidelity Asset Manager                           0.71%                          0.08%                         0.79%
       Fidelity Index 500                               0.00%                          0.28%                         0.28%
       Seligman Communications               
          and Information                               0.75%                          0.20%                         0.95%
       Seligman Frontier                                0.75%                          0.20%                         0.95%
       Dreyfus Growth and Income                        0.72%                          0.20%                         0.92%
       Dreyfus Socially Responsible                     0.69%                          0.58%                         1.27%
       Alger Small Capitalization                       0.85%                          0.07%                         0.92%
       Alger Growth                                     0.75%                          0.10%                         0.85%
       Alger MidCap Growth                              0.80%                          0.10%                         0.90%
       Alger Leveraged AllCap                           0.85%                          0.71%                         1.56%
       Montgomery Emerging Markets                      1.25%                          0.50%                         1.75%
</TABLE>
    


*    The Daily Administration Fee is imposed only under contracts issued after
     May 1, 1994, or such later date as applicable regulatory approvals are
     obtained in the jurisdiction in which the contracts are offered. We do not
     assess the Daily Administration Fee under contracts issued prior to May 1,
     1994.

**   Certain of the unaffiliated investment advisers reimburse us for
     administrative costs incurred in connection with administering the funds
     as variable funding options. These reimbursements are paid out of the
     advisers' investment advisory fees as a percentage of assets under
     management.

   
***  The above table is intended to assist the policyowner in understanding
     the costs and expenses that will be borne, directly or indirectly. These
     includes the expenses of CLASF. Prior to May 1, 1995, we were reimbursing
     CLASF for expenses that exceeded 0.50% of the Managed, Bond, Value Equity
     and Capital Series, and 0.25% of the average daily net assets of the Money
     Market Series.; subsequent to this date, we increased the reimbursement
     amount to cover the expenses that exceeded 0.40% of the average daily net
     assets of Managed, Bond, Value Equity, Capital and International Equity
     Series and 0.25% of the Money Market Series. Absent such reimbursement,
     the "Other Expenses"  for the Money Market would have been 0.64% and for
     the International Equity Series 0.74%. "Other Expenses"  for the Managed,
     Bond, Value Equity, and Capital Series did not exceed the reimbursement 
     level of 0.40%. Between May 1, 1996 and April 30, 1997 we will reimburse 
     CLASF for expenses that exceed 0.40% of the average daily net assets of 
     the Managed, Bond, Value Equity, Capital, and International Equity Series,
     and 0.25% of the average daily net assets of the Money Market Series.

     A portion of the brokerage commissions the fund paid was used to reduce its
     expenses. Without this reduction, total operating expenses would have been
     (for High Income: 0.71% [please note - there were brokerage commissions
     paid, but it did not affect the ratio]; and for Asset Manager 0.81%.

     The fund's expenses were voluntarily reduced by the fund's investment
     adviser. Absent reimbursement, Management Fee, Other Expenses and Total
     Annual Expenses would have been (Index 500 Portfolio) 0.28%, 0.19% and 
     0.47% respectively.
    

   
    

                                      9
<PAGE>   15
   
    

   
   Included in the other expenses of the Alger American Leveraged AllCap
   Portfolio is 0.06% of interest expense. The figures shown above for the
   Alger Leveraged AllCap and Montgomery Emerging Markets Portfolios are based
   on estimated expenses for fiscal year 1996 (as a percentage of each
   portfolio's average net assets after expense reimbursement). The expense
   figures shown reflect anticipated voluntary waivers of a portion of the
   management fees and/or assumption of expenses. The maximum Management Fees,
   Other Expenses and Total Annual Expenses absent the anticipated voluntary
   waivers are estimated to be as follows:         %,         %,  and        %,
   respectively for the Alger American Leveraged AllCap Portfolio and 1.25%,
   0.95%, and 2.20%, respectively for the Montgomery Emerging Markets
   Portfolio. 
    

   See "Charges Against The Policy, Variable Account, And Funds,"
   page ___, and the Funds Prospectus. In addition to the expenses listed
   above, premium taxes may be applicable, which currently range between 0.5%
   to 3.5%, according to the jurisdiction. In many jurisdictions, there is no
   tax at all. See Appendix A, State Premium Taxes.


EXAMPLES

A policyowner would pay the following expenses on a $1,000 investment, assuming
a 5% annual return on assets:

  1. If the policy is surrendered at the end of the applicable time period:

   
<TABLE>
    SUB-ACCOUNT                          1 YEAR  3 YEARS  5 YEARS  10 YEARS
    -----------------------------------  ------  -------  -------  --------
    <S>                                  <C>     <C>      <C>      <C>
    Money Market                         $77     $116     $157     $260
    Managed                              $78     $120     $165     $275
    Bond                                 $78     $120     $165     $275
    Value Equity                         $78     $120     $165     $275
    International Equity                 $81     $129     $180     $305
    Capital                              $78     $120     $165     $275
    Fidelity Growth                      $76     $114     $154     $254
    Fidelity High Income                 $77     $115     $155     $256
    Fidelity Overseas                    $79     $121     $166     $277
    Fidelity Asset Manager               $77     $117     $159     $264
    Fidelity Index 500                   $       $        $        $
    Seligman Communications
       and Information                   $79     $122     $167     $280
    Seligman Frontier                    $79     $122     $167     $280
    Dreyfus Growth and Income            $       $        $        $
    Dreyfus Socially Responsible Growth  $       $        $        $
    Alger Small Capitalization           $       $        $        $
    Alger Growth                         $       $        $        $
    Alger MidCap Growth                  $       $        $        $
    Alger Leveraged AllCap               $       $        $        $
    Montgomery Emerging Markets          $       $        $        $
</TABLE>
    


  2. If the policy is annuitized or not surrendered at the end of the
  applicable time period:

   
<TABLE>
    SUB-ACCOUNT                          1 YEAR  3 YEARS  5 YEARS  10 YEARS
    -----------------------------------  ------  -------  -------  --------
    <S>                                  <C>     <C>      <C>      <C>
    Money Market                         $23     $71      $121     $260
    Managed                              $24     $75      $129     $275
    Bond                                 $24     $75      $129     $275
    Value Equity                         $24     $75      $129     $275
</TABLE>
    


                                      10
<PAGE>   16

   
<TABLE>
    <S>                                  <C>     <C>      <C>      <C>
    International Equity                 $27     $84      $144     $305
    Capital                              $24     $75      $129     $275
    Fidelity Growth                      $22     $69      $118     $254
    Fidelity High Income                 $23     $70      $119     $256
    Fidelity Overseas                    $25     $76      $130     $277
    Fidelity Asset Manager               $23     $72      $123     $264
    Fidelity Index 500                   $       $        $        $
    Seligman Communications
      and Information                    $25     $77      $131     $280
    Seligman Frontier                    $25     $77      $131     $280
    Dreyfus Growth and Income            $       $        $        $
    Dreyfus Socially Responsible Growth  $       $        $        $
    Alger Small Capitalization           $       $        $        $
    Alger Growth                         $       $        $        $
    Alger MidCap Growth                  $       $        $        $
    Alger Leveraged AllCap               $       $        $        $
    Montgomery Emerging Markets          $       $        $        $
</TABLE>
    


   
The examples represent expenses incurred in connection with a 7 year surrender
charge period. Policies issued with a 5 year maximum surrender charge period
would be subject to lower expenses.
    

The examples provided above assume that no transfer charges have been assessed.
The examples also reflect a policy administration charge of 0.12% of assets,
determined by dividing the total policy administration charges collected by the
total average net assets of the sub-accounts of the Variable Account.

THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESSER
THAN THE ASSUMED AMOUNT.


                        CONDENSED FINANCIAL INFORMATION

The following condensed financial information is derived from the financial
statements of the Variable Account. The data should be read in conjunction with
the financial statements, related notes and other financial information
included in the Statement of Additional Information. See the "FINANCIAL
STATEMENTS" section on page ___ concerning financial statements contained in
the Statement of Additional Information.

   
The table below sets forth certain information regarding the sub-accounts for a
policy for the period from December 31, 1991 through December 31, 1995.
Accumulation Unit Values will not be provided for any date prior to the
inception of the Variable Account. The Capital Sub-Account commenced operations
on May 1, 1993, and the Fidelity Growth, Fidelity High Income, Fidelity
Overseas, and Fidelity Asset Manager sub-accounts were offered beginning on May
1, 1994. The International Equity, Communications and Information, Frontier
sub-accounts commenced operations on May 1, 1995. As of December 31, 1995, the
Index 500, Growth & Income, Socially Responsible Growth, Small Capitalization,
Growth, MidCap Growth, Leveraged AllCap; and Emerging Markets sub-accounts had
not commenced operations. Accordingly, condensed financial information is not
available for those sub-accounts.
    


   
<TABLE>
   ACCUMULATION UNIT
   VALUE*
                            AS OF     AS OF     AS OF     AS OF     AS OF
   SUB-ACCOUNT              12/31/95  12/31/94  12/31/93  12/31/92  12/31/91
   -----------              --------  --------  --------  --------  --------
   <S>                      <C>       <C>       <C>       <C>       <C>
   Money Market             $         $11.50    $11.27    $11.16    $10.99
   Managed                  $         $13.75    $13.97    $13.07    $12.25
   Bond                     $         $12.98    $13.69    $12.57    $11.93
   Value Equity             $         $14.21    $14.11    $13.56    $12.66
   International Equity     $
   Capital                  $         $10.54    $11.14
   Fidelity Growth          $         $23.62
</TABLE>
    

                                      11
<PAGE>   17
   
<TABLE>
<S>                         <C>       <C>
   Fidelity High Income     $         $22.97
   Fidelity Overseas        $         $15.33
   Fidelity Asset Manager   $         $15.56
   Seligman Communications
     and Information        $
   Seligman Frontier        $
</TABLE>
    


*    Accumulation Unit Values prior to 1994 do not reflect the .15%
     Daily Administration Fee imposed after May 1, 1994. Accumulation
     Unit Values for year ended 12/31/94 reflect the .15% Daily
     Administration Fee.


   
<TABLE>
    NUMBER OF UNITS
    OUTSTANDING AT
    END OF PERIOD
                            AS OF     AS OF     AS OF     AS OF     **AS OF
    SUB-ACCOUNT             12/31/95  12/31/94  12/31/93  12/31/92  12/31/91
    -----------             --------  --------  --------  --------  --------
    <S>                     <C>       <C>       <C>       <C>       <C>
    Money Market                      233,129   191,369   38,210     5,268
    Managed                           726,809   816,591   531,327   312,712
    Bond                              100,443   122,984   73,332     6,027
    Value Equity                      278,147   273,813   147,334   32,775
    International Equity
    Capital                           147,095   59,901
    Fidelity Growth                   30,356
    Fidelity High Income              29,537
    Fidelity Overseas                 76,731
    Fidelity Asset Manager            112,511
    Seligman Communications
     and Information
    Seligman Frontier
</TABLE>
    

   
**   The number of accumulation units for CLASF decreased in 1991 due to
     the transfer of seed money from the Variable Account to our general
     account to meet California's insurance regulations. This did not
     affect the seed money in the underlying Series.
    

                                  THE COMPANY

   
Canada Life Insurance Company of America ("we," "our," and "us") is a stock
life insurance company with assets as of December 31, 1995 of approximately
$___ billion. We were incorporated under Michigan law on April 12, 1988,
and our Administrative Office is located at 6201 Powers Ferry Road, NW,
Atlanta, Georgia 30339. We currently are principally engaged in issuing and
reinsuring annuity policies.
    

We share our A.M. Best Company rating with our parent company, The Canada Life
Assurance Company. From time to time, we will quote this rating, our rating
from Standard & Poor's Corporation, Duff & Phelps Inc., and/or Moody's
Investors Service for claims paying ability. These ratings address the
financial ability of these companies to meet their contractual obligations in
accordance with the terms of their insurance contracts. They do not take into
account deductibles, surrender or cancellation penalties, or timeliness of
claim payment, nor do they address the suitability of the policy for a
particular purchaser. Also, these evaluations do not refer to the ability of
these companies to meet non-policy obligations.

   
We are a wholly-owned subsidiary of The Canada Life Assurance Company, a
Canadian life insurance company headquartered in Toronto, Ontario, Canada, with
a U.S. home office in Atlanta, Georgia. The Canada Life Assurance Company:
commenced insurance operations in 1847, and has been actively operating in the
United States since 1889; and is one of the largest life insurance companies in
North America with consolidated assets as of December 31, 1995 of approximately
$________ billion (U.S. dollars).
    

Obligations under the policies are obligations of Canada Life Insurance Company
of America.

We are subject to regulation and supervision by the Michigan Insurance Bureau,
as well as the applicable laws and regulations of all jurisdictions in which we
are authorized to do business.


                                      12
<PAGE>   18

                       THE VARIABLE ACCOUNT AND THE FUNDS

THE VARIABLE ACCOUNT

We established the Canada Life of America Variable Annuity Account 1 (the
"Variable Account") as a separate investment account on July 22, 1988 under
Michigan law. Although we own the assets in the Variable Account, these assets
are held separately from our other assets and are not part of our general
account. The income, gains or losses, whether or not realized, from the assets
of the Variable Account are credited to or charged against the Variable Account
in accordance with the policies without regard to our other income, gains or
losses.

The portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the Variable Account will not be charged with
liabilities that arise from any other business that we conduct and will be held
in the Variable Account. We have the right to transfer to our general account
any assets of the Variable Account which are in excess of such reserves and
other liabilities.

The Variable Account is registered with the Securities and Exchange Commission
(the "SEC") as a unit investment trust under the Investment Company Act of 1940
(the "1940 Act") and meets the definition of a "separate account" under the
federal securities laws. A unit investment trust is a type of investment
company that invests its assets in specified securities, such as the shares of
one or more investment companies. Registration under the 1940 Act does not
involve the supervision by the SEC of the management or investment policies or
practices of the Variable Account.

   
The Variable Account currently has twenty sub-accounts: Money Market; Bond;
Value Equity; Managed; International Equity; Capital; Fidelity Growth; Fidelity
High Income; Fidelity Overseas; Fidelity Asset Manager; Fidelity Index 500;
Communications and Information; Frontier; Dreyfus Growth and Income; Dreyfus
Socially Responsible Growth; Alger Small Capitalization; Alger Growth; Alger
MidCap Growth; Alger Leveraged AllCap; and Montgomery Emerging Markets. The
assets of each sub-account are invested in shares of the corresponding series
of the Funds. Shares of a series are purchased and redeemed for a sub-account
at their net asset value. Any amounts of income, dividends and gains
distributed from the shares of a series will be reinvested in additional shares
of that series at their net asset value. The Prospectus for each Fund defines
the net asset value of series shares. There is, of course, no assurance that
the investment objective of any series will be achieved.
    


THE FUNDS

   
The Variable Account invests in shares of CLASF, Fidelity, Fidelity II,
Seligman, Dreyfus, the Dreyfus Socially Responsible, Alger and Montgomery. The
Funds are management investment companies of the series type with one or more
investment portfolios. Each Fund is registered with the SEC as an open-end,
management investment company. Such registration does not involve supervision
of the management or investment practices or policies of the Company or the
portfolios by the SEC.

The Funds may, in the future, create additional portfolios that may or may not
be available as investment options under the Contracts. Each portfolio has its
own investment objectives and the income and losses for each portfolio are
determined separately for that portfolio.

The investment objectives and policies of each portfolio are summarized below.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVES.
More detailed information, including a description of risks and expenses, may
be found in the prospectuses for the Funds which must accompany or precede this
prospectus and which should be read carefully and retained for future
reference.
    

CANADA LIFE OF AMERICA SERIES FUND ("CLASF")

   
The Canada Life of America Series Fund, Inc., ("CLASF") currently has six
series: Money Market; Managed; Bond; Value Equity; International Equity; and
Capital.
    

CLASF is a diversified open-end investment company incorporated in Maryland.
CLASF has four series which use the investment advisory services of CL Capital
Management, Inc., a Georgia corporation: Money Market; Managed; Bond; 



                                      13
<PAGE>   19

   
and Value Equity. CLASF has one series, the International Equity Series, which
uses the sub-investment advisory services of Canada Life Investment Management
Limited, a Toronto, Ontario, Canada SEC-registered investment adviser. CLASF
also has one series, the Capital Series, which uses the sub-investment advisory
services of J. & W. Seligman & Co. Incorporated, an unaffiliated investment
manager that is a Delaware Corporation. CL Capital Management, Inc. is a wholly
owned subsidiary of our Company. Canada Life Investment Management Limited is a
wholly owned subsidiary of The Canada Life Assurance Company. The following is a
brief description of the investment objectives of each of the current series of
CLASF.
    

MONEY MARKET SERIES

The Money Market Series seeks the highest possible level of current income
consistent with preservation of capital and liquidity by investing in money
market instruments maturing in thirteen months or less.

MANAGED SERIES

The Managed Series seeks as high a level of return as possible through capital
appreciation and income consistent with prudent investment risk and
preservation of capital, by investing in equities, fixed income debt
instruments and money market instruments.

BOND SERIES

The Bond Series seeks as high a level of current income and capital
appreciation as is consistent with preservation of principal, by investing
primarily in fixed income debt instruments.

   
VALUE EQUITY SERIES

The Value Equity Series seeks long-term growth and income by investing in
common stocks and other equity securities which are believed to have
appreciation potential.
    

INTERNATIONAL EQUITY SERIES

The International Equity Series seeks long-term capital appreciation by
investing in equity or equity-type securities of companies located outside of
the United States.

CAPITAL SERIES

The Capital Series seeks capital appreciation, not current income, by investing
in common stocks and securities convertible into or exchangeable for common
stocks, in common stock purchase warrants, in debt securities and in preferred
stocks believed to provide capital appreciation opportunities.


Since CLASF may be available to other separate accounts, including registered
separate accounts for variable annuity and variable life products, and
non-registered separate accounts for group annuity products of the Company,
Canada Life Insurance Company of New York, and The Canada Life Assurance
Company, it is possible that material conflicts may arise between the interests
of the Variable Account and one or more other separate accounts investing in
CLASF. CLASF's board of directors will monitor events to identify any
irreconcilable material conflict. Upon being advised of such a conflict, we
will take any steps we believe necessary to resolve the matter, including
removing the assets of the Variable Account from one or more series.

   
    
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND

The Fidelity Investments Variable Insurance Products Fund ("Fidelity") has been
established to act as one of the funding vehicles for the policy offered and
three Portfolios are available under this policy: Fidelity Growth; Fidelity
High Income; 



                                      14
<PAGE>   20

   
and Fidelity Overseas. Fidelity is managed by Fidelity Management & Research
Company ("Investment Manager"). The Investment Manager is not affiliated with
the Company. Fidelity is a diversified open-end investment company.
    

FIDELITY GROWTH PORTFOLIO

The Fidelity Growth Portfolio seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security.

FIDELITY HIGH INCOME PORTFOLIO

The Fidelity High Income Portfolio seeks to obtain a high level of current
income by investment primarily in high yielding, lower-rated, fixed income
securities, while also considering growth of capital. Please refer to the
accompanying Fidelity prospectus for a description and explanation of the
unique risks associated with investing in high risk, high yielding, lower rated
fixed income securities.

FIDELITY OVERSEAS PORTFOLIO

The Fidelity Overseas Portfolio seeks long term growth of capital primarily
through investments in foreign securities. This portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.

   
    
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND II

   
The Fidelity Investments Variable Insurance Products Fund II ("Fidelity II")
has been established to act as one of the funding vehicles for the policy
offered and the Asset Manager and Index 500 Portfolios are available under this
policy. Fidelity II is managed by Fidelity Management & Research Company
("Investment Manager"). The Investment Manager is not affiliated with the
Company. Fidelity II is a diversified open-end management investment company.
    

FIDELITY ASSET MANAGER PORTFOLIO

   
The Fidelity Asset Manager Portfolio seeks high total return with reduced risk
over the long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term fixed-income instruments.

FIDELITY INDEX 500 PORTFOLIO

The Fidelity Index 500 Portfolio seeks a total return which corresponds to that
of the Standard & Poor's Composite Index of 500 Stocks.
    

   
    

                                      15
<PAGE>   21

SELIGMAN PORTFOLIOS, INC.

   
Seligman Portfolios, Inc. (Seligman) currently has ten portfolios, two of which
are available for this policy: Communications and Information; and Frontier.

Seligman is a diversified open-ended investment company incorporated in
Maryland which uses the investment management services of J. & W. Seligman &
Co. Incorporated, a Delaware corporation. The Investment Manager is not
affiliated with the Company. The following is a brief description of the
investment objectives of the Communications and Information, and Frontier
Portfolios.
    


SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO

The investment objective of this Portfolio is to produce capital gain. Income
is not an objective. The Portfolio seeks to achieve its objective by investing
primarily in securities of companies operating in the communications,
information and related industries.

SELIGMAN FRONTIER PORTFOLIO

The investment objective of this Portfolio is to produce growth in capital
value; income may be considered but will be only incidental to the Portfolio's
investment objective. In general, securities owned are likely to be those
issued by small-to- medium-sized companies selected for their growth potential.

   
    

   
DREYFUS VARIABLE INVESTMENT FUND

Dreyfus Variable Investment Fund ("Dreyfus") is an open-end, management
investment company, that is intended to be a funding vehicle for variable
annuity contracts and variable life insurance companies. One portfolio is
available under this policy, the Dreyfus Growth and Income Portfolio.

DREYFUS GROWTH AND INCOME PORTFOLIO

The Growth and Income Portfolio seeks long-term capital growth, current income
and growth of income, consistent with reasonable investment risk. The Portfolio
invests primarily in equity and debt securities and money market instruments of
domestic and foreign issuers. The proportion of the Portfolio's assets invested
in each type of security will vary from time to time in accordance with The
Dreyfus Corporation's assessment of economic conditions and investment
opportunities.


DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.

The Dreyfus Socially Responsible Growth Fund, Inc. ("Dreyfus Socially
Responsible") is an open-end, diversified, management investment company fund,
that is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies to be offered by the separate accounts of
various life insurance companies.

DREYFUS SOCIALLY RESPONSIBLE GROWTH PORTFOLIO

The Dreyfus Socially Responsible Growth Portfolio seeks to provide capital
growth by investing principally in common stocks, or securities convertible
into common stock, of companies which, in the opinion of the Fund's management,
not only meet traditional investment standards, but also show evidence that
they conduct their business in a manner that contributes to the enhancement of
the quality of life in America. Current income is a secondary goal.
    



                                      16
<PAGE>   22
   
ALGER AMERICAN FUND

The Alger American Fund ("Alger") is intended to be a funding vehicle for
variable annuity contracts and variable life insurance policies to be offered
by the separate accounts of certain life insurance companies; and its shares
may also be offered to qualified pension and retirement plans. Each Portfolio
has distinct investment objectives and policies. No assurance can be made that
any Portfolio's objective will be achieved. Further information regarding the
investment practices of the Portfolios is set forth under the caption
"Investment Objectives and Policies" in this Prospectus and in the Statement of
Additional Information.

ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO

The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65%
of its total assets in equity securities of companies that, at the time of
purchase of the securities, have total market capitalization within the range
of companies included in the Russell 2000 Growth Index, updated quarterly. The
Portfolio may invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have total market capitalization
outside the range of companies included in the Russell 2000 Growth Index and in
excess of that amount (up to 100% of its assets) during temporary defensive
periods.

ALGER AMERICAN GROWTH PORTFOLIO

The Alger American Growth Portfolio seeks long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities,
primarily of companies with total market capitalization of $1 billion or
greater.

ALGER AMERICAN MIDCAP GROWTH PORTFOLIO

The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65%
of its total assets in equity securities of companies that, at the time of
purchase of the securities, have total market capitalization within the range
of companies included in the S&P MidCap 400 Index, updated quarterly. The
Portfolio may invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have total market capitalization
outside the range of companies included in the S&P MidCap 400 Index and in
excess of that amount (up to 100% of its assets) during temporary defensive
periods.

ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO

The Alger American Leveraged AllCap Portfolio seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities. The Portfolio may engage in leveraging (up to 33 1/3% of its
assets) and options and futures transactions, which are deemed to be
speculative and which may cause the Portfolio's net asset value to be more
volatile than the net asset value of a fund that does not engage in these
activities.

MONTGOMERY FUNDS III

Shares of Montgomery Variable Series: Emerging Markets Fund, a series of The
Montgomery Funds III ("Montgomery"), an open-end investment company, are
offered by this policy. Shares of the Fund are sold only to insurance company
separate accounts ("Accounts") to fund the benefits of variable life insurance
policies or variable annuity contracts ("Variable Contract") owned by their
respective policy holders, or contract holders, and to qualified pension and
retirement plans.

EMERGING MARKETS PORTFOLIO

The investment objective of this portfolio is capital appreciation, which under
normal conditions it seeks by investing at least 65% of its total assets in
equity securities of companies in countries having emerging markets. For these
purposes, the portfolio defines an emerging market country as having an economy
that is or would be considered by the World Bank or the United Nations to be
emerging or developing.
    


                                      17
<PAGE>   23
 
RESERVED RIGHTS

   
We reserve the right to substitute shares of another series or portfolio of
CLASF, Fidelity, Fidelity II, Seligman, Dreyfus, Dreyfus Socially Responsible,
Alger, or Montgomery or shares of another registered open-end investment
company if, in the judgment of our management, investment in shares of one or
more series or portfolios is no longer appropriate for any legitimate reason,
including: a change in investment policy; or a change in the tax laws; or the
shares are no longer available for investment. However, we will obtain the
approval of the SEC before we make a substitution of shares, if such approval
is required by law.
    

When permitted by law, we also reserve the right to: create new variable
accounts;  combine variable accounts, including the Canada Life of America
Variable Annuity Account 1; remove, combine or add sub-accounts and make the
new sub-accounts available to policyowners at our discretion; add new series to
CLASF; deregister the Variable Account under the 1940 Act if registration is no
longer required; make any changes required by the 1940 Act; and operate the
Variable Account as a managed investment company under the 1940 Act or any
other form permitted by law.

If a change is made, we will send you a revised Prospectus and any notice
required by law.


CHANGE IN INVESTMENT POLICY

The investment policy of a sub-account of the Variable Account may not be
changed unless: the change is approved, if required, by the Michigan Insurance
Bureau; and a statement of such approval is filed, if required, with the
insurance department of the state in which the policy is delivered.


                         DESCRIPTION OF ANNUITY POLICY

TEN DAY RIGHT TO EXAMINE POLICY

You have ten days after you receive the policy to decide if the policy meets
your needs (except in California, if you are over age 60, you have 30 days, and
in Idaho and North Dakota you have 20 days), and if the policy does not meet
your needs to return the policy to our Administrative Office. We will promptly
return either the Policy Value (where allowed by law); or in states which do
not allow return of Policy Value, we will return the full premium paid, without
interest and less the amount of any partial withdrawals, within seven days.
When the policy is issued as an Individual Retirement Annuity, during the first
seven days of the ten day period, we will return all premiums if this is
greater than the amount otherwise payable.


PREMIUMS

INITIAL PREMIUM

A prospective owner must submit a properly completed application along with a
check made payable to us for the initial premium. The minimum initial premium
is $5,000 ($2,000 if the Policy is an Individual Retirement Annuity, but we
reserve the right to lower or raise the minimum premium for IRAs). However, the
minimum initial premium is $100 ($50 if the Policy is an Individual Retirement
Annuity) when a prospective owner has enclosed a completed pre-authorized check
("PAC") agreement for additional premiums to be automatically withdrawn monthly
from the owner's bank account.

The application is subject to our underwriting standards. If the application is
properly completed and is accompanied by all the information necessary to
process it, including the initial premium, we will normally accept the
application and apply the initial net premium within two valuation days of
receipt at our Administrative Office. However, we may retain the premium for up
to five valuation days while we attempt to complete the processing of an
incomplete application. If this cannot be achieved within five valuation days,
we will inform the prospective owner of the reasons for the delay and
immediately return the premium, unless the prospective owner specifically
consents to our retaining the premium until the application is made complete.
If the prospective owner consents to our retaining the premium, we will apply
the initial net premium within two valuation days of when the application is
complete.


                                      18
<PAGE>   24
ADDITIONAL PREMIUMS

The minimum additional premium is $1,000. However, the minimum additional
premium paid by PAC is $100 per month ($50 per month if the policy is an
Individual Retirement Annuity). We will apply additional net premiums as of
receipt at our Administrative Office.

   
You may make additional premium payments at any time during the annuitant's
lifetime and before the earlier of the annuity date or maturity date. Our prior
approval is required before we will accept an additional premium which,
together with the total of other premiums paid, would exceed $1,000,000. We
will give you a receipt for each additional premium payment.
    


WIRE TRANSMITTAL PRIVILEGE

If a written agreement between us and broker/dealers who use wire transmittals
is in effect, as a privilege to you we will accept transmittal of the initial
and/or additional premiums by wire order from the broker/dealer to our
designated financial institution. A copy of such transmittal must be
simultaneously sent to our Administrative Office via a telephone facsimile
transmission that also contains the essential information we require to begin
application processing and/or to allocate the net premium. We will normally
apply the initial net premium within two valuation days of receipt at our
Administrative Office of the facsimile transmission that contains a copy of the
wire order and such required essential information. We may retain such wire
orders for up to five valuation days while an attempt is made to obtain such
required information that we do not receive via such facsimile transmission. If
such required information is not obtained within five valuation days, we will
inform the broker/dealer, on behalf of the prospective owner, of the reasons
for the delay and immediately return the premium wired to us to the
broker/dealer who will return the full premium paid to the prospective owner,
unless we receive within such five valuation days the prospective owner's
specific written consent to our retaining the premium until we receive such
required information via facsimile transmission.

Our acceptance of the wire order and facsimile does not create a contractual
obligation with us until we receive and accept a properly completed original
application. If we do not receive a properly completed original application
within ten valuation days of receipt of the initial premium via wire order, we
will return the premium wired to us to the broker/dealer who will return the
full premium paid to the prospective owner. If the allocation instructions in
the properly completed original application are inconsistent with such
instructions contained in the facsimile transmission, the policy value will be
reallocated in accordance with the allocation instructions in the application
at the price which was next determined after receipt of the wire order.

ELECTRONIC DATA TRANSMISSION OF APPLICATION INFORMATION

In certain states, we will also accept, by agreement with broker-dealers who
use electronic data transmissions of application information, wire transmittals
of initial premium payments from the broker-dealer to the Company for purchase
of the policy. Contact us to find out about state availability.

Upon receipt of the electronic data and wire transmittal, we will process the
information and allocate the premium payment according to the policyowner's
instructions. Based on the information provided, we will generate a policy and
a verification letter to be forwarded to the policyowner for signature.

During the period from receipt of the initial premium until the signed
verification letter is received, the policyowner may not execute any financial
transactions with respect to the policy unless such transactions are requested
in writing by the owner and signature guaranteed.

NET PREMIUM ALLOCATION

   
You elect in your application how you want your initial net premium to be
allocated among the sub-accounts and the Fixed Account. Any additional net
premiums will be allocated in the same manner, unless at the time of payment we
have received your written notice to the contrary. The total allocation must
equal 100%.
    

We cannot guarantee that a sub-account or shares of a series will always be
available. If an owner requests that all or part of a premium be allocated to a
sub-account at a time when the sub-account or underlying series or portfolio is
not available, we will immediately return that portion of the premium to you,
unless you specify otherwise.


                                      19
<PAGE>   25
TERMINATION

   
We may pay you the cash surrender value and terminate the policy if before the
annuity date or maturity date all of these events simultaneously exist:
    

    1.   you have not paid any premiums for at least two years;
    2.   the policy value is less than $2,000; and
    3.   the total premiums paid, less any partial withdrawals,
         is less than $2,000.

We will mail you a notice of our intention to terminate this policy at least
six months in advance. The policy will automatically terminate on the date
specified in the notice, unless we receive an additional premium before the
termination date specified in the notice. This additional premium must be at
least the minimum amount specified in "Additional Premiums."


VARIABLE ACCOUNT VALUE

   
The Variable Account value before the annuity date or maturity date is
determined by multiplying the number of units credited to this policy for each
sub-account by the current unit value of these units.
    

UNITS

We credit net premiums in the form of units. The number of units credited to
the policy for each sub-account is determined by dividing the net premium
allocated to that sub-account by the unit value for that sub-account at the end
of the valuation period during which we receive the premium at our
Administrative Office.

We will credit units for the initial net premium on the effective date of the
policy. We will adjust the units for any transfers in or out of a sub-account,
including any transfer processing fee.

   
We will cancel the appropriate number of units based on the unit value at the
end of the valuation period in which any of the following events occur: the
policy administration charge of $30 is assessed; the date we receive and file
your written notice for a partial withdrawal or a cash surrender; the date of a
systematic withdrawal; the earlier of the annuity date or maturity date; or the
date we receive due proof of your death or the annuitant's death.
    

UNIT VALUE

The unit value for each sub-account's first valuation period is set at $10. The
unit value for each subsequent valuation period is determined by multiplying
the unit value at the end of the immediately preceding valuation period by the
net investment factor for the valuation period for which the value is being
determined.

The unit value for a valuation period applies to each day in that period. The
unit value may increase or decrease from one valuation period to the next.

NET INVESTMENT FACTOR

The net investment factor is an index that measures the investment performance
of a sub-account from one valuation period to the next. Each sub-account has a
net investment factor, which may be greater than or less than one.

The net investment factor for each sub-account for a valuation period equals 1
plus the rate of return earned by the relevant series or portfolio, adjusted
for the effect of taxes charged or credited to the sub-account and the
mortality and expense risk charge.

The rate of return of the relevant series or portfolio is equal to the fraction
obtained by dividing (a) by (b) where:

    (a)  is the net investment income and net gains, realized and
         unrealized, credited during the current valuation period; and
    (b)  is the value of the net assets of the relevant series at the
         end of the preceding valuation period, adjusted for the net
         capital transactions and dividends declared during the current
         valuation period.


                                      20
<PAGE>   26

TRANSFERS

TRANSFER PRIVILEGE

You may transfer all or a part of an amount in the sub-account(s) to another
sub-account(s) or to the Fixed Account, or transfer a part of an amount in the
Fixed Account to the sub-account(s), subject to these general restrictions and
the additional restrictions in "Restrictions on Transfers from Fixed Account":

   
    1.   the Company's minimum transfer amount, currently $250; and
    2.   a transfer request that would reduce the amount in that
         sub-account or the Fixed Account below $500 will be treated as a
         transfer request for the entire amount in that sub-account or the
         Fixed Account.
    
   
    
We cannot guarantee that a sub-account or shares of a series or portfolio will
always be available. If you request an amount in a sub-account or Fixed Account
be transferred to a sub-account at a time when the sub-account or underlying
series or portfolio is unavailable, we will not process your transfer request,
and this request will not be counted as a transfer for purposes of determining
the number of free transfers executed. The Company reserves the rights to
change its minimum transfer amount requirements.

TELEPHONE TRANSFER PRIVILEGE

You may direct us to act on transfer instructions given by telephone, subject
to our procedures, by initialing the authorization on the application or by
subsequently completing our administrative form. The authorization will
continue in effect until we receive your written revocation or we discontinue
this privilege. We reserve the right to change our procedures and to
discontinue this privilege.

We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If we do not employ such reasonable procedures, we
may be liable for any losses due to unauthorized or fraudulent instructions.
These procedures may include, but are not limited to, possible recording of
telephone calls and obtaining appropriate personal security codes and contract
number before effecting any transfers.

DOLLAR COST AVERAGING PRIVILEGE ("DCA")

   
You may elect to have us automatically transfer specified amounts FROM
ANY ONE variable sub-account or the Fixed Account (either one a "disbursement"
account) TO ANY OTHER variable sub-account(s) or the Fixed Account on a
periodic basis, subject to our administrative procedures and the restrictions
in "Transfer Privilege" above. This privilege is intended to allow you to
utilize "Dollar Cost Averaging," a long-term investment method which provides
for regular, level, investments over time. We make no representation or
guarantee that DCA will result in a profit or protect against loss.

When the Fixed Account is selected as the disbursement account, we require a
minimum distribution period of 18 months. During this period, surrenders and/or
transfers from the Fixed Account are not permitted.

To initiate DCA, we must receive your written notice on our form. Once elected,
such transfers will be processed until the entire value of the sub-account or
Fixed Account is completely depleted; or we receive your written revocation of
such monthly transfers; or we discontinue this privilege. We reserve the right
to change our procedures or to discontinue the DCA privilege upon 30 days
written notice to you.
    

RESTRICTIONS ON TRANSFERS FROM FIXED ACCOUNT
   
Other than transfers made pursuant to DCA, you may transfer an amount from the
Fixed Account to the sub-account(s) of the Variable Account, subject to these
additional restrictions:
    


                                      21
<PAGE>   27
    1.   we allow only one transfer each year and this transfer must
         be within the period that is 30 days before and 30 days after the
         policy anniversary, and an unused transfer option does not carry
         over to the next year; and
   
    2.   the maximum transfer amount is 50% of the Fixed Account
         value on the date of the transfer, unless the balance after the
         transfer is less than $5000, in which case you may transfer the
         entire value.
    

Under our current procedures, the transfer will be made on the valuation date
that occurs on or next following the date we receive your transfer request at
our Administrative Office.

TRANSFER PROCESSING FEE

There is no limit to the number of transfers that you can make between
sub-accounts or to the Fixed Account. However, we only allow one transfer each
year from the Fixed Account (see "Restrictions on Transfers from Fixed Account"
on page ___). The first 12 transfers during each policy year are free under our
current policy, which we reserve the right to change. If our current policy
changes, we guarantee that we will provide at least four free transfers during
each policy year. Any unused free transfers do not carry over. We will assess a
$25 processing fee for each additional transfer. For the purposes of assessing
the fee, each transfer request (which includes a written notice or telephone
call, but does not include dollar cost averaging automatic transfers) is
considered to be one transfer, regardless of the number of sub-accounts or the
Fixed Account affected by the transfer. The processing fee will be charged
proportionately to the receiving sub-account(s) and/or the Fixed Account.


PAYMENT OF PROCEEDS

PROCEEDS

   
Proceeds means the amount we will pay under your policy when the first of the
following events occurs: the annuity date or maturity date; or the policy is
surrendered; or we receive due proof of death of the annuitant or any owner. We
will pay any proceeds in a single sum that may be payable due to death before
the annuity date or maturity date, unless an election is made for a payment
option. See "Election of Options" on page ___. The policy ends when we pay the
proceeds.
    

We will deduct any applicable premium tax from the proceeds described below,
unless we already deducted the tax from the premiums when paid.

   
PROCEEDS ON ANNUITY DATE OR MATURITY DATE

If Payment Option 1 is in effect on the annuity date, the proceeds we will pay
is the policy value. See "Payment Options" on page ___. If the proceeds are
paid in a lump sum on the annuity date, we will pay the cash surrender value.
    

You may change the annuity date, subject to these limitations:

    1.   we must receive your written notice at our Administrative
         Office at least 30 days before the current annuity date;
    2.   the requested annuity date must be a date that is at least
         30 days after we receive your written notice; and
   
    3.   the requested annuity date should be no later than the first
         day of the month following the annuitant's 100th birthday or any
         earlier date required by law.

The proceeds on the Maturity Date will be the policy value. The Maturity Date
is the first day of the annuitant's 100th birthday.
    

PROCEEDS ON SURRENDER

If you surrender the policy before the annuity date, the proceeds we will pay
is the cash surrender value. The cash surrender value is the policy value, less
any applicable surrender charge. The cash surrender value will be determined on
the date we receive your written notice for surrender and this policy at our
Administrative Office.



                                      22
<PAGE>   28
   
You may surrender the policy for its cash surrender value at any time before
the earlier of the death of the annuitant, the annuity date or maturity date.
However, the surrender proceeds may be subject to a federal income tax,
including a penalty tax. See "Federal Tax Status" on page ___.

You may elect to have the cash surrender value paid in a single sum or under a
payment option. See "Payment Options" on page ___. The policy ends when we pay
the cash surrender value. You may avoid a surrender charge by electing to apply
the policy values under Payment Option 1. See "Proceeds on Annuity Date or
Maturity Date" on page ___.

PROCEEDS ON DEATH OF ANNUITANT BEFORE ANNUITY DATE OR MATURITY DATE (THE DEATH
BENEFIT)

If we receive due proof of death of the annuitant before the annuity date or
maturity date ("such due proof"), the proceeds we will pay to the beneficiary
is the death benefit.

  THE FOLLOWING APPLIES ONLY TO POLICIES ISSUED ON OR AFTER MAY 1, 1996 OR SUCH
  LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE OBTAINED IN THE
  JURISDICTION IN WHICH THE POLICIES ARE OFFERED:

    If we receive such due proof during the first five years, the death benefit
    is the greater of:

        1.   the premiums paid, less: a) any partial withdrawals,
             including applicable surrender charges; and b) any incurred
             taxes; or
        2.   the policy value on the date we receive due proof of
             the annuitant's death.

    If we receive such due proof after the first five policy years, the death
    benefit is the greatest of:

        1.   item "1" above; or
        2.   item "2" above; or
        3.   the policy value at the end of the most recent 5
             policy year period preceding the date we receive due proof of
             the annuitant's death, adjusted for any of the following
             items that occur after such last 5 policy year period: a)
             less any partial withdrawals, including applicable surrender
             charges; b)  less any incurred taxes; and c) plus any
             premiums paid. The 5 policy year periods are measured from
             the policy date (i.e., 5, 10, 15, 20, etc.).

    If on the date the policy was issued, the annuitant was attained age 80 or
    less, then after the annuitant attains age 81, the death benefit is the
    greater of items "1" or "2" above, with no further step-ups in Death
    Benefits occurring. However, if on the date the policy was issued, the
    annuitant was attained age 81 or more, then the death benefit is the policy
    value.

    THE FOLLOWING APPLIES ONLY TO POLICIES ISSUED FROM MAY 1, 1995 THROUGH
    APRIL 30, 1996, OR SUCH LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE
    OBTAINED IN THE JURISDICTIONS IN WHICH THE CONTRACTS ARE OFFERED.
    

    If we receive such due proof during the first seven policy years, the death
    benefit is the greater of:

        1.   the premiums paid, less: a) any partial withdrawals,
             including applicable surrender charges; and b) any incurred
             taxes; or
   
        2.   the policy value on the date we receive due proof of
             the annuitant's death.
    

    If we receive such due proof after the first seven policy years, the death
    benefit is the greatest of:

        1.   item "1." above; or
        2.   item "2." above; or
   
        3.   the policy value at the end of the most recent 7
             policy year period preceding the date we receive due proof of
             the annuitant's death, adjusted for any of the following
             items that occur after such last 7 policy year period: a)
             less any partial withdrawals, including applicable surrender
             charges; b) less any incurred taxes; and c) plus any premiums
             paid. The 7 policy year periods are measured from the policy
             date (i.e., 7, 14, 21, 28, etc.). No further step-ups in
             Death Benefits will occur after the age of 80.
    

THE FOLLOWING APPLIES ONLY TO CONTRACTS ISSUED PRIOR TO MAY 1, 1995 OR SUCH
LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE OBTAINED IN THE JURISDICTION
IN WHICH THE CONTRACTS ARE OFFERED.



                                      23
<PAGE>   29


    If we receive such due proof during the first five policy years, the death
    benefit is the greater of:

        1.   the premiums paid, less: a) any partial withdrawals,
             including applicable surrender charges; and b) any incurred
             taxes; or
        2.   the policy value on the date we receive due proof of
             the annuitant's death.

    If we receive such due proof after the first five policy years, the death
    benefit is the greatest of:
        1.   item "1" above; or
        2.   item "2" above; or
   
        3.   the policy value at the end of the most recent 5
             policy year period preceding the date we receive due proof of
             the annuitant's death, adjusted for any of the following
             items that occur after such last 5 policy year period: a)
             less any partial withdrawals, including applicable surrender
             charges; b) less any incurred taxes; and c) plus any premiums
             paid. The 5 policy year periods are measured from the policy
             date (i.e., 5, 10, 15, 20, etc.).
    

No death benefit is payable if the policy is surrendered before the annuitant's
death.

   
PROCEEDS ON DEATH OF ANY OWNER BEFORE OR AFTER ANNUITY DATE OR MATURITY DATE

If you are not the annuitant, and we receive due proof of your death before the
annuity date or maturity date we will pay the beneficiary the policy value as
of the date we receive due proof of your death. If you are the annuitant, and
we receive due proof of your death before the annuity date or maturity date we
will pay the beneficiary the death benefit described in "Proceeds on Death of
Annuitant Before Annuity Date or Maturity Date."  If any owner dies before the
annuity date, Federal tax law requires the policy value be distributed within
five years after the date of such owner's death regardless of whether such
owner is or is not an annuitant, unless such owner's spouse is the designated
beneficiary, in which case the policy may be continued with the surviving
spouse as the new owner. All such distributions will be made in accordance with
the requirements of the Investment Company Act of 1940.

A "designated beneficiary" is the person designated by you as a beneficiary and
to whom the benefits of the policy pass by reason of an owner's death and must
be a natural person.

If any owner dies on or after the earlier of the annuity date, any remaining
payments must be distributed at least as rapidly as under the payment option in
effect on the date of such owner's death.
    

The distribution requirements described above will be considered satisfied as
to any portion of the proceeds:

    1.   payable to or for the benefit of a designated beneficiary;
         and
   
    2.   which is distributed over the life (or period not exceeding
         the life expectancy) of that beneficiary, provided that the
         beneficiary is a natural person and such distributions begin
         within one year of the owner's death.

If you are not a natural person, the primary annuitant as determined in
accordance with Section 72(s) of the Code (i.e., the individual the events in
the life of whom are of primary importance in effecting the timing or amount of
the payout under the policy) will be treated as an owner for purposes of these
distribution requirements, and any change in the primary annuitant will be
treated as the death of an owner.
    

INTEREST ON PROCEEDS

We will pay interest on proceeds if we do not pay the proceeds in a single sum
or begin paying the proceeds under a payment option:

    1.   within 30 days after the proceeds become payable; or
    2.   within the time required by the applicable jurisdiction, if
         less than 30 days.

This interest will accrue from the date the proceeds become payable to the date
of payment, but not for more than one year, at an annual rate of 3%, or the
rate and time required by law, if greater.



                                     24
<PAGE>   30
PARTIAL WITHDRAWALS

   
You may withdraw part of the cash surrender value at any time before the
earlier of the death of the annuitant, the annuity date or maturity date,
subject to these limits:
    

    1.   the Company's minimum partial withdrawal, currently $250;
    2.   the maximum partial withdrawal is the amount that would
         leave a cash surrender value of $5,000;
   
    3.   a partial withdrawal request which would reduce the amount
         in a sub-account or the Fixed Account below $500 will be treated
         as a request for a full withdrawal of the amount in that
         sub-account or Fixed Account; and
    

    4.   a partial withdrawal request for an amount exceeding $10,000
         must be accompanied by a guarantee of the owner's signature by a
         commercial bank, trust company, or savings and loan.

On the date we receive your written notice for a partial withdrawal at our
Administrative Office, we will withdraw the amount of the partial withdrawal
from the policy value, and we will then deduct any applicable surrender charge
from the remaining policy value. The Company reserves the right to change its
minimum partial withdrawal amount requirements.

   
You may specify the amount to be withdrawn from certain sub-accounts or the
Fixed Account. If you do not provide his information to us, we will withdraw
proportionately from the sub-accounts and Fixed Account in which you are
invested. If you do provide this information to us, but the amount in the
designated sub-accounts or the Fixed Account is inadequate to comply with your
withdrawal request, we will first withdraw as much as possible from the
specified sub-accounts or Fixed Account, withdrawing the remainder
proportionately from the other sub-accounts and Fixed Account in which you are
invested.
    

Any partial or systematic withdrawal may be included in the owner's gross
income in the year in which the withdrawal occurs, and may be subject to
federal income tax, including a penalty tax equal to 10% of the amount treated
as taxable income, and the Code restricts certain distributions under
Tax-Sheltered Annuity Plans and other qualified plans. See "Federal Tax Status"
on page ___.

SYSTEMATIC WITHDRAWAL PRIVILEGE ("SWP")

You may elect to withdraw a fixed-level amount from the sub-account(s) on a
monthly, quarterly, or semi-annual basis beginning 30 days after the Effective
Date, if we receive your written notice on our form and the policy meets the
Company's minimum premium, currently $25,000, and in accordance with "Partial
Withdrawals" above (when surrender charges are applicable). No minimum is
necessary when Surrender Charges are not applicable. While Surrender Charges
are applicable, each year you may withdraw as follows:

    1.   Up to 100% of positive investment earnings of each variable
         sub-account available at the time the SWP is executed/processed;
         PLUS
    2.   Up to 100% of current policy year's interest on FIXED
         ACCOUNT available at the time the SWP is executed/processed; PLUS
    3.   Up to 10% of total premiums still subject to a surrender charge;
         PLUS
    4.   Up to 100% of total premiums NOT SUBJECT TO A SURRENDER CHARGE.

When no Surrender Charges are applicable, the entire policy is available for
systematic withdrawal. The Systematic Withdrawal Privilege will end at the
earliest of the date: when the sub-account(s) you specified for these
withdrawals has no remaining amount to withdraw; or the cash surrender value is
reduced to $5,000; or you elect to pay premiums by pre-authorized check; or we
receive your written notice to end this privilege; or we elect to discontinue
this privilege upon 30 days written notice to you. Use of this privilege during
a policy year counts as your first 10% free withdrawal of total premiums under
the "Surrender Charge" provision. References to partial withdrawals in other
provisions of this Prospectus include systematic withdrawals. If applicable, a
charge for premium taxes may be deducted from each systematic withdrawal
payment. The Company reserves the right to change its minimum systematic
withdrawal amount requirements.


   
PORTFOLIO REBALANCING ("REBALANCING")

Portfolio Rebalancing is an investment strategy in which, on a quarterly,
semi-annual or annual basis, your policy value in the sub-accounts only is
reallocated back to its original portfolio allocation, regardless of changes in
individual portfolio 
    



                                     25
<PAGE>   31

   
values from the time of the last Rebalancing. We make no representation or
guarantee that Rebalancing will result in a profit, protect you against loss or
ensure that you meet your financial goals.

To initiate Rebalancing, we must receive your written notice on our form.
Participation in Rebalancing is voluntary and can be modified or discontinued
at any time by you in writing on our form. Portfolio Rebalancing is not
available for amounts invested and earnings thereon in the Fixed Account.

Once elected, we will continue to perform Rebalancing until we are instructed
otherwise. We reserve the right to change our procedures or discontinue
offering Rebalancing upon 30 days written notice to you.
    


LOANS

The Company may in the future offer a loan privilege to owners of policies
issued in connection with Section 403(b) qualified plans that are not subject
to Title I of ERISA. If offered, owners of such policies may obtain loans using
the policy as the only security for the loan. Loans are subject to provisions
of the Code and to applicable retirement program rules (collectively, "loan
rules"). Tax advisers and retirement plan fiduciaries should be consulted prior
to exercising loan privileges. Policy loans that satisfy certain requirements
with respect to loan amount and repayment are not treated as taxable
distributions. If these requirements are not satisfied, or if the policy
terminates while a loan is outstanding, the loan balance will be treated as a
taxable distribution and may be subject to penalty tax, and the treatment of
the policy under Section 403(b) may be adversely affected.

If loans are offered, the following will apply:

  Under the terms of the policy, qualified policies have a maximum loan
  value equal to 80% of the policy value, although loan rules may serve to
  reduce such maximum loan value in some cases. The amount available for a
  loan at any given time is the loan value less any outstanding debt. Debt
  equals the amount of any loans plus accrued interest. Loans will be made
  only upon written request from the owner. The Company will make loans
  within seven days of receiving a properly completed loan application
  (applications are available from the Company), subject to postponement
  under the same circumstances that payment of withdrawals may be postponed.
  See "Partial Withdrawals" on page ___.

  When an owner requests a loan, the Company will reduce the owner's
  investment in the investment accounts and transfer the amount of the loan
  to the loan account, a part of the Company's general account. The owner
  may designate the investment accounts from which the loan is to be
  withdrawn. Absent such a designation, the amount of the loan will be
  withdrawn from the investment accounts in accordance with the rules for
  making partial withdrawals. See "Partial Withdrawals" on page ___. The
  policy provides that owners may repay policy debt at any time. Under
  applicable loan rules, loans generally must be repaid within five years,
  repayments must be made at least quarterly and repayments must be made in
  substantially equal amounts. When a loan is repaid, the amount of the
  repayment will be transferred from the loan account to the investment
  accounts. The owner may designate the investment accounts to which a
  repayment is to be allocated. Otherwise, the repayment will be allocated
  in the same manner as the owner's most recent premium. On each policy
  anniversary, the Company will transfer from the investment accounts to the
  loan account the amount by which the debt on the policy exceeds the
  balance in the loan account.

  The Company charges interest of 6% per year on policy loans. Loan interest
  is payable in arrears and, unless paid in cash, the accrued loan interest
  is added to the amount of the debt and bears interest at 6% as well. The
  Company credits interest with respect to amounts held in the loan account
  at a rate of 4% per year. Consequently, the net cost of loans under the
  policy is 2%. If on any date debt under a policy exceeds the policy value,
  the policy will be in default. In such case the owner will receive a
  notice indicating the payment needed to bring the policy out of default
  and will have a thirty-one day grace period within which to pay the
  default amount. If the required payment is not made within the grace
  period, the policy will be foreclosed (terminated without value).

   
  The amount of any debt will be deducted from the minimum death benefit.
  See "Proceeds on Death of Annuitant Before Annuity Date or Maturity Date"
  on page ___. In addition, debt, whether or not repaid, will have a
  permanent effect on the policy value because the investment results of the
  investments accounts will apply only to the unborrowed portion of the
  policy value. The longer debt is outstanding, the greater the effect is
  likely to be. The effect could be favorable or unfavorable. If the
  investment results are greater than the rate being credited on amounts
  held in the loan account while the debt is outstanding, the policy value
  will not increase as rapidly as it 
    


                                     26
<PAGE>   32

  would have if no debt were outstanding. If investment results are below
  that rate, the policy value will be higher than it would have been had no
  debt been outstanding.


PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS, CASH SURRENDERS AND TRANSFERS -
POSTPONEMENT

We will usually pay any proceeds payable, amounts partially withdrawn, or the
cash surrender value within seven calendar days after:

    1.   we receive your written notice for a partial withdrawal or a
         cash surrender; or
    2.   the date chosen for any systematic withdrawal; or
    3.   we receive due proof of your death or the death of the
         annuitant.

However, we can postpone the payment of proceeds, amounts withdrawn, the cash
surrender value, or the transfer of amounts between sub-accounts if:

    1.   the New York Stock Exchange is closed, other than customary
         weekend and holiday closings, or trading on the exchange is
         restricted as determined by the SEC; or
    2.   the SEC permits by an order the postponement for the
         protection of policyowners; or
    3.   the SEC determines that an emergency exists that would make
         the disposal of securities held in the Variable Account or the
         determination of the value of the Variable Account's net assets
         not reasonably practicable.

We have the right to defer payment of any partial withdrawal, cash surrender,
or transfer from the Fixed Account for up to six months from the date we
receive your written notice for a withdrawal, surrender or transfer.


CHARGES AGAINST THE POLICY, VARIABLE ACCOUNT, AND FUNDS

SURRENDER CHARGE

   
No deduction for a sales charge is made when premiums are paid. However, a 6%
surrender charge (contingent deferred sales charge) will be deducted when
certain partial withdrawals and cash surrenders are made to at least partially
reimburse us for certain expenses relating to the sale of the policy, including
commissions to registered representatives and other promotional expenses. A
surrender charge may also be applied to the proceeds paid on the annuity date,
unless the proceeds are applied under Payment Option 1.
    

For the purpose of determining if any surrender charge applies and the amount
of such charge, partial withdrawals and surrenders are taken according to these
rules from policy value attributable to premiums or investment earnings in the
following order:

<TABLE>
                                                                                                         SURRENDER CHARGE
                                                                                                         ----------------
<S>                                                                                                      <C>
  1.   Up to 100% of positive investment earnings of each variable sub-account available at
       the time the request is made, once a policy year, PLUS ...........................................None
  2.   Up to 100% of current policy year's interest on the FIXED ACCOUNT at the time the
       request for surrender/withdrawal is made, once a policy year, PLUS................................None
  3.   Up to 10% of total premiums STILL SUBJECT TO A SURRENDER CHARGE, once a policy
       year, PLUS .......................................................................................None
  4.   Up to 100% of those premiums NOT SUBJECT TO A SURRENDER CHARGE, available
       at any time.......................................................................................None
  5.   Premiums subject to a surrender charge:

           For policies issued prior to May 1, 1995 or such later date as applicable regulatory        
           approvals are obtained in the jurisdiction in which the contracts are offered               
           (For 5 years from the date of payment, each premium is subject to a 6% surrender            
               charge. After the 5th year, no surrender charge will apply to such payment) ..............6%  
                                                                                                       
           For policies issued after April 30, 1995 or such later date as applicable regulatory        
           approvals are obtained in the jurisdiction in which the contracts are offered:              
              Policy Years Since Premium Was Paid
              -----------------------------------
                  Less than 1............................................................................6%
                  At least 1, but less than 2............................................................6%
</TABLE>


                                      27
<PAGE>   33
<TABLE>
<S>                                                                                                      <C>
                  At least 2, but less than 3............................................................5%
                  At least 3, but less than 4............................................................5%
                  At least 4, but less than 5............................................................4%
                  At least 5, but less than 6............................................................3%
                  At least 6, but less than 7............................................................2%
                  At least 7...........................................................................None
</TABLE>


   
Any surrender charge will be deducted proportionately from the sub-account(s)
or Fixed Account being surrendered or partially withdrawn in relation to the
amount(s) withdrawn. If the amount remaining in a sub-account or the Fixed
Account after the withdrawal is insufficient to cover the proportionate
surrender charge deduction, the balance of the surrender charge will be
assessed proportionately from any other sub-account and the Fixed Account in
which you are invested.
    

POLICY ADMINISTRATION CHARGE

   
To cover the costs of providing certain administrative services attributable to
the policies and the operations of the Variable Account, including policy
records, communicating with policyowners, and processing transactions, we
deduct a policy administration charge of $30 for the prior policy year on each
policy anniversary. If the policy value on the policy anniversary is $75,000 or
more, we will waive the policy administration charge for the prior policy year.
We will also deduct this charge for the current policy year if the policy is
surrendered for its cash surrender value, unless the policy is surrendered on a
policy anniversary. We do not anticipate any profit from this charge. Even
though our administrative expenses may increase, we guarantee that we will not
increase this charge.

The charge will be assessed proportionately from any sub-accounts and the Fixed
Account in which you are invested. If the charge is obtained from one of the
sub-accounts, we will cancel the appropriate number of units credited to this
policy based on the unit value at the end of the valuation period when the
charge is assessed.
    

DAILY ADMINISTRATION FEE

At each valuation period, we deduct a daily administration fee at an effective
annual rate of 0.15% from the net assets of each sub-account of the Variable
Account. This daily administration fee is intended to reimburse us for other
administrative costs under the policies. There is no necessary relationship
between the daily administration fee and the amount of expenses that may be
attributable to any one policy. We do not anticipate realizing any profit from
this fee, which is guaranteed not to increase for the duration of your policy.

TRANSFER PROCESSING FEE

The first 12 transfers during each policy year are free under our current
policy, which we reserve the right to change. If our current policy changes, we
guarantee that we will provide at least four free transfers during each policy
year. We will assess a $25 processing fee for each additional transfer. For the
purposes of assessing the fee, each transfer request (which includes a written
notice or telephone call, but does not include dollar cost averaging automatic
transfers) is considered to be one transfer, regardless of the number of
sub-accounts or the Fixed Account affected by the transfer. The processing fee
will be charged proportionately to the receiving sub-account(s) and/or the
Fixed Account. We do not expect a profit from this fee. See "Transfers" on page
___ for the rules concerning transfers.

ANNUALIZED MORTALITY AND EXPENSE RISK CHARGE

   
The mortality risk we assume is the risk that annuitants may live for a longer
period of time than we estimated when we established our guarantees in the
policy. Because of these guarantees, each annuitant is assured that their
longevity will not have an adverse effect on the annuity payments they receive.
The mortality risk we assume also includes our guarantee to pay a death benefit
if the annuitant dies before the annuity date or maturity date. The expense
risk we assume is the risk that the surrender charges, policy administration
charges, daily administration fee, and transfer fees may be insufficient to
cover our actual future expenses.

The annual mortality and expense risk charge is deducted at each valuation
period from the assets of the Variable Account at an effective annual rate of
1.25% of the value of the net assets in the Variable Account. We guarantee that
the rate of this charge will never increase. This charge is not made after the
earlier of the annuity date or maturity date, and this charge is not made
against any Fixed Account value. This charge consists of approximately 0.85% to
cover the mortality risk, and approximately 0.40% to cover the expense risk. If
this charge is 
    



                                      28
<PAGE>   34

insufficient to cover our actual costs of mortality and expense risks, we will
bear the loss. However, if this charge exceeds our actual costs of mortality and
expense risks, the excess will be a profit to us and will be available for any
proper corporate purpose including, among other things, payment of distribution
expenses, since we anticipate that the surrender charges will be insufficient to
cover the costs of our actual distribution expenses. We currently anticipate a
profit from this charge.

WAIVER OF SURRENDER CHARGE

When the policy has been in effect for 1 year, upon written notice from you,
the Surrender Charge will be waived on any partial withdrawal or surrender
after you provide us evidence that satisfies us in a written statement signed
by a qualified physician that:

    1.   a) you are terminally ill: and
         b) your life expectancy is not more than 12 months due to
            the severity and nature of the terminal illness; and
         c) the diagnosis of the terminal illness was made
            after the effective date of this policy.

    2.   you are or have been confined to a hospital, nursing home or
         long-term care facility for at least 90 consecutive days,
         provided:

         a) confinement is for medically necessary reasons at
            the recommendation of a physician;
         b) the hospital, nursing home or long-term care
            facility is licensed or otherwise recognized and operating as
            such by the proper authority in the state where it is
            located, the Joint Commission on Accreditation of Hospitals
            or Medicare and satisfactory evidence of such status is
            provided to us; and
         c) the withdrawal or surrender request is received by
            us no later than 91 days after the last day of your
            confinement.

   
For policies issued on or after May 1, 1996, this provision is not available if
any owner was attained age 81 or older on the Effective Date.
    

REDUCTION OR ELIMINATION OF SURRENDER CHARGES

The amount of the surrender charge on a policy may be reduced or eliminated
when some or all of the policies are to be sold to a group of individuals in
such a manner that results in savings of sales expenses. In determining whether
to reduce the surrender charge, the Company will consider certain factors
including the following:

    1.   The size and type of group to which the sales are to be made
         will be considered. Generally, sales expenses for a larger group
         are smaller than for a smaller group because of the ability to
         implement large numbers of sales with fewer sales contacts.
    2.   The total amount of premiums to be received will be
         considered. Per dollar sales expenses are likely to be less on
         larger premiums than on smaller ones.
    3.   Any prior or existing relationship with the Company will be
         considered. Policy sales expenses are likely to be less when
         there is a prior or existing relationship because of the
         likelihood of implementing more sales with fewer sales contacts.
    4.   The level of commissions paid to selling broker-dealers will
         be considered. Certain broker-dealers may offer policies in
         connection with financial planning programs offered on a fee for
         service basis. In view of the financial planning fees, such
         broker-dealers may elect to receive lower commissions for sales
         of the policies, thereby reducing the Company's sales expenses.

If, after consideration of the foregoing factors, it is determined that there
will be a reduction in sales expenses, the Company will provide a reduction in
the surrender charge. The surrender charge will be eliminated when a policy is
issued to an officer, director, employee, or relative thereof of: the Company;
The Canada Life Assurance Company; J. & W. Seligman Co. Incorporated; or any of
their affiliates. In no event will reduction or elimination of the surrender
charge be permitted where such reduction or elimination will be discriminatory
to any person.

REDUCTION OR ELIMINATION OF POLICY ADMINISTRATION CHARGE

   
The amount of the policy administration charge on a policy may be reduced or
eliminated when some or all of the policies are to be sold to a group of
individuals in such a manner that results in savings of administration
expenses. In addition, if the policy value on the policy anniversary is $75,000
or more, we will waive the policy administration charge 
    


                                      29

<PAGE>   35

   
for the prior policy year. In determining whether to reduce or eliminate the
administration charges, the Company will consider certain factors including the
following:
    

    1.   The size and type of group to which administrative services
         are to be provided will be considered.
    2.   The total amount of premiums to be received will be
         considered.

If, after consideration of the foregoing factors, it is determined that there
will be a reduction or elimination of administration expenses, the Company will
provide a reduction in the policy administration charge. In no event will
reduction or elimination of the administration charge be permitted where such
reduction or elimination will be discriminatory to any person.

TAXES

We will incur premium taxes in some jurisdictions relating to the policies.
Depending on the jurisdiction, we deduct any such taxes from either: a) the
premium when paid; or b) the policy value when it is applied under a payment
option, cash surrender or partial withdrawal. A summary of current state
premium tax rates is contained in Appendix A.

   
When any tax is deducted from the policy value, it will be deducted
proportionately from the sub-accounts and the Fixed Account in which you are
invested.
    

We reserve the right to charge or provide for any taxes levied by any
governmental entity, including:

    1.   taxes that are against or attributable to premiums, policy
         values or annuity payments; or
    2.   taxes that we incur which are attributable to investment
         income or capital gains retained as part of our reserves under
         the policies or from the establishment or maintenance of the
         Variable Account.


OTHER CHARGES INCLUDING INVESTMENT ADVISORY FEES

   
Each portfolio is responsible for all of its operating expenses. In addition,
fees for investment advisory services are charged monthly from each portfolio
at an annual rate of the monthly net assets of the portfolio. The Prospectus
and Statement of Additional Information for each Fund provides more information
concerning the investment advisory fee, other charges assessed against the
portfolio(s) each Fund offers, and the investment advisory services provided to
such portfolio(s).
    

   
    

                                      30
<PAGE>   36
   
    

PAYMENT OPTIONS

   
The policy ends when we pay the proceeds on the earlier of the annuity date or
maturity date. On the annuity date, we will apply the policy value under Payment
Option 1, unless you have an election of a payment option on file at our
Administrative Office to receive the cash surrender value in a single sum, or to
receive a mutually agreed upon payment option (Payment Option 2). See "Proceeds
on Annuity Date or Maturity Date" on page ___. We require the surrender of your
policy so that we may pay the cash surrender value or issue a supplemental
contract for the applicable payment option. The term "payee" means a person who
is entitled to receive payment under this section.
    

   
    

ELECTION OF OPTIONS

   
You may elect an option or revoke or change your election at any time before
the annuity date or maturity date while the annuitant is living. If an election
is not in effect at the annuitant's death or if payment is to be made in one
sum under an existing election, the beneficiary may elect one of the options.
This election must be made within one year after the annuitant's death and
before any payment has been made.
    

An election of an option and any revocation or change must be made in a written
notice. It must be filed with our Administrative Office with the written
consent of any irrevocable beneficiary or assignee.

An option may not be elected and we will pay the proceeds in one sum if either
of the following conditions exist:

    1.   the amount to be applied under the option is less than
         $1,000; or
    2.   any periodic payment under the election would be less than
         $50.

   
    

   
DESCRIPTION OF PAYMENT OPTIONS

Payment Option 1: Life Income

We will pay the proceeds in equal amounts at the beginning of each month,
during the payee's lifetime.
    



                                      31
<PAGE>   37

   
The amount of each payment will be determined from the tables in the policy
which apply to Payment Option 1, using the payee's age. Age will be determined
from the nearest birthday at the due date of the first payment.

Payment Option 2: Mutual Agreement

We will pay the proceeds according to other terms, if those terms are mutually
agreed upon.
    
   
    

PAYMENT DATES

   
The payment dates of the options will be calculated from the date on which the
proceeds become payable.
    

AGE AND SURVIVAL OF PAYEE

We have the right to require proof of age of the payee(s) before making any
payment. When any payment depends on the payee's survival, we will have the
right, before making the payment, to require proof satisfactory to us that the
payee is alive.



                                      32
<PAGE>   38


DEATH OF PAYEE

At the death of the payee, or the last survivor of the payees, any amount
remaining to be paid under this section will become payable in one sum, unless
specified otherwise.

   
    

OTHER POLICY PROVISIONS

   
OWNER OR JOINT OWNER

During the annuitant's lifetime and before the earlier of the annuity date or
maturity date, you have all the rights and privileges granted by the policy. If
you appoint an irrevocable beneficiary or assignee, then your rights will be
subject to those of that beneficiary or assignee.

During the annuitant's lifetime and before the earlier of the annuity date or
maturity date, you may name a new owner, joint owner or annuitant by giving us
written notice.

With respect to Qualified Policies generally, however, the contract may not be
assigned (other than to us), joint ownership is not permitted, and the Owner
must be the annuitant.
    

BENEFICIARY

   
We will pay the beneficiary any proceeds payable on your death or the death of
the annuitant. During the annuitant's lifetime and before the earlier of the
annuity date or maturity date, you may name and change one or more
beneficiaries by giving us written notice. However, we will require written
notice from any irrevocable beneficiary or assignee specifying their consent to
the change.
    

We will pay the proceeds under the beneficiary appointment in effect at the
date of death. If you have not designated otherwise in your appointment, the
proceeds will be paid to the surviving beneficiary(ies) equally. If no
beneficiary is living when you die or the annuitant dies, or if none has been
appointed, the proceeds will be paid to you or to your estate.

WRITTEN NOTICE

Written Notice must be signed by you, dated, and of a form and content
acceptable to us. Your written notice will not be effective until we receive it
at our Administrative Office. However, the change provided in your written
notice to name or change the owner or beneficiary will then be effective as of
the date you signed the written notice:

    1.   subject to any payments made or other action we take before
         we receive and file your written notice; and
    2.   whether or not you or the annuitant are alive when we
         receive and file your written notice.

PERIODIC REPORTS

We will mail you a report showing the following items about your policy:

    1.   the number of units credited to the policy and the dollar value
         of a unit;
    2.   the policy value;
    3.   any premiums paid, withdrawals, and charges made since the
         last report; and
    4.   any other information required by law.

The information in the report will be as of a date not more than two months
before the date of the mailing. We will mail the report to you:

    1.   at least annually, or more often as required by law; and
    2.   to your last address known to us.


                                      33
<PAGE>   39
ASSIGNMENT

   
You may assign a nonqualified policy or an interest in it at any time before
the earlier of the annuity date or maturity date during the annuitant's
lifetime. An assignment must be in a written notice acceptable to us. It will
not be binding on us until we receive and file it at our Administrative Office.
We are not responsible for the validity of any assignment. Your rights and the
rights of any beneficiary will be affected by an assignment.
    

An assignment of a nonqualified policy may result in certain tax consequences
to the owner. See "Transfers, Assignment or Exchanges of a Policy" on page ___.

MODIFICATION

Upon notice to you, we may modify the policy, but only if such modification:

    1.   is necessary to make the policy or the Variable Account
         comply with any law or regulation issued by a governmental agency
         to which we are subject; or
    2.   is necessary to assure continued qualification of the policy
         under the Code or other federal or state laws relating to
         retirement annuities or variable annuity policies; or
    3.   is necessary to reflect a change in the operation of the Variable
         Accounts; or
    4.   provides additional variable account and/or fixed
         accumulation options.

In the event of any such modification, we may make any appropriate endorsement
to the policy.


                            YIELDS AND TOTAL RETURNS


From time to time, we may advertise yields, effective yields, and total returns
for the sub-accounts. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT
INDICATE OR PROJECT FUTURE PERFORMANCE. Each sub-account may, from time to
time, advertise performance relative to certain performance rankings and
indices compiled by independent organizations. More detailed information as to
the calculation of performance information, as well as comparisons with
unmanaged market indices, appears in the Statement of Additional Information.

Effective yields and total returns for the sub-accounts are based on the
investment performance of the corresponding series or portfolio of the Funds.
The Funds' performance in part reflects the Funds' expenses. CLASF's expenses
in excess of 0.40% (0.25% for the Money Market Series), other than the advisory
fee, may be reimbursed. Fidelity's expenses in excess of those stated, other
than the individual fund fee, may be reimbursed. Effective yields and total
returns for the sub-accounts prior to May 1, 1994, do not reflect the deduction
of a 0.15% Daily Administration Fee. See the Prospectuses for CLASF, Fidelity,
Fidelity II, and Seligman.

The yield of the Money Market Sub-Account refers to the annualized income
generated by an investment in the Sub-Account over a specified 7 day period.
The yield is calculated by assuming that the income generated for that 7 day
period is generated each 7 day period over a 52 week period and is shown as a
percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the 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 sub-account (except the Money Market Sub-Account) refers to the
annualized income generated by an investment in the sub-account over a
specified 30 day or one month period. The yield is calculated by assuming that
the income generated by the investment during that 30 day or one month period
is generated each period over a 12 month period and is shown as a percentage of
the investment.

The total return of a sub-account refers to return quotations assuming an
investment under a policy has been held in the sub-account for various periods
of time including, but not limited to, a period measured from the date the
sub-account commenced operations. When a sub-account has been in operation for
1, 5, and 10 years, respectively, the total return for these periods will be
provided.

The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a policy to the redemption value of that investment as of the last day of
each of the periods for which total return quotations are provided. Average
annual total return information shows the average 



                                      34
<PAGE>   40

percentage change in the value of an investment in the sub-account from the
beginning date of the measuring period to the end of that period. This
standardized version of average annual total return reflects all historical
investment results, less all charges and deductions applied against the
sub-account (including any surrender charge that would apply if an Owner
terminated the policy at the end of each period indicated, but excluding any
deductions for premium taxes).

We may, in addition, advertise total return performance information computed on
a different basis. We may present total return information computed on the same
basis as described above, except deductions will not include the surrender
charge. This presentation assumes that the investment in the policy persists
beyond the period when the surrender charge applies, consistent with the
long-term investment and retirement objectives of the policy.

We may compare the performance of each sub-account in advertising and sales
literature 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 sub-accounts. Lipper Analytical Services, Inc.
("Lipper") and the Variable Annuity Research Data Service ("VARDS") are
independent services which monitor and rank the performances of variable
annuity issuers in each of the major categories of investment objectives on an
industry-wide basis. Other services or publications may also be cited in our
advertising and sales literature.

Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS rankings compare only variable annuity issuers. The performance
analysis prepared by Lipper and VARDS each  rank such issuers on the basis of
total return, assuming reinvestment of distributions, but do not take sales
charges, redemption fees or certain expense deductions at the separate account
level into consideration. In addition, VARDS prepares risk adjusted rankings,
which consider the effects of market risk on total return performance. This
type of ranking provides data as to which funds provide the highest total
return within various categories of funds defined by the degree of risk
inherent in their investment objectives.

We may also compare the performance of each sub-account in advertising and
sales literature to the Standard & Poor's composite index of 500 common stocks,
a widely used index to measure stock market performance. This unmanaged index
does not reflect any "deduction" for the expense of operating or managing an
investment portfolio. We may also make comparison to Lehman Brothers
Government/Corporate Bond Index, an index that includes the Lehman Brothers
Government Bond and Corporate Bond Indices. These indices are total rate of
return indices. The Government Bond Index includes the Treasury Bond Index
(public obligations of the U.S. Treasury) and the Agency Bond Index (publicly
issued debt of U.S. Government agencies, quasi-federal corporations, and
corporate debt guaranteed by the U.S. Government). The Corporate Bond Index
includes publicly issued, fixed rate, nonconvertible investment grade
dollar-denominated, SEC registered corporate debt. All issues have at least a
one-year maturity, and all returns are at market value inclusive of accrued
interest. Other independent indices such as those prepared by Lehman Brothers
Bond Indices may also be used as a source of performance comparison.

We may also compare the performance of each sub-account in advertising and
sales literature to the Dow Jones Industrial Average, a stock average of 30
blue chip stock companies that does not represent all new industries. Other
independent averages such as those prepared by Dow Jones & Company, Inc. may
also be used as a source of performance comparison. Day-to-day changes may not
be reflective of the overall market when an average is composed of a small
number of companies.


                                  TAX DEFERRAL

Under current tax laws any increase in policy value is generally not taxable to
you or the annuitant until received, subject to certain exceptions. See
"FEDERAL TAX STATUS" on page ___. This deferred tax treatment may be beneficial
to you in building assets in a long-range investment program.

We may also distribute sales literature or other information including the
effect of tax-deferred compounding on a sub-account's investment returns, or
returns in general, which may be illustrated by tables, graphs, charts or
otherwise, and which may include a comparison, at various points in time, of
the return from an investment in a policy (or returns in general) on a
tax-deferred basis (assuming one or more tax rates) with the return on a
currently taxable basis where allowed by state laws. All income and capital
gains derived from sub-account investments are reinvested and compound
tax-deferred until distributed. Such tax-deferred compounding can result in
substantial long-term accumulation of assets, provided that the investment
experience of the underlying series of the Funds is positive.




                                      35
<PAGE>   41
                               FEDERAL TAX STATUS

     THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE

INTRODUCTION

This discussion is not intended to address the tax consequences resulting from
all of the situations in which a person may be entitled to or may receive a
distribution under the annuity policy we issue. Any person concerned about
these tax implications should consult a tax adviser before initiating any
transaction. This discussion is based upon general understanding of the present
Federal income tax laws. No representation is made as to the likelihood of the
continuation of the present Federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.

The policy may be purchased on a nonqualified tax basis ("Nonqualified Policy")
or purchased and used in connection with plans qualifying for favorable tax
treatment ("Qualified Policy"). The Qualified Policy was designed for use by
individuals whose premium payments are comprised of proceeds from and/or
contributions under retirement plans which are intended to qualify as plans
entitled to special income tax treatment under Sections 401(a), 401(k), 403(a),
403(b), 408 or 457 of the Code. The ultimate effect of Federal income tax on
the amounts held under a policy, or annuity payments, and on the economic
benefit to the owner, the annuitant, or the beneficiary depends on the type of
retirement plan, on the tax and employment status of the individual concerned
and on our tax status. In addition, certain requirements must be satisfied in
purchasing a Qualified Policy with proceeds from a tax qualified plan and
receiving distributions from a Qualified Policy in order to continue receiving
favorable tax treatment. Therefore, purchasers of Qualified Policies should
seek legal and tax advice regarding the suitability of a policy for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of a policy. The following discussion assumes that Qualified Policies
are purchased with proceeds from and/or contributions under retirement plans
that receive the intended special Federal income tax treatment.


THE COMPANY'S TAX STATUS

The Variable Account is not separately taxed as a "regulated investment
company" under Subchapter M of the Code. The operations of the Variable Account
are a part of and taxed with our operations. We are taxed as a life insurance
company under Subchapter L of the Code.

At the present time, we make no charge for any Federal, state or local taxes
(other than premium taxes) that we incur which may be attributable to the
Variable Account or to the policies. However, we do reserve the right to make a
charge in the future for any such tax or other economic burden resulting from
the application of the tax laws that we determine to be properly attributable
to the Variable Account or to the policies.


TAX STATUS OF THE POLICY

DIVERSIFICATION REQUIREMENTS

   
Section 817(h) of the Code provides that separate account investments
underlying a policy must be "adequately diversified" in accordance with
Treasury regulations in order for the policy to qualify as an annuity policy
under Section 72 of the Code. The Variable Account, through each series or
portfolio of CLASF, Fidelity, Fidelity II, Seligman, Dreyfus, Dreyfus Socially
Responsible, Alger, and Montgomery intends to comply with the diversification
requirements prescribed in regulations under Section 817(h) of the Code, which
affect how the assets in the various divisions of the Accounts may be invested.
Although we do not have control over CLASF, Fidelity, Fidelity II, Seligman,
Dreyfus, Dreyfus Socially Responsible, Alger, or Montgomery in which the
Variable Account invests, we believe that each series in which the Variable
Account owns shares will meet the diversification requirements and that
therefore the Policy will be treated as an annuity under the Code.
    

In certain circumstances, variable annuity policyowners may be considered the
owners, for Federal income tax purposes, of the assets of the separate account
used to support their policies. In those circumstances, income and gains from
the separate account assets would be includable in the variable annuity
policyowner's gross income. Several years ago, the IRS stated in published
rulings that a variable policyowner will be considered the owner of separate
account assets if the policyowner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets.
More recently, the Treasury Department announced, in connection with the
issuance of regulations concerning 



                                      36
<PAGE>   42

   
investment diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account."  This
announcement also stated that guidance would be issued by way of regulations or
rulings on the "extent to which policyholders may direct their investments to
particular sub-accounts without being treated as owners of the underlying
assets."
    

The ownership rights under the policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not owners of separate account assets. For example, the
owner of the policy has the choice of more subdivisions to which to allocate
premiums and policy values then such rulings, has a choice of investment
strategies different from such rulings, and may be able to transfer among
subdivisions more frequently than in such rulings. These differences could
result in the policyowner being treated as the owner of the assets of the
Variable Account. In addition, we do not know what standards will be set forth
in the regulations or rulings which the Treasury Department has stated it
expects to issue. We therefore reserve the right to modify the policy as
necessary to attempt to prevent the policyowner from being considered the owner
of the assets of the Variable Account.

REQUIRED DISTRIBUTIONS

In addition to the requirements of Section 817(h) of the Code, in order to be
treated as an annuity policy for Federal income tax purposes, Section 72(s) of
the Code requires any Nonqualified Policy to provide that (a) if any owner dies
on or after the annuity commencement date but prior to the time the entire
interest in the Policy has been distributed, the remaining portion of such
interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that owner's death; and (b) if any
owner dies prior to the annuity commencement date, the entire interest in the
Policy will be distributed within five years after the date of the owner's
death. These requirements will be considered satisfied as to any portion of the
owner's interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
owner's death. The owner's "designated beneficiary" is the person designated by
such owner as a beneficiary and to whom proceeds of the Policy passes by reason
of death and must be a natural person. However, if the owner's "designated
beneficiary" is the surviving spouse of the owner, the Policy may be continued
with the surviving spouse as the new owner.

The Nonqualified Policies contain provisions which are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. We intend to review such
provisions and modify them if necessary to assure that they comply with the
requirements of Code Section 72(s) when clarified by regulation or otherwise.

   
Other rules may apply to Qualified Policies (see "Minimum Distribution
Requirements ("MDR") for IRA's, page      ).
    


The following discussion assumes that the policies will qualify as annuity
contracts for Federal income tax purposes.

TAXATION OF ANNUITIES

IN GENERAL

Section 72 of the Code governs taxation of annuities in general. We believe
that an owner who is a natural person generally is not taxed on increases in
the value of a policy until distribution occurs by withdrawing all or part of
the accumulation value (e.g., partial withdrawal or surrenders) or as annuity
payments under the annuity option elected. For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the accumulation value
(and in the case of a Qualified Policy, any portion of an interest in the
qualified plan) generally will be treated as a distribution. The taxable
portion of a distribution (in the form of a single sum payment or an annuity)
is taxable as ordinary income.

The owner of any annuity policy who is not a natural person generally must
include in income any increase in the excess of the policy's accumulation value
over the policy's "investment in the contract" during the taxable year. There
are some exceptions to this rule and a prospective owner that is not a natural
person may wish to discuss these with a tax adviser.



                                      37
<PAGE>   43
The following discussion generally applies to policies owned by natural
persons.

WITHDRAWALS/DISTRIBUTIONS

In the case of a distribution under a Qualified Policy (other than a Section
457 plan), under Section 72(e) of the Code a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the participant's total accrued benefit or balance under the
retirement plan. The "investment in the contract" generally equals the portion,
if any, of any premium payments paid by or on behalf of any individual under a
Policy which was not excluded from the individual's gross income. For policies
issued in connection with qualified plans, the "investment in the contract" can
be zero. Special tax rules may be available for certain distributions from
Qualified Policies.

   
In the case of a withdrawal/distribution (e.g. surrender, partial withdrawal of
systematic withdrawal) under a Nonqualified Policy before the annuity date,
under Code Section 72(e) amounts received are generally first treated as
taxable income to the extent that the accumulation value immediately before the
withdrawal exceeds the "investment in the contract" at that time. Any
additional amount withdrawn is not taxable.
    

ANNUITY PAYMENTS

Although tax consequences may vary depending on the annuity option elected
under an annuity policy, under Code Section 72(b), generally gross income does
not include that part of any amount received as an annuity under an annuity
policy that bears the same ratio to such amount as the investment in the
contract bears to the expected return at the annuity starting date. For
variable income payments, in general, the taxable portion (prior to recovery of
the investment in the contract) is determined by a formula which establishes
the specific dollar amount of each annuity payment that is not taxed. The
dollar amount is determined by dividing the "investment in the contract" by the
total number of expected periodic payments. For fixed income payments (prior to
recovery of the investment in the contract), in general, there is no tax on the
amount of each payment which represents the same ratio that the "investment in
the contract" bears to the total expected value of the annuity payments for the
term of the payments; however, the remainder of each income payment is taxable.
In all cases, after the "investment in the contract" is recovered, the full
amount of any additional annuity payments is taxable.

TAXATION OF DEATH BENEFIT PROCEEDS

   
Amounts may be distributed from a policy because of the death of an owner or
the annuitant. Generally, such amounts are includable in the income of the
recipient as follows:
    

    1.   if distributed in a lump sum, they are taxed in the same
         manner as a full surrender of the policy; or
    2.   if distributed under a payment option, they are taxed in the
         same manner as annuity payments.

PENALTY TAX ON CERTAIN WITHDRAWALS

In the case of a distribution pursuant to a Nonqualified Policy, there may be
imposed a Federal penalty tax equal to 10% of the amount treated as taxable
income. In general, however, there is no penalty tax on distributions:

    1.   made on or after the taxpayer reaches age 59 1/2;
   
    2.   made on or after the death of an owner (or if the owner is
         not an individual, the death of the primary annuitant);
    

    3.   attributable to the owner becoming disabled;
   
    4.   as part of a series of substantially equal periodic payments
         (not less frequently than annually) for the life (or life
         expectancy) of the taxpayer or the joint lives (or joint life
         expectancies) of the taxpayer and beneficiary;
    

    5.   made under an annuity policy that is purchased with a single
         premium when the annuity starting date is no later than a year
         from purchase of the annuity and substantially equal periodic
         payments are made, not less frequently than annually, during the
         annuity period; and
    6.   made under certain annuities issued in connection with
         structured settlement agreements.

Other tax penalties may apply to certain distributions under a Qualified
Policy, as well as to certain contributions, loans and other circumstances.



                                      38
<PAGE>   44

TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A POLICY

A transfer of ownership, the designation of an annuitant or other beneficiary
who is not also the owner, the designation of certain annuity starting dates,
or the exchange of a policy may result in certain tax consequences to the owner
that are not discussed herein. An owner contemplating any such transfer,
assignment, designation, or exchange of a policy should contact a tax adviser
with respect to the potential tax effects of such a transaction.


WITHHOLDING

Pension and annuity distributions generally are subject to withholding for the
recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1993, withholding is mandatory for certain
distributions from Qualified contracts.


MULTIPLE POLICIES

Section 72(e)(11) of the Code treats all nonqualified deferred annuity policies
entered into after October 21, 1988, that are issued by us (or our affiliates)
to the same owner during any calendar year as one annuity policy for purposes
of determining the amount includable in gross income under Code Section 72(e).
The effects of this rule are not yet clear; however, it could affect the time
when income is taxable and the amount that might be subject to the 10% penalty
tax described above. In addition, the Treasury Department has specific
authority to issue regulations that prevent the avoidance of Section 72(e)
through the serial purchase of annuity contracts or otherwise. There may also
be other situations in which the Treasury may conclude that it would be
appropriate to aggregate two or more annuity contracts purchased by the same
owner. Accordingly, a policyowner should consult a tax adviser before
purchasing more than one annuity contract.

POSSIBLE TAX CHANGES

In recent years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is
credited to the annuity. Although as of the date of this prospectus Congress is
not considering any legislation regarding the taxation of annuities, there is
always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, and
judicial decisions.)  Moreover, it is also possible that any legislative change
could be retroactive (that is, effective prior to the date of such change).


TAXATION OF QUALIFIED PLANS

The policies are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according to
the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits, distributions prior to age 59 1/2 (subject to certain
exceptions), distributions that do not conform to specified commencement and
minimum distribution rules, aggregate distributions in excess of a specified
annual amount, and in certain other circumstances. Therefore, no attempt is
made to provide more than general information about the use of the policies
with the various types of qualified retirement plans. Policyowners, annuitants,
and beneficiaries are cautioned that the rights of any person to any benefits
under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the policy, but we shall not be bound by the terms and conditions of such plans
to the extent such terms contradict the policy, unless we consent. Some
retirement plans are subject to distribution and other requirements that are
not incorporated in the administration of the policies. Owners are responsible
for determining that contributions, distributions and other transactions with
respect to the policies satisfy applicable law. Brief descriptions follow of
the various types of qualified retirement plans in connection with which we
will issue a policy. We will amend the policy as instructed to conform it to
the applicable legal requirements for such plan.



                                      39
<PAGE>   45
INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSIONS (SEP/IRAS)

Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA". These IRAs are subject to limits on the amount that may be contributed,
the persons who may be eligible and on the time when distributions may
commence. Also, distributions from certain other types of qualified retirement
plans may be "rolled over" on a tax-deferred basis into an IRA. Sales of the
policy for use with IRAs may be subject to special requirements of the Internal
Revenue Service.

Section 408(k) of the Code allows employers to establish simplified employee
pension plans for their employees, using an IRA for such purpose, if certain
criteria are met. Under these plans the employer may, within specified limits,
make deductible contributions on behalf of the employee to an IRA. Employers
intending to use the policy in connection with such plans should seek advice.

   
Purchasers of a policy for use with IRAs will be provided with supplemental
information required by the Internal Revenue Service or other appropriate
agency. Such purchasers will have the right to revoke their purchase within
seven days of the earlier of the establishment of the IRA or their purchase.
Purchasers should seek competent advice as to the suitability of the policy for
use with IRAs. The Internal Revenue Service has not reviewed the Policy for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in the
policy comports with IRA qualification requirements.

MINIMUM DISTRIBUTION REQUIREMENTS ("MDR") FOR IRAS

The Code  requires that minimum distribution from an IRA begin no later than
April 1 of the year following the year in which the owner attains age 70.
Failure to do so results in a penalty of 50% of the amount not withdrawn. This
penalty is in addition to normal income tax. We will calculate the MDR only for
funds invested in this Policy and subject to our administrative guidelines,
including but not limited to: 1) minimum withdrawal amount of $250; 2) while
surrender charges are applicable, up to 10% of total premium plus 100% of any
sub-account earnings and 100% of current policy year's Fixed Account interest
may be withdrawn; and 3) use of MDR counts as the once a policy year free
withdrawal.

As an administrative practice, we will calculate and distribute an amount from
an IRA using the method contained in the Code's minimum distribution
requirements. The annual distribution is determined by dividing the prior
December 31st value for the policy by a life expectancy factor. The factor will
be based on either your life or the life expectancies of your life and your
designated beneficiary, as directed by you, and based on tables found in the
IRS' regulations. Factors are redetermined for each year's distribution. The
value of the policy to be used in this calculation is the policy value on the
December 31st prior to the year for which each subsequent payment is made. The
life expectancy factor is determined by using the appropriate IRS chart based
on one of the following circumstances:

     1. Your life expectancy (Single Life Expectancy);
     2. Joint life expectancy between you and your designated beneficiary
        (Joint Life and Last Survivor Expectancy); or
     3. Your life expectancy and a non-spouse beneficiary more than 10 years
        younger than you (Minimum Distribution Incident Benefit Requirement).

The Code Minimum Distribution Requirements also apply to distribution from
qualified plans other than IRA's. You are responsible for ensuring that
distributions from such plans satisfy the Code minimum distribution
requirements.
    

CORPORATE AND SELF-EMPLOYED (H.R.10 AND KEOGH) PENSION AND PROFIT-SHARING PLANS

Sections 401(a), 401(k) and 403(a) of the Code permit corporate employers to
establish various types of tax-favored retirement plans for employees. The
Self-Employed Individual Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R.10" or "Keogh", permits self-employed individuals also to
establish such tax-favored retirement plans for themselves and their employees.
Such retirement plans may permit the purchase of the policies in order to
accumulate retirement savings under the plans. Adverse tax consequences to the
plan, to the participant or to both may result if this policy is assigned or
transferred to any individual as a means to provide benefit payments. Employers
intending to use the policy in connection with such plans should seek advice.

DEFERRED COMPENSATION PLANS

Section 457 of the Code provides for certain deferred compensation plans. These
plans may be offered with respect to service for state governments, local
governments, political subdivisions, agencies, instrumentalities and certain
affiliates of such entities, and tax exempt organizations. The plans may permit
participants to specify the form of investment for 



                                      40
<PAGE>   46

their deferred compensation account. All distributions are taxable as ordinary
income. All investments are owned by the sponsoring employer and are subject to
the claims of the general creditors of the employer.

TAX-SHELTERED ANNUITY PLANS

   
Section 403(b) of the Code permits public school systems and certain tax-exempt
organizations specified in Section 501(c)(3) to make payments to purchase
annuity policies for their employees. Such payments are excludable from the
employee's gross income (subject to certain limitations), but may be subject to
FICA (Social Security) taxes. Under Code requirements, Section 403(b) annuities
generally may not permit distribution of: 1) elective contributions made in
years beginning after December 31, 1988; 2) earnings on those contributions;
and 3) earnings on amounts attributed to elective contributions held as of the
end of the last year beginning before January 1, 1989. Under Code requirements,
distributions of such amounts will be allowed only: 1) upon the death of the
employee; or 2) on or after attainment of age 59 1/2; or 3) separation from
service; or 4) disability; or 5) financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship. With respect to these restrictions, the Company is relying upon a
no-action letter dated November 28, 1988, from the staff of the SEC to the
American Council of Life Insurance, the requirements for which have been or
will be complied with by the Company.
    


OTHER TAX CONSEQUENCES

As noted above, the foregoing comments about the Federal tax consequences under
these policies are not exhaustive and special rules are provided with respect
to other tax situations not discussed in this Prospectus. Further, the Federal
income tax consequences discussed herein reflect our understanding of current
law and the law may change. Federal estate and state and local estate,
inheritance, and other tax consequences of ownership or receipt of
distributions under a Policy depend on the individual circumstances of each
owner or recipient of the distribution. A tax adviser should be consulted for
further information.


            RESTRICTIONS UNDER THE TEXAS OPTIONAL RETIREMENT PROGRAM

Section 36.105 of the Texas Educational Code permits participants in the Texas
Optional Retirement Program ("ORP") to withdraw their interest in a variable
annuity policy issued under the ORP only upon: 1) termination of employment in
the Texas public institutions of higher education; 2) retirement; or 3) death.
Accordingly, a participant in the ORP, or the participant's estate if the
participant has died, will be required to obtain a certificate of termination
from the employer or a certificate of death before policy values can be
withdrawn or surrendered.

   
Other restrictions with respect to the election, commencement, or distribution
of benefits may apply under Qualified Policies or under the terms of the plans
in respect of which Qualified Policies are issued.
    


                            DISTRIBUTION OF POLICIES

The policies will be offered to the public on a continuous basis, and we do not
anticipate discontinuing the offering of the policies. However, we reserve the
right to discontinue the offering. Applications for policies are solicited by
agents who are licensed by applicable state insurance authorities to sell our
variable annuity policies and who are also registered representatives of Canada
Life of America Financial Services, Inc. ("CLAFS"). CLAFS is a wholly owned
subsidiary of our Company. CLAFS, a Georgia corporation organized on January 18,
1988, is registered with the SEC under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. The policies may also be sold through other broker-dealers registered under
the Securities Exchange Act of 1934 whose representatives are authorized by
applicable law to sell variable annuity policies. The commissions paid to agents
are no greater than 4% of premiums. We may pay an additional commission to the
general agent.

CLAFS acts as the principal underwriter, as defined in the Investment Company
Act of 1940, of the policies for the Variable Account pursuant to a
distribution agreement involving CLAFS and us. CLAFS is not obligated to sell
any specific number of policies. CLAFS principal business address is 6201
Powers Ferry Road, NW, Atlanta, Georgia.




                                      41
<PAGE>   47
                               LEGAL PROCEEDINGS

There are at present no legal proceedings to which the Variable Account is a
party or the assets of the Variable Account are subject. We are not involved in
any litigation that is of material importance in relation to our total assets
or that relates to the Variable Account.


                                 VOTING RIGHTS

To the extent deemed to be required by law and as described in the Prospectuses
for the Funds, shares held in the Variable Account and in our general account
will be voted by us at regular and special shareholder meetings in accordance
with instructions received from persons having voting interests in the
corresponding sub-accounts. If however, the Investment Company Act of 1940 or
any regulation thereunder should be amended, or if the present interpretation
thereof should change, or if we determine that we are allowed to vote the
shares in our own right, we may elect to do so.

   
The number of votes which are available to you will be calculated separately
for each sub-account of the Variable Account, and may include fractional votes.
The number of votes attributable to a sub-account will be determined by
applying your percentage interest, if any, in a particular sub-account to the
total number of votes attributable to that sub-account. You hold a voting
interest in each sub-account to which the Variable Account value is allocated.
You only have voting interest prior to the annuity date or maturity date.
    

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

Shares as to which no timely instructions are received and shares held by us in
a sub-account as to which you have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
policies participating in that sub-account. Voting instructions to abstain on
any item to be voted upon will be applied to reduce the total number of votes
cast on such item.

Each person having a voting interest in a sub-account will receive proxy
materials, reports, and other material relating to the appropriate series.


                              FINANCIAL STATEMENTS

   
Our balance sheets as of December 31, 1995 and 1994, and the related statements
of operations, accumulated deficit, and cash flows for each of the three years
in the period ended December 31, 1995, as well as the Report of Independent
Auditors, are contained in the Statement of Additional Information. The
Variable Account's statement of net assets as of December 31, 1995, statement
of operations for the year then ended, and statements of changes in net assets
for fiscal years ended December 31, 1995 and December 31, 1994, as well as the
Report of Independent Auditors, are contained in the Statement of Additional
Information.
    

The financial statements of the Company included in the Statement of Additional
Information should be considered only as bearing on the ability of the Company
to meet its obligations under the policies. They should not be considered as
bearing on the investment performance of the assets held in the Variable
Account.



                                      42
<PAGE>   48
            STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS


<TABLE>
    <S>                                                                  <C>
    ADDITIONAL POLICY PROVISIONS
         Contract........................................................  2
         Incontestability................................................  2
         Misstatement of Age.............................................  2
         Currency........................................................  2
         Place of Payment................................................  3
         Non-Participation...............................................  3
         Our Consent.....................................................  3
    CALCULATION OF YIELDS AND TOTAL RETURNS
         Money Market Yields.............................................  3
         Other Sub-Account Yields........................................  4
         Total Returns...................................................  4
         Effect of the Policy Administration Charge on Performance Data..  6
    SAFEKEEPING OF ACCOUNT ASSETS........................................  6
    STATE REGULATION.....................................................  7
    RECORDS AND REPORTS..................................................  7
    LEGAL MATTERS........................................................  7
    EXPERTS..............................................................  7
    OTHER INFORMATION....................................................  7
    FINANCIAL STATEMENTS.................................................  7
</TABLE>



                                      43
<PAGE>   49


                                 FIXED ACCOUNT

DUE TO EXEMPTIVE AND EXCLUSIONARY PROVISIONS, OUR GENERAL ACCOUNT, INCLUDING
THE FIXED ACCOUNT, IS NOT SUBJECT TO OR REGISTERED UNDER THE SECURITIES ACT OF
1933, AND IS NOT SUBJECT TO OR REGISTERED AS AN INVESTMENT COMPANY UNDER THE
1940 ACT. THEREFORE, THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS
NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT.
HOWEVER, DISCLOSURES ABOUT THE GENERAL ACCOUNT AND THE FIXED ACCOUNT MAY BE
SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF FEDERAL SECURITIES LAWS
CONCERNING THE ACCURACY AND COMPLETENESS OF STATEMENTS IN PROSPECTUSES.

   
The Fixed Account is not part of and does not depend on the investment
performance of the Variable Account. Amounts in the Fixed Account are part of
our general account. We credit interest to amounts in the Fixed Account at
rates we determine. We guarantee the interest rate will not be less than 3% per
annum. We will also credit interest to amounts in the Fixed Account at a
guaranteed rate of 4% for contracts issued prior to May 1, 1994, or such later
date as applicable regulatory approvals are obtained in the jurisdiction in
which the contracts are offered. At our sole discretion, we may credit a higher
current interest rate. Each net premium allocated to the Fixed Account will be
credited with a specified interest rate which will remain in effect for 12
calendar months. After such 12 month period, the net premium and any earnings
accumulated thereon will be credited with the rate of interest currently
credited to new monies allocated to the Fixed Account. This means that if you
allocate monies to the Fixed Account on a monthly basis, over the course of 12
months, those monies may be credited with 12 different interest rates. We will
establish a new interest rate the first business day of each calendar month.

You may allocate all or a portion of initial and any additional net premiums to
the Fixed Account. See "Net Premium Allocation" on page ___. You may transfer
all or a part of an amount in the sub-account(s) to the Fixed Account. You may
transfer a part of an amount in the Fixed Account to the sub-account(s),
subject to these restrictions, and except for transfers made pursuant to DCA
(see page    ):
    

  1.   we allow only one transfer each year and this transfer must be
       within the period that is 30 days before and 30 days after the
       policy anniversary, and an unused transfer option does not carry
       over to the next year; and
  2.   the maximum transfer amount is 50% of the Fixed Account value on
       the date of the transfer, unless the balance after the transfer is
       less than $5,000, in which case you have the option to transfer the
       entire value.

Transfers to and from the Fixed Account may be subject to a transfer fee, and
are also subject to other restrictions. See "Transfers" on page ___.

A portion or all of the policy administration charge will be deducted from
amounts in the Fixed Account to the extent that amounts in the sub-accounts are
insufficient to cover the charge. See "Policy Administration Charge" on page
___. A fee for taxes may also be deducted from amounts in the Fixed Account.
See "Taxes" on page ___.

You may withdraw all or a part of your Fixed Account value. See "Partial
Withdrawals" on page ___ and "Proceeds on Surrender" on page ___  . Upon a
partial withdrawal or a cash surrender, you may incur a surrender charge. See
"Surrender Charge" on page ___    . We have the right to defer payment of any
cash surrender value or partial withdrawal from the Fixed Account for up to six
months from the date we receive your written notice for surrender. See "Payment
of Benefits, Withdrawals, Cash Surrenders and Transfers - Postponement" on page
___.

FIXED ACCOUNT VALUE

   
The Fixed Account value before the annuity date or maturity date is:
    

  1.   the sum of the net premiums allocated to the Fixed Account; plus
  2.   any amounts transferred to the Fixed Account from a sub-account
       of the Variable Account; minus
  3.   any cash surrender value withdrawn or amounts transferred from
       the Fixed Account; minus
  4.   any policy administration charge deducted from the amount in the
       Fixed Account; plus
  5.   interest credited to the amount in the Fixed Account.


                                      44
<PAGE>   50


                        APPENDIX A: STATE PREMIUM TAXES


Premium taxes vary according to the state and are subject to change. In many
jurisdictions there is no tax at all. For current information, a tax adviser
should be consulted.



   
<TABLE>
                                                                                   TAX RATE
                                                                             QUALIFIED  NONQUALIFIED
STATE                                                                        CONTRACTS   CONTRACTS
<S>                                                                            <C>        <C>
California.............................................................        .50%       2.35%
District of Columbia...................................................        2.25       2.25
Kansas.................................................................        .00        2.00
Kentucky...............................................................        2.00       2.00
Maine..................................................................        .00        2.00
Nevada.................................................................        .00        3.50
South Dakota...........................................................        .00        1.25
West Virginia..........................................................        1.00       1.00
Wyoming................................................................        .00        1.00
</TABLE>
    
   
                                          45
<PAGE>   51

                                     PART B



                       INFORMATION REQUIRED TO BE IN THE

                      STATEMENT OF ADDITIONAL INFORMATION



<PAGE>   52

                    CANADA LIFE INSURANCE COMPANY OF AMERICA
   ADMINISTRATIVE OFFICE: 6201 POWERS FERRY ROAD, NW, ATLANTA, GEORGIA 30339
                             PHONE: (800) 333-2542

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


                      STATEMENT OF ADDITIONAL INFORMATION
                           VARIABLE ANNUITY ACCOUNT 1
               FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY


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

   
This Statement of Additional Information contains information in addition to
the information described in the Prospectus for the flexible premium variable
deferred annuity policy (the "policy") offered by Canada Life Insurance Company
of America. This Statement of Additional Information is not a Prospectus, and
it should be read only in conjunction with the Prospectuses for the policy;
Canada Life of America Series Fund; Fidelity Investments Variable Insurance
Products Fund; Fidelity Investments Variable Insurance Products Fund II;
Seligman Portfolios, Inc.; Dreyfus Variable Investment Fund; Dreyfus Socially
Responsible Growth Fund, Inc.; Alger American Fund; and The Montgomery Fund
III. The Prospectuses are dated the same date as this Statement of Additional
Information. You may obtain copies of the Prospectuses by writing or calling us
at our address or phone number shown above.

      The date of this Statement of Additional Information is May 1, 1996.
    




<PAGE>   53


                      STATEMENT OF ADDITIONAL INFORMATION
                               TABLE OF CONTENTS


<TABLE>
    <S>                                                                  <C>
    ADDITIONAL POLICY PROVISIONS
         Contract.......................................................   2
         Incontestability...............................................   2
         Misstatement Of Age............................................   2
         Currency.......................................................   2
         Place Of Payment...............................................   3
         Non-Participation..............................................   3
         Our Consent....................................................   3
    CALCULATION OF YIELDS AND TOTAL RETURNS
         Money Market Yields............................................   3
         Other Sub-Account Yields.......................................   4
         Total Returns .................................................   4
         Effect Of The Policy Administration Charge On Performance Data.   6
    SAFEKEEPING OF ACCOUNT ASSETS.......................................   6
    STATE REGULATION....................................................   7
    RECORDS AND REPORTS.................................................   7
    LEGAL MATTERS.......................................................   7
    EXPERTS.............................................................   7
    OTHER INFORMATION...................................................   7
    FINANCIAL STATEMENTS................................................   7
</TABLE>



                          ADDITIONAL POLICY PROVISIONS

CONTRACT

The entire contract is made up of the policy and the application for the
policy. The statements made in the application are deemed representations and
not warranties. We cannot use any statement in defense of a claim or to void
the policy unless it is contained in the application and a copy of the
application is attached to the policy at issue.

INCONTESTABILITY
We will not contest the policy after it has been in force during the
annuitant's lifetime for two years from the date of issue of the policy.


MISSTATEMENT OF AGE

If the age of the annuitant has been misstated, we will pay the amount which
the proceeds would have purchased at the correct age.

If we make an overpayment because of an error in age, the overpayment plus
interest at 3% compounded annually will be a debt against the policy. If the
debt is not repaid, future payments will be reduced accordingly.

If we make an underpayment because of an error in age, any annuity payments
will be recalculated at the correct age, and future payments will be adjusted.
The underpayment with interest at 3% compounded annually will be paid in a
single sum.

                                      2
<PAGE>   54

CURRENCY

All amounts payable under the policy will be paid in United States currency.

PLACE OF PAYMENT

All amounts payable by us will be payable at our Administrative Office at the
address shown on page one of this Statement of Additional Information.

NON-PARTICIPATION

The policy is not eligible for dividends and will not participate in our
divisible surplus.

OUR CONSENT

If our consent is required, it must be given in writing. It must bear the
signature, or a reproduction of the signature, of our President, Secretary or
Actuary.


                    CALCULATION OF YIELDS AND TOTAL RETURNS

MONEY MARKET YIELDS

We may, from time to time, quote in advertisements and sales literature the
current annualized yield of the Money Market Sub-Account for a 7 day period in
a manner which does not take into consideration any realized or unrealized
gains or losses on shares of the Money Market Series or on its portfolio
securities. This current annualized yield is computed by determining the net
change (exclusive of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) at the end of the 7 day period in the
value of a hypothetical account under a policy having a balance of 1 unit of
the Money Market Sub-Account at the beginning of the period, dividing such net
change in account value by the value of the account at the beginning of the
period to determine the base period return, and annualizing this quotient on a
365 day basis. The net change in account value reflects: 1) net income from the
Series attributable to the hypothetical account; and 2) charges and deductions
imposed under the policy which are attributable to the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical
account for: 1) the policy administration charge; 2) the daily administration
fee; and 3) the mortality and expense risk charge. The yield calculation
reflects an average per unit policy administration charge of $30 per year per
policy deducted at the end of each policy year. Current Yield will be
calculated according to the following formula:

                    Current Yield = ((NCS-ES)/UV) X (365/7)

Where:
NCS  =    the net change in the value of the Series (exclusive of realized
          gains and losses on the sale of securities and unrealized
          appreciation and depreciation) for the 7 day period attributable to a
          hypothetical account having a balance of 1 Sub-Account unit.
ES   =    per unit expenses of the Sub-Account for the 7 day period.
UV   =    the unit value on the first day of the 7 day period.


   
The current yield for the 7 day period ended December 31, 1995 was 3.76%.
    

We may also quote the effective yield of the Money Market Sub-Account for the
same 7 day period, determined on a compounded basis. The effective yield is
calculated by compounding the unannualized base period return according to the
following formula:
                                                      365/7
                  Effective Yield = (1+((NCS-ES)/UV))       -1

Where:
NCS  =    the net change in the value of the Series (exclusive of realized
          gains and losses on the sale of securities and unrealized
          appreciation and depreciation) for the 7 day period attributable to a
          hypothetical account having a balance of 1 Sub-Account unit.
ES   =    per unit expenses of the Sub-Account for the 7 day period.
UV   =    the unit value for the first day of the 7 day period.



                                      3
<PAGE>   55

   
The effective yield for the 7 day period ended December 31, 1995 was 3.83%.
    

Because of the charges and deductions imposed under the policy, the yield for
the Money Market Sub-Account will be lower than the yield for the Money Market
Series.

The yields on amounts held in the Money Market Sub-Account normally will
fluctuate on a daily basis. Therefore, the disclosed yield for any given past
period is not an indication or representation of future yields or rates of
return. The Money Market Sub-Account's actual yield is affected by changes in
interest rates on money market securities, average portfolio maturity of the
Money Market Series, the types and quality of portfolio securities held by the
Money Market Series of the Fund, and the Money Market Series' operating
expenses.

OTHER SUB-ACCOUNT YIELDS

We may, from time to time, quote in sales literature and advertisements the
current annualized yield of one or more of the sub-accounts (except the Money
Market Sub-Account) for a policy for 30 day or one month periods. The annualized
yield of a sub-account refers to income generated by the sub-account over a
specific 30 day or one month period. Because the yield is annualized, the yield
generated by a sub-account during the 30 day or one month period is assumed to
be generated each period over a 12 month period. The yield is computed by:  1)
dividing the net investment income of the series attributable to the sub-account
units less sub-account expenses for the period; by 2) the maximum offering price
per unit on the last day of the period multiplied by the daily average number of
units outstanding for the period; by 3) compounding that yield for a 6 month
period; and by 4) multiplying that result by 2. Expenses attributable to the
sub-account include 1) the policy administration charge, 2) the daily
administration fee, and 3) the mortality and expense risk charge. The yield
calculation reflects a policy administration charge of $30 per year per policy
deducted at the end of each policy year. For purposes of calculating the 30 day
or one month yield, an average policy administration charge per dollar of policy
value in the Variable Account is used to determine the amount of the charge
attributable to the sub-account for the 30 day or one month period as described
below. The 30 day or one month yield is calculated according to the following
formula: 

                                                    6 
              Yield = 2 x ((((NI-ES)/(U x UV)) + 1)  - 1) 
Where:

NI   =    net income of the series for the 30 day or one month period 
          attributable to the sub-account's units.
ES   =    expenses of the sub-account for the 30 day or one month period.
U    =    the average number of units outstanding.
UV   =    the unit value at the close (highest) of the last day in the 30 day 
          or one month period.

Because of the charges and deductions imposed under the policies, the yield for
the sub-account will be lower than the yield for the corresponding series.

The yield on the amounts held in the sub-accounts normally will fluctuate over
time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. The
sub-account's actual yield is affected by the types and quality of portfolio
securities held by the series, and its operating expenses.

Yield calculations do not take into account the surrender charge under the
policy. The surrender charge is equal to 6% of premiums paid during that
current policy year and the previous 4 policy years on certain amounts
surrendered or withdrawn under the policy as described in the Prospectus. A
surrender charge will not be imposed on the first withdrawal in any policy year
on an amount up to 10% of the premiums paid during that current policy year and
the previous 4 policy years, if the systematic withdrawal privilege is not
elected in that policy year.

TOTAL RETURNS

We may, from time to time, also quote in sales literature or advertisements
total returns, including average annual total returns for one or more of the
sub-accounts for various periods of time. We will always include quotes of
average annual total return for the period measured from the date the
sub-account commenced operations. When a sub-account has been in operation for
1, 5, and 10 years, respectively, the average annual total return for these
periods will be provided.



                                      4
<PAGE>   56

Average annual total returns for other periods of time may, from time to time,
also be disclosed. Average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a policy to the redemption value of that investment as of the last day of
each of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent month-end practicable,
considering the type and media of the communication and will be stated in the
communication.

Average annual total returns will be calculated using sub-account unit values
which we calculate on each valuation day based on the performance of the
sub-account's underlying series, and the deductions for the mortality and
expense risk charge, daily administration fee and the policy administration
charge of $30 per year per policy deducted at the end of each policy year. For
purposes of calculating total return, an average per dollar policy
administration charge attributable to the hypothetical account for the period is
used. The total return will then be calculated according to the following
formula:

                                      1/N
                              TR = ((ERV/P)    )-1
     Where:

TR   =    the average annual total return net of sub-account recurring charges.
ERV  =    the ending redeemable value of the hypothetical account at the end 
          of the period.
P    =    a hypothetical initial payment of $1,000.
N    =    the number of years in the period.

   
The total returns assume that the maximum fees and charges are imposed for
calculations.
    

Average annual total returns for the periods shown below for the sub-accounts
were:


   
<TABLE>
<CAPTION>
                                1 Year Return  5 Year Return  Cumulative from
                                   Year Ended    12/31/90 to  Inception Date*
                                     12/31/95       12/31/95      to 12/31/95
                                -------------  -------------  ---------------
   <S>                          <C>            <C>            <C>
   Money Market:                      (1.91)%          1.77%            2.85%
   Managed:                            14.68%          9.99%            8.54%
   Bond:                                9.66%          7.04%            6.76%
   Value Equity:                       16.27%         12.31%            9.37%
   International Equity Series           N/A%             **          (1.21)%
   Capital:                            26.65%             **           11.25%
   Fidelity Growth***:                 27.98%         18.76%           13.18%
   Fidelity High Income***:            13.42%         16.91%           10.20%
   Fidelity Overseas***:                2.52%          6.09%            5.74%
   Fidelity Asset Manager***:           9.83%         10.75%            9.62%
   Seligman Communications
      and Information                  31.37%             **           28.52%
   Seligman Frontier                   25.97%             **           25.90%
</TABLE>


*    The Inception Dates of the Series or Portfolios are as follows:  Money
     Market, Managed, Bond and Value Equity, 12/4/89; Capital 5/1/93; Fidelity
     Growth 10/9/86; Fidelity High Income 9/19/85; Fidelity Overseas 1/28/87;
     Fidelity Asset Manager 9/6/89; International Equity, Communications and
     Information, Frontier  5/1/95.

**   These Sub-Accounts invest in portfolios that have not been in operation
     five years as of December 31, 1995, and accordingly, no five year average
     annual total return is available.
    


                                      5
<PAGE>   57
   
***  The date of inception for the Fidelity Growth, High Income, Overseas, and
     Asset Manager, Sub-Accounts was May 1, 1994. The total return values
     reflected in the middle column reflect performance of the sub-accounts if
     they had existed for a five year period.

As of December 31, 1995, the Fidelity Index 500, Dreyfus Growth and Income,
Dreyfus Socially Responsible Growth, Alger Small Capitalization, Alger Growth,
Alger MidCap Growth, Alger Leveraged AllCap, and Montgomery Emerging Markets
Sub-Accounts had not commenced operations. Accordingly, average annual total
return information is not shown for these sub-accounts.
    

We may, from time to time, also quote in sales literature or advertisements,
total returns that do not reflect the surrender charge. These are calculated in
exactly the same way as average annual total returns described above, except
that the ending redeemable value of the hypothetical account for the period is
replaced with an ending value for the period that does not take into account
any charge on amounts surrendered or withdrawn.

   
Average annual total returns without a surrender charge for the periods shown
below for the sub-accounts (except the Fidelity Index 500, Dreyfus Growth and
Income, Dreyfus Socially Responsible Growth, Alger Small Capitalization, Alger
Growth, Alger MidCap Growth, Alger Leveraged AllCap, and Montgomery Emerging
Markets Sub-Accounts) were:
    


   
<TABLE>
<CAPTION>
                                1 Year Return  5 Year Return  Cumulative from
                                   Year Ended    12/31/90 to  Inception Date*
                                     12/31/95       12/31/95      to 12/31/95
                                -------------  -------------  ---------------
   <S>                          <C>            <C>            <C>
   Money Market:                        3.49%          2.27%            2.85%
   Managed:                            20.08%         10.36%            8.54%
   Bond:                               15.06%          7.45%            6.76%
   Value Equity:                       21.67%         12.65%            9.37%
   International Equity Series           N/A%             **            6.71%
   Capital                             32.05%             **           12.91%
   Fidelity Growth***:                 33.38%         19.03%           13.18%
   Fidelity High Income***:            18.82%         17.20%           10.20%
   Fidelity Overseas*** :               7.92%          6.51%            5.74%
   Fidelity Asset Manager***:          15.23%         11.10%            9.62%
   Seligman Communications
      and Information                  36.42%             **           32.60%
   Seligman Frontier                   31.02%             **           30.00%
</TABLE>
    


   
*    The Inception Dates of the Series or Portfolios are as follows:  Money
     Market, Managed, Bond and Value Equity, 12/4/89; Capital 5/1/93; Fidelity
     Growth 10/9/86; Fidelity High Income 9/19/85; Fidelity Overseas 1/28/87;
     Fidelity Asset Manager 9/6/89; International Equity, Communications and
     Information, Frontier  5/1/95.

**   These Sub-Accounts invest in portfolios that have not been in operation
     five years as of December 31, 1995, and accordingly, no five year average
     annual total return is available.

***  The date of inception for the Fidelity Growth, High Income, Overseas, and
     Asset Manager, Sub-Accounts was May 1, 1994. The total return values
     reflected in the middle column reflect performance of the sub-accounts if
     they had existed for a five year period.
    


                                      6
<PAGE>   58




EFFECT OF THE POLICY ADMINISTRATION CHARGE ON PERFORMANCE DATA

   
The policy provides for a $30 policy administration charge to be assessed
annually on each policy anniversary proportionately from any sub-accounts or
Fixed Account in which you are invested. If the policy value on the policy
anniversary is $75,000 or more, we will waive the policy administration charge
for the prior policy year. For purposes of reflecting the policy administration
charge in yield and total return quotations, we will convert the annual charge
into a per-dollar per-day charge based on the average policy value in the
Variable Account of all policies on the last day of the period for which
quotations are provided. The per-dollar per-day average charge will then be
adjusted to reflect the basis upon which the particular quotation is
calculated.
    

                         SAFEKEEPING OF ACCOUNT ASSETS

We hold the title to the assets of the Variable Account. The assets are kept
physically segregated and held separate and apart from our general account
assets and from the assets in any other separate account we have.

Records are maintained of all purchases and redemptions of series shares held
by each of the sub-accounts.

Our officers and employees are covered by an insurance company blanket bond
issued by America Home Assurance Company to The Canada Life Assurance Company,
our parent Company, in the amount of $25 million. The bond insures against
dishonest and fraudulent acts of officers and employees.

                                STATE REGULATION

We are subject to the insurance laws and regulations of all the jurisdictions
where we are licensed to operate. The availability of certain policy rights and
provisions depends on state approval and/or filing and review processes. The
policies will be modified to comply with the requirements of each applicable
jurisdiction.


                              RECORDS AND REPORTS

We will maintain all records and accounts relating to the Variable Account.  As
presently required by the Investment Company Act of 1940 and regulations
promulgated thereunder, reports containing such information as may be required
under the Act or by any other applicable law or regulation will be sent to you
semi-annually at your last address known to us.

                                 LEGAL MATTERS

All matters relating to Michigan law pertaining to the policies, including the
validity of the policies and our authority to issue the policies, have been
passed upon by David A. Hopkins. Sutherland, Asbill & Brennan of Washington,
D.C., has provided advice on certain matters relating to the federal securities
laws.

                                    EXPERTS

   
Our balance sheets as of December 31, 1995 and 1994, and the related statements
of operations, accumulated deficit, and cash flows for each of the three years
in the period ended December 31, 1995, included in this Statement of Additional
Information and Registration Statement as well as the Variable Account's
statement of net assets as of December 31, 1995, statement of operations for
the year then ended, and the statements of changes in net assets for fiscal
years ended December 31, 1995 and December 31, 1994 included in this Statement
of Additional Information and Registration Statement have been audited by Ernst
& Young LLP, independent auditors, of Atlanta, Georgia, as set forth in their
reports thereon appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
    


                                      7
<PAGE>   59

                               OTHER INFORMATION

A registration statement has been filed with the SEC under the Securities Act
of 1933 as amended, with respect to the policies discussed in this Statement of
Additional Information. Not all of the information set forth in the
registration statement, amendments and exhibits thereto has been included in
this Statement of Additional Information. Statements contained in this
Statement of Additional Information concerning the content of the policies and
other legal instruments are intended to be summaries. For a complete statement
of the terms of these documents, reference should be made to the instruments
filed with the SEC.


                              FINANCIAL STATEMENTS

   
The Variable Account's statement of net assets as of December 31, 1995, and the
related statement of operations, and the statements of changes in net assets
for the periods indicated therein, as well as the Report of Independent
Auditors, are contained herein. Ernst & Young LLP, independent auditors, serves
as independent auditors for the Variable Account.
    

   
Our balance sheets as of December 31, 1995 and 1994, and the related statements
of operations, accumulated deficit, and cash flows for each of the three years
in the period ended December 31, 1995, as well as the Report of Independent
Auditors, are contained herein. The financial statements of the Company should
be considered only as bearing on our ability to meet our obligations under the
policies. They should not be considered as bearing on the investment
performance of the assets held in the Variable Account.
    


                                      8
<PAGE>   60


                                     PART C



                               OTHER INFORMATION



<PAGE>   61
PART C
                               OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements
   
    To be filed in a subsequent Post-Effective Amendment.
    

(b) Exhibits
    (1)  Resolution of the Board of Directors of Canada Life Insurance
         Company of America (CLICA) authorizing establishment of the Variable
         Account *

    (2) Not applicable.

    (3) (a) Form of Distribution Agreement**
        (b) Form of Selling Agreement***
   
    (4) (a) Form of Annuity Policy
            To be filed in a subsequent Post-Effective Amendment
    
        (b) Riders and Endorsements****
   

    (5) Form of Application
            To be filed in a subsequent Post-Effective Amendment
    

    (6) (a) Certificate of Incorporation of CLICA*
        (b) By-Laws of CLICA*

    (7) Not applicable
    
    (8) (a) Participation Agreement**
        (b) Service Agreement**

    (9) Opinion and Consent of Counsel***

   (10) (a) Consent of Counsel
   
        (b) Consent of Independent Counsel
            To be filed in a subsequent Post-Effective Amendment

        (c) Consent of Independent Auditors
            To be filed in a subsequent Post-Effective Amendment
    
   (11) No financial statements are omitted from Item 23

   (12) Subscription Agreement**


   (13) Sample Performance Data Calculation***
   
   (14) Financial Data Schedule
          To be filed in a subsequent Post-Effective Amendment
    

*    Incorporated herein by reference to the initial filing of this Form N-4
     Registration Statement (Filed No. 33-28889) made on May 31, 1989.

**   Incorporated herein by reference to the Pre-Effective Amendment No. 1 of
     this Form N-4 Registration Statement filed (File No. 33-28889) on
     September 5, 1989.

***  Incorporated herein by reference to the Post-Effective Amendment No. 2 of
     this Form N-4 Registration Statement filed (File No. 33-28889) on May 1,
     1990.

**** Incorporated herein by reference to the Post-Effective Amendment No. 7 of
     this Form N-4 Registration Statement filed (File No. 33-28889) on April
     29, 1994.



<PAGE>   62
Item 25.   Directors and Officers of the Depositor

   
<TABLE>
<CAPTION>
     
     Name and Principal
     Business Address           Positions and Offices with Depositor
     ------------------         ------------------------------------
     <S>                        <C>
     D. A. Nield (1)            Chairman & Director
     D. A. Loney (2)            President & Director
     G. E. Hughes (2)           Agency Vice President
     W. S. McIlwaine (2)        Group Sales Vice-President
     F. D'Ambra (2)             Annuity & Investment Products Vice-President
     D. D. Myers (1)            Accounting Officer
     P. D. Cochrane (1)         Administrative Officer
     M. L. Craft (2)            Administrative Officer
     K. T. Ledwos (2)           Actuary & Director
     S. Benedetti               Marketing Actuary
     J. G. Deskins              Marketing Actuary
     M. G. Libenson             Internal Auditor
     R. W. Linden (1)           Secretary
     D. A. Hopkins (2)          Assistant Secretary
     D. M. Cooper (1)           Treasurer
     D. V. Rough (1)            Assistant Treasurer
     E. P. Ovsenny (1)          Assistant Treasurer
     D. N. Rattray (1)          Assistant Treasurer
     G. N. Isaac (1)            Assistant Treasurer
     B. J. Lynch (1)            Assistant Treasurer
     M. V. Sim (1)              Assistant Treasurer
     K. J. J. Fillman (2)       Product Manager Investment Management Services
     J. H. Ruess (1)            Director
     S. H. Zimmerman (3)        Director 
</TABLE>
    

    (1)  The business address is 330 University Avenue, Toronto, Ontario, 
         Canada M5G 1R8.
    (2)  The business address is 6201 Powers Ferry Road, NW, Suite 600, 
         Atlanta, Georgia 30339.
    (3)  The business address is 800 Michigan National Tower, Lansing, Michigan
         48933.

Item 26. Persons Controlled by or Under Common Control With the Depositor or 
         Registrant

<TABLE>
                                                               PERCENT OF
                                                                VOTING
                                                               SECURITIES                           PRINCIPAL
 NAME                          JURISDICTION                     OWNED                               BUSINESS
 ----                          ------------                     -----                               --------
<S>                            <C>                            <C>                                   <C>
The Canada Life Assurance      Canada                         Mutual Company                        Life Insurance and Health
Company

Canada Life Insurance          New York                       Ownership of voting securities        Life Insurance
Company of New York                                           through Canada Life

Adason Properties Limited      Canada                         Ownership of all voting securities    Property Management
                                                              through Canada Life
</TABLE>
<PAGE>   63

   
<TABLE>
<S>                            <C>                            <C>                                   <C>
The Canada Life Assurance      England                        Ownership of all voting securities    Life Insurance
Company of Great Britain                                      through Canada Life

Canada Life Unit Trust         England                        Ownership of all voting securities    Unit Trust Management
Managers Limited                                              through Canada Life of Great Britain

Canada Life Mortgage           Canada                         Ownership of all voting securities    Mortgage Portfolios
Services Ltd.                                                 through Canada life                   Management

Canada Life Data Services      Canada                         Ownership of all voting securities    Data Support Services
Limited                                                       through Canada Life

The CLGB Property Company      England                        Ownership of all voting securities    Property Management
Limited                                                       through Canada Life of Great Britain

CLASSO Benefit Services        Canada                         Ownership of all voting securities    Administrative Services
Limited                                                       through Canada Life

Canada Life Casualty           Canada                         Ownership of all voting securities    Property and Casualty
Insurance Company                                             through Canada Life                   Insurance

Canada Life Investment         Canada                         Ownership of all voting securities    Investment Counseling
Management Limited                                            through Canada Life

Sherway Centre Limited         Canada                         Ownership of all voting securities    Property Management
                                                              through Canada Life

The Canada Life Assurance      Rep. of Ireland                Ownership of all voting securities    Life Insurance
Company of Ireland Limited                                    through Canada Life of Great Britain

Canlife - IBI Investment       Rep. of Ireland                Ownership of 50% of voting            Equity Fund Management
Services Limited                                              securities through Canada Life of
                                                              Ireland Limited and 50% by the
                                                              Investment Bank of Ireland

Canada Life Financial          England                        Ownership of all voting securities    Unit Fund Sales and
Services Company Limited                                      through Canada Life of Great Britain  Management

Canada Life Financial          Rep. of Ireland                Ownership of all voting securities    Unit Fund Sales and
Services Company of Ireland                                   through Canada Life of Ireland        Management
Limited

Canada Life of America         Georgia                        Ownership of all voting securities    Broker Dealer
Financial Services Inc.                                       through CLICA

Canada Life of America         Maryland                       Ownership of all voting securities    Mutual Fund
Series Fund, Inc.                                             through CLICA

CLMS Realty Ltd.               Canada                         99% of the common shares and          Realtor
                                                              100% of the convertible preference
                                                              shares are owned by Canada Life

Canada Life Pension &          Rep. of Ireland                Ownership of all voting securities    Unit Trust
Annuities (Ireland) Limited                                   through Canada Life Assurance
                                                              (Ireland) Limited

</TABLE>
    

<PAGE>   64

<TABLE>
<S>                            <C>                            <C>                                   <C>
CLAI Limited                   Rep. of Ireland                Ownership of all voting securities    Holding Company
                                                              through Canada Life of Great Britain

The Canada Life Assurance      Rep. of Ireland                Ownership of all voting securities    Life Insurance
Company of Ireland Limited                                    through CLAI Limited

CL Capital Management, Inc.    Georgia                        Ownership of all voting securities    Investment Management
                                                              through CLICA
</TABLE>


   
Item 27.  Number of Policy Owners
          As of December 31, 1995, there are 995 owners of Nonqualified 
          Policies and 756 owners of Qualified Policies.
    

Item 28.  Indemnification*

Item 29.  Principal Underwriter*

Item 30.  Location of Accounts and Records***

Item 31.  Management Services
          All management contract are discussed in Part A or Part B.

Item 32.  Undertakings**


STATEMENT PURSUANT TO RULE 6c-7

CLICA and the Variable Account rely on 17 C.F.R., Section 270.6c-7 and
represent that the provisions of that Rule have been or will be complied with.
Accordingly, CLICA and the Variable Account are exempt from the provisions of
Section 22(e), 27(c)(1) and 27(d) of the Investment Company Act of 1940 with
respect to any variable annuity contract participating in such account to the
extent necessary to permit compliance with the Texas Optional Retirement
Program.




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

*    Incorporated herein by reference to the Pre-Effective Amendment No. 1 of
     this Form N-4 Registration Statement filed (File No. 33-28889) on
     September 5, 1989.

**   Undertakings (a) - (d) are incorporated herein by reference to the
     Post-Effective Amendment No. 3 of this Form N-4 Registration Statement
     filed (File No. 33-28889) on March 20, 1991. Undertakings (e) is
     incorporated herein by reference to the Post-Effective Amendment No. 4 of
     this Form N-4 Registration Statement (File No. 33-32199) filed April 30,
     1992.

***  Incorporated herein by reference to the Post-Effective Amendment No. 7 of
     this Form N-4 Registration Statement filed (File No. 33-28889) on April
     29, 1994.



<PAGE>   65


                                   SIGNATURES


   
  As required by the Securities Act of 1933 and the Investment Company Act
  of 1940, the Registrant has caused this Post-Effective Amendment Number 10
  to be signed on its behalf by the undersigned, thereunto duly authorized,
  in the City of Toronto, and the Province of Ontario on the 1st day of
  March, 1996.


                             CANADA LIFE INSURANCE COMPANY OF AMERICA  
                             VARIABLE ANNUITY ACCOUNT 1                
                                                                       
                                                                       
                             By /s/ D. A. Loney                        
                                ----------------------------------------
                                D. A. Loney, President                    
                                Canada Life Insurance Company of America  
                                                                       
                                                                       
                             CANADA LIFE INSURANCE COMPANY OF AMERICA  
                                                                       
                                                                       
                             By /s/ D. A. Loney                        
                                ----------------------------------------
                                D. A. Loney, President                    


  As required by the Securities Act of 1933, this Post-Effective Amendment
  Number 10 has been signed by the following persons in the capacities and
  on the dates indicated.
    

   
<TABLE>
<CAPTION>
      SIGNATURE                  TITLE                          DATE
      ---------                  -----                          ----
      <S>                        <C>                         <C>

     /s/ D. A. Nield             Chairman and Director          03/01/96
     ---------------------
     D. A. Nield

     /s/ D. A. Loney             President and Director         03/01/96
     ----------------------
     D. A. Loney


     /s/ K. T. Ledwos            Director                       03/01/96
     -----------------------
     K. T. Ledwos


     /s/ J. H. Ruess             Director                       03/01/96
     -----------------------
     J. H. Ruess


     /s/ S. H. Zimmerman         Director                       03/01/96 
     -----------------------
     S. H. Zimmerman


     /s/ D. M. Cooper            Treasurer                      03/01/96
     -----------------------
     D. M. Cooper


     /s/ D. D. Myers             Accounting Officer             03/01/96
     -----------------------
     D. D. Myers


</TABLE>
    
   
    

<PAGE>   66

                                 EXHIBIT INDEX



<TABLE>
<CAPTION>
                     Exhibit Number  Description of Exhibit
                     --------------  ----------------------
                     <S>             <C>
                     10 (a)          Consent of Counsel
</TABLE>





<PAGE>   1






                                 Exhibit 10 (a)
                               Consent of Counsel



<PAGE>   2










     February 29, 1996







     Board Of Directors
     Canada Life Insurance Company of America
     Canada Life of America Variable Annuity Account 1
     330 University Avenue
     Toronto, Canada M5G 1R8

     Gentlemen:

     I hereby consent to the use of my name under the caption "Legal
     Matters" in the Statement of Additional Information contained in
     Post-effective Amendment No. 10 to the Registration Statement on
     Form N-4 (File No. 33-28889) filed by Canada Life Insurance Company
     of America and Canada Life of America Variable Annuity Account 1
     with the Securities and Exchange Commission. In giving this consent,
     I do not admit that I am in the category of persons whose consent is
     required under Section 7 of the Securities Act of 1933.

     Sincerely,


     /s/ David A. Hopkins

     David A. Hopkins
     Chief Counsel, U.S. Division

     DAH/dr




© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission