CG VARIABLE ANNUITY SEPARATE ACCOUNT, 497, 2000-06-02

CG VARIABLE ANNUITY SEPARATE ACCOUNT
497, 2000-06-02

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Prospectus dated May 12, 2000

AIM/CIGNA Heritage Variable Annuity

Issued by

Connecticut General Life Insurance Company

Through

CG Variable Annuity Separate Account

Mailing Address: For New York Customers Only

Mailing Address:
Customer Service Center

P.O. Box 94039 Customer Service Center
Palatine, IL 60094-4039 P.O. Box 94038
Telephone: 800-776-6978 Palatine, IL 60094-4038
Fax: 847-402-9543 Telephone: 800-692-4682
Fax: 847-402-4361

This Prospectus describes the AIM/CIGNA Heritage Variable Annuity, an individual
and group flexible payment deferred variable annuity contract (the "Contract").
We are no longer offering the Contract for new sales. If you already own a
Contract, you may continue to make additional premium payments.

This Prospectus contains important information about the Contract and the
Variable Account that you should know before investing.

If you would like more information about the AIM/CIGNA Heritage Variable
Annuity, you can obtain a free copy of the Statement of Additional Information
("SAI") dated May 12, 2000. Please call, or write to us, at the numbers shown
above.

The SAI has been filed with the Securities and Exchange Commission ("SEC") and
is legally a part of this prospectus. The table of contents of the SAI is
included at the end of this Prospectus.

Please note that the Contract and the Portfolios:

. Are not bank deposits
. Are not federally insured
. Are not endorsed by any bank or government agency
. Are not guaranteed to achieve their investment goals
. Involve risks, including possible loss of premiums.

This prospectus must be accompanied by the current prospectus of AIM Variable
Insurance Funds. You should read it before you invest and retain it for future
reference. All Portfolios may not be available. Please call your Financial
Advisor or the Customer Service Center to check availability.

You may direct your premium payments, as well as any money accumulated in your
Contract, into the variable sub-accounts of the CG Variable Annuity Separate
Account (the "Variable Account") and/or the fixed account with guaranteed
interest periods.

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The Variable Account is divided into variable sub-accounts. Each variable sub-
account invests exclusively in one Portfolio of the AIM Variable Insurance
Funds. You may choose to invest in any of the following 17 Portfolios:

. AIM V.I. Aggressive Growth Fund . AIM V.I. Global Utilities Fund
. AIM V.I. Balanced Fund . AIM V.I. Government Securities Fund
. AIM V.I. Blue Chip Fund . AIM V.I. Growth Fund
. AIM V.I. Capital Appreciation Fund . AIM V.I. Growth and Income Fund
. AIM V.I. Capital Development Fund . AIM V.I. High Yield Fund
. AIM V.I. Dent Demographic Trends Fund
. AIM V.I. International Equity Fund
. AIM V.I. Diversified Income Fund . AIM V.I. Money Market Fund
. AIM V.I. Global Growth and Income Fund
. AIM V.I. Telecommunications and
Technology Fund
. AIM V.I. Value Fund

Your investments in the variable sub-accounts are not guaranteed and will vary
in value with the investment performance of the Portfolios you select. You bear
the entire investment risk for all amounts you allocate to the Variable Account.

We will credit the money you direct to the fixed sub-accounts with a fixed rate
of interest for the duration of the guaranteed period you choose. We set
interest rates periodically and will not set them below 3% annually. The
interest earned on your money as well as your principal is guaranteed as long as
you keep it in the fixed sub-accounts until the end of the guaranteed period.
Money that you withdraw or transfer before the end of the guaranteed period will
be subject to a Market Value Adjustment. A Market Value Adjustment may increase
or decrease your Contract's value.

The Contract offers you the right to receive monthly annuity payments beginning
on the Annuity Date you select. You can receive annuity payments on a fixed or
variable basis, or a combination of both.

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

<PAGE>

TABLE OF CONTENTS
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Page

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<S> <C>
Definitions............................................................... 5
Summary................................................................... 7
Overview............................... ................................ 7
Premium Payments........................................................ 7
The Fixed Account....................................................... 7
The Variable Account.................................................... 8
Transfers............................... ............................... 8
Cash Withdrawals........................................................ 8
Free Partial Withdrawals................................................ 8
Annuity Payments........................................................ 8
Death Benefit........................................................... 9
Additional Features..................................................... 9
Expenses................................................................ 9
Owner Inquiries......................................................... 10
Expense Table............................................................. 11
The Company, the Fixed Account, the Variable Account and the Fund......... 14
The Company............................................................. 14
The Administrator....................................................... 14
The Fixed Account....................................................... 14
The Variable Account.................................................... 15
The Fund and the Portfolios............................................. 15
Premium Payments and Account Values During the Accumulation Period........ 18
Premium Payments........................................................ 18
Your Annuity Account.................................................... 18
Allocating Your Premium Payments........................................ 18
Fixed Accumulation Value................................................ 18
Guaranteed Periods...................................................... 18
Guaranteed Interest Rates............................................... 19
Variable Accumulation Value............................................. 19
Variable Accumulation Units............................................. 19
Variable Accumulation Unit Value........................................ 19
Optional Features......................................................... 20
Dollar Cost Averaging................................................... 20
Automatic Rebalancing................................................... 20
Transfer Privilege........................................................ 22
Transfers During the Accumulation Period................................ 22
Transfers During the Annuity Period..................................... 22
Access to Your Money...................................................... 23
Cash Withdrawals........................................................ 23
Minimum Value Requirement............................................... 23
Section 403(b) Annuities................................................ 24
Death Benefits............................................................ 25
Election and Effective Date of Election................................. 25
Payment of Death Benefit................................................ 25
Spousal Continuation.................................................... 25
Amount of Death Benefit................................................. 26
</TABLE>

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Page

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<S> <C>
Surrender of the Contracts................................................. 27
Annuity Provisions......................................................... 28
Annuity Date............................................................. 28
Election-Change of Annuity Option........................................ 28
Annuity Options.......................................................... 28
Fixed Annuity Payments................................................... 29
Variable Annuity Payments................................................ 29
Fixed Annuity Options...................................................... 31
Life Annuity Option...................................................... 31
Life Annuity with Certain Period Option.................................. 31
Cash Refund Life Annuity Option.......................................... 31
Annuity Certain Option................................................... 31
Variable Annuity Options................................................... 32
Variable Life Annuity Option............................................. 32
Variable Life Annuity with Certain Period Option......................... 32
Variable Annuity Certain Option.......................................... 32
Additional Annuity Options............................................... 32
Determination of Annuity Payments........................................ 32
Expenses................................................................... 33
Withdrawal Charges....................................................... 33
Free Partial Withdrawal.................................................. 34
Annuity Account Fee...................................................... 34
Administrative Fee....................................................... 34
Premium Taxes............................................................ 34
Charge for Mortality and Expense Risks................................... 35
Market Value Adjustment.................................................. 35
Other Contract Provisions.................................................. 37
Deferral of Payment...................................................... 37
Designation and Change of Beneficiary.................................... 37
Exercise of Contract Rights.............................................. 37
Transfer of Ownership.................................................... 37
Death of Owner........................................................... 38
Voting Fund Shares....................................................... 38
Adding, Deleting or Substituting Investments............................. 39
Change in Operation of the Variable Account.............................. 40
Modifying the Contract................................................... 40
Periodic Reports......................................................... 41
Federal Tax Matters........................................................ 42
Taxation of Non-Qualified Contracts...................................... 42
Taxation of Qualified Contracts.......................................... 43
Possible Tax Law Changes................................................. 44
Distribution of the Contracts.............................................. 45
Historical Performance Data................................................ 46
Condensed Financial Information............................................ 48
Table of Contents for the Statement of Additional Information.............. 51
</TABLE>

<PAGE>

DEFINITIONS

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

The following special terms are used throughout this Prospectus:

Account Value: The total value in your Contract. It is equal to the value you
have in the Variable Account plus your value in the fixed account.

Accumulation Period: The time from the date we issue the Contract until the
earliest of: (i) the Annuity Date; (ii) the date on which we pay the death
benefit; or (iii) the date on which you surrender or annuitize the Contract.

Annuitant: The person or persons you identify on whose life we will make the
first annuity payment.

Annuity Account: An account we establish for you to which we credit all your
premium payments, net investment gains and interest, and from which we deduct
charges and investment losses.

Annuity Date: The date on which we begin to pay annuity payments to you.

Annuity Option: The method by which we make annuity payments to you.

Beneficiary: The person or entity having the right to receive the death benefit
set forth in the Contract.

Business Day: Every day on which the New York Stock Exchange ("NYSE") is open
for business. It is also called a "Valuation Date."

Certificate: (For Group Contract only) The document which confirms your
coverage under the Contract.

Contract Years and Contract Anniversaries: 12-month periods we measure from the
Date of Issue.

Date of Issue: The date on which the Contract became effective.

Due Proof of Death: Any proof of death we find satisfactory, for example, an
original certified copy of an official death certificate or an original
certified copy of a decree of a court of competent jurisdiction as to the
finding of death.

Fixed Account: Allocation options under the Contract, other than the Variable
Account, that provide a guarantee of principal and minimum interest. Fixed
account assets are our general assets.

Fund: AIM Variable Insurance Funds.

Guaranteed Period Amount: That portion of your account value that you allocate
to a specific guaranteed period with a specified expiration date. It includes
any interest we credit to that amount.

Guaranteed Interest Rate: The interest rate we credit on a compound annual
basis during a guaranteed period.

Guaranteed Period: The period for which we credit a guaranteed interest rate to
any amounts which you allocate to a fixed sub-account. In most states, you may
elect a period from one to ten years.

Index Rate: An index rate based on the Treasury Constant Maturity Series
published by the Federal Reserve Board.

In writing: A written form that we find satisfactory and we receive at our
Customer Service Center.

Market Value Adjustment: An amount we add to or subtract from certain
transactions involving your interest in the fixed account. The amount of the
adjustment reflects the impact of changing interest rates.

Non-Qualified Contract: A Contract used in connection with a retirement plan
which does not receive favorable federal income tax treatment.

<PAGE>

Owner, You, or Your: The persons entitled to the ownership rights stated in the
Contract. The Certificate Owner under a group contract.

Payee: A person who receives payments under the Contract.

Portfolio: An underlying mutual fund in which a variable sub-account invests.
Each Portfolio is a separate investment series of the Fund which is an
investment company registered with the SEC.

Premium Payment: Any amount you pay to us as consideration for the benefits the
Contract provides.

Qualified Contract: A Contract used in connection with a retirement plan which
receives favorable federal income tax treatment under Sections 401, 403, 408, or
457 of the Internal Revenue Code ("Code").

Seven Year Anniversary: The seventh Contract Anniversary and each succeeding
Contract Anniversary occurring at any seven year interval thereafter, for
example, the 14th, 21st and 28th Contract Anniversaries.

Sub-Account: That portion of the fixed account associated with a specific
guaranteed period and guaranteed interest rate and each portion of the Variable
Account which invests in a specific Portfolio of the Fund.

Surrender: When you elect to end your Contract and receive your account value in
a lump sum payment. Your account value will be reduced by any applicable
withdrawal charges, contract fees, or premium taxes, and may be either increased
or reduced by any market value adjustment that we apply.

Valuation Date: Every day on which the New York Stock Exchange ("NYSE") is open
for business.

Valuation Period: The period of time over which we determine the change in the
value of the variable sub-accounts in order to price Variable Accumulation Units
and Annuity Units. Each Valuation Period begins at the close of normal trading
on the NYSE (usually 4:00 p.m. Eastern time) on each Valuation Date and ends at
the close of the NYSE on the next Valuation Date. A Valuation Period may be more
than one day.

Variable Account: A separate account divided into variable sub-accounts. Each
sub-account invests exclusively in shares of a specific Portfolio of the AIM
Variable Insurance Funds. The assets in the Variable Account are owned by
Connecticut General Life Insurance Company.

Variable Accumulation Unit: A unit of measure we use to calculate the value of
the variable sub-accounts.

We, Us, Our or CG Life: Connecticut General Life Insurance Company. Our Home
Office is located at 900 Cottage Grove Road, Bloomfield, CT.

The following terms used in this prospectus have the same or substituted
meanings as the corresponding terms currently used in the Contract.

Terms Used in This Prospectus Corresponding Term Used in the
Contract

Account value Annuity Account Value
Annuity option Income Payments
Fixed sub-account Fixed Account Sub-Account
Variable sub-account Variable Account Sub-Account

<PAGE>

SUMMARY

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This summary provides only a brief overview of the more important features of
the Contract. The Contract is more fully described in the rest of this
Prospectus. Please read the entire Prospectus carefully.

OVERVIEW

We designed the AIM/CIGNA Heritage variable annuity contract as a way for you to
invest on a tax-deferred basis in the sub-accounts of the Variable Account and
the fixed account. We intend the Contract to be used to accumulate money for
retirement or other long-term purposes. The Contract can be used in connection
with retirement and tax-deferred plans, some of which may qualify as retirement
programs under Sections 401, 403, 408, or 457 of the Code.

We are no longer offering the Contract for sale.

The Contract, like all deferred annuity contracts, has two phases: the
"accumulation period" and the "income phase." During the accumulation period,
your earnings accumulate on a tax-deferred basis and are generally taxed as
income when you take them out of the Contract. The income phase occurs when you
begin receiving regular annuity payments from your Contract on the Annuity Date.
The money you can accumulate during the accumulation period, as well as the
annuity payment option you choose, will determine the dollar amount of any
annuity payments you receive during the income phase.

PREMIUM PAYMENTS

Additional payments you direct into a guaranteed period of the fixed account
must be at least $500. The minimum payment you can place in a variable sub-
account is $100. We must approve any premium payment greater than $1,000,000.

THE FIXED ACCOUNT

You may direct your premium payments into any of the sub-accounts available in
the fixed account. We set interest rates at our sole discretion and guarantee a
minimum interest rate of three percent (3%) per year, compounded annually. There
is no assurance that guaranteed interest rates will exceed 3% per year.

Each fixed sub-account guarantees interest at a specified rate for a particular
period ranging from one to ten years. But you must keep your money in the sub-
account for the length of the guaranteed period in order to receive the
guaranteed interest rate. If you withdraw or transfer amounts from a fixed sub-
account before the end of the guaranteed interest period, we will apply a Market
Value Adjustment that could increase or decrease your contract value. We
guarantee, however, that you will be credited with an interest rate of at least
3% per year, compounded annually, on amounts you allocated to the fixed account,
regardless of any effects of the Market Value Adjustment. We do not apply a
Market Value Adjustment to the death benefit or annuity payments.

<PAGE>

THE VARIABLE ACCOUNT

The Variable Account is divided into sub-accounts. Each variable sub-account
uses its assets to purchase, at net asset value, shares of a specific Portfolio
of the AIM Variable Insurance Funds. You may invest in any of the following 17
Portfolios of the Fund through this Contract:

Depending on market conditions, you can earn or lose the money you invest in any
of the Portfolios through the variable sub-accounts. We reserve the right to
offer other investment choices in the future. All Portfolios may not be
available in all states. Please call to determine whether a particular Portfolio
is available.

TRANSFERS

You may transfer money among the fixed and variable sub-accounts before the
Annuity Date. All transfers are subject to the following conditions:

. transfers from any variable or fixed sub-account must be at least $100;

. transfers to a fixed sub-account must be at least $500; and

. if your account value remaining in a fixed sub-account is less than $500 or
less than $50 in a variable sub-account, then the entire account value
within the sub-account must be transferred.

In addition, we may restrict the number and dollar amount of transfers from a
fixed sub-account. We will subject transfers from a fixed sub-account to a
Market Value Adjustment, unless the transfer is made on the expiration date of
the fixed sub-account. After the Annuity Date, we may permit transfers among the
variable sub-accounts subject to certain conditions.

CASH WITHDRAWALS

At any time before the Annuity Date, you may take your money out of the
Contract. Each cash withdrawal must be at least $50. Withdrawal charges, annuity
account fees, premium taxes and a Market Value Adjustment may apply. After the
Annuity Date, we do not permit withdrawals under most Annuity Options.

You may have to pay federal income taxes and a penalty tax on any withdrawals.

FREE PARTIAL WITHDRAWALS

Each Contract Year you may withdraw up to 15% of the total amount of the premium
payments you have paid without paying a withdrawal charge.

ANNUITY PAYMENTS

The Contract allows you to receive income under one of 7 annuity payment
options. You may choose from fixed payments options, variable payment options,
or a combination of both. Annuity payments will begin on the first day of the
month following the Annuity Date you selected and specified in the Contract
application.

If you select a variable payment option, the dollar amount of the annuity
payments you receive will go up or down depending on the investment results of
the Portfolios in which you invest at that time. If you choose to

<PAGE>

have any portion of your annuity payments come from the fixed account, the
payment amount will be fixed and guaranteed by us.

Annuity payments may be subject to federal income taxes.

DEATH BENEFIT

If an Owner dies before the Annuity Date, we will pay a death benefit to the
surviving Owner, if any, otherwise the Beneficiary. If the deceased Owner (or
any Annuitant if an Owner is a non-natural person) dies on or after the Annuity
Date, we will not pay a death benefit unless the Annuity Option you select
provides for a death benefit. If there is no designated Beneficiary living on
the date of death of the Owner, CG Life will pay the Death Benefit upon receipt
of due proof of the death of both the owner and the designated Beneficiary in
one sum to the estate of the Owner. The death benefit we will pay before the
Annuity Date generally equals the greatest of:

. the account value on the date we deem the death benefit election to be
effective;

. the sum of all premium payments under the Contract, minus all partial
withdrawals;

. your account value on the Seven Year Anniversary immediately preceding the
date on which the death benefit election is deemed effective, adjusted for
any subsequent premium payments, partial withdrawals and applicable charges;

. the amount that would have been paid if a full surrender occurred during the
day when the death benefit election is deemed effective, including any
applicable withdrawal charges and Market Value Adjustment; and

. the Maximum Anniversary Value, adjusted for any subsequent premium payments
and partial withdrawals.

ADDITIONAL FEATURES

Enhanced Dollar Cost Averaging

You can arrange to have money automatically transferred monthly from any of the
variable sub-accounts or the One-Year fixed sub-account to your choice of
variable and fixed sub-accounts. Dollar cost averaging does not guarantee a
profit and does not protect against a loss if market prices decline.

Automatic Rebalancing

We will, upon your request, automatically transfer amounts among the variable
sub-accounts on a regular basis to maintain a desired allocation of your Account
Value among the variable sub-accounts.

EXPENSES

Contingent Deferred Sales Charge

We do not deduct a sales charge from your premium payments. However, if you
withdraw any part of your account value during the accumulation period, we may
deduct a withdrawal charge (contingent deferred sales charge) on any amount you
withdraw that exceeds the Free Withdrawal Amount described herein. The
withdrawal charge is 7% of the premium payment if you make the withdrawal during
the first year after you paid the premium, decreasing by 1% each year. After we
have held the premium payment for seven years, the withdrawal charge on that
amount of premium is 0%. For purposes of computing the withdrawal charges,
amounts are withdrawn in the order in which they are received by us, that is,
the oldest premium payment first. We adjust withdrawals from the fixed account
by the withdrawal charges and by any applicable Market Value Adjustment.
Withdrawal charges may be waived in certain cases.

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Market Value Adjustment

A cash withdrawal or transfer from a fixed sub-account during the accumulation
period may be subject to a Market Value Adjustment. The Market Value Adjustment
will reflect the relationship between the value of a government securities index
at the time a cash withdrawal or transfer is made, and the value of that index
at the time you paid the premium payments being withdrawn or transferred. The
index is published by the Federal Reserve Board and reflects yields on U.S.
Government securities of various maturities. The Market Value Adjustment may
cause the amount you withdraw or transfer to be higher or lower. The Market
Value Adjustment applies to transfers from the fixed account unless the transfer
is made at the end of a guaranteed period.

A Market Value Adjustment may also apply to death benefit payments, but only if
it would increase the death benefit. The Market Value Adjustment is not applied
against a withdrawal or transfer which occurs on the Expiration Date of a
guaranteed period, nor is it applied if it would decrease a death benefit
payment. The Market Value Adjustment may be waived in certain cases.

Annuity Account Fee

During the accumulation period, we deduct an annual Annuity Account Fee of $35
from your account value on the last business day of each calendar year, or if
you surrender your Contract. After the Annuity Date, we deduct an annual Annuity
Account Fee of $35, in approximately equal amounts, from each variable annuity
payment you receive during the year. We do not deduct an Annuity Account Fee
from fixed annuity payments. State law may require us to reduce the $35 Annuity
Account Fee. During the accumulation period, we do not deduct this fee if, when
the deduction is to be made, your account value is $100,000 or more.

Administrative Fee

On each business day, we deduct an administrative fee equal to an annual rate of
0.10% of the daily net assets you have in the Variable Account. We deduct this
fee to cover our administrative expenses.

Mortality and Expense Risk Charge

On each business day, we deduct a mortality and expense risk charge equal to an
annual rate of 1.25% of the daily net assets you have in the Variable Account.
We deduct this fee to cover the mortality and expense risks we assume under the
Contract.

Taxes

Some states and other governmental entities charge premium and other taxes
ranging up to 3.5% on contracts issued by insurance companies. We are
responsible for paying these taxes and will make a deduction from your annuity
value to pay for them. We will deduct any such taxes when you surrender,
withdraw or annuitize, or if we pay a death benefit. We only charge you premium
taxes if your state requires us to pay premium taxes.

Fund Charges

Each Portfolio incurs administrative expenses and pays investment advisory fees
to its investment adviser. These advisory fees and other Portfolio charges and
expenses are indirectly passed on to you.

OWNER INQUIRIES

Please direct any questions or requests for additional information to:

Customer Service Center: P.O. Box 94039 Palatine, IL 60094-4039
Tel: 800-776-6978 Fax: 847-402-9543

For New York Customers Only:
Customer Service Center
P.O. Box 94038 Palatine, IL 60094-4038
Tel: 800-692-4682 Fax: 847-402-4361

<PAGE>

EXPENSE TABLE
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The following Expense Table and examples will help you understand the costs and
expenses that you will bear, directly and indirectly, by investing in the
Variable Account. For more information, you should read "Contract Charges and
Fees" below and consult the Fund's Prospectus. The examples do not include any
taxes or tax penalties you may be required to pay if you surrender your
Contract.

<TABLE>

<S> <C> <C>
Owner Transactions Expenses

Sales Load on Purchases............................................ 0%
Maximum Deferred Sales Charge on Withdrawals (as a percentage of
your premium payment)(/1/)........................................ 7.0%
Transfer Fee....................................................... $0
Annual Annuity Account Fee(/2/)......................... $35 per contract

Variable Account Annual Expenses (as a percentage of average Variable
Account assets)
Mortality and Expense Risk Fee..................................... 1.25%
Administrative Fee................................................. 0.10%
-----
Total Separate Account Annual Expenses........................... 1.35%
=====
</TABLE>

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(1) You may withdraw the Free Withdrawal Amount from your Annuity Account once
each Contract Year without a withdrawal charge if you have not previously
withdrawn all premium payments. The withdrawal charge on the remaining
portion is equal to a percentage of the premium payment you withdraw and
ranges from 7% to 0%, depending upon the length of time between our
acceptance of the premium payment you are withdrawing and your withdrawal.
After we hold the premium payment for seven years, you may withdraw that
premium payment without a withdrawal charge.

(2) We waive the Annuity Account Fee for account values of $100,000 or more as
of the date on which we deduct the charge.

AIM VARIABLE INSURANCE FUNDS ANNUAL EXPENSES (as a percentage of Portfolio
average net assets after fee waivers and reimbursements)(/1/)

Total Annual

Name of Portfolio Management Fees Other Expenses Expenses
----------------- --------------- -------------- ------------
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AIM V.I. Aggressive Growth

Fund(/2/)......................... 0.00% 1.19% 1.19%
AIM V.I. Balanced Fund(/2/)........ 0.65% 0.56% 1.21%
AIM V.I. Blue Chip Fund............ 0.75% 0.55% 1.30%
AIM V.I. Capital Appreciation Fund. 0.62% 0.11% 0.73%
AIM V.I. Capital Development
Fund(/2/)......................... 0.00% 1.23% 1.23%
AIM V.I. Dent Demographic Trends

Fund.............................. 0.85% 0.55% 1.40%
AIM V.I. Diversified Income Fund... 0.60% 0.23% 0.83%
AIM V.I. Global Growth and Income
Fun(/2/).......................... 0.97% 0.37% 1.34%
AIM V.I. Global Utilities Fund..... 0.65% 0.49% 1.14%
AIM V.I. Government Securities
Fund.............................. 0.50% 0.40% 0.90%
AIM V.I. Growth Fund............... 0.63% 0.10% 0.73%
AIM V.I. Growth and Income Fund.... 0.61% 0.16% 0.77%
AIM V.I. High Yield Fund(/2/)...... 0.35% 0.79% 1.14%
AIM V.I. International Equity Fund. 0.75% 0.22% 0.97%
AIM V.I. Money Market Fund......... 0.40% 0.20% 0.60%
AIM V.I. Telecommunications and
Technology Fund................... 1.00% 0.27% 1.27%
AIM V.I. Value Fund................ 0.61% 0.15% 0.76%
</TABLE>

<PAGE>

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

(1) Figures shown in the table are for the year ended December 31, 1999, except
for the AIM V.I. Blue Chip, Dent Demographic Trends, Global Growth and
Income, and Telecommunications and Technology Funds which commenced
operations on December 29, 1999, December 29, 1999, October 15, 1999 and
October 15, 1999 respectively. For these Portfolios, the management fee,
other expenses and total annual fund operating expenses are based on
estimates for the Funds' first full fiscal year.

(2) Absent voluntary reductions and reimbursements for certain Portfolios,
management fees, other expenses, and total annual fund expenses expressed as
a percentage of average net assets of the Portfolios would have been as
follows:

Management Other Total Annual

Fund Fee Expenses Fund Expenses
---- ---------- -------- -------------
<S> <C> <C> <C>
AIM V.I. Aggressive

Growth Fund............ 0.80% 1.62% 2.42%
AIM V.I. Balanced Fund.. 0.75% 0.56% 1.31%
AIM V.I. Capital
Development Fund....... 0.75% 2.67% 3.42%
AIM V.I. Global Growth
and Income Fund........ 1.00% 0.37% 1.37%
AIM V.I. High Yield
Fund................... 0.63% 0.79% 1.42%
</TABLE>

<PAGE>

EXAMPLES

An Owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets (and assuming all premium payments are allocated to the
Variable Account):

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
1. If the Contract is surrendered at the end
of the applicable time period:
Variable Sub-Accounts

AIM V.I. Aggressive Growth.................. $ 93 $155 $219 $412
AIM V.I. Balanced........................... $ 82 $122 $164 $308
AIM V.I. Blue Chip.......................... $ 82 $121 $163 $307
AIM V.I. Capital Appreciation............... $ 75 $102 $131 $243
AIM V.I. Capital Development................ $104 $185 $266 $497
AIM V.I. Dent Demographic Trends............ $ 83 $124 $168 $317
AIM V.I. Diversified Income................. $ 76 $105 $136 $253
AIM V.I. Global Growth and Income........... $ 83 $126 $171 $322
AIM V.I. Global Utilities................... $ 80 $116 $154 $288
AIM V.I. Government Securities.............. $ 76 $105 $136 $252
AIM V.I. Growth............................. $ 76 $104 $134 $248
AIM V.I. Growth and Income.................. $ 75 $101 $130 $241
AIM V.I. High Yield......................... $ 83 $125 $169 $319
AIM V.I. International Equity............... $ 78 $109 $144 $268
AIM V.I. Money Market....................... $ 74 $ 99 $126 $233
AIM V.I. Telecommunications and Technology.. $ 83 $126 $170 $321
AIM V.I. Value.............................. $ 75 $102 $131 $242

2. If the Contract is not surrendered or if it
is annuitized:
AIM V.I. Aggressive Growth.................. $ 39 $119 $201 $412
AIM V.I. Balanced........................... $ 28 $ 86 $146 $308
AIM V.I. Blue Chip.......................... $ 28 $ 85 $145 $307
AIM V.I. Capital Appreciation............... $ 21 $ 66 $113 $243
AIM V.I. Capital Development................ $ 50 $149 $248 $497
AIM V.I. Dent Demographic Trends............ $ 29 $ 88 $150 $317
AIM V.I. Diversified Income................. $ 22 $ 69 $118 $253
AIM V.I. Global Growth and Income........... $ 29 $ 90 $153 $322
AIM V.I. Global Utilities................... $ 26 $ 80 $136 $288
AIM V.I. Government Securities.............. $ 22 $ 69 $118 $252
AIM V.I. Growth............................. $ 22 $ 68 $116 $248
AIM V.I. Growth and Income.................. $ 21 $ 65 $112 $241
AIM V.I. High Yield......................... $ 29 $ 89 $151 $319
AIM V.I. International Equity............... $ 24 $ 73 $126 $268
AIM V.I. Money Market....................... $ 20 $ 63 $108 $233
AIM V.I. Telecommunications and Technology.. $ 29 $ 90 $152 $321
AIM V.I. Value.............................. $ 21 $ 66 $113 $242
</TABLE>

These tables are intended to assist you in understanding the costs and expenses
that you will incur, directly or indirectly, by investing in the Variable
Account. These include the expenses of the Portfolios of the AIM Variable
Insurance Funds. See the Fund Prospectus. In addition to the expenses listed
above, premium taxes may be applicable.

These examples reflect the annual $35 Annuity Account Fee as an annual charge of
0.07% of assets, based on an average account value of $50,000.

The examples should not be considered a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown.

Condensed Financial Information is found at the end of this prospectus.

<PAGE>

THE COMPANY, THE FIXED ACCOUNT, THE VARIABLE ACCOUNT AND THE FUND
--------------------------------------------------------------------------------

THE COMPANY

Connecticut General Life Insurance Company ("CG Life") is a stock life insurance
company incorporated in Connecticut in 1865. Our Home Office mailing address is
Hartford, Connecticut 06152. Our telephone number is (860) 726-6000. We do
business in fifty states, the District of Columbia and Puerto Rico. We issue
group and individual life and health insurance policies and annuities. We have
various wholly owned subsidiaries which are generally engaged in the insurance
business.

We are a wholly owned subsidiary of Connecticut General Corporation, Hartford,
Connecticut. Connecticut General Corporation is wholly owned by CIGNA Holdings
Inc., Philadelphia, Pennsylvania which is in turn wholly owned by CIGNA
Corporation, Philadelphia, Pennsylvania. Connecticut General Corporation is the
holding company of various insurance companies, one of which is CG Life.

THE ADMINISTRATOR

Allstate Life Insurance Company and Allstate Life Insurance Company of New York
(together, "Allstate") perform certain administrative functions relating to the
Contracts, the fixed account, and the variable account. Allstate will, among
other things, maintain the books and records of the sub-accounts, the variable
account, and the fixed account. Allstate will also maintain records of the name,
address, contract number, Annuity Account value, and any other information
necessary to operate and administer the Contracts. Allstate is responsible for
servicing the Contracts, including the payment of benefits, and contract
administration.

THE FIXED ACCOUNT

The fixed account is part of our general account and is made up of our general
assets, other than those held in any separate account. Interests in the fixed
account have not been registered under the Securities Act of 1933 (the "1933
Act"), and neither the fixed account nor our general account has been registered
under the Investment Company Act of 1940 (the "1940 Act"). Therefore, neither
the fixed account nor any interest therein is generally subject to regulation
under the provisions of the 1933 Act or the 1940 Act. Accordingly, we have been
advised that the staff of the SEC has not reviewed the disclosure in this
Prospectus relating to the fixed account.

The assets in the fixed sub-accounts are part of our general account assets and
are available to fund the claims of all our creditors and to fund benefits under
the Contract. You do not participate in the investment performance of the fixed
account's assets or our general account. Instead, we credit a specified rate of
interest, declared in advance, to amounts you allocate to the fixed account. We
guarantee this rate to be at least 3% per year. We may credit interest at a rate
greater than 3% per year, but we are not obligated to do so.

You may direct your premium payments, and any portion of your account value, to
any available fixed sub-account. Each fixed sub-account credits guaranteed
interest rates for a guaranteed interest period. Currently, 3 guaranteed periods
range from one to ten years, although we may offer different guaranteed periods
in the future. When you direct money to a fixed sub-account, you select the
number of years (the guaranteed period) during which you will keep money in that
fixed sub-account. You may select one or more fixed sub-accounts at any one
time. If you keep your money in the fixed sub-account for the length of the
sub-account's guaranteed period, we will credit interest at the rate we
specified for that sub-account.

But if you withdraw, or transfer, any money from the sub-account before its
expiration date for any reason, we will apply a Market Value Adjustment to the
amount you withdraw (see "Market Value Adjustment"). We may also apply a
withdrawal charge. We guarantee, however, that you will be credited with an
interest rate of at

<PAGE>

least 3% per year, compounded annually, on amounts you allocate to any fixed
sub-account, regardless of any effects of the Market Value Adjustment. The
Market Value Adjustment will not reduce the amount available for withdrawal or
transfer to an amount less than the initial amount you allocated or transferred
to the fixed sub-account plus compound interest of 3% per year. (However, if we
apply a withdrawal charge, the amount you receive may be less than your original
allocation credited with 3% compounded interest per year.) We reserve the right
to defer the payment or transfer of amounts you withdraw from the fixed account
for up to six (6) months from the date we receive a proper request for such
withdrawal or transfer.

THE VARIABLE ACCOUNT

The Contract permits you to invest in the Portfolios through the variable sub-
accounts. Your account value and/or variable annuity payments will reflect the
investment performance of the Portfolios in which you invest through the
variable sub-accounts. The values of the shares of the Portfolios held by the
Variable Account will fluctuate and are subject to the risks of changing
economic conditions as well as the risk that the Fund's management may not make
necessary changes in its Portfolios to anticipate changes in economic
conditions. Therefore, you bear the entire investment risk that the Contract's
basic objectives may not be realized and that the adverse effects of inflation
may not be lessened. We cannot guarantee that the total surrender proceeds or
the aggregate amount of annuity payments you receive will equal or exceed the
premium payments you make.

We established the Variable Account as a separate account on May 15, 1992,
pursuant to a resolution of our Board of Directors. Under Connecticut insurance
law, the income, gains or losses of the Variable Account are credited to or
charged against the assets of the Variable Account without regard to our other
income, gains, or losses. Assets we maintain in the Variable Account, equal to
the reserves and other contract liabilities with respect to the Variable
Account, will not be charged with any liabilities arising out of any of our
other business. All obligations arising under the Contract, including the
promise to make annuity payments, are our general corporate obligations.

Effective January 1, 1998, CG Life contracted the administrative servicing
obligations with respect to its individual variable annuity business to The
Lincoln National Life Insurance Company ("Lincoln Life") and Lincoln Life &
Annuity Company of New York ("LLANY"). Effective September 1, 1998, Lincoln Life
and LLANY subcontracted the administrative servicing obligations with respect to
the variable annuity business included in the Variable Account to Allstate.
Although CG Life was responsible for all Contract terms and conditions, Lincoln
Life and LLANY were responsible for servicing the individual annuity contracts,
including the payment of benefits, oversight of investment management and
contract administration, until these services were transitioned to the Allstate
Companies on April 12, 1999.

The Variable Account is registered with the SEC as a unit investment trust under
the Act and meets the definition of a separate account under the federal
securities laws. Registration with the SEC does not involve their supervision of
our management or investment practices or policies, or those of the Variable
Account.

The Variable Account is divided into variable sub-accounts. Each variable sub-
account invests exclusively in shares of a specific Portfolio of the Fund. All
amounts you allocate to the Variable Account will be used to purchase shares of
the Portfolios in accordance with your instructions at their net asset value.
Any and all distributions the Fund makes with respect to the shares held by the
Variable Account will be reinvested to purchase additional shares at their net
asset value.

We will make deductions from the Variable Account for cash withdrawals, annuity
payments, death benefits, annuity account fees, and any applicable taxes by
redeeming the number of Portfolio shares at their net asset value that equals
the amount to be deducted. The Variable Account will purchase and redeem
Portfolio shares on an aggregate basis. The Variable Account will be fully
invested in Portfolio shares at all times.

THE FUND AND THE PORTFOLIOS

AIM Variable Insurance Funds (the "Fund") is an open-end investment management
company registered under the Act. Shares of the Portfolios of the Fund are
offered to both registered and unregistered separate accounts of insurance
companies and to certain pension and retirement plans. The general public may
not purchase shares of the Portfolios.

<PAGE>

A I M Advisors, Inc. ("AIM"), the Fund's investment adviser, its affiliates, and
any insurance companies with separate accounts investing in the Fund must report
certain potential and existing conflicts of interests to the Fund's Board of
Trustees. These include any potential or existing conflicts between the
interests of owners/participants of variable annuity contracts and owners of
variable life insurance contracts that invest in shares of the Fund. The Board
of Trustees, a majority of whom are not "interested persons" of the Fund, as
that term is defined in the Act, will monitor the Fund to identify any such
irreconcilable material conflicts and to determine what action, if any, the
Fund, AIM, or its affiliates should take.

You may invest in any of the following (17) Portfolios of the Fund:

Portfolio Investment
--------- ----------
<S> <C>
Objective(s)
AIM V.I. Aggressive Growth Fund**...... Long-term growth of capital

AIM V.I. Balanced Fund................. As high a total return as possible,
consistent with preservation of capital

AIM V.I. Blue Chip Fund................ Long-term growth of capital with a
secondary objective of current income

AIM V.I. Capital Appreciation Fund..... Growth of capital

AIM V.I. Capital Development Fund...... Long-term growth of capital

AIM V.I. Dent Demographic Trends Fund.. Long-term growth of capital

AIM V.I. Diversified Income Fund....... High level of current income

AIM V.I. Global Growth and Income Fund. Long-term growth of capital together
with current income

AIM V.I. Global Utilities Fund......... High total return

AIM V.I. Government Securities Fund.... High level of current income consistent
with reasonable concern for safety of
principal

AIM V.I. Growth Fund................... Growth of capital

AIM V.I. Growth and Income Fund........ Growth of capital with a secondary
objective of current income

AIM V.I. High Yield Fund............... High level of current income

AIM V.I. International Equity Fund..... Long-term growth of capital

AIM V.I. Money Market Fund............. As high a level of current income as is
consistent with the preservation of
capital and liquidity

AIM V.I. Telecommunications and Long-term growth of capital
Technology Fund.......................

AIM V.I. Value Fund.................... Long-term growth of capital and income
is a secondary objective
</TABLE>

The Fund pays advisory fees to AIM for its services pursuant to an investment
advisory agreement. AIM, a Delaware corporation, also serves as investment
adviser to certain other investment companies.

The investment objectives and policies of the Portfolios may be similar to other
portfolios and mutual funds managed by the same investment adviser that are sold
directly to the public. You should not expect that the investment results of the
other portfolios or mutual funds will be similar to those of the underlying
Portfolios.

<PAGE>

There is no assurance that any Portfolio will achieve its stated investment
objective. Each Portfolio's investment objective may be changed by the Funds'
Board of Trustees without shareholder approval. A more detailed description of
the Fund, the Portfolios, their investment objectives, policies and restrictions
and expenses is found in the Fund's Prospectus and SAI. You should read the
Fund's Prospectus carefully before you invest.

<PAGE>

PREMIUM PAYMENTS AND ACCOUNT VALUES DURING THE ACCUMULATION PERIOD
--------------------------------------------------------------------------------

PREMIUM PAYMENTS

All premium payments must be paid to us or to our authorized agent. When you
apportion your premium payments among the sub-accounts, the minimum you can put
into a fixed sub-account is $500; the minimum for a variable sub-account is
$100.

We may reduce the minimum premium payment requirements under group contracts if
premium payments are paid through employee payroll deduction. We may also reduce
the minimum premium payment requirements if you use the Contract under a program
that qualifies under Section 403 or 408 of the Code. We must pre- approve any
premium payment in excess of $1,000,000.

If we receive any premium payment at our Customer Services Center before the
closing time of the New York Stock Exchange (usually 4 p.m. Eastern Time), we
will credit the payment to your Annuity Account the same day we receive it.
Otherwise, we will credit your payment on the next business day.

We reserve the right in our sole discretion not to accept a premium payment. In
addition, we may postpone the payment of any amount under the Contract which is
derived, all or in part, from any premium payment you paid by check or draft
until we determine the check or draft has been honored.

YOUR ANNUITY ACCOUNT

Each premium payment you make will be credited to your Annuity Account. The
value of your Annuity Account for any Valuation Period is equal to the sum of
your variable accumulation value plus your fixed accumulation value.

The Annuity Account shall continue in full force until the earliest of:

. the Annuity Date;

. the date we pay all death benefits under the Contract;

. the date you surrender the Contract; or

. the date your account value no longer meets the Minimum Value Requirement
described below.

Cash withdrawals may cause us to discontinue your Annuity Account.

ALLOCATING YOUR PREMIUM PAYMENTS

We will allocate your premium payments as you specify. If you wish to change
your allocation instructions, you must do so in writing. You must make
allocations to multiple sub-accounts in whole percentages.

If your allocation instructions would place less than to $500 in a fixed sub-
account, we will promptly ask you for further instructions regarding how we
should apportion the premium.

FIXED ACCUMULATION VALUE

The fixed accumulation value of your Annuity Account for any Valuation Period is
equal to the sum of the values of all the fixed sub-accounts to which you have
allocated money.

GUARANTEED PERIODS

You may allocate your premium payments, or transfer your account value, to any
fixed sub-account we offer. Each fixed sub-account will credit guaranteed
interest rates for the length of a guaranteed period ranging from

<PAGE>

one to ten years. The length of the sub-account's guaranteed period will affect
the rate of interest we credit to the sub-account.

Your money in a fixed sub-account will earn interest at a guaranteed interest
rate during the sub-account's guaranteed period, unless you withdraw value
before the guaranteed period expires. The guaranteed period starts on the date
we accept a premium payment or, in the case of a transfer, on the effective date
of the transfer. The guaranteed period expires on the date that equals its start
date plus the number of calendar years in the guaranteed period.

We will credit interest daily at a rate equivalent to a compound annual rate. We
will set the interest rate from time to time. A renewal and/or a transfer will
begin a new fixed sub-account for the guaranteed period you select. Amounts you
allocate at different times to fixed sub-accounts with the same guaranteed
period may have different interest rates. Each fixed sub-account will be treated
separately for purposes of determining whether to apply a Market Value
Adjustment.

We will notify you in writing before the expiration date for any guaranteed
period. We will automatically roll over the amount in an expiring sub-account
into a sub-account with the same guaranteed period, unless you notify us
otherwise. Transfers at the end of a guaranteed period do not count as transfers
(See "Transfers" in this Prospectus) and are not subject to restrictions on
fixed account transfers.

GUARANTEED INTEREST RATES

From time to time, we will set current guaranteed interest rates for the
guaranteed periods of the fixed account. We will set interest rates at our
discretion. We have no specific formula for determining the rates we declare.
Once you allocate money to a fixed sub-account for a guaranteed period, the
interest rate is guaranteed for the entire duration of the guaranteed period.
Any amount you withdraw from the sub-account will be subject to any applicable
withdrawal charges, Annuity Account Fees, Market Value Adjustment, premium taxes
or other fees. We will also apply a Market Value Adjustment to amounts you
transfer out of a fixed sub-account before the end of the guaranteed period.

The guaranteed interest rate will not be less than 3% per year compounded
annually, regardless of any Market Value Adjustment we may apply. We have no
obligation to declare a rate greater than 3%. You assume the risk that we will
not declare interest rates greater than 3%.

VARIABLE ACCUMULATION VALUE

The variable accumulation value of your Annuity Account for any Valuation Period
is equal to the sum of the value of all Variable Accumulation Units credited to
your Annuity Account.

VARIABLE ACCUMULATION UNITS

We credit premium payments to your Annuity Account in the form of Variable
Accumulation Units. We determine the number of Variable Accumulation Units we
credit by dividing the dollar amount you allocate to the particular variable
sub-account by the Variable Accumulation Unit Value for the particular sub-
account for the Valuation Period during which we receive and accept the premium
payment.

VARIABLE ACCUMULATION UNIT VALUE

We established the initial Variable Accumulation Unit Value for each sub-
account at $10. We recalculate the Variable Accumulation Unit Value for each
sub-account at the close of each Valuation Date. The Variable Accumulation Unit
Value will reflect the investment performance of the underlying Portfolio in
which the sub-account invests, the deduction of the mortality and expense risk
charge and the deduction of the Administrative Fee.

For a detailed discussion of how we determine Variable Accumulation Unit Value,
see the SAI.

<PAGE>

OPTIONAL FEATURES
--------------------------------------------------------------------------------

You may elect to enroll in either of the following programs. However, you may
not be enrolled in both programs at the same time.

DOLLAR COST AVERAGING

Dollar Cost Averaging is a program which allows you to systematically transfer a
specific dollar amount each month from any variable sub-account or the One- Year
fixed sub-account to one or more variable sub-accounts. By transferring set
amounts on a regular schedule, instead of transferring the total amount at one
particular time, you may reduce the risk of investing in the portfolios only
when the price is high.

You may select Dollar Cost Averaging by having at least $1,000 in a variable or
One-Year fixed sub-account. You must transfer at least $50 per month. You may
enroll in this program at any time by calling us or by providing us the
information we request on the Dollar Cost Averaging election form.

You must have sufficient value in the variable or One-Year fixed sub-account. We
do not permit transfers to or from any fixed sub-account other than the One-
Year fixed sub-account under Dollar Cost Averaging. We may, at our sole
discretion, waive Dollar Cost Averaging minimum deposit and transfer
requirements.

Dollar Cost Averaging will terminate when any of the following occurs:

. the number of designated transfers has been completed;

. the value of the variable or the One-Year fixed sub-account is
insufficient to complete the next transfer;

. you request termination by telephone or in writing (we must receive such
request at least one week before the next scheduled transfer date to take
effect that month); or

. you surrender the Contract.

The Dollar Cost Averaging program is not available following the Annuity Date.
We do not currently charge for Dollar Cost Averaging but we may do so.

We do not control the Fund and cannot guarantee that it will accept transfers
under the Dollar Cost Averaging program. We reserve the right to discontinue or
change this program at any time.

We do not guarantee that the dollar cost averaging program will result in
annuity account values which equal or exceed the value of your Premium Payments.
The Dollar Cost Averaging program may not achieve its objective. We do not
guarantee that the program will result in a profit, or protect against loss, nor
do we guarantee that it produces better results than a single lump- sum
investment.

AUTOMATIC REBALANCING

Automatic Rebalancing is an option which periodically restores to a pre-
determined level the percentage of annuity value allocated to each variable
sub-account (e.g., 20% Money Market, 50% Growth, 30% Utilities). This pre-
determined level will be the allocation you initially selected when you
purchased the Contract, unless you subsequently change it. You may change the
Automatic Rebalancing allocation at any time by submitting a request to us In
Writing.

If you elect Automatic Rebalancing, all premium payments you allocate to the
variable sub-accounts must be subject to Automatic Rebalancing. The fixed sub-
account is not available for Automatic Rebalancing.

You may choose to rebalance monthly, quarterly, semi-annually or annually. Once
the rebalancing option is activated, any variable sub-account transfers you
execute outside of the rebalancing option will immediately terminate the
Automatic Rebalancing option. Any subsequent premium payment or withdrawal that
modifies

<PAGE>

the net account balance within each variable sub-account may also cause the
Automatic Rebalancing option to terminate. We will confirm any such termination
to you. You may terminate the Automatic Rebalancing option or re-enroll at any
time by calling or writing us.

The Automatic Rebalancing program is not available following the Annuity Date.
We do not currently charge for Automatic Rebalancing but we may do so.

<PAGE>

TRANSFER PRIVILEGE
--------------------------------------------------------------------------------

TRANSFERS DURING THE ACCUMULATION PERIOD

During the Accumulation Period you may transfer all or part of your account
value to one or more variable or fixed sub-accounts. Transfers from the fixed
sub-accounts are subject to the following conditions:

. you must transfer at least $100 unless you are transferring the entire
value of the sub-account;

. the amount you transfer to any fixed sub-account must be at least $500;

. there must be at least $500 remaining in the sub-account after the
transfer; and

. transfers may be subject to a Market Value Adjustment.

Amounts you transfer into a fixed sub-account will earn interest at the
guaranteed interest rate we declare for that guaranteed period as of the
effective date of the transfer. We also may defer transfers of amounts from the
fixed account for a period not greater than six (6) months from the date we
receive the transfer request.

Transfers from the variable sub-accounts are subject to the following
conditions:

. you must transfer at least $100 unless you are transferring the entire
value of the sub-account;

. the amount you transfer to any variable sub-account must be at least
$100; and

. there must be at least $50 remaining in the sub-account after the
transfer.

We may otherwise restrict the transfer privilege in any way or eliminate it
entirely. Transfer requests in writing must be on a form we find acceptable.

Telephone Transfers. We will allow telephone transfers automatically.

We will take the following procedures to confirm that instructions we receive by
telephone are genuine.

. before a service representative accepts any request, the representative
will ask the caller for specific information to validate the request;

. we will record all calls; and

. we will confirm In Writing all transactions we perform.

We are not liable for any loss, cost or expense for acting on telephone
instructions which we believe are genuine, if we act in accordance with these
procedures.

A transfer from a fixed sub-account before its expiration date will be subject
to a Market Value Adjustment. Transfers involving Variable Accumulation Units
will be subject to any conditions the Fund imposes. A transfer from a variable
sub-account will be effective on the date we receive the request for transfer,
provided we receive the request before 4:00 p.m. Eastern Time on a day which the
New York Stock Exchange is open for business. Otherwise, the transfer will
become effective on the next day the New York Stock Exchange is open for
business. Under current law, there will not be any tax liability to you for
making a transfer.

TRANSFERS DURING THE ANNUITY PERIOD

After the Annuity Date, the Payee receiving variable annuity payments may
transfer value among the variable sub-accounts in which the Contract is
invested. The request must be in writing. We will exchange the value of the
number of Annuity Units from the variable sub-accounts you specify for other
Annuity Units, so that the value of an annuity payment made on the date of the
exchange will not be affected by the exchange. Each Payee is limited to three
exchanges per Contract Year after the Annuity Date. Such exchanges may be made
only between variable sub-accounts. We will make exchanges using the Annuity
Unit values for the Valuation Period during which we receive the request for
exchange.

<PAGE>

ACCESS TO YOUR MONEY
--------------------------------------------------------------------------------

CASH WITHDRAWALS

During the accumulation period, you may request a cash withdrawal. Any
withdrawal from the Variable Account will be effective on the date that we
receive it, so long as we receive the request by 4:00 p.m. Eastern Time. We will
process your withdrawal request within seven days of our receipt of your
request.

You may request a full surrender or a partial cash withdrawal. A request for a
partial withdrawal will result in the cancellation of a portion of your account
value equal to the dollar amount of the cash withdrawal payment, plus or minus
any applicable Market Value Adjustment, plus any applicable withdrawal charge
and premium taxes. Upon request, we will advise you of the amounts that we would
pay to you if you request a full surrender or partial withdrawal.

A partial cash withdrawal must be at least $50. When electing such a partial
withdrawal, you must tell us:

. the amount to be withdrawn; and

. the sub-accounts from which to take the money.

Partial withdrawals may not reduce the total account value below $1,000. If you
do not specify the sub-accounts from which we should take the withdrawal, we
will withdraw the requested amount pro-rata from each variable and fixed sub-
account you maintain. If such a pro-rata withdrawal reduces the value of any
fixed sub-account below $500, or any variable sub-account balance below $50, we
will transfer the value of those sub-accounts to that variable sub-account where
you maintain the highest value, or to the fixed account if there is no variable
sub-account where you maintain a balance greater than $50.

All cash withdrawals from any fixed sub-account will be subject to the Market
Value Adjustment, except those which become effective upon the expiration date
of the sub-account's guaranteed period. If you make a partial cash withdrawal,
we will assess any applicable withdrawal charge, Market Value Adjustment, and
premium taxes pro-rata against the amounts you have remaining in each sub-
account. If you request a full surrender of the Contract, we will assess any
applicable withdrawal charges, Market Value Adjustment, Annuity Account Fee, and
premium taxes against the amount you withdraw. We will deduct the Annuity
Account Fee and any applicable Market Value Adjustment from the Annuity Account
before we apply any withdrawal charge.

We may defer the payment of amounts withdrawn or transferred from the fixed
account for a period not to exceed six (6) months from the date we receive your
written request for such withdrawal or transfer.

Cash withdrawals from a variable sub-account will result in the cancellation of
Variable Accumulation Units from your Annuity Account. These Variable
Accumulation Units will have an aggregate value on the effective date of the
withdrawal equal to the total amount by which we reduce the account value (which
amount will include any applicable withdrawal charge). We will base the
cancellation of such units on the Variable Accumulation Unit values of the
variable sub-accounts at the end of the Valuation Period during which we receive
your cash withdrawal request.

Income taxes, federal tax penalties and other restrictions may apply to any
withdrawals you make. See "Federal Tax Matters".

MINIMUM VALUE REQUIREMENT

If you request a partial withdrawal which would cause your account value to fall
to less than $1,000, then we will treat the partial withdrawal as a request for
a full surrender. We will terminate your Contract as if you surrendered the
Contract if you do not make premium payments under the Contract for three
consecutive years and the account value has fallen below $1,000 during this
period. Before we exercise this right to terminate, we will give you thirty (30)
days notice and the opportunity to make an additional premium payment to
increase

<PAGE>

the account value above the minimum amount. On termination, you will receive the
amount which we would have paid had the Contract been fully surrendered. We may
also transfer any fixed sub-account balance which has a value below $500 and any
variable sub-account balance which has a value below $50 to that variable
sub-account where you maintain the highest value or to the fixed account if
there is no variable sub-account where you maintain a balance greater than $50.

SECTION 403(B) ANNUITIES

The Code imposes restrictions on cash withdrawals if your Contract is used with
Section 403(b) annuities. In order for such a Contract to receive tax deferred
treatment, the Contract must provide that cash withdrawals of amounts
attributable to salary reduction contributions (other than withdrawals of
accumulation account value as of December 31, 1988 ("Pre-1989, Salary Reduction
Account Value") may be made only when you attain age 59 1/2, separate from
service with the employer, die or become disabled (within the meaning of Section
72(m)(7) of the Code). These restrictions apply to any growth or interest on or
after January 1, 1989, on Pre-1989 Salary Reduction Account Values, salary
reduction contributions made on or after January 1, 1989, and any growth or
interest on such contributions ("Restricted Account Values").

Withdrawals of Restricted Account Values are also permitted in cases of
financial hardship, but only to the extent of contributions; earnings on
contributions cannot be withdrawn for hardship reasons. Hardship (and other)
withdrawals may be subject to a 10% tax penalty, in addition to any withdrawal
charge, Market Value Adjustment, Annuity Account Fee, and premium taxes
applicable under the Contract.

Under the terms of a particular Section 403(b) plan, you may be entitled to
transfer all or a portion of the account value to one or more alternative
funding options. You should consult the documents governing your plan and the
person who administers the plan for information as to such investment
alternatives.

With respect to the restrictions on withdrawals from the Variable Account, we
are relying upon a no-action letter dated November 28, 1988, from the staff of
the Commission to the American Council of Life Insurance. We have complied or
will comply with the requirements of that no-action letter.

<PAGE>

DEATH BENEFITS
--------------------------------------------------------------------------------

In the event of the death of any Owner before the Annuity Date, we will pay a
death benefit to the surviving Owner, if any, otherwise the Beneficiary upon
receipt of due proof of the Owner's death. If there is no designated Beneficiary
living on the date of the Owner's death, we will, upon receipt of due proof of
death of both the Owner and the designated Beneficiary, pay the death benefit in
one lump sum to the Owner's estate. If the death of any Annuitant occurs on or
after the Annuity Date, no death benefit will be payable under the Contract
except as may be provided under the Annuity Option elected.

ELECTION AND EFFECTIVE DATE OF ELECTION

During your lifetime and before the Annuity Date, you may elect in writing to
have the death benefit applied under the Annuity Options for the Beneficiary
after the Owner's death.

If no death benefit payment method is in effect on the date of the Owner's
death, the Beneficiary may elect:

. to receive the death benefit in the form of a single cash payment; or

. to have the death benefit applied under the Annuity Options (on the Annuity
Date).

The Beneficiary must make the election to us in writing. Your election of an
Annuity Option specifying the method by which the death benefit shall be paid
will become effective on the date we receive it. Any Annuity Option the
Beneficiary elects will become effective on the later of:

. the date we receive the election; or

. the date we receive due proof of the Owner's death.

If we do not receive the Beneficiary's election within 60 days following the
date we receive due proof of the Owner's death, the Beneficiary will be deemed
to have elected on such 60th day to receive the death benefit in the form of a
single cash payment.

The Annuity Option you or the Beneficiary elect may be restricted by the Code.
See "Federal Tax Matters" for further discussion.

PAYMENT OF DEATH BENEFIT

If the Beneficiary requests the death benefit to be paid in cash, subject to our
receipt of due proof of death, we will make payment within seven days of the
date the election becomes effective or is deemed to become effective. If we will
pay the death benefit in one lump sum to the Owner's estate, we will make the
payment within seven (7) days of the date we receive due proof of the death of
the Owner and/or the designated Beneficiary, as applicable. We may defer any
such payment of amounts derived from the Variable Account in accordance with the
Act. If we must make payment under any of the Annuity Options, the Annuity Date
will be thirty (30) days following the effective date or the deemed effective
date of the election. We will maintain your Annuity Account in effect until the
Annuity Date.

SPOUSAL CONTINUATION

If the death benefit is payable to your spouse, your spouse may elect to receive
the death benefit or may continue the Contract in the Accumulation Period as if
the death had not occurred. If the surviving spouse continues the Contract in
the Accumulation Period, the following conditions apply:

. On the day the Contract is continued, the account value will be the death
benefit as determined at the end of the Valuation Period during which we
receive due proof of death.

<PAGE>

. The surviving spouse may make a single withdrawal of any amount within one
year of the date of death without incurring a withdrawal charge or Market
Value Adjustment. (This feature may not be available in all states. Please
consult with your representative for further information).

. Prior to the Annuity Date, the amount of the death benefit of the continued
Contract will be the greatest of:

. The account value on the date we determine the amount of the death
benefit; or

. The sum of all premium payments reduced by the sum of all partial
withdrawals; or

. The amount that would have been payable in the event of a full surrender
of the Annuity Account on the date the death benefit election is effective
or is deemed to become effective.

Other death benefit alternatives in the Contract (including the Maximum
Anniversary Value feature described immediately below) will no longer apply if
the surviving spouse chooses to continue the Contract.

AMOUNT OF DEATH BENEFIT

We do not assess Market Value Adjustment or withdrawal charges against amounts
which we apply toward payment of a death benefit. We determine the amount of the
death benefit as of the effective date or deemed effective date of the death
benefit election (not as of the date of death). Unless there is a transfer of
ownership, the death benefit is equal to the greater of:

. the account value for the Valuation Period during which the death benefit
election is effective or deemed to become effective;

. the sum of all premium payments under the Contract, minus the sum of all
partial withdrawals from the Contract;

. your account value on the Seven Year Anniversary immediately preceding the
date the death benefit election is effective or is deemed to become
effective, adjusted for any subsequent premium payments and partial
withdrawals and charges;

. the amount that would have been payable in the event of a full surrender of
the Contract including surrender charges and any applicable Market Value
Adjustment on the date the death benefit election is effective or is deemed
to become effective; or

. the Maximum Anniversary Value between the "Enhanced Death Benefit
Endorsement" effective date and the date we calculate the death benefit,
adjusted for any subsequent premium payments, partial withdrawals and
applicable charges.

On each Contract Anniversary, the "Maximum Anniversary Value" is equal to the
greater of the account value of the most recently calculated Maximum Anniversary
Value. Premium payments will increase the Maximum Anniversary Value dollar for
dollar. Partial withdrawals will reduce the Maximum Anniversary Value according
to a withdrawal adjustment, described below.

The calculation of the Maximum Anniversary Value will begin on your first
Contract Anniversary after the endorsement effective date. Unless the death
benefit becomes payable, we will recalculate the Maximum Anniversary Value until
the first Contract Anniversary after the 75th birthday of the Owner, or five
years from the endorsement effective date, whichever is later. After that date,
we will recalculate the Maximum Anniversary Value only for premium payments and
withdrawals. The Maximum Anniversary Value will never be greater than the
maximum death benefit allowed by any state non-forfeiture laws that govern the
Contract.

The withdrawal adjustment is equal to: (i) the withdrawal adjustment divided by
(ii) the account value immediately prior to the withdrawal, with the result
multiplied by (iii) the value of the Maximum Anniversary Value immediately prior
to the withdrawal.

<PAGE>

SURRENDER OF THE CONTRACTS
--------------------------------------------------------------------------------

At any time before the Annuity Date, you may elect to surrender the Contract and
receive a cash payment. On the Surrender Date, we will cancel your Annuity
Account and we will pay the account value, minus any applicable withdrawal
charges, Annuity Account Fee, and premium taxes, and plus or minus any
applicable Market Value Adjustment. We will make the payment to you within seven
days of the Surrender Date in the form of a cash payment. We may be permitted to
defer any such payment of amount derived from the Variable Account in accordance
with the Act. We may defer the payment of amounts withdrawn from the fixed
account for a period not greater than 6 months from the date we receive your
written request for such withdrawal.

Following a surrender of the Contract, or if the Contract terminates for any
other reason, all your rights, and those of the Annuitant, and Beneficiary will
terminate.

Income taxes, federal tax penalties and other restrictions may apply to any
surrender. See "Federal Tax Matters."

<PAGE>

ANNUITY PROVISIONS
--------------------------------------------------------------------------------

ANNUITY DATE

Annuity payments will begin on the first day of the month following the Annuity
Date you selected and specified in the Contract Application or Order to
Purchase. You may change this date from time to time by notifying us in writing.
We must receive notice of each change at least 45 days before the then current
Annuity Date. The new Annuity Date must be a date which is:

. at least 30 days after the effective date of the change;

. the first day of a month; and

. not later than the first day of the first month following the Annuitant's
90th birthday.

These requirements may be restricted, in the case of a Qualified Contract, by
the particular retirement plan or by applicable law. You may also change the
Annuity Date by electing an Annuity Option as described in the death benefit
section of this Prospectus.

On the Annuity Date, we will cancel your Annuity Account and we will apply the
account value, minus any applicable Annuity Account Fee and premium taxes, to
provide an annuity under one or more of the options described below. We will not
impose any Market Value Adjustment or withdrawal charges upon amounts applied to
purchase an annuity. You may not request payments under the Contract's cash
withdrawal provisions on or after the Annuity Date.

Since the Contract offered by this Prospectus may be issued in connection with
retirement plans which meet the requirements of Section 401, 403, 408, or 457 of
the Code, as well as certain non-qualified plans, you should refer to the terms
of the particular plan for any limitations or restrictions on the Annuity Date.

ELECTION-CHANGE OF ANNUITY OPTION

During your lifetime and before the Annuity Date, you may elect one or more of
the Annuity Options described below, or any other Annuity Option to which we
agree. You may also change any election, but we must receive notice in writing
of any election or any change of election at least 45 days before the Annuity
Date.

If no election is in effect on the 30th day before the Annuity Date and you use
the Contract in connection with a retirement plan which meets the requirements
of either Section 401 (including Section 401(k)), Section 403, Section 408(c),
Section 408(k), or Section 457 of the Code, we will conclude that you elected
the Joint and Survivor Annuity described below or Life Annuity, whichever is
applicable, if required by such retirement plan. If you do not use the Contract
in connection with one of these plans, we will conclude that you have elected
Life Annuity with 120 Monthly Payments Certain.

At any time you may request annuitization in writing of your account value under
any of the Annuity Options described below. We will not impose a withdrawal
charge or Market Value Adjustment at the time payments under the Annuity Option
begin. Such annuitization will automatically result in a change in the Annuity
Date to the date payments commence under the Annuity Option you elect.

You should refer to the terms of your particular retirement plan and any
applicable legislation for any limitations or restrictions on the options which
you may elect. We do not permit a change of Annuity Option after the Annuity
Date.

ANNUITY OPTIONS

The Contract provides for seven different Annuity Options which are described
below. Four are fixed annuity options, and three are variable annuity options.
You may elect a fixed annuity, a variable annuity, or a

<PAGE>

combination of both. If electing a combination, you must specify what part of
the Annuity Account we should apply to each fixed and variable annuity Option.
If we do not receive your election by the 30th day before the Annuity Date, we
will determine the portion of the Annuity Account to be applied to a fixed
annuity and/or a variable annuity on a pro-rata basis based on the composition
of your Annuity Account on the Annuity Date. (Any amounts in the Variable
Account will be applied to a variable annuity, and amounts in the fixed account
will be applied to a fixed annuity.) We will base variable annuity payments on
the variable sub-accounts you select, or on how you allocate the account value
among the variable sub-accounts.

FIXED ANNUITY PAYMENTS

A fixed annuity provides for Annuity Option payments which will remain constant.
Payments will be made under the terms of the Annuity Option you elected. The
effect of choosing a fixed annuity is that we will set the amount of each
payment on the Annuity Date and that amount will not change. If you select a
fixed annuity, we will transfer to our general account any amounts in the
Variable Account that we use to provide the fixed annuity.

We will fix the amount of the annuity payments by the fixed annuity provisions
you select and, for some options, the Annuitant's settlement age (determined in
accordance with the Contract). We determine the amount of each fixed annuity
payment by applying the Annuity Payment Rates found in the Contract to the
portion of the account value allocated to the fixed annuity Option you select,
or, we will use the Annuity Payment Rates we use on the Annuity Date if they are
more favorable to the Payee. The rates found in the Contract show, for each
$1,000 applied, the dollar amount of the monthly fixed annuity payment. We may
change this rate with respect to Contracts purchased after the effective date of
such change (see "Modification").

VARIABLE ANNUITY PAYMENTS

If you choose to receive variable annuity payments, the dollar amount of the
payments will fluctuate or vary in dollar amount, based on the investment
performance of the variable sub-accounts in which you invest. The variable
annuity purchase rate tables in the Contract reflect an assumed interest rate of
3%, so if the actual net investment performance of the variable sub-account is
less than this rate, then the dollar amount of the actual annuity payments will
decrease. If the actual net investment performance of the variable sub- account
is higher than this rate, then the dollar amount of the actual annuity payments
will increase. If the net investment performance exactly equals the 3% rate,
then the dollar amount of the actual annuity payments will remain constant.

We determine the amount of the first variable annuity payment by the variable
annuity provisions you select and, for some options, the Annuitant's settlement
age of the Annuitant (determined in accordance with the Contract). We determine
all variable annuity payments other than the first by means of Annuity Units
credited to the Contract with respect to the particular payee. We determine the
number of Annuity Units to be credited in respect of a particular variable sub-
account by dividing that portion of the first variable annuity payment
attributable to that sub-account by the Annuity Unit Value of that variable
sub-account for the Valuation Period which ends immediately preceding the
Annuity Date. The number of Annuity Units of each sub-account credited with
respect to the particular payee then remains fixed unless an exchange of Annuity
Units is made pursuant to the "Transfer Privilege--Annuity Period" section. The
dollar amount of each variable annuity payment after the first may increase,
decrease or remain constant, and equals the sum of the amounts determined by
multiplying the number of Annuity Units of a particular variable sub-account for
the Valuation Period, which ends immediately preceding the due date of each
subsequent payment, by the Annuity Unit Value for that sub- account, for the
first Valuation Period occurring on or immediately before the first day of each
month. We deduct the annual Annuity Account Fee, pro-rata, from each variable
annuity payment.

You may choose to receive annuity payments under any one of the Annuity Options
described below. We may consent to other plans of payment before the Annuity
Date.

<PAGE>

If you use the Contract in connection with a retirement plan which meets the
requirements of either Section 401 (including Section 401(k)), Section 403,
Section 408(c), Section 408(k), or Section 457 of the Code, we will offer a
Joint and Survivor Annuity under the Contract. A Joint and Survivor Annuity
provides for monthly payments payable during the joint lifetime of the Payee and
a designated second person and during the lifetime of the survivor. During the
lifetime of the survivor we will determine the monthly payment payable in the
same manner as during the joint lifetime of the Payee and the designated second
person.

<PAGE>

FIXED ANNUITY OPTIONS
--------------------------------------------------------------------------------

LIFE ANNUITY OPTION

We make monthly payments to the Payee during the Annuitant's lifetime ending
with the last payment due before the Annuitant's death. Under this option, we
will make only one payment if the Annuitant dies before we make the second
payment, we will make only two payments if the Annuitant dies before we make the
third payment, etc.

LIFE ANNUITY WITH CERTAIN PERIOD OPTION

We will make monthly payments to the Payee for a fixed period of 60, 120, 180,
or 240 months (as selected) and for as long thereafter as the Annuitant lives.

CASH REFUND LIFE ANNUITY OPTION

We make monthly payments to the Payee during the Annuitant's lifetime ending
with the last payment due before the Annuitant's death provided that, at the
Annuitant's death, the Payee will receive an additional payment equal to the
excess, if any, of the initial value of the proceeds we apply under this option
over the dollar amount of payments we have already paid.

ANNUITY CERTAIN OPTION

We pay monthly payments for the number of years selected which may be from 5 to
30 years.

<PAGE>

VARIABLE ANNUITY OPTIONS
--------------------------------------------------------------------------------

VARIABLE LIFE ANNUITY OPTION

We make monthly payments to the Payee during the Annuitant's lifetime, ending
with the last payment due before the Annuitant's death. Under this option, we
will make only one payment if the Annuitant dies before we make the second
payment, we will make only two payments if the Annuitant dies before we make the
third payment, etc.

VARIABLE LIFE ANNUITY WITH CERTAIN PERIOD OPTION

We make monthly payments to the Payee for a fixed period of 60, 120, 180, or 240
months (as selected), and for as long thereafter as the Annuitant lives.

VARIABLE ANNUITY CERTAIN OPTION

We make monthly payments for the number of years you select which may be from 5
to 30 years. At any time during the period we make payments, the Annuitant may
elect to withdraw a portion or all of the future payments to which the Payee is
entitled. Upon withdrawal, the amount of the future payments will be commuted
and paid in one sum. A withdrawal may be taken at any time after annuitization
which does not exceed the total value of the variable annuity certain on the
withdrawal date. The minimum amount you may withdraw is $1,000. We determine the
value of the variable annuity certain by first converting your number of annuity
units into dollars based on the value of the annuity units. Thereafter, we
divide the dollar value by an annuity certain payment factor to obtain the total
value of the variable annuity certain. We determine the annuity certain payment
factor by calculating the number of monthly payments remaining from the date of
withdrawal to the end of the variable annuity certain period and discounting
such payments to a present value using an assumed interest rate of 3%. The
Annuitant may elect that the Payee receives all or a portion of this present
value.

ADDITIONAL ANNUITY OPTIONS

You may settle any proceeds payable under the Contract, under any other method
of settlement including joint and senior settlement options under joint life
annuities) we offer at the time of the request.

DETERMINATION OF ANNUITY PAYMENTS

On the Annuity Date, we will apply the adjusted value of the fixed account and
the Variable Account to provide for payments under the selected Annuity Option.
The adjusted value will be equal to:

. the account value at the end of the Valuation Period which ends
immediately preceding the Annuity Date;

. reduced by a proportionate amount of the Annuity Account Fee to reflect the
time elapsed between the last day of the prior contract year and the day
before the Annuity Date; and

. reduced by any premium or similar taxes.

If the amount to be applied under any annuity option is less than $5,000, or if
the monthly annuity payment payable in accordance with such option is less than
$50, we will pay the amount in a single payment to the Payee you designate.

<PAGE>

EXPENSES

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

We assess charges under the Contract offered by this Prospectus in three ways:

. as withdrawal charges (contingent deferred sales charges);

. as deductions for Contract administration expenses and, if applicable,
for premium taxes; and

. as charges against the assets of the Variable Account for the assumption of
mortality and expense risks and for administrative expenses.

In addition, certain deductions are made from the assets of the Fund for
investment management fees and expenses. These fees and expenses are fully
described in the Fund's Prospectus and its SAI.

WITHDRAWAL CHARGES

We do not make a deduction for sales charges from a premium payment. However, if
you make a cash withdrawal of a premium payment, we may assess a withdrawal
charge (contingent deferred sales charge). The length of time between our
acceptance of the premium payment deemed withdrawn and the receipt of a
withdrawal request determines the withdrawal charge. This charge will be used to
cover certain expenses relating to the sale of the Contract including
commissions paid to sales personnel, the costs of preparation of sales
literature, other promotional costs and acquisition expenses.

Each premium payment has its own time period for purposes of assessing a
withdrawal charge. For purposes of computing the withdrawal charge, we deem
amounts to be withdrawn in the order in which we received them. For example, we
will make withdrawals from the oldest premium payment we have accepted first.
After these amounts are exhausted, we will make withdrawals from the second
oldest premium payment we have accepted, and so on until you withdraw all of
your premium payments. After you withdraw all premium payments, we will deem
further withdrawals to be from net investment results attributable to such
premium payments, if any.

Subject to the Free Partial Withdrawal described below, we will assess the
following withdrawal charge to premium payment amounts you withdraw from your
Annuity Account (adjusted by any applicable Market Value Adjustment):

Withdrawal
Charge

Percentage Year Applicable
---------- ---------------
<S> <C>
7%......................... During 1st Year since premium payment accepted
6%......................... During 2nd Year since premium payment accepted
5%......................... During 3rd Year since premium payment accepted
4%......................... During 4th Year since premium payment accepted
3%......................... During 5th Year since premium payment accepted
2%......................... During 6th Year since premium payment accepted
1%......................... During 7th Year since premium payment accepted
0%......................... Thereafter
</TABLE>

When you make a withdrawal, we will deduct any applicable Annuity Account Fee
from, and make any Market Value Adjustment to, your Annuity Account before we
apply any withdrawal charge. We then assess the withdrawal charge against the
amounts remaining in your Annuity Account. If your Annuity Account is allocated
among more than one sub-account, we will assess the withdrawal charge pro-rata
against the amounts remaining within the sub-accounts from which the withdrawal
occurred. If the sub-accounts from which the withdrawal occurred do not contain
sufficient amounts to satisfy the withdrawal charge, we will assess the
deficiency pro-rata against all amounts remaining within the sub-accounts. If a
cash withdrawal causes the entire value of the Annuity Account to be withdrawn
(i.e., a complete surrender), then we will deduct the withdrawal charge from the
amount paid. We will not impose the withdrawal charge on a premium payment

<PAGE>

you withdraw after the end of the seventh year from the date we accept such
premium payment, nor do we impose the withdrawal charge upon payment of the
death benefit or upon amounts applied to an Annuity Option.

We may, upon notice to you, modify the withdrawal charges, provided that such
modification shall apply only to your Annuity Account established after the
effective date of such modification (see "Modification"). For examples of
withdrawals, surrenders, withdrawal charges and the Market Value Adjustment, see
the SAI.

FREE PARTIAL WITHDRAWAL

During each Contract Year before the Annuity Date you may withdraw a portion of
the premium payments you paid without being assessed a withdrawal charge. Your
request must be In Writing. This privilege continues until you withdraw all
premium payments you paid to the your Annuity Account. You may withdraw up to
15% of the total amount of your premium payments without a withdrawal charge
each Contract Year. The amount must be at least $50.

You must specify the sub-accounts from which the amount will be withdrawn. If
you do not specify the sub-accounts from which the withdrawal will occur, the
Company will withdraw the amount pro-rata from all your sub-accounts.

A Free Partial Withdrawal may have federal income tax consequences. See
"Federal Tax Matters."

ANNUITY ACCOUNT FEE

On the last Valuation Date of each calendar year, we deduct an annual policy
administration fee, the Annuity Account Fee, on a pro-rata basis from all of
your sub-accounts. The Annuity Account Fee equals $35. This fee partially
reimburses us for administrative expenses relating to the issue and maintenance
of the Contract and your Annuity Account.

We will pro rate your initial Annuity Account Fee for the calendar year during
which you established your Annuity Account, to reflect the shorter initial
period. Thereafter, we will assess the full $35 Annuity Account Fee annually. If
you surrender the Contract, we will deduct a $35 Annuity Account Fee. On the
Annuity Date, we will reduce the account value by a proportionate amount of the
Annuity Account Fee to reflect the time elapsed between the previous December 31
and the day before the Annuity Date. After the Annuity Date, we will deduct an
annual $35 Annuity Account Fee, in approximately equal amounts, from each
variable annuity payment you receive during the year. We will not deduct Annuity
Account Fee from fixed annuity payments. If applicable state law requires, we
will reduce the $35 Annuity Account Fee to a lesser amount. We will waive the
annual Annuity Account Fee each year that your account value is at least
$100,000 on the last Valuation Date of that year.

ADMINISTRATIVE FEE

On each Valuation Date, we deduct an Administrative Fee from the assets you have
in each variable sub-account to partially reimburse us for administrative
expenses relating to the issue and maintenance of the Contract and your Annuity
Account. This charge currently has an effective annual rate of 0.10% (equal to a
daily rate of 0.000275834% of the assets in each sub-account). There is no
necessary relationship between the administrative charges imposed and the amount
of expenses that may be attributable to any single Owner's Annuity Account.

PREMIUM TAXES

We will deduct premium tax equivalents (including any related retaliatory
taxes), if any, and any other taxes due under the Contract. We currently deduct
any such taxes at the time you withdraw or annuitize account value, or any
portion thereof, (although the deduction could, in the future, be taken from
premium payments). Currently these taxes range from 0% to 3.5% of the amount of
premium paid depending upon your state of residence.

<PAGE>

We do not currently deduct federal, state or local taxes other than state
premium taxes. However, we may charge for such taxes in the future or for other
economic burdens resulting from the application of any tax laws that we
determine to be attributable to the Contract.

CHARGE FOR MORTALITY AND EXPENSE RISKS

The mortality risk we assume arises from the contractual obligation to continue
to make annuity payments to one or more Payees regardless of how long the
Annuitant lives and regardless of how long all annuitants as a group live. This
assures each annuitant that neither the longevity of fellow annuitants nor an
improvement in the life expectancy generally will have an adverse effect on the
amount of any annuity payment received under the Contract. We assume this
mortality risk by virtue of annuity rates incorporated into the Contract. These
rates cannot be changed. We also assume a mortality risk in connection with the
death benefits. The expense risk we assumed is the risk that the administrative
charges assessed under the Contract may be insufficient to cover the actual
total administrative expenses we incur.

For assuming these risks, we deduct a charge from value you have in the Variable
Account at the end of each Valuation Period at an effective annual rate of 1.25%
(calculated at a daily rate of 0.003447920% of the assets in the Variable
Account). If the deduction is insufficient to cover our actual costs for
mortality and expense risks, we will bear the loss. Conversely, if the deduction
proves more than sufficient, we will profit from the excess. We expect to
realize a profit from this charge. We do not make a deduction for these risks
from the fixed account.

We assume the risk that withdrawal charges assessed under the Contract may be
insufficient to compensate us for the costs of distributing the Contract. In the
event the withdrawal charges prove to be insufficient to cover actual
distribution expenses, the deficiency will be met from our general corporate
funds, which may include amounts derived from the mortality and expense risk
charge.

The Contract provides that we may modify the mortality and expense risk charges;
however, such modification shall apply only with respect to Contracts issued
after the effective date of such modification.

MARKET VALUE ADJUSTMENT

Any cash withdrawal, surrender or transfer from a fixed sub-account, other than
a withdrawal, surrender or transfer at the expiration date of the guaranteed
period, will be subject to a Market Value Adjustment. We will apply the Market
Value Adjustment to the amount you withdraw or transfer after we deduct any
applicable Annuity Account Fee and before we deduct any applicable withdrawal
charge.

The Market Value Adjustment generally reflects the relationship between the
Index Rate (based upon the Treasury Constant Maturity Series published by the
Federal Reserve) in effect at the time you initially allocated an amount to a
fixed sub-account's guaranteed period under the Contract and the Index Rate in
effect at the time you withdraw or transfer the amount from the fixed sub-
account. It also reflects the time remaining in the fixed sub-account's
guaranteed period. Generally, if the Index Rate at the time of withdrawal or
transfer is more than .50% lower than the Index Rate at the time the premium
payment was allocated, then the application of the Market Value Adjustment will
result in higher payment upon withdrawal or transfer. Similarly, if the Index
Rate at the time of withdrawal or transfer is higher than the Index Rate at the
time the premium payment was allocated (or less than 0.50% lower), the
application of the Market Value Adjustment will generally result in a lower
payment upon withdrawal or transfer.

We apply the following formula to compute the Market Value Adjustment:

(1 + A)N(th)

(1 + B)N(th)

<PAGE>

Where:

A = an Index Rate (based on the Treasury Constant Maturity Series published by
the Federal Reserve) for a security with time to maturity equal to the sub-
account's guaranteed period, determined at the beginning of the guaranteed
period. We use an Index Rate declared for the Friday occurring within the
calendar week which is two weeks earlier than the calendar week during which
the guaranteed period begins.

B = an Index Rate (based on the Treasury Constant Maturity Series published by
the Federal Reserve) for a security with time to maturity equal to the sub-
account's guaranteed period, determined at the time of withdrawal or
transfer, plus a 0.50% adjustment (unless otherwise limited by applicable
state law). This adjustment builds into the formula a factor representing
direct and indirect costs to us associated with liquidating general account
assets in order to satisfy surrender requests. This adjustment of 0.50% has
been added to the denominator of the formula because it is anticipated that a
substantial portion of the general account assets will be in relatively
illiquid securities. Thus, in addition to direct transaction costs, if we
must sell such securities (e.g., because of surrenders), the market price may
be lower. Accordingly, even if interest rates decline, there will not be a
positive adjustment until this factor is overcome, and then any adjustment
will be lower than otherwise, to compensate for this factor. Similarly, if
interest rates rise, any negative adjustment will be greater than otherwise,
to compensate for this factor. If interest rates stay the same, this factor
will result in a small but negative Market Value Adjustment. If Index Rates
"A" and "B" are within 0.25% of each other when the Index Rate Factor is
determined, no such percentage adjustment to "B" will be made. We use an
Index Rate declared for the Friday occurring within the calendar week which
is two weeks earlier than the calendar week during which the withdrawal,
surrender or transfer occurs.

N = The number of years remaining in the guaranteed period (e.g., 1 year and 73
days = 1 + (73 divided by 365) = 1.2 years).

Straight line interpolation is used for periods to maturity not quoted.

See the SAI for examples of the application of the Market Value Adjustment.

Waiver of Withdrawal Charge and Market Value Adjustment

Pursuant to the "Contract Endorsement for Waiver of Charges," we will waive any
withdrawal charge and Market Value Adjustment prior to the Annuity Date if any
Owner (or Annuitant, if the Owner is not a natural person):

1. is first confined after the Endorsement Effective Date to a Long Term Care
Facility or Hospital for at least 90 consecutive days, confinement is
prescribed by a Physician and is Medically Necessary, and the request for a
withdrawal and adequate written proof of confinement are received by us no
later than 120 days after discharge; or

2. is first diagnosed by a Physician as having a Terminal Illness after the
Endorsement Effective Date and we receive a request for a withdrawal and
adequate written proof of the diagnosis. We may require a second opinion at
our expense by a Physician that we choose.

Please refer to your Contract endorsement for the meaning of, and limitations
imposed by, the terms "Hospital," "Long Term Care Facility," "Medically
Necessary," "Physician," and "Terminal Illness."

This feature may not be available in all states. Please consult with your
representative for further information.

<PAGE>

OTHER CONTRACT PROVISIONS
--------------------------------------------------------------------------------

DEFERRAL OF PAYMENT

We may defer the calculation and payment of partial withdrawal and full
surrender values, transfers or death benefits from any variable sub-account
during any period:

. when the New York Stock Exchange is closed other than customary week-end
and holiday closings; or

. when trading on the New York Stock Exchange is restricted as the SEC
determines; or

. when an emergency exists as a result of which:

(a) disposal of securities held by the Fund is not reasonably
practicable; or

(b) it is not reasonably practicable to determine the value of the net
assets of the Fund; or

. when the SEC may by order permit for the protection of security holders.

We may defer the payment or transfer of amounts you withdraw from any fixed
sub-account for a period not greater than 6 months from the date we receive
written request for such withdrawal or transfer. If payment or transfer is
deferred beyond thirty (30) days, we will pay interest of at least 3% per year
on amounts so deferred.

In addition, payment of the amount of any withdrawal derived, all or in part,
from any premium payment paid to us by check or draft may be postponed until we
determine the check or draft has been honored.

DESIGNATION AND CHANGE OF BENEFICIARY

The Beneficiary designated in your Contract Specifications will remain in effect
unless you change it. You have the sole right to change any Beneficiary. Subject
to the rights of an irrevocable Beneficiary, you may change or revoke your
Beneficiary designation at any time while you are living by filing with us a
beneficiary designation or revocation in writing. The change or revocation will
not be binding upon us until we record it. The change or revocation will take
effect as of the date on which you sign the beneficiary designation or
revocation, but the change or revocation will be without prejudice to us with
regard to any payment we made or any action we took before recording the change
or revocation.

You should refer to the terms of your particular retirement plan and any
applicable legislation for any restrictions on the beneficiary designation.

EXERCISE OF CONTRACT RIGHTS

The Contract shall belong to you. You may expressly reserve all Contract rights
and privileges. You may exercise such rights and privileges without the consent
of the Beneficiary (other than an irrevocable Beneficiary) or any other person.
You may exercise such rights and privileges only during your lifetime and before
the Annuity Date, except as otherwise provided in the Contract.

Unless provided otherwise, the Annuitant becomes the Payee on and after the
Annuity Date. If the Annuitant predeceases you before the Annuity Date, you
become the Annuitant until you designate a new Annuitant in writing. The
Beneficiary becomes the Payee on the death of the Annuitant after the Annuity
Date. Such Payees may thereafter exercise such rights and privileges, if any, of
ownership which continue.

TRANSFER OF OWNERSHIP

The owner of a Non-Qualified Contract may transfer the ownership of the Contract
before the Annuity Date. A transfer of ownership will not be binding upon us
until we receive and record written notification. When we

<PAGE>

record such notification, the change will take effect as of the effective date
you specified. The change will be without prejudice to us regarding any payment
we made or any action we took before recording the change.

You may not transfer ownership of a Qualified Contract except to:

. the Annuitant;

. a trustee or successor trustee of a pension or profit sharing trust which is
qualified under Section 401 of the Code;

. the employer of the Annuitant provided that the Qualified Contract after
transfer is maintained under the terms of a retirement plan qualified under
Section 403(a) of the Code for the benefit of the Annuitant;

. the trustee of an individual retirement account plan qualified under
Section 408 of the Code for the benefit of the Owner; or

. as otherwise permitted from time to time by laws and regulations governing
the retirement or deferred compensation plans for which a Qualified Contract
may be issued.

Subject to the foregoing, a Qualified Contract may not be sold, assigned,
transferred, discounted or pledged as collateral for a loan or as security for
the performance of an obligation or for any other purpose to any person other
than us.

A transfer of ownership may have federal income tax consequences. See "Federal
Tax Matters".

DEATH OF OWNER

If any Owner of a Non-Qualified Contract dies before the Annuity Date, we must
distribute the death benefit payable under the Contract, if any, to the
surviving Owner, if any, otherwise the Beneficiary, if then alive, either:

. within five years after the deceased Owner's date of death; or

. over some period not greater than the Beneficiary's life or expected life,
with annuity payments beginning within one year after the deceased Owner's
date of death.

If any Owner is not an individual, a change in or death of any annuitant will be
considered the death of an Owner.

The person named as your Beneficiary in the Contract Application shall be
considered the designated beneficiary for the purposes of Section 72(s)of the
Code and if no person then living has been so named, then the Annuitant shall
automatically be the designated beneficiary for this purpose. In all cases, any
such designated beneficiary shall not be entitled to exercise any rights
prohibited by applicable federal income tax law.

These mandatory distribution requirements may not apply when the Beneficiary is
the deceased Owner's spouse, if the spouse elects to continue the Contract in
the spouse's own name, as Owner.

If the Payee dies on or after the Annuity Date and before the entire
accumulation under such Owner's Annuity Account has been distributed, the
remaining portion of such Owner's Annuity Account, if any, must be distributed
at least as rapidly as the method of distribution then in effect. Similar rules
may apply with respect to Qualified Contract.

VOTING FUND SHARES

We will vote Fund shares held by the variable sub-accounts at the Fund's
shareholder meetings, and to the extent required by law, will follow voting
instructions received from persons having the right to give voting instructions.
You are the person having the right to give voting instructions before the
Annuity Date. The number of Fund shares as to which each such person is entitled
to give instructions will be determined as of a

<PAGE>

date not more than 90 days before each such meeting. Before the Annuity Date, we
determine the number of Fund shares as to which voting instructions may be given
to us by dividing the value of all of the Variable Accumulation Units of the
particular sub-account credited to your Annuity Account by the net asset value
of one Fund share as of the same date. The Fund is not required to, and does not
intend to, hold annual or other regular meetings of shareholders.

If you elect a variable annuity Option, then after the Annuity Date, the Payee
has the right to give voting instructions. The number of votes decreases as we
make annuity payments and as the Contract reserves decrease. The person's number
of votes will be determined by dividing the Contract reserve you allocate to a
variable sub-account by the net asset value per share of the corresponding Fund
Portfolio. There are no voting rights associated with the fixed account or a
fixed annuity before or after the Annuity Date.

We will vote any shares attributable to us, and Fund shares for which we receive
no timely voting instructions, in the same proportion as the shares for which we
receive instructions. We must receive voting instructions at least one day
before the shareholders meeting for them to be considered timely.

Owners participating under Qualified Contracts may be subject to other voting
provisions of the particular plan. Individuals who contribute to plans which the
Contract funds may be entitled to instruct you as to how to instruct us to vote
the Fund shares attributable to their contributions. Such plans may also provide
the additional extent, if any, to which you shall follow voting instructions of
persons with rights under the plans. If we do not receive voting instructions
from any such person with respect to a particular employee's Annuity Account,
you may instruct us as to how to vote the number of Fund shares for which
instructions may be given.

Neither we, nor the Variable Account, are under any duty to provide information
concerning the voting instruction rights of persons who may have such rights
under plans, other than rights afforded by the Act. Nor are we under any duty to
inquire as to the instructions we receive, or to your authority or the authority
of others to instruct the voting of Fund shares. The instructions you give will
be valid as they affect the Variable Account, us, and any others having voting
instruction rights with respect to the Variable Account, except where we or the
Variable Account have actual knowledge to the contrary.

We will provide all Fund proxy material, together with an appropriate form to be
used to give voting instructions, to each person we know to have the right to
give voting instructions, at least ten days before each meeting of the Fund's
shareholders. If the Act or any regulation thereunder should be amended, or if
the present interpretation thereof should change, and as a result we determine
that we are permitted to vote the Fund's shares in our own right, we may do so.

Fund shares that we (or our affiliates) hold, in which you or other persons
entitled to vote have no beneficial interest, may be voted by the shareholder
thereof (us or our affiliates) in its sole discretion.

ADDING, DELETING OR SUBSTITUTING INVESTMENTS

We do not control the Fund and cannot guarantee that it or any of its Portfolios
will be available for investment in the future or that it or any Portfolio will
accept premium payments or transfers. In the event the Fund or any Portfolio is
not available, we reserve the right to make changes in the Variable Account and
its investments. We may take reasonable action to secure a comparable or
otherwise appropriate funding vehicle, although we are not required to do so and
may not actually do so. In the unlikely event that the Fund is not available in
the future and a substitute funding vehicle is not obtained, then we may
maintain all Annuity Account values in the fixed account. If the Fund or other
funding vehicle restricts or refuses to accept transfers or other transactions,
then we may change, modify, or revoke transfer privileges under the Contract.

We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares of the Fund that
are held by the Variable Account (or any variable sub-account thereof) or that
the Variable Account (or any variable sub-account thereof) may purchase. We may
eliminate the

<PAGE>

shares of any of the Fund's Portfolios and substitute shares of another
Portfolio or any other investment vehicle of another open-end, registered
investment company if:

. laws or regulations are changed;

. shares of the Fund or of a Portfolio are no longer available for
investment; or

. we determine that further investment in any Portfolio should become
inappropriate in view of the purposes of the Variable Account.

If any of these events occurs, substitution of any shares attributable to your
interest in a variable sub-account of the Variable Account shall occur only
after notice and prior approval by the Commission to the extent required.
Nothing contained herein shall prevent the Variable Account from purchasing
other securities for other series or classes of policies, or from permitting a
conversion between series or classes of policies on the basis of requests Owners
make. We shall make any appropriate endorsement to the Contract to reflect any
substitution pursuant to this provision.

We may establish new sub-accounts when, in our sole discretion, marketing, tax,
investment or other conditions warrant. Any new sub-accounts may be made
available to existing Owners on a basis we determine. Each additional sub-
account will purchase shares in a Portfolio of the Fund or in another mutual
fund or investment vehicle. We may also eliminate one or more sub-accounts if,
in our sole discretion, marketing, tax, investment or other conditions warrant
such change. In the event we eliminate any sub-account, we will notify you and
request a reallocation of the amounts invested in the eliminated sub-account.

CHANGE IN OPERATION OF THE VARIABLE ACCOUNT

At our election, and if we determined that it is in the best interests of
persons having voting rights under the Contract, we may operate the Variable
Account as a management company under the Act or any other form permitted by
law; deregister the Variable Account under the Act in the event registration is
no longer required (deregistration of the Variable Account requires an order by
the Commission); or combine the Variable Account with one or more other separate
accounts. To the extent permitted by applicable law, we also may transfer the
assets of the Variable Account associated with the Contract to another account
or accounts. In the event of any change in the operation of the Variable Account
pursuant to this provision, we may make appropriate endorsement to the Contract
to reflect the change and take such other action as may be necessary and
appropriate to effect the change.

MODIFYING THE CONTRACT

If we modify the Contract we will give notice to you (or the Payees after the
Annuity Date). We may modify the Contract if such modification:

. is necessary to make the Contract or the Variable Account comply with, or
take advantage of, any law or regulation issued by a governmental agency to
which we or the Variable Account are subject; or

. is necessary to attempt to assure continued qualification of the Contract
under the Code or other federal or state laws relating to retirement
annuities or annuity contracts; or

. is necessary to reflect a change in the operation of the Variable Account
or its sub-accounts; or

. provides additional Variable Account and/or fixed accumulation options.

If we modify the Contract, we may make appropriate endorsement in the Contract.

In addition, upon notice to you, we may modify the Contract to change the
withdrawal charges, Annuity Account Fees, mortality and expense risk charges,
the tables used in determining the amount of the first monthly fixed annuity
payment, and the formula used to calculate the Market Value Adjustment. Such
modification shall apply only to Contracts established after the effective date
of such modification. In order to exercise our modification rights in these
particular instances, we must notify you of such modification in

<PAGE>

writing. All of the charges and the annuity tables which are provided in the
Contract before any such modification will remain in effect permanently, unless
approved by us, with respect to Contracts established before the effective date
of such modification.

PERIODIC REPORTS

At least once each calendar year, we will provide you with a report showing the
account value at the end of the preceding calendar year, all transactions during
the calendar year, the current account value, the number of Accumulation Units
in each variable sub-account, the applicable Variable Accumulation Unit Values
as of the date of the report and the interest rate credited to the fixed
sub-accounts. In addition, each person having voting rights in the Variable
Account and a Portfolio or Portfolios will receive such reports as may be
required by the 1940 Act and the 1933 Act. We will also send such statements
reflecting transactions in the Annuity Account as may be required by applicable
laws, rules and regulations.

<PAGE>

FEDERAL TAX MATTERS
--------------------------------------------------------------------------------

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

TAXATION OF NON-QUALIFIED CONTRACTS

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

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

Withdrawals. When a withdrawal from a Non-Qualified Contract occurs, the amount
received will be treated as ordinary income subject to tax up to an amount equal
to the excess (if any) of the account value immediately before the distribution
over the Owner's investment in the Contract (generally, the premiums or other
consideration paid for the Contract, reduced by any amount previously
distributed from the Contract that was not subject to tax) at that time. The
account value immediately before a withdrawal may have to be increased by any
positive Market Value Adjustments which result from a withdrawal. There is,
however, no definitive guidance on the proper tax treatment of Market Value
Adjustments, and you may want to discuss the potential tax consequences of a
Market Value Adjustment with your tax adviser. In the case of a surrender under
a Non-Qualified Contract, the amount received generally will be taxable only to
the extent it exceeds the Owner's investment in the Contract.

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

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

. made on or after the death of an Owner;

. attributable to the taxpayer's becoming disabled; or

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

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

Annuity Payments. Although tax consequences may vary depending on the payout
option elected under an annuity contract, a portion of each annuity payment is
generally not taxed and the remainder is taxed as ordinary income. The non-
taxable portion of an annuity payment is generally determined in a manner that
is designed to allow you to recover your investment in the contract ratably on a
tax-free basis over the expected stream of annuity payments, as determined when
annuity payments start. Once your investment in the contract has been fully
recovered, however, the full amount of each annuity payment is subject to tax as
ordinary income.

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

Transfers, Assignments or Exchanges of a Contract. A transfer or assignment of
ownership of a Contract, the designation of an annuitant, the selection of
certain maturity dates, or the exchange of a Contract may result

<PAGE>

in certain tax consequences to you that are not discussed herein. An owner
contemplating any such transfer, assignment or exchange, should consult a tax
advisor as to the tax consequences.

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

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

TAXATION OF QUALIFIED CONTRACTS

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

Individual Retirement Accounts (IRAs), as defined in Sections 219 and 408 of the
Code, permit individuals to make annual contributions of up to the lesser of
$2,000 or 100% of adjusted gross income. The contributions may be deductible in
whole or in part, depending on the individual's income. Distributions from
certain pension plans may be "rolled over" into an IRA on a tax-deferred basis
without regard to these limits. Amounts in the IRA (other than nondeductible
contributions) are taxed when distributed from the IRA. A 10% penalty tax
generally applies to distributions made before age 59 1/2, unless certain
exceptions apply. The Internal Revenue Service has not reviewed the Contract for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in the
Contract comports with IRA qualification requirements.

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

Tax Sheltered Annuities under section 403(b) of the Code allow employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the premium payments made, within certain limits, on a contract
that will provide an annuity for the employee's retirement. These premium
payments may be subject to FICA (social security) tax.

Distributions of (1) salary reduction contributions made in years beginning
after December 31, 1988; (2) earnings on those contributions; and (3) earnings
on amounts held as of the last year beginning before January 1, 1989, are not
allowed prior to age 59 1/2, separation from service, death or disability.
Salary reduction contributions may also be distributed upon hardship, but would
generally be subject to penalties.

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

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

<PAGE>

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

"Eligible rollover distributions" from section 401(a) plans are subject to a
mandatory federal income tax withholding of 20%. An eligible rollover
distribution is the taxable portion of any distribution from such a plan, except
certain distributions such as distributions required by the Code or
distributions in a specified annuity form. The 20% withholding does not apply,
however, if the Owner chooses a "direct rollover" from the plan to another tax-
qualified plan or IRA.

POSSIBLE TAX LAW CHANGES

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

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

<PAGE>

DISTRIBUTION OF THE CONTRACTS
--------------------------------------------------------------------------------

Sagemark Consulting, Inc. ("Sagemark"), formerly known as CIGNA Financial
Advisors, Inc., located at 350 Church Street, Hartford, Connecticut 06103, is
the principal underwriter and the distributor of the Contract. As of January 1,
1998, Sagemark, formerly a wholly owned subsidiary of CIGNA Corporation, became
a wholly owned subsidiary of The Lincoln National Life Insurance Company
("Lincoln Life"), an Indiana corporation, whose principal businesses are
insurance and financial services. Lincoln Life is wholly owned by Lincoln
National Corporation, a publicly-held insurance holding company domiciled in
Indiana. Sagemark may enter into contracts with various broker-dealers to aid in
the distribution of the Contract. The commissions paid to dealers are no greater
than 6.75% of premium payments.

<PAGE>

HISTORICAL PERFORMANCE DATA
--------------------------------------------------------------------------------

We may from time to time disclose the current annualized yield of the Money
Market variable 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
AIM V.I. Money Market Portfolio or on its portfolio securities. Yield figures
will not reflect withdrawal charges or premium taxes. We compute the current
annualized yield 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 having a
balance of one variable accumulation unit of the Money Market variable sub-
account at the beginning of the 7-day 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 (i) net income from the
Portfolio attributable to the hypothetical account; and (ii) charges and
deductions imposed under a Contract that are attributable to the hypothetical
account.

We may also disclose the effective yield of the Money Market variable sub-
account for the same 7-day period, determined on a compounded basis. We
calculate the effective yield by compounding the unannualized base period return
by adding one to the base period return, raising the sum to a power equal to 365
divided by 7, and subtracting one from the result.

We may also advertise or disclose the current annualized yield of one or more of
the variable sub-accounts of the Variable Account (except the Money Market
variable sub-account) for 30-day periods. The annualized yield of a variable
sub-account refers to income generated by the variable sub-account over a
specific 30-day period. Because the yield is annualized, the yield a variable
sub-account generates during the 30-day period is assumed to be generated each
30-day period over a 12-month period. We compute the yield by dividing the net
investment income per variable accumulation unit earned during the period by the
maximum offering price per unit on the last day of the period. The yield
calculations do not reflect the effect of any premium taxes or withdrawal
charges that may be applicable to a particular Contract.

We may also advertise or disclose annual average total returns for one or more
variable sub-accounts for various periods of time. The standardized total return
of a sub-account refers to return quotations assuming an investment has been
held in the variable sub-account for various periods of time including, but not
limited to, one year, five years, and ten years (if the variable sub- account
has been in operation for those periods), and a period measured from the date
the variable sub-account commenced operations. Total returns represent the
average annual compounded rates of return that would equate the initial amount
invested to the redemption value of that investment as of the last day of each
of the periods for which total return quotations are provided. Accordingly, the
total return quotations will reflect not only income but also changes in
principal (i.e., variable accumulation unit) value, whereas the yield figures
will only reflect income. The standardized total return quotations reflect the
withdrawal charge, but the standardized yield figures will not.

We may from time to time also disclose average annual total returns in a non-
standard format in conjunction with the standard format described above. The
non-standard format will be identical to the standard format except that the
withdrawal charge percentage is assumed to be 0%. We may from time to time also
disclose cumulative total returns in conjunction with the standard format
described above. The cumulative returns will be calculated assuming that the
withdrawal charge is 0%.

We will only advertise non-standard performance data if we also disclose the
standard performance data. Performance will vary from time to time and
historical results will not be representative of future performance. Performance
information may not provide a basis for comparison with other investments or
other investment companies using a different method of calculating performance.
Current yield is not fixed and varies with changes in investment income and
variable accumulation unit values. The Money Market variable sub-account's yield
will be affected if it experiences a net inflow of new money which is invested
at interest rates different from those being earned on its then-current
investments. An investor's principal in a variable sub-

<PAGE>

account and a variable sub-account's return are not guaranteed and will
fluctuate according to market conditions. And, as noted above, advertised
performance data figures will be historical figures for a contract during the
Accumulation Period.

We may also from time to time use advertising which includes hypothetical
illustrations to compare the difference between the growth of a taxable
investment and a tax-deferred investment in a variable annuity.

For additional information regarding how we calculate performance data, please
refer to the SAI.

<PAGE>

CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------

The following tables show the Accumulation Unit Values and the number of
Accumulation Units outstanding for each of the nine sub-accounts available under
the Contract. During 1995, the Variable Account changed its fiscal year end from
January 31 to December 31, effective in the year beginning January 1, 1996.
Accordingly, the information which follows includes the eleven months transition
period ended December 31, 1995.

AIM V.I. Aggressive Growth Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $-- --
</TABLE>

AIM V.I. Balanced Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $-- --
</TABLE>

AIM V.I. Blue Chip Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $-- --
</TABLE>

AIM V.I. Capital Appreciation Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $34.720 11,571,957
12/31/98...................... $24.337 14,259,245
12/31/97...................... $20.678 16,027,198
12/31/96...................... $18.467 16,934,302
12/31/95...................... $15.924 13,216,713
1/31/95...................... $11.736 7,513,807
1/31/94...................... $12.380
----------
</TABLE>

AIM V.I. Capital Development Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $-- --
</TABLE>

AIM V.I. Dent Demographic Trends Sub-acount

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $-- --
</TABLE>

<PAGE>

AIM V.I. Diversified Income Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $13.430 3,524,878
12/31/98...................... $13.885 4,464,714
12/31/97...................... $13.588 4,695,148
12/31/96...................... $12.591 4,290,852
12/31/95...................... $11.585 3,747,828
1/31/95...................... $ 9.931 2,442,031
1/31/94...................... $10.749
---------
</TABLE>

AIM V.I. Global Utilities Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $25.120 789,220
12/31/98...................... $19.066 850,446
12/31/97...................... $16.591 921,883
12/31/96...................... $13.826 796,782
12/31/95...................... $12.508 571,320
1/31/95...................... $10.235 190,264
1/31/94...................... $ --
-------
</TABLE>

AIM V.I. Government Securities Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $12.240 1,745,100
12/31/98...................... $12.575 2,172,332
12/31/97...................... $11.832 1,926,036
12/31/96...................... $11.089 1,864,171
12/31/95...................... $10.991 1,672,986
1/31/95...................... $ 9.775 1,214,456
1/31/94...................... $10.260
---------
</TABLE>

AIM V.I. Growth Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $35.970 8,060,152
12/31/98...................... $26.960 9,036,202
12/31/97...................... $20.376 9,603,064
12/31/96...................... $16.281 9,484,547
12/31/95...................... $13.978 7,342,011
1/31/95...................... $10.491 4,337,355
1/31/94...................... $11.448
---------
</TABLE>

<PAGE>

AIM V.I. Growth and Income Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $32.760 6,002,927
12/31/98...................... $24.739 6,735,903
12/31/97...................... $19.639 7,046,189
12/31/96...................... $15.835 5,709,782
12/31/95...................... $13.385 2,779,812
1/31/95...................... $10.216 622,513
1/31/94...................... $ --
---------
</TABLE>

AIM V.I. High Yield Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $-- --
</TABLE>

AIM V.I. International Equity Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $28.640 6,796,498
12/31/98...................... $18.723 8,137,165
12/31/97...................... $16.434 9,290,316
12/31/96...................... $15.578 9,121,429
12/31/95...................... $13.156 6,249,610
1/31/95...................... $10.738 5,124,627
1/31/94...................... $12.296
---------
</TABLE>

AIM V.I. Money Market Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $12.390 3,917,971
12/31/98...................... $11.994 3,737,115
12/31/97...................... $11.571 3,829,515
12/31/96...................... $11.156 4,855,567
12/31/95...................... $10.775 6,071,486
1/31/95...................... $10.378 2,979,228
1/31/94...................... $10.084
---------
</TABLE>

AIM V.I. Telecommunications and Technology Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $-- --
</TABLE>

AIM V.I. Value Sub-account

Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
<S> <C> <C>
12/31/99...................... $35.930 15,219,966
12/31/98...................... $28.037 17,453,096
12/31/97...................... $21.464 18,682,024
12/31/96...................... $17.591 18,443,298
12/31/95...................... $15.505 16,590,052
1/31/95...................... $11.522 9,479,495
1/31/94...................... $11.922
----------
</TABLE>

<PAGE>

TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

The following is the Table of Contents for the Statement of Additional
Information:

TABLE OF CONTENTS

Page

----
<S> <C>
The Contracts--General Provisions.......................................... 1
The Contracts............................................................ 1
Loans.................................................................... 1
Non-Participating Contracts.............................................. 1
Misstatement of Age...................................................... 1
Assignment............................................................... 1
Evidence of Survival..................................................... 1
Endorsement of Annuity Payments.......................................... 1
Tax Status of the Contracts................................................ 2
Diversification Requirements............................................. 2
Owner Control............................................................ 2
Required Distributions................................................... 2
Taxation of the Company.................................................. 2
Investment Experience...................................................... 3
Variable Accumulation Unit Value and Variable Accumulation Value........... 3
Net Investment Factor...................................................... 3
Sample Calculations and Tables............................................. 4
Variable Account Calculations............................................ 4
Fixed Account Calculation--Withdrawal Charge and Market Value............ 4
Adjustment Tables.......................................................... 5
Sample Calculations for Male Age 35 at Issue........................... 5
State Regulation of the Company............................................ 6
Administration............................................................. 6
Distribution of the Contracts.............................................. 6
Custody of Assets.......................................................... 7
Historical Performance Data................................................ 7
Money Market Variable Sub-account Yield.................................. 7
Other Variable Sub-account Yields........................................ 8
Standard Variable Sub-account Total Returns.............................. 8
Non-Standard Variable Sub-account Total Returns.......................... 9
Adjusted Historical Portfolio Performance................................ 9
Legal Matters.............................................................. 10
Legal Proceedings.......................................................... 10
Experts.................................................................... 10
Financial Statements....................................................... 11
</TABLE>

--------------------------------------------
CG VARIABLE ANNUITY

SEPARATE ACCOUNT

FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
AND FOR THE PERIODS ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1998, AND INDEPENDENT
AUDITORS' REPORTS

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of Allstate Life Insurance Company and
Contractholders of CG Variable Annuity Separate Account:

We have audited the accompanying statement of net assets of CG Variable
Annuity Separate Account as of December 31, 1999 (including the assets of
each of the individual sub-accounts which comprise the Account as disclosed
in Note 1), and the related statements of operations and changes in net assets
for the year then ended for each of the individual sub-accounts which
comprise the Account. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1999 by correspondence with the
account custodians. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of CG Variable Annuity Separate Account as
of December 31, 1999 (including the assets of each of the individual
sub-accounts which comprise the Account), and the results of operations for
each of the individual sub-accounts and the changes in their net assets for
the year then ended in conformity with generally accepted accounting
principles.

/s/ Deloitte & Touche LLP

Chicago, Illinois
March 27, 2000

<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors of The Lincoln National Life Insurance Company
and
Contract Owners of CG Variable Annuity Separate Account

We have audited the accompanying statement of changes in net assets of CG
Variable Annuity Separate Account ("Variable Account") (comprised of the AIM
V.I. Capital Appreciation, AIM V.I. Diversified Income, AIM V.I. Global
Utilities, AIM V.I. Government Securities, AIM V.I. Growth, AIM V.I. Growth and
Income, AIM V.I. International Equity, AIM V.I. Money Market, AIM V.I. Value
subaccounts) for the year ended December 31, 1998. This financial statement is
the responsibility of the Variable Account's management. Our responsibility is
to express an opinion on this financial statement based on our audit.

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

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the changes in net assets of each of the respective
subaccounts constituting the CG Variable Annuity Separate Account for the year
ended December 31, 1998, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young LLP

Fort Wayne, Indiana
April 2, 1999

<PAGE>

CG VARIABLE ANNUITY SEPARATE ACCOUNT

<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
December 31, 1999
----------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Allocation to Sub-Accounts investing in the AIM Variable Insurance Funds:
Capital Appreciation, 11,292,375 shares (cost $175,373,962) $ 401,782,119
Diversified Income, 4,707,214 shares (cost $48,853,414) 47,355,223
Global Utilities, 869,570 shares (cost $11,508,453) 19,826,180
Government Securities, 2,009,345 shares (cost $21,401,418) 21,359,351
Growth, 8,989,411 shares (cost $137,041,499) 289,908,045
Growth and Income, 6,225,830 shares (cost $91,747,626) 196,673,688
International Equity, 6,645,341 shares (cost $94,435,268) 194,641,756
Money Market, 48,529,267 shares (cost $48,529,267) 48,529,267
Value, 16,322,977 shares (cost $245,821,589) 546,818,920
----------------
Total Assets 1,766,894,549
================
</TABLE>

See notes to financial statements

3
<PAGE>

CG VARIABLE ANNUITY SEPARATE ACCOUNT

<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------------------------

AIM Variable Insurance Funds Sub-Accounts
----------------------------------------------------------------------------

For the Year Ended December 31, 1999
----------------------------------------------------------------------------

Capital Diversified Global Government
Appreciation Income Utilities Securities Growth
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 8,620,209 $ 3,018,516 $ 308,559 $ 677,209 $10,343,556
Charges from Connecticut General Life Insurance
Company
Mortality and expense risk (4,466,474) (727,945) (230,504) (323,033) (3,448,642)
------------- ------------- ------------- ------------- -------------
Net investment income (loss) 4,153,735 2,290,571 78,055 354,176 6,894,914
------------- ------------- ------------- ------------- -------------

REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 88,123,727 19,317,125 3,716,792 10,097,459 46,064,872
Cost of investments sold 53,404,718 18,507,326 2,550,171 9,578,935 25,756,015
------------- ------------- ------------- ------------- -------------
Net realized gains (losses) 34,719,009 809,799 1,166,621 518,524 20,308,857
------------- ------------- ------------- ------------- -------------
Change in unrealized gains (losses) 84,979,856 (4,912,266) 3,653,909 (1,659,421) 48,298,080
------------- ------------- ------------- ------------- -------------
Net gains (losses) on investments 119,698,865 (4,102,467) 4,820,530 (1,140,897) 68,606,937
------------- ------------- ------------- ------------- -------------

CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 123,852,600 $ (1,811,896) $ 4,898,585 $ (786,721) $75,501,851
============= ============= ============= ============= =============
</TABLE>

See notes to financial statements.

4
<PAGE>

CG VARIABLE ANNUITY SEPARATE ACCOUNT

<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------------------------------------

AIM Variable Insurance Funds Sub-Accounts
-----------------------------------------------------------

For the Year Ended December 31, 1999
-----------------------------------------------------------

Growth International Money
and Income Equity Market Value
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 1,634,495 $ 6,477,816 $ 2,307,247 $ 9,206,966
Charges from Connecticut General Life Insurance
Company
Mortality and expense risk (2,359,413) (2,017,750) (675,614) (6,883,729)
------------- ------------- ------------- -------------
Net investment income (loss) (724,918) 4,460,066 1,631,633 2,323,237
------------- ------------- ------------- -------------

REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 32,366,014 38,011,154 49,907,019 92,280,655
Cost of investments sold 18,652,509 25,062,175 49,907,019 50,124,230
------------- ------------- ------------- -------------
Net realized gains (losses) 13,713,505 12,948,979 - 42,156,425
------------- ------------- ------------- -------------
Change in unrealized gains (losses) 37,214,762 51,632,116 - 83,245,135
------------- ------------- ------------- -------------
Net gains (losses) on investments 50,928,267 64,581,095 - 125,401,560
------------- ------------- ------------- -------------

CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $50,203,349 $ 69,041,161 $ 1,631,633 $ 127,724,797
============= ============= ============= =============
</TABLE>

See notes to financial statements.

5
<PAGE>

CG VARIABLE ANNUITY SEPARATE ACCOUNT

<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31,
---------------------------------------------------------------------------------------------------------------------------------

AIM Variable Insurance Funds Sub-Accounts
-----------------------------------------------------------------------------------

Capital Appreciation Diversified Income Global Utilities
--------------------------- --------------------------- ---------------------------

1999 1998 1999 1998 1999 1998
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 4,153,735 $ 4,840,796 $ 2,290,571 $ 3,139,306 $ 78,055 $ 159,429
Net realized gains (losses) 34,719,009 21,973,089 809,799 1,873,511 1,166,621 1,322,170
Change in unrealized gains (losses) 84,979,856 26,522,568 (4,912,266) (3,580,234) 3,653,909 689,626
------------- ------------- ------------- ------------- ------------- -------------

Change in net assets resulting from operations 123,852,600 53,336,453 (1,811,896) 1,432,583 4,898,585 2,171,225
------------- ------------- ------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 2,431,546 6,622,951 901,759 2,575,258 66,713 722,067
Benefit payments and withdrawals (47,803,218) (31,097,125) (7,866,548) (6,231,656) (2,427,453) (1,239,604)
Transfers among the sub-accounts
and with the Fixed Account - net (23,727,110) (13,321,565) (5,859,429) 342,581 1,073,952 (772,360)
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets resulting
from capital transactions (69,098,782) (37,795,739) (12,824,218) (3,313,817) (1,286,788) (1,289,897)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS 54,753,818 15,540,714 (14,636,114) (1,881,234) 3,611,797 881,328

NET ASSETS AT BEGINNING OF PERIOD 347,028,301 331,487,587 61,991,337 63,872,571 16,214,383 15,333,055
------------- ------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD $ 401,782,119 $ 347,028,301 $ 47,355,223 $ 61,991,337 $ 19,826,180 $ 16,214,383
============= ============= ============= ============= ============= =============
</TABLE>

See notes to financial statements.

6
<PAGE>

CG VARIABLE ANNUITY SEPARATE ACCOUNT

AIM Variable Insurance Funds Sub-Accounts
-----------------------------------------------------------------------------------

Government Securities Growth Growth and Income
--------------------------- --------------------------- ---------------------------

1999 1998 1999 1998 1999 1998
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 354,176 $ 458,428 $ 6,894,914 $ 12,438,264 $ (724,918) $ 250,480
Net realized gains (losses) 518,524 655,405 20,308,857 10,024,346 13,713,505 7,016,146
Change in unrealized gains (losses) (1,659,421) 340,677 48,298,080 37,942,473 37,214,762 27,560,775
------------- ------------- ------------- ------------- ------------- -------------

Change in net assets resulting from operations (786,721) 1,454,510 75,501,851 60,405,083 50,203,349 34,827,401
------------- ------------- ------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 333,235 851,929 2,090,037 5,635,643 1,427,255 6,571,206
Benefit payments and withdrawals (5,682,942) (3,021,136) (34,659,581) (20,522,678) (22,166,346) (17,333,660)
Transfers among the sub-accounts
and with the Fixed Account - net 179,734 5,242,249 3,357,321 2,375,383 572,737 4,155,669
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets resulting
from capital transactions (5,169,973) 3,073,042 (29,212,223) (12,511,652) (20,166,354) (6,606,785)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS (5,956,694) 4,527,552 46,289,628 47,893,431 30,036,995 28,220,616

NET ASSETS AT BEGINNING OF PERIOD 27,316,045 22,788,493 243,618,417 195,724,986 166,636,693 138,416,077
------------- ------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD $ 21,359,351 $ 27,316,045 $289,908,045 $243,618,417 $196,673,688 $166,636,693
============= ============= ============= ============= ============= =============
</TABLE>

See notes to financial statements.

7
<PAGE>

CG VARIABLE ANNUITY SEPARATE ACCOUNT

AIM Variable Insurance Funds Sub-Accounts
-----------------------------------------------------------------------------------

International Equity Money Market Value
--------------------------- --------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 4,460,066 $ (929,425) $ 1,631,633 $ 1,645,330 $ 2,323,237 $ 16,522,025
Net realized gains (losses) 12,948,979 9,483,442 - - 42,156,425 17,343,105
Change in unrealized gains (losses) 51,632,116 11,064,361 - - 83,245,135 82,893,346
------------- ------------- ------------- ------------- ------------- -------------

Change in net assets resulting from operations 69,041,161 19,618,378 1,631,633 1,645,330 127,724,797 116,758,476
------------- ------------- ------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 1,267,151 2,843,179 712,067 6,021,063 4,014,717 11,150,776
Benefit payments and withdrawals (20,456,881) (10,969,937) (32,268,982) (22,861,741) (71,967,283) (38,935,120)
Transfers among the sub-accounts
and with the Fixed Account - net (7,563,407) (11,933,394) 33,632,508 15,706,874 (2,280,086) (768,244)
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets resulting
from capital transactions (26,753,137) (20,060,152) 2,075,593 (1,133,804) (70,232,652) (28,552,588)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS 42,288,024 (441,774) 3,707,226 511,526 57,492,145 88,205,888

NET ASSETS AT BEGINNING OF PERIOD 152,353,732 152,795,506 44,822,041 44,310,515 489,326,775 401,120,887
------------- ------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD $ 194,641,756 $152,353,732 $ 48,529,267 $44,822,041 $546,818,920 $489,326,775
============= ============= ============= ============= ============= =============
</TABLE>

See notes to financial statements.

8
<PAGE>

CG VARIABLE ANNUITY SEPARATE ACCOUNT

NOTES TO FINANCIAL STATEMENTS

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

1. ORGANIZATION

CG Variable Annuity Separate Account (the "Account"), a unit investment
trust registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, is a Separate Account of Connecticut
General Life Insurance Company ("CG Life"). The assets of the Account are
legally segregated from those of CG Life.

Effective January 1, 1998, CG Life contracted the administrative servicing
obligations of its individual variable annuity business to the Lincoln
National Life Insurance Company and Lincoln Life & Annuity Company of New
York ("Lincoln Companies"). Effective September 1, 1998, the Lincoln
Companies subcontracted the administrative servicing obligations of the
variable annuity business included in the Account to Allstate Life
Insurance Company ("Allstate Life") and Allstate Life Insurance Company of
New York ("Allstate New York"). Although CG Life is responsible for all
policy terms and conditions, Allstate Life and Allstate New York are
responsible for servicing the individual annuity contracts, including the
payment of benefits, oversight of investment management and contract
administration. These services were transitioned from the Lincoln Companies
on April 12, 1999.

CG Life issues the AIM/CIGNA Heritage Variable Annuity, the deposits of
which are invested at the direction of the contractholders in the
sub-accounts that comprise the Account. Absent any contract provisions
wherein CG Life contractually guarantees either a minimum return or account
value to the beneficiaries of the contractholders in the form of a death
benefit, the contractholders bear the investment risk that the sub-accounts
may not meet their stated objectives. The sub-accounts invest in the
following underlying mutual fund portfolios of the AIM Variable Insurance
Funds (the "Funds").

Capital Appreciation Growth and Income
Diversified Income International Equity
Global Utilities Money Market
Government Securities Value
Growth

CG Life provides insurance and administrative services to the
contractholders for a fee. CG Life also maintains a fixed account ("Fixed
Account"), to which contractholders may direct their deposits and receive a
fixed rate of return. CG Life has sole discretion to invest the assets of
the Fixed Account, subject to applicable law.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

VALUATION OF INVESTMENTS - Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices at December 31,
1999.

INVESTMENT INCOME - Investment income consists of dividends declared by the
Funds and is recognized on the ex-dividend date.

REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.

9
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

FEDERAL INCOME TAXES - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included in the tax return of CG Life. CG
Life is taxed as a life insurance company under the Code. No federal income
taxes are allocable to the Account as the Account did not generate taxable
income.

USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

3. EXPENSES

ADMINISTRATIVE EXPENSE CHARGE - CG Life deducts administrative expense
charges daily at a rate equal to .10% per annum of the average daily net
assets of the Account.

ANNUITY ACCOUNT FEE - CG Life deducts an annual maintenance charge of $35
on the last valuation date of each calendar year. This charge will be
waived if total deposits are $100,000 or more on the last valuation date of
that year.

MORTALITY AND EXPENSE RISK CHARGE - CG Life assumes mortality and expense
risks related to the operations of the Account and deducts charges daily at
a rate equal to 1.25% per annum of the daily net assets of the Account. The
mortality and expense risk charge covers insurance benefits available with
the contract and certain expenses of the contract. It also covers the risk
that the current charges will not be sufficient in the future to cover the
cost of administering the contract.

4. UNITS OUTSTANDING AND ACCUMULATION UNIT VALUES

<TABLE>
<CAPTION>
(Units in whole amounts)

Units Outstanding Accumulation Unit Value
December 31, 1999 December 31, 1999
----------------- -----------------
<S> <C> <C>
Investments in the AIM Variable Insurance
Funds Sub-Accounts:
Capital Appreciation 11,571,957 $ 34.72
Diversified Income 3,524,878 13.43
Global Utilities 789,220 25.12
Government Securities 1,745,100 12.24
Growth 8,060,152 35.97
Growth and Income 6,002,927 32.76
International Equity 6,796,498 28.64
Money Market 3,917,971 12.39
Value 15,219,966 35.93
</TABLE>