IL ANNUITY & INSURANCE CO SEPARATE ACCOUNT 1, 485BPOS, 1998-04-30

IL ANNUITY & INSURANCE CO SEPARATE ACCOUNT 1
485BPOS, 1998-04-30

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<PAGE> 1
As filed with the Securities and Exchange Commission on April 30, 1998
Registration Nos. 33-89028
811-8964

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. [ ]
---
Post-Effective Amendment No. 6 [X]
---
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

Amendment No. 7 [X]
---

IL ANNUITY AND INSURANCE CO.
----------------------------
SEPARATE ACCOUNT 1
------------------
(Exact Name of Registrant)

IL ANNUITY AND INSURANCE COMPANY
--------------------------------
(Name of Depositor)

2960 North Meridian Street, Indianapolis, Indiana 46208
-------------------------------------------------------
(Address of Depositor's Principal Executive Offices)

Depositor's Telephone Number, including Area Code:
(317) 927-6500

Name and Address of Agent for Service: Copy to:

Janis B. Funk, Esq. Stephen E. Roth, Esq.
Counsel Sutherland, Asbill & Brennan LLP
Indianapolis Life Insurance Company 1275 Pennsylvania Avenue, N.W.
2960 North Meridian Street Washington, D.C. 20004-2415
Indianapolis, Indiana 46208

Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement.

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

It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on ________ pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on _____________ pursuant to paragraph (a) of the Rule 485

<PAGE> 2

CROSS REFERENCE SHEET
Pursuant to Rule 495

Showing location in Part A (Prospectus) and Part B (Statement of
Additional Information) of Registration Statement of information required by
Form N-4.

<TABLE>
<CAPTION>
PART A

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

2. Definitions......................................... Definitions

3. Synopsis............................................ Fee Table; Summary

4. Condensed Financial
Information......................................... Appendix I: Condensed Financial Information;
How to Review Investment Performance of the
Variable Accounts

5. General Description of Registrant,
Depositor and Portfolio Companies

(a) Depositor...................................... About IL Annuity and Insurance Company
(b) Registrant..................................... IL Annuity and Insurance Co. Separate Account1
(c) Portfolio Company.............................. The Portfolios
(d) Fund Prospectus................................ The Portfolios
(e) Voting Rights.................................. Voting Rights
(f) Administrators................................. N/A

6. Deductions and Expenses

(a) General........................................ Fees and Charges; Summary
(b) Sales Load..................................... Fees and Charges; Summary
(c) Special Purchase Plan.......................... Fees and Charges
(d) Commissions.................................... Other Information
(e) Expenses - Registrant.......................... Fees and Charges; Summary
(f) Fund Expenses.................................. Fees and Charges
(g) Organizational Expenses........................ N/A

7. Contracts

(a) Persons with Rights........................... Summary; The Portfolios; The Pay-In Period,
Payout Period; Voting Rights; Death Benefit

(b) (i) Allocation of
Premium Payments...................... Summary; Pay-In Period; Other Information
(ii) Transfers............................. Summary; Transfers
(iii) Exchanges............................. Transfers

(c) Changes....................................... The Portfolios; Other Information
(d) Inquiries..................................... Cover page; Other Information
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ---------------- ------------------
<S> <C> <C>
8. Annuity Period..................................... Summary; Payout Period

9. Death Benefit...................................... Death Benefits

10. Purchases and Contract Value

(a) Purchases..................................... Summary; Transfers; Pay-In Period
(b) Valuation..................................... Definitions; Pay-In Period
(c) Daily Calculation............................. Definitions; Pay-In Period
(d) Underwriter................................... Other Information

11. Redemptions

(a) - By Owners................................... Summary; Transfers; Withdrawals; Payout Period;
Federal Tax Matters
- By Annuitant................................ Summary; Transfers; Withdrawals; Payout Period;
Federal Tax Matters
(b) Texas ORP..................................... Withdrawals
(c) Check Delay................................... Other Information
(d) Lapse ...................................... Contract Loans
(e) Free Look..................................... Summary; Pay-In Period

12. Taxes.............................................. Summary; Federal Tax Matters

13. Legal Proceedings.................................. Legal Proceedings

14. Table of Contents for the
Statement of Additional Information................ Statement of Additional Information Table of Contents
</TABLE>

<PAGE> 4

<TABLE>
<CAPTION>
PART B

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

16. Table of Contents.................................. Table of Contents

17. General Information and
History............................................ About IL Annuity and Insurance Company; IL Annuity
and Insurance Co. Separate Account 1; the
Portfolios (Prospectus)

18. Services

(a) Fees and Expenses of
Registrant.................................... Fees and Charges (Prospectus)
(b) Management Contracts.......................... Termination of Participation Agreements
(c) Custodian..................................... Safekeeping of Account Assets
Independent
Auditors...................................... Experts
(d) Assets of Registrant.......................... About IL Annuity and Insurance Co. Separate Account
1 (Prospectus)
(e) Affiliated Persons............................ About IL Annuity and Insurance Company
(Prospectus)
(f) Principal Underwriter......................... Distribution of the Contracts

19. Purchase of Securities
Being Offered................................. Distribution of the Contracts
Offering Sales Load........................... N/A

20. Underwriters....................................... Distribution of the Contracts

21. Calculation of Performance
Data.......................................... Calculation of Historical Performance Data; How to
Review Investment Performance of the Variable
Accounts (Prospectus)

22. Annuity Payments................................... Variable Annuity Payments; Payout Period
(Prospectus)

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

<PAGE> 5

<TABLE>
<CAPTION>
PART C -- OTHER INFORMATION

ITEM OF FORM N-4 PART C CAPTION
<S> <C> <C>
24. Financial Statements
and Exhibits....................................... Financial Statements and Exhibits

(a) Financial Statements.......................... (a) Financial Statements
(b) Exhibits...................................... (b) Exhibits

25. Directors and Officers
of the Depositor................................... Directors and Officers of IL Annuity and Insurance
Company

26. Persons Controlled By or
Under Common Control with
the Depositor or Registrant........................ Persons Controlled By or Under Common Control with
the Depositor or Registrant

27. Number of Contractowners........................... Number of owners

28. Indemnification.................................... Indemnification

29. Principal Underwriters............................. Principal Underwriter

30. Location of Accounts
and Records........................................ Location of Books and Records

31. Management Services................................ Management Services

32. Undertakings....................................... Undertakings and Representations

Signature Page Signatures
</TABLE>

<PAGE> 6
SUPPLEMENT DATED MAY 1, 1998 TO
PROSPECTUS DATED MAY 1, 1998

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY VARIABLE ANNUITY

For Residents of the State of Texas

This supplement is intended to be used with the prospectus dated May 1,
1998. This supplement, together with the prospectus, constitutes a current
prospectus for the Visionary Variable Annuity.

The following information supplements footnote 1 of the Expense Table
on page 8 of the Prospectus, as well as the second paragraph of the section on
page 13 of the Prospectus entitled "Withdrawal Charge (Contingent Deferred Sales
Charge)":

For Texas Owners 58 years of age and older on the date the Contract is
issued, the maximum withdrawal charge is 7% of the amount withdrawn
during the first two Contract Years, declining to 6.5% for withdrawals
made during the third Contract Year, and 6% during the fourth Contract
Year. Thereafter, the Withdrawal Charges decreases by 1% for each
subsequent Contract Year until it is zero in year ten.

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

The following chart replaces the chart on page 34 of the Prospectus in
the section entitled "Charge for Partial or Full Withdrawal":

<TABLE>
<CAPTION>
=====================================================================================================================
Age 57 or under Age 58 or older
--------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Contract Charge as % of Contract Charge as % Contract Charge as %
Year Withdrawal Year of Withdrawal Year of Withdrawal
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-6 7% 1-2 7% 7 3%
7 6% 3 6.5% 8 2%
8 4% 4 6% 9 1%
9 2% 5 5% 10 0%
10 0% 6 4%
=====================================================================================================================
</TABLE>

<PAGE> 7

SUPPLEMENT DATED MAY 1, 1998 TO
PROSPECTUS DATED MAY 1, 1998

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY VARIABLE ANNUITY

For Residents of the State of Maryland

This supplement is intended to be used with the prospectus dated May 1,
1998. This supplement, together with the prospectus, constitutes a current
prospectus for the Visionary Variable Annuity.

For Maryland Owners 58 years of age and older on the date the Contract
is issued, the maximum withdrawal charge is 7% of the amount withdrawn
during the first two Contract Years, declining to 6.5% for withdrawals
made during the third Contract Year, and 6% during the fourth Contract
Year. Thereafter, the Withdrawal Charges decreases by 1% for each
subsequent Contract Year until it is zero in year ten.

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

The following chart replaces the chart on page 34 of the Prospectus in
the section entitled "Charge for Partial or Full Withdrawal":

<TABLE>
<CAPTION>
=====================================================================================================================
Age 57 or under Age 58 or older
--------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Contract Charge as % Contract Charge as % Contract Charge as %
Year of Withdrawal Year of Withdrawal Year of Withdrawal
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-6 7% 1-2 7% 7 3%
7 6% 3 6.5% 8 2%
8 4% 4 6% 9 1%
9 2% 5 5% 10 0%
10 0% 6 4%
=====================================================================================================================
</TABLE>

<PAGE> 8

SUPPLEMENT DATED MARCH 5, 1998 TO
PROSPECTUS DATED MAY 1, 1997

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I

VISIONARY VARIABLE ANNUITY

This supplement is intended to be used with the prospectus dated May 1,
1997. This supplement, together with the prospectus and any supplements
previously furnished to you, constitute a current prospectus for the Visionary
Variable Annuity.

* * * *

Recently, IL Annuity learned that the Board of Trustees of the Van Eck
Worldwide Insurance Trust has voted to propose the closing of the Van Eck
Worldwide Balanced Portfolio (the "Balanced Portfolio"). The Van Eck Board
concluded that the Balanced Portfolio's small size, together with decision of
its investment adviser to discontinue the voluntary absorption of all expenses
of the Balanced Portfolio, will have an adverse effect on performance. This
could have the effect of further reducing assets and increasing the Balanced
Portfolio's expense ratio.

AS A RESULT, EFFECTIVE APRIL 1, 1998, IL ANNUITY IS CLOSING THE VAN ECK
WORLDWIDE BALANCED VARIABLE ACCOUNT TO TRANSFERS AND NEW PREMIUM PAYMENTS. After
that date, Contract owners will not be permitted to allocate new Premium
Payments, or transfer Contract Value, to the Van Eck Worldwide Balanced Variable
Account.

In addition, the Van Eck Worldwide Balanced Portfolio will be deleted,
wherever listed, from any instructions you have given us regarding your premium
allocation, dollar cost averaging, automatic account balancing, or systematic
withdrawals, and we will reassign the percentages previously assigned to the
Balanced Portfolio on a pro-rata basis among the remaining Portfolios listed in
your instructions. If you want us to treat your account differently, please call
the Service Center.

In addition, as of the date of this supplement, the Van Eck Worldwide
Hard Assets Variable Account will be an Eligible Variable Account for purposes
of calculating the Living Benefit. New allocations to the Van Eck Worldwide Hard
Assets Variable Account will be treated as Eligible Premium Payments for
purposes of calculating the Living Benefit on the Living Benefit Date, once the
new allocations have been held in that Variable Account for 10 years.

<PAGE> 9

PROSPECTUS FOR THE VISIONARY
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT

Offered by
IL ANNUITY AND INSURANCE COMPANY
2960 North Meridian Street
Indianapolis, Indiana 46208
Telephone: (317) 927-6500
(800) 388-1331

This Prospectus describes the Visionary, a flexible premium deferred
variable annuity contract (the "Contract") being offered by IL Annuity and
Insurance Company (the "Company" or "Il Annuity"). The Contract is designed to
aid individuals in long-term financial planning and provides for the
accumulation of capital on a tax-deferred basis for retirement and other
long-term purposes. The Contract may be sold to or used in connection with
retirement plans, including those that qualify for favorable federal tax
treatment under the Internal Revenue Code.

Net Premium Payments and Contract Values will be allocated, as designated
by the Owner, to one or more of the 14 Variable Accounts of the IL Annuity and
Insurance Co. Separate Account 1 (the "Separate Account") or to the Fixed
Account (which is part of the Company's General Account and pays interest at
declared rates guaranteed to equal or exceed 3%) or to both. The assets of each
Variable Account will be invested solely in an investment portfolio
("Portfolio") of a designated mutual fund ("Fund"). Currently, there are seven
such Funds with 14 Portfolios available under this Contract:

The Alger American Fund:
MidCap Growth Portfolio and Small Capitalization Portfolio

Fidelity Variable Insurance Products ("VIP") Fund:
Equity-Income Portfolio, Growth Portfolio and Money Market Portfolio

Fidelity Variable Insurance Products ("VIP") Fund II:
Asset Manager Portfolio, Contrafund Portfolio, Index 500 Portfolio
and Investment Grade Bond Portfolio

OCC Accumulation Trust:
Managed Portfolio and Small Cap Portfolio

T. Rowe Price Fixed Income Series, Inc.:
Limited-Term Bond Portfolio

T. Rowe Price International Series, Inc.:
International Stock Portfolio

Van Eck Worldwide Insurance Trust:
Worldwide Hard Assets Portfolio

The Contract Value of the Contracts prior to the Annuity Commencement Date,
except for amounts in the Fixed Account, will vary according to the investment
performance of the Portfolios in which the selected Variable Accounts are
invested. The Owner bears the entire investment risk on amounts allocated to the
Variable Accounts.

THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH OF THE
FUNDS.

This Prospectus sets forth basic information about the Contract and the
Separate Account that a prospective investor should know before investing.
Additional information about the Contract and the Separate Account is contained
in the Statement of Additional Information, which has been filed with the
Securities and Exchange Commission. The Statement of Additional Information has
the same date as this Prospectus and is incorporated herein by reference. The
table of contents for the Statement of Additional
<PAGE> 10

information is on page 49 of this prospectus. You may obtain a copy of the
Statement of Additional Information free of charge by writing to or calling the
Company at the address or phone number shown above.

PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.

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

Unlike bank and credit union accounts, Contract Value invested in the
Separate Account is not insured. Investment of Contract Value in the Separate
Account involves certain risks including loss of Premium Payments (principal).
Separate Account Value is not deposited in or guaranteed by any bank or credit
union and is not guaranteed by any government agency.

The Date of This Prospectus is May 1, 1998

ii
<PAGE> 11

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................. 3
EXPENSE TABLES.............................................. 6
SUMMARY..................................................... 11
The Contract........................................... 11
Charges and Deductions................................. 13
Annuity Provisions..................................... 14
Federal Tax Status..................................... 14
CONDENSED FINANCIAL INFORMATION............................. 14
THE COMPANY AND THE SEPARATE ACCOUNT........................ 17
IL Annuity and Insurance Company....................... 17
IL Annuity and Insurance Co. Separate Account 1........ 18
THE FUNDS................................................... 18
The Alger American Fund................................ 19
Fidelity Variable Insurance Products Fund and Fidelity
Variable Insurance Products Fund II................... 19
OCC Accumulation Trust................................. 20
T. Rowe Price Fixed Income Series, Inc................. 20
T. Rowe Price International Series, Inc................ 21
Van Eck Worldwide Insurance Trust...................... 21
Availability of the Funds.............................. 22
Addition, Deletion or Substitution of Investments...... 22
Resolving Material Conflicts........................... 22
DESCRIPTION OF THE CONTRACT................................. 23
Issuance of a Contract................................. 23
Premium Payments....................................... 23
Free-Look Period....................................... 23
Allocation of Net Premium Payments..................... 24
Separate Account Value................................. 25
Transfer Privileges.................................... 26
Full and Partial Withdrawals........................... 27
Contract Loans......................................... 28
Death Benefit Before the Annuity Commencement Date..... 29
Death of Payee After the Annuity Commencement Date..... 30
The Maturity Benefit................................... 31
Annuity Payments on the Annuity Commencement Date...... 33
Payments............................................... 34
Modification........................................... 34
Reports to Owners...................................... 34
Inquiries.............................................. 35
THE FIXED ACCOUNT........................................... 35
Fixed Account Value.................................... 35
Transfer Privileges.................................... 36
Payment Deferral....................................... 36
CHARGES AND DEDUCTIONS...................................... 36
Withdrawal Charge (Contingent Deferred Sales Charge)... 36
Contract Fee........................................... 38
Asset-Based Administration Charge...................... 38
Transfer Fee........................................... 38
Mortality and Expense Risk Charge...................... 38
</TABLE>

1
<PAGE> 12

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses.......................................... 38
Premium Taxes.......................................... 38
Other Taxes............................................ 39
PAYOUT PLAN OPTIONS......................................... 39
Election of Payout Plan Options........................ 39
Fixed Annuity Payments................................. 39
Variable Annuity Payments.............................. 40
Description of Payout Plan Options..................... 40
HISTORICAL PERFORMANCE DATA................................. 41
FEDERAL TAX MATTERS......................................... 43
Introduction........................................... 43
Tax Status of the Contract............................. 43
Taxation of Annuities.................................. 44
Transfers, Assignments or Exchanges of a Contract...... 46
Withholding............................................ 46
Multiple Contracts..................................... 46
Taxation of Qualified Plans............................ 46
Possible Charge for the Company's Taxes................ 48
Other Tax Consequences................................. 48
DISTRIBUTION OF THE CONTRACTS............................... 48
LEGAL PROCEEDINGS........................................... 48
VOTING RIGHTS............................................... 49
COMPANY HOLIDAYS............................................ 49
YEAR 2000 MATTERS........................................... 49
FINANCIAL STATEMENTS........................................ 50
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS....... 51
</TABLE>

2
<PAGE> 13

DEFINITIONS

ACCUMULATION UNIT -- A unit of measure used to calculate the value of a Variable
Account prior to the Annuity Commencement Date.

ANNUITANT -- The person or persons whose life (or lives) determine the annuity
payment benefits payable under the Contract and whose death determines the Death
Benefit. The maximum number of joint annuitants is two and provisions referring
to the death of an annuitant mean the death of the last surviving annuitant. The
Annuitant may not be changed.

ANNUITY COMMENCEMENT DATE -- The date when the adjusted Contract Value will be
applied under an annuity payment option, if the Annuitant is still living. If
the Owner does not specify an Annuity Commencement Date, the Annuity
Commencement Date is the later of the Annuitant's age 70 or 10 years after the
Date of Issue. Different Annuity Commencement Dates apply to owners of Qualified
Contracts and Non-Qualified Contracts.

ANNUITY SERVICE OFFICE -- The office of Financial Administrative Services, Inc.
which provides service for the Contract. The mailing address for the Annuity
Service Office is P.O. Box 290764, Wethersfield, CT 06129.

ANNUITY UNIT -- An accounting unit of measure used to calculate the amount of
annuity payments under a variable annuity option.

BENEFICIARY -- The person named by the Owner to receive the Death Benefit if the
Annuitant dies before the Annuity Commencement Date.

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

CONTINGENT OWNER -- The person or persons who will own the Contract following
the Owner's death (or the death of the last surviving Joint Owner).

CONTRACT FEE -- A charge deducted from Contract Value at the end of each
contract quarter or on the date of full withdrawal, if earlier, to cover the
Company's cost of providing certain administrative services related to the
Contracts and the Separate Account. The charge is $7.50 per contract quarter.
Deduction of the Contract Fee is currently waived for all Qualified Contracts.
The Company also currently waives quarterly deduction of the Contract Fee for
Non-Qualified Contracts whose cumulative Premium Payments on the date the
Contract Fee is assessed are equal to or greater than $100,000. The Company
reserves the right to modify this waiver upon 30 days written notice to Contract
Owners.

CONTRACT VALUE -- The total amount invested under the Contract. It is the sum of
the Separate Account Value and the Fixed Account Value.

CONTRACT YEAR -- A twelve-month period beginning on the Date of Issue or on a
contract anniversary.

DATE OF ISSUE -- The date shown on the specifications page of the Contract on
which the first Contract Year begins.

DUE PROOF OF DEATH -- Proof of death that is satisfactory to the Company. Such
proof may consist of the following if acceptable to the Company: (a) a certified
copy of the death record; (b) a certified copy of a court decree reciting a
finding of death; (c) any other proof satisfactory to the Company.

ELIGIBLE PREMIUM PAYMENT -- That part of a Premium Payment that the Owner
initially allocated to a particular Eligible Variable Account at the time of
payment, provided payment was made at least ten (10) years prior to the Maturity
Benefit Date. (See "Maturity Benefit.")

ELIGIBLE VARIABLE ACCOUNT -- Currently all Variable Accounts. (See "Maturity
Benefit.")

FIXED ACCOUNT -- Part of the Company's General Account to which Net Premium
Payments and transferred amounts may be allocated. The Fixed Account provides
guarantees of principal and interest. Special limits apply to transfers of
Contract Value to and from the Fixed Account. See page .

3
<PAGE> 14

FIXED ACCOUNT CURRENT RATE -- The applicable interest rate contained in a
schedule of rates established by the Company from time to time. The rate of
interest applicable to the initial Premium Payment is shown on the
specifications page of the Contract.

FIXED ACCOUNT VALUE -- The value of the Contract in the Fixed Account prior to
the Annuity Commencement Date.

FUND -- A designated open-end management investment company (or investment
portfolio thereof) or unit investment trust in which a Variable Account invests.

GENERAL ACCOUNT -- The assets of the Company other than those allocated to the
Separate Account or any other separate account of the Company.

MATURITY BENEFIT -- If the Contract is in the accumulation phase on the Maturity
Benefit Date, the Maturity Benefit for a particular Eligible Variable Account is
equal to: (a) the sum of the Eligible Premium Payments for that particular
Eligible Variable Account; MINUS (b) a percentage of any transfer or withdrawal
from that Eligible Variable Account; and MINUS (c) the value of that Eligible
Variable Account on the Maturity Benefit Date. (See "Maturity Benefit.")

MATURITY BENEFIT DATE -- The later of the Annuitant's age 70 or 10 years after
the Date of Issue. If the Contract is owned by Joint Owners who are spouses at
the time one Joint Owner dies, the Maturity Benefit Date will become the date
the surviving spouse attains age 70. If the Contract is owned by Joint Owners
who are not spouses and one of the Joint Owners dies before the Maturity Benefit
Date, the Maturity Benefit is not available to the sole surviving Owner.

NET PREMIUM PAYMENT -- A Premium Payment minus any applicable premium tax
deducted from Premium Payments.

NON-QUALIFIED CONTRACT -- A Contract that is not a "Qualified Contract."

OWNER -- The person(s) who owns the Contract and who is entitled to exercise all
rights and privileges provided in the Contract. The maximum number of Joint
Owners is two. Joint Owners are not permitted under Qualified Contracts.

PAYEE -- The person or persons entitled to receive annuity payments. The
"Successor Payee" named by the Owner is the person who will receive any
guaranteed annuity payments after the death of the sole surviving Payee.

PAYOUT PLAN -- An arrangement under which annuity payments are made under the
Contract.

QUALIFIED CONTRACT -- A Contract that is issued in connection with retirement
plans that qualify for special federal income tax treatment under Sections
401(a), 403(b), 408 or 408A of the Code.

SEC -- U.S. Securities and Exchange Commission.

SEPARATE ACCOUNT -- IL Annuity and Insurance Co. Separate Account 1 which is not
part of the Company's General Account. The Separate Account is divided into
Variable Accounts, each of which invests in shares of a corresponding Portfolio
of a designated Fund.

SEPARATE ACCOUNT VALUE -- The value of the Contract in the Separate Account
prior to the Annuity Commencement Date.

SURRENDER VALUE -- The Contract Value MINUS (1) any applicable Withdrawal
Charges; MINUS (2) any premium taxes not previously deducted; and MINUS (3) the
Contract Fee. For a 403(b) Qualified Plan, the outstanding loan amount, if any,
is also deducted from Contract Value.

VALUATION DAY -- For each Variable Account, each day on which the New York Stock
Exchange is open for business except for the holidays listed in the prospectus
under "Holidays" and any day that a Variable Account's corresponding fund does
not value its shares.

4
<PAGE> 15

VALUATION PERIOD -- The period commencing at the close of the New York Stock
Exchange ("NYSE") on each Valuation Day and ending at the close of the NYSE for
the next succeeding Valuation Day.

VARIABLE ACCOUNT -- A subdivision of the Separate Account; the assets of each
Variable Account are invested in a corresponding Portfolio of a designated Fund.

WRITTEN REQUEST -- A written notice or request in a form satisfactory to the
Company which is signed by the Owner and received at the Annuity Service Office.

5
<PAGE> 16

EXPENSE TABLES

The following expense information assumes that the entire Contract Value is
in the Separate Account.

OWNER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Sales Charge Imposed on Premium Payments.................................................. None
Maximum Withdrawal Charge (contingent
deferred sales charge) as a percentage of
Premium Payments(1)..................................................................... 7.0%
Transfer Fee.............................. No fee for first twelve transfers in a Contract Year
The Company reserves the right to charge a $25 fee for each transfer thereafter during a Contract
Year
ANNUALIZED CONTRACT FEE(2)................................................................ $30
</TABLE>

SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of net assets)

<TABLE>
<S> <C>
Mortality and Expense Risk Charge........................... 1.25%
Other Separate Account Expenses(3).......................... 0.15
----
Total Separate Account Annual Expenses................. 1.40%
====
</TABLE>

ANNUAL FUND EXPENSES
(as a percentage of average net assets after expense cap or expense deferral)

ALGER AMERICAN FUND ANNUAL EXPENSES

<TABLE>
<CAPTION>
SMALL
MIDCAP GROWTH CAPITALIZATION
PORTFOLIO PORTFOLIO
------------- --------------
<S> <C> <C>
Management Fees (investment advisory fees).................. 0.80% 0.85%
Other Expenses After Reimbursement.......................... 0.04 0.03
---- ----
Total Annual Portfolio Expenses
(after reimbursements)............................... 0.84% 0.88%
==== ====
</TABLE>

FIDELITY VIP FUND ANNUAL EXPENSES

<TABLE>
<CAPTION>
EQUITY INCOME GROWTH MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
------------- --------- ------------
<S> <C> <C> <C>
Management Fees (investment advisory fees)................ 0.51% 0.61% 0.21%
Other Expenses After Reimbursement........................ 0.07 0.08 0.09
---- ---- ----
Total Annual Portfolio Expenses
(after reimbursements)............................. 0.58% 0.69% 0.30%
==== ==== ====
</TABLE>

6
<PAGE> 17

FIDELITY VIP FUND II ANNUAL EXPENSES

<TABLE>
<CAPTION>
ASSET INVESTMENT
MANAGER CONTRAFUND INDEX 500 GRADE BOND
PORTFOLIO PORTFOLIO PORTFOLIO(4) PORTFOLIO
--------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Management Fees (investment advisory fees).......... 0.64% 0.61% 0.13% 0.45%
Other Expenses After Reimbursement.................. 0.10 0.13 0.15 0.13
---- ---- ---- ----
Total Annual Portfolio Expenses
(after reimbursements)....................... 0.74% 0.74% 0.28% 0.58%
==== ==== ==== ====
</TABLE>

OCC ACCUMULATION TRUST ANNUAL EXPENSES

<TABLE>
<CAPTION>
MANAGED SMALL CAP
PORTFOLIO(5) PORTFOLIO(5)
------------ ------------
<S> <C> <C>
Management Fees (investment advisory fees).................. 0.80% 0.80%
Other Expenses After Reimbursement.......................... 0.07 0.17
---- ----
Total Annual Portfolio Expenses
(after reimbursements)............................... 0.87% 0.97%
==== ====
</TABLE>

T. ROWE PRICE FIXED INCOME SERIES, INC. ANNUAL EXPENSES

<TABLE>
<CAPTION>
LIMITED-TERM
BOND PORTFOLIO(6)
-----------------
<S> <C>
Management Fees (investment advisory fees).................. 0.70%
Other Expenses.............................................. 0.00
----
Total Annual Portfolio Expenses........................ 0.70%
====
</TABLE>

T. ROWE PRICE INTERNATIONAL SERIES, INC. ANNUAL EXPENSES

<TABLE>
<CAPTION>
INTERNATIONAL
STOCK PORTFOLIO(6)
------------------
<S> <C>
Management Fees (investment advisory fees).................. 1.05%
Other Expenses.............................................. 0.00
----
Total Annual Portfolio Expenses........................ 1.05%
====
</TABLE>

VAN ECK WORLDWIDE INSURANCE TRUST ANNUAL EXPENSES

<TABLE>
<CAPTION>
WORLDWIDE HARD
ASSETS PORTFOLIO
----------------
<S> <C>
Management Fees (investment advisory fees).................. 1.00%
Other Expenses After Reimbursement.......................... 0.17
----
Total Annual Portfolio Expenses
(after reimbursements)............................... 1.17%
====
</TABLE>

Premium taxes may be applicable, depending on the laws of various
jurisdictions.

The purpose of these tables is to assist the Contract Owner in
understanding the costs and expenses that he or she will bear directly or
indirectly. The table reflects the actual charges and expenses for the Separate

7
<PAGE> 18

Account and for each Portfolio for the fiscal year ended December 31, 1997. For
a more complete description of the various charges and expenses described in
these tables, see "Charges and Deductions" and the prospectus for each Portfolio
which accompanies this prospectus.

(1) A Withdrawal Charge is deducted only if a full or partial withdrawal occurs
during the first nine Contract Years; no Withdrawal Charge is deducted from
a full or partial surrender in Contract Years ten and later. Amounts subject
to the Withdrawal Charge will be deemed to be first from Premium Payments,
then from earnings. No Withdrawal Charge applies to Contract Value in excess
of aggregate Premium Payments. For the first six Contract Years, the maximum
charge is 7% of the amount withdrawn. For amounts withdrawn within the
seventh year from the Date of Issue, the charge is 6% of the amount
withdrawn. Thereafter, the Withdrawal Charge decreases by 2% for each
subsequent Contract Year until it is zero in year ten. (See "Charges for
Partial or Full Withdrawals.")

(2) Deduction of the Contract Fee is currently waived for all Qualified
Contracts. The Company also currently waives deduction of the Contract Fee
for Non-Qualified Contracts whose cumulative Premium Payments on the date
the Contract Fee is assessed are equal to or greater than $100,000.

(3) Asset-based administrative charge.

(4) Total Annual Expenses for the Fidelity Index 500 Portfolio were reduced from
0.28% to 0.24%, effective December 1, 1997.

(5) Other Expenses of the OCC Accumulation Trust Portfolios are shown gross of
certain expense offsets afforded the Portfolios which effectively lowered
overall custody expenses. The Total Annual Portfolio Expenses of the Managed
and Small Cap Portfolios are limited by OpCap Advisors so that their
respective annualized operating expenses (net of any expense offsets) do not
exceed 1.00% of the average daily net assets. Without such limitations, and
without giving effect to any expense offsets, the Management Fees, Other
Expenses and Total Annual Portfolio Expenses incurred for the fiscal year
ended December 31, 1997 would have been: .80%, .07% and .87%, respectively,
for the Managed Portfolio; and .80%, .17% and .97% respectively, for the
Small Cap Portfolio.

(6) The Limited-Term Bond Portfolio pays T. Rowe Price an all-inclusive fee of
0.70%, computed daily and paid monthly, based on its average daily net
assets. The International Stock Portfolio pays Rowe Price-Fleming
International, Inc. ("Price-Fleming") an all-inclusive fee of 1.05%,
computed daily and paid monthly, based on its average daily net assets.
These fees pay for investment management services and other operating costs
of the Portfolios.

8
<PAGE> 19

EXAMPLES

(NOTE: The examples shown below are entirely hypothetical. They are not
representations of past or future performance or expenses. Actual performance
and/or expenses may be more or less than shown.)

You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets and charges and expenses reflected in the Fee Table
above:

1. If You surrender your Contract (or if you elect to annuitize under
a period certain option for a specified period of less than 10 years) at
the end of the applicable time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Alger American Fund
MidCap Growth Portfolio.................. $94.50 $143.44 $198.64 $273.95
Small Capitalization Portfolio........... $94.92 $144.61 $200.74 $278.14

Fidelity VIP Fund
Equity-Income Portfolio.................. $91.77 $135.79 $184.89 $246.26
Growth Portfolio......................... $92.92 $139.03 $190.73 $258.07
Money Market Portfolio................... $88.83 $127.50 $169.71 $215.62

Fidelity VIP Fund II
Asset Manager Portfolio.................. $93.45 $140.50 $193.37 $263.39
Contrafund Portfolio..................... $93.45 $140.50 $193.37 $263.39
Index 500 Portfolio...................... $88.62 $126.90 $168.83 $213.40
Investment Grade Bond Portfolio.......... $91.77 $135.79 $184.89 $246.26

OCC Accumulation Trust
Managed Portfolio........................ $94.81 $144.32 $200.22 $277.10
Small Cap Portfolio...................... $95.86 $147.25 $205.48 $287.52

T. Rowe Price Fixed Income Series, Inc.
Limited-Term Bond Portfolio.............. $93.03 $139.92 $191.26 $259.13

T. Rowe Price International Series, Inc.
International Stock Portfolio............ $96.70 $149.59 $209.64 $295.78

Van Eck Worldwide Insurance Trust
Worldwide Hard Assets Portfolio.......... $97.96 $153.10 $215.88 $308.05
</TABLE>

9
<PAGE> 20

2. If You do not surrender your Contract (or if you elect to annuitize
under a life contingency option or under a period certain option for a
minimum specified period of 10 years) at the end of the applicable time
period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Alger American Fund
MidCap Growth Portfolio................... $24.50 $75.31 $128.64 $273.95
Small Capitalization Portfolio............ $24.92 $76.57 $130.74 $278.14

Fidelity VIP Fund
Equity-Income Portfolio................... $21.77 $67.09 $114.89 $246.26
Growth Portfolio.......................... $22.92 $70.57 $120.73 $258.07
Money Market Portfolio.................... $18.83 $58.18 $ 99.91 $215.62

Fidelity VIP Fund II
Asset Manager Portfolio................... $23.45 $72.15 $123.37 $263.39
Contrafund Portfolio...................... $23.45 $72.15 $123.37 $263.39
Index 500 Portfolio....................... $18.62 $57.55 $ 98.83 $213.40
Investment Grade Bond Portfolio........... $21.77 $67.09 $114.89 $246.26

OCC Accumulation Trust
Managed Portfolio......................... $24.81 $76.25 $130.22 $277.10
Small Cap Portfolio....................... $25.86 $79.40 $135.46 $287.52

T. Rowe Price Fixed Income Series, Inc.
Limited-Term Bond Portfolio............... $23.03 $70.89 $121.26 $259.13

T. Rowe Price International Series, Inc.
International Stock Portfolio............. $26.70 $81.91 $139.64 $295.78

Van Eck Worldwide Insurance Trust
Worldwide Hard Assets Portfolio........... $27.96 $85.67 $145.88 $308.05
</TABLE>

The examples provided above assume that no transfer charges or premium
taxes have been assessed. The examples also reflect that the annualized Contract
Fee of $30 is assessed on an average Contract Value of $30,000, which translates
the Contract Fee into a 0.10% charge for the purposes of the examples based on a
$1,000 investment.

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

10
<PAGE> 21

SUMMARY

THE CONTRACT

Issuance of a Contract. The Contract is a flexible premium deferred
variable annuity issued by IL Annuity and Insurance Company. Contracts may be
sold in connection with retirement plans that may or may not qualify for special
federal tax treatment under the Code. The maximum age for Owners on the Date of
Issue is 85. Annuity payments are deferred until the Annuity Commencement Date.
(See "Issuance of a Contract.")

Free-Look Period. The Owner has the right to return the Contract for any
reason within 10 days after he or she receives it (or within 20 days of receipt
if the Contract is replacing another annuity contract or insurance policy). The
contract must be returned to the Annuity Service Office. The Owner's Written
Request for cancellation must accompany the Contract. The returned contract will
be treated as if it were never issued. In certain states the Owner may have more
than 10 days to return the Contract for a refund. The amount that the Company
refunds will vary according to state requirements. Most states allow the Company
to refund an amount equal to the sum of: (i) the difference between the Premium
Payments made and the amounts allocated to the Fixed Account and the Separate
Account; and (ii) the Contract Value as of the date the contract and request for
cancellation is received at the Annuity Service Office. The Contract Owner bears
the investment risk for Premium Payments allocated to the Variable Accounts
during the period prior to the Company's receipt of the Contract and Written
Request for cancellation.

A few states require a return of Premium Payments. In these states, the
refund amount will be the greater of: (i) the amount of Premium Payments made
under the Contract; and (ii) the Contract Value on the date the Contract is
received at the Annuity Service Office, plus any amounts which may have been
deducted for premium taxes. In these states, the Company will allocate Premium
Payments to the Money Market Variable Account for 15 calendar days from the date
the initial Premium Payment is credited to the Contract. (See "Free-Look
Period.")

Premium Payments. The minimum amount which the Company will accept as an
initial Premium Payment is $1,000; the maximum amount of the initial premium is
$250,000. Subsequent Premium Payments of not less than $1,000 may be paid under
the Contract at any time until the earliest of: (a) the Annuity Commencement
Date; (b) full withdrawal of Contract Value; or (c) the date the Owner attains
age 85 (age 70 1/2 for Qualified Contracts other than Roth IRAs). Additional
premiums in amounts up to two times the initial premium may be paid annually.
The Company will not accept total premiums in excess of $250,000. The Company
reserves the right to waive these premium limitations. (See "Premium Payments.")

Allocation of Net Premium Payments. Net Premium Payments under a Contract
will be allocated, as designated by the Owner, to any available Variable Account
of the Separate Account and to the Fixed Account or to both, subject to any
minimum allocation amounts established by the Company. In states where the
Company must refund Premium Payments in the event the Owner exercises the
free-look right, any portion of the initial Net Premium Payments to be allocated
to a Variable Account will be allocated to the Money Market Variable Account for
a 15-day period following the date the initial Premium Payment is credited to
the Contract. At the end of that period, the amount in the Money Market Variable
Account will be allocated to the Variable Accounts selected by the Owner. The
assets of each Variable Account will be invested solely in a corresponding
Portfolio of a Fund. The Contract Value, except for amounts in the Fixed
Account, will vary according to the investment performance of the Portfolio(s)
in which the selected Variable Account(s) is invested. Interest will be credited
to amounts in the Fixed Account at a guaranteed minimum rate of 3% per year, or
a higher current interest rate declared by the Company. (See "Allocation of Net
Premium Payments.")

Transfers. Prior to the Annuity Commencement Date, the Owner may transfer
Contract Value from one or more of the Variable Accounts or the Fixed Account to
another one or more of the Variable Accounts, subject to certain restrictions.
If the Owner transfers Contract Value from an Eligible Variable Account, the
transfer will reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. (See "Maturity Benefit.")

11
<PAGE> 22

Transfers to the Fixed Account must be at least $1,000. Prior to the
Annuity Commencement Date, the Owner may transfer up to 20% of the Fixed Account
Value (as determined at the beginning of the Contract Year) from the Fixed
Account to one or more of the Variable Accounts in any Contract Year. No fee is
charged for transfers from the Fixed Account to one or more Variable Accounts
and such transfers are not considered a transfer for purposes of assessing a
transfer charge. (See "Transfer Privileges.")

The Company reserves the right to impose a transfer charge of $25 for the
thirteenth and each subsequent request made by the Owner to transfer Contract
Value from one or more Variable Accounts to another one or more of the Variable
Accounts or the Fixed Account during a single Contract Year prior to the Annuity
Commencement Date. (See "Charges and Deductions.")

Partial Withdrawal. Prior to the Annuity Commencement Date, the Owner may
submit a Written Request to withdraw part of the Contract Value in amounts not
less than $250. If the remaining Contract Value is reduced to less than $1,000
by the partial withdrawal, the Company reserves the right to pay the Surrender
Value to the Owner in a lump sum. The Federal tax laws impose penalties upon,
and in some cases prohibit, certain premature distributions from the Contract
before or after the date on which the annuity payments are to begin. (See
"Federal Tax Matters.") Amounts withdrawn may be subject to a Withdrawal Charge
(Contingent Deferred Sales Charge), depending on the number of years between the
request for withdrawal and the Contract's Date of Issue. In any Contract Year
after the first Contract Year, an amount equal to 10% of the Contract Value at
the beginning of the Contract Year may be withdrawn without Withdrawal Charges.
(See "Withdrawal Charge -- Full and Partial Withdrawals.")

Full Withdrawal. Upon Written Request before the Annuity Commencement
Date, the Owner may cancel the Contract and receive its Surrender Value. (See
"Full and Partial Withdrawals.") As with partial withdrawals, Federal tax laws
impose penalties upon, and in some cases prohibit, certain premature
distributions from the Contract before or after the date on which the annuity
payments are to begin. (See "Federal Tax Matters.")

Death Benefit. If the Annuitant dies before the Annuity Commencement
Date, the Beneficiary will receive a Death Benefit. The Death Benefit will be
equal to the greater of:

(1) Premium Payments made under the Contract, less partial withdrawals
as of the date the Company receives due proof of the deceased's
death and payment instructions; or

(2) Contract Value as of the date the Company receives due proof of the
deceased's death and payment instructions;

LESS any applicable premium taxes not previously deducted. If the Owner dies
before the Annuity Commencement Date, the Contract Value (or if the Owner is
also the Annuitant, the Death Benefit) must generally be distributed to the
Beneficiary within five years after the date of the Owner's death. (See "Death
Benefit Before the Annuity Commencement Date.")

Maturity Benefit. If the Contract is in the accumulation phase on the
Maturity Benefit Date, IL Annuity will calculate the Maturity Benefit for each
Eligible Variable Account in which the Owner has value as of that date. The
Maturity Benefit will be credited to the Contract Value of an Eligible Variable
Account only if the value of the Eligible Variable Account on the Maturity
Benefit Date is less than: (a) the sum of the Eligible Premium Payments for such
Eligible Variable Account, MINUS (b) a percentage of all prior withdrawals and
transfers from such Eligible Variable Account.

Eligible Premium Payments are those Premium Payments that initially were
allocated to a particular Eligible Variable Account at the time of payment,
provided the payment was made at least ten (10) years prior to the Maturity
Benefit Date.

On the Maturity Benefit Date, the Maturity Benefit to be credited to each
Eligible Variable Account is equal to: (a) the sum of the Eligible Premium
Payments for that particular Eligible Variable Account; MINUS (b) a percentage
of all prior withdrawals and transfers from that Eligible Variable Account;
MINUS (c) the value of that Eligible Variable Account as of the Maturity Benefit
Date.

12
<PAGE> 23

The Maturity Benefit will not be credited to Contract Value if the Owner
chooses an Annuity Commencement Date that is earlier than the Maturity Benefit
Date.

Transfers and withdrawals from an Eligible Variable Account will reduce the
amount of the Eligible Premium Payments on which the Maturity Benefit is based.
(See "Maturity Benefit.")

CHARGES AND DEDUCTIONS

The following charges and deductions are assessed under the Contract:

Withdrawal Charge (Contingent Deferred Sales Charge). No charge for sales
expenses is deducted from Premium Payments at the time Premium Payments are
paid. However, a Withdrawal Charge is deducted upon full or partial withdrawal
of Contract Value during the first nine Contract Years. No Withdrawal Charge
will be assessed on distributions made in the event the contract terminates due
to the death of the Annuitant or Owner or if Contract Values are applied to a
life contingency option or an annuity plan with a period certain of at least 10
years.

For amounts withdrawn within the first six years from the Date of Issue,
the charge is 7.0% of the amount withdrawn. For amounts withdrawn during the
seventh year from the Date of Issue, the charge is 6.0% of the amount withdrawn.
For each Contract Year thereafter, the Withdrawal Charge decreases by 2.0% for
each subsequent Contract Year until it is zero in year ten. Amounts subject to
the Withdrawal Charge will be deemed to be first from Premium Payments, then
from earnings. No Withdrawal Charge is assessed upon the withdrawal of Contract
Value in excess of aggregate Premium Payments or on withdrawals made in Contract
Years ten or later. (See "Withdrawal Charge -- Charges for Full or Partial
Withdrawals.")

In any Contract Year after the first Contract Year, an amount equal to 10%
of the Contract Value at the beginning of the Contract Year may be withdrawn
without Withdrawal Charges. (See "Withdrawal Charge.") The Withdrawal Charge
also may be waived in cases of extended hospitalization, long-term care,
terminal illness, or to pay for post secondary education, as provided in the
Contract. (See "Withdrawal Charge -- Waiver of Withdrawal Charge.")

Contract Fee. At the end of each Contract quarter (or on the date of full
surrender of the Contract) prior to the Annuity Commencement Date, the Company
deducts a quarterly Contract Fee of $7.50 from the Contract Value. Deduction of
the Contract Fee is currently waived for all Qualified Contracts. The Company
also currently waives quarterly deduction of the Contract Fee for Non-Qualified
Contracts whose cumulative Premium Payments on the date the Contract Fee is
assessed are equal to or greater than $100,000. The Company reserves the right
to modify this waiver upon 30 days written notice to Contract Owners. This
charge does not apply after an annuity payout plan has begun. (See "Contract
Fee.")

Transfer Fee. The Company reserves the right to impose a transfer charge
of $25 for the thirteenth and each subsequent request made by the Owner to
transfer Contract Value from one or more Variable Accounts to another one or
more of the Variable Accounts or the Fixed Account during a single Contract Year
prior to the Annuity Commencement Date. (See "Transfer Fee.")

Mortality and Expense Risk Charge. The Company deducts a daily mortality
and expense risk charge to compensate it for assuming certain mortality and
expense risks. The charge is deducted from the assets of the Separate Account at
a rate of 0.003404% per day which is an annual rate of 1.25% (approximately
0.90% for mortality risk and 0.35% for expense risks). This charge will continue
to be assessed if annuity payments are made on a variable basis after the
Annuity Commencement Date. (See "Mortality and Expense Risk Charge.")

13
<PAGE> 24

Asset-Based Administration Charge. The Company deducts a daily
administration charge to compensate it for certain expenses it incurs in
administering the Contract. The charge is deducted from the assets of the
Separate Account at an annual rate of 0.15%. This charge will continue to be
assessed after annuitization if annuity payments are made on a variable basis.
(See "Asset-Based Administration Charge.")

Premium Taxes. Various states and other governmental entities levy a
premium tax, currently ranging up to 3.5%, on annuity contracts issued by
insurance companies. Premium tax rates are subject to change from time to time
by legislative and other governmental action. In addition, other governmental
units within a state may levy such taxes. If state or other premium taxes are
applicable to a Contract, they will be deducted either: (a) from Premium
Payments as they are received, (b) from Contract Value upon partial or full
withdrawal, (c) upon application of adjusted Contract Value to a payout plan
option, or (d) upon payment of a Death Benefit. (See "Premium Taxes.")

Investment Advisory Fees and Other Expenses of the Funds. Because each
Variable Account purchases shares of the Funds, the net assets of each Variable
Account will reflect the investment advisory fee incurred by the corresponding
Portfolio of the Funds. For each Portfolio, an investment advisor is paid a
daily fee by the Funds for its investment advisory services. The advisory fees
are based on the average daily net assets of the Portfolio, and, as a result,
the amount of the advisory fee will depend upon the Portfolio and the assets of
such Portfolio. Each Portfolio of the Fund in which the Variable Accounts invest
is also responsible for its own expenses. Presently, certain fees and expenses
of the Funds are waived and reimbursed. (See the accompanying Prospectuses of
the Funds for further details.)

ANNUITY PROVISIONS

Payout Plan Options. On the Annuity Commencement Date, the Contract Value
(adjusted as described below) will be applied to a payout plan option, unless
the Owner chooses to receive the Surrender Value in a lump sum. Adjusted
Contract Value is Contract Value, LESS applicable premium tax not yet deducted,
LESS the quarterly Contract Fee, and, for an installment income annuity payout
plan with a payout period of less than 10 years, LESS any applicable Withdrawal
Charge. (See "Payout Plan Options.")

FEDERAL TAX STATUS

Generally, a distribution (including a full or partial withdrawal or Death
Benefit payment) may result in taxable income. In certain circumstances, a 10%
penalty tax may apply. For a further discussion of the federal tax status of
variable annuity contracts, see "Federal Tax Status."

CONDENSED FINANCIAL INFORMATION

The following condensed financial information is derived from the financial
statements of the Separate Account. The data should be read in conjunction with
the financial statements, related notes and other financial information included
in the Statement of Additional Information. See "Financial Statements"
concerning the financial statements contained in the Statement of Additional
Information.

14
<PAGE> 25

The Variable Accumulation Unit values and the number of Variable
Accumulation Units outstanding for each Variable Account for the periods shown
are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------------------------
ALGER ALGER FIDELITY FIDELITY FIDELITY
MIDCAP GROWTH SMALL CAPITALIZATION EQUITY-INCOME GROWTH MONEY MARKET
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- -------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period.......... $10.000 $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value at End
of Period.................... $ 9.786 $ 9.675 $10.616 $ 9.604 0
Number of Accumulation Units
Outstanding at End of
Period....................... 2,764 1,709 3,789 2,199 0
</TABLE>

<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY FIDELITY OCC ACCUMULATION*
ASSET MANAGER CONTRAFUND INDEX 500 INVESTMENT GRADE BOND MANAGED
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- ---------------- ---------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period........ $10.000 $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value at
End of Period.............. $ 8.224 $10.091 $10.514 $10.247 $10.380
Number of Accumulation
Units Outstanding at End of
Period..................... 255 5,731 3,538 1,668 161
</TABLE>

<TABLE>
<CAPTION>
OCC ACCUMULATION* T.ROWE PRICE T.ROWE PRICE VAN ECK
SMALL CAP LIMITED-TERM BOND INTERNATIONAL STOCK WORLDWIDE HARD ASSETS
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT**
----------------- ----------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Accumulation Unit
Value at Beginning
of Period.............. $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value
at End of Period....... $10.388 $10.042 $10.487 $10.621
Number of Accumulation
Units Outstanding at
End of Period.......... 1,182 1,485 2,530 58

<CAPTION>
VAN ECK
WORLDWIDE BALANCED***
VARIABLE ACCOUNT
---------------------
<S> <C>
Accumulation Unit
Value at Beginning
of Period.............. $10.000
Accumulation Unit Value
at End of Period....... $10.010
Number of Accumulation
Units Outstanding at
End of Period.......... 1,201
</TABLE>

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

* Prior to May 1, 1996, OCC Accumulation Trust was called Quest for Value
Accumulation Trust.

** Prior to May 1, 1997, Van Eck Worldwide Hard Assets Variable Account was
called Van Eck Gold and Natural Resources.

*** Effective April 1, 1998, the Van Eck Worldwide Balanced Variable Account was
closed to new transfers of Contract Value and allocations of Premium
Payments.

15
<PAGE> 26

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------------------------
ALGER ALGER FIDELITY FIDELITY FIDELITY
MIDCAP GROWTH SMALL CAPITALIZATION EQUITY-INCOME GROWTH MONEY MARKET
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- -------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period.......... $ 9.786 $9.675 $10.616 $ 9.604 $10.000
Accumulation Unit Value at End
of Period.................... $10.812 $9.955 $11.958 $10.868 $10.456
Number of Accumulation Units
Outstanding at End of
Period....................... 109,955 181,361 195,400 164,945 179,504
</TABLE>

<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY FIDELITY OCC ACCUMULATION*
ASSET MANAGER CONTRAFUND INDEX 500 INVESTMENT GRADE BOND MANAGED VARIABLE
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT ACCOUNT
---------------- ---------------- ---------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period........ $ 8.224 $10.091 $10.514 $10.247 $10.380
Accumulation Unit Value at
End of Period.............. $11.817 $12.105 $12.734 $10.422 $12.567
Number of Accumulation Units
Outstanding at End of
Period..................... 61,512 203,860 193,803 57,476 133,102
</TABLE>

OCC ACCUMULATION* T.ROWE PRICE T.ROWE PRICE VAN ECK
SMALL CAP LIMITED-TERM BOND INTERNATIONAL STOCK WORLDWIDE HARD ASSETS**
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
----------------- ----------------- ------------------- -----------------------
<S> <C> <C> <C> <C>
Accumulation Unit Value
at Beginning of
Period................. $10.388 $10.042 $10.487 $10.621
Accumulation Unit Value
at End of Period....... $12.148 $ 9.946 $11.780 $12.356
Number of Accumulation
Units Outstanding at
End of Period.......... 40,024 27,325 122,831 29,990

<CAPTION>
VAN ECK
WORLDWIDE
BALANCED***
VARIABLE ACCOUNT
----------------
<S> <C>
Accumulation Unit Value
at Beginning of
Period................. $10.010
Accumulation Unit Value
at End of Period....... $11.019
Number of Accumulation
Units Outstanding at
End of Period.......... 26,719
</TABLE>

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

* Prior to May 1, 1996, OCC Accumulation Trust was called Quest for Value
Accumulation Trust.

** Prior to May 1, 1997, Van Eck Worldwide Hard Assets Variable Account was
called Van Eck Gold and Natural Resources.

*** Effective April 1, 1998, the Van Eck Worldwide Balanced Variable Account was
closed to new transfers of Contract Value and allocations of Premium
Payments.

16
<PAGE> 27

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------------------------------------------
ALGER ALGER FIDELITY FIDELITY FIDELITY
MIDCAP GROWTH SMALL CAPITALIZATION EQUITY-INCOME GROWTH MONEY MARKET
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- -------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period.......... $10.812 $ 9.955 $11.958 $10.868 $10.456
Accumulation Unit Value at End
of Period.................... $12.263 $10.936 $15.114 $13.240 $10.888
Number of Accumulation Units
Outstanding at End of
Period....................... 294,506 372,229 781,937 462,381 486,050
</TABLE>

<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY FIDELITY OCC ACCUMULATION*
ASSET MANAGER CONTRAFUND INDEX 500 INVESTMENT GRADE BOND MANAGED VARIABLE
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT ACCOUNT
---------------- ---------------- ---------------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period........ $11.817 $12.105 $12.734 $10.422 $12.567
Accumulation Unit Value at
End of Period.............. $14.066 $14.824 $16.672 $11.214 $15.160
Number of Accumulation Units
Outstanding at End of
Period..................... 212,897 638,524 826,178 274,009 672,203
</TABLE>

OCC ACCUMULATION* T.ROWE PRICE T.ROWE PRICE VAN ECK
SMALL CAP LIMITED-TERM BOND INTERNATIONAL STOCK WORLDWIDE HARD ASSETS**
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
----------------- ----------------- ------------------- -----------------------
<S> <C> <C> <C> <C>
Accumulation Unit Value
at Beginning of
Period................. $12.148 $ 9.946 $11.780 $12.356
Accumulation Unit Value
at End of Period....... $14.649 $10.767 $11.979 $11.983
Number of Accumulation
Units Outstanding at
End of Period.......... 162,435 136,902 368,187 166,188

<CAPTION>
VAN ECK
WORLDWIDE
BALANCED***
VARIABLE ACCOUNT
----------------
<S> <C>
Accumulation Unit Value
at Beginning of
Period................. $11.019
Accumulation Unit Value
at End of Period....... $12.002
Number of Accumulation
Units Outstanding at
End of Period.......... 81,483
</TABLE>

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

* Prior to May 1, 1996, OCC Accumulation Trust was called Quest for Value
Accumulation Trust.

** Prior to May 1, 1997, Van Eck Worldwide Hard Assets Variable Account was
called Van Eck Gold and Natural Resources.

*** Effective April 1, 1998, the Van Eck Worldwide Balanced Variable Account was
closed to new transfers of Contract Value and allocations of Premium
Payments.

THE COMPANY AND THE SEPARATE ACCOUNT

IL ANNUITY AND INSURANCE COMPANY

IL Annuity and Insurance Company, formerly known as Sentry Investors Life
Insurance Company, is a stock life insurance company organized under the laws of
the Commonwealth of Massachusetts on December 21, 1965 and incorporated on March
9, 1966. The Company changed its named to "IL Annuity and Insurance Company" on
January 17, 1995.

Effective October 31, 1994, the Company entered into an assumption
reinsurance agreement with Sentry Life Insurance Company ("Sentry") whereby
Sentry assumed all of the existing insurance in-force and related assets and
liabilities from the Company.

On November 1, 1994, the Company became a wholly-owned subsidiary of the
Indianapolis Life Group of Companies, Inc. ("Indianapolis Life Group"), which is
a majority-owned subsidiary of Indianapolis Life Insurance Company. Indianapolis
Life Insurance Company is a mutual life insurance company chartered under
Indiana law in 1905 with assets as of December 31, 1997 which approximated
$1.702 billion.

17
<PAGE> 28

will retain ownership of 75% of the stock of Indianapolis Life Group and AUL
will own the remaining 25% of the Indianapolis Life Group stock. The Agreement
to Affiliate does contain provisions which would allow AUL to invest additional
amounts in Indianapolis Life Group, and potentially to own up to 49.9% of the
outstanding Indianapolis Life Group stock. As of the date of this prospectus,
there is no current intention for additional investments by AUL.

The Company is subject to regulation by the Insurance Department of the
State of Massachusetts as well as by the insurance departments of all other
states and jurisdictions in which it does business. The Company submits annual
statements on its operations and finances to insurance officials in such states
and jurisdictions. The forms for the Contract described in this Prospectus are
filed with and (where required) approved by insurance officials in each state
and jurisdiction in which Contracts are sold.

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1

The IL Annuity and Insurance Co. Separate Account I (the "Separate
Account") was established by the Company as a separate account under
Massachusetts insurance law on November 1, 1994. The Separate Account will
receive and invest Net Premium Payments made under the Contracts. In addition,
the Separate Account may receive and invest Premium Payments for any other
variable annuity contracts issued in the future by the Company.

Although the assets in the Separate Account are the property of the
Company, the portion of the assets in the Separate Account equal to the reserves
and other contract liabilities of the Separate Account are not chargeable with
the liabilities arising out of any other business which the Company may conduct
and which has no specific relation to or dependence upon the Separate Account.
The assets of the Separate Account are available to cover the general
liabilities of the Company only to the extent that the Separate Account's assets
exceed its liabilities arising under the Contracts and any other contracts
supported by the Separate Account. The Company has the right to transfer to the
general account any assets of the Separate Account which are in excess of
reserves and other contract liabilities. All obligations arising under the
Contracts are general corporate obligations of the Company. Income, gains and
losses, whether or not realized, from assets allocated to the Separate Account
are credited to or charged against the Separate Account without regard to other
income, gains or losses of any other separate account or of the Company.

The Separate Account currently is divided into fourteen Variable Accounts
that are available for investment but may, in the future, include additional
Variable Accounts. Each Variable Account invests exclusively in shares of a
single corresponding fund. The income, gains and losses, whether or not
realized, from the assets allocated to each Variable Account are credited to or
charged against that Variable Account without regard to income, gains or losses
from any other Variable Account.

The Separate Account has been registered with the SEC as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of a separate account under the federal securities laws. Registration
with the SEC does not involve supervision of the management or investment
practices or policies of the Separate Account or the Company by the SEC. The
Separate Account is also subject to the laws of the State of Massachusetts which
regulate the operations of insurance companies domiciled in Massachusetts.

THE FUNDS

Each Variable Account of the Separate Account invests in shares of a
designated Portfolio of a series-type mutual fund. Each Fund currently available
under the Contract is registered with the SEC under the Investment Company Act
of 1940 (the "1940 Act") as an open-end, management investment company. Such
registration does not involve supervision of the management or investment
practices or policies of the companies or their funds by the SEC.

The assets of each Portfolio are separate from the assets of other
Portfolios, and each Portfolio has separate investment objectives and policies.
As a result, each Portfolio operates as a separate investment

18
<PAGE> 29

Portfolio and the income or losses of one Portfolio has no effect on the
investment performance of any other Portfolio.

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

Each of the Funds is managed by an investment adviser registered with the
SEC under the Investment Advisers Act of 1940, as amended. Each investment
manager is responsible for the selection of Portfolio investments consistent
with the investment objectives and policies of the Portfolio, and conducts
securities trading for the Portfolio.

Certain Variable Accounts invest in Portfolios that have similar investment
objectives and/or policies; therefore, before choosing Variable Accounts,
carefully read the individual prospectuses for the Funds along with this
prospectus.

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

THE ALGER AMERICAN FUND

The MidCap Growth Variable Account and the Small Capitalization Variable
Account will invest exclusively in shares of the MidCap Growth Portfolio and the
Small Capitalization Portfolio of The Alger American Fund.

The investment objectives of these Portfolios are:

MIDCAP GROWTH PORTFOLIO -- seeks to obtain long-term capital
appreciation. Except during temporary defensive periods, the Portfolio
invests at least 65% of its total assets in equity securities of companies
that, at the time of purchase of the securities, have total market
capitalization within the range of companies included in the S&P MidCap 400
Index, updated quarterly. The S&P MidCap Index is designed to track the
performance of medium capitalization companies. As of March 31, 1998, the
range of market capitalization of these companies was $210 million to $14.3
billion.

SMALL CAPITALIZATION PORTFOLIO -- seeks to obtain long-term capital
appreciation. Except during temporary defensive periods, the Portfolio
invests at least 65% of its total assets in equity securities of companies
that, at the time of purchase of the securities, have total market
capitalization within the range of companies included in the Russell 2000
Growth Index ("Russell Index") or the S&P SmallCap 600 Index, updated
quarterly. Both indexes are broad indices of small capitalization stocks.
As of March 31, 1998, the range of market capitalization of the companies
in the Russell Index was $20 million to $4.25 billion; the range of
capitalization of the companies in the S&P SmallCap 600 Index at that date
was $31 million to $3.7 billion.

Fred Alger Management, Inc. ("Alger Management") serves as investment
adviser for the MidCap Growth and Small Capitalization Portfolios of The Alger
American Fund. Fred Alger & Company, Incorporated, an affiliate of Alger
Management, will serve as the Portfolios' broker in effecting substantially all
of the portfolio transactions on security exchanges.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II

The Equity-Income Variable Account, the Growth Variable Account and the
Money Market Variable Account will invest exclusively in shares of the
corresponding Portfolio of Fidelity's Variable Insurance Products Fund ("VIP
Fund"); the Asset Manager Variable Account, the Contrafund Variable Account, the

19
<PAGE> 30

Index 500 Variable Account and the Investment Grade Bond Variable Account will
invest exclusively in shares of the corresponding Portfolio of the Variable
Insurance Products Fund II ("VIP Fund II").

The investment objectives of these Portfolios are:

EQUITY-INCOME PORTFOLIO -- seeks reasonable income by investing
primarily in income-producing equity securities.

GROWTH PORTFOLIO -- seeks to achieve capital appreciation by investing
in common stocks and securities convertible into common stock of companies
that the adviser believes have above-average growth potential. The
Portfolio, however, is not restricted to any one type of security and may
pursue capital appreciation through the purchase of bonds and preferred
stocks.

MONEY MARKET PORTFOLIO -- seeks to earn a high level of current income
while maintaining a stable $1.00 share price by investing in high-quality,
short-term money market securities of different types.

ASSET MANAGER PORTFOLIO -- seeks to obtain high total return with
reduced risk over the long-term by allocating its assets among stocks,
bonds, short-term and other instruments of U.S. and foreign issuers.

CONTRAFUND PORTFOLIO -- seeks capital appreciation by investing in
companies that the adviser believes to be undervalued due to an overly
pessimistic appraisal by the public.

INDEX 500 PORTFOLIO -- seeks to match the total return of the S&P 500
while keeping expenses low. The adviser normally invests at least 80% (65%
if Portfolio assets are below $20 million) of the Portfolio's assets in
equity securities of companies that compose the S&P 500.

INVESTMENT GRADE BOND PORTFOLIO -- seeks high current income by
investing in fixed-income obligations of all types.

The Portfolios of the VIP Fund and the VIP Fund II are managed by Fidelity
Management & Research Company ("FMR"). On behalf of the Money Market Portfolio,
FMR has entered in a subadvisory agreement with FMR Texas, Inc., pursuant to
which FMR Texas, Inc. has primary responsibility for providing investment
management services to the Portfolio. On behalf of the Asset Manager Portfolio
and the Contrafund Portfolio, FMR has entered into subadvisory agreements with
Fidelity Investment Management and Research (U.K.) Inc. ("FMR (U.K.)") and
Fidelity Management and Research (Far East) Inc. ("FMR Far East"), pursuant to
which those entities provide research and investment recommendations with
respect to companies based outside the United States. FMR (U.K.) focuses
primarily on companies based in Europe, while FMR Far East focuses primarily on
companies based in Asia and the Pacific Basin.

OCC ACCUMULATION TRUST

The Managed Variable Account and the Small Cap Variable Account will invest
only in shares of their corresponding portfolios of the OCC Accumulation Trust
("OCC Trust"). The investment objectives of these Portfolios are:

MANAGED PORTFOLIO -- seeks growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based on management's
assessments of relative investment values.

SMALL CAP PORTFOLIO -- seeks capital appreciation through investment
in a diversified portfolio of equity securities of companies with market
capitalizations of under $1 billion.

The OCC Trust receives investment advice with respect to each of its
Portfolios from OpCap Advisors, a subsidiary of Oppenheimer Capital which is a
subsidiary of Oppenheimer Financial Corp.

T. ROWE PRICE FIXED INCOME SERIES, INC.

The Limited-Term Bond Variable Account will invest exclusively in shares of
the Limited-Term Bond Portfolio of the T. Rowe Price Fixed Income Series, Inc.
The investment objective of this Portfolio is:

20
<PAGE> 31

LIMITED-TERM BOND PORTFOLIO -- seeks a high level of income consistent
with moderate fluctuation in principal value. The Portfolio will invest at
least 65% of total assets in short- and intermediate-term, investment-grade
debt securities.

T. Rowe Price Associates, Inc. is responsible for the selection and
management of the portfolio investments of T. Rowe Price Limited-Term Bond
Portfolio and receives a single, all-inclusive fee based on the Portfolio's
average daily net assets to cover investment management and operating expenses.

T. ROWE PRICE INTERNATIONAL SERIES, INC.

The International Stock Variable Account will invest exclusively in shares
of the International Stock Portfolio of the T. Rowe Price International Series,
Inc. The investment objective of this Portfolio is:

INTERNATIONAL STOCK PORTFOLIO -- seeks long-term growth of capital
through investments primarily in common stocks of established, non-U.S.
companies.

Rowe Price-Fleming International, Inc. ("Price-Fleming") is responsible for
the selection and management of the Portfolio's investments. Incorporated in
1979 as a joint venture between T. Rowe Price Associates, Inc. ("T. Rowe Price")
and Robert Fleming Holdings Limited ("Fleming"), Price-Fleming receives a
single, all-inclusive fee based on the Portfolio's average daily net assets to
cover investment management and operating expenses.

VAN ECK WORLDWIDE INSURANCE TRUST

The Worldwide Hard Assets Variable Account will invest exclusively in
shares of the Worldwide Hard Assets Portfolio of the Van Eck Worldwide Insurance
Trust (the "Van Eck Trust").

The investment objectives of this Portfolio is:

WORLDWIDE HARD ASSETS PORTFOLIO -- seeks long-term capital
appreciation by investing globally, primarily in "Hard Asset Securities" of
companies that are directly or indirectly engaged to a significant extent
in the exploration, development, production or distribution of one or more
of the following: (i) precious metals, (ii) ferrous and non-ferrous metals,
(iii) energy, (iv) forest products, (v) real estate, and (vi) other basic
non-agricultural commodities.

Van Eck Associates Corporation serves as investment adviser and manager to
the Van Eck Worldwide Hard Assets Portfolio pursuant to an Advisory Agreement
with the Van Eck Trust.

THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH PORTFOLIO'S
INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS INVOLVED IN
INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S FEES AND EXPENSES,
IS CONTAINED IN THE PROSPECTUSES FOR THE FUNDS, CURRENT COPIES OF WHICH
ACCOMPANY THIS PROSPECTUS. INFORMATION CONTAINED IN THE FUNDS' PROSPECTUSES
SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE ALLOCATION
OF PREMIUM PAYMENTS TO OR TRANSFERS AMONG THE VARIABLE ACCOUNTS.

An investment in a Variable Account, or in any Portfolio, including the
Money Market Portfolio, is not insured or guaranteed by the U.S. Government and
there can be no assurance that the Money Market Portfolio will be able to
maintain a stable net asset value per share.

The Company cannot guarantee that each Fund will always be available for
its variable annuity contracts, but in the unlikely event that a fund is not
available, the Company will do everything reasonably practicable to secure the
availability of a comparable fund. Shares of each Portfolio are purchased and
redeemed at net asset value, without a sales charge.

IL Annuity has entered into agreements with the investment adviser of
several of the Funds pursuant to which each such investment adviser will pay IL
Annuity a servicing fee based upon an annual percentage of the average aggregate
net assets invested by IL Annuity on behalf of the Separate Account. These
agreements reflect administrative services provided to the Funds by IL Annuity.
Payments of such amounts by the Funds will not increase the fees paid by the
Funds or their shareholders.

21
<PAGE> 32

AVAILABILITY OF THE FUNDS

The Separate Account purchases shares of each of the Funds in accordance
with a participation agreement between the Company and the Fund. The termination
provisions of these agreements vary. A summary of the termination provisions of
these agreements may be found in the Statement of Additional Information. Should
a participation agreement between the Company and a Fund terminate, the Separate
Account may not be able to purchase additional shares of that Fund. Likewise, in
certain circumstances, it is possible that shares of a Fund may not be available
to the Separate Account even if the participation agreement relating to that
Fund has not been terminated. In either event, Owners will no longer be able to
allocate Premium Payments or transfer Contract Value to the Variable Account
investing in that Fund.

ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS

The Company reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares of a fund that are
held in the Separate Account or that the Separate Account may purchase. If the
shares of a fund are no longer available for investment or if, in the Company's
judgment, further investment in any fund should become inappropriate, the
Company may redeem the shares, if any, of that fund and substitute shares of
another fund. The Company will not substitute any shares attributable to a
Contract's interest in a Variable Account without notice and prior approval of
the SEC and state insurance authorities, to the extent required by the 1940 Act
or other applicable law.

The Company also reserves the right to establish additional Variable
Accounts of the Separate Account, each of which would invest in shares of a new
corresponding fund having a specified investment objective. The Company may, in
its sole discretion, establish new Variable Accounts or eliminate or combine one
or more Variable Accounts if marketing needs, tax considerations or investment
conditions warrant. Any new Variable Accounts may be made available to existing
Contract Owners on a basis to be determined by the Company. Subject to obtaining
any approvals or consents required by applicable law, the assets of one or more
Variable Accounts may be transferred to any other Variable Account if, in the
sole discretion of the Company, marketing, tax, or investment conditions
warrant.

In the event of any such substitution or change, the Company may (by
appropriate endorsement, if necessary) change the Contract to reflect the
substitution or change. If the Company considers it to be in the best interest
of Owners and Annuitants, and subject to any approvals that may be required
under applicable law, the Separate Account may be operated as a management
investment company under the 1940 Act, it may be deregistered under that Act if
registration is no longer required, it may be combined with other Company
separate accounts, or its assets may be transferred to another separate account
of the Company. In addition, the Company may, when permitted by law, restrict or
eliminate any voting rights of Owners or other persons who have such rights
under the Contracts.

The Company will continue to pay a Maturity Benefit on Premium Payments
allocated to an Eligible Variable Account if: (a) the Portfolio underlying an
Eligible Variable Account changes its investment objective; (b) the Company
determines that an investment in the Portfolio underlying an Eligible Variable
Account is no longer appropriate in light of the purposes of the Separate
Account; or (c) shares of a Portfolio underlying an Eligible Variable Account
are no longer available for investment by the Separate Account and IL Annuity is
forced to redeem all shares of the Portfolio held by the Eligible Variable
Account. (See "Maturity Benefit.")

RESOLVING MATERIAL CONFLICTS

The Funds currently sell shares to registered separate accounts of
insurance companies other than the Company to support other variable annuity
contracts and variable life insurance contracts. In addition, some of the Funds
may in the future be sold to other separate accounts of the Company and may in
the future be sold to separate accounts of other affiliated life insurance
companies to support other variable annuity or variable life insurance
contracts. Moreover, shares of some of the Funds may in the future be sold to
qualified retirement plans. As a result, there is a possibility that an
irreconcilable material conflict may arise between the interests of Contract
Owners owning Contracts whose Contract Values are allocated to the Separate

22
<PAGE> 33

Account and of Contract Owners owning Contracts whose Contract Values are
allocated to one or more other separate accounts investing in any one of the
Funds. There is also the possibility that a material conflict may arise between
the interests of Contract Owners generally, or certain classes of Contract
Owners, and participating qualified retirement plans or participants in such
retirement plans.

The Company currently does not foresee any disadvantages to Owners arising
from the sale of such shares to support variable life insurance contracts or
variable annuity contracts of other companies or to qualified retirement plans.
However, the management of the Funds will each monitor events related to their
Fund in order to identify any material irreconcilable conflicts that might
possibly arise as a result of such Fund's offering its shares to (1) support
both variable life insurance contracts and variable annuity contracts, or (2)
support the variable life insurance contracts and/or variable annuity contracts
issued by various unaffiliated insurance companies. In addition, the management
of the Funds will monitor the Funds in order to identify any material
irreconcilable conflicts that might possibly arise as a result of the sale of
its shares to qualified retirement plans, if applicable. In the event of such a
conflict, the management of the appropriate Fund would determine what action, if
any, should be taken in response to the conflict. In addition, if the Company
believes that the response of the Funds to any such conflict insufficiently
protects Owners, it will take appropriate action on its own, including
withdrawing the Separate Account's investment in such Funds, as appropriate.
(See the Fund's prospectuses for greater detail.)

DESCRIPTION OF THE CONTRACT

ISSUANCE OF A CONTRACT

In order to purchase a Contract, application must be made to the Company
through a licensed representative of the Company, who is also a registered
representative of IL Securities, Inc. or a broker-dealer having a selling
agreement with IL Securities, Inc. or a broker-dealer having a selling agreement
with such broker-dealer. Contracts may be sold to or in connection with
retirement plans that do not qualify for special tax treatment as well as
retirement plans that qualify for special tax treatment under the Code. The
maximum age for Owners on the Date of Issue is 85.

PREMIUM PAYMENTS

The minimum amount which the Company will accept as an initial Premium
Payment is $1,000; the maximum amount of the initial premium is $250,000.
Subsequent Premium Payments may be paid under the Contract at any time until the
earliest of: (a) the Annuity Commencement Date; (b) full withdrawal of Contract
Value; or (c) the date the Owner attains age 85 (age 70 1/2 for Qualified
Contracts other than Roth IRAs under Code Section 408A), and must be for at
least $1,000. The Company will not accept total premiums under the Contract in
excess of $250,000. The Company reserves the right to waive these limitations.

Under the Company's Automatic Premium Payment Plan, the Owner can select an
annual, semi-annual, or monthly payment schedule pursuant to which Premium
Payments will be automatically deducted from a bank or credit union account or
other source. The minimum size of such payment is $1,000.

FREE-LOOK PERIOD

The Contract provides for an initial "Free-Look" Period. The Owner has the
right to return the Contract within 10 days of receiving it (or within 20 days
of receipt if the Contract is replacing another annuity contract or insurance
policy). In some jurisdictions, this period may be longer than 10 days. When the
Company receives a Written Request for cancellation and the returned Contract at
the Annuity Service Office before the end of this period, the Company will
cancel the Contract.

The amount that the Company will refund will vary according to state
requirements. In most states, the Company will refund to the Owner an amount
equal to the sum of: (i) the difference between the Premium Payments paid and
the amounts allocated to the Variable Accounts and the Fixed Account under the

23
<PAGE> 34

Contract; and (ii) the Contract Value as of the date the Contract and the
Written Request for cancellation are received at the Annuity Service Office. The
Contract Owner bears the investment risk only for premiums allocated to the
Variable Accounts during the period prior to the Company's receipt of the
Contract and Written Request for cancellation.

A few states require the return of Premium Payments. If state law requires
that Premium Payments be returned, the amount of the refund will be the greater
of: (i) the Premium Payments made under the Contract; and (ii) the Contract
Value (without reduction of any withdrawal charge) on the date the Contract is
received at the Annuity Service Office, plus any amount that may have been
deducted for premium taxes. In those states where Premium Payments must be
returned, the Company will allocate Premium Payments to the Money Market
Variable Account for 15 calendar days from the date the initial Premium Payment
is credited to the Contract.

ALLOCATION OF NET PREMIUM PAYMENTS

At the time of application, the Owner selects how the initial Net Premium
Payment is to be allocated among the Variable Accounts and the Fixed Account.
Any allocation must be for at least 1% of a Premium Payment and be in whole
percentages.

If the application for a Contract is properly completed and is accompanied
by all the information necessary to process it, including payment of the initial
Premium Payment, the initial Net Premium Payment will be allocated, as
designated by the Owner, to one or more of the Variable Accounts or to the Fixed
Account within two valuation days of receipt of such Premium Payment by the
Company at its Annuity Service Office. If the application is not properly
completed, the Company reserves the right to retain the Premium Payment for up
to five valuation days while it attempts to complete the application. If the
application is not complete at the end of the 5-day period, the Company will
inform the applicant of the reason for the delay and the initial Premium Payment
will be returned immediately, unless the applicant specifically consents to the
Company retaining the Premium Payment until the application is complete. Once
the application is complete, the initial Net Premium Payment will be allocated
as designated by the Owner within two valuation days.

Notwithstanding the foregoing, in jurisdictions where the Company must
refund aggregate Premium Payments in the event the Owner exercises the free-look
right, the Company will place any portion of the initial Net Premium Payments
allocated to a Variable Account into the Money Market Variable Account for a
15-day period following the date on which the initial Premium Payment is
credited to the Contract. At the end of that period, the amount in the Money
Market Variable Account will be allocated to the Variable Accounts as designated
by the Owner based on the proportion that the allocation percentage for each
such Variable Account bears to the sum of the allocation percentages.

Any subsequent Net Premium Payments will be allocated as of the end of the
valuation period in which the subsequent Net Premium Payment is received by the
Company and will be allocated in accordance with the allocation schedule in
effect at the time the Premium Payment is received. However, Owners may direct
individual payments to a specific Variable Account or to the Fixed Account (or
any combination thereof) without changing the existing allocation schedule. The
allocation schedule may be changed by the Owner at any time by Written Request.
Changing the Premium Payment allocation schedule will not change the allocation
of existing Contract Value among the Variable Accounts or the Fixed Account.

THE CONTRACT VALUES ALLOCATED TO A VARIABLE ACCOUNT WILL VARY WITH THAT VARIABLE
ACCOUNT'S INVESTMENT EXPERIENCE. THE OWNER BEARS THE ENTIRE INVESTMENT RISK FOR
AMOUNTS ALLOCATED TO THE VARIABLE ACCOUNTS. OWNERS SHOULD PERIODICALLY REVIEW
THEIR PREMIUM PAYMENT ALLOCATION SCHEDULE IN LIGHT OF MARKET CONDITIONS AND
THEIR OVERALL FINANCIAL OBJECTIVES.

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SEPARATE ACCOUNT VALUE

The Separate Account Value will reflect the investment experience of the
selected Variable Accounts, any Net Premium Payments paid, any surrenders or
partial withdrawals, any transfers, and any charges assessed in connection with
the Contract. There is no guaranteed minimum Separate Account Value, and,
because a Contract's Separate Account Value on any future date depends upon a
number of variables, it cannot be predetermined.

Calculation of Separate Account Value. The Separate Account Value is
determined at the end of each valuation period. The value will be the aggregate
of the values attributable to the Contract in each of the Variable Accounts,
determined for each Variable Account by multiplying that Variable Account's unit
value for the relevant valuation period by the number of accumulation units of
that Variable Account allocated to the Contract.

Determination of Number of Accumulation Units. Any amounts allocated or
transferred to the Variable Accounts will be converted into Variable Account
accumulation units. The number of accumulation units to be credited to a
Contract is determined by dividing the dollar amount being allocated or
transferred to a Variable Account by the accumulation unit value for that
Variable Account at the end of the valuation period during which the amount was
allocated or transferred. The number of accumulation units in any Variable
Account will be increased at the end of the valuation period by any Net Premium
Payments allocated to the Variable Account during the current valuation period
and by any amounts transferred to the Variable Account from another Variable
Account or from the Fixed Account during the current valuation period.

Any amounts transferred, surrendered or deducted from a Variable Account
will be processed by cancelling or liquidating accumulation units. The number of
accumulation units to be cancelled is determined by dividing the dollar amount
being removed from a Variable Account by the accumulation unit value for that
Variable Account at the end of the valuation period during which the amount was
removed. The number of accumulation units in any Variable Account will be
decreased at the end of the valuation period by: (a) any amounts transferred
(including any applicable transfer fee) from that Variable Account to another
Variable Account or to the Fixed Account, (b) any amounts withdrawn or
surrendered during that valuation period, (c) any Withdrawal Charge or premium
tax assessed upon a partial withdrawal or surrender, and (d) the quarterly
contract fee, if assessed during that valuation period.

Determination of Accumulation Unit Value. The accumulation unit value for
each Variable Account's first valuation period was set at $10. The accumulation
unit value for a Variable Account is calculated for each subsequent Valuation
Period by multiplying the Accumulation Unit Value at the end of the immediately
preceding Valuation Period by the Net Investment Factor for the Valuation Period
for which the value is being determined.

Net Investment Factor. The Net Investment Factor is an index that measures
the investment performance of a Variable Account from one Valuation Period to
the next. Each Variable Account has its own Net Investment Factor, which may be
greater or less than one. The Net Investment Factor for each Variable Account
for a Valuation Period equals 1 plus the fraction obtained by dividing (a) by
(b) where:

(a) is the net result of:

1. the investment income, dividends, and capital gains, realized or
unrealized, credited during the current Valuation Period; PLUS

2. the amount credited or released from reserves for taxes attributed
to the operation of the Variable Account; MINUS

3. the capital losses, realized or unrealized, charged during the
current Valuation Period; MINUS

4. any amount charged for taxes or any amount set aside during the
Valuation Period as a reserve for taxes attributable to the
operation or maintenance of the Variable Account; MINUS

5. the amount charged for mortality and expense risk for that
Valuation Period; MINUS
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6. the amount charged for administration for that Valuation Period;
and

(b) is the value of the assets in the Variable Account at the end of the
preceding Valuation Period, adjusted for allocations and transfers
to and withdrawals and transfers from the Variable Account occurring
during that preceding Valuation Period.

TRANSFER PRIVILEGES

General. Before the Annuity Commencement Date and subject to the
restrictions described below, the Owner may transfer all or part of the amount
in a Variable Account or the Fixed Account to another Variable Account or the
Fixed Account.

If the Owner transfers Contract Value from an Eligible Variable Account,
the transfer will reduce the amount of the Eligible Premium Payments on which
the Maturity Benefit is based. (See "Maturity Benefit.")

Transfers to the Fixed Account must be at least $1,000. Prior to the
Annuity Commencement Date, the Owner may transfer up to 20% of the Fixed Account
Value (as determined at the beginning of the Contract Year) from the Fixed
Account to one or more of the Variable Accounts in any Contract Year. No fee is
charged for transfers from the Fixed Account to one or more Variable Accounts
and such a transfer is not considered a transfer for purposes of assessing a
transfer charge.

Transfers will be made as of the valuation day on which Written Request
requesting such transfer is received by the Company if received before 4:00 p.m.
Eastern Time. Transfers will be made as of the valuation day next following the
day on which Written Request requesting such transfer is received if received
after 4:00 p.m. Eastern Time. Subject to the foregoing restrictions, there
currently is no limit on the number of transfers that can be made prior to the
Annuity Commencement Date among or between Variable Accounts or to the Fixed
Account.

Telephone Transfers. Transfers will be made based upon instructions given
by telephone, provided the Company has a currently valid telephone transfer
authorization form on file signed by the Owner(s). A telephone transfer
authorization form received by the Company at the Annuity Service Office is
valid until it is rescinded or revoked in writing by the Owner(s) or until a
subsequently dated form signed by the Owner(s) is received at the Annuity
Service Office.

The Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and if it follows such procedures it will
not be liable for any losses due to unauthorized or fraudulent instructions. The
Company, however, may be liable for such losses if it does not follow those
reasonable procedures. The procedures the Company may follow for telephone
transfers include providing a written confirmation of all transfers made
pursuant to telephone instructions, requiring a form of personal identification
prior to acting on instructions received by telephone, and tape recording
instructions received by telephone.

The Company reserves the right to modify, restrict, suspend or eliminate
the transfer privileges (including the telephone transfer facility) at any time,
for any class of Contracts, for any reason. In particular, the Company reserves
the right to not honor transfers requested by a third party holding a power of
attorney from an Owner where that third party requests simultaneous transfers on
behalf of the Owners of two or more Contracts.

Dollar-Cost Averaging. If elected at the time of the application or at any
time thereafter before the Annuity Commencement Date by Written Request, an
Owner may systematically or automatically transfer (on a monthly or quarterly
basis) specified dollar amounts from one or more Variable Accounts or the Fixed
Account to one or more other Variable Accounts. This is known as the dollar-cost
averaging method of investment. The fixed dollar amount will purchase more
accumulation units of a Variable Account when their

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<PAGE> 37

value is lower and fewer units when their value is higher. Over time, the cost
per unit averages out to be less than if all purchases of units had been made at
the highest value and greater than if all purchases had been made at the lowest
value. The dollar-cost averaging method of investment reduces the risk of making
purchases only when the price of accumulation units is high. It does not assure
a profit or protect against a loss in declining markets.

The minimum transfer amount for dollar-cost averaging is $100 to each
Variable Account. Once elected, dollar-cost averaging remains in effect for the
life of the Contract until Separate Account Value in the Variable Account from
which transfers are being made is depleted (and the value of the Fixed Account
is expended if transfers are being made from the Fixed Account) or until the
Owner cancels the election (by Written Request or by telephone if the Company
has the Owner's telephone authorization form on file). There is no additional
charge for dollar-cost averaging and a transfer under this program is not
considered a transfer for purposes of assessing a transfer change. The Company
reserves the right to discontinue offering the dollar-cost averaging facility at
any time and for any reason. Dollar-Cost Averaging from an Eligible Variable
Account will reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. (See "Maturity Benefit.")

Interest Sweep. Prior to the Annuity Commencement Date, the Owner may
elect to have any interest credited to the Fixed Account automatically
transferred on a quarterly basis to one or more Variable Accounts. There is no
charge for interest sweep transfers and an interest sweep transfer is not
considered a transfer for purposes of assessing a transfer charge. Amounts
transferred out of the Fixed Account due to an interest sweep transfer are
counted toward the 20% of Fixed Account Value that may be transferred out of the
Fixed Account during any Contract Year.

Automatic Account Balancing Service. If elected at the time of the
application or requested at any time thereafter before the Annuity Commencement
Date by Written Request, an Owner may instruct the Company to automatically
balance (on a monthly or quarterly basis) Contract Value in order to match the
Owner's currently effective Premium Payment allocation schedule. Such percentage
allocations must be in whole percentages and be at least 1% per allocation.
Owners may start and stop Automatic Account Balancing at any time. There is no
additional charge for using Automatic Account Balancing and an account balancing
transfer is not considered a transfer for purposes of assessing a transfer
charge. The Company reserves the right to discontinue offering the automatic
account balancing service at any time and for any reason. Automatic Account
Balancing from an Eligible Variable Account will reduce the amount of the
Eligible Premium Payments on which the Maturity Benefit is based. (See "Maturity
Benefit.")

FULL AND PARTIAL WITHDRAWALS

Full Withdrawals. At any time before the Annuity Commencement Date, the
Owner may surrender the contract for its Surrender Value. The Surrender Value is
equal to the Contract Value MINUS (1) any applicable Withdrawal Charges; MINUS
(2) any premium taxes not previously deducted; MINUS (3) the Contract Fee unless
waived. For Qualified Plans, any outstanding loan balance is also deducted. The
Surrender Value will be determined as of the valuation day on the date that the
Written Request requesting surrender and the Contract are received at the
Company's Annuity Service Office. The Surrender Value will be paid in a lump sum
unless the Owner requests payment under a payout plan option. A full withdrawal
may have adverse federal income tax consequences, including a penalty tax. (See
"Taxation of Annuities.")

Partial Withdrawals. At any time before the Annuity Commencement Date, an
Owner may submit a Written Request to withdraw part of the Contract Value in
amounts not less than $250. The maximum amount is that which would leave the
remaining Surrender Value equal to $1,000. If the remaining Contract Value is
reduced to less than $1,000 by the partial withdrawal, the Company reserves the
right to pay the Surrender Value to the Owner in a lump sum. The Company will
withdraw the amount requested from the Contract Value as of the Valuation Day
that the Written Request requesting the partial withdrawal is received. Any
applicable Withdrawal Charge also will be deducted from the remaining Contract
Value. (See "Withdrawal Charge.")

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<PAGE> 38

The Owner may specify the amount of the partial withdrawal to be made from
the Variable Accounts or the Fixed Account. If the Owner does not so specify, or
if the amount in the designated Variable Accounts or Fixed Account is inadequate
to comply with the request, the partial withdrawal will be made on a pro rata
basis from the Fixed Account and Variable Accounts in which Contract Value is
invested based on the proportion that the Variable Account Values and the Fixed
Account Value bear to the Contract Value prior to the partial withdrawal.

If the Owner withdraws Contract Value from an Eligible Variable Account,
the withdrawal will reduce the amount of the Eligible Premium Payments on which
the Maturity Benefit is based. (See "Maturity Benefit.")

For purposes of calculating the Maturity Benefit, withdrawals from the
Variable Accounts and the Fixed Account will be accounted for on a last-in,
first-out ("LIFO") basis. (See "Maturity Benefit.") For purposes of calculating
the Withdrawal Charge, all withdrawals will be deemed to be first from Premium
Payments, then from earnings. (See "Withdrawal Charge.")

A partial withdrawal may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")

Systematic Withdrawal Program. The Systematic Withdrawal Program provides
an automatic monthly or quarterly payment to the Owner from amounts accumulated
in the Variable Accounts and/or the Fixed Account. The minimum amount that may
be withdrawn is $100. To use the program, the Owner must maintain a $1,000
balance in the Contract. An Owner may elect to participate in the Systematic
Withdrawal Program at any time before the Annuity Commencement Date by sending a
Written Request to the Annuity Service Office. Once elected, the program remains
in effect unless the balance in the Contract drops below $1,000. The program may
be canceled at any time by sending a Written Request, or by calling IL Annuity
provided a telephone authorization form for the Owner is on file.

A Withdrawal Charge will be assessed on each systematic withdrawal made
during the first nine Contract Years, unless the amount withdrawn qualifies as a
Free Withdrawal Amount. (See "Withdrawal Charge -- Free Withdrawal Amount.")
Withdrawals under the Systematic Withdrawal Program are permitted an Annual Free
Withdrawal Amount during the first Contract Year. No other charges are deducted
for this program.

All Systematic Withdrawals will be paid to the Owner on the same day each
month, provided that day is a Valuation Day. If it is not, then payment will be
made on the next Valuation Day. Systematic withdrawals may be taxable, subject
to withholding, and subject to a 10% penalty tax. (See "Federal Tax Matters.")
IL Annuity reserves the right to discontinue offering the Systematic Withdrawal
Program at any time and for any reason.

Full and Partial Withdrawal Restrictions. The Owner's right to make full
and partial withdrawals is subject to any restrictions imposed by applicable law
or employee benefit plan.

Restrictions on Distributions from Certain Types of Contracts. There are
certain restrictions on surrenders of and partial withdrawals from Contracts
used as funding vehicles for Code Section 403(b) retirement programs. Section
403(b)(11) of the Code restricts the distribution under Section 403(b) annuity
contracts of: (i) elective contributions made in years beginning after December
31, 1988; (ii) earnings on those contributions; and (iii) earnings in such years
on amounts held as of the last year beginning before January 1, 1989.
Distributions of those amounts may only occur upon the death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.

CONTRACT LOANS

Owners of Contracts issued in connection with retirement programs meeting
the requirements of Section 403(b) of the Code (other than those programs
subject to Title I of the Employee Retirement Income Security Act of 1984) may
borrow from the Company using their Contracts as collateral. Loans such

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<PAGE> 39

as these are subject to the provisions of any applicable retirement program and
to the Code. Owners should, therefore, consult their tax and retirement plan
advisers prior to taking a contract loan.

At any time prior to the year the Owner reaches age 70 1/2, Owners may
borrow the lesser of (1) the maximum loan amount permitted under the Code, and
(2) 90% of the Surrender Value of their Contract less any existing loan amount,
determined as of the date of the loan. Loans in excess of the maximum amount
permitted under the Code will be treated as a taxable distribution rather than a
loan. The minimum loan amount is $1,000. The Company will only make contract
loans after approving a written application by the Owner. The written consent of
all assignees and irrevocable beneficiaries must be obtained before a loan will
be given.

When a loan is made, the Company transfers an amount equal to the amount
borrowed from Separate Account Value or Fixed Account Value to the loan account.
The loan account is part of the Company's general account and Contract Value in
the loan account does not participate in the investment experience of any
Variable Account or Fixed Account. The Owner must indicate in the loan
application from which Variable Accounts or Fixed Account, and in what amounts,
Contract Value is to be transferred to the loan account. In the absence of any
such instructions from the Owner, the transfer(s) are made pro-rata on a last-
in, first out ("LIFO") basis from all Variable Accounts having Separate Account
Value and from the Fixed Account. Loans may be repaid by the Owner at any time
before the Annuity Commencement Date. Upon the repayment of any portion of a
loan, an amount equal to the repayment will be transferred from the loan account
to the Variable Account(s) or Fixed Account designated by the Owner or according
to the Owner's current Premium Payment allocation instructions.

The Company charges interest on contract loans at an effective annual rate
of 6.0%. The Company pays interest on the Contract Value in the loan account at
rates it determines from time to time but never less than an effective annual
rate of 3.0%. Consequently, the net cost of a loan is the difference between
6.0% and the rate being paid from time to time on the Contract Value in the loan
account. The Company may declare from time to time higher current interest
rates. Different current interest rates may be applied to the loan account than
the rest of the Fixed Account. If not repaid, loans will automatically reduce
the amount of any Death Benefit, the amount payable upon a partial or full
withdrawal of Contract Value and the amount applied on the Annuity Commencement
Date to provide annuity payments.

If at any time, the loan amount of a Contract exceeds the Surrender Value,
the Contract will be in default. In this event, the Company will send a Written
Request of default to the Owner stating the amount of loan repayment needed to
reinstate the Contract and the Owner will have 60 days, from the day the notice
is mailed, to pay the stated amount. If the Company does not receive the
required loan repayment within 60 days, it will terminate the Contract without
value. In addition, in order to comply with the requirements of the Code, loans
must be repaid in substantially equal installments, at least quarterly, over a
period of no longer than five years (which can be longer for certain home
loans). If these requirements are not satisfied, or if the Contract terminates
while a loan is outstanding, the loan balance will be treated as a taxable
distribution and may be subject to penalty tax, and the treatment of the
Contract under section 403(b) may be adversely affected.

Any loan amount outstanding upon the death of the Owner or Annuitant is
deducted from any Death Benefit paid. In addition, a contract loan, whether or
not repaid, will have a permanent effect on the Contract Value because the
investment experience of the Separate Account and the interest rates applicable
to the Fixed Account do not apply to the portion of Contract Value transferred
to the loan account. The longer the loan remains outstanding, the greater this
effect is likely to be.

DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE

Death of an Owner. If the Contract is owned by Joint Owners and one Owner
dies prior to the Annuity Commencement Date, the surviving Owner becomes the
sole Owner. If the Contract is owned by one person and a Contingent Owner is
named, the Contingent Owner will become the Owner if the sole Owner dies. If
there is no surviving Owner, the estate of the Owner will become the Owner. If
the Owner or Joint Owner who

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is the Annuitant dies before the Annuity Commencement Date, then the provisions
relating to the death of an Annuitant (described below) will govern.

The following options are available to sole surviving Owners or new Owners
of Non-Qualified Contracts who are not the Annuitant:

(1) If the Owner is the spouse of the deceased Owner, he or she may
continue the Contract as the new Owner.

(2) If the Owner is not the spouse of the deceased Owner:

(a) he or she may elect to receive the Contract Value, LESS any
premium taxes not yet deducted, in a single sum within 5 years of
the deceased Owner's death; or

(b) he or she may elect to receive the Contract Value paid out under
one of the approved payout plan options, provided that
distributions begin within one year of the deceased Owner's death
and the distribution period under the payout plan is for the life
of, or for a period not exceeding the life expectancy of, the
sole surviving or new Owner.

If he or she does not elect one of the above options, the Company
will pay the Contract Value five years from the date of the deceased
Owner's death.

Under any of these options, sole surviving Owners or new Owners may exercise all
Ownership rights and privileges from the date of the deceased Owner's death
until the date that the Contract Value is paid. Similar rules apply to Qualified
Contracts.

Death of the Annuitant. If the Annuitant dies before the Annuity
Commencement Date, the Company will pay the Death Benefit described below to the
Beneficiaries named by the Owner in a lump sum. (Owners also may name contingent
beneficiaries.) If the Owner has named two or more primary beneficiaries, they
will share equally in the Death Benefit unless the Owner has specified
otherwise. If there are no living primary beneficiaries at the time of the
Annuitant's death, payments will be made to those contingent beneficiaries who
are living when payment of the Death Benefit is due. If all the beneficiaries
have predeceased the Annuitant, the Company will pay the Death Benefit to the
Owner, if living, or the Annuitant's estate. In lieu of a lump sum payment, the
beneficiary may elect, within 60 days of the date the Company receives due proof
of the Annuitant's death, to apply the Death Benefit to a payout plan option.

If the Annuitant who is also an Owner dies, the provisions described
immediately above apply except that the beneficiary may only apply the Death
Benefit payment to a payout plan option if:

(1) payments under the option begin within one (1) year of the
Annuitant's death; and

(2) payments under the option are payable over the beneficiary's life or
over a period not greater than the beneficiary's life expectancy.

Death Benefit. If the Annuitant dies before the Annuity Commencement Date,
the Death Benefit is an amount equal to the greater of:

(1) aggregate Premium Payments made under the Contract, LESS partial
withdrawals as of the date the Company receives due proof of the
deceased's death and payment instructions; or

(2) Contract Value as of the date the Company receives due proof of the
deceased's death and payment instructions;

LESS any applicable premium taxes not previously deducted. If the Contract is a
Qualified Contract, any outstanding loan amount on the date the Death Benefit is
paid will also be deducted.

DEATH OF PAYEE AFTER THE ANNUITY COMMENCEMENT DATE

If the Payee dies after the Annuity Commencement Date, any Joint Payee
becomes the sole Payee. If there is no Joint Payee, the Successor Payee becomes
the sole Payee. If there is no Successor Payee, the remaining benefits are paid
to the estate of the last surviving Payee. The death of the Payee after the
Annuity
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<PAGE> 41

Commencement Date will have the effect stated in the payout plan option pursuant
to which annuity payments are being made. If the Owner dies on or after the
Annuity Commencement Date, any payments that remain must be made at least as
rapidly as under the payout plan in effect on the date of the Owner's death.

THE MATURITY BENEFIT

If the Contract is in the accumulation phase on the Maturity Benefit Date,
IL Annuity will calculate the Maturity Benefit for each Eligible Variable
Account in which the Owner has value. The Maturity Benefit will be credited to
the Contract Value of an Eligible Variable Account only if the value of the
Eligible Variable Account on the Maturity Benefit Date is less than: (a) the sum
of the Eligible Premium Payments for such Eligible Variable Account, MINUS (b) a
percentage of all prior withdrawals and transfers from the Eligible Variable
Account.

The Maturity Benefit to be credited to each Eligible Variable Account on
the Maturity Benefit Date is equal to: (a) the sum of the Eligible Premium
Payments for that particular Eligible Variable Account; MINUS (b) a percentage
of all prior withdrawals and transfers from that Eligible Variable Account;
MINUS (c) the value of that Eligible Variable Account on the Maturity Benefit
Date.

The Maturity Benefit Date is the later of the Annuitant's age 70 and 10
years after the Date of Issue. If the Contract is owned by Joint Owners who are
spouses at the time one Joint Owner dies, the Maturity Benefit Date will become
the date the surviving spouse attains age 70. If the Contract is owned by Joint
Owners who are not spouses and one of the Joint Owners dies before the Maturity
Benefit Date, the Maturity Benefit is not available to the sole surviving Owner.
Currently, all Variable Accounts are Eligible Variable Accounts. The Van Eck
Worldwide Hard Assets Variable Account became an Eligible Variable Account on
March 5, 1998. Only new allocations made to the Van Eck Worldwide Hard Assets
Variable Account on or after March 5, 1998 will be treated as Eligible Premium
Payments for purposes of calculating the Maturity Benefit on the Maturity
Benefit Date, provided the new allocations have been held in that Variable
Account for ten (10) years.

The Maturity Benefit will not be credited to Contract Value if the Owner
chooses an Annuity Commencement Date that is earlier than the Maturity Benefit
Date.

A TRANSFER OR A PARTIAL WITHDRAWAL OF PREMIUM PAYMENTS OUT OF AN ELIGIBLE
VARIABLE ACCOUNT WILL REDUCE THE AMOUNT OF ELIGIBLE PREMIUM PAYMENTS HELD IN THE
ELIGIBLE VARIABLE ACCOUNT IN THE SAME PROPORTION AS THE TRANSFER OR WITHDRAWAL
REDUCED THE VALUE OF THE ELIGIBLE VARIABLE ACCOUNT. EXAMPLES #3, 4 AND 6 BELOW
ILLUSTRATE HOW THIS FEATURE OF THE MATURITY BENEFIT WORKS.

For purposes of calculating the value of an Eligible Variable Account, the
Company deems all transfers and withdrawals to be first a withdrawal of Premium
Payments, then of earnings. Transfers out of an Eligible Variable Account
include transfers resulting from Dollar Cost Averaging or Automatic Account
Balancing; withdrawals out of an Eligible Variable Account include withdrawals
resulting from the Systematic Withdrawal Payments.

The following examples illustrate how the Maturity Benefit works:

Example #1:

Suppose an Owner buys a Contract with a single Premium Payment of
$50,000 at age 55 and immediately allocates the $50,000 to an Eligible
Variable Account. The Owner does not withdraw or transfer any amounts from
the Eligible Variable Account. As of the Maturity Benefit Date (which is
fifteen years later when the Owner is age 70), the $50,000 qualifies as an
Eligible Premium Payment because it was made fifteen years prior to the
Maturity Benefit Date and so it meets the requirement that payment be made
ten years prior to the Maturity Benefit Date.

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On the Maturity Benefit Date (Owner's age 70), IL Annuity will
calculate the Maturity Benefit for the Eligible Variable Account. IL
Annuity will total the value of all Eligible Premium Payments in the
Eligible Variable Account -- in this case $50,000. If the value of the
Eligible Variable Account on the Maturity Benefit Date is less than
$50,000, IL Annuity will automatically credit the difference to Contract
Value.

Example #2:

Assume the same facts as in Example #1, except that the Owner
specifies an Annuity Commencement Date of age 65 and begins to receive
payments under one of the payout options available under the Contract. At
age 70 (the Maturity Benefit Date), IL Annuity does not calculate the
Maturity Benefit and does not credit a Maturity Benefit to Contract Value.
By selecting an Annuity Commencement Date (age 65) that is earlier than the
Maturity Benefit Date (age 70), the Owner forfeited all eligibility for the
Maturity Benefit.

Example #3:

Assume the same facts as in Example #1, except that the Owner
transfers $40,000 from the Eligible Variable Account at age 69. At that
time, the total value of the Eligible Variable Account is $100,000. The
transfer of $40,000 reduced the value of the Eligible Variable Account by
40% ($40,000/$100,000 = .40). No additional transfers or withdrawals are
made prior to the Maturity Benefit Date. On the Maturity Benefit Date, the
sum of the Eligible Premium Payments is $50,000 and is reduced by 40% to
take into account the transfer at age 69 ($50,000 X .40 = $20,000), leaving
$30,000 ($50,000 - $20,000 = $30,000). If on the Maturity Benefit Date the
value of the Eligible Variable Account is less than $30,000, IL Annuity
will automatically credit the difference to Contract Value.

Example #4:

Assume the same facts as in Example #1, except that at age 65 the
Owner deposits (or transfers) an additional $50,000 Premium Payment into
the Eligible Variable Account. At age 69, when the value of the Eligible
Variable Account is $150,000, the Owner withdraws $40,000. The withdrawal
reduced the value of the Eligible Variable Account by 26.667%
($40,000/$150,000 = .26667). No additional transfers or withdrawals are
made before the Maturity Benefit Date. On the Maturity Benefit Date, the
sum of Eligible Premium Payments is $50,000. (The second Premium Payment of
$50,000 does not qualify as an Eligible Premium Payment because it was made
only five years prior to the Maturity Benefit Date and does not meet the
requirement that payment be made ten years prior to the Maturity Benefit
Date.) This sum is then reduced by 26.667% to take into account the
transfer at age 69 ($50,000 X .26667 = $13,333.33), leaving $36,666.67
($50,000 - $13,333.33 = $36,666.67). If on the Maturity Benefit Date the
value of the Eligible Variable Account is less than $36,666.67, IL Annuity
will automatically credit the difference to Contract Value.

Example #5:

Assume the Owner deposits Premium Payments of $5,000 per year into the
same Eligible Variable Account beginning at age 55 until the Maturity
Benefit Date. By age 70, the Owner had paid $75,000 in Premium Payments and
had taken no withdrawals or transfers. The sum of the Eligible Premium
Payments on the Maturity Benefit Date (age 70) is $25,000 because only the
five Premium Payments made prior to age 60 ($5,000 X 5 = $25,000) meet the
requirement that payment be made ten years prior to the Maturity Benefit
Date. If on the Maturity Benefit Date the value of the Eligible Variable
Account is less than $25,000, IL Annuity will automatically credit the
difference to Contract Value.

Example #6:

Assume the same facts as in Example #5, except that the Owner
transfers $10,000 out of the Eligible Variable Account at age 68 when the
value of the Eligible Variable Account is $100,000. The

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<PAGE> 43

transfer reduced the value of the Eligible Variable Account by 10%
($10,000/$100,000 = .10). The next year, the Owner withdraws $9,000 when
the value of the Eligible Variable Account is $90,000. The withdrawal
reduced the value of the Eligible Variable Account by 10% ($9,000/$90,000 =
.10). No additional transfers or withdrawals are made prior to the Maturity
Benefit Date. On the Maturity Benefit Date the sum of the Eligible Premium
Payments ($25,000) is reduced by 20% to take into account both the 10%
transfer at age 68 and the 10% withdrawal at age 69 ($25,000 X .20 =
$5,000), leaving $20,000 ($25,000 - $5,000 = $20,000). If on the Maturity
Benefit Date the value of the Eligible Variable Account is less than
$20,000, IL Annuity will automatically credit the difference to Contract
Value.

Example #7:

Spousal Joint Owners: If the Contract is owned by Joint Owners who are
spouses at the time one of the Joint Owners dies, the surviving spouse may
continue the Contract. The Maturity Benefit Date will become the date the
surviving spouse attains age 70. On that date, IL Annuity will calculate
the Maturity Benefit for each Eligible Variable Account with value.

Example #8:

If the Contract is owned by Joint Owners who are not spouses and one
of the Joint Owners dies, the Maturity Benefit is not available to the sole
surviving Owner.

ANNUITY PAYMENTS ON THE ANNUITY COMMENCEMENT DATE

The Annuity Commencement Date is selected by the Owner. If the Owner does
not specify, the Annuity Commencement Date is the later of the Annuitant's age
70 or ten (10) years after the Date of Issue. For non-qualified contracts, the
Annuity Commencement Date may be no later than the contract anniversary
following the Annuitant's 85th birthday. For Qualified Contracts purchased in
connection with qualified plans under Code sections 401(a), 401(k), 403(b) and
457, the Code requires that the Annuity Commencement Date must be no later than
April 1 of the calendar year following the later of the year in which the Owner
(i) reaches age 70 1/2 or (ii) retires and the payment must be made in a
specified form or manner. If the Owner is a "5 percent owner" (as defined in the
Code), or in the case of an IRA that satisfies Code section 408, the Annuity
Commencement Date must be no later than the date described in (i). Roth IRAs
under Section 408A of the Code do not require distributions at any time prior to
the Owner's death.

If the Owner changes the Annuity Commencement Date to a date earlier than
the Maturity Benefit Date, then the Owner will lose his/her eligibility for the
Maturity Benefit.

The Annuity Commencement Date may be changed subject to the following
limitations: (1) the Owner's Written Request must be received at the Annuity
Service Office at least 31 days before the current Annuity Commencement Date,
and (2) the requested Annuity Commencement Date must be a Contract Anniversary
or the date on which the Owner fully withdraws the Surrender Value.

On the Annuity Commencement Date, the adjusted Contract Value will be
applied under the life income payout plan option with ten years guaranteed,
unless the Owner elects to have the proceeds paid under another payment option
or to receive the Surrender Value in a lump sum. (See "Payout Plan Options.") In
certain states, the Surrender Value will be applied to the payout plan option
rather than the adjusted Contract Value. Unless the Owner instructs the Company
otherwise, amounts in the Fixed Account will be used to provide a fixed-payout
plan option and amounts in the Separate Account will be used to provide a
variable payout plan option.

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<PAGE> 44

The adjusted Contract Value is the Contract Value:

(1) MINUS the pro-rated portion of the Contract Fee (unless the Annuity
Commencement Date falls on the contract quarter);

(2) MINUS any applicable premium taxes not yet deducted.

For Qualified Contracts, the amount of any outstanding loan is also
deducted, and distributions must satisfy certain requirements specified in the
Code.

PAYMENTS

Any full or partial withdrawal, Death Benefit payment, (or in the case of
Qualified Contracts, payment of contract loan proceeds) will usually be paid
within seven days of receipt of a Written Request, any information or
documentation reasonably necessary to process the request, and (in the case of a
Death Benefit) receipt and filing of due proof of death. However, payments may
be postponed if:

1. the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on the exchange is restricted as
determined by the SEC; or

2. the SEC permits by an order the postponement for the protection of
Owners; or

3. the SEC determines that an emergency exists that would make the
disposal of securities held in the Separate Account or the
determination of the value of the Separate Account's net assets not
reasonably practicable.

If a recent check or draft has been submitted, the Company has the right to
delay payment until it has assured itself that the check or draft has been
honored.

The Company has the right to defer payment of any full or partial
withdrawal or transfer from the Fixed Account for up to six months from the date
of receipt of Written Request for such a surrender or transfer. If payment is
not made within 30 days after receipt of documentation necessary to complete the
transaction, or such shorter period required by a particular jurisdiction,
interest will be added to the amount paid from the date of receipt of
documentation at 3% or such higher rate required for a particular jurisdiction.

MODIFICATION

Upon notice to the Owner, the Company may modify the Contract if:

1. necessary to permit the Contract or the Separate Account to comply
with any applicable law or regulation issued by a government agency;
or

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

3. necessary to reflect a change in the operation of the Separate
Account; or

4. the modification provides additional investment options.

In the event of most such modifications, the Company will make appropriate
endorsement to the Contract.

REPORTS TO OWNERS

At least annually, the Company will mail to each Owner, at such Owner's
last known address of record, a report setting forth the Contract Value
(including the Contract Value in each Variable Account and the Fixed Account) of
the Contract, Premium Payments paid and charges deducted since the last report,
partial withdrawals made since the last report and any further information
required by any applicable law or regulation.

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<PAGE> 45

INQUIRIES

Inquiries regarding a Contract may be made by writing to the Company at its
Annuity Service Office.

THE FIXED ACCOUNT

An Owner may allocate some or all of the Net Premium Payments and transfer
some or all of the Contract Value to the Fixed Account, which is part of the
Company's general account and pays interest at declared rates. The principal,
after deductions, is also guaranteed. The Company's general account supports its
insurance and annuity obligations. Since the Fixed Account is part of the
general account, the Company assumes the risk of investment gain or loss on this
amount. All assets in the general account are subject to the Company's general
liabilities from business operations. The Fixed Account may not be available in
all states.

The Fixed Account has not been, and is not required to be, registered with
the SEC under the Securities Act of 1933, and neither the Fixed Account nor the
Company's general account has been registered as an investment company under the
1940 Act. Therefore, neither the Company's general account, the Fixed Account,
nor any interests therein are generally subject to regulation under the 1933 Act
or the 1940 Act. The disclosures relating to the Fixed Account which are
included in this prospectus are for the Owner's information and have not been
reviewed by the SEC. However, such disclosures may be subject to certain
generally applicable provisions of federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.

FIXED ACCOUNT VALUE

The portion of the Contract Value allocated to the Fixed Account is the
Fixed Account Value which is credited with interest, as described below. The
Fixed Account Value reflects interest credited to Contract Value in the Fixed
Account, Net Premium Payments allocated to or Contract Value transferred to the
Fixed Account, transfers of Contract Value out of the Fixed Account, full and
partial withdrawals from the Fixed Account, and charges assessed in connection
with the Contract. The Fixed Account Value is guaranteed to accumulate at a
minimum effective annual interest rate of 3%.

The Fixed Account Value is equal to: (1) Net Premium Payments allocated to
the Fixed Account, PLUS (2) amounts transferred to the Fixed Account, PLUS (3)
interest credited the Fixed Account, MINUS (4) any partial withdrawals or
transfers from the Fixed Account, and MINUS (5) any withdrawal charges, contract
fees or premium taxes deducted from the Fixed Account.

The Company intends to credit the Fixed Account with interest at current
rates in excess of the minimum guaranteed rate but is not obligated to do so.
The Company has no specific formula for determining current interest rates. Some
of the factors that the Company may consider, in its sole discretion, in
determining whether to credit interest in excess of the 3% guaranteed rate are:
general economic trends, rates of return currently available and anticipated on
the Company's investments, regulatory and tax requirements, and competitive
factors. The Fixed Account Value will not share in the investment performance of
the Company's general account or any portion thereof. Because the Company, in
its sole discretion, anticipates changing the current interest rate from time to
time, different allocations to the Fixed Account will be credited with different
current interest rates.

The interest rate to be credited to each amount allocated or transferred to
the Fixed Account will apply to the end of the calendar year in which such
amount is received or transferred. At the end of the calendar year, the Company
will determine a new current interest rate on such amount and accrued interest
thereon (which may be a different current interest rate from the current
interest rate on new allocations to the Fixed Account on that date). The rate
declared on such amount and accrued interest will be guaranteed for the
following calendar year. Any interest credited on amounts in the Fixed Account
in excess of the minimum guaranteed effective rate of 3% per year will be
determined in the sole discretion of the Company. The Owner therefore assumes
the risk that interest credited may not exceed the minimum guaranteed rate.

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<PAGE> 46

Amounts deducted from the Fixed Account for the administration fee,
withdrawals, transfers to the Variable Accounts, and other charges are
currently, for the purpose of crediting interest, accounted for on a last-in,
first-out ("LIFO") basis.

The Company reserves the right to change the method of crediting interest
from time to time, provided that such changes do not have the effect of reducing
the guaranteed rate of interest below 3% per annum or shorten the period for
which the interest rate applies to less than one calendar year (except for the
year in which such amount is received or transferred).

TRANSFER PRIVILEGES

General. Transfers to the Fixed Account must be at least $1,000. A
transfer charge of $25 will be imposed for the thirteenth and each subsequent
request made by the Owner to transfer Contract Value from one or more Variable
Accounts to the Fixed Account (or to one or more Variable Accounts) during a
single Contract Year prior to the Annuity Commencement Date.

Prior to the Annuity Commencement Date, the Owner may transfer up to 20% of
the Fixed Account Value (as determined at the beginning of the Contract Year)
from the Fixed Account to one or more of the Variable Accounts in any Contract
Year. No fee is charged for transfers from the Fixed Account to one or more
Variable Accounts and such a transfer is not considered a transfer for purposes
of assessing a transfer charge.

Dollar-Cost Averaging. An Owner may elect to automatically transfer (on a
monthly or quarterly basis) specified dollar amounts from the Fixed Account (as
well as one or more Variable Accounts) to one or more Variable Accounts. The
minimum transfer amount for dollar-cost averaging is $100 to each Variable
Account. Once elected, dollar-cost averaging from the Fixed Account remains in
effect for the life of the Contract until the Fixed Account is depleted or until
the Owner cancels the election (by Written Request or by telephone if the
Company has the Owner's telephone authorization form on file). There is no
additional charge for dollar-cost averaging and a transfer under this program is
not considered a transfer for purposes of assessing a transfer charge. The
Company reserves the right to discontinue offering the dollar-cost averaging
facility at any time and for any reason. (See "Transfer Privileges -- Dollar
Cost Averaging.")

PAYMENT DEFERRAL

CHARGES AND DEDUCTIONS

WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)

General. No charge for sales expenses is deducted from Premium Payments at
the time Premium Payments are paid. However, within certain time limits
described below, a Withdrawal Charge (contingent deferred sales charge) is
deducted from the Contract Value if a full or partial withdrawal is made before
the Annuity Commencement Date. Also, a Withdrawal Charge is deducted from
amounts applied to certain payout plan options. (See "Annuity Payments on the
Annuity Commencement Date".)

In the event Withdrawal Charges are not sufficient to cover sales expenses,
the loss will be borne by the Company; conversely, if the amount of such charges
proves more than enough to cover such expenses, the excess will be retained by
the Company. The Company does not currently believe that the Withdrawal Charges
imposed will cover the expected costs of distributing the Contracts. Any
shortfall will be made up from the Company's general assets which may include
amounts derived from the mortality and expense risk charge.

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<PAGE> 47

Charge for Partial or Full Withdrawal. A charge is imposed on the partial
or full withdrawal of Premium Payments during the first nine Contract Years. The
Withdrawal Charge is assessed as a percentage of the amount withdrawn based on
the number of years between the request for Withdrawal and the Date of Issue and
is based on the rates in the table below. The Withdrawal Charge is separately
calculated for each withdrawal of Contract Value within the first nine years
from the Contract's Date of Issue. Amounts subject to the Withdrawal Charge will
be deemed to be first from Premium Payments, then from earnings. No Withdrawal
Charge applies to Contract Value in excess of aggregate Premium Payments.

<TABLE>
<CAPTION>
NUMBER OF CHARGE AS PERCENTAGE
CONTRACT YEARS OF PREMIUM PAYMENTS
-------------- --------------------
<S> <C>
0-6............................................... 7.0%
7 ............................................... 6.0%
8 ............................................... 4.0%
9 ............................................... 2.0%
10 ............................................... 0%
</TABLE>

Any applicable Withdrawal Charge is deducted pro-rata from the remaining
value in the Variable Accounts or Fixed Account from which the withdrawal is
being made. If such remaining Separate Account Value or Fixed Account Value is
insufficient for this purpose, the Withdrawal Charge is deducted pro-rata from
all Variable Accounts and the Fixed Account in which the Contract is invested
based on the remaining Contract Value in each Variable Account and the Fixed
Account.

Free Withdrawal Amount. In each Contract Year after the first Contract
Year, up to 10% of Contract Value, as determined at the beginning of the
Contract Year, may be withdrawn during that year without a Withdrawal Charge
(the "Annual Free Withdrawal Amount"). Any amounts withdrawn in excess of this
10% after the first and through the ninth full Contract Year from the Contract's
Date of Issue will be assessed a Withdrawal Charge. This right is not cumulative
from Contract Year to Contract Year. Such withdrawals may be subject to the 10%
federal penalty tax if made by an Owner before age 59 1/2. Withdrawals under the
Systematic Withdrawal Program are permitted an Annual Free Withdrawal Amount
during the first Contract Year.

Waiver of Withdrawal Charge. If permitted by state law, upon Written
Request from the Owner before the Annuity Commencement Date, the Withdrawal
Charge will be waived on any full or partial withdrawal if the Annuitant or the
Annuitant's spouse is confined for a specified period to a hospital (as
described in the Contract) or a long term care facility (as described in the
Contract). If the Annuitant becomes terminally ill (as described in the
Contract) prior to the Annuity Commencement Date and if permitted by state law,
the Company will waive the Withdrawal Charge on any full withdrawal or any
partial withdrawal, provided the partial withdrawal is at least $500 and a
$5,000 balance remains in the Accounts after the withdrawal.

Under the terms of the Post-Secondary Education Rider, if the Owner, the
Owner's spouse, the Owner's child or the Annuitant is enrolled in a college,
university, vocational, technical, trade or business school, the Company will
waive the Withdrawal Charge on one withdrawal of up to 20% of Contract Value in
each Contract Year prior to the Annuity Commencement Date while the Annuitant is
alive, so long as this waiver is permitted by state law. The maximum withdrawal
permitted under the Post-Secondary Education Rider, when combined with the
Annual Free Withdrawal Amount, is 20% of Contract Value per Contract Year. Prior
to the withdrawal, the Company must receive at its Home Office written proof of
enrollment satisfactory to the Company within one (1) year of the date of
enrollment. (See "Free Withdrawal Amount" and the "Statement of Additional
Information".)

Employee and Agent Purchases. If permitted by state law, the Withdrawal
Charge will be waived on any full or partial withdrawals from Contracts sold to
agents or employees of Indianapolis Life Insurance Company (or its affiliates
and subsidiaries).

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<PAGE> 48

CONTRACT FEE

At the end of each Contract quarter (or on the date of full surrender of
the Contract) prior to the Annuity Commencement Date, the Company deducts from
the Contract Value a quarterly contract fee of $7.50 to reimburse it for
administrative expenses relating to the Contract. The fee will be deducted from
each Variable Account and the Fixed Account based on the proportion that the
value in each such Variable Account and the Fixed Account bears to the total
Contract Value. The Company does not expect to make a profit on this fee. The
charge does not apply after an annuity payout plan has begun. Deduction of the
Contract Fee is currently waived for all Qualified Contracts. The Company also
currently waives deduction of the Contract Fee for Non-Qualified Contracts whose
cumulative Premium Payments on the date the Contract Fee is assessed are equal
to or greater than $100,000. The Company reserves the right to modify this
waiver upon 30 days written notice to Contract Owners.

ASSET-BASED ADMINISTRATION CHARGE

The Company deducts a daily administration charge to compensate it for
certain expenses it incurs in administration of the Contract. The charge is
deducted from the assets of the Separate Account at an annual rate of 0.15%.
This charge will continue to be assessed after annuitization if annuity payments
are made on a variable basis. The Company does not expect to make a profit from
this charge.

TRANSFER FEE

A transfer fee of $25 will be imposed for the 13th and each subsequent
transfer during a Contract year. For the purpose of assessing such a transfer
fee, each Written Request would be considered to be one transfer, regardless of
the number of Variable Accounts affected by the transfer. The transfer fee would
be deducted from the Variable Account from which the transfer is made. If a
transfer is made from more than one Variable Account at the same time, the
transfer fee would be deducted pro-rata from the remaining Separate Account
Value in such Variable Account(s). The Company reserves the right to waive the
transfer fee.

MORTALITY AND EXPENSE RISK CHARGE

To compensate the Company for assuming mortality and expense risks, the
Company deducts a daily mortality and expense risk charge from the assets of the
Separate Account. The charge is at a daily rate of 0.003404%. If applied on an
annual basis this rate would be 1.25% (approximately 0.90% for mortality risk
and 0.35% for expense risk). This charge will continue to be assessed if annuity
payments are made on a variable basis either before or after the Annuity
Commencement Date.

The mortality risk the Company assumes is that Annuitants may live for a
longer period of time than estimated when the guarantees in the Contract were
established. Because of these guarantees, each Annuitant is assured that
longevity will not have an adverse effect on the annuity payments received. The
mortality risk that the Company assumes also includes a guarantee to pay a Death
Benefit if the Annuitant dies before the Annuity Commencement Date. The expense
risk that the Company assumes is the risk that the administrative fees and
transfer fees (if imposed) may be insufficient to cover actual future expenses.
The Company may use any profits from this charge to pay the costs of
distributing the Contracts.

FUND EXPENSES

Because the Separate Account purchases shares or units of the various
Funds, the net assets of the Separate Account will reflect the investment
advisory fees and other operating expenses incurred by such Funds. See the
accompanying current Prospectuses for the Funds.

PREMIUM TAXES

Various states and other governmental entities levy a premium tax,
currently ranging up to 3.5%, on annuity contracts issued by insurance
companies. Premium tax rates are subject to change from time to time

38
<PAGE> 49

by legislative and other governmental action. In addition, other government
units within a state may levy such taxes.

The timing of tax levies varies from one taxing authority to another. If
premium taxes are applicable to a Contract, they will be deducted either (a)
from Premium Payments as they are received, (b) from Contract Value upon full or
partial withdrawal, (c) from adjusted Contract Value upon application to a
payout plan option, or (d) upon payment of a Death Benefit. The Company,
however, reserves the right to deduct premium taxes at the time such taxes are
paid to the taxing authority.

OTHER TAXES

Currently, no charge is made against the Separate Account for any federal,
state or local taxes (other than premium taxes) that the Company incurs or that
may be attributable to the Separate Account or the Contracts. The Company may,
however, make such a charge in the future from Surrender Value, Death Benefits
or annuity payments, as appropriate. Such taxes may include taxes (levied by any
government entity) which the Company determines to have resulted from: (1) the
establishment or maintenance of the Separate Account, (2) receipt by the Company
of Premium Payments, (3) issuance of the Contracts, or (4) the payment of
annuity payments.

PAYOUT PLAN OPTIONS

ELECTION OF PAYOUT PLAN OPTIONS

On the Annuity Commencement Date, the adjusted Contract Value will be
applied under a payout plan option, unless the Owner elects to receive the
Surrender Value in a single sum. (See "Annuity Payments on the Annuity
Commencement Date.") If an election of a payout plan option is not on file at
the Company's Annuity Service Office on the Annuity Commencement Date, the
proceeds will be paid as a life income annuity with payments for ten years
guaranteed. A payout plan option may be elected, revoked, or changed by the
Owner at any time before the Annuity Commencement Date while the Annuitant is
living. An election of a payout plan option and any revocation or change must be
made by Written Request signed by the Owner and/or beneficiary, as appropriate.
The Owner may elect to apply any portion of the adjusted Contract Value to any
payout plan described below or any other plan then being offered by the Company.
The payout plans currently offered by the Company provide either variable
annuity payments or fixed annuity payments or a combination of both.

Prior to the Annuity Commencement Date, the Owner can apply the entire
Surrender Value under a payout plan option, or a beneficiary can apply the Death
Benefit under a payout plan option. The payout plan options available are
described below.

The Company reserves the right to refuse the election of a payout plan
option other than paying the adjusted Contract Value in a lump sum if the total
amount applied to a payout plan option would be less than $2,500, or the amount
of payments would be less than $25.

FIXED ANNUITY PAYMENTS

Fixed annuity payments are periodic payments from the Company to the
designated Annuitant, the amount of which is fixed and guaranteed by the
Company. The amount of each payment depends only on the form and duration of the
payout plan option chosen, the age of the Annuitant, the sex of the Annuitant
(if applicable), the amount applied to purchase the annuity payments and the
applicable annuity purchase rates in the Contract. The annuity purchase rates in
the Contract are based on a minimum guaranteed interest rate of 3.0%. The
Company may, in its sole discretion, make annuity payments in an amount based on
a higher interest rate.

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<PAGE> 50

VARIABLE ANNUITY PAYMENTS

The dollar amount of the first variable annuity payment is determined in
the same manner as that of a fixed annuity payment. Therefore, for any
particular amount applied to a particular payout plan option, the dollar amount
of the first variable annuity payment and the first fixed annuity payment
(assuming such fixed payment is based on the minimum guaranteed 3.0% interest
rate) would be the same. Variable annuity payments after the first payment are
similar to fixed annuity payments except that the amount of each payment varies
to reflect the net investment performance of the Variable Account(s) selected by
the Owner or Annuitant.

The net investment performance of a Variable Account is translated into a
variation in the amount of variable annuity payments through the use of annuity
units. The amount of the first variable annuity payment associated with each
Variable Account is applied to purchase annuity units at the annuity unit value
for the Variable Account on the Annuity Commencement Date. The number of annuity
units of each Variable Account attributable to a Contract then remains fixed
unless an exchange of annuity units is made as described below. Each Variable
Account has a separate annuity unit value that changes with each valuation
period in substantially the same manner as do accumulation units of the Variable
Account.

The dollar value of each variable annuity payment after the first is equal
to the sum of the amounts determined by multiplying the number of annuity units
under a Contract of a particular Variable Account by the annuity unit value for
the Variable Account for the valuation period which ends immediately preceding
the date of each such payment. If the net investment return of the Variable
Account for a payment period is equal to the pro-rated portion of the 3.0%
annual assumed investment rate, the variable annuity payment attributable to
that Variable Account for that period will equal the payment for the prior
period. To the extent that such net investment return exceeds an annualized rate
of 3.0% for a payment period, the payment for that period will be greater than
the payment for the prior period and to the extent that such return for a period
falls short of an annualized rate of 3.0%, the payment for that period will be
less than the payment for the prior period. The Owner may choose an assumed
interest rate of 3.0%, 4.0%, or 5.0% at the time a variable payout plan is
selected.

After the Annuity Commencement Date, a Annuitant may change the selected
Variable Account(s) by Written Request up to one time per contract year. No
charge is assessed for this transfer. Such a change will be made by exchanging
annuity units of one Variable Account for another Variable Account on an
equivalent dollar value basis. See the Statement of Additional Information for
examples of annuity unit value calculations and variable annuity payment
calculations.

DESCRIPTION OF PAYOUT PLAN OPTIONS

Option 1 -- Installment Income For a Fixed Period. To have the proceeds
paid out in equal monthly installments for a fixed number of years between 1 and
30 years. The amount of the payment is not guaranteed if a variable payout plan
is selected. If a fixed payout plan is selected, the payments for each $1,000
applied will not be less than those shown in the Fixed Period Table in Section
13 of the Contract. In the event of the Payee's death, a Successor Payee may
receive the payments or may elect to receive the present value of the remaining
payments in a lump sum. If there is no Successor Payee, the present value of the
remaining payments will be paid to the estate of the last surviving Payee.

Option 2 -- Installment Income In a Fixed Amount. To have the proceeds
paid out in equal monthly installments of $5.00 or more for each $1,000 applied
until the full amount is paid out. In the event of the Payee's death, a
Successor Payee may receive the payments or may elect to receive the present
value of the remaining payments in a lump sum. If there is no Successor Payee,
the present value of the remaining payments will be paid to the estate of the
last surviving Payee.

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<PAGE> 51

Option 3 -- One Life Income. To have the proceeds paid in monthly
installments during the Payee's lifetime for as long as the Payee lives,* or
while the Payee is living with the guarantee that payments will be made for a
period certain of ten years; or while the Payee is living with the guarantee
that payments will be made for a period certain of twenty years. The amount of
each payment is not guaranteed if a variable payout plan is selected. If a fixed
payout plan is selected, the payment for each $1,000 applied will not be less
than that shown in the One Life Table in Section 12 of the Contract. Payments
guaranteed for 10 or 20 years certain may be commuted. Payments guaranteed only
for the life of the Payee may not be commuted.

Option 4 -- Joint and Survivor Life Income. To have proceeds paid out in
monthly installments jointly to two Payees and after one dies to the surviving
Payee.* If one Payee dies before the due date of the first payment, the
surviving Payee will receive payments under the One Life Income Option 3 with
payments guaranteed for 10 years certain. The payments may not be commuted.

The amount of each payment will be determined from the tables in the
Contract that apply to the particular option using the Annuitant's age (and if
applicable, sex). Age will be determined from the last birthday at the due date
of the first payment.

HISTORICAL PERFORMANCE DATA

From time to time, the Company may advertise or include in sales literature
yields, effective yields and total returns for the Variable Accounts. These
figures are based on historical earnings and do not indicate or project future
performance. The Company also may, from time to time, advertise or include in
sales literature Variable Account performance relative to certain performance
rankings and indices compiled by independent organizations. More detailed
information as to the calculation of performance, as well as comparisons with
unmanaged market indices, appears in the Statement of Additional Information.

Performance data for the Variable Accounts is based on the investment
performance of the corresponding Portfolio of a Fund and reflects its expenses.
(See the Prospectuses for the Funds.)

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

The yield of a Variable Account (other than the Money Market Variable
Account) refers to the annualized income generated by an investment in the
Variable Account over a specified 30-day or one-month period. The yield is
calculated by assuming that the income generated by the investment during that
30-day or one-month period is generated each period over a 12-month period and
is shown as a percentage of the investment.

Yield quotations do not reflect the Withdrawal Charge.

The "total return" of a Variable Account refers to return quotations
assuming an investment under a Contract has been held in the Variable Account
for various periods of time. When a Variable Account or Portfolio has been in
operation for one, five, and ten years, respectively, the total return for these
periods will be provided.

- ---------------
* IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE
PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE SECOND PAYMENT OR TO
RECEIVE ONLY TWO ANNUITY PAYMENTS IF THE PAYEE DIES (OR PAYEES DIE) BEFORE THE
DUE DATE OF THE THIRD PAYMENT, AND SO ON.
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<PAGE> 52

of average annual total return reflects all historical investment results, less
all charges and deductions applied against the Variable Account (including any
Withdrawal Charge that would apply if an Owner terminated the Contract at the
end of each period indicated, but excluding any deductions for premium taxes).

In addition to the standard version described above, total return
performance information computed on different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the Withdrawal Charge. In addition, the Company may from time
to time disclose average annual total return in non-standard formats and
cumulative total return for Contracts funded by the Variable Accounts.

The Company may disclose yield, standard total returns, and non-standard
total returns for the Portfolios, including such disclosures for periods prior
to the date the Variable Account commenced operations. Sales literature or
advertisements may quote adjusted yields and total returns for the Portfolios
since their inception reduced by some or all of the fees and charges under the
Contract. Such adjusted historic Portfolio performance may include data that
precedes the inception dates of the Variable Accounts. This data is designed to
show the performance that could have resulted if the Contract had been in
existence during that time.

Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.

In advertising and sales literature (including illustrations), the
performance of each Variable Account may be compared with the performance of
other variable annuity issuers in general or to the performance of particular
types of variable annuities investing in mutual funds, or investment portfolios
of mutual funds with investment objectives similar to the Variable Account.
Lipper Analytical Services, Inc. ("Lipper"), CDA Investment Technology ("CDA"),
Variable Annuity Research Data Service ("VARDS") and Morningstar, Inc.
("Morningstar") are independent services which monitor and rank the performance
of variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis.

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

Advertising and sales literature may also compare the performance of each
Variable Account to the Standard & Poor's Index of 500 Common Stocks, a widely
used measure of stock performance. This unmanaged index assumes the reinvestment
of dividends but does not reflect any "deduction" for the expense of operating
or managing an investment portfolio. Other independent ranking services and
indices may also be used as a source of performance comparison.

The Company may also report other information including the effect of
systematic withdrawals, systematic investments and tax-deferred compounding on a
Variable Account's investment returns, or returns in general, which may be
illustrated by tables, graphs, or charts. All income and capital gains derived
from Variable Account investments are reinvested and can lead to substantial
long-term accumulation of assets, provided that the Variable Account investment
experience is positive.

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<PAGE> 53

FEDERAL TAX MATTERS

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

INTRODUCTION

This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may receive a
distribution under the annuity contract issued by the Company. Any person
concerned about these tax implications should consult a competent tax advisor
before initiating any transaction. This discussion is based upon the Company's
understanding of the present federal income tax laws, as they are currently
interpreted by the Internal Revenue Service ("IRS"). No representation is made
as to the likelihood of the continuation of the present federal income tax laws
or of the current interpretation by the IRS. Moreover, no attempt has been made
to consider any applicable state or other tax laws.

The Contract may be purchased on a non-qualified basis or purchased and
used in connection with plans qualifying for favorable tax treatment. The
Qualified Contract is designed for use by individuals whose Premium Payments are
comprised solely of proceeds from and/or contributions under retirement plans
which are intended to qualify as plans entitled to special income tax treatment
under Sections 401(a), 403(b), 408, or 408A of the Code. The ultimate effect of
federal income taxes on the amounts held under a Contract, or annuity payments,
and on the economic benefit to the Owner, the Annuitant, or the beneficiary
depends on the type of retirement plan, on the tax and employment status of the
individual concerned, and on the Company's tax status. In addition, certain
requirements must be satisfied in purchasing a Qualified Contract with proceeds
from a tax-qualified plan and receiving distributions from a Qualified Contract
in order to continue receiving favorable tax treatment. Some retirement plans
are subject to distribution and other requirements that are not incorporated
into our Contract administration procedures. Owners, participants and
beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Contracts comply with applicable law.
Therefore, purchasers of Qualified Contracts should seek competent legal and tax
advice regarding the suitability of a Contract for their situation, the
applicable requirements, and the tax treatment of the rights and benefits of a
Contract. The following discussion assumes that Qualified Contracts are
purchased with proceeds from and/or contributions under retirement plans that
qualify for the intended special federal income tax treatment.

TAX STATUS OF THE CONTRACT

Diversification Requirements. Section 817(h) of the Code provides that
separate account investments underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity contract under Section 72 of the Code. The Separate
Account, through each underlying Fund, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various Variable Accounts may be
invested. Although the Company does not have direct control over the Funds in
which the Separate Account invests, we believe that each Fund in which the
Separate Account owns shares will meet the diversification requirements, and
therefore, the Contract will be treated as an annuity contract under the Code.

Owner Control. In certain circumstances, Owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includible in the variable annuity contract owner's gross income. The IRS has
stated in published rulings that a variable contract owner will be considered
the owner of separate account assets if the contract owner possesses incidents
of ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury Department has also announced, in connection with
the issuance of regulations concerning investment diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause the
investor (i.e., the Contract Owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
states

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<PAGE> 54

that guidance would be issued by way of regulations or rulings on the "extent to
which policyholders may direct their investments to particular Variable Accounts
without being treated as owners of the underlying assets."

The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the Owner of a Contract has the choice of one or more Variable Accounts
in which to allocate Net Premium Payments and Contract Values, and may be able
to transfer among Variable Accounts more frequently than in such rulings. These
differences could result in an Owner being treated as the Owner of a pro rata
share of the assets of the Separate Account. In addition, the Company does not
know what standards will be set forth, if any, in the regulations or rulings
which the Treasury Department has stated it expects to issue. The Company
therefore reserves the right to modify the Contract as necessary to attempt to
prevent the contract Owner from being considered the Owner of any portion of the
assets of the Separate Account.

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

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

Other rules may apply to Qualified Contracts.

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

TAXATION OF ANNUITIES

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

The Owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Contract Value over the
"investment in the contract" during the taxable year. There are some exceptions
to this rule, and a prospective Owner that is not a natural person may wish to
discuss these with a competent tax advisor.

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

Withdrawals. In the case of a partial withdrawal from a Qualified
Contract, under Section 72(e) of the

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<PAGE> 55

Code, a ratable portion of the amount received is taxable, generally based on
the ratio of the "investment in the contract" to the participant's total accrued
benefit or balance under the retirement plan. The "investment in the contract"
generally equals the portion, if any, of any Premium Payment paid by or on
behalf of the individual under a Contract which was not excluded from the
individual's gross income. For Contracts issued in connection with qualified
plans, the "investment in the contract" can be zero. Special tax rules may be
available for certain distributions from Qualified Contracts.

In the case of a partial withdrawal from a Non-Qualified Contract, under
Section 72(e), any amounts received are generally first treated as taxable
income to the extent that the Contract Value immediately before the partial
withdrawal exceeds the "investment in the contract" at that time. Any additional
amount withdrawn is not taxable.

In the case of a full withdrawal under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."

Section 1035 of the Code generally provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. If the
surrendered contract was issued prior to August 14, 1982, the tax rules formerly
provided that the surrender was taxable only to the extent the amount received
exceeds the Owner's investment in the contract will continue to apply to amounts
allocable to investments in that contract prior to August 14, 1982. In contrast,
contracts issued after January 19, 1985 in a Code Section 1035 exchange are
treated as new contracts for purposes of the penalty and distribution-at-death
rules. Special rules and procedures apply to Section 1035 transactions.
Prospective Owners wishing to take advantage of Section 1035 should consult
their tax adviser.

Annuity Payments. Although tax consequences may vary depending on the
payment option elected under an annuity contract, under Code Section 72(b),
generally (prior to recovery of the investment in the contract) gross income
does not include that part of any amount received as an annuity under an annuity
contract that bears the same ratio to such amount as the investment in the
contract bears to the expected return at the annuity starting date. For variable
annuity payments, the taxable portion is generally determined by an equation
that establishes a specific dollar amount of each payment that is not taxed. The
dollar amount is determined by dividing the "investment in the contract" by the
total number of expected periodic payments. However, the entire distribution
will be taxable once the recipient has recovered the dollar amount of his or her
"investment in the contract." For fixed annuity payments, in general, there is
no tax on the portion of each payment which represents the same ratio that the
"investment in the contract" bears to the total expected value of the annuity
payments for the term of the payments; however, the remainder of each annuity
payment is taxable until the recovery of the investment in the contract, and
thereafter the full amount or each annuity payment is taxable. If death occurs
before full recovery of the investment in the contract, the unrecovered amount
may be deducted on the Annuitant's final tax return.

Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of the death of an Owner or 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 full surrender of the
Contract or (ii) if distributed under a payment option, they are taxed in the
same way as annuity payments.

Other rules relating to distributions at death apply to Qualified
Contracts. Owners should consult their legal counsel and tax adviser regarding
these rules and their impact on Qualified Contracts.

Penalty Tax on Certain Withdrawals. In the case of a distribution pursuant
to a Non-Qualified Contract, there may be imposed a federal penalty tax equal to
10% of the amount treated as taxable income. In general, however, there is no
penalty on distributions:

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

2. made on or after the death of the holder (or if the holder is not an
individual, the death of the primary Annuitant);

3. attributable to the taxpayer's becoming disabled;

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<PAGE> 56

4. a part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and his or her designated beneficiary;

5. made under certain annuities issued in connection with structured
settlement agreements; and

6. made under an annuity contract that is purchased with a single
Premium Payment when the Annuity Commencement Date is no later than a
year from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during the
annuity payment period.

Other tax penalties may apply to certain distributions under a Qualified
Contract.

Although the likelihood of legislative change is uncertain, there is always
the possibility that the tax treatment of the Contracts could change by
legislation or other means. For instance, the President's 1999 Budget Proposal
recommended legislation that, if enacted, would adversely modify the federal
taxation of the Contracts. It is also possible that any change could be
retroactive (that is, effective prior to the date of the change). A tax adviser
should be consulted with respect to legislative developments and their effect on
the Contract.

TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT

A transfer of Ownership of a Contract, the designation of an Annuitant,
Payee or other Beneficiary who is not also the Owner, the selection of certain
Annuity Commencement Dates or the exchange of a Contract may result in certain
tax consequences to the Owner that are not discussed herein. An Owner
contemplating any such transfer, designation, selection, assignment, or exchange
of a Contract should contact a competent tax advisor with respect to the
potential tax effects of such a transaction.

WITHHOLDING

Distributions from 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 and section 403(b)
tax-sheltered annuities 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. Certain states
also require withholding of state income tax whenever federal income tax is
withheld.

MULTIPLE CONTRACTS

All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by the Company (or its affiliates) to the same Owner during
any calendar year are treated as one annuity Contract for purposes of
determining the amount includible in gross income under Section 72(e). In
addition, the Treasury Department has specific authority to issue regulations
that prevent the avoidance of Section 72(e) through the serial purchase of
annuity contracts or otherwise. There may also be other situations in which the
Treasury may conclude that it would be appropriate to aggregate two or more
annuity contracts purchased by the same Owner. Accordingly, a Contract Owner
should consult a competent tax advisor before purchasing more than one annuity
contract.

TAXATION OF QUALIFIED PLANS

age 59 1/2 (subject to certain exceptions); distributions that do not conform to
specified commencement and minimum distribution rules; and in other specified
circumstances. Therefore, no attempt is made to provide more than general
information about the use of the Contracts with the various types of qualified
retirement plans. Contract Owners, the Annuitants, and Beneficiaries are
cautioned that the rights of any person to any benefits under these qualified
retirement plans may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contract, but the
Company shall not be bound by the terms and conditions of such plans to the
extent such terms contradict the Contract, unless the Company consents. Brief
descriptions follow of the various types of qualified retirement plans in
connection with a Contract. The Company will amend the Contract as necessary to
conform it to the requirements of such plan.

Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Section
401(a) of the Code permits corporate employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish these plans for themselves and their employees. These retirement plans
may permit the purchase of the Contracts to accumulate retirement savings under
the plans. Adverse tax or other legal consequences to the plan, to the
participant or to both may result if this Contract is assigned or transferred to
any individual as a means to provide benefit payments, unless the plan complies
with all legal requirements applicable to such benefits prior to transfer of the
Contract. Employers intending to use the Contract with such plans should seek
competent advice.

Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals and their employers to contribute to an individual retirement
program known as an "Individual Retirement Annuity" or "IRA". IRA contributions
are limited each year to the lesser of $2,000 or 100% of the Owner's adjusted
gross income. IRA contributions may be deductible in whole or in part depending
on the individual's income and whether the individual is a participant in a
qualified plan. Distributions from certain other types of qualified plans,
however, may be "rolled-over" on a tax-deferred basis into an IRA without regard
to this limit. Earnings in an IRA are not taxed while held in the IRA are not
taxed while held in the IRA. All amounts in the IRA (other than nondeductible
contributions) are taxed when distributed. Distributions prior to age 59 1/2
(unless certain exceptions apply) are also subject to a 10% penalty tax. Sales
of the Contract for use with IRAs may be subject to special disclosure
requirements of the Internal Revenue Service.

Simplified Employee Pension (SEP) IRAs. Employers may establish Simplified
Employee Pension (SEP) IRAs under Code section 408(k) to provide IRA
contributions on behalf of their employees. In addition to all of the general
Code rules governing IRAs, such plans are subject to certain Code requirements
regarding participation and amounts of contributions.

Simple Retirement Accounts. Beginning January 1, 1997, certain small
employers may establish Simple Retirement Accounts as provided by Section 408(p)
of the Code, under which employees may elect to defer up to $6,000 (as increased
for cost of living adjustments) as a percentage of compensation. The sponsoring
employer is required to make a matching or non-elective contribution on behalf
of employees. Distributions from a Simple Retirement Account are subject to the
same restrictions that apply to IRA distributions and are taxed as ordinary
income. Subject to certain exceptions, premature distributions prior to age
59 1/2 are subject to a 10% penalty tax, which is increased to 25% if the
distribution occurs within the first two years after the commencement of the
employee's participation in the plan.

Roth IRAs. Effective January 1, 1998, section 408A of the Code permits
certain eligible individuals to contribute to a Roth IRA. Contributions to a
Roth IRA, which are subject to certain limitations, are not deductible and must
be made in cash or as a rollover or transfer from another Roth IRA or other IRA.
A rollover from or conversion of an IRA to a Roth IRA may be subject to tax and
other special rules may apply. You should consult a tax adviser before combining
any converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA.

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Tax Sheltered Annuities. Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the Premium Payments paid, 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.

POSSIBLE CHARGE FOR THE COMPANY'S TAXES

At the present time, the Company makes no charge to the Variable Accounts
for any Federal, state, or local taxes that the Company incurs which may be
attributable to such Variable Accounts or the Contracts. The Company, however,
reserves the right in the future to make a charge for any such tax or other
economic burden resulting from the application of the tax laws that it
determines to be properly attributable to the Variable Accounts or to the
Contracts.

OTHER TAX CONSEQUENCES

As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in the Prospectus. Further, the
Federal income tax consequences discussed herein reflect the Company's
understanding of current law and the law may change. Federal estate and state
and local estate, inheritance and other tax consequences of Ownership or receipt
of distributions under a Contract depend on the individual circumstances of each
Owner or recipient of the distribution. A competent tax advisor should be
consulted for further information.

DISTRIBUTION OF THE CONTRACTS

The Contracts will be offered to the public on a continuous basis. The
Company does not anticipate discontinuing the offering of the Contracts, but
reserves the right to discontinue the offering. Applications for Contracts are
solicited by agents who are licensed by applicable state insurance authorities
to sell the Company's variable annuity contracts and who are also registered
representatives of IL Securities, Inc. or broker-dealers having selling
agreements with IL Securities, Inc. or broker-dealers having selling agreements
with such broker-dealers. IL Securities, Inc. is a wholly-owned subsidiary of
the Indianapolis Life Group of Companies, Inc., which, in turn, is a
wholly-owned subsidiary of Indianapolis Life Insurance Company and is registered
with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is
a member of the National Association of Securities Dealers, Inc.

IL Securities, Inc. acts as the principal underwriter, as defined in the
1940 Act, of the Contracts for the Separate Account pursuant to an Underwriting
Agreement between the Company and IL Securities, Inc. IL Securities, Inc. is not
obligated to sell any specific number of Contracts. The principal business
address for IL Securities, Inc. is P.O. Box 1230, 2960 North Meridian Street,
Indianapolis, Indiana 46208.

The Company may pay sales commissions to broker-dealers up to an amount
equal to 7.2% of the Premium Payments paid under a Contract. In addition,
asset-based trailer commissions of up to 1.25% may be paid. The Company may also
pay up to 1.25% on Premium Payments to IL Securities to compensate it for
certain distribution expenses. These broker-dealers are expected to compensate
sales representatives in varying amounts from these commissions. The Company
also may pay other distribution expenses such as production incentive bonuses,
agent's insurance and pension benefits, and agency expense allowances. These
distribution expenses do not result in any additional charges against the
Contracts that are not described under "Charges and Deductions."

LEGAL PROCEEDINGS

The Company and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving other insurers, substantial damages have been sought
and/or material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, the Company believes that at the
present time there are not

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pending or threatened lawsuits that are reasonably likely to have a material
adverse impact on the Variable Account or the Company.

VOTING RIGHTS

In accordance with its view of current applicable law, the Company will
vote Fund shares held in the Separate Account at regular and special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Variable Accounts. If, however, the
1940 Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or the Company otherwise determines that
it is allowed to vote the shares in its own right, it may elect to do so.

The number of votes that an Owner or Annuitant has the right to instruct
will be calculated separately for each Variable Account of the Separate Account,
and may include fractional votes. Prior to the Annuity Commencement Date, an
Owner holds a voting interest in each Variable Account to which the Contract
Value is allocated. After the Annuity Commencement Date, the Annuitant has a
voting interest in each Variable Account from which variable annuity payments
are made.

For each Owner, the number of votes attributable to a Variable Account will
be determined by dividing the Contract Value attributable to that Owner's
Contract in that Variable Account by the net asset value per share of the Fund
in which that Variable Account invests. For each Annuitant, the number of votes
attributable to a Variable Account will be determined by dividing the liability
for future variable annuity payments to be paid from that Variable Account by
the net asset value per share of the Fund in which that Variable Account
invests. This liability for future payments is calculated on the basis of the
mortality assumptions, the 3.0% assumed investment rate used in determining the
number of annuity units of that Variable Account credited to the Annuitant's
Contract and annuity unit value of that Variable Account on the date that the
number of votes is determined. As variable annuity payments are made to the
Annuitant, the liability for future payments decreases as does the number of
votes.

The number of votes available to an Owner or Annuitant will be determined
as of the date coincident with the date established by the Fund for determining
shareholders eligible to vote at the relevant meeting of the Fund's
shareholders. Voting instructions will be solicited by written communication
prior to such meeting in accordance with procedures established for the Fund.
Each Owner or Annuitant having a voting interest in a Variable Account will
receive proxy materials and reports relating to any meeting of shareholders of
the Fund in which that Variable Account invests.

Fund shares as to which no timely instructions are received and shares held
by the Company in a Variable Account as to which no Owner or Annuitant has a
beneficial interest will be voted in proportion to the voting instructions which
are received with respect to all Contracts participating in that Variable
Account. Voting instructions to abstain on any item to be voted upon will be
applied to reduce the total number of votes eligible to be cast on a matter.

COMPANY HOLIDAYS

The Company is closed on the following holidays: the Friday following
Thanksgiving, the day preceding Christmas when Christmas falls on Tuesday
through Saturday, the day following Christmas when Christmas falls on Sunday or
Monday, and the day following New Year's Day when it falls on a Sunday, the
Monday following New Year's Day when New Year's Day falls on a Saturday, and the
day preceding or following Independence Day when it falls on Saturday or Sunday.

YEAR 2000 MATTERS

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service providers are also engaged in similar transition plans. The resources
that are being devoted to this effort are substantial. It is difficult to
predict with precision whether the amount of resources ultimately devoted, or
the outcome of these efforts, will have any negative impact on the Company's
operations. However, as of the date of this Prospectus, it is not anticipated
that owners will experience negative effects on their investment, or on the
services provided in connection therewith, as a result of Year 2000 transition
implementation. The Company currently anticipates that its systems will be Year
2000 compliant in a timely manner, but there can be no assurance that the
Company will be successful, or that interaction with other service providers
will not impair services at that time.

FINANCIAL STATEMENTS

IL Annuity and Insurance Company, formerly known as Sentry Investors Life
Insurance Company, became a wholly-owned subsidiary of the Indianapolis Life
Group of Companies, Inc. on November 1, 1994. Immediately prior thereto, the
Company entered into an assumption reinsurance agreement with Sentry Life
Insurance Company ("Sentry") whereby Sentry assumed all of the insurance
in-force and related assets and liabilities from the Company. The effect of the
reinsurance agreement was to transfer all of the insurance related assets and
liabilities to Sentry, leaving only bonds, cash and state insurance department
licenses to be acquired by the Indianapolis Life Group of Companies, Inc. No
business was issued by the Company through December 31, 1994.

The audited statement of net assets of IL Annuity and Insurance Co.
Separate Account 1 as of December 31, 1997 and the related statement of
operations for the year then ended and statements of changes in net assets for
the two years then ended, as well as the Report of the Independent Auditors, are
included in the Statement of Additional Information ("SAI"). The audited balance
sheets for the Company as of December 31, 1997 and 1996, and the related
statements of income, shareholder's equity, and cash flows for each of the three
years in the period ended December 31, 1997, as well as the Report of the
Independent Auditors, are contained in the SAI. The financial statements of the
Company should be considered only as bearing on the ability of the Company to
meets its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Separate
Account.

50
<PAGE> 61

STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS

Additional information about the Contract and the Separate Account is
contained in the Statement of Additional Information. A Statement of Additional
Information is available (at no cost) by writing the Company at the address
shown on the front cover or by calling 1-800-388-1331. The following is the
Table of Contents for that Statement.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADDITIONAL CONTRACT PROVISIONS.............................. 1
The Contract........................................... 1
Incontestability....................................... 1
Incorrect Age or Sex................................... 1
Nonparticipation....................................... 1
Options................................................ 2
CALCULATION OF VARIABLE ACCOUNT AND ADJUSTED PORTFOLIO
PERFORMANCE DATA.......................................... 2
Money Market Variable Account Yields................... 2
Other Variable Account Yields.......................... 4
Average Annual Total Returns for the Variable
Accounts.............................................. 5
Non-Standard Variable Account Total Returns............ 6
Adjusted Historic Portfolio Performance Data...........
Effect of the Annual Contract Fee on Performance
Data.................................................. 7
Other Information...................................... 7
HISTORIC PERFORMANCE DATA...................................
General Limitations....................................
Variable Account Performance Figures...................
Adjusted Historic Portfolio Performance Figures........
NET INVESTMENT FACTOR....................................... 8
VARIABLE ANNUITY PAYMENTS................................... 9
Assumed Investment Rate................................ 9
Amount of Variable Annuity Payments.................... 10
Annuity Unit Value..................................... 10
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS........... 11
Resolving Material Conflicts........................... 12
TERMINATION OF PARTICIPATION AGREEMENTS..................... 13
The Alger American Fund................................ 13
Fidelity Variable Insurance Products Fund.............. 13
Fidelity Variable Insurance Products Fund II........... 13
OCC Accumulation Trust................................. 14
Royce Capital Fund..................................... 14
SAFECO Resource Series Trust........................... 14
SoGen Variable Funds, Inc. ............................ 15
T. Rowe Price Fixed Income Series, Inc. ............... 15
T. Rowe Price International Series, Inc. .............. 15
Van Eck Worldwide Insurance Trust...................... 16
VOTING RIGHTS............................................... 16
SAFEKEEPING OF ACCOUNT ASSETS............................... 17
DISTRIBUTION OF THE CONTRACTS............................... 17
LEGAL MATTERS............................................... 18
EXPERTS..................................................... 18
OTHER INFORMATION........................................... 18
FINANCIAL STATEMENTS........................................ 18
</TABLE>

51
<PAGE> 62

[This page is intentionally left blank]
<PAGE> 63

SUPPLEMENT DATED MAY 1, 1998 TO
PROSPECTUS DATED MAY 1, 1998

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY CHOICE VARIABLE ANNUITY

For Residents of the State of Texas

This supplement is intended to be used with the prospectus dated May 1,
1998. This supplement, together with the prospectus, constitutes a current
prospectus for the Visionary Choice Variable Annuity.

The following information supplements footnote 1 of the Fee Table on
page 6 of the Prospectus, as well as the section on page 26 of the Prospectus
entitled "WITHDRAWAL CHARGE":

For Texas Owners 58 years of age and older on the date the Contract is
issued who have chosen the DATE OF ISSUE WITHDRAWAL CHARGE OPTION, the
maximum withdrawal charge is 7% of the amount withdrawn during the
first two Contract Years, declining to 6.5% for withdrawals made during
the third Contract Year, and 6% during the fourth Contract Year.
Thereafter, the Withdrawal Charges decreases by 1% for each subsequent
Contract Year until it is zero in year ten.

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

The following chart replaces the chart on page 26 of the Prospectus in
the section entitled "WITHDRAWAL CHARGE":

<TABLE>
<CAPTION>
=====================================================================================================================
Age 57 or under Age 58 or older
--------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Contract Charge as % Contract Charge as % Contract Charge as %
Year of Withdrawal Year of Withdrawal Year of Withdrawal
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-6 7% 1-2 7%
7 6% 3 6.5% 7 3%
8 4% 4 6% 8 2%
9 2% 5 5% 9 1%
10 0% 6 4% 10 0%
=====================================================================================================================
</TABLE>

<PAGE> 64

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY CHOICE VARIABLE ANNUITY

For Residents of the State of Maryland

The following information supplements footnote 1 of the Fee Table on
page 8 of the Prospectus, as well as section on page 26 of the Prospectus
entitled "WITHDRAWAL CHARGE":

For Maryland Owners 58 years of age and older on the date the Contract
is issued who have chosen the DATE OF ISSUE WITHDRAWAL CHARGE OPTION,
the maximum withdrawal charge is 7% of the amount withdrawn during the
first two Contract Years, declining to 6.5% for withdrawals made during
the third Contract Year, and 6% during the fourth Contract Year.
Thereafter, the Withdrawal Charges decreases by 1% for each subsequent
Contract Year until it is zero in year ten.

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

The following chart replaces the chart on page 26 of the Prospectus in
the section entitled "WITHDRAWAL CHARGE":

<TABLE>
<CAPTION>
=====================================================================================================================
Age 57 or under Age 58 or older
--------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
Contract Charge as % Contract Charge as % Contract Charge as %
Year of Withdrawal Year of Withdrawal Year of Withdrawal
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-6 7% 1-2 7% 7 3%
7 6% 3 6.5% 8 2%
8 4% 4 6% 9 1%
9 2% 5 5% 10 0%
10 0% 6 4%
=====================================================================================================================
</TABLE>

<PAGE> 65

SUPPLEMENT DATED MARCH 5, 1998 TO
PROSPECTUS DATED AUGUST 8, 1997

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I

VISIONARY CHOICE VARIABLE ANNUITY

This supplement is intended to be used with the prospectus dated August
8, 1997. This supplement, together with the prospectus and any supplements
previously furnished to you, constitute a current prospectus for the Visionary
Choice Variable Annuity.

* * * *

In addition, the Van Eck Worldwide Balanced Portfolio will be deleted,
wherever listed, from any instructions you have given us regarding your premium
allocation, dollar cost averaging, automatic account balancing, or systematic
withdrawals and we will reassign the percentages previously assigned to the
Balanced Portfolio on a pro-rata basis among the remaining Portfolios listed in
your instructions. If you want us to treat your account differently, please call
the Service Center.

<PAGE> 66

PROSPECTUS FOR THE
VISIONARY CHOICE

FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ALSO KNOWN AS
MODIFIED SINGLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
Issued by
IL ANNUITY AND INSURANCE COMPANY
2960 North Meridian Street
Indianapolis, Indiana 46208
Telephone: (317) 927-6500
(888) 232-6486

This prospectus describes the VISIONARY CHOICE variable annuity, an
individual deferred variable annuity contract (the "Contract") being offered by
IL Annuity and Insurance Company (the "Company," "we," "us," or "our"). Under
the terms of the Contract, we promise to pay the Annuitant a series of income
payments in the form of annuity payments starting on the Annuity Start Date you
choose. (You will be the Annuitant unless you state otherwise.) Until the
Annuity Start Date, the Contract is in the Pay-in Period and allows you to
accumulate assets on a tax-deferred basis for retirement and other long-term
purposes. VISIONARY CHOICE may be available to you when you participate in a
retirement plan that qualifies for deferral of federal income taxes.
Non-Qualified Contracts are also available.

You may direct your Premium Payments, as well as any value accumulated
under your Contract, to one or more of 18 Variable Accounts of the IL Annuity
and Insurance Co. Separate Account 1 (the "Separate Account") and/or to the
Fixed Account. The money you place in the Fixed Account will earn interest at a
rate guaranteed by the Company to equal or exceed 3% annually. The money you
place in a Variable Account will be invested solely in an investment portfolio
("Portfolio") of a mutual fund ("Fund"). The value of the assets you place in
the Variable Accounts will vary according to the investment performance of the
Portfolios. Currently you may choose among 18 Portfolios of 10 Funds:

The Alger American Fund:
MidCap Growth Portfolio and Small Capitalization Portfolio

Fidelity Variable Insurance Products ("VIP") Fund and Fidelity VIP
Fund II:
Equity-Income Portfolio, Growth Portfolio, Money Market Portfolio,
Asset Manager Portfolio, Contrafund Portfolio, Index 500 Portfolio
and Investment Grade Bond Portfolio

OCC Accumulation Trust:
Managed Portfolio and Small Cap Portfolio

Royce Capital Fund:
Royce Micro-Cap Portfolio

SAFECO Resource Series Trust:
SAFECO Equity Portfolio and SAFECO Growth Portfolio

SoGen Variable Funds, Inc.:
SoGen Overseas Variable Portfolio

T. Rowe Price Fixed Income Series, Inc.:
Limited-Term Bond Portfolio

T. Rowe Price International Series, Inc.:
International Stock Portfolio

Van Eck Worldwide Insurance Trust:

Worldwide Hard Assets Portfolio

<PAGE> 67

You bear the entire investment risk on the assets you place in the Variable
Accounts. This means that, depending on market conditions, you may increase or
lose the principal you have invested in any of these Portfolios.

With the VISIONARY CHOICE, you choose one of two withdrawal charge options
at the time you complete your application. You also choose, at no additional
charge, either an enhanced death benefit option or a living benefit option. And,
if your initial Premium Payment is $100,000 or more, you may choose one of two
free withdrawal options on your application. ONCE YOU CHOOSE YOUR OPTIONS, YOU
MAY NOT CHANGE THEM.

THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR EACH OF THE
FUNDS.

This prospectus contains important information about the Contract and the
Separate Account that you should know before investing. Additional information
about the Contract and the Separate Account is contained in the Statement of
Additional Information ("SAI") that has been filed with the Securities and
Exchange Commission. The SAI has the same date as this prospectus and is legally
a part of this prospectus. The table of contents for the SAI is on page of this
prospectus. You may obtain a free copy of the SAI by writing to us at the
address shown above or by calling 1-888-232-6486.

PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.

The Contract is not available in all states.

Unlike bank and credit union accounts, Contract Value invested in the
Separate Account is not insured. Investment of Contract Value in the Separate
Account involves certain risks including possible loss of Premium Payments.
Separate Account Value is not deposited in or guaranteed by any bank or credit
union and is not guaranteed by any government agency.

The date of this prospectus is May 1, 1998

ii
<PAGE> 68

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................. 2
FEE TABLE................................................... 5
SUMMARY OF THE VISIONARY CHOICE CONTRACT.................... 12
ABOUT IL ANNUITY AND THE SEPARATE ACCOUNT................... 16
THE PORTFOLIOS.............................................. 17
THE PAY-IN PERIOD........................................... 21
TRANSFERS BETWEEN INVESTMENT OPTIONS........................ 24
FEES AND CHARGES............................................ 25
THE PAYOUT PERIOD........................................... 29
WITHDRAWAL OF CONTRACT VALUE................................ 31
CONTRACT LOANS.............................................. 32
DEATH BENEFITS.............................................. 33
THE LIVING BENEFIT.......................................... 35
THE FIXED ACCOUNT........................................... 37
HOW TO REVIEW INVESTMENT PERFORMANCE OF THE VARIABLE
ACCOUNTS.................................................. 39
VOTING RIGHTS............................................... 41
FEDERAL TAX MATTERS......................................... 41
OTHER INFORMATION........................................... 46
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL
INFORMATION............................................... 49
APPENDIX I: CONDENSED FINANCIAL INFORMATION................. A-1
</TABLE>

1
<PAGE> 69

DEFINITIONS

ACCUMULATION UNIT -- An accounting measure we use to calculate the value of a
Variable Account during the Pay-in Period.

ANNUITANT -- You are the Annuitant, unless you state otherwise in your
application. The Annuitant is the person or persons whose life (or lives)
determines the dollar amount of the annuity payments that will be paid under the
Contract. If the Annuitant dies before the Annuity Start Date, we will pay a
death benefit. The maximum number of joint annuitants is two. Provisions
referring to the death of an Annuitant mean the death of the last surviving
Annuitant. The Annuitant named in the application may not be changed.

ANNUITY START DATE -- The date when the Annuitant will begin to receive annuity
payments. (You are the Annuitant, unless you tell us otherwise at the time of
your application.) If you do not select a date, the Annuity Start Date is either
the Annuitant's age 70 or 10 years after the Date of Issue, whichever is later.
Different Annuity Start Dates apply if you own a Qualified Contract or a
Non-Qualified Contract.

ANNUITY UNIT -- An accounting measure we use to calculate the value of your
annuity payments if you choose to receive annuity payments from the Variable
Accounts.

BENEFICIARY -- The person you name to receive the death benefit if the Owner or
Annuitant dies before the Annuity Start Date.

BUSINESS DAY -- Each day on which the New York Stock Exchange is open for
business, except for the holidays listed in this prospectus under "Holidays" and
except for any day on which the Portfolio in which a Variable Account invests
does not value its shares.

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

THE COMPANY ("WE," "US," "OUR") -- IL Annuity and Insurance Company, a
Massachusetts stock life insurance company.

CONTRACT ANNIVERSARY -- The same month and day as the Date of Issue in each
calendar year during which the Contract is in force.

CONTRACT FEE -- During the Pay-in Period, we will deduct this charge from your
Contract Value at the end of each contract quarter and on the date you fully
withdraw all value from the Contract. We use the Contract Fee to cover our cost
of providing certain administrative services related to the Contracts and the
Separate Account.

CONTRACT VALUE -- The total amount you have accumulated under the Contract. It
is the sum of the Separate Account Value and the Fixed Account Value.

CONTRACT YEAR -- A twelve-month period that we measure from the anniversary of
the Date of Issue. The first Contract Year begins on the Date of Issue.

DATE OF ISSUE -- The date we issue your Contract. It is shown on the
specifications page of the Contract and is the date on which the first Contract
Year begins.

DEATH BENEFIT ANNIVERSARY -- Every third Contract Anniversary beginning on the
Date of Issue.

DUE PROOF OF DEATH -- Proof of death that is satisfactory to us. Such proof may
consist of the following if acceptable to us: (a) a certified copy of the death
record; (b) a certified copy of a court decree reciting a finding of death; (c)
any other proof satisfactory to us.

ELIGIBLE PREMIUM PAYMENT -- That portion of your first Premium Payment that you
allocate to a particular Eligible Variable Account on the Date of Issue. It will
be used as a benchmark for calculating the Living Benefit. The Eligible Premium
Payment in a particular Eligible Variable Account will be reduced by a
percentage of all withdrawals and transfers you make out of that Eligible
Variable Account. (See "Living Benefit.")

ELIGIBLE VARIABLE ACCOUNT -- Currently all Variable Accounts. (See "Living
Benefit.")

2
<PAGE> 70

ENHANCED DEATH BENEFIT -- If you elect the three-year stepped-up Enhanced Death
Benefit option at the time of purchase, the Enhanced Death Benefit will equal
the greater of: (a) the Contract Value as of the date we receive due proof of
the deceased's death and payment instructions; or (b) the highest Contract Value
on any Death Benefit Anniversary preceding the date the death benefit is
determined, plus any Premium Payments and minus any withdrawals and charges
incurred between such Death Benefit Anniversary and the date the death benefit
is determined.

FIXED ACCOUNT -- Part of our General Account to which you may apportion Net
Premium Payments and to which you may transfer assets under the Contract. The
Fixed Account provides guarantees of principal and interest. Special limits
apply to transfers of Contract Value to and from the Fixed Account. (See "Fixed
Account.")

FIXED ACCOUNT CURRENT RATE -- The interest rate contained in a schedule of rates
we set from time to time. The rate of interest we will credit to the initial
Premium Payment, if allocated to the Fixed Account, is shown on the
specifications page of the Contract.

FIXED ACCOUNT VALUE -- The value of your Contract in the Fixed Account before
the Annuity Start Date.

FUNDS -- Each of (i) The Alger American Fund; (ii) Fidelity VIP Fund; (iii)
Fidelity VIP Fund II; (iv) OCC Accumulation Trust; (v) Royce Capital Fund; (vi)
SAFECO Resource Series Trust; (vii) SoGen Variable Funds, Inc.; (viii) T. Rowe
Price Fixed Income Series, Inc.; (ix) T. Rowe Price International Series, Inc.;
and (x) Van Eck Worldwide Insurance Trust. Each Variable Account invests in a
separate investment portfolio ("Portfolio") of a Fund. Each Fund is either an
open-end management investment company or a unit investment trust.

GENERAL ACCOUNT -- The account that contains all of our assets other than those
held in the separate accounts.

LIVING BENEFIT -- If you elect the Living Benefit option at the time of purchase
and if the Contract is in the Pay-in Period on the Living Benefit Date, the
Living Benefit for a particular Eligible Variable Account will be equal to: (a)
the value of the Eligible Premium Payment on the Date of Issue for that
particular Eligible Variable Account; MINUS (b) a percentage of any transfers or
withdrawals from that Eligible Variable Account; and MINUS (c) the value of that
Eligible Variable Account on the Living Benefit Date. (See "Living Benefit.")

LIVING BENEFIT DATE -- 10 years after the Date of Issue.

NET PREMIUM PAYMENT -- A Premium Payment minus any applicable premium tax.

NON-QUALIFIED CONTRACT -- A Contract that is not a "Qualified Contract."

OWNER ("YOU" OR "YOUR") -- The person(s) who owns the Contract and who is
entitled to exercise all rights and privileges provided in the Contract. The
term also includes any person designated as a Joint Owner. The maximum number of
Joint Owners is two. Joint Owners are not permitted under Qualified Contracts.

PAYEE -- The person or persons entitled to receive annuity payments. You may
name a "Successor Payee" to receive any guaranteed annuity payments after the
death of the sole surviving Payee.

PAY-IN PERIOD -- The period of time that begins when your Contract is issued and
continues until the date you begin to receive annuity payments on the Annuity
Start Date. The Pay-in Period will also end if you fully withdraw your Contract
before the Annuity Start Date.

PAYOUT PERIOD -- The period of time during which you will receive a steady
stream of annuity payments based on the money you have accumulated under your
Contract. It begins on the Annuity Start Date.

PAYOUT OPTION -- The arrangement under which annuity payments are made to you.
You may choose to have your annuity payments made on a fixed, a variable, or a
combination payout basis.

PORTFOLIO -- The separate investment portfolios of the Funds. The Portfolios
currently offered through the Contract are listed on the front cover of this
prospectus.

3
<PAGE> 71

PREMIUM PAYMENT YEAR -- The twelve-month period beginning on the date we receive
any Premium Payment. It is used to calculate the Withdrawal Charge if you choose
the Date of Premium Payment Withdrawal Charge Option.

QUALIFIED CONTRACT -- A Contract issued in connection with retirement plans that
qualify for special federal income tax treatment under Sections 401(a), 403(b),
408, or 408A of the Code.

SEC -- U.S. Securities and Exchange Commission.

SEPARATE ACCOUNT -- IL Annuity and Insurance Co. Separate Account 1. It is not
part of our General Account. The Separate Account is divided into Variable
Accounts, each of which invests solely in shares of a designated Portfolio.

SEPARATE ACCOUNT VALUE -- The value of the Contract in the Separate Account
before the Annuity Start Date.

SERVICE CENTER -- The office of USA Administration Services, Inc., an
administrator that provides administrative service for the Contracts. The
mailing address for the Service Center is P.O. Box 29163, Overland Park, KS
66201.

SURRENDER VALUE -- The Contract Value MINUS (1) any applicable Withdrawal
Charges; MINUS (2) any premium taxes not previously deducted; and MINUS (3) the
Contract Fee. For a 403(b) Qualified Contract, the outstanding loan amount, if
any, is also deducted from Contract Value.

VARIABLE ACCOUNT -- A subdivision of the Separate Account. A Variable Account
invests solely in the shares of a designated Portfolio of a Fund.

WRITTEN REQUEST -- A written notice or request in a form satisfactory to us that
is signed by you and received at the Service Center.

4
<PAGE> 72

FEE TABLE

The following expense information assumes that you have invested your
entire Contract Value in the Separate Account.

CONTRACT OWNER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Maximum Withdrawal Charge (as a percentage of Premium
Payments withdrawn(1)).................................... 7.0%
Transfer Fee(2) (No charge for first 12 transfers in a
Contract Year; thereafter, $25 fee per transfer).......... $ 0
Contract Fee ($7.50 per quarter, annualized)(3)............. $30
</TABLE>

SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of Separate Account Value)

<TABLE>
<S> <C>
Mortality and Expense Risk Charge........................... 1.25%
Administrative Expense Charge............................... 0.15%
Total Separate Account Annual Expenses................. 1.40%
</TABLE>

INVESTMENT PORTFOLIO ANNUAL EXPENSES
(as a percentage of average daily net assets of a Portfolio after expense
cap or reimbursement)

<TABLE>
<CAPTION>
TOTAL ANNUAL
OTHER EXPENSES EXPENSES (AFTER
MANAGEMENT FEES (AFTER WAIVERS AND
NAME OF PORTFOLIO (AFTER WAIVERS) REIMBURSEMENT) REIMBURSEMENT)
----------------- --------------- -------------- ---------------
<S> <C> <C> <C>
Alger American Fund
MidCap Growth Portfolio.......................... 0.80% 0.04% 0.84%
Small Capitalization Portfolio................... 0.85% 0.03% 0.88%
Fidelity VIP Fund
Equity Income Portfolio.......................... 0.51% 0.07% 0.58%
Growth Portfolio................................. 0.61% 0.08% 0.69%
Money Market Portfolio........................... 0.21% 0.09% 0.30%
Fidelity VIP Fund II
Asset Manager Portfolio.......................... 0.64% 0.10% 0.74%
Contrafund Portfolio............................. 0.61% 0.13% 0.74%
Index 500 Portfolio(4)........................... 0.13% 0.15% 0.28%
Investment Grade Bond Portfolio.................. 0.45% 0.13% 0.58%
OCC Accumulation Trust
Managed Portfolio(5)............................. 0.80% 0.07% 0.87%
Small Cap Portfolio(5)........................... 0.80% 0.17% 0.97%
Royce Capital Fund
Royce Micro-Cap Portfolio(6)..................... 0.00% 1.35% 1.35%
SAFECO Resource Series Trust
SAFECO Equity Portfolio.......................... 0.73% 0.02% 0.75%
SAFECO Growth Portfolio.......................... 0.74% 0.03% 0.77%
SoGen Variable Funds, Inc.
SoGen Overseas Portfolio(7)...................... 0.00% 2.00% 2.00%
T. Rowe Price Fixed Income Series, Inc.
Limited-Term Bond Portfolio(8)................... 0.70% 0.00% 0.70%
T. Rowe Price International Series, Inc.
International Stock Portfolio(8)................. 1.05% 0.00% 1.05%
Van Eck Worldwide Insurance Trust
Worldwide Hard Assets Portfolio.................. 1.00% 0.17% 1.17%
</TABLE>

Premium taxes are not shown here, but may be charged by some states. (See
"Premium Taxes".)

5
<PAGE> 73

The purpose of the fee table is to assist you in understanding the costs
and expenses that you will pay directly or indirectly when you invest in the
Contract. The table reflects the actual charges and expenses for the Separate
Account and the Portfolios for the year ended December 31, 1997. For a more
complete description of these charges and expenses, see "Fees and Charges" in
this prospectus and the prospectus for each Portfolio that is attached to this
prospectus.

(1) In any Contract Year after the first Contract Year, you may withdraw a
portion of your Contract Value without incurring a Withdrawal Charge. This
amount is called the Free Withdrawal Amount. If your initial Premium
Payment is less than $100,000, the Free Withdrawal Amount is 10% of
Contract Value each year, as determined at the beginning of the Contract
Year. If you do not withdraw the full 10% in any Contract Year, the
remaining amount does not roll over to the next Contract Year. If your
initial Premium Payment is $100,000 or more, the Free Withdrawal Amount
will depend on the Free Withdrawal Option you choose at the time you
purchase your Contract. If you choose the CUMULATIVE 10% OPTION, you may
withdraw up to 10% of your Contract Value as of the beginning of each
Contract Year after the first Contract Year and we will not charge you a
Withdrawal Charge on that amount. If you do not withdraw the full 10% in
any one Contract Year, the remaining percentage may be rolled over to the
next Contract Year, up to a maximum of 50% after 5 years, as determined as
of the beginning of each Contract Year. If you choose the EARNINGS OPTION,
you may withdraw all your Contract earnings at any time after the first
Contract Year without incurring a Withdrawal Charge. (See "Fees and
Charges -- Withdrawal Charge.")

The Contract also gives you a choice between two Withdrawal Charge options.
If you choose the DATE OF ISSUE WITHDRAWAL CHARGE OPTION, we will calculate
the Withdrawal Charge from the Date of Issue. Under this option, we will
deduct the Withdrawal Charge from all withdrawals of Premium Payments that
occur during the first nine Contract Years and that are greater than the
Free Withdrawal Amount. No Withdrawal Charge is deducted from full or
partial withdrawals that occur in Contract Years ten and later. For the
first six Contract Years, the Withdrawal Charge is 7% of the amount
withdrawn, decreasing to 6% in the seventh Contract Year, and declining by
2% for each subsequent Contract Year until it is zero in Contract Year ten.

If you choose the DATE OF PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION, we will
calculate the Withdrawal Charge from the date you make a Premium Payment.
Under this option, we will deduct a Withdrawal Charge from all withdrawals
of Premium Payments that we have held for less than seven years and that
are greater than the Free Withdrawal Amount. Premium Payments withdrawn
during the first year after receipt by us are subject to a 7% Withdrawal
Charge, decreasing by 1% annually until it is zero in Premium Payment Year
eight. (See "Fees and Charges -- Withdrawal Charge.")

(2) We will not charge you a transfer fee on the first twelve transfers in a
Contract Year. We will charge a $25 fee for each transfer you make after
the twelfth during a Contract Year.

(3) We will not charge a Qualified Contract for the Contract Fee. We also
currently will not charge a Non-Qualified Contract for the Contract Fee
once the total Premium Payments you have paid equals $100,000.

(4) Total Annual Expenses for the Fidelity Index 500 Portfolio were reduced
from 0.28% to 0.24%, effective December 1, 1997.

(5) Other Expenses of the OCC Accumulation Trust Portfolios are shown gross of
certain expense offsets afforded the Portfolios which effectively lowered
overall custody expenses. The Total Annual Portfolio Expenses of the
Managed and Small Cap Portfolios are limited by OpCap Advisors so that
their respective annualized operating expenses (net of any expense offsets)
do not exceed 1.00% of the average daily net assets. Without such
limitations, and without giving effect to any expense offsets, the
Management Fees, Other Expenses and Total Annual Portfolio Expenses
incurred for the fiscal year ended December 31, 1997 would have been: .80%,
.17% and .97%, respectively, for the Small Cap Portfolio; and .80%, .07%
and .87% respectively, for the Managed Portfolio.

(6) Royce & Associates, Inc., the investment adviser to the Portfolio, has
voluntarily committed to waive its management fees and reimburse Other
Expenses through December 31, 1998 to the extent necessary to

6
<PAGE> 74

maintain Total Annual Expenses of the Portfolio at or below 1.35%. Without
such waiver and reimbursement, the Management Fee was 1.25% and Total
Annual Expenses were 7.32% for fiscal year 1997.

(7) Other Expenses for the SoGen Overseas Portfolio include a 0.25% charge for
12b-1 fees. The 12b-1 fee is imposed to enable the Portfolio to recover
certain sales expenses, including compensation to broker-dealers, the cost
of printing prospectuses, advertising costs and shareholder
servicing-related expenses for the Portfolio. Over a long period of time,
the total amount of 12b-1 fees paid may exceed the amount of sales charges
imposed by other portfolios. Under the terms of an investment advisory
agreement dated August 16, 1996, the SoGen Overseas Portfolio pays its
investment adviser a monthly advisory fee at an annual rate of 0.70% of the
average daily net assets of the Portfolio. For the period since inception
through December 31, 1997, the advisor waived its investment advisory fee
in its entirety and reimbursed the Portfolio for all expenses in excess of
2.00% of average daily net assets. Without such waiver and reimbursements,
the Management Fee was 0.75%, Other Expenses were 14.40%, and Total Annual
Expenses were 15.15%.

(8) The Limited-Term Bond Portfolio pays T. Rowe Price an all-inclusive fee of
0.70%, computed daily and paid monthly, based on its average daily net
assets. The International Stock Portfolio pays Rowe Price-Fleming
International, Inc. ("Price-Fleming") an all-inclusive fee of 1.05%,
computed daily and paid monthly, based on its average daily net assets.
These fees pay for investment management services and other operating costs
of the Portfolios.

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<PAGE> 75

EXAMPLES

(NOTE: The examples shown below are entirely hypothetical. They are not
representations of past or future performance or expenses. Actual performance
and/or expenses may be more or less than shown.)

Examples 1 and 2 show expenses for Contracts with a DATE OF ISSUE
WITHDRAWAL CHARGE OPTION.

Examples: You would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets and the changes and
expenses listed on the Fee Table above.

1. If you fully withdraw all Contract Value (or if you elect to
annuitize under a period certain option for a period of less than 10
years) at the end of the stated time period:

<TABLE>
<CAPTION>
NAME OF PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Alger American Fund
MidCap Growth Portfolio.......... $ 94.50 $143.44 $198.64 $273.95
Small Capitalization Portfolio... $ 94.92 $144.61 $200.74 $278.14
Fidelity VIP Fund
Equity-Income Portfolio.......... $ 91.77 $135.79 $184.89 $246.26
Growth Portfolio................. $ 92.92 $139.03 $190.73 $258.07
Money Market Portfolio........... $ 88.83 $127.50 $169.91 $215.62
Fidelity VIP Fund II
Asset Manager Portfolio.......... $ 93.45 $140.50 $193.37 $263.39
Contrafund Portfolio............. $ 93.45 $140.50 $193.37 $263.39
Index 500 Portfolio.............. $ 88.62 $126.90 $168.83 $213.40
Investment Grade Bond
Portfolio...................... $ 91.77 $135.79 $184.89 $246.26
OCC Accumulation Trust
Managed Portfolio................ $ 94.81 $144.32 $200.22 $277.10
Small Cap Portfolio.............. $ 95.86 $147.25 $205.48 $287.52
Royce Capital Fund
Royce Micro-Cap Portfolio........ $ 99.85 $158.33 N/A N/A
SAFECO Resource Series Trust
SAFECO Equity Portfolio.......... $ 93.55 $140.80 N/A N/A
SAFECO Growth Portfolio.......... $ 93.76 $141.38 N/A N/A
SoGen Variable Funds, Inc.
SoGen Overseas Variable
Portfolio...................... $106.67 $177.08 N/A N/A
T. Rowe Price Fixed Income Series
Limited-Term Bond Portfolio...... $ 93.03 $139.32 $191.26 $259.13
T. Rowe Price International
Series
International Stock Portfolio.... $ 96.70 $149.59 $209.64 $295.78
Van Eck Worldwide Insurance Trust
Worldwide Hard Assets
Portfolio...................... $ 97.96 $153.10 $215.88 $308.05
</TABLE>

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<PAGE> 76

2. If you do not fully withdraw all Contract Value (or if you elect
to annuitize under a payout plan with a life contingency or under a
period certain option with a period certain of at least 10 years) at the
end of the stated time:

<TABLE>
<CAPTION>
NAME OF PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Alger American Fund
MidCap Growth Portfolio........... $24.50 $ 75.31 $128.64 $273.95
Small Capitalization Portfolio.... $24.92 $ 76.57 $130.74 $278.14
Fidelity VIP Fund
Equity-Income Portfolio........... $21.77 $ 67.09 $114.89 $246.26
Growth Portfolio.................. $22.92 $ 70.57 $120.73 $258.07
Money Market Portfolio............ $18.83 $ 58.18 $ 99.91 $215.62
Fidelity VIP Fund II
Asset Manager Portfolio........... $23.45 $ 72.15 $123.37 $263.39
Contrafund Portfolio.............. $23.45 $ 72.15 $123.37 $263.39
Index 500 Portfolio............... $18.62 $ 57.55 $ 98.83 $213.40
Investment Grade Bond Portfolio... $21.77 $ 67.09 $114.89 $246.26
OCC Accumulation Trust
Managed Portfolio................. $24.81 $ 76.25 $130.22 $277.10
Small Cap Portfolio............... $25.86 $ 79.40 $135.46 $287.52
Royce Capital Fund
Royce Micro-Cap Portfolio......... $29.85 $ 91.30 N/A N/A
SAFECO Resource Series Trust
SAFECO Equity Portfolio........... $23.55 $ 72.47 N/A N/A
SAFECO Growth Portfolio........... $23.76 $ 73.10 N/A N/A
SoGen Variable Funds, Inc.
SoGen Overseas Variable
Portfolio....................... $36.67 $111.43 N/A N/A
T. Rowe Price Fixed Income Series
Limited-Term Bond Portfolio....... $23.03 $ 70.89 $121.26 $259.13
T. Rowe Price International Series
International Stock Portfolio..... $26.70 $ 81.91 $139.64 $295.78
Van Eck Worldwide Insurance Trust
Worldwide Hard Assets Portfolio... $27.96 $ 85.67 $145.88 $308.05
</TABLE>

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<PAGE> 77

Examples 3-4 show examples for Contracts with the DATE OF PREMIUM PAYMENT
WITHDRAWAL OPTION.

Examples: You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets and the charges and expenses listed on the
Fee Table above:

3. If you fully withdraw all Contract Value (or if you elect to
annuitize under a period certain option for a period of less than 10
years) at the end of the stated time period:

<TABLE>
<CAPTION>
NAME OF PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Alger American Fund
MidCap Growth Portfolio.......... $ 94.50 $123.97 $158.64 $273.95
Small Capitalization Portfolio... $ 94.92 $125.17 $160.74 $278.14
Fidelity VIP Fund
Equity-Income Portfolio.......... $ 91.77 $116.16 $144.89 $246.26
Growth Portfolio................. $ 92.92 $119.47 $150.73 $258.07
Money Market Portfolio........... $ 88.83 $107.69 $129.91 $215.62
Fidelity VIP Fund II
Asset Manager Portfolio.......... $ 93.45 $120.97 $153.37 $263.39
Contrafund Portfolio............. $ 93.45 $120.97 $153.37 $263.39
Index 500 Portfolio.............. $ 88.62 $107.09 $128.83 $213.40
Investment Grade Bond
Portfolio...................... $ 91.77 $116.16 $144.89 $246.26
OCC Accumulation Trust
Managed Portfolio................ $ 94.81 $124.87 $160.22 $277.10
Small Cap Portfolio.............. $ 95.86 $127.87 $165.46 $287.52
Royce Capital Fund
Royce Micro-Cap Portfolio........ $ 99.85 $139.18 N/A N/A
SAFECO Resource Series Trust
SAFECO Equity Portfolio.......... $ 93.55 $121.27 N/A N/A
SAFECO Growth Portfolio.......... $ 93.76 $121.87 N/A N/A
SoGen Variable Funds, Inc.
SoGen Overseas Variable
Portfolio...................... $106.67 $158.32 N/A N/A
T. Rowe Price Fixed Income Series
Limited-Term Bond Portfolio...... $ 93.03 $119.77 $151.26 $259.13
T. Rowe Price International
Series
International Stock Portfolio.... $ 96.70 $130.26 $169.64 $295.78
Van Eck Worldwide Insurance Trust
Worldwide Hard Assets
Portfolio...................... $ 97.96 $133.83 $175.88 $308.05
</TABLE>

10
<PAGE> 78

4. If you do not fully withdraw all Contract Value (or if you elect
to annuitize under a payout plan with a life contingency or under a
period certain option with a period certain of at least 10 years) at the
end of the stated time:

The examples provided above assume that no transfer charges or premium
taxes have been assessed. The examples reflect the annualized Contract Fee of
$30 assessed on an average Contract Value of $30,000. This translates the
Contract Fee into a 0.10% charge for the purposes of the examples based on a
$1,000 investment.

There is a table of Condensed Financial Information that contains the
accumulated unit value history of the Separate Account. That table is found in
Appendix A -- Condensed Financial Information.

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<PAGE> 79

SUMMARY OF THE VISIONARY CHOICE CONTRACT

Purchasing Your Contract. The VISIONARY CHOICE Contract is an individual
deferred variable annuity issued by IL Annuity and Insurance Company. You may
purchase this Contract with $1,000 or more under most circumstances. We will not
issue a Contract if you are older than 85 on the Date of Issue.

The Contract provides a means for investing on a tax-deferred basis. This
means that you will not be taxed on earnings or appreciation in your Contract
until you withdraw your money. The Contract may be sold in connection with
retirement plans, some of which may qualify for special federal tax treatment
under the Code. (See "The Pay-In Period -- Issuing Your Contract.")

Cancellation -- The 10 Day Free-Look Period. You have the right to cancel
the Contract for any reason within 10 days after you receive it (or within 20
days if the Contract is replacing another annuity contract or insurance policy).
The Contract must be returned to our Service Center. Your Written Request to
cancel the Contract must accompany the Contract. The returned Contract will be
treated as if it were never issued. In certain states you may have more than 10
days to return the Contract for a refund. The amount that we refund will vary
according to state requirements. If we are required by state law to refund your
original Premium Payment, we will allocate your initial Premium Payment to the
Money Market Variable Account during the Free-Look Period. (See "The Pay-In
Period -- Cancellation -- The 10-Day Free-Look Period.")

Premium Payments. A Premium Payment is the money you pay us to buy the
Visionary Choice Contract. The Contract generally gives you the flexibility to
make Premium Payments as often as you like, although you may choose to make only
a single Premium Payment. After you buy the Contract, you may send us Premium
Payments of $1,000 or more at any time during the Pay-in Period, so long as they
do not exceed two times the amount of your initial Premium Payment in any year.
We generally will not accept total Premium Payments in excess of $250,000. We
reserve the right to waive these limitations. (See "Premium Payments.")

Designating Your Investment Options. When you purchase your Contract, we
will ask you to provide us with written instructions telling us how to allocate
your Premium Payments among the Portfolios of the Variable Accounts and the
Fixed Account. You may place your Premium Payments in one or more Variable
Accounts and/or the Fixed Account, subject to certain restrictions. (See "The
Pay-In Period.")

Transfers. During the Pay-in Period, you may transfer your Contract Value
from the Variable Accounts and the Fixed Account to other Variable Account(s)
and the Fixed Account, subject to certain restrictions. (See "Transfers Between
Investment Options.") If you transfer Contract Value from an Eligible Variable
Account, the transfer will reduce the value of the Eligible Premium Payment on
which the Living Benefit is based. (See "Living Benefit.")

Transfers to the Fixed Account must be at least $1,000. During the Pay-in
Period, you may transfer up to 20% of the Fixed Account Value (as determined at
the beginning of the Contract Year) from the Fixed Account to one or more of the
Variable Accounts in any Contract Year. No fee is charged for transfers from the
Fixed Account to one or more Variable Accounts and such transfers are not
considered a transfer for purposes of assessing a transfer charge. (See
"Transfers Between Investment Options.")

Once you begin to receive annuity payments, you may make one transfer
between the Variable Accounts each Contract Year. (See "The Payout Period.")

Partial Withdrawals. During the Pay-in Period, you may withdraw part of
your Contract Value by sending a Written Request to the Service Center. The
amount of your request must be at least $250. If the Contract Value remaining
after your partial withdrawal is less than $1,000, we reserve the right to pay
you the Surrender Value in a lump sum. Amounts withdrawn may be subject to a
Withdrawal Charge, depending upon the Withdrawal Charge Option you chose at the
time of purchase. In any Contract Year after the first Contract Year, you may
withdraw a portion of your Contract Value without incurring a Withdrawal Charge,
called the Free Withdrawal Amount. (See "Fees and Charges -- Withdrawal
Charge.")

Withdrawals from an Eligible Variable Account will reduce the value of the
Eligible Premium Payment on which the Living Benefit is based. (See "Living
Benefit.")

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<PAGE> 80

The Federal tax laws may impose income taxes and tax penalties upon, and in
some cases prohibit, certain premature withdrawals from the Contract before or
after the Annuity Start Date. (See "Federal Tax Matters.")

Full Withdrawal. During the Pay-in Period, you may cancel the Contract and
receive its Surrender Value by sending us a Written Request. (See "Withdrawal of
Contract Value.") As with partial withdrawals, Federal tax laws may impose
income taxes and tax penalties upon, and in some cases prohibit, certain
premature withdrawals from the Contract before or after the Annuity Start Date.
(See "Federal Tax Matters.")

Death Benefit. If the Annuitant dies before the Annuity Start Date, the
Beneficiary will receive a Death Benefit. The Death Benefit will be determined
as of the date we receive due proof of the deceased's death and payment
instructions. If you do not choose the Enhanced Death Benefit option at the time
of purchase, the Death Benefit will equal the greater of:

(1) the sum of all Premium Payments made under the Contract, LESS
partial withdrawals as of the date the Death Benefit is determined;
or

(2) the Contract Value as of the date the Death Benefit is determined;

LESS any applicable premium taxes not previously deducted.

If you elect the three year stepped-up Enhanced Death Benefit option at the
time of purchase, an Enhanced Death Benefit will be payable upon the death of
the Annuitant before the Annuity Start Date and will be determined as of the
date we receive due proof of the deceased's death and payment instructions. The
Enhanced Death Benefit will be the greater of:

(1) the Contract Value as of the date the Enhanced Death Benefit is
determined; or

(2) the highest Contract Value on any Death Benefit Anniversary
preceding the date the Enhanced Death Benefit is determined,
adjusted for any Premium Payments received, withdrawals taken and
charges incurred between such Death Benefit Anniversary and the date
the Enhanced Death Benefit is determined. This value is initially
set on the first Death Benefit Anniversary and equals the greater
of: (a) the sum of Premium Payments, MINUS partial withdrawals; or
(b) Contract Value, on that date. This value will be reset on every
future Death Benefit Anniversary (that is, every third Contract
Anniversary) to equal Contract Value on that date only if Contract
Value on that Death Benefit Anniversary is greater than the Enhanced
Death Benefit Value on any previous Death Benefit Anniversary. Once
reset, this value will never decrease unless partial withdrawals are
made;

LESS any applicable premium taxes not previously deducted.

Age Limitation on Death Benefit Provision: If the Annuitant dies at or
after age 75 (or ten years after the Date of Issue, whichever is later) but
before the Annuity Start Date, the Death Benefit under either Death Benefit
option will equal Contract Value LESS any applicable premium taxes not yet
deducted, as of the date we receive due proof of death and payment instructions.
(See "Death Benefits.")

Living Benefit. If you elect the Living Benefit option at the time of
purchase and if the Contract is in the Pay-in Period on the Living Benefit Date,
IL Annuity will calculate the Living Benefit for each Eligible Variable Account
in which you have value as of that date. The Living Benefit will be credited to
an Eligible Variable Account if the value of the Eligible Variable Account 10
years after the Date of Issue (i.e., on the Living Benefit Date) is less than
the current value of the Eligible Premium Payment for that Eligible Variable
Account on the Living Benefit Date.

An Eligible Premium Payment is that portion of your first Premium Payment
that you placed in a particular Eligible Variable Account on the Date of Issue.
Its value will be reduced by a percentage of all withdrawals and transfers you
make out of that Eligible Variable Account.

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<PAGE> 81

On the Living Benefit Date, the Living Benefit credited to a particular
Eligible Variable Account will be equal to: (a) the value of the Eligible
Premium Payment placed in a particular Eligible Variable Account on the Date of
Issue; MINUS (b) a percentage of all withdrawals and transfers from that
Eligible Variable Account; MINUS (c) the value of that Eligible Variable Account
on the Living Benefit Date.

The Living Benefit Date is 10 years after the Date of Issue. If the
Contract is owned by two persons who are spouses at the time one dies before the
Living Benefit Date, the original Living Benefit Date remains in effect. If the
Contract is owned by two persons who are not spouses and one of them dies before
the Living Benefit Date, the original Living Benefit Date remains in effect,
provided no distributions have occurred as a result of the Owner's death. (See
"Death Benefits.") The Eligible Variable Accounts currently include all Variable
Accounts.

The Living Benefit will not be credited if you elect to receive annuity
payments before the Living Benefit Date. (See "Living Benefit.")

Transfers and withdrawals from an Eligible Variable Account will reduce the
value of the Eligible Premium Payment on which the Living Benefit is based. (See
"Living Benefit.")

FEES AND CHARGES

The following charges and deductions are assessed under the Contract:

Withdrawal Charge. We will deduct a Withdrawal Charge if you withdraw all
or part of your Contract Value during certain time periods. The amount of the
Withdrawal Charge depends on the Withdrawal Charge Option and Free Withdrawal
Option you choose at the time you purchase the Contract. We do not assess a
Withdrawal Charge in the event the Contract terminates due to your death or the
death of the Annuitant, or if you decide to begin to receive annuity payments
under an annuity payout plan with a life contingency or an annuity payout plan
with at least 10 years of guaranteed payments.

The Contract gives you a choice between two Withdrawal Charge Options. If
you choose the DATE OF ISSUE WITHDRAWAL CHARGE OPTION, we will calculate the
Withdrawal Charge from the Date of Issue. We will deduct the Withdrawal Charge
from all withdrawals of Premium Payments that: (1) are greater than the Free
Withdrawal Amount, and (2) that occur during the first nine Contract Years.
Under this option, no Withdrawal Charge is deducted from full or partial
withdrawals that occur in Contract Years ten and later. For the first six
Contract Years, the Withdrawal Charge is 7% of the amount withdrawn that exceeds
the Free Withdrawal Amount, decreasing to 6% in the seventh Contract Year, and
declining by 2% for each subsequent Contract Year until it is zero in Contract
Year ten.

If you choose the DATE OF PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION, we will
calculate the Withdrawal Charge from the date you make a Premium Payment and
deduct a Withdrawal Charge from all withdrawals of Premium Payments that we have
held for less than seven years and that are greater than the Free Withdrawal
Amount. Premium Payments in excess of the Free Withdrawal Amount that are
withdrawn during the first year after payment are subject to a 7% Withdrawal
Charge, decreasing by 1% annually, until it is zero in Premium Payment Year 8.

Under either option, for purposes of calculating the Withdrawal Charge, a
withdrawal is deemed to come first from Premium Payments and then from earnings.
In addition, the money that has been held the longest in the Contract will be
deemed to be the first money withdrawn. This is called the "first in, first out"
method of accounting or "FIFO." (See "Fees and Charges.")

In any Contract Year after the first Contract Year, you may withdraw a
portion of your Contract Value without incurring a Withdrawal Charge. This
amount is called the Free Withdrawal Amount. Withdrawals under the Systematic
Withdrawal Program are permitted a Free Withdrawal Amount, as determined below,
during the first Contract Year. If your initial Premium Payment is less than
$100,000, the Free Withdrawal Amount is 10% of Contract Value each year, as
determined at the beginning of the Contract Year. If you do not withdraw the
full 10% in any Contract Year, the remaining amount does NOT roll over to the
next Contract Year. If your initial Premium Payment is $100,000 or more, the
value of the Free Withdrawal Amount

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<PAGE> 82

depends on the Free Withdrawal Option you choose at the time you purchase your
Contract. If you choose the CUMULATIVE 10% OPTION, you may withdraw up to 10% of
your Contract Value as of the beginning of each Contract Year after the first
Contract Year and we will not charge you a Withdrawal Charge on that amount. If
you do not withdraw the full 10% in any one Contract Year, the remaining
percentage may be rolled over to the next Contract Year, up to a maximum of 50%
of Contract Value after 5 years as determined as of the beginning of each
Contract Year. If you choose the EARNINGS OPTION, you may withdraw all your
Contract earnings at any time after the first Contract Year without incurring a
Withdrawal Charge. (See "Fees and Charges -- Withdrawal Charge.")

The Withdrawal Charge also may be waived in cases of extended
hospitalization, long-term care, terminal illness, or to pay for post secondary
education, as provided in the Contract. (See "Fees and Charges -- Withdrawal
Charge.")

Contract Fee. At the end of each Contract quarter (and on the date of full
withdrawal from the Contract) during the Pay-in Period, we will deduct a
quarterly Contract Fee of $7.50 from the Contract Value. Currently we waive the
Contract Fee for Qualified Contracts. We also do not charge the Contract Fee if
the Contract is a Non-Qualified Contract whose cumulative Premium Payments on
the date the Contract Fee is charged are equal to or greater than $100,000. We
reserve the right to modify this waiver upon 30 days written notice to you. We
do not charge a Contract Fee after annuity payments have begun. (See "Fees and
Charges -- Contract Fee.")

Transfer Fee. During the Pay-in Period, you may make 12 transfers each
Contract Year at no charge. We will impose a transfer fee of $25 for the
thirteenth and each subsequent transfer you make during a Contract Year before
the Annuity Start Date. (See "Fees and Charges -- Transfer Fee.")

Mortality and Expense Risk Charge. We will deduct a daily mortality and
expense risk charge as compensation for our assuming certain mortality and
expense risks. The charge is deducted from the assets of the Separate Account at
a rate of 0.003404% per day. This is equal to an annual rate of 1.25%
(approximately 0.90% for mortality risk and 0.35% for expense risks). This
charge will continue to be assessed after the Annuity Start Date if annuity
payments are made on a variable basis. (See "Fees and Charges -- Mortality and
Expense Risk Charge.")

Asset-Based Administrative Charge. We will deduct a daily administrative
charge as compensation for certain expenses we incur in administering the
Contract. The charge is deducted from the assets of each Variable Account at an
annual rate of 0.15%. This charge will continue to be assessed after you begin
to receive annuity payments if you choose to receive annuity payments on a
variable basis. (See "Fees and Charges -- Asset-Based Administrative Charge.")

Premium Taxes. Various states and other governmental entities charge a
premium tax on annuity contracts issued by insurance companies. Premium tax
rates currently range up to 3.5%, depending on the state. Tax rates are subject
to change from time to time by legislative and other governmental action. In
addition, other governmental units within a state may levy such taxes. We are
responsible for the payment of these taxes and, if necessary, we will make a
deduction from the value of your Contract either: (a) from Premium Payments as
we receive them, (b) from Contract Value upon partial or full withdrawal, (c)
when annuity payments begin, or (d) upon payment of a Death Benefit. (See "Fees
and Charges -- Premium Taxes.")

Investment Advisory Fees and Other Expenses of the Funds. Each Portfolio
pays investment management charges to its investment adviser based on a
percentage of the Portfolio's average daily net assets. These advisory fees and
other Portfolio charges and expenses are fully described in the accompanying
prospectuses for the Portfolios. These charges are indirectly passed on to you.
In addition, the SoGen Overseas Portfolio deducts a 12b-1 fee from its Portfolio
assets at a maximum annual rate of 0.25% of the average daily value of the
Portfolio's net assets. The 12b-1 fee may be used to reimburse IL Annuity for
certain administrative and distribution support services provided to the
Overseas Portfolio.

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<PAGE> 83

ANNUITY PROVISIONS

Payout Options. Under the Contract, you may choose to receive regular
annuity payments under one of several available payout plans. You may also
choose the month and year on which those payments are to begin. (This is the
Annuity Start Date.) On the Annuity Start Date, the Contract Value (adjusted as
described below) will be used to calculate the amount of your annuity payments
under the payment plan you choose, unless you choose to receive the Surrender
Value in a lump sum. Adjusted Contract Value is Contract Value, LESS applicable
premium tax not yet deducted, LESS the quarterly Contract Fee, and, for an
installment income annuity payout plan with a payout period of less than 10
years, less any applicable Withdrawal Charge. (See "Payout Period.")

FEDERAL TAX STATUS

ABOUT IL ANNUITY AND THE SEPARATE ACCOUNT

IL ANNUITY AND INSURANCE COMPANY

IL Annuity and Insurance Company, formerly known as Sentry Investors Life
Insurance Company, is a stock life insurance company organized under the laws of
the Commonwealth of Massachusetts on December 21, 1965 and incorporated on March
9, 1966. We changed our name to "IL Annuity and Insurance Company" on January
17, 1995.

Effective October 31, 1994, we entered into an assumption reinsurance
agreement with Sentry Life Insurance Company ("Sentry") whereby Sentry assumed
all of our existing insurance in-force and related assets and liabilities.

At the end of 1997, American United Life Insurance Company ("AUL") and
Indianapolis Life Insurance Company took preliminary steps toward an
affiliation. At that time, AUL invested $8,910,000 in Indianapolis Life Group
and on March 30, 1998 AUL invested an additional $18,090,000. As a result of
this investment and related transactions, it is intended by both parties that
Indianapolis Life Insurance Company will retain ownership of 75% of the stock of
Indianapolis Life Group and AUL will own the remaining 25% of the Indianapolis
Life Group stock. The Agreement to Affiliate does contain provisions which would
allow AUL to invest additional amounts in Indianapolis Life Group, and
potentially to own up to 49.9% of the outstanding Indianapolis Life Group stock.
As of the date of this prospectus, there is no current intention for additional
investments by AUL.

We are subject to regulation by the Insurance Department of the State of
Massachusetts as well as by the insurance departments of all other states and
jurisdictions in which we do business. We submit annual statements on our
operations and finances to insurance officials in such states and jurisdictions.
The forms for the Contract described in this prospectus are filed with and
(where required) approved by insurance officials in each state and jurisdiction
in which Contracts are sold.

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1

We established the IL Annuity and Insurance Co. Separate Account I (the
"Separate Account") as a separate account under Massachusetts insurance law on
November 1, 1994. The Separate Account will

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<PAGE> 84

receive and invest Net Premium Payments made under the Contracts. In addition,
the Separate Account may receive and invest Premium Payments for certain other
variable annuity contracts we may issue in the future.

Although the assets in the Separate Account are our property, the portion
of the assets in the Separate Account equal to the reserves and other contract
liabilities of the Separate Account are not chargeable with the liabilities
arising out of any other business that we may conduct and that has no specific
relation to or dependence upon the Separate Account. The assets of the Separate
Account are available to cover our general liabilities only to the extent that
the Separate Account's assets exceed its liabilities arising under the Contracts
and any other contracts supported by the Separate Account. We have the right to
transfer to the general account any assets of the Separate Account which are in
excess of reserves and other contract liabilities. All obligations arising under
the Contracts are our general corporate obligations. Income, gains and losses,
whether or not realized, from assets allocated to the Separate Account are
credited to or charged against the Separate Account without regard to other
income, gains or losses of any other separate account or of the Company.

The Separate Account currently is divided into eighteen Variable Accounts
that are available for investment but may, in the future, include additional
Variable Accounts. Each Variable Account invests exclusively in shares of a
single corresponding fund. The income, gains and losses, whether or not
realized, from the assets allocated to each Variable Account are credited to or
charged against that Variable Account without regard to income, gains or losses
from any other Variable Account.

THE PORTFOLIOS

Each Variable Account of the Separate Account invests exclusively in shares
of a designated Portfolio of a series-type mutual fund ("Fund"). Shares of each
Portfolio are purchased and redeemed at net asset value, without a sales charge.
Each Fund currently available under the Contract is registered with the SEC
under the Investment Company Act of 1940 (the "1940 Act") as an open-end,
management investment company. Such registration does not involve supervision of
the management or investment practices or policies of the companies or their
funds by the SEC.

The assets of each Portfolio of each Fund are separate from the assets of
that Fund's other Portfolios, and each Portfolio has separate investment
objectives and policies. As a result, each Portfolio operates as a separate
investment Portfolio and the income or losses of one Portfolio has no effect on
the investment performance of any other Portfolio.

Each of the Funds is managed by an investment adviser registered with the
SEC under the Investment Advisers Act of 1940, as amended. Each investment
adviser is responsible for the selection of the investments of the Portfolio.
These investments must be consistent with the investment objective, policies and
restrictions of that Portfolio.

The investment objective of each Portfolio is summarized below. THERE IS NO
ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVES. More detailed
information, including a description of risks, fees

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<PAGE> 85

and expenses of each Portfolio, may be found in the prospectuses for the Funds
which accompany this prospectus.

CERTAIN PORTFOLIOS HAVE SIMILAR INVESTMENT OBJECTIVES AND/OR POLICIES. YOU
SHOULD READ THE PROSPECTUSES FOR THE PORTFOLIOS CAREFULLY BEFORE YOU INVEST.

THE ALGER AMERICAN FUND

The MidCap Growth Portfolio and the Small Capitalization Portfolio of The
Alger American Fund ("The Alger Fund") are available for investment under the
Contract. The investment objective of each Portfolio is:

MIDCAP GROWTH PORTFOLIO -- seeks to obtain long-term capital
appreciation. Except during temporary defensive periods, the Portfolio
invests at least 65% of its total assets in equity securities of companies
that, at the time of purchase, have total market capitalization within the
range of companies included in the S&P MidCap 400 Index, updated quarterly.
The S&P MidCap 400 Index is designed to track the performance of medium
capitalization companies. As of March 31, 1998, the range of market
capitalization of these companies was $210 million to $14.3 billion.

SMALL CAPITALIZATION PORTFOLIO -- seeks to obtain long-term capital
appreciation. Except during temporary defensive periods, the Portfolio
invests at least 65% of its total assets in equity securities of companies
that, at the time of purchase, have total market capitalization within the
range of companies included in the Russell 2000 Growth Index ("Russell
Index") or the S&P SmallCap 600 Index updated quarterly. Both indexes are
broad indices of small capitalization stocks. As of March 31, 1997, the
range of market capitalization of the companies in the Russell Index was
$20 million to $4.25 billion; the range of capitalization of the companies
in the S&P SmallCap 600 Index at that date was $31 million to $3.7 billion.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II

The Equity-Income Portfolio, the Growth Portfolio and the Money Market
Portfolio of Fidelity's Variable Insurance Products Fund ("VIP Fund"), as well
as the Asset Manager Portfolio, the Contrafund Portfolio, the Index 500
Portfolio and the Investment Grade Bond Portfolio of the Variable Insurance
Products Fund II ("VIP Fund II") are available for investment under the
Contract. The investment objective of each Portfolio is:

EQUITY-INCOME PORTFOLIO -- seeks reasonable income by investing
primarily in income-producing equity securities.

CONTRAFUND PORTFOLIO -- seeks capital appreciation by investing in
companies that the adviser believes to be undervalued due to an overly
pessimistic appraisal by the public.

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<PAGE> 86

INVESTMENT GRADE BOND PORTFOLIO -- seeks high current income by
investing in fixed-income obligations of all types.

OCC ACCUMULATION TRUST

The Managed Portfolio and the Small Cap Portfolio of the OCC Accumulation
Trust ("OCC Trust") are available for investment under the Contract. The
investment objective of each Portfolio is:

SMALL CAP PORTFOLIO -- seeks capital appreciation through investment
in a diversified portfolio of equity securities of companies with market
capitalizations of under $1 billion.

The OCC Trust receives investment advice with respect to each of its
Portfolios from OpCap Advisors, a subsidiary of Oppenheimer Capital which is a
subsidiary of Oppenheimer Financial Corp.

ROYCE CAPITAL FUND

The Royce Micro-Cap Portfolio of the Royce Capital Fund is available for
investment under the Contract and has the following investment objective:

ROYCE MICRO-CAP PORTFOLIO -- seeks long-term capital appreciation,
primarily through investments in common stocks and convertible securities
of small and micro-cap companies. Production of income is incidental to
this objective.

Royce & Associates, Inc. serves as the investment adviser to the Portfolio.

SAFECO RESOURCE SERIES TRUST

The SAFECO Equity Portfolio and the SAFECO Growth Portfolio of the SAFECO
Resource Series Trust are available for investment under the Contract. The
investment objective of each Portfolios is:

SAFECO EQUITY PORTFOLIO -- seeks long-term growth of capital and
reasonable current income. The Equity Portfolio ordinarily invests
principally in common stocks or securities convertible into common stocks.

SAFECO GROWTH PORTFOLIO -- seeks growth of capital and the increased
income that ordinarily follows from such growth. The Growth Portfolio
ordinarily invests a preponderance of its assets in common stock selected
for potential appreciation.

Each Portfolio is managed by SAFECO Asset Management Company.

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<PAGE> 87

SOGEN VARIABLE FUNDS, INC.

The SoGen Overseas Variable Portfolio of the SoGen Variable Funds, Inc. is
available for investment under the Contract and has the following investment
objective:

SOGEN OVERSEAS VARIABLE PORTFOLIO -- seeks long-term growth of capital
by investing primarily in securities of small and medium size non-U.S.
companies. It particularly seeks companies that have growth potential,
financial strength and stability, strong management and fundamental value.
The Portfolio may invest in securities traded in mature markets (for
example, Japan, Canada and the United Kingdom) and in emerging markets
(Mexico and Indonesia, for example). The Portfolio may invest up to 20% of
its total assets in debt securities, that may include lower-rated
securities, commonly referred to a "junk bonds" and securities that are not
rated. The greater risks involved in foreign investing and investing in
junk bonds should be understood and carefully considered. See the
Portfolio's Prospectus for a description of these risks.

Societe Generale Asset Management Corp., which is indirectly owned by
Societe Generale, one of France's largest banks, serves as the Portfolio's
investment adviser.

T. ROWE PRICE FIXED INCOME SERIES, INC.

The Limited-Term Bond Portfolio of the T. Rowe Price Fixed Income Series,
Inc. is available for investment under the Contract and has the following
investment objective:

T. ROWE PRICE INTERNATIONAL SERIES, INC.

The International Stock Portfolio of the T. Rowe Price International
Series, Inc. is available for investment under the Contract and has the
following investment objective:

INTERNATIONAL STOCK PORTFOLIO -- seeks long-term growth of capital
through investments primarily in common stocks of established, non-U.S.
companies.

VAN ECK WORLDWIDE INSURANCE TRUST

The Worldwide Hard Assets Portfolio of the Van Eck Worldwide Insurance
Trust (the "Van Eck Trust") is available for investment under the Contract. The
investment objective of this Portfolio is:

Van Eck Associates Corporation serves as investment adviser and manager to
the Van Eck Worldwide Hard Assets Portfolio pursuant to an Advisory Agreement
with the Van Eck Trust.

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<PAGE> 88

An investment in a Portfolio, including the Money Market Portfolio, is not
insured or guaranteed by the U.S. Government and there can be no assurance that
the Money Market Portfolio will be able to maintain a stable net asset value per
share.

IL Annuity has entered into agreements with the investment adviser of
several of the Funds pursuant to which each such investment adviser will pay IL
Annuity a servicing fee based upon an annual percentage of the average aggregate
net assets invested by IL Annuity on behalf of the Separate Account. These
agreements reflect administrative services provided to the Funds by IL Annuity.
Payments of such amounts on behalf of the Funds will not increase the fees paid
by the Funds or their shareholders.

AVAILABILITY OF THE FUNDS

We cannot guarantee that each Portfolio will always be available for
investment through the Contracts, but in the unlikely event that a Portfolio is
not available, we will do everything reasonably practicable to secure the
availability of a comparable portfolio. The Separate Account purchases shares of
each Portfolio in accordance with a participation agreement we have entered into
with each Fund. If a participation agreement terminates, the Separate Account
may not be able to purchase additional shares of the Portfolios of that Fund. In
such case, you will no longer be able to allocate Premium Payments or transfer
Contract Value to the Variable Account investing in that Portfolio.

We reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares of a Portfolio that are held in
the Separate Account. If the shares of a Portfolio are no longer available for
investment or if, in our judgment, further investment in any Portfolio should
become inappropriate, we may redeem the shares of that Portfolio and substitute
shares of another portfolio. We will not substitute any shares without notice
and prior approval of the SEC and state insurance authorities, to the extent
required by the 1940 Act or other applicable law.

We also reserve the right in our sole discretion to establish additional
Variable Accounts, or eliminate or combine one or more Variable Accounts, if
marketing needs, tax considerations or investment conditions warrant. We will
determine if new or substituted Variable Accounts will be available to existing
Contract Owners. Subject to obtaining any approvals or consents required by law,
the assets of one or more Variable Accounts may also be transferred to any other
Variable Account if, in our sole discretion, marketing, tax, or investment
conditions warrant. Additional information regarding termination of
participation agreements, substitutions of investments and resolving conflicts
among Funds may be found in the Statement of Additional Information.

THE PAY-IN PERIOD

The Pay-in Period begins when your first Premium Payment is made and
continues until you begin to receive annuity payments during the Payout Period.
The Pay-in Period will also end if you fully withdraw all of your Contract Value
before the Payout Period.

PURCHASING A CONTRACT

You may purchase a Contract with a Premium Payment of $1,000 or more. The
maximum first Premium Payment is $250,000. To purchase a Contract, you must make
an application to us either through one of our licensed representatives who is
also a registered representative of IL Securities, Inc., or a broker-dealer
having a selling agreement with IL Securities, Inc. Contracts may be sold to or
in connection with retirement plans that do not qualify for special tax
treatment as well as retirement plans that qualify for special tax treatment
under the Code. We will not issue you a Contract if you are older than 85 on the
Date of Issue.

PREMIUM PAYMENTS

Premium Payments must be at least $1,000. You may make Premium Payments at
any time until the earliest of: (a) the Annuity Start Date; (b) the date you
fully withdraw all Contract Value; or (c) the date you reach age 85 (age 70 1/2
for Qualified Contracts other than Roth IRAs). In any one Contract Year, we will
not

21
<PAGE> 89

accept Premium Payments that total more than two times your first Premium
Payment. We will not accept total Premium Payments in excess of $250,000.
However, we reserve the right to waive these limitations.

Under the Automatic Premium Payment Plan, you may select an annual,
semi-annual, quarterly or monthly payment schedule under which we will
automatically deduct Premium Payments from a bank or credit union account or
other source. The minimum amount of such payment is $1,000.

CANCELLATION -- THE 10 DAY FREE-LOOK PERIOD

You have the right to cancel the Contract for any reason within 10 days
after you receive it (or within 20 days of receipt if the Contract is replacing
another annuity contract or insurance policy). In some jurisdictions, this
period may be longer than 10 days. To cancel the Contract, you must send a
Written Request for cancellation and the returned Contract to the Service Center
before the end of the Free-Look Period.

The amount that we will refund to you will vary according to state
requirements. In most states, we will refund to you an amount equal to the sum
of: (i) the difference between the Premium Payments paid and the amounts
allocated to the Variable Accounts and the Fixed Account under the Contract; and
(ii) the Contract Value as of the date the Contract and the Written Request for
cancellation are received at the Service Center. You bear the investment risk
for Premium Payments allocated to the Variable Accounts during the free-look
period.

A few states require us to return Premium Payments upon cancellation. If
state law requires that Premium Payments be returned, the amount of the refund
will be the greater of: (i) the Premium Payments made under the Contract; and
(ii) the Contract Value (without the deduction of a Withdrawal Charge) on the
date the Contract and the Written Request for cancellation is received at our
Service Center, plus any amount that may have been deducted for premium taxes.
In those states where Premium Payments must be returned, we will place any
portion of the initial Net Premium Payments allocated to a Variable Account into
the Money Market Variable Account for a 15-day period following the date on
which we credit the initial Premium Payment to your Contract. At the end of that
period, the amount in the Money Market Variable Account will be allocated to the
Variable Accounts you selected on your application based on the allocation
percentages you specified.

DESIGNATING YOUR INVESTMENT OPTIONS

When you fill out your application, you will give us instructions on how to
allocate your first Net Premium Payment among the eighteen Variable Accounts and
the Fixed Account. The amount you direct to a particular Variable Account and/or
to the Fixed Account must equal at least 1% of the Premium Payment.

Once we receive your Premium Payment and your completed application at the
Service Center, we will issue your Contract and direct your first Net Premium
Payment within two (2) Business Days to the Variable Accounts and/or the Fixed
Account in accordance with your instructions, subject to the limitations set
forth above under "Cancellation -- The 10-Day Free Look Period."

If you did not give us all the information we need, we will contact you. If
we cannot complete the application within five (5) Business Days, we will either
send back your money immediately or obtain your permission to keep your money
until we receive all the necessary information. Once the application is
complete, we will direct your first Net Premium Payment to the Variable Accounts
and/or the Fixed Account according to your instructions within two Business
Days.

We will credit any additional Premium Payments you make to your Contract as
of the same Business Day we receive them. Our Business Day closes when the New
York Stock Exchange closes, usually at 4 p.m. Eastern Time. If we receive your
Premium Payments after the close of our Business Day, we will calculate and
credit them the next Business Day. We will direct your Premium Payment to the
Variable Accounts and/or the Fixed Account according to your written
instructions in effect at the time we receive it. However, you may direct
individual Premium Payments to a specific Variable Account or to the Fixed
Account (or any combination thereof) without changing your instructions. You may
change your instructions directing your
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<PAGE> 90

investments at any time by sending us a Written Request or by telephone
authorization. Changing such instructions will not change the way existing
Contract Value is apportioned among the Variable Accounts or the Fixed Account.

THE CONTRACT VALUE ALLOCATED TO A VARIABLE ACCOUNT WILL VARY WITH THE INVESTMENT
EXPERIENCE OF THAT VARIABLE ACCOUNT. YOU BEAR THE ENTIRE INVESTMENT RISK FOR
AMOUNTS YOU ALLOCATE TO THE VARIABLE ACCOUNTS. YOU SHOULD PERIODICALLY REVIEW
YOUR PREMIUM PAYMENT ALLOCATION INSTRUCTIONS IN LIGHT OF MARKET CONDITIONS AND
YOUR OVERALL FINANCIAL OBJECTIVES.

SEPARATE ACCOUNT VALUE

The value of your investment in the Separate Account will go up or down
depending on the investment experience of the Portfolios underlying the Variable
Accounts you select for investment. Separate Account Value will be decreased by
any partial withdrawals, transfers and Separate Account charges. There is no
guaranteed minimum Separate Account Value. Because the value in the Separate
Account of your Contract on any future date depends upon market conditions, it
cannot be predetermined.

Calculating Separate Account Value. The Separate Account Value is
determined at the end of each Business Day. It is the sum of the assets you have
in each of the Variable Accounts. To measure the value of each Variable Account,
we use a unit of measure called an Accumulation Unit.

Determining the Number of Accumulation Units. Any money you allocate or
transfer to a Variable Account will be converted into Accumulation Units and
will increase the number of Accumulation Units credited to the Variable Account.
We determine the number of Accumulation Units to be credited to the Variable
Account by dividing the dollar amount of the payment or transfer by the
Accumulation Unit value for that Variable Account as of the end of that Business
Day. (See "Determining Accumulation Unit Value" below.)

Any amounts transferred, withdrawn or deducted from a Variable Account will
be processed by cancelling or liquidating Accumulation Units. The number of
Accumulation Units to be cancelled is determined by dividing the dollar amount
being removed from a Variable Account by the value of an Accumulation Unit for
that Variable Account as of the end of the Business Day during which the amount
was removed. The number of Accumulation Units in any Variable Account will be
decreased at the end of each Business Day by:

(a) any amounts transferred (and any applicable Transfer Fee) from that
Variable Account to another Variable Account or to the Fixed
Account,

(b) any amounts withdrawn during that Business Day,

(d) the quarterly Contract Fee, if assessed on that Business Day.

Determining Accumulation Unit Value. On the first day of operation for
each Variable Account, the value of an Accumulation Unit for that Variable
Account is set at $10. We recalculate the value of an Accumulation Unit for each
Variable Account at the end of each Business Day. Accumulation Unit Value is
calculated by multiplying the value of an Accumulation Unit at the end of the
immediately preceding Business Day by the Variable Account's Net Investment
Factor for the current Business Day. The Net Investment Factor for each Variable
Account reflects the investment performance and capital gains and losses
(whether realized or unrealized) of the underlying Portfolio and certain
Separate Account charges for that Business Day. The formula for computing the
Net Investment Factor may be found in the Statement of Additional Information.

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<PAGE> 91

TRANSFERS BETWEEN INVESTMENT OPTIONS

General. Before the Annuity Start Date and subject to the restrictions
described below, you may transfer all or part of the amount in a Variable
Account or the Fixed Account to another Variable Account or the Fixed Account.

If you transfer money out of an Eligible Variable Account, you will reduce
the value of the Eligible Premium Payment on which your Living Benefit is based.
(See "Living Benefit.") IT IS IMPORTANT THAT YOU READ THE SECTION ON "LIVING
BENEFIT" BEFORE YOU MAKE A TRANSFER IF YOU HAVE SELECTED THE LIVING BENEFIT
OPTION.

Transfers to the Fixed Account must be at least $1,000. Before the Annuity
Start Date, you may transfer up to 20% of the Fixed Account Value (as determined
at the beginning of the Contract Year) from the Fixed Account to one or more of
the Variable Accounts in any Contract Year. We measure a Contract Year from the
anniversary of the day we issued your Contract. We do not charge a Transfer Fee
for transfers from the Fixed Account to one or more Variable Accounts and such a
transfer is not considered a transfer for purposes of assessing a transfer
charge.

Transfers will be made as of the Business Day on which we receive your
Written Request or telephone authorization to transfer, provided we receive it
before the close of our Business Day, usually 4:00 p.m. Eastern Time. If we
receive your request after the close of our Business Day, we will make the
transfer as of the next Business Day. There currently is no limit on the number
of transfers that you can make before the Annuity Start Date among or between
Variable Accounts or to the Fixed Account.

Telephone Transfers. We will make a transfer based upon instructions you
give us over the telephone, provided we have on file a currently valid telephone
transfer authorization that you have signed. If you have not completed such an
authorization on your application, you must send a telephone transfer
authorization form to our Service Center. Your authorization is valid until you
revoke it in writing or until the Service Center receives a subsequently dated
form that you have signed. You may use your telephone to authorize a transfer
from one Variable Account or the Fixed Account to another Variable Account or
the Fixed Account, to change the allocation instructions for future investments,
to change Dollar-Cost Averaging, interest sweep and Automatic Account Balancing
options and/or to request a partial withdrawal.

We will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If we follow such procedures we will not
be liable for any losses due to unauthorized or fraudulent instructions. We may
be liable for such losses if we do not follow those reasonable procedures. The
procedures that we may follow for telephone transfers include providing you with
a written confirmation of all transfers made according to telephone
instructions, requiring a form of personal identification prior to acting on
instructions received by telephone, and tape recording instructions received by
telephone.

We reserve the right to modify, restrict, suspend or eliminate the transfer
privileges (including the telephone transfer facility) at any time, for any
class of Contracts, for any reason. In particular, we reserve the right not to
honor transfers requested by a third party holding a power of attorney from you
where that third party requests simultaneous transfers on your behalf of two or
more Contracts.

Transfer Fee. We will impose a transfer fee of $25 for the thirteenth and
each subsequent transfer request you make per Contract Year. For the purpose of
assessing the Transfer Fee, each Written Request will be considered to be one
transfer, regardless of the number of Variable Accounts affected by the
transfer. There is currently no limit on the number of transfers you can make of
Contract Value from one or more Variable Accounts to another one or more of the
Variable Accounts or the Fixed Account during a single Contract Year before the
Annuity Start Date. (See "Charges and Deductions.")

Dollar-Cost Averaging. The Dollar-Cost Averaging program permits you to
systematically transfer (on a monthly or quarterly basis) a set dollar amount
from one or more Variable Accounts or the Fixed Account to any other Variable
Accounts. The fixed dollar amount will purchase more Accumulation Units of a
Variable Account when their value is lower and fewer units when their value is
higher. Over time, the cost per unit averages out to be less than if all
purchases of units had been made at the highest value and greater than if

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<PAGE> 92

all purchases had been made at the lowest value. The dollar-cost averaging
method of investment reduces the risk of making purchases only when the price of
Accumulation Units is high. It does not assure a profit or protect against a
loss in declining markets.

You may elect to participate in the Dollar-Cost Averaging program when you
complete your application, or at any other time before the Annuity Start Date,
by sending us a Written Request. To use the Dollar-Cost Averaging program, you
must transfer at least $100 to each Variable Account. Once you elect the
program, it remains in effect for the life of the Contract until the value of
the Variable Account from which transfers are being made is depleted, and/or the
value of the Fixed Account is expended, or until you cancel the program by
Written Request or by telephone request if we have your telephone authorization
on file. There is no additional charge for dollar-cost averaging, and a transfer
under this program is not considered a transfer for purposes of assessing a
transfer change. We reserve the right to discontinue offering the Dollar-Cost
Averaging program at any time and for any reason.

Dollar-Cost Averaging from an Eligible Variable Account will reduce the
value of the Eligible Premium Payment on which the Living Benefit is based. (See
"Living Benefit.")

Interest Sweep. Before the Annuity Start Date, you may elect to have any
interest credited to the Fixed Account automatically transferred on a quarterly
basis to one or more Variable Accounts. There is no charge for interest sweep
transfers and an interest sweep transfer is not considered a transfer for
purposes of assessing a transfer charge. Amounts transferred out of the Fixed
Account due to an interest sweep transfer are counted toward the 20% of Fixed
Account Value that may be transferred out of the Fixed Account during any
Contract Year.

Automatic Account Balancing Service. Once your money has been allocated
among the Variable Accounts, the performance of each Variable Account may cause
your allocation to shift. You may instruct us to automatically rebalance your
Variable Account values (on a monthly or quarterly basis) to return to the
percentages specified in your allocation instructions. You may elect to
participate in the Automatic Account Balancing Service when you complete your
application or at any other time before the Annuity Start Date by sending us a
Written Request. Your percentage allocations must be in whole percentages and be
at least 1% per allocation. You may start and stop Automatic Account Balancing
at any time by sending us a Written Request or by telephone request, if we have
your telephone authorization on file. There is no additional charge for using
Automatic Account Balancing, and an account balancing transfer is not considered
a transfer for purposes of assessing a transfer charge. We reserve the right to
discontinue offering the Automatic Account Balancing Service at any time and for
any reason.

Automatic Account Balancing from an Eligible Variable Account will reduce
the value of the Eligible Premium Payment on which the Living Benefit is based.
(See "Living Benefit.")

FEES AND CHARGES

WITHDRAWAL CHARGE

General. We do not deduct a charge for sales expenses from Premium
Payments at the time Premium Payments are paid to us. However, we will deduct
any applicable Withdrawal Charge if you fully or partially withdraw Contract
Value before the Annuity Start Date. We do not assess a Withdrawal Charge on
withdrawals made in the event the Contract terminates due to your death or the
death of the Annuitant, or if you decide to begin to receive annuity payments
and you choose an annuity payout plan with a life contingency or an annuity
payout plan with a period certain of at least 10 years.

The amount of the Withdrawal Charge you may incur depends on the Withdrawal
Charge Option you choose at the time you purchase your Contract. ONCE YOU CHOOSE
YOUR WITHDRAWAL CHARGE OPTION, YOU CANNOT CHANGE IT. If your initial Premium
Payment is $100,000 or more, you may choose one of two Free Withdrawal Options
at the time you complete your application.

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<PAGE> 93

Withdrawal Charge Options. When you purchase your Contract, you must
choose between two Withdrawal Charge Options.

The DATE OF ISSUE WITHDRAWAL CHARGE OPTION is designed for the owner who
wishes to make additional Premium Payments periodically over the life of the
Contract. The charge expires after the ninth Contract Year, benefiting those
owners who intend to continue to make Premium Payments after the ninth Contract
Year.

The PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION is more suitable for the owner
who currently intends to make only a single Premium Payment or several Premium
Payments close in time to the date the Contract is issued. This withdrawal
charge option is not designed for the owner who intends to make additional
Premium Payments over an extended period of time because each time you make
another Premium Payment, the seven-year period for paying the Withdrawal Charge
begins again with respect to that payment.

The Withdrawal Charge is separately calculated for each withdrawal you
make. For purposes of calculating the Withdrawal Charge, the money that has been
held the longest in the Contract will be deemed to be the first money withdrawn.
This is called the "first in, first out" method of accounting or "FIFO." In
addition, amounts subject to the Withdrawal Charge will be deemed to be first
from Premium Payments, and then from earnings. This means that we will not
deduct a Withdrawal Charge on withdrawals of that portion of your Contract Value
that exceeds the sum total of your Premium Payments.

IF YOU CHOOSE THE DATE OF ISSUE WITHDRAWAL CHARGE OPTION: We will impose a
Withdrawal Charge on all partial or full withdrawals of Premium Payments that
you make during the first nine Contract Years if the amount of the withdrawal
exceeds the Free Withdrawal Amount. The Withdrawal Charge is calculated as a
percentage of the amount you withdraw based on the number of years between the
date we receive your Written Request for withdrawal and the Date of Issue. The
rate of the Withdrawal Charge is listed in the table below. Under this option,
no Withdrawal Charge is deducted from full or partial withdrawals that you make
in Contract Years ten and later.

<TABLE>
<CAPTION>
CHARGE AS PERCENTAGE
CONTRACT YEAR OF PREMIUM PAYMENTS
------------- --------------------
<S> <C>
1-6............................................... 7.0%
7................................................. 6.0
8................................................. 4.0
9................................................. 2.0
10+............................................... 0
</TABLE>

IF YOU CHOOSE THE DATE OF PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION: We
will calculate the Withdrawal Charge by determining the length of time between
the date we receive your Written Request for a withdrawal and the date you made
the Premium Payment being withdrawn. We will deduct a Withdrawal Charge if you
withdraw a Premium Payment that we have held for less than seven Premium Payment
Years if it is greater than the Free Withdrawal Amount.

<TABLE>
<CAPTION>
PREMIUM CHARGE AS PERCENTAGE
PAYMENT YEAR OF PREMIUM PAYMENTS
------------ --------------------
<S> <C>
1................................................. 7.0%
2................................................. 6.0
3................................................. 5.0
4................................................. 4.0
5................................................. 3.0
6................................................. 2.0
7................................................. 1.0
8+................................................ 0
</TABLE>

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<PAGE> 94

Free Withdrawal Amount. In any Contract Year after the first, you may
withdraw a portion of your Contract Value without incurring a Withdrawal Charge.
This amount is called the Free Withdrawal Amount. Withdrawals under the
Systematic Withdrawal Program are also permitted a Free Withdrawal Amount, as
determined below, during the first Contract Year. If your initial Premium
Payment is less than $100,000, the Free Withdrawal Amount is 10% of Contract
Value each year, as determined at the beginning of the Contract Year. If you do
not withdraw the full 10% in any Contract Year after the first, the remaining
amount does not roll over to the next Contract Year.

If your initial Premium Payment is $100,000 or more, the Free Withdrawal
Amount depends on the Free Withdrawal Option you choose at the time you purchase
your Contract. Once you choose an option, you cannot change it.

IF YOU CHOOSE THE CUMULATIVE 10% OPTION: After the first Contract Year,
you may withdraw up to 10% of your Contract Value as of the beginning of each
Contract Year and we will not charge you a Withdrawal Charge on that amount. If
you do not withdraw the full 10% in any one Contract Year, the remaining
percentage may be rolled over to the next Contract Year, up to a maximum of 50%
of Contract Value after 5 years measured as of the beginning of each Contract
Year.

IF YOU CHOOSE THE EARNINGS OPTION: After the first Contract Year, you may
withdraw part or all of your earnings under the Contract at any time without
incurring a Withdrawal Charge. Earnings are equal to your Contract Value minus
Premium Payments, transfers and partial withdrawals.

Amounts withdrawn in excess of the Free Withdrawal Amount will be assessed
a Withdrawal Charge, depending on the Withdrawal Charge Option you choose. (See
"Withdrawal Charge.") Free withdrawals may be subject to the 10% federal penalty
tax if made before you reach age 59 1/2.

Waiver of Withdrawal Charge. If state law permits, we will waive the
Withdrawal Charge if the Annuitant or the Annuitant's spouse is confined for a
specified period to a hospital (as described in the Contract) or a long term
care facility (as described in the Contract). If the Annuitant becomes
terminally ill (as described in the Contract) before the Annuity Start Date and
if permitted by state law, we will waive the Withdrawal Charge on any full
withdrawal or any partial withdrawal, provided the partial withdrawal is at
least $500 and a $5,000 balance remains in the Accounts after the withdrawal. We
must receive your Written Request to waive the charge before the Annuity Start
Date.

Under the terms of the Post-Secondary Education Rider, if you, your spouse,
your child or the Annuitant is enrolled in a college, university, vocational,
technical, trade or business school, we will waive the Withdrawal Charge on one
withdrawal of up to 20% of Contract Value in each Contract Year before the
Annuity Start Date while the Annuitant is alive, so long as this waiver is
permitted by state law. The maximum withdrawal permitted under the
Post-Secondary Education Rider, when combined with the Free Withdrawal Amount,
is 20% of Contract Value per Contract Year. Before the withdrawal, we must
receive at our Home Office written proof of enrollment to our satisfaction
within one (1) year of the date of enrollment. (See "Free Withdrawal Amount" and
the Statement of Additional Information.)

Employee and Agent Purchases. If state law permits, we will waive the
Withdrawal Charge on any full or partial withdrawals from Contracts sold to
agents or employees of Indianapolis Life Insurance Company (or its affiliates
and subsidiaries).

CONTRACT FEE

At the end of each Contract quarter (or on the date of full withdrawal of
Contract Value) before the Annuity Start Date, we will deduct from the Contract
Value a quarterly contract fee of $7.50 as

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reimbursement for our administrative expenses relating to the Contract. The fee
will be deducted from each Variable Account and the Fixed Account based on the
proportion that the value in each such Variable Account and the Fixed Account
bears to the total Contract Value. We will not charge the Contract Fee after an
annuity payout plan has begun. Deduction of the Contract Fee is currently waived
for all Qualified Contracts. We also currently waive deduction of the Contract
Fee for Non-Qualified Contracts whose cumulative Premium Payments on the date
the Contract Fee is assessed are equal to or greater than $100,000. We reserve
the right to modify this waiver upon 30 days written notice to you.

ASSET-BASED ADMINISTRATIVE CHARGE

We will deduct a daily administrative charge as compensation for certain
expenses we incur in the administration of the Contract. The charge is deducted
from the assets of the Separate Account at an annual rate of 0.15%. We will
continue to assess this charge after annuitization if annuity payments are made
on a variable basis. There is no necessary relationship between the amount of
this administrative charge and the amount of expenses that may be attributable
to a particular Contract.

TRANSFER FEE

A transfer fee of $25 will be imposed for the 13th and each subsequent
transfer during a Contract Year. For the purpose of assessing the Transfer Fee,
each Written Request would be considered to be one transfer, regardless of the
number of Variable Accounts affected by the transfer. The transfer fee will be
deducted from the Variable Account from which the transfer is made. If a
transfer is made from more than one Variable Account at the same time, the
transfer fee would be deducted pro-rata from the remaining Separate Account
Value in such Variable Account(s). We reserve the right to waive the transfer
fee.

MORTALITY AND EXPENSE RISK CHARGE

As compensation for assuming mortality and expense risks, we will deduct a
daily mortality and expense risk charge from the assets of the Separate Account.
The charge is at a daily rate of 0.003404%. If applied on an annual basis this
rate would be 1.25% (approximately 0.90% for mortality risk and 0.35% for
expense risk). This charge will continue to be assessed if annuity payments are
made on a variable basis either before or after the Annuity Start Date.

The mortality risk we assume is that Annuitants may live for a longer
period of time than estimated when the guarantees in the Contract were
established. Because of these guarantees, each Annuitant is assured that
longevity will not have an adverse effect on the annuity payments received. The
mortality risk that we assume also includes a guarantee to pay a Death Benefit
if the Annuitant dies before the Annuity Start Date. The expense risk that we
assume is the risk that the administrative fees and transfer fees (if imposed)
may be insufficient to cover actual future expenses. We may use any profits from
this charge to pay the costs of distributing the Contracts.

FUND EXPENSES

Because the Separate Account purchases shares or units of the various
Portfolios of the Funds, the net assets of the Separate Account will be reduced
by the investment advisory fees and other operating expenses incurred by such
Portfolios. See the accompanying prospectuses for the Portfolios.

PREMIUM TAXES

Various states and other governmental entities charge a premium tax on
annuity contracts issued by insurance companies. Premium tax rates currently
range up to 3.5%, depending on the state. Tax rates are subject to change from
time to time by legislative and other governmental action. In addition, other
governmental units within a state may levy such taxes. We are responsible for
the payment of these taxes and, if necessary, we will make a deduction from the
value of your Contract either: (a) from Premium Payments as we receive them, (b)
from Contract Value upon partial or full withdrawal, (c) when annuity payments
begin,

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or (d) upon payment of a Death Benefit. We, however, reserve the right to deduct
premium taxes at the time such taxes are paid to the taxing authority.

OTHER TAXES

Currently, no charge is made against the Separate Account for any federal,
state or local taxes (other than premium taxes) that we incur or that may be
attributable to the Separate Account or the Contracts. We may, however, deduct
such a charge in the future from Surrender Value, Death Benefits or annuity
payments, as appropriate. Such taxes may include taxes (levied by any government
entity) which we determine to have resulted from: (1) the establishment or
maintenance of the Separate Account, (2) receipt by us of Premium Payments, (3)
issuance of the Contracts, or (4) the payment of annuity payments.

THE PAYOUT PERIOD

The Payout Period is that period of time during which you will receive a
steady stream of annuity payments from the money you have accumulated under your
Contract. The Payout Period begins on the Annuity Start Date. You may choose to
receive your annuity payments on a fixed or variable basis, or a combination of
both. If you choose to have your Payout Option on a variable basis, you may keep
the same Variable Accounts to which your Premium Payments were allocated during
the Pay-in Period, or transfer to different Variable Accounts.

THE ANNUITY START DATE. If you own a Non-Qualified Contract, you may
select the Annuity Start Date on which you will begin to receive annuity
payments. If you do not specify a date, the Annuity Start Date is the later of
the Annuitant's age 70 or 10 years after the Date of Issue. For Qualified
Contracts purchased in connection with qualified plans under Code sections
401(a), 401(k), 403(b) and 457, the Code requires that the Annuity Start Date
must be no later than April 1 of the calendar year following the later of the
year in which the Owner (i) reaches age 70 1/2 or (ii) retires and the payment
must be made in a specified form or manner. If the Owner is a "5 percent owner"
(as defined in the Code), or in the case of an IRA that satisfies Code section
408, the Annuity Start Date must be no later than the date described in (i).
Roth IRAs under Section 408A of the Code do not require distributions at any
time prior to the Owner's death.

If you have chosen the Living Benefit option at the time you purchase the
Contract and you select an Annuity Start Date that is earlier than the Living
Benefit Date (i.e., 10 years after the Date of Issue), you will lose your
eligibility for the Living Benefit. (See "Living Benefit.")

We will start annuity payments to the Annuitant on the Annuity Start Date
shown in your contract, unless you change the date. You may change your Annuity
Start Date if: (1) we receive your Written Request at the Service Center at
least 31 days before the current Annuity Start Date, and (2) the Annuity Start
Date you request is a Contract Anniversary or it is the date on which you fully
withdraw the Surrender Value.

ANNUITY PAYOUT OPTIONS. You may elect, revoke, or change your annuity
payout plan at any time before the Annuity Start Date while the Annuitant is
living by sending us a Written Request signed by you and/or your beneficiary, as
appropriate. You may choose one of the payout plans described below or any other
plan being offered by us as of the Annuity Start Date. The payout plans we
currently offer provide either variable annuity payments or fixed annuity
payments or a combination of both.

You may select to receive annuity payments on a monthly, quarterly,
semi-annual or annual basis. The first payment under any payout plan will be
made on the fifteenth day of the month immediately following the Annuity Start
Date. Subsequent payments shall be made on the fifteenth of the month.

If you do not select an annuity payout plan by the Annuity Start Date, we
will apply the adjusted Contract Value under Option 3, One Life Income with
payments guaranteed for 10 years, as described below. The adjusted Contract
Value will be allocated to a fixed and variable payout in the same proportion
that your interest in the Fixed and Variable Accounts bears to the total
Contract Value on the Annuity Start Date.

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Anytime before the Annuity Start Date, you may have the entire Surrender
Value paid to you as an annuity under one of the payout plans. A beneficiary may
have the Death Benefit paid as an annuity under one of the payout plans.

We reserve the right to pay you the adjusted Contract Value in a lump sum
and not as an annuity if your adjusted Contract Value after the Annuity Start
Date would be less than $2,500, or the amount of annuity payments would be less
than $25.

DETERMINING THE AMOUNT OF THE ANNUITY PAYMENT. On the Annuity Start Date,
the adjusted Contract Value will be used to calculate your annuity payments
under the payout plan you select, unless you choose to receive the Surrender
Value in a lump sum. In certain states, we must use the Surrender Value of your
Contract to calculate your annuity payments under the payout plan you choose,
rather than the adjusted Contract Value.

The adjusted Contract Value is the Contract Value on the Annuity Start
Date:

(1) MINUS the quarterly Contract Fee;

(2) MINUS any applicable premium taxes not yet deducted; and

(3) for an installment income annuity payout plan with a payout period
of less than 10 years, MINUS any applicable Withdrawal Charge.

For Qualified Contracts, the amount of any outstanding loan is also
deducted; distributions must satisfy certain requirements specified in the Code.

We do not assess a Withdrawal Charge if you choose an annuity payout plan
with a life contingency or an installment payout plan with a period certain of
at least 10 years.

FIXED ANNUITY PAYMENTS

Fixed annuity payments are periodic payments that we make to the Annuitant.
The amount of the fixed annuity payment is fixed and guaranteed by us. The
amount of each payment depends only on the form and duration of the payout plan
you choose, the age of the Annuitant, the sex of the Annuitant (if applicable),
the amount of your adjusted Contract Value and the applicable annuity purchase
rates in the Contract. The annuity purchase rates in the Contract are based on a
minimum guaranteed interest rate of 3.0%. We may, in our sole discretion, make
annuity payments in an amount based on a higher interest rate.

VARIABLE ANNUITY PAYMENTS

As with fixed annuity payments, variable annuity payout plans guarantee
income either for life or the number of years that you have chosen. The amount
of your variable annuity payments will depend on the current value of the
underlying investments, which varies over time. Your contract will contain
annuity tables which demonstrate how the initial annuity payment rate is
derived. This rate is different for each payout plan, and varies by age and sex
of the annuitant. The contract will also permit you to choose a benchmark rate
of return for the Payout Period. You may choose a benchmark rate of 3.0%, 4.0%
or 5.0% annually. If the net investment performance is greater than this
benchmark rate, your payments will increase. If the performance falls below this
benchmark, your payments will decline. Therefore, if you choose a 5.0% benchmark
rate, you assume more risk that your income check may occasionally decline than
if you choose a 3.0% benchmark rate. For further details on Variable Annuity
Payments, see the Statement of Additional Information.

Transfers. After the Annuity Start Date, an Annuitant may change the
Variable Account(s) in which the annuity payout plan is invested once per
Contract Year by sending us a Written Request. No charge is assessed for this
transfer. We will make the transfer by exchanging annuity units of one Variable
Account for another Variable Account on an equivalent dollar value basis. See
the Statement of Additional Information for examples of annuity unit value
calculations and variable annuity payment calculations.

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DESCRIPTION OF ANNUITY PAYOUT OPTIONS

Option 1 -- Installment Income For a Fixed Period. Under this option, we
will make equal monthly annuity payments for a fixed number of years between 1
and 30 years. The amount of the payment is not guaranteed if a variable payout
plan is selected. If a fixed payout plan is selected, the payments for each
$1,000 of Contract Value will not be less than those shown in the Fixed Period
Table in Section 13 of the Contract. In the event of the Payee's death, a
Successor Payee may receive the remaining payments or may elect to receive the
present value of the remaining payments in a lump sum. If there is no Successor
Payee, the present value of the remaining payments will be paid to the estate of
the last surviving Payee.

Option 2 -- Installment Income In a Fixed Amount. Under this option, we
will make equal monthly payments of $5.00 or more for each $1,000 of Contract
Value used to purchase the option until the full amount is paid out. In the
event of the Payee's death, a Successor Payee may receive the payments or may
elect to receive the present value of the remaining payments in a lump sum. If
there is no Successor Payee, the present value of the remaining payments will be
paid to the estate of the last surviving Payee.

Option 3 -- One Life Income. Under this option, we will make an annuity
payment each month so long as the Payee is alive,* or for a guaranteed 10 or 20
year period. If when the Payee dies, we have made annuity payments for less than
the selected guaranteed period to the Successor Payee, we will continue to make
annuity payments for the rest of the guaranteed period. The amount of each
payment is not guaranteed if a variable payout plan is selected. If a fixed
payout plan is selected, the payment for each $1,000 of Contract Value used to
purchase the option will not be less than that shown in the One Life Table in
Section 12 of the Contract. Payments guaranteed for 10 or 20 years certain may
be commuted. Payments guaranteed only for the life of the Payee may not be
commuted.

Option 4 -- Joint and Survivor Life Income. Under this option, we will
make annuity payments each month so long as two Payees are alive, or if one
Payee dies to the surviving Payee.* If one Payee dies before the due date of the
first payment, the surviving Payee will receive payments under Option 3 -- One
Life Income with payments guaranteed for 10 years. The payments may not be
commuted.

WITHDRAWAL OF CONTRACT VALUE

Full Withdrawals. At any time before the Annuity Start Date, you may
withdraw fully from the Contract for its Surrender Value. The Surrender Value is
equal to the Contract Value MINUS (1) any applicable Withdrawal Charges; MINUS
(2) any premium taxes not previously deducted; and MINUS (3) the Contract Fee
unless waived. For Qualified Contracts, any outstanding loan balance is also
deducted. The Surrender Value will be determined as of the Business Day that we
receive your Written Request requesting full withdrawal and your Contract at our
Service Center. The Surrender Value will be paid in a lump sum unless you
request payment under a payout plan. (See "The Payout Period.") A full
withdrawal may have adverse federal income tax consequences, including a penalty
tax. (See "Federal Tax Matters.")

Partial Withdrawals. At any time before the Annuity Start Date, you may
send a Written Request to us to withdraw part of your Contract Value. You must
withdraw at least $250. We will withdraw the amount you request from the
Contract Value as of the Business Day on which we receive your Written Request
for the partial withdrawal. We will then reduce the amount remaining in the
Contract by any applicable Withdrawal Charge. Your Contract Value after a
partial withdrawal must be at least $1,000. If your Contract Value after a
partial withdrawal is less than $1,000, we reserve the right to pay you the
Surrender Value in a lump sum. (See "Fees and Charges -- Withdrawal Charge.")

You may specify how much you wish to withdraw from each Variable Account
and/or the Fixed Account. If you do not specify, or if you do not have
sufficient assets in the Variable Accounts or Fixed Account you specified to
comply with your request, we will make the partial withdrawal on a pro rata
basis from the Fixed Account and those Variable Accounts in which you are
invested. We will base the pro rata reduction on the ratio that the value in
each Variable Account and the Fixed Account has to the entire Contract Value
before the partial withdrawal.

If you withdraw money from an Eligible Variable Account, you will reduce
the value of the Eligible Premium Payment on which your Living Benefit is based.
IT IS IMPORTANT THAT YOU READ THE SECTION ON "LIVING BENEFIT" BEFORE YOU MAKE A
WITHDRAWAL IF YOU HAVE SELECTED THE LIVING BENEFIT OPTION.

INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE. (See "Federal Tax Matters.")

Systematic Withdrawal Program. The Systematic Withdrawal Program provides
an automatic monthly or quarterly payment to you, the Owner, from the amounts
you have accumulated in the Variable Accounts and/or the Fixed Account. The
minimum amount you may withdraw is $100. The maximum amount that may be
transferred and withdrawn out of the Fixed Account in any Contract Year under
all circumstances (Dollar-Cost Averaging, Systematic Withdrawals and Partial
Withdrawals) is 20% of the Fixed Account Value as determined at the beginning of
the Contract Year. To use the program, you must maintain a $1,000 balance in
your Contract. You may elect to participate in the Systematic Withdrawal Program
at any time before the Annuity Start Date by sending a Written Request to our
Service Center. Once you elect the program, it remains in effect unless the
balance in your Contract drops below $1,000. You may cancel the program at any
time by sending us a Written Request or by calling us by telephone if we have
your telephone authorization on file.

We will assess a Withdrawal Charge on these withdrawals, unless the amount
you withdraw under the Systematic Withdrawal Program qualifies as a Free
Withdrawal Amount or unless Withdrawal Charges no longer apply to the amounts
withdrawn. Withdrawals under the Systematic Withdrawal Program are permitted a
Free Withdrawal Amount during the first Contract Year. (See "Fees and
Charges -- Withdrawal Charge.") We do not deduct any other charges for this
program.

All Systematic Withdrawals will be paid to you on the same day each month,
provided that day is a Business Day. If it is not, then payment will be made on
the next Business Day. Systematic withdrawals may be taxable, subject to
withholding, and subject to a 10% penalty tax. (See "Federal Tax Matters.") We
reserve the right to discontinue offering the Systematic Withdrawal Program at
any time and for any reason.

Systematic Withdrawals from an Eligible Variable Account will reduce the
value of the Eligible Premium Payment on which the Living Benefit is based. (See
"Living Benefit.")

Full and Partial Withdrawal Restrictions. Your right to make full and
partial withdrawals is subject to any restrictions imposed by applicable law or
employee benefit plan.

Restrictions on Distributions from Certain Types of Contracts. There are
certain restrictions on full and partial withdrawals from Contracts used as
funding vehicles for Code Section 403(b) retirement programs. Section 403(b)(11)
of the Code restricts the distribution under Section 403(b) annuity contracts
of: (i) elective contributions made in years beginning after December 31, 1988;
(ii) earnings on those contributions; and (iii) earnings in such years on
amounts held as of the last year beginning before January 1, 1989. Distributions
of those amounts may only occur upon the death of the employee, attainment of
age 59 1/2, separation from service, disability, or financial hardship. In
addition, income attributable to elective contributions may not be distributed
in the case of hardship.

CONTRACT LOANS

If your Contract is issued to you in connection with retirement programs
meeting the requirements of Section 403(b) of the Code (other than those
programs subject to Title I of the Employee Retirement Income Security Act of
1974), you may borrow from us using your Contract as collateral. Loans such as
these
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are subject to the provisions of any applicable retirement program and to the
Code. You should, therefore, consult your tax and retirement plan advisers
before taking a contract loan.

At any time prior to the year the Owner reaches age 70 1/2, you may borrow
the lesser of (1) the maximum loan amount permitted under the Code, and (2) 90%
of the Surrender Value of your Contract less any existing loan amount,
determined as of the date of the loan. Loans in excess of the maximum amount
permitted under the Code will be treated as a taxable distribution rather than a
loan. The minimum loan amount is $1,000. We will only make contract loans after
approving your written application. The written consent of all assignees and
irrevocable beneficiaries must be obtained before a loan will be given.

When a loan is made, we will transfer an amount equal to the amount
borrowed from Separate Account Value or Fixed Account Value to the loan account.
The loan account is part of our general account, and Contract Value in the loan
account does not participate in the investment experience of any Variable
Account or Fixed Account. You must indicate in the loan application from which
Variable Accounts or Fixed Account, and in what amounts, Contract Value is to be
transferred to the loan account. In the absence of any such instructions from
you, the transfer(s) are made pro-rata on a last-in, first out ("LIFO") basis
from all Variable Accounts having Separate Account Value and from the Fixed
Account. Loans may be repaid by you at any time before the Annuity Start Date.
Upon the repayment of any portion of a loan, an amount equal to the repayment
will be transferred from the loan account to the Variable Account(s) or Fixed
Account as designated by you or according to your current Premium Payment
allocation instructions.

We charge interest on contract loans at an effective annual rate of 6.0%.
We pay interest on the Contract Value in the loan account at rates we determine
from time to time but never less than an effective annual rate of 3.0%.
Consequently, the net cost of a loan is the difference between 6.0% and the rate
being paid from time to time on the Contract Value in the loan account. We may
declare from time to time higher current interest rates. Different current
interest rates may be applied to the loan account than the rest of the Fixed
Account. If not repaid, loans will automatically reduce the amount of any Death
Benefit, the amount payable upon a partial or full withdrawal of Contract Value
and the amount applied on the Annuity Start Date to provide annuity payments.

If at any time, the loan amount of a Contract exceeds the Surrender Value,
the Contract will be in default. In this event, we will send you a written
notice of default stating the amount of loan repayment needed to reinstate the
Contract, and you will have 60 days, from the day the notice is mailed, to pay
the stated amount. If we do not receive the required loan repayment within 60
days, we will terminate the Contract without value. In addition, in order to
comply with the requirements of the Code, loans must be repaid in substantially
equal installments, at least quarterly, over a period of no longer than five
years (which can be longer for certain home loans). If these requirements are
not satisfied, or if the Contract terminates while a loan is outstanding, the
loan balance will be treated as a taxable distribution and may be subject to
penalty tax, and the treatment of the Contract under Section 403(b) of the Code
may be adversely affected.

Any loan amount outstanding at the time of your death or the death of the
Annuitant is deducted from any Death Benefit paid. In addition, a contract loan,
whether or not repaid, will have a permanent effect on the Contract Value
because the investment experience of the Separate Account and the interest rates
applicable to the Fixed Account do not apply to the portion of Contract Value
transferred to the loan account. The longer the loan remains outstanding, the
greater this effect is likely to be.

DEATH BENEFITS

DEATH BENEFITS BEFORE THE ANNUITY START DATE

Death Benefit. If the Annuitant dies before the Annuity Start Date, the
Beneficiary will receive a Death Benefit. If you do not choose the Enhanced
Death Benefit option, the Death Benefit will be equal to the greater of:

(1) the sum of all Premium Payments made under the Contract, LESS
partial withdrawals, as of the date we receive due proof of the
deceased's death and payment instructions; or

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(2) the Contract Value as of the date we receive due proof of the
deceased's death and payment instructions;

LESS any applicable premium taxes not previously deducted.

Enhanced Death Benefit. If you elect the three year stepped-up Enhanced
Death Benefit option at the time of purchase, the minimum Enhanced Death Benefit
payable upon the death of the Annuitant before the Annuity Start Date will be
reset every third year on the Death Benefit Anniversary if the Contract Value on
such Death Benefit Anniversary is greater than the Contract Value on the
previous Death Benefit Anniversary. The Enhanced Death Benefit will equal the
greater of:

(1) the Contract Value as of the date we receive due proof of the
deceased's death and payment instructions; or

(2) the highest Contract Value as of any Death Benefit Anniversary
preceding the date the Enhanced Death Benefit is determined, plus
any Premium Payments, and minus any withdrawals and charges,
incurred between such Death Benefit Anniversary and the date the
Enhanced Death Benefit is determined. This value is initially set on
the first Death Benefit Anniversary and equals the greater of: (a)
the sum of Premium Payments, MINUS partial withdrawals; or (b)
Contract Value, on that date. This value will be reset on every
future Death Benefit Anniversary (that is, every third Contract
Anniversary) to equal Contract Value on that date only if Contract
Value on that Death Benefit Anniversary is greater than the Enhanced
Death Benefit Value on any previous Death Benefit Anniversary. Once
reset, this value will never decrease unless partial withdrawals are
made;

LESS any applicable premium taxes not previously deducted.

Age Limitation Under Either Death Benefit Option. If the Annuitant dies at
or after age 75 (or ten years after the Date of Issue, whichever is later) but
before the Annuity Start Date, the Death Benefit will equal Contract Value, LESS
any applicable premium taxes not yet deducted, as of the date we receive due
proof of death and payment instructions.

Loans. If the Contract is a Qualified Contract, any outstanding loan
amount on the date the Death Benefit is paid will also be deducted from the
Death Benefit.

Distribution Upon the Owner's Death. If you own the Contract with another
person, and one of you dies before the Annuity Start Date, the survivor becomes
the sole Beneficiary regardless of your designation. If there is no surviving
Owner, your named Beneficiary will become the Beneficiary upon your death. (You
may name primary and contingent beneficiaries.) If you have named two or more
primary Beneficiaries, they will share equally in the death benefit (described
below) unless you have specified otherwise. If there are no living primary
Beneficiaries at the time of your death, payments will be made to those
contingent Beneficiaries who are living when payment of the death benefit is
due. If all the Beneficiaries have predeceased you, we will pay the death
benefit to your estate. If you or a Joint Owner who is the Annuitant dies before
the Annuity Start Date, then the provisions relating to the death of an
Annuitant (described below) will govern.

If you are not the Annuitant and you die before the Annuitant and before
the Annuity Start Date, then the following options are available to your
Beneficiary:

(1) If such Beneficiary is the spouse of the deceased Owner, the spouse
may continue the Contract as the new Owner.

(2) If such Beneficiary is not the spouse of the deceased Owner:

(a) such Beneficiary may elect to receive the Contract Value, LESS
any premium taxes not yet deducted, in a single sum within 5
years of the deceased Owner's death; or

(b) such Beneficiary may elect to receive the Contract Value paid out
under one of the approved payout plans, provided that
distributions begin within one year of the deceased

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Owner's death and the distribution period under the payout plan
is for the life of, or for a period not exceeding the life
expectancy of, the Beneficiary.

If such Beneficiary does not elect one of the above options, we will
pay the Contract Value, LESS any premium taxes not yet deducted, within five
years from the date of the deceased Owner's death.

Under any of the distribution options in this section, "Distribution Upon the
Owner's Death," the Beneficiary may exercise all ownership rights and privileges
from the date of the deceased Owner's death until the date that the Contract
Value is paid. Similar rules apply to Qualified Contracts. The above
distribution requirements will apply only upon the death of the first Joint
Owner.

Distribution Upon the Death of the Annuitant. If the Annuitant (including
an Owner who is the Annuitant) dies before the Annuity Start Date, we will pay
the Death Benefit described above in "Death Benefits Before the Annuity Start
Date" in a lump sum to your named Beneficiaries within five years after the date
of the Annuitant's death. (You may name primary and contingent beneficiaries.)
If you have named two or more primary Beneficiaries, they will share equally in
the Death Benefit unless you have specified otherwise. If there are no living
primary Beneficiaries at the time of the Annuitant's death, payments will be
made to those contingent Beneficiaries who are living when payment of the Death
Benefit is due. If all the Beneficiaries have predeceased the Annuitant, we will
pay the Death Benefit to you, if living, or the Annuitant's estate. In lieu of a
lump sum payment, the Beneficiary may elect, within 60 days of the date we
receive due proof of the Annuitant's death, to apply the Death Benefit to a
payout plan. (See "Payout Options.")

If you are also the Annuitant and you die, the provisions described
immediately above apply, except that the Beneficiary may only apply the Death
Benefit payment to a payout plan if:

(1) payments under the option begin within one (1) year of the
Annuitant's death; and

(2) payments under the option are payable over the Beneficiary's life or
over a period not greater than the Beneficiary's life expectancy.

DEATH OF PAYEE AFTER THE ANNUITY START DATE

If the Payee dies after the Annuity Start Date, any Joint Payee becomes the
sole Payee. If there is no Joint Payee, the Successor Payee becomes the sole
Payee. If there is no Successor Payee, the remaining benefits are paid to the
estate of the last surviving Payee. The death of the Payee after the Annuity
Start Date will have the effect stated in the payout plan pursuant to which
annuity payments are being made. If any Owner dies on or after the Annuity Start
Date, any payments that remain must be made at least as rapidly as under the
payout plan in effect on the date of the your death.

THE LIVING BENEFIT

If you elect the Living Benefit option and if you do not choose to receive
annuity payments until you have owned the Contract for at least 10 years, IL
Annuity will calculate the Living Benefit for each Eligible Variable Account on
the Living Benefit Date. The Living Benefit will be credited to an Eligible
Variable Account if the value of the Eligible Variable Account on the Living
Benefit Date is less than the current value of the Eligible Premium Payment for
that Eligible Variable Account.

An Eligible Premium Payment is that portion of your first Premium Payment
that you allocated to a particular Eligible Variable Account on the Date of
Issue. It will be reduced by a percentage of all withdrawals and transfers you
make out of that Eligible Variable Account.

The Living Benefit that we will credit to a particular Eligible Variable
Account on the Living Benefit Date is: (a) the value of the Eligible Premium
Payment on the Date of Issue for that particular Eligible Variable Account;
MINUS (b) a percentage of all withdrawals and transfers from that Eligible
Variable Account; MINUS (c) the value of that Eligible Variable Account on the
Living Benefit Date.

The Living Benefit Date is 10 years after the Date of Issue.

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If the Contract is owned by persons who are spouses at the time one Joint
Owner dies, the Living Benefit Date will remain the same date. If the Contract
is owned by Joint Owners who are not spouses and one of the Joint Owners dies
before the Living Benefit Date, the original Living Benefit Date remains in
effect provided no distributions have occurred as a result of the Owner's death.
(See "Death Benefits.") Currently, all Variable Accounts are Eligible Variable
Accounts.

You will not receive the Living Benefit if you choose an Annuity Start Date
that is earlier than the Living Benefit Date.

A TRANSFER OR A PARTIAL WITHDRAWAL OF PREMIUM PAYMENTS OUT OF AN ELIGIBLE
VARIABLE ACCOUNT WILL REDUCE THE VALUE OF ELIGIBLE PREMIUM PAYMENT FOR THE
ELIGIBLE VARIABLE ACCOUNT IN THE SAME PROPORTION AS THE TRANSFER OR WITHDRAWAL
REDUCED THE VALUE OF THE ELIGIBLE VARIABLE ACCOUNT. EXAMPLES #3 AND 4 BELOW
ILLUSTRATE HOW THIS FEATURE OF THE LIVING BENEFIT WORKS.

For purposes of calculating the value of an Eligible Variable Account, we
deem all transfers and withdrawals to be first a withdrawal of Premium Payments,
then of earnings. Transfers out of an Eligible Variable Account include
transfers resulting from Dollar Cost Averaging or Automatic Account Balancing;
withdrawals out of an Eligible Variable Account include withdrawals resulting
from the Systematic Withdrawal Payments.

The following examples illustrate how the Living Benefit works:

Example #1:

Suppose an Owner buys a Contract with a single Premium Payment of
$50,000 and immediately allocates the $50,000 to an Eligible Variable
Account. The Owner does not withdraw or transfer any amounts from the
Eligible Variable Account. As of the Living Benefit Date (which is ten
years later), $50,000 is the current value of the Eligible Premium Payment
on the Living Benefit Date.

IL Annuity will calculate the Living Benefit for the Eligible Variable
Account by comparing the current value of the Eligible Premium Payment in
the Eligible Variable Account on the Living Benefit Date ($50,000) to the
value of the Eligible Variable Account on the Living Benefit Date. In this
example, if the value of the Eligible Variable Account is less than $50,000
(the current value of the Eligible Premium Payment) on the Living Benefit
Date, IL Annuity will automatically credit the difference to Contract
Value.

Example #2:

Assume the same facts as in Example #1, except that the Owner
specifies an Annuity Start Date of the sixth Contract Anniversary and
begins to receive payments under one of the payout options available under
the Contract. On the Living Benefit Date, IL Annuity will not calculate the
Living Benefit and will not credit a Living Benefit to Contract Value. By
selecting an Annuity Start Date (the 6th Contract Anniversary) that is
earlier than the Living Benefit Date (10 years from the Date of Issue), the
Owner forfeited all eligibility for the Living Benefit.

Example #3:

Assume the same facts as in Example #1, except that the Owner
transfers $40,000 from the Eligible Variable Account in the eighth Contract
Year. At that time, the total value of the Eligible Variable Account is
$100,000. The transfer of $40,000 reduced the value of the Eligible
Variable Account by 40% ($40,000/$100,000 = .40). No additional transfers
or withdrawals are made prior to the Living Benefit Date. On the Living
Benefit Date, the initial value of the Eligible Premium Payment ($50,000)
is reduced by 40% to take into account the transfer in the eighth Contract
Year ($50,000 X .40 = $20,000), leaving $30,000 ($50,000 -- $20,000 =
$30,000). If on the Living Benefit Date the value of the Eligible Variable
Account is less than $30,000, IL Annuity will automatically credit the
difference to Contract Value.

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Example #4:

Assume the same facts as in Example #1, except that in the fourth
Contract Year the Owner deposits (or transfers) an additional $50,000
Premium Payment into the Eligible Variable Account. In the eighth Contract
Year when the value of the Eligible Variable Account is $150,000, the Owner
withdraws $40,000. The withdrawal reduced the value of the Eligible
Variable Account by 26.667% ($40,000/$150,000 = .26667). No additional
transfers or withdrawals are made before the Living Benefit Date. On the
Living Benefit Date, the initial value of the Eligible Premium Payment is
$50,000. (The second Premium Payment of $50,000 does not qualify as an
Eligible Premium Payment because it was made after the Date of Issue.) This
Eligible Premium Payment is then reduced by 26.667% to take into account
the transfer in the eighth Contract Year ($50,000 X .26667 = $13,333.33),
leaving $36,666.67 ($50,000 -- $13,333.33 = $36,666.67). If on the Living
Benefit Date the value of the Eligible Variable Account is less than
$36,666.67, IL Annuity will automatically credit the difference to Contract
Value.

Example #5:

Spousal Joint Owners: If the Contract is owned by Joint Owners who are
spouses at the time one of the Joint Owners dies, the surviving spouse may
continue the Contract. The Living Benefit Date will remain unchanged as 10
years from the Date of Issue. On that date, IL Annuity will calculate the
Living Benefit for each Eligible Variable Account with value.

Example #6:

If the Contract is owned by Joint Owners who are not spouses and one
of the Joint Owners dies, the Living Benefit will be calculated on the
original Living Benefit Date, provided the survivor has not received any
distributions as a result of the Owner's death. (See "Death Benefits.")

We will continue to pay a Living Benefit on an Eligible Premium Payment
allocated to an Eligible Variable Account if: (a) the Portfolio underlying an
Eligible Variable Account changes its investment objective; (b) we determine
that an investment in the Portfolio underlying an Eligible Variable Account is
no longer appropriate in light of the purposes of the Separate Account; or (c)
shares of a Portfolio underlying an Eligible Variable Account are no longer
available for investment by the Separate Account and IL Annuity is forced to
redeem all shares of the Portfolio held by the Eligible Variable Account.

THE FIXED ACCOUNT

You may allocate some or all of your Net Premium Payments and transfer some
or all of your Contract Value to the Fixed Account. The Fixed Account offers a
guarantee of principal (after deductions for fees and expenses) as well as
interest guaranteed by IL Annuity to be not less than 3% per year. The Fixed
Account is part of our general account. Our general account supports our
insurance and annuity obligations. Since the Fixed Account is part of the
general account, we assume the risk of investment gain or loss on this amount.
All assets in the general account are subject to our general liabilities from
business operations. The Fixed Account may not be available in all states.

The Fixed Account has not been, and is not required to be, registered with
the SEC under the Securities Act of 1933, and neither the Fixed Account nor our
general account have been registered as an investment company under the 1940
Act. Therefore, neither our general account, the Fixed Account, nor any
interests therein are generally subject to regulation under the 1933 Act or the
1940 Act. The disclosures relating to the Fixed Account which are included in
this prospectus are for your information and have not been reviewed by the SEC.
However, such disclosures may be subject to certain generally applicable
provisions of federal securities laws relating to the accuracy and completeness
of statements made in prospectuses.

FIXED ACCOUNT VALUE

The Fixed Account Value is equal to: (1) Net Premium Payments allocated to
the Fixed Account, PLUS (2) amounts transferred to the Fixed Account, PLUS (3)
interest credited to the Fixed Account, MINUS (4) any

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partial withdrawals or transfers from the Fixed Account, and MINUS (5) any
Withdrawal Charges, contract fees or premium taxes deducted from the Fixed
Account.

We intend to credit the Fixed Account with interest at current rates in
excess of the minimum guaranteed rate of 3%, but we are not obligated to do so.
We have no specific formula for determining current interest rates. Some of the
factors that we may consider, in our sole discretion, in determining whether to
credit interest in excess of the 3% guaranteed rate are: general economic
trends, rates of return currently available and anticipated on the company's
investments, regulatory and tax requirements, and competitive factors. The Fixed
Account Value will not share in the investment performance of the company's
general account or any portion thereof. Because we, in our sole discretion,
anticipate changing the current interest rate from time to time, different
allocations you make to the Fixed Account will be credited with different
current interest rates.

The interest rate we credit to amounts allocated or transferred to the
Fixed Account will apply to the end of the calendar year in which we receive the
amount. At the end of the calendar year, we will determine a new current
interest rate on such amount and accrued interest thereon (which may be a
different current interest rate from the current interest rate on new
allocations to the Fixed Account on that date). We will guarantee the rate of
interest we declare on such amount and accrued interest for the following
calendar year. We will determine, in our sole discretion, any interest to be
credited on amounts in the Fixed Account in excess of the minimum guaranteed
effective rate of 3% per year. You therefore assume the risk that interest
credited to amounts in the Fixed Account may not exceed the minimum 3%
guaranteed rate.

For purposes of making withdrawals, transfers or deductions of fees and
charges from the Fixed Account, we will consider such withdrawals to have come
from the last money into the contract, that is, on a last-in, first-out ("LIFO")
basis.

We reserve the right to change the method of crediting interest from time
to time, provided that such changes do not reduce the guaranteed rate of
interest below 3% per year or shorten the period for which the interest rate
applies to less than one calendar year (except for the year in which such amount
is received or transferred).

TRANSFER PRIVILEGES

General. Transfers to the Fixed Account must be at least $1,000. A
transfer charge of $25 may be imposed for the thirteenth and each subsequent
request you make to transfer Contract Value from one or more Variable Accounts
to the Fixed Account (or to one or more Variable Accounts) during a single
Contract Year before the Annuity Start Date.

Before the Annuity Start Date, you may transfer up to 20% of the Fixed
Account Value (as determined at the beginning of the Contract Year) from the
Fixed Account to one or more of the Variable Accounts in any Contract Year. No
fee is charged for transfers from the Fixed Account to one or more Variable
Accounts and such a transfer is not considered a transfer for purposes of
assessing a transfer charge.

Dollar-Cost Averaging. You may elect to participate in the Dollar-Cost
Averaging Program at the time of your application, or at any time thereafter
before the Annuity Start Date by sending us a Written Request. The Dollar-Cost
Averaging Program permits you to systematically transfer (on a monthly or
quarterly basis) a set dollar amount from the Fixed Account or one or more
Variable Accounts to any other Variable Accounts. The minimum amount that may be
transferred under the Dollar-Cost Averaging Program is $100 to each Variable
Account. The maximum amount that may be transferred and withdrawn out of the
Fixed Account in any Contract Year under all circumstances (Dollar-Cost
Averaging, Systematic Withdrawals and Partial Withdrawals) is 20% of the Fixed
Account Value as determined at the beginning of the Contract Year. Once elected,
dollar-cost averaging from the Fixed Account remains in effect for the life of
the Contract until the value of the Fixed Account is depleted or until you
cancel your participation by Written Request or by telephone if we have your
telephone authorization on file. There is no additional charge for dollar-cost
averaging, and a transfer under this program is not considered a transfer for
purposes of assessing a transfer change. We reserve the right to discontinue
offering the dollar-cost averaging program at any time and for any reason. (See
"Transfer Privileges -- Dollar Cost Averaging.")

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PAYMENT DEFERRAL

We have the right to defer payment of any full or partial withdrawal or
transfer from the Fixed Account for up to six months from the date we receive
your Written Request for such a withdrawal or transfer at our Service Center. If
we do not give you a payment within 30 days after we receive all necessary
documentation, or such shorter period required by a particular jurisdiction, we
will credit interest at 3%, or such higher rate as is required for a particular
jurisdiction, to the amount to be paid from the date we received the
documentation.

HOW TO REVIEW INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS

From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the Variable Accounts. These figures are
based on historical earnings and do not indicate or project future performance.
We also may, from time to time, advertise or include in sales literature
Variable Account performance relative to certain performance rankings and
indices compiled by independent organizations. More detailed information as to
the calculation of performance, as well as comparisons with unmanaged market
indices, appears in the Statement of Additional Information.

Performance data for the Variable Accounts is based on the investment
performance of the corresponding Portfolio of a Fund and reflects its expenses.
(See the accompanying prospectuses for the Funds.)

Yield quotations do not reflect the Withdrawal Charge.

The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average annual percentage change in
the value of an investment in the Variable Account from the beginning date of
the measuring period to the end of that period. This standardized version of
average annual total return reflects all historical investment results, less all
charges and deductions applied against the Variable Account (including any
Withdrawal Charge that would apply if you terminated the Contract at the end of
each period indicated, but excluding any deductions for premium taxes).

In addition to the standard version described above, total return
performance information computed on different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the Withdrawal Charge. In addition, we may from time to time
disclose average annual total return in non-standard formats and cumulative
total return for Contracts funded by the Variable Accounts.

We may also disclose yield, standard total returns, and non-standard total
returns for the Portfolios, including such disclosures for periods before the
date the Variable Account commenced operations. Sales

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literature or advertisements may quote adjusted yields and total returns for the
Portfolios since their inception reduced by some or all of the fees and charges
under the Contract. Such adjusted historic Portfolio performance may include
data that precedes the inception dates of the Variable Accounts. This data is
designed to show the performance that could have resulted if the Contract had
been in existence during that time.

In advertising and sales literature (including illustrations), the
performance of each Variable Account may be compared with the performance of
other variable annuity issuers in general or to the performance of particular
types of variable annuities investing in mutual funds, or investment portfolios
of mutual funds with investment objectives similar to the Variable Account.
Lipper Analytical Services, Inc. ("Lipper"), CDA Investment Technologies
("CDA"), Variable Annuity Research Data Service ("VARDS") and Morningstar, Inc.
("Morningstar") are independent services which monitor and rank the performance
of variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis.

We may also report other information including the effect of systematic
withdrawals, systematic investments and tax-deferred compounding on a Variable
Account's investment returns, or returns in general, which may be illustrated by
tables, graphs, or charts. All income and capital gains derived from Variable
Account investments are reinvested and can lead to substantial long-term
accumulation of assets, provided that the Variable Account investment experience
is positive.

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VOTING RIGHTS

We are the legal owner of the Portfolio shares held in the Variable
Accounts. However, when a Portfolio is required to solicit the votes of its
shareholders through the use of proxies, we believe that current law requires us
to solicit you and other Contract Owners as to how we should vote the Portfolio
shares held in the Variable Accounts. If we determine that we no longer are
required to solicit your votes, we may vote the shares in our own right.

When we solicit your vote, the number of votes you have will be calculated
separately for each Variable Account in which you have an investment. The number
of your votes is based on the net asset value per share of the Portfolio in
which the Variable Account invests. It may include fractional shares. Before the
Annuity Start Date, you hold a voting interest in each Variable Account to which
the Contract Value is allocated. After the Annuity Start Date, the Annuitant has
a voting interest in each Variable Account from which variable annuity payments
are made. If you have a voting interest in a Variable Account, you will receive
proxy materials and reports relating to any meeting of shareholders of the
Portfolio in which that Variable Account invests.

If we do not receive timely voting instructions for Portfolio shares or if
we own the shares, we will vote those shares in proportion to the voting
instructions we receive. Instructions we receive to abstain on any item will
reduce the total number of votes being cast on a matter. For further details as
to how we determine the number of your votes, see the Statement of Additional
Information.

FEDERAL TAX MATTERS

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

INTRODUCTION

This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may receive a
distribution under the annuity contract issued by us. Any person concerned about
these tax implications should consult a competent tax advisor before initiating
any transaction. This discussion is based upon our understanding of the present
federal income tax laws, as they are currently interpreted by the Internal
Revenue Service ("IRS"). No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.

The Contract may be purchased on a non-qualified basis or purchased and
used in connection with plans qualifying for favorable tax treatment. The
Qualified Contract is designed for use by individuals whose Premium Payments are
comprised solely of proceeds from and/or contributions under retirement plans
which are intended to qualify as plans entitled to special income tax treatment
under Sections 401(a), 403(b), 408 or 408A of the Code. The ultimate effect of
federal income taxes on the amounts held under a Contract, or annuity payments,
and on the economic benefit to you, the Annuitant, or the beneficiary depends on
the type of retirement plan, on the tax and employment status of the individual
concerned, and on our tax status. In addition, certain requirements must be
satisfied in purchasing a Qualified Contract with proceeds from a tax-qualified
plan and receiving distributions from a Qualified Contract in order to continue
receiving favorable tax treatment. Some retirement plans are subject to
distribution and other requirements that are not incorporated into our Contract
administration procedures. Owners, participants and beneficiaries are
responsible for determining that contributions, distributions and other
transactions with respect to the Contracts comply with applicable law.
Therefore, purchasers of Qualified Contracts should seek competent legal and tax
advice regarding the suitability of a Contract for their situation, the
applicable requirements, and the tax treatment of the rights and benefits of a
Contract. The following discussion assumes that Qualified Contracts are
purchased with proceeds from and/or contributions under retirement plans that
qualify for the intended special federal income tax treatment.

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TAX STATUS OF THE CONTRACT

Diversification Requirements. Section 817(h) of the Code provides that
separate account investments underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity contract under Section 72 of the Code. The Separate
Account, through each underlying Fund, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various Variable Accounts may be
invested. Although we do not have direct control over the Funds in which the
Separate Account invests, we believe that each Fund in which the Separate
Account owns shares will meet the diversification requirements, and therefore,
the Contract will be treated as an annuity contract under the Code.

Owner Control. In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includible in the variable annuity contract owner's gross income. The IRS has
stated in published rulings that a variable contract owner will be considered
the owner of separate account assets if the contract owner possesses incidents
of ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury Department has also announced, in connection with
the issuance of regulations concerning investment diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause the
investor (i.e., the Contract Owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
states that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
variable accounts without being treated as owners of the underlying assets."

The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the Owner of a Contract has the choice of one or more Variable Accounts
in which to allocate Net Premium Payments and Contract Values, and may be able
to transfer among Variable Accounts more frequently than in such rulings. These
differences could result in an Owner being treated as the Owner of a pro rata
share of the assets of the Separate Account. In addition, we do not know what
standards will be set forth, if any, in the regulations or rulings which the
Treasury Department has stated it expects to issue. We, therefore, reserve the
right to modify the Contract as necessary to attempt to prevent you from being
considered the Owner of any portion of the assets of the Separate Account.

Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any Owner dies on or after the
Annuity Start Date but before the entire interest in the Contract has been
distributed, the remaining portion of such interest will be distributed at least
as rapidly as under the method of distribution being used as of the date of that
Owner's death; and (b) if any Owner dies before the Annuity Start Date, the
entire interest in the Contract will be distributed within five years after the
date of your death. These requirements will be considered satisfied as to any
portion of the Owner's interest which is payable to or for the benefit of a
"designated beneficiary" and which is distributed over the life of such
Beneficiary or over a period not extending beyond the life expectancy of that
beneficiary, provided that such distributions begin within one year of that
Owner's death. The Owner's "designated beneficiary" is the person to whom
ownership of the Contract passes by reason of death. However, if a "designated
beneficiary" is the surviving spouse of a deceased Owner, the Contract may be
continued with the surviving spouse as the new Owner.

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

Other rules may apply to Qualified Contracts.

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

TAXATION OF ANNUITIES

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

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

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

In the case of a full withdrawal under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."

Section 1035 of the Code generally provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. If the
surrendered contract was issued before August 14, 1982, the tax rules formerly
providing that the withdrawal was taxable only to the extent the amount received
exceeds your investment in the contract will continue to apply to amounts
allocable to investments in that contract before August 14, 1982. In contrast,
contracts issued after January 19, 1985 in a Code Section 1035 exchange are
treated as new contracts for purposes of the penalty and distribution-at-death
rules. Special rules and procedures apply to Section 1035 transactions. Persons
who may wish to take advantage of Section 1035 should consult their tax adviser.

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payment is taxable. If death occurs before full recovery of the investment in
the contract, the unrecovered amount may be deducted on the Annuitant's final
tax return.

Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of the death of an Owner or 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 full
withdrawal from the contract or (ii) if distributed under a payment option, they
are taxed in the same way as annuity payments.

Other rules relating to distributions at death apply to Qualified
Contracts. You should consult your legal counsel and tax adviser regarding these
rules and their impact on Qualified Contracts.

Penalty Tax on Certain Withdrawals. In the case of a distribution from a
Non-Qualified Contract, there may be imposed a federal penalty tax equal to 10%
of the amount treated as taxable income. In general, however, there is no
penalty on distributions:

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

2. made on or after the death of the owner (or if the owner is not an
individual, the death of the primary Annuitant);

3. attributable to the taxpayer's becoming disabled;

5. made under certain annuities issued in connection with structured
settlement agreements; or

6. made under an annuity contract that is purchased with a single
Premium Payment when the Annuity Start Date is no later than a year
from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during the
annuity payment period.

Other tax penalties may apply to certain distributions under a Qualified
Contract.

Possible Changes in Taxation. Although the likelihood of legislative
change is uncertain, there is always the possibility that the tax treatment of
the Contracts could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted, would
adversely modify the federal taxation of the Contracts. It is also possible that
any change could be retroactive (that is, effective prior to the date of the
change). A tax adviser should be consulted with respect to legislative
developments and their effect on the Contract.

TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT

A transfer of Ownership of a Contract, the designation of an Annuitant,
Payee or other Beneficiary who is not also the Owner, the selection of certain
Annuity Start Dates or the exchange of a Contract may result in certain tax
consequences to you that are not discussed herein. An Owner contemplating any
such transfer, designation, selection, assignment, or exchange of a Contract
should contact a competent tax advisor with respect to the potential tax effects
of such a transaction.

WITHHOLDING

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"direct rollover" from the plan to another tax-qualified plan or IRA. Certain
states also require withholding of state income tax whenever federal income tax
is withheld.

MULTIPLE CONTRACTS

All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by us (or our affiliates) to you during any calendar year
are treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e). In addition, the Treasury
Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise. There may also be other situations in which the Treasury may conclude
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same Owner. Accordingly, a Contract Owner should consult a
competent tax advisor before purchasing more than one annuity contract.

TAXATION OF QUALIFIED PLANS

The Contracts are designed for use with several types of qualified plans.
The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances. Therefore, no
attempt is made to provide more than general information about the use of the
Contracts with the various types of qualified retirement plans. Contract Owners,
the Annuitants, and Beneficiaries are cautioned that the rights of any person to
any benefits under these qualified retirement plans may be subject to the terms
and conditions of the plans themselves, regardless of the terms and conditions
of the Contract, but we shall not be bound by the terms and conditions of such
plans to the extent such terms contradict the Contract, unless the Company
consents. Brief descriptions follow of the various types of qualified retirement
plans in connection with a Contract. We will amend the Contract as necessary to
conform it to the requirements of such plan.

Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals and their employers to contribute to an individual retirement
program known as an "Individual Retirement Annuity" or "IRA". IRA contributions
are limited each year to the lesser of $2,000 or 100% of the Owner's adjusted
gross income. IRA contributions may be deductible in whole or in part depending
on the individual's income and whether the individual is a participant in a
qualified plan. Distributions from certain other types of qualified plans,
however, may be "rolled over" on a tax-deferred basis into an IRA without regard
to this limit. Earnings in an IRA are not taxed while held in the IRA. All
amounts in the IRA (other than nondeductible contributions) are taxed when
distributed. Distributions prior to age 59 1/2 (unless certain exceptions apply)
are also subject to a 10% penalty tax. Sales of the Contract for use with IRAs
may be subject to special disclosure requirements of the Internal Revenue
Service. Employers may establish Simplified Employee Pension (SEP) Plans to
provide IRA contributions on behalf of their employees. The Internal Revenue
Service has not reviewed the Contract for qualification as an IRA, and has not
generally ruled whether a death benefit provision such as the provision in the
Contract comports with IRA qualification requirements.

Simplified Employee Pension (SEP) IRAs. Employers may establish Simplified
Employee Pension (SEP) IRAs under Code section 408(k) to provide IRA
contributions on behalf of their employees. In

45
<PAGE> 113

addition to all of the general Code rules governing IRAs, such plans are subject
to certain Code requirements regarding participation and amounts of
contributions.

RESTRICTIONS UNDER QUALIFIED CONTRACTS

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

POSSIBLE CHARGE FOR THE COMPANY'S TAXES

At the present time, we make no charge to the Variable Accounts for any
Federal, state, or local taxes that we incur which may be attributable to such
Variable Accounts or the Contracts. We, however, reserve the right in the future
to make a charge for any such tax or other economic burden resulting from the
application of the tax laws that it determines to be properly attributable to
the Variable Accounts or to the Contracts.

OTHER TAX CONSEQUENCES

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

OTHER INFORMATION

HOLIDAYS

In addition to federal holidays, we are closed on the following days: the
Friday after Thanksgiving, the day before Christmas when Christmas falls on
Tuesday through Saturday, the day after Christmas when
46
<PAGE> 114

Christmas falls on Sunday or Monday, and the day after New Year's Day when it
falls on a Sunday, the Monday after New Year's Day when New Year's Day falls on
a Saturday, and the day before or after Independence Day when it falls on
Saturday or Sunday.

PAYMENTS

We will usually pay you any full or partial withdrawal, Death Benefit
payment, (or for Qualified Contracts only, payment of your loan proceeds) within
seven days after we receive your Written Request, any information or
documentation we reasonably need to process your request, and in the case of a
Death Benefit receipt and filing of due proof of death.

However, we may be required to suspend or postpone payments during any
period when:

1. the New York Stock Exchange is closed, other than customary weekend
and holiday closings;

2. trading on the New York Stock Exchange is restricted as determined by
the SEC;

4. the SEC permits, by order, the suspension or postpone of payments for
your protection.

If a recent check or draft has been submitted, we have the right to delay
payment until we have assured ourselves that the check or draft has been
honored.

We have the right to defer payment for a full or partial withdrawal or
transfer from the Fixed Account for up to six months from the date we receive
your Written Request. If we do not make a payment within 30 days after we
receive the documentation we need to complete the transaction (or a shorter
period if required by a particular jurisdiction), we will credit interest to the
amount to be paid from the date we received the necessary documentation at a
rate of 3% (or such higher rate required for a particular jurisdiction).

MODIFICATION

Upon notice to you, we may modify the Contract to:

1. permit the Contract or the Separate Account to comply with any
applicable law or regulation issued by a government agency; or

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

3. reflect a change in the operation of the Separate Account; or

4. provide additional investment options.

In the event of most such modifications, we will make appropriate
endorsement to the Contract.

DISTRIBUTION OF THE CONTRACTS

IL Securities, Inc. ("IL Securities"), P.O. Box 1230, 2960 North Meridian
Street, Indianapolis, Indiana 46208, acts as the distributor for the Contracts.
IL Securities is an affiliate of Indianapolis Life Insurance Company.

Sales commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions of up to 7.2% of Premium Payments. Other
commissions of up to 1.25% may also be paid. We may also pay up to 1.25% of
Premium Payments to IL Securities to compensate it for certain distribution
expenses. These broker-dealers are expected to compensate sales representatives
in varying amounts from these commissions. In addition, we may pay other
distribution expenses such as production incentive bonuses, agent's insurance
and pension benefits, and agency expense allowances. These distribution expenses
do not result in any additional charges against the Contracts other than those
described under "Fees and Charges."

47
<PAGE> 115

LEGAL PROCEEDINGS

REPORTS TO OWNERS

We will mail a report to you at least annually at your last known address
of record. The report will state the Contract Value (including the Contract
Value in each Variable Account and the Fixed Account) of the Contract, Premium
Payments paid and charges deducted since the last report, partial withdrawals
made since the last report and any further information required by any
applicable law or regulation.

INQUIRIES

Inquiries regarding your Contract may be made by writing to us at our
Service Center.

YEAR 2000 MATTERS

Like all financial services providers, the Company utilizes systems that
may be affected by Year 2000 transition issues. The Company also relies on
service providers, including the Portfolios and the administrator, that may be
affected by Year 2000 issues. The Company has developed, and is in the process
of implementing, a Year 2000 transition plan. In addition, the Company is in the
process of confirming that the Portfolios and its service providers are also
engaged in similar transition plans. The resources that are being devoted to
this effort are substantial. It is difficult to predict with precision whether
the amount of resources ultimately devoted, or the outcome of these efforts,
will have any negative impact on the Company's operations. However, as of the
date of this Prospectus, it is not anticipated that owners will experience
negative effects on their investment, or on the services provided in connection
therewith, as a result of Year 2000 transition implementation. The Company
currently anticipates that its systems will be Year 2000 compliant in a timely
manner, but there can be no assurance that the Company will be successful, or
that interaction with other service providers will not impair services at that
time.

FINANCIAL STATEMENTS

IL Annuity and Insurance Company, formerly known as Sentry Investors Life
Insurance Company, became a wholly-owned subsidiary of the Indianapolis Life
Group of Companies, Inc. on November 1, 1994. Immediately prior thereto, we
entered into an assumption reinsurance agreement with Sentry Life Insurance
Company ("Sentry") whereby Sentry assumed all of the insurance in-force and
related assets and liabilities from us. The effect of the reinsurance agreement
was to transfer all of the insurance related assets and liabilities to Sentry,
leaving only bonds, cash and state insurance department licenses to be acquired
by the Indianapolis Life Group of Companies, Inc. No business was issued by us
through December 31, 1994.

The audited statement of net assets of IL Annuity and Insurance Co.
Separate Account 1 as of December 31, 1997 and the related statement of
operations for the year then ended and statements of changes in net assets for
the two years then ended, as well as the Report of the Independent Auditors, are
included in the Statement of Additional Information ("SAI"). The audited balance
sheets for the Company as of December 31, 1997 and 1996, and the related
statements of income, shareholder's equity, and cash flows for each of the three
years in the period ended December 31, 1997, as well as the Report of the
Independent Auditors, are contained in the SAI. The financial statements of the
Company should be considered only as bearing on our ability to meet our
obligations under the Contracts. They should not be considered as bearing on the
investment performance of the assets held in the Separate Account.

48
<PAGE> 116

TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION

Additional information about the Contract and the Separate Account is
contained in the Statement of Additional Information (SAI). You may obtain a
free copy of the SAI by writing to us at the address shown on the front cover or
by calling 1-888-232-6486. The following is the Table of Contents for that
Statement.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADDITIONAL CONTRACT PROVISIONS.............................. 1
The Contract.............................................. 1
Incontestability.......................................... 1
Incorrect Age or Sex...................................... 1
Nonparticipation.......................................... 1
Options................................................... 2
CALCULATION OF VARIABLE ACCOUNT AND ADJUSTED PORTFOLIO
PERFORMANCE DATA.......................................... 2
Money Market Variable Account Yields...................... 2
Other Variable Account Yields............................. 4
Average Annual Total Returns for the Variable Accounts.... 5
Non-Standard Variable Account Total Returns............... 6
Adjusted Historic Portfolio Performance Data..............
Effect of the Contract Fee on Performance Data............ 7
Other Information......................................... 7
HISTORIC PERFORMANCE DATA................................... 8
General Limitations....................................... 8
Variable Account Performance Figures...................... 8
Adjusted Historical Portfolio Performance Figures......... 13
NET INVESTMENT FACTOR....................................... 18
VARIABLE ANNUITY PAYMENTS................................... 19
Assumed Investment Rate................................... 20
Amount of Variable Annuity Payments....................... 20
Annuity Unit Value........................................ 21
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS........... 23
Resolving Material Conflicts.............................. 23
TERMINATION OF PARTICIPATION AGREEMENTS..................... 24
The Alger American Fund................................... 24
Fidelity Variable Insurance Products Fund................. 24
Fidelity Variable Insurance Products Fund II.............. 24
OCC Accumulation Trust.................................... 25
Royce Capital Fund........................................ 25
SAFECO Resource Series Trust.............................. 26
SoGen Variable Funds, Inc. ............................... 26
T. Rowe Price Fixed Income Series, Inc.................... 27
T. Rowe Price International Series, Inc................... 27
Van Eck Worldwide Insurance Trust......................... 27
VOTING RIGHTS............................................... 28
SAFEKEEPING OF ACCOUNT ASSETS............................... 28
DISTRIBUTION OF THE CONTRACTS............................... 28
LEGAL MATTERS............................................... 29
EXPERTS..................................................... 29
OTHER INFORMATION........................................... 30
FINANCIAL STATEMENTS........................................ 30
</TABLE>

49
<PAGE> 117

[This page is intentionally left blank]
<PAGE> 118

APPENDIX I

CONDENSED FINANCIAL INFORMATION

The following condensed information includes Accumulation Unit values for
the periods indicated. This data is obtained from the financial statements of
the Separate Account. The data should be read together with the financial
statements, related notes and other financial information included in the
Statement of Additional Information. (See "Financial Statements" in the
Statement of Additional Information.)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------------------------------------
ALGER ALGER FIDELITY FIDELITY FIDELITY
MIDCAP GROWTH SMALL CAPITALIZATION EQUITY-INCOME GROWTH MONEY MARKET
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- -------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period....... $10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value at
End of Period............. $ 9.786 $ 9.675 $10.616 $ 9.604 0
Number of Accumulation Units
Outstanding at End of
Period.................... 2,764 1,709 3,789 2,199 0
</TABLE>

<TABLE>
<CAPTION>
OCC
FIDELITY FIDELITY FIDELITY FIDELITY ACCUMULATION*
ASSET MANAGER CONTRAFUND INDEX 500 INVESTMENT GRADE BOND MANAGED
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- ---------------- ---------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period..... $10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit Value at
End of Period........... $ 8.224 $10.091 $10.514 $10.247 $10.380
Number of Accumulation
Units Outstanding at End
of Period............... 255 5,731 3,538 1,668 161
</TABLE>

<TABLE>
<CAPTION>
OCC VAN ECK
ACCUMULATION* T.ROWE PRICE T.ROWE PRICE WORLDWIDE VAN ECK
SMALL CAP LIMITED-TERM BOND INTERNATIONAL STOCK HARD ASSETS** WORLDWIDE BALANCED***
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
----------------- ----------------- ------------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit
Value at Beginning
of Period.......... $10.00 $10.00 $10.00 $10.00 $10.00
Accumulation Unit
Value at End of
Period............. $10.388 $10.042 $10.487 $10.621 $10.010
Number of
Accumulation Units
Outstanding at End
of Period.......... 1,182 1,485 2,530 58 1,201
</TABLE>

- ---------------
* Prior to May 1, 1996, OCC Accumulation Trust was called Quest for Value
Accumulation Trust.

** Prior to May 1, 1997, Van Eck Worldwide Hard Assets Variable Account was
called Van Eck Gold and Natural Resources.

*** Effective April 1, 1998, the Van Eck Worldwide Balanced Variable Account was
closed to new transfers of Contract Value and allocations of Premium
Payments.

A-1
<PAGE> 119

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------------------------------------
ALGER ALGER FIDELITY FIDELITY FIDELITY
MIDCAP GROWTH SMALL CAPITALIZATION EQUITY-INCOME GROWTH MONEY MARKET
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- -------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period....... $ 9.786 $ 9.675 $ 10.616 $ 9.604 $ 10.00
Accumulation Unit Value at
End of Period............. $ 10.812 $ 9.955 $ 11.958 $ 10.868 $ 10.456
Number of Accumulation Units
Outstanding at End of
Period.................... 109,955 181,361 195,400 164,945 179,504
</TABLE>

<TABLE>
<CAPTION>
OCC
FIDELITY FIDELITY FIDELITY FIDELITY ACCUMULATION*
ASSET MANAGER CONTRAFUND INDEX 500 INVESTMENT GRADE BOND MANAGED
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- ---------------- ---------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period..... $ 8.224 $ 10.091 $ 10.514 $10.247 $ 10.380
Accumulation Unit Value at
End of Period........... $ 11.817 $ 12.105 $ 12.734 $10.422 $ 12.567
Number of Accumulation
Units Outstanding at End
of Period............... 61,512 203,860 193,803 57,476 133,102
</TABLE>

<TABLE>
<CAPTION>
OCC VAN ECK
ACCUMULATION* T.ROWE PRICE T.ROWE PRICE WORLDWIDE VAN ECK
SMALL CAP LIMITED-TERM BOND INTERNATIONAL STOCK HARD ASSETS** WORLDWIDE BALANCED***
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
----------------- ----------------- ------------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit
Value at Beginning
of Period.......... $10.388 $10.042 $ 10.487 $10.621 $10.010
Accumulation Unit
Value at End of
Period............. $12.148 $ 9.946 $ 11.780 $12.356 $11.019
Number of
Accumulation Units
Outstanding at End
of Period.......... 40,024 27,325 122,831 29,990 26,719
</TABLE>

- ---------------
* Prior to May 1, 1996, OCC Accumulation Trust was called Quest for Value
Accumulation Trust.

** Prior to May 1, 1997, Van Eck Worldwide Hard Assets Variable Account was
called Van Eck Gold and Natural Resources.

*** Effective April 1, 1998, the Van Eck Worldwide Balanced Variable Account was
closed to new transfers of Contract Value and allocations of Premium
Payments.

A-2
<PAGE> 120

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------------------------------------------
ALGER ALGER FIDELITY FIDELITY FIDELITY
MIDCAP GROWTH SMALL CAPITALIZATION EQUITY-INCOME GROWTH MONEY MARKET
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- -------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period....... $10.812 $ 9.955 $11.958 $10.868 $10.456
Accumulation Unit Value at
End of Period............. $12.263 $10.936 $15.114 $13.240 $10.888
Number of Accumulation Units
Outstanding at End of
Period.................... 294,506 372,229 781,937 462,381 486,050
</TABLE>

<TABLE>
<CAPTION>
OCC
FIDELITY FIDELITY FIDELITY FIDELITY ACCUMULATION*
ASSET MANAGER CONTRAFUND INDEX 500 INVESTMENT GRADE BOND MANAGED
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- ---------------- ---------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period..... $11.817 $12.105 $12.734 $10.422 $12.567
Accumulation Unit Value at
End of Period........... $14.066 $14.824 $16.672 $11.214 $15.160
Number of Accumulation
Units Outstanding at End
of Period............... 212,897 638,524 826,178 274,009 672,203
</TABLE>

<TABLE>
<CAPTION>
OCC VAN ECK
ACCUMULATION* T.ROWE PRICE T.ROWE PRICE WORLDWIDE VAN ECK
SMALL CAP LIMITED-TERM BOND INTERNATIONAL STOCK HARD ASSETS** WORLDWIDE BALANCED***
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
----------------- ----------------- ------------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit
Value at Beginning
of Period.......... $12.148 $ 9.946 $11.780 $12.356 $11.019
Accumulation Unit
Value at End of
Period............. $14.649 $10.767 $11.979 $11.983 $12.002
Number of
Accumulation Units
Outstanding at End
of Period.......... 162,435 136,902 368,187 166,188 81,483
</TABLE>

<TABLE>
<CAPTION>
PERIOD FROM SEPTEMBER 1, 1997 TO DECEMBER 31, 1997
-------------------------------------------------------------------------
SAFECO SAFECO ROYCE SOGEN
EQUITY GROWTH MICRO-CAP OVERSEAS
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Accumulation Unit Value at Beginning of
Period..................................... $10.000 $10.000 $10.000 $10.000
Accumulation Unit Value at End of Period..... $10.495 $11.092 $10.920 $ 9.322
Number of Accumulation Units Outstanding at
End of Period.............................. 104,775 122,625 69,105 56,558
</TABLE>

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

* Prior to May 1, 1996, OCC Accumulation Trust was called Quest for Value
Accumulation Trust.

** Prior to May 1, 1997, Van Eck Worldwide Hard Assets Variable Account was
called Van Eck Gold and Natural Resources.

*** Effective April 1, 1998, the Van Eck Worldwide Balanced Variable Account was
closed to new transfers of Contract Value and allocations of Premium
Payments.

A-3
<PAGE> 121

STATEMENT OF ADDITIONAL INFORMATION

for the

VISIONARY AND VISIONARY CHOICE

FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS

Issued Through

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1

Offered by

IL ANNUITY AND INSURANCE COMPANY
2960 North Meridian Street
Indianapolis, Indiana 46208

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

This Statement of Additional Information expands upon subjects
discussed in the current Prospectus for each of the Visionary and Visionary
Choice flexible premium deferred variable annuity contracts (each, the
"Contract") offered by IL Annuity and Insurance Company.

The Owner may obtain a copy of the Prospectus for the Visionary
Contract dated May 1, 1998 by calling 1-800-388-1331 or by writing to the
Annuity Service Center: IL Annuity and Insurance Company, P.O. Box 290764,
Wethersfield, CT 06129.

The Owner may obtain a copy of the Prospectus for the Visionary Choice
Contract dated May 1, 1998 by calling 1-888-232-6486 or by writing to the
Annuity Service Center: IL Annuity and Insurance Company, c/o USA
Administration Services, Inc., P.O. Box 29163, Overland Park, KS 66201.

Terms used in the current Prospectus for each Contract are
incorporated into this Statement.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES
FOR THE OWNER'S CONTRACT AND THE FUNDS.

The date of this Statement of Additional Information is May 1, 1998.

<PAGE> 122

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----

<S> <C>
ADDITIONAL CONTRACT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Incorrect Age or Sex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Nonparticipation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CALCULATION OF VARIABLE ACCOUNT AND ADJUSTED PORTFOLIO PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . 2
Money Market Variable Account Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Other Variable Account Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Average Annual Total Returns for the Variable Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Non-Standard Variable Account Total Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Adjusted Historic Portfolio Performance Data
Effect of the Contract Fee on Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
HISTORIC PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Variable Account Performance Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Adjusted Historical Portfolio Performance Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
NET INVESTMENT FACTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
VARIABLE ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Assumed Investment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Amount of Variable Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Annuity Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Resolving Material Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
TERMINATION OF PARTICIPATION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The Alger American Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Fidelity Variable Insurance Products Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Fidelity Variable Insurance Products Fund II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
OCC Accumulation Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Royce Capital Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SAFECO Resource Series Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SoGen Variable Funds, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
T. Rowe Price Fixed Income Series, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
T. Rowe Price International Series, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Van Eck Worldwide Insurance Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SAFEKEEPING OF ACCOUNT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
DISTRIBUTION OF THE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>

<PAGE> 123
ADDITIONAL CONTRACT PROVISIONS

THE CONTRACT

The entire contract is the Contract, the signed application, the data
page, the endorsements, options and all other attached papers. The statements
made in the application are deemed representations and not warranties. The
Company will not use any statement in defense of a claim or to void the
Contract unless it is contained in the application.

Any change in the Contract or waiver of its provisions must be in
writing and signed by the Company's President, a Vice President, Secretary or
Assistant Secretary. No other person --no agent or Registered Representative
- -- has authority to change or waive any provision of this Contract.

Upon notice to the Contract Owner, the Company may modify the Contract
if necessary to permit the Contract or the Separate Account to comply with any
applicable law or regulation issued by a governmental agency; or if necessary
to assure continued qualification of the contract under the Internal Revenue
Code or other federal or state laws relating to retirement annuities or
variable annuity contracts; or if necessary to effect a change in the operation
of the Separate Account or to provide additional investment options.

In the event of such modifications, the Company will make the
appropriate endorsement to the Contract.

INCONTESTABILITY

The Company will not contest the Contract from the Date of Issue.

INCORRECT AGE OR SEX

The Company may require proof of age, sex, and right to payments
before making any life annuity payments. If the age or sex (if applicable) of
the annuitant has been stated incorrectly, the Annuity Start Date and the
amount of the annuity payments will be determined using the correct age and
sex. If misstatement of age or sex results in annuity payments that are too
large, the overpayments will be charged with compound interest against
subsequent payments. If the Company has made payments that are too small, the
underpayments will be paid with compound interest upon receipt of notice of the
underpayments. Adjustments for overpayments or underpayments will be paid
interest at the rate then in use to determine the rate of payments.

- 1 -
<PAGE> 124
NONPARTICIPATION

The Contract does not participate in the Company's surplus earnings or profits.

OPTIONS

Except in the limited circumstances described below, the Company will
issue four options automatically upon the issuance of each Contract. These
options provide for the waiver of the Withdrawal Charge in case of extended
hospitalization, long term care, terminal illness, or the post secondary
education of certain family members or the Annuitant, as provided in the
option. There is no additional charge for the issuance of the options, which
are available only at the issuance of the Contract. All options may not be
available in all states.

CALCULATION OF VARIABLE ACCOUNT AND ADJUSTED HISTORIC PORTFOLIO
PERFORMANCE DATA

The Company may advertise and disclose historic performance data for
the Variable Accounts, including yields, standard annual total returns, and
nonstandard measures of performance of the Variable Accounts. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.

MONEY MARKET VARIABLE ACCOUNT YIELDS

Advertisements and sales literature may quote the current annualized
yield of the Money Market Variable Account for a seven-day period in a manner
which does not take into consideration any realized or unrealized gains or
losses, or income other than investment income, on shares of the Money Market
Portfolio.

This current annualized yield is computed by determining the net
change (exclusive of realized gains and losses on the sale of securities,
unrealized appreciation and depreciation, and income other than investment
income) at the end of the seven-day period in the value of a hypothetical
Variable Account under a Contract having a balance of one unit of the Money
Market Variable Account at the beginning of the period, dividing such net
change in Variable Account value by the value of the hypothetical Variable
Account at the beginning of the period to determine the base period return, and
annualizing this quotient on a 365-day basis. The net change in account value
reflects: 1) net income from the Portfolio attributable to the hypothetical
Variable Account; and 2) charges and deductions imposed under the Contract
which are attributable to the hypothetical Variable Account. These charges and
deductions include the per unit charges for: 1) the annualized Contract Fee; 2)
the mortality and expense risk charge;

- 2 -
<PAGE> 125
and 3) the asset-based administration charge. For purposes of calculating
current yields for a Contract, an average per unit Contract Fee is used based
on the $30 annualized Contract Fee which is deducted in four equal payments at
the end of each Contract Quarter. Current Yield is calculated according to the
following formula:

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

Where:

NCS = the net change in the value of the Money Market
Portfolio (exclusive of realized gains or losses on
the sale of securities, unrealized appreciation and
depreciation, and income other than investment
income) for the seven-day period attributable to a
hypothetical Variable Account having a balance of
one Variable Account unit.

ES = per unit expenses attributable to the hypothetical
Variable Account for the seven-day period.

UV = the unit value for the first day of the seven-day
period.

The Company may also disclose the effective yield of the Money Market
Variable Account for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the unanualized base
period return by adding one to the base return, raising the sum to a power
equal to 365 divided by 7, and subtracting one from the result.

(365/7)
Effective yield = (1 + ((NCS-ES)/UV)) - 1

Where:

ES = per unit expenses attributable to the hypothetical
Variable Account for the seven-day period.

UV = the unit value for the first day of the seven-day
period.

- 3 -
<PAGE> 126
Because of the charges and deductions imposed under the Contract, the
yield for the Money Market Variable Account is lower than the yield for the
Money Market Portfolio.

The current and effective yields on amounts held in the Money Market
Variable Account normally fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF
FUTURE YIELDS OR RATES OF RETURN. The Money Market Variable Account's actual
yield is affected by changes in interest rates on money market securities,
average portfolio maturity of the Money Market Portfolio, the types and quality
of securities held by the Money Market Portfolio and that Portfolio's operating
expenses. Yields on amounts held in the Money Market Variable Account may also
be presented for periods other than a seven-day period.

Yield calculations do not take into account the Withdrawal Charge that
is assessed on certain withdrawals of Contract Value. The amount of the
Withdrawal Charge depends on the Withdrawal Charge Option and the Free
Withdrawal Option chosen by the Owner at the time of purchase. See "Fees and
Charges" in the prospectus for further description of these options. No
Withdrawal Charge applies to Contract Value in excess of aggregate Premium
Payments.

Based on the method of calculation described above, for the seven-day
period ended December 31, 1997, the current yield and the effective yield for
the Money Market Variable Account were as follows:

Current yield: 4.15%
Effective yield: 4.23%

OTHER VARIABLE ACCOUNT YIELDS

Sales literature or advertisements may quote the current annualized
yield of one or more of the Variable Accounts (except the Money Market Variable
Account) under the Contract for 30-day or one-month periods. The annualized
yield of a Variable Account refers to income generated by the Variable Account
during a 30-day or one-month period and is assumed to be generated each period
over a 12-month period.

The yield is computed by: 1) dividing the net investment income of
the Portfolio attributable to the Variable Account units less Variable Account
expenses for the period; by 2) the maximum offering price per unit on the last
day of the period times the daily average number of units outstanding for the
period; and 3) compounding that yield for a six-month period; and 4)
multiplying that result by 2. Expenses attributable to the Variable Account
include the annualized Contract Fee, the asset-based administration charge and
the mortality and expense risk charge. The yield calculation assumes a
Contract Fee of $30 per year per Contract deducted at the end of each Contract
Year. For purposes of calculating the 30-day or one-month yield, an average
Contract Fee based on the average Contract Value in the Variable Account is
used to determine the amount of the charge attributable to the Variable Account
for the 30-day or

- 4 -
<PAGE> 127
one-month period. The 30-day or one-month yield is calculated according to the
following formula:

Yield = 2 X (((NI - ES)/(U X UV)) + 1)(6) - 1)

Where:

NI = net income of the Portfolio for the 30-day or
one-month period attributable to the Variable
Account's units.

ES = expenses of the Variable Account for the 30-day or
one-month period.

U = the average number of units outstanding.

UV = the unit value at the close (highest) of the last
day in the 30-day or one-month period.

Because of the charges and deductions imposed under the Contracts, the
yield for the Variable Account is lower than the yield for the corresponding
Portfolio.

The yield on the amounts held in the Variable Accounts normally
fluctuates over time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD
IS NOT AN INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. A
Variable Account's actual yield is affected by the types and quality of
securities held by the corresponding Portfolio and that Portfolio's operating
expenses.

AVERAGE ANNUAL TOTAL RETURNS FOR THE VARIABLE ACCOUNTS

Sales literature or advertisements may quote average annual total
returns for one or more of the Variable Accounts for various periods of time.
If the Company advertises total return for the Money Market Variable Account,
such advertisements and sales literature will include the statement that yield
more closely reflects current earnings than total return.

When a Variable Account has been in operation for 1, 5, and 10 years,
respectively, the average annual total return for these periods will be
provided. Average annual total returns for other periods of time may, from
time to time, also be disclosed.

- 5 -
<PAGE> 128
Standard average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.

Standard average annual total returns are calculated using Variable
Account unit values which the Company calculates on each valuation day based on
the performance of the Variable Account's underlying Portfolio, the deductions
for the mortality and expense risk charge, the deductions for the asset-based
administration charge and the annualized Contract Fee. The calculation assumes
that the Contract Fee is $7.50 per quarter per Contract deducted at the end of
each Contract quarter. For purposes of calculating average annual total
return, an average per-dollar per-day Contract Fee attributable to the
hypothetical Variable Account for the period is used. The calculation also
assumes total withdrawal of the Contract at the end of the period for the
return quotation and will take into account the Withdrawal Charge applicable to
the Contract that is assessed on certain withdrawals of Contract Value.

Standard total return is calculated according to the following formula:

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

Where:

TR = the average annual total return net of Variable
Account recurring charges.

ERV = the ending redeemable value (net of any applicable
Withdrawal Charge) of the hypothetical Variable
Account at the end of the period.

P = a hypothetical initial payment of $1,000.

N = the number of years in the period.

- 6 -
<PAGE> 129

NON-STANDARD VARIABLE ACCOUNT TOTAL RETURNS

Sales literature or advertisements may quote average annual total
returns for the Variable Accounts that do not reflect any Withdrawal Charges.
Such non-standard total returns are calculated in exactly the same way as
average annual total returns described above, except that the ending redeemable
value of the hypothetical Variable Account for the period is replaced with an
ending value for the period that does not take into account any Withdrawal
Charges.

The Company may disclose cumulative total returns in conjunction with
the standard formats described above. The cumulative total returns will be
calculated using the following formula:

CTR = (ERV/P) - 1

Where:

CTR = The cumulative total return net of Variable Account recurring
charges for the period.

ERV = The ending redeemable value of the hypothetical investment
at the end of the period.

P = A hypothetical single payment of $1,000.

ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA

Sales literature or advertisements may quote adjusted yields and total
returns for the Portfolios since their inception reduced by some or all of the
fees and charges under the Contract. Such adjusted historic Portfolio
performance may include data that precedes the inception dates of the Variable
Accounts. This data is designed to show the performance that would have
resulted if the Contract had been in existence during that time.

Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.

EFFECT OF THE CONTRACT FEE ON PERFORMANCE DATA

The Contract provides for a $7.50 Contract Fee to be deducted at the
end of each Contract Quarter from the Fixed and Variable Accounts based on the
proportion that the value of each

- 7 -
<PAGE> 130
such Account bears to the total Contract Value. For purposes of reflecting the
Contract Fee in yield and total return quotations, the Contract Fee is
converted into a per-dollar per-day charge based on the average Contract Value
in the Separate Account of all Contracts on the last day of the period for
which quotations are provided. The per-dollar per-day average charge will then
be adjusted to reflect the basis upon which the particular quotation is
calculated.

OTHER INFORMATION

The following is a partial list of those publications which may be
cited in the Funds' advertising shareholder materials which contain articles
describing investment results or other data relative to one or more of the
Variable Accounts. Other publications may also be cited.

<TABLE>
<S> <C>
Broker World Financial World
Across the Board Advertising Age
American Banker Barron's
Best's Review Business Insurance
Business Month Business Week
Changing Times Consumer Reports
Economist Financial Planning
Forbes Fortune
Inc. Institutional Investor
Insurance Forum Insurance Sales
Insurance Week Journal of Accountancy
Journal of the American Society of Journal of Commerce
CLU & ChFC
Life Insurance Selling Life Association News
MarketFacts Manager's Magazine
National Underwriter Money
Morningstar, Inc. Nation's Business
New Choices (formerly 50 Plus) New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker VARDs
Wall Street Journal Working Woman
</TABLE>

HISTORIC PERFORMANCE DATA

General Limitations

The figures below represent the past performance of the Variable
Accounts and are not indicative of future performance. The figures may reflect
the waiver of advisory fees and reimbursement of other expenses.

- 8 -
<PAGE> 131

The Funds have provided the performance data for the Portfolios. The
Variable Account performance data is derived from the data provided by the
Funds. None of the Funds are affiliated with IL Annuity. In preparing the
tables below, IL Annuity has relied on the data provided by the Funds. While
IL Annuity has no reason to doubt the accuracy of the figures provided by the
Funds, IL Annuity has not verified those figures.

VARIABLE ACCOUNT PERFORMANCE FIGURES

The charts below show the historical performance data for the Variable
Accounts since each Variable Account's commencement of operations. THESE
FIGURES ARE NOT AN INDICATION OF FUTURE PERFORMANCE OF THE VARIABLE ACCOUNTS.
Some of the figures reflect the waiver of advisory fees and reimbursement of
other expenses for part or all of the periods indicated.

Standard average annual total returns for periods since the inception
of each Variable Account are as follows. These figures include: (a) the daily
deduction of a mortality and expenses charge at an annual rate of 1.25%; (b)
the daily deduction of an administrative expenses charge at an annual rate of
0.15%; (c) the quarterly deduction of an administration charge of $7.50
adjusted for average account size; and (d) the contingent deferred sales load
of 7%.

- 9 -
<PAGE> 132

<TABLE>
<CAPTION>
===============================================================================================================
VARIABLE ACCOUNT For the 1-year For the period from
(Date of commencement of period ended commencement of
operation of Variable Account) 12/31/97 Variable Account operations
to 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Asset Manager (11/6/95) 11.88% 13.15%
Contrafund (11/6/95) 15.32% 16.79%
Index 500 (11/6/95) 23.91% 22.26%
Investment Grade Bond (11/6/95) 0.67% 1.66%
- ---------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------
Managed (11/6/95) 13.50% 17.32%
Small Cap (11/6/95) 13.46% 16.21%
- ---------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (9/1/97) N/A 6.49%
- ---------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------
Equity (9/1/97) N/A -5.35%
Growth (9/1/97) N/A 11.91%
- ---------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------
SoGen Overseas (9/1/97) N/A -33.53%
- ---------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------
Limited-Term Bond (11/6/95) 5.40% 0.62%
- ---------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------
International Stock (11/6/95) -6.95% 3.99%
- ---------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (11/6/95) -9.29% 3.44%
===============================================================================================================
</TABLE>

* Yield more closely reflects current earnings of the Money Market
Variable Account than its total return.

- 10 -
<PAGE> 133

Non-standard average annual total returns for periods since the
inception of each Variable Account are as follows. These figures include: (a)
the daily deduction of a mortality and expenses charge at an annual rate of
1.25%; and (b) the daily deduction of an administrative expenses charge at an
annual rate of 0.15%. These figures do not reflect the quarterly deduction of
an administration charge and the contingent deferred sales load which, if
deducted, would reduce performance. Non-standard performance data will only be
disclosed if standard performance data for the required periods is also
disclosed.

<TABLE>
<CAPTION>
===============================================================================================================
VARIABLE ACCOUNT For the 1-year For the period from
(Date of commencement of period ended commencement of
operation of Variable Account) 12/31/97 Variable Account operations
to 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------
MidCap Growth (11/6/95) 13.42% 9.88%
Small Capitalization (11/6/95) 9.85% 4.08%
- ---------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------
Equity Income (11/6/95) 26.34% 19.36%
Growth (11/6/95) 21.78% 14.28%
Money Market (11/6/95) * 4.03% 3.85%
- ---------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------
Asset Manager (11/6/95) 18.99% 16.03%
Contrafund (11/6/95) 22.43% 19.57%
Index 500 (11/6/95) 31.02% 24.91%
Investment Grade Bond (11/6/95) 7.55% 4.89%
- ---------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------
Managed (11/6/95) 20.61% 20.09%
Small Cap (11/6/95) 20.56% 19.01%
- ---------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (9/1/97) N/A 29.90%
- ---------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

- 11 -
<PAGE> 134

* Yield more closely reflects current earnings of the Money Market Variable
Account than its total return.

Standard cumulative total returns for periods since the inception of each
Variable Account are as follows. These figures include: (a) the daily
deduction of a mortality and expenses charge at an annual rate of 1.25%; (b)
the daily deduction of an annual administrative expenses charge at an annual
rate of 0.15%; (c) the quarterly deduction of an administration charge of
$7.50 adjusted for average account size; and (d) the contingent deferred
sales load of 7%.

- 12 -
<PAGE> 135

<TABLE>
<CAPTION>
===============================================================================================================
VARIABLE ACCOUNT For the 1-year For the period from
(Date of commencement of period ended commencement of
operation of Variable Account) 12/31/97 Variable Account operations
to 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------
Asset Manager (11/6/95) 11.88% 30.46%
Contrafund (11/6/95) 15.32% 39.67%
Index 500 (11/6/95) 23.91% 54.13%
Investment Grade Bond (11/6/95) 0.67% 3.61%
- ---------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
Managed (11/6/95) 13.50% 41.05%
Small Cap (11/6/95) 13.46% 38.18%
- ---------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (9/1/97) N/A 2.12%
- ---------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------
Equity (9/1/97) N/A -1.82%
Growth (9/1/97) N/A 3.83%
- ---------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------
SoGen Overseas (9/1/97) N/A -12.73%
- ---------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------
Limited-Term Bond (11/6/95) 5.40% 1.34%
- ---------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------
International Stock (11/6/95) -6.95% 8.78%
- ---------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (11/6/95) -9.29% 7.54%
===============================================================================================================
</TABLE>

* Yield more closely reflects current earnings of the Money Market Variable
Account than its total return.

- 13 -
<PAGE> 136

Non-standard cumulative total returns for each Variable Account for the
periods since the inception of each Variable Account are as follows. These
figures include: (a) the daily deduction of a mortality and expenses charge at
an annual rate of 1.25%; and (b) The daily deduction of the annual
administrative expenses charge at an annual rate of 0.15%. These figures do
not reflect the quarterly deduction of an administration charge and the
contingent deferred sales load which, if deducted, would reduce performance.
Non-standard performance data will only be disclosed if standard performance
data for the required periods is also disclosed.

<TABLE>
<CAPTION>
===============================================================================================================
VARIABLE ACCOUNT For the 1-year For the period from
(Date of commencement of period ended commencement of
operation of Variable Account) 12/31/97 Variable Account operations
to 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------
MidCap Growth (11/6/95) 13.42% 22.49%
Small Capitalization (11/6/95) 9.85% 9.00%
- ---------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
Equity Income (11/6/95) 26.34% 46.38%
Growth (11/6/95) 21.78% 33.30%
Money Market (11/6/95)* 4.03% 8.48%
- ---------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------
Asset Manager (11/6/95) 18.99% 37.72%
Contrafund (11/6/95) 22.43% 46.93%
Index 500 (11/6/95) 31.02% 61.42%
Investment Grade Bond (11/6/95) 7.55% 10.83%
- ---------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------
Managed (11/6/95) 20.61% 48.31%
Small Cap (11/6/95) 20.56% 45.45%
- ---------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (9/1/97) N/A 9.11%
- ---------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

- 14 -
<PAGE> 137

* Yield more closely reflects current earnings of the Money Market Variable
Account than its total return.

ADJUSTED HISTORICAL PORTFOLIO PERFORMANCE FIGURES

The charts below show "adjusted" historical performance data for the
Portfolios, including for periods prior to the inception of the Variable
Accounts, based on the performance of each Portfolio since its inception date,
with a level of charges equal to those currently assessed under the Contracts.
THESE FIGURES ARE NOT AN INDICATION OF THE FUTURE PERFORMANCE OF THE VARIABLE
ACCOUNTS. Some of the figures reflect the waiver of advisory fees and
reimbursement of other expenses for part or all of the periods indicated.

Adjusted historical standard average annual total returns for periods
since the inception of each Portfolio are as follows. These figures include:
(a) the daily deduction of the mortality and expenses charges at an annual rate
of 1.25% (except that, prior to the inception of the corresponding Variable
Account, deductions are monthly); (b) the daily deduction of the annual
administrative expenses charge at an annual rate of 0.15% (except that, prior
to the inception of the corresponding Variable Account, deductions are
monthly); (c) the quarterly deduction of the administration charge of $7.50
adjusted for average account size; and (d) the deduction of the applicable
contingent deferred sales load for the

- 15 -
<PAGE> 138

Visionary contract and the Date of Issue Withdrawal Charge Option under the
Visionary Choice contract.

<TABLE>
<CAPTION>
===============================================================================================================
PORTFOLIO For the For the For the For the For the period
(Date of commencement of 1-year 3-year 5 -year 10-year from
operation of Corresponding period period period period commencement of
Portfolio) ended ended ended ended Portfolio
12/31/97 12/31/97 12/31/97 12/31/97 operations
to 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------
MidCap Growth (5/3/93) 6.31% 21.34% N/A N/A 20.65%
Small Capitalization (9/20/88) 2.83% 17.04% 11.05% N/A 18.08%
- ---------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------
Equity Income (10/9/86) 19.23% 22.28% 17.77% 14.96% 12.94%
Growth (10/9/86) 14.67% 21.77% 16.04% 15.76% 14.13%
Money Market (4/2/82)* 2.62% 1.92% 2.14% 3.84% 5.05%
- ---------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------
Asset Manager (9/6/89) 11.88% 14.00% 10.47% N/A 11.04%
Contrafund (1/3/95) 15.32% N/A N/A N/A 25.40%
Index 500 (8/27/92) 23.91% 27.68% 17.57% N/A 17.62%
Investment Grade Bond (12/5/88) 0.67% 6.09% 3.13% N/A 4.08%
- ---------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------
Managed (8/31/88) 13.50% 26.77% 17.58% N/A 18.91%
Small Cap (8/31/88) 13.46% 15.28% 12.10% N/A 13.97%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

- 16 -
<PAGE> 139

<TABLE>
<CAPTION>
===============================================================================================================
PORTFOLIO For the For the For the For the For the period
(Date of commencement of 1-year 3-year 5 -year 10-year from
operation of Corresponding period period period period commencement of
Portfolio) ended ended ended ended Portfolio
12/31/97 12/31/97 12/31/97 12/31/97 operations
to 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (12/27/96) 12.45% N/A N/A N/A 12.53%
- ---------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------
Equity (11/6/86) 16.03% 17.23% 17.15% 16.00% 13.73%
Growth (12/31/92) 35.47% 35.88% 30.24% N/A 30.24%
- ---------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------
SoGen Overseas (2/3/97) N/A N/A N/A N/A -10.61%
- ---------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------
Limited-Term Bond (5/13/94) 5.40% 2.76% N/A N/A 2.74%
- ---------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------
International Stock (3/31/94) -6.95% 5.06% N/A N/A 4.22%
- ---------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (8/31/89) -9.29% 1.72% 10.44% N/A 4.07%
===============================================================================================================
</TABLE>

* Yield more closely reflects current earnings of the Money Market Portfolio
than its total return.

Adjusted historical non-standard average annual total returns for periods
since the inception of each Portfolio are as follows. These figures include:
(a) the daily deduction of the mortality

- 17 -
<PAGE> 140

and expenses charge at an annual rate of 1.25% (except that, prior to the
inception of the corresponding Variable Account, deductions are monthly); and
(b) and the daily deduction of the annual administrative expenses charge at the
annual rate of 0.15% (except that, prior to the inception of the corresponding
Variable Account, deductions are monthly). These figures do not reflect the
quarterly deduction of the administration charge and any applicable contingent
deferred sales load which, if deducted, would reduce performance.

- 18 -
<PAGE> 141

<TABLE>
<CAPTION>
=====================================================================================================================
For the period
PORTFOLIO For the For the For the For the from
(Date of commencement of 1-year 3-year 5-year 10-year commencement of
operation of Corresponding period period period period Portfolio
Portfolio) ended ended ended ended operations
12/31/97 12/31/97 12/31/97 12/31/97 to 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Managed (8/31/88) 20.61% 28.29% 18.39% N/A 18.97%
Small Cap (8/31/88) 20.56% 17.10% 13.06% N/A 14.04%
- ---------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (12/27/96) 19.56% N/A N/A N/A 19.55%
- ---------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------
Equity (11/6/86) 23.14% 18.99% 17.96% 16.06% 13.80%
Growth (12/31/92) 42.59% 37.22% 30.80% N/A 30.80%
- ---------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------
SoGen Overseas (2/3/97) N/A N/A N/A N/A -3.88%
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (5/13/94) 12.51% 5.02% N/A N/A 4.60%
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
International Stock (3/31/94) -0.60% 7.22% N/A N/A 5.94%
- ---------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (8/31/89) -3.10% 4.02% 11.44% N/A 4.34%
=====================================================================================================================
</TABLE>

* Yield more closely reflects current earnings of the Money Market Portfolio
than its total return.

- 19 -
<PAGE> 142

Adjusted historical standard cumulative total returns for periods since the
inception of each Portfolio are as follows. These figures include: (a) the
daily deduction of the mortality and expenses charge at an annual rate of 1.25%
(except that, prior to the inception of the corresponding Variable Account,
deductions are monthly); (b) the daily deduction of the annual administrative
expenses charge at an annual rate of 0.15% (except that, prior to the
inception of the corresponding Variable Account, deductions are monthly); (c)
the quarterly deduction of an administration charge of $7.50 adjusted for
average account size; and (d) the applicable contingent deferred sales load
for the Visionary contract and for the Date of Issue Withdrawal Charge Option
under the Visionary Choice contract.

- 20 -
<PAGE> 143

<TABLE>
<CAPTION>
=====================================================================================================================
For the period
PORTFOLIO For the For the For the For the from
(Date of commencement of 1-year 3-year 5-year 10-year commencement of
operation of Corresponding period period period period Portfolio
Portfolio) ended ended ended ended operations
12/31/97 12/31/97 12/31/97 12/31/97 to 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Asset Manager (9/6/89) 11.88% 48.15% 64.52% N/A 138.86%
Contrafund (1/3/95) 15.32% N/A N/A N/A 96.84%
Index 500 (8/27/92) 23.91% 108.17% 124.62% N/A 138.03%
Investment Grade Bond (12/5/88) 0.67% 19.42% 16.67% N/A 43.68%
- ---------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------
Managed (8/31/88) 13.50% 103.72% 124.74% N/A 403.69%
Small Cap (8/31/88) 13.46% 53.19% 77.05% N/A 238.86%
- ---------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (12/27/96) 12.45% N/A N/A N/A 12.67%
- ---------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------
Equity (11/6/86) 16.03% 61.09% 120.62% 341.15% 319.77%
Growth (12/31/92) 35.47% 150.67% 274.70% N/A 274.70%
- ---------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------
SoGen Overseas (2/3/97) N/A N/A N/A N/A -9.67%
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (5/13/94) 5.40% 8.51% N/A N/A 10.34%
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
International Stock (3/31/94) -6.95% 15.96% N/A N/A 16.78%
- ---------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

- 21 -
<PAGE> 144

* Yield more closely reflects current earnings of the Money Market Portfolio
than its total return.

Adjusted historical non-standard cumulative total returns for periods since
the inception of each Portfolio are as follows. These figures include: (a) the
daily deduction of the mortality and expenses charges at an annual rate of
1.25% (except that, prior to the inception of the corresponding Variable
Account, deductions are monthly); and (b) the daily deduction of the
administrative expenses charge at an annual rate of 0.15% (except that, prior
to the inception of the corresponding Variable Account, deductions are
monthly). These figures do not reflect the quarterly deduction of the
administration charge and the applicable contingent deferred sales load
which, if deducted, would reduce performance. Nonstandard performance data
will only be disclosed if standard performance data for the required periods is
also disclosed.

- 22 -
<PAGE> 145

<TABLE>
<CAPTION>
=====================================================================================================================
PORTFOLIO For the For the For the For the For the period from
(Date of commencement of 1-year 3-year 5-year 10-year commencement of
operation of period ended period period ended period Portfolio operations
Corresponding Portfolio) 12/31/97 ended 12/31/97 ended to 12/31/97
12/31/97 12/31/97
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------
Equity Income (10/9/86) 26.34% 90.25% 134.37% 305.37% 294.71%
Growth (10/9/86) 21.78% 87.95% 118.16% 334.45% 344.01%
Money Market (4/2/82) * 4.03% 13.18% 18.69% 47.02% 119.48%
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------
Asset Manager (9/6/89) 18.99% 55.52% 72.20% N/A 142.23%
Contrafund (1/3/95) 22.43% N/A N/A N/A 104.24%
Index 500 (8/27/92) 31.02% 115.60% 132.49% N/A 145.98%
Investment Grade Bond (12/5/88) 7.55% 26.75% 24.24% N/A 44.81%
- ---------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------
Managed (8/31/88) 20.61% 111.12% 132.57% N/A 406.04%
Small Cap (8/31/88) 20.56% 60.58% 84.76% N/A 240.76%
- ---------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (12/27/96) 19.56% N/A N/A N/A 19.78%
- ---------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------
Equity (11/6/86) 23.14% 68.48% 128.38% 343.39% 322.44%
Growth (12/31/92) 42.59% 158.36% 282.79% N/A 282.79%
- ---------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

- 23 -
<PAGE> 146

* Yield more closely reflects current earnings of the Money Market Portfolio
than its total return.

NET INVESTMENT FACTOR

The Net Investment Factor is an index that measures the investment
performance of a Variable Account from one Business Day to the next. Each
Variable Account has its own Net Investment Factor, which may be greater or
less than one. The Net Investment Factor for each Variable Account equals 1
plus the fraction obtained by dividing (a) by (b) where:

(a) is the net result of:

1. the investment income, dividends, and capital gains,
realized or unrealized, credited at the end of the current
Business Day; PLUS

2. the amount credited or released from reserves for taxes
attributed to the operation of the Variable Account; MINUS

- 24 -
<PAGE> 147
3. the capital losses, realized or unrealized, charged at the
end of the current Business Day, MINUS

4. any amount charged for taxes or any amount set aside
during the Business Day as a reserve for taxes
attributable to the operation or maintenance of the
Variable Account; MINUS

5. the amount charged for mortality and expense risk on that
Business Day; MINUS

6. the amount charged for administration on that Business
Day; and

(b) is the value of the assets in the Variable Account at the end of
the preceding Business Day, adjusted for allocations and transfers
to and withdrawals and transfers from the Variable Account
occurring during that preceding Business Day.

VARIABLE ANNUITY PAYMENTS

The dollar amount of the first variable annuity payment is determined in
the same manner as that of a fixed annuity payment. Therefore, for any
particular amount applied to a variable payout plan, the dollar amount of the
first variable annuity payment and the first fixed annuity payment (assuming
the fixed payment is based on the minimum guaranteed 3.0% interest rate) will
be the same. Later variable annuity payments, however, will vary to reflect
the net investment performance of the Variable Account(s) selected by the Owner
or the Annuitant.

Annuity units measure the net investment performance of a Variable Account
for purposes of determining the amount of variable annuity payments. On the
Annuity Start Date, the adjusted Contract Value for each Variable Account is
used to purchase annuity units at the annuity unit value for that Variable
Account. The number of annuity units in each Variable Account then remains
fixed unless an exchange of annuity units is made as described below. Each
Variable Account has a separate annuity unit value that changes each Business
Day in substantially the same way as does the value of an accumulation unit of
a Variable Account.

The dollar value of each variable annuity payment after the first is
determined by multiplying the number of annuity units of a particular Variable
Account by the annuity unit value for that Variable Account on the Business Day
immediately preceding the date of each payment. If the net investment return
of the Variable Account for a payment period is equal to the pro-rated portion
of the 3.0% annual assumed investment rate, the variable annuity payment for
that Variable Account for that period will equal the payment for the prior
period. If the net investment return exceeds an annualized rate of 3.0% for a
payment period, the payment for that period will be greater than the payment
for the prior period. Similarly, if the return for a period

- 25 -
<PAGE> 148
falls short of an annualized rate of 3.0%, the payment for that period will be
less than the payment for the prior period. The Owner may choose an assumed
interest rate of 3.0%, 4.0%, or 5.0% at the time a variable payout plan is
selected.

ASSUMED INVESTMENT RATE

The discussion concerning the amount of variable annuity payments which
follows this section is based on an assumed investment rate of 3.0% per year.
Under the Contract, the Contract Owner may choose an assumed interest rate of
3.0%, 4.0% or 5.0% at the time a variable payout plan is selected. The assumed
investment rate is used merely in order to determine the first monthly payment
per thousand dollars of applied value. THIS RATE DOES NOT BEAR ANY
RELATIONSHIP TO THE ACTUAL NET INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT OR
ANY VARIABLE ACCOUNT.

AMOUNT OF VARIABLE ANNUITY PAYMENTS

The amount of the first variable annuity payment to a payee will depend on
the amount (i.e., the adjusted Contract Value, the Surrender Value, the death
benefit) applied to effect the variable annuity payment as of the Annuity
Start Date, the annuity payout plan option selected, and the age and sex (if
applicable) of the annuitant. The Contracts contain tables indicating the
dollar amount of the first annuity payment under each annuity payment option
for each $1,000 applied at various ages. These tables are based upon the 1983
Table A (promulgated by the Society of Actuaries) and an assumed investment
rate of 3.0% per year.

The portion of the first monthly variable annuity payment derived from a
Variable Account is divided by the annuity unit value for that Variable Account
(calculated as of the date of the first monthly payment). The number of such
units will remain fixed during the annuity period, assuming the Annuitant makes
no exchanges of annuity units for annuity units of another Variable Account or
to provide a fixed annuity payment.

In any subsequent month, for any Contract, the dollar amount of the
variable annuity payment derived from each Variable Account is determined by
multiplying the number of annuity units of that Variable Account attributable
to that Contract by the value of such annuity unit at the end of the valuation
period immediately preceding the date of such payment.

The annuity unit value will increase or decrease from one payment to the
next in proportion to the net investment return of the Variable Account or
Variable Accounts supporting the variable annuity payments, less an adjustment
to neutralize the 3.0% assumed investment rate referred to above. Therefore,
the dollar amount of annuity payments after the first will vary with the amount
by which the net investment return of the appropriate Variable Accounts is
greater or less than 3.0% per year. For example, for a Contract using only one
Variable Account to generate variable annuity payments, if that Variable
Account has a cumulative net investment return of 5% over a one year period,
the first annuity payment in the next year will be

- 26 -
<PAGE> 149
approximately 2% greater than the payment on the same date in the preceding
year. If such net investment return is 1% over a one year period, the first
annuity payment in the next year will be approximately 2 percentage points less
than the payment on the same date in the preceding year. (See also "Variable
Annuity Payments" in the Prospectus.)

ANNUITY UNIT VALUE

The value of an annuity unit is calculated at the same time that the value
of an accumulation unit is calculated and is based on the same values for fund
shares and other assets and liabilities. (See "Separate Account Value" in the
Prospectus.) The annuity unit value for each Variable Account's first
valuation period was set at $100. The annuity unit value for a Variable
Account is calculated for each subsequent valuation period by dividing (1) by
(2), then multiplying this quotient by (3) and then multiplying the result by
(4), where:

(1) is the accumulation unit value for the current valuation period;

(2) is the accumulation unit value for the immediately preceding
valuation period;

(3) is the annuity unit value for the immediately preceding valuation
period; and

(4) is a special factor designed to compensate for the assumed
investment rate of 3.0% built into the table used to compute the
first variable annuity payment.

The following illustrations show, by use of hypothetical examples, the
method of determining the annuity unit value and the amount of several variable
annuity payments based on one Variable Account.

ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE

<TABLE>
<S> <C> <C>
1. Accumulation unit value for current
valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.15
2. Accumulation unit value for immediately preceding valuation period . . . . . . . . . . . . . $11.10
3. Annuity unit value for immediately preceding
valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105.00
4. Factor to compensate for the assumed
investment rate of 3.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9975
5. Annuity unit value of current valuation
period ((1) / (2)) x (3) x (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105.2093
</TABLE>

ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS

- 27 -
<PAGE> 150

<TABLE>
<S> <C> <C>
1. Number of accumulation units at Annuity Start Date . . . . . . . . . . . . . . . . . . . 10,000
2. Accumulation unit value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.1500
3. Adjusted Contract Value (1)x(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $111,500
4. First monthly annuity payment per $1,000
of adj. Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5.89
5. First monthly annuity payment (3)x(4) / 1,000 . . . . . . . . . . . . . . . . . . . . . . $656.74
6. Annuity unit value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105.2093
7. Number of annuity units (5)/(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2422
8. Assume annuity unit value for second month equal to . . . . . . . . . . . . . . . . . . . $105.3000
9. Second monthly annuity payment (7)x(8) . . . . . . . . . . . . . . . . . . . . . . . . . . $657.30
10. Assume annuity unit value for third month equal to . . . . . . . . . . . . . . . . . . . . $104.9000
11. Third monthly annuity payment (7)x(10) . . . . . . . . . . . . . . . . . . . . . . . . . . $654.81
</TABLE>

ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS

In the event of any such substitution or change, the Company may (by
appropriate endorsement, if necessary) change the Contract to reflect the
substitution or change. If the Company considers it to be in the best interest
of Owners and Annuitants, and subject to any approvals that may be required
under applicable law, the Separate Account may be operated as a management
investment company under the 1940 Act, it may be deregistered under that Act if
registration is no longer required, it may be combined with other of the
Company's separate accounts, or the assets may be transferred to another
separate account. In addition, the Company may, when permitted by law,
restrict or eliminate any voting rights the Owner has under the Contracts.

The Company will continue to pay a Living Benefit under the Visionary
Choice Contract and a Maturity Benefit under the Visionary Contract on Premium
Payments allocated to an Eligible Variable Account if: (a) the Portfolio
underlying an Eligible Variable Account changes its investment objective; (b)
the Company determines that an investment in the Portfolio underlying an
Eligible Variable Account is no longer appropriate in light of the purposes of
the Separate Account; or (c) shares of a Portfolio underlying an Eligible
Variable Account are no longer available for investment by the Separate Account
and the Company is forced to redeem all shares of the Portfolio held by the
Eligible Variable Account. (See the Prospectus for the Owner's Contract.)

RESOLVING MATERIAL CONFLICTS

The Funds currently sell shares to registered separate accounts of
insurance companies other than IL Annuity to support other variable annuity
contracts and variable life insurance contracts. In addition, some of the
Funds may in the future be sold to the Company's other separate accounts and
may in the future be sold to separate accounts of other affiliated life
insurance companies to support other variable annuity or variable life
insurance contracts.

- 28 -
<PAGE> 151
Moreover, shares of some of the Funds may in the future be sold to qualified
retirement plans. As a result, there is a possibility that an irreconcilable
material conflict may arise between the Owner's interests in owning a Contract
whose Contract Value is allocated to the Separate Account and of persons owning
Contracts whose Contract Values are allocated to one or more other separate
accounts investing in any one of the Funds. There is also the possibility that
a material conflict may arise between the interests of Contract Owners
generally, or certain classes of Contract Owners, and participating qualified
retirement plans or participants in such retirement plans.

The Company currently does not foresee any disadvantages to the Owner
that would arise from the sale of Fund shares to support variable life
insurance contracts or variable annuity contracts of other companies or to
qualified retirement plans. However, the management of the Funds will each
monitor events related to their Fund in order to identify any material
irreconcilable conflicts that might possibly arise as a result of such Fund
offering its shares to (1) support both variable life insurance contracts and
variable annuity contracts, or (2) support the variable life insurance
contracts and/or variable annuity contracts issued by various unaffiliated
insurance companies. In addition, the management of the Funds will monitor the
Funds in order to identify any material irreconcilable conflicts that might
possibly arise as a result of the sale of its shares to qualified retirement
plans, if applicable. In the event of such a conflict, the management of the
appropriate Fund would determine what action, if any, should be taken in
response to the conflict. In addition, if the Company believes that the
response of the Funds to any such conflict does not sufficiently protect the
Owner, the Company will take appropriate action on its own, including
withdrawing the Separate Account's investment in such Funds, as appropriate.
(See the individual Fund prospectuses for greater detail.)

TERMINATION OF PARTICIPATION AGREEMENTS

The participation agreements pursuant to which the Funds sell their
shares to the Variable Account contain varying provisions regarding
termination. The following summarizes those provisions:

THE ALGER AMERICAN FUND. This agreement provides for termination: (1)
on six months' advance written notice by any party; (2) at IL Annuity's option
if shares of any Portfolio are not reasonably available to meet the
requirements of the Contracts or are not registered, issued or sold in
accordance with applicable state and/or federal law; (3) at IL Annuity's option
if any Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"); (4) at IL Annuity's
option if any Portfolio fails to meet certain diversification requirements of
the Code; (5) at the option of the Fund or Fred Alger & Company, Inc. (the
"Distributor"), upon a determination that IL Annuity has suffered a material
adverse change in its business, operations, financial condition or prospects or
is the subject of material adverse publicity; (6) by IL Annuity upon a
determination that either the Fund or the Distributor has suffered a material
adverse change in its business, operations, financial condition or prospects or
is the subject of material adverse publicity; (7) by the Fund or the
Distributor if

- 29 -
<PAGE> 152
the Contracts cease to qualify as annuity contracts or endowment contracts
under the Code or if the Contracts are not registered, issued or sold in
accordance with state and/or federal law; or (8) on 180 days written notice
upon a determination by any party that a material irreconcilable conflict
exists.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND and FIDELITY VARIABLE
INSURANCE PRODUCTS FUND II. These agreements provide for termination: (1) on
six months' advance written notice by any party; (2) at IL Annuity's option if
shares of any Portfolio are not reasonably available to meet the requirements
of the Contracts or are not registered, issued or sold in accordance with
applicable state and/or federal law; (3) at IL Annuity's option if any
Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"); (4) at IL Annuity's
option if any Portfolio fails to meet certain diversification requirements of
the Code; (5) at the option of the Fund or Fidelity Distributors Corporation
(the "Underwriter") upon a determination that IL Annuity has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (6) by IL Annuity
upon a determination that either the Fund or the Underwriter has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; or (7) by the Fund
or the Underwriter if IL Annuity provides written notice of its intent to use
another investment company as a funding vehicle for the Contracts.

OCC ACCUMULATION TRUST. This agreement provides for termination: (1)
on six months' advance written notice by any party; (2) at IL Annuity's option
if shares of any Portfolio are not reasonably available to meet the
requirements of the Contracts; (3) at IL Annuity's option if any Portfolio
ceases to be qualified as a Regulated Investment Company under Subchapter M of
the Internal Revenue Code (the "Code"); (4) at IL Annuity's option if any
Portfolio fails to meet certain diversification requirements of the Code; (5)
at the option of the Fund upon a determination that IL Annuity has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (6) by IL Annuity
upon a determination that the Fund has suffered a material adverse change in
its business, operations, financial condition or prospects or is the subject of
material adverse publicity; (7) by the Fund or IL Annuity if IL Annuity
receives necessary regulatory approvals to substitute shares of another
investment company as a funding vehicle for the Contracts; (8) by the Fund upon
institution of certain proceedings against IL Annuity; (9) at IL Annuity's
option upon institution of certain administrative proceedings against the Fund
or the Underwriter; (10) by the Fund or IL Annuity upon a determination that
certain irreconcilable conflicts exist; or (11) at the option of the Fund or IL
Annuity, upon the other party's material breach of any provision in the
Participation Agreement.

ROYCE CAPITAL FUND. This agreement provides for termination: (1) at
the option of IL Annuity or the Royce Trust (the "Trust") upon 180 days'
notice; (2) at the option of IL Annuity, if the Trust shares are not reasonably
available to meet the requirements of the Contracts; (3) at the option of IL
Annuity, upon the institution of certain formal proceedings against the Trust
by

- 30 -
<PAGE> 153
the SEC, the National Association of Securities Dealers, Inc. ("NASD"), or any
other regulatory body; (4) at the option of the Advisor of the Trust or the
Trust, upon the institution of certain formal proceedings against IL Annuity by
the SEC, the NASD or any other regulatory body; (5) in the event the Trust's
shares are not registered, issued or sold in accordance with applicable state
or federal law, or such law precludes the use of such shares as the underlying
investment medium of Contracts; (6) at the option of the Adviser of the Trust
or the Trust, if the Contracts cease to qualify as annuity contracts or life
insurance contracts, as applicable, under the Code; (7) at the option of IL
Annuity, upon the Trust's unremedied breach of any material provision of this
agreement; (8) at the option of the Adviser of the Trust or the Trust, upon IL
Annuity's unremedied breach of any material provision of this agreement; (9)
at the option of the Adviser of the Trust or the Trust, if the Contracts are
not registered, issued or sold in accordance with applicable federal and/or
state law; (10) in the event this agreement is assigned without the prior
written consent of IL Annuity and the Trust.

SAFECO RESOURCE SERIES TRUST. This agreement shall terminate as to
the sale and issuance of new Contracts: (1) at the option of either IL Annuity
or the SAFECO Trust ("Trust"), upon 180 days' advance written notice to the
other; (2) at the option of IL Annuity, upon ten days' advance written notice
to the Trust if shares of the Portfolios are not available for any reason to
meet the requirements of the Contracts as determined by IL Annuity; (3) at the
option of IL Annuity, upon the institution of certain formal proceedings
against the Trust or Adviser by the SEC, the National Association of Securities
Dealers, Inc. ("NASD"), or any other regulatory body; (4) at the option of the
Trust, upon the institution of certain formal proceedings against IL Annuity or
the principal underwriter for the Contracts by the SEC, the NASD or any other
regulatory body; (5) in the event the Trust's shares are not registered, issued
or sold in accordance with applicable state or federal law, or such law
precludes the use of such shares as the underlying investment medium of
Contracts; (6) upon the receipt of any necessary regulatory approvals, or the
requisite vote of Contract owners having an interest in the Portfolios, to
substitute for shares of the Portfolios the shares of another investment
company in accordance with the terms of the applicable Contracts; (7) at the
option of the Trust, if the Contracts cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code; (8) at the option of
IL Annuity, upon the Trust's unremedied breach of any material provision of
this agreement; (9) at the option of the Trust, upon IL Annuity's unremedied
breach of any material provision of this agreement; (10) at the option of the
Trust, if the Contracts are not registered, issued or sold in accordance with
applicable federal and/or state law; (11) in the event this agreement is
assigned without the prior written consent of IL Annuity, the Trust or Adviser.

SOGEN VARIABLE FUNDS, INC. This agreement shall continue in full
force and effect until the first to occur of: (1) termination by any party, for
any reason with respect to the Portfolio, by 120 days advance written notice
delivered to the other parties; or (2) termination by IL Annuity by written
notice to the SoGen Fund and its Underwriter based upon IL Annuity's
determination that shares of the Portfolio are not reasonably available to meet
the requirements of the Contracts; or (3) termination by IL Annuity by written
notice to the SoGen Fund and its Underwriter in the event the Portfolio's
shares are not registered, issued or sold in accordance

- 31 -
<PAGE> 154
with applicable state and/or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts; or (4) termination
by the SoGen Fund or its Underwriter in the event that certain formal
administrative proceedings are instituted against IL Annuity by the NASD, the
SEC, the Insurance Commissioner or like official of any state or any other
regulatory body; or (5) termination by IL Annuity in the event that certain
formal administrative proceedings are instituted against the SoGen Fund or
Underwriter by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body; or (6) termination by IL Annuity by
written notice to the SoGen Fund and its Underwriter in the event that the
Portfolio ceases to qualify as a Regulated Investment Company under Subchapter
M or fails to comply with the Section 817(h) diversification requirements of
the Code; or (7) termination by the SoGen Fund or its Underwriter by written
notice to IL Annuity in the event that the Contracts fail to meet certain
qualifications; or (8) termination by either the SoGen Fund or its Underwriter
by written notice to IL Annuity if either one or both of the SoGen Fund or its
Underwriter respectively, shall determine, in their sole judgment exercised in
good faith, that IL Annuity has suffered a material adverse change in its
business, operations, financial condition, or prospects since the date of the
Participation Agreement or is the subject of material adverse publicity; or (9)
termination by IL Annuity by written notice to the SoGen Fund and its
Underwriter, if the Company shall determine, in its sole judgment exercised in
good faith, that the SoGen Fund, its Adviser, or its Underwriter has suffered a
material adverse change in its business, operations, financial condition or
prospects since the date of this agreement or is the subject of material
adverse publicity; or (10) termination by IL Annuity upon any substitution of
the shares of another investment company or series thereof for shares of the
Portfolio in accordance with the terms of the Contracts; or (11) termination by
any party in the event that the SoGen Fund's Board of Directors determines that
a material irreconcilable conflict exists.

T. ROWE PRICE FIXED INCOME SERIES, INC. AND T. ROWE PRICE
INTERNATIONAL SERIES, INC. These agreements provide for termination: (1) on
six months' advance written notice by any party; (2) at IL Annuity's option if
shares of any Portfolio are not reasonably available to meet the requirements
of the Contracts or are not registered, issued or sold in accordance with
applicable state and/or federal law; (3) at IL Annuity's option if any
Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"); (4) at IL Annuity's
option if any Portfolio fails to meet certain diversification requirements of
the Code; (5) at the option of the Fund or T. Rowe Price Investment Services,
Inc. (the "Underwriter") upon a determination that IL Annuity has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (6) by IL Annuity
upon a determination that either the Fund or the Underwriter has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (7) by the Fund or
the Underwriter if IL Annuity provides written notice of its intent to use
another investment company as a funding vehicle for the Contracts; (8) by the
Fund or the Underwriter upon institution of certain proceedings against IL
Annuity; or (9) at IL Annuity's option upon institution of certain
administrative proceedings against the Fund or the Underwriter.

- 32 -
<PAGE> 155
VAN ECK WORLDWIDE INSURANCE TRUST. This agreement provides for
termination: (1) on six months' advance written notice by any party; (2) at IL
Annuity's option if shares of any Portfolio are not reasonably available to
meet the requirements of the Contracts or are not registered, issued or sold in
accordance with applicable state and/or federal law; (3) at IL Annuity's option
if any Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"); (4) at IL Annuity's
option if any Portfolio fails to meet certain diversification requirements of
the Code; (5) at the option of the Trust or Van Eck Associates Corporation (the
"Adviser") upon a determination that IL Annuity has suffered a material adverse
change in its business, operations, financial condition or prospects or is the
subject of material adverse publicity; (6) by IL Annuity upon a determination
that either the Trust or the Adviser has suffered a material adverse change in
its business, operations, financial condition or prospects or is the subject of
material adverse publicity; (7) by IL Annuity, the Adviser or the Trust, upon
institution of certain proceedings against the broker-dealers marketing the
Contracts, the Adviser or the Trust; (8) upon a decision by IL Annuity to
substitute the Trust's shares with the shares of another investment company; or
(9) upon assignment of the Agreement.

VOTING RIGHTS

The number of the Owner's votes is determined by dividing the Contract
Value the Owner has in a Variable Account by the net asset value per share of
the Portfolio in which that Variable Account invests. For each Annuitant, the
number of votes attributable to a Variable Account will be determined by
dividing the liability for future variable annuity payments to be paid from
that Variable Account by the net asset value per share of the Portfolio in
which that Variable Account invests. This liability for future payments is
calculated on the basis of the mortality assumptions. The assumed investment
rate the Owner selected is used in determining the number of annuity units of
that Variable Account credited to the Annuitant's Contract and annuity unit
value of that Variable Account on the date that the number of votes is
determined. As variable annuity payments are made to the Annuitant, the
liability for future payments decreases as does the number of votes.

The number of votes available to the Owner or an Annuitant will be
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the relevant meeting of the
Portfolio's shareholders. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established
for the Fund.

SAFEKEEPING OF ACCOUNT ASSETS

- 33 -
<PAGE> 156
The Company holds the title to the assets of the Separate Account.
The assets are kept physically segregated and held separate and apart from the
Company's General Account assets and from the assets in any other separate
account.

Records are maintained of all purchases and redemptions of Portfolio
shares held by each of the Variable Accounts.

The officers and employees of the Company are covered by an insurance
company blanket bond issued by Travelers Casualty and Surety Company of
America to Indianapolis Life Insurance Company and its various subsidiaries in
the amount of twenty million dollars. The bond insures against dishonest and
fraudulent acts of officers and employees.

DISTRIBUTION OF THE CONTRACTS

IL Securities, Inc., P.O. Box 1230, 2960 North Meridian Street,
Indianapolis, Indiana 46208, acts as the distributor for the Contracts. IL
Securities, Inc. is wholly-owned by the Indianapolis Life Group of Companies,
Inc., which, in turn, is wholly-owned by Indianapolis Life Insurance Company.
IL Securities, Inc. is registered with the SEC under the Securities Exchange
Act of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc.

The Company offers the Contracts to the public on a continuous basis.
The Company does not anticipate discontinuing the offering of the Contracts,
but reserves the right to discontinue the offering. Agents who sell the
Contracts are licensed by applicable state insurance authorities to sell the
Contracts and are registered representatives of IL Securities, Inc. or
broker-dealers having selling agreements with IL Securities, Inc. or
broker-dealers having selling agreements with such broker-dealers.

The Company may pay sales commissions to broker-dealers up to an
amount equal to 7.2% of the Premium Payments paid under a Contract. In
addition, asset-based trailer commissions of up to 1.25% may be paid. The
Company may also pay up to 1.00% of Premium Payments to IL Securities to
compensate it for certain distribution expenses. The broker-dealers are
expected to compensate sales representatives in varying amounts from these
commissions. The Company may also pay other distribution expenses such as
production incentive bonuses, an agent's insurance and pension benefits, and
agency expense allowances. These distribution expenses do not result in any
additional charges against the Contracts other than those described in the
prospectus under "Fees and Charges." IL Securities, Inc. received and retained
$637,722.49 in underwriting commissions during fiscal year 1997, and
$195,937.53 in fiscal year 1996.

- 34 -
<PAGE> 157
LEGAL MATTERS

All matters relating to Massachusetts law pertaining to the Contracts,
including the validity of the Contracts and the Company's authority to issue
the Contracts, have been passed upon by Janis B. Funk, Counsel.
Sutherland, Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain matters relating to the federal securities laws.

EXPERTS

The balance sheets of IL Annuity and Insurance Company as of December
31, 1997 and 1996, and the related statements of income, shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1997, and the statement of net assets of IL Annuity and Insurance Co. Separate
Account 1 as of December 31, 1997, and the related statement of operations for
the year then ended, and statements of changes in net assets for each of the
years in the period then ended, appearing in this Statement of Additional
Information and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.

OTHER INFORMATION

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

FINANCIAL STATEMENTS

- 35 -
<PAGE> 158
Financial Statements

IL Annuity and Insurance Company

Years ended December 31, 1997, 1996 and 1995
With Report of Independent Auditors

<PAGE> 159

IL Annuity and Insurance Company

Financial Statements

Years ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>
CONTENTS

<S> <C>
Report of Independent Auditors..........................................1

Audited Financial Statements

Balance Sheets..........................................................2
Statements of Income....................................................3
Statements of Shareholder's Equity......................................4
Statements of Cash Flows................................................5
Notes to Financial Statements...........................................6
</TABLE>

<PAGE> 160

Report of Independent Auditors

Board of Directors
IL Annuity and Insurance Company

We have audited the accompanying balance sheets of IL Annuity and Insurance
Company (indirectly majority owned by Indianapolis Life Insurance Company) as
of December 31, 1997 and 1996, and the related statements of income,
shareholder's equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IL Annuity and Insurance
Company at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

/s/ Ernst & Young, LLP

April 17, 1998

<PAGE> 161

IL Annuity and Insurance Company

Balance Sheets

<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------------
RESTATED
<S> <C> <C>
ASSETS
Fixed maturity securities:
Available for sale, at fair value $ 432,917,723 $ 37,780,704
Trading, at fair value 28,033,530 86,062
Held to maturity, at amortized cost 8,036,013 2,000,000
Mortgage loans 20,853,908 -
Policy loans 41,309 -
Cash and short-term investments 78,206,640 20,947,222
-----------------------------------
568,089,123 60,813,988

Accrued investment income 5,838,029 565,974
Reinsurance recoverable 30,962,413 -
Deferred acquisition costs 18,954,120 4,860,881
Goodwill, net of accumulated amortization of $346,801
in 1997 and $237,285 in 1996 1,843,518 1,953,034
Federal income taxes recoverable 951,606 -
Receivables and other assets 195,990 5,681
Separate account assets 85,386,460 19,804,429
-----------------------------------
Total assets $ 712,221,259 $ 88,003,987
===================================

LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefit reserves $ 581,568,496 $ 45,729,780
Other policyholder liabilities 432,661 -
Accounts payable and other liabilities 13,437,140 4,989,172
Federal income taxes 5,233,339 92,809
Separate account liabilities 85,386,460 19,804,429
-----------------------------------
Total liabilities 686,058,096 70,616,190

Shareholder's equity:
Common stock, $250 par value:
Authorized and issued--10,000 shares 2,500,000 2,500,000
Additional paid-in capital 24,262,659 17,262,659
Net unrealized gains on available for sale securities 250,115 154,469
Retained earnings (deficit) (849,611) (2,529,331)
-----------------------------------
Total shareholder's equity 26,163,163 17,387,797
-----------------------------------
Total liabilities and shareholder's equity $ 712,221,259 $ 88,003,987
===================================
</TABLE>

See accompanying notes.

2
<PAGE> 162

IL Annuity and Insurance Company

Statements of Income

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------
RESTATED
<S> <C> <C> <C>
Revenue:
Annuity fees and charges $ 8,284,399 $ 346,265 $ -
Investment income 12,315,656 884,450 402,408
Net realized capital gains 3,350,187 133,003 936
-------------------------------------------------
23,950,242 1,363,718 403,344

Expenses:
Policy benefits 16,627,276 549,779 -
Underwriting, acquisition and insurance expenses 5,604,485 2,762,343 996,098
-------------------------------------------------
22,231,761 3,312,122 996,098
-------------------------------------------------
Gain (loss) before federal income taxes 1,718,481 (1,948,404) (592,754)
Federal income taxes (benefit) 38,761 9,634 (3,909)
-------------------------------------------------
Net income (loss) $ 1,679,720 $(1,958,038) $ (588,845)
=================================================
</TABLE>

See accompanying notes.

3
<PAGE> 163

IL Annuity and Insurance Company

Statements of Shareholder's Equity

RETAINED
COMMON ADDITIONAL PAID- NET UNREALIZED EARNINGS
STOCK IN CAPITAL GAINS (LOSSES) (DEFICIT) TOTAL
-------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 1,500,000 $ 6,112,659 $ (32,908) $ 17,552 $ 7,597,303
Net loss - - - (588,845) (588,845)
Capital contribution 1,000,000 650,000 - - 1,650,000
Change in unrealized gains net of
deferred taxes - - 167,275 - 167,275
-------------------------------------------------------------------------------------------
Balance at December 31, 1995 2,500,000 6,762,659 134,367 (571,293) 8,825,733

Net loss as restated - - - (1,958,038) (1,958,038)
Capital contribution - 10,500,000 - - 10,500,000
Change in unrealized gains net of
deferred taxes - - 20,102 - 20,102
-------------------------------------------------------------------------------------------
Balance at December 31, 1996 2,500,000 17,262,659 154,469 (2,529,331) 17,387,797

Net income - - - 1,679,720 1,679,720
Capital contribution - 7,000,000 - - 7,000,000
Change in unrealized gains net of -
deferred taxes - - 95,646 - 95,646
-------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 2,500,000 $ 24,262,659 $ 250,115 $ (849,611) $ 26,163,163
===========================================================================================
</TABLE>

See accompanying notes.

4
<PAGE> 164

IL Annuity and Insurance Company

Statements of Cash Flows

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES RESTATED
Net income (loss) $ 1,679,720 $ (1,958,038) $ (588,845)
Adjustments to reconcile net income (loss) to net
cash provided(used) by operating activities:
Amortization of discount and premium on investments 1,066,886 56,760 (77,287)
Amortization of goodwill 109,516 109,516 109,516
Changes in operating assets and liabilities:
Deferred acquisition costs (17,569,346) (5,227,443) -
Amortization of deferred acquisition costs 3,476,107 366,562
Accrued investment income (5,272,055) (484,944) (52,155)
Reinsurance recoverable (30,962,413) - -
Receivables and other assets (8,623,873) (5,681) 100,000
Future policy benefit reserves and
reinsurance payable 13,334,701 565,410 7,500
Accounts payable and accrued liabilities 8,447,968 4,831,911 157,269
Federal income taxes 4,188,924 20,457 (9,395)
--------------------------------------------------------
Net cash provided (used) by operating activities (30,123,865) (1,725,490) (353,397)

INVESTING ACTIVITIES
Sales and maturity of fixed maturity securities 59,815,409 55,536,586 1,997,037
Mortgage loan repayments 222,696 - -
Purchase of fixed maturity securities (470,660,322) (91,982,677) (949,707)
Investment in mortgage loans (21,287,250) - -
Increase in policy loans (41,309) - -
--------------------------------------------------------
Net cash used for investing activities (431,950,776) (36,446,091) 1,047,330

FINANCING ACTIVITIES
Annuity deposits received 526,440,770 45,239,786 -
Annuity surrender benefits (14,106,711) (82,916) -
Capital contribution 7,000,000 10,500,000 1,650,000
--------------------------------------------------------
Net cash provided by financing activities 519,334,059 55,656,870 1,650,000
--------------------------------------------------------

Net increase (decrease) in cash and short-term investments 57,259,418 17,485,289 2,343,933
Cash and short-term investments at beginning of year 20,947,222 3,461,933 1,118,000
--------------------------------------------------------
Cash and short-term investments at end of year $ 78,206,640 $ 20,947,222 $ 3,461,933
========================================================
</TABLE>

See accompanying notes.

5
<PAGE> 165

IL Annuity and Insurance Company

Notes to Financial Statements

December 31, 1997

1. ORGANIZATION, BASIS OF PRESENTATION AND ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

IL Annuity and Insurance Company (the "Company") is a wholly owned subsidiary
of Indianapolis Life Group of Companies, which in turn is a majority owned
subsidiary of Indianapolis Life Insurance Company ("Indianapolis Life"). The
Company exists under the laws of the State of Massachusetts and is licensed to
do business in forty-one states and the District of Columbia.

The Company offers flexible premium deferred annuity contracts which may be
offered in connection with retirement plans. The premiums collected on variable
annuity contracts are invested primarily in various mutual funds held in a
Separate Account at the direction of the policyholder.

Preparation of the financial statements requires management to make estimates
and assumptions that effect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future
as more information becomes known, which could impact the amounts reported and
disclosed herein.

ACCOUNTING POLICIES

FIXED MATURITY SECURITIES

Fixed maturity securities which may be sold to meet liquidity and other needs
of the Company are categorized as available for sale and are reported at fair
value with unrealized holding gains and losses reported as a separate component
of shareholder's equity. Fixed maturity securities which the Company has the
positive intent and ability to hold to maturity are categorized as
held-to-maturity and are reported at amortized cost. Fixed maturity securities
that are bought and held principally for the purpose of selling them in the
near term to generate profits from short-term differences in price are
categorized as trading and are reported at fair value with unrealized holding
gains and losses reported in operations.

6
<PAGE> 166
IL Annuity and Insurance Company

Notes to Financial Statements (continued)

1. ORGANIZATION, BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)

CASH AND SHORT-TERM INVESTMENTS

Cash and short-term investments include cash on hand and demand deposits and
investments with maturities of less than one year at the date of acquisition,
and are stated at cost which approximates fair value.

DEFERRED ACQUISITION COSTS

Costs relating to the acquisition of annuity products, primarily commissions
and certain costs of marketing, policy issuance and underwriting, which vary
with and are directly related to the production of new business, are deferred
and included in the deferred acquisition cost asset to the extent that such
cost are recoverable from future policy related revenues. Deferred acquisition
costs, with interest, are amortized over the lives of the policies in a
relationship to the present value of estimated future gross profits, discounted
using the interest rate credited to the policy.

GOODWILL

Goodwill is amortized over the period of 20 years using the straight-line
method.

FUTURE POLICY BENEFIT RESERVES

Future policy benefit reserves for annuity products represent policy account
balances before applicable surrender charges, and net unrealized gains on
available for sale securities allocated to policyholders.

THIRD-PARTY ADMINISTRATORS

The Company has contractual arrangements with three third-party administrators
to distribute its annuity products, which represents all of the Company's
business. A significant portion of the Company's annuity products are
distributed and administered by Legacy Marketing Group.

SEPARATE ACCOUNTS

Separate account assets and liabilities represent funds that are separately
administered, principally for variable annuity contracts, and for which the
contractholder, rather than the Company, bears the investment risk. Separate
account contractholders have no claim against the assets of the general account
of the Company. Separate account assets are reported at market value. The
operations of the Separate Account are not included in the accompanying
financial statements.

7
<PAGE> 167
IL Annuity and Insurance Company

Notes to Financial Statements (continued)

1. ORGANIZATION, BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

Revenue for annuity products consist of policy charges for the cost of
insurance, policy administration charges, and surrender charges assessed
against policyholder account balances.

FEDERAL INCOME TAXES

The Company files a stand-alone federal income tax return.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current
year presentation.

2. RESTATEMENT

The accompanying financial statements have been restated for 1996 to adjust the
reserves for future policy benefits. The effect of the restatement was a
decrease in net income for 1996 and shareholder's equity at December 31, 1996
of $1,133,000.

3. INVESTMENTS

Fixed maturity securities consist of the following at December 31:

<TABLE>
<CAPTION>
1997
------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
United States government $ 27,377,457 $ 528,917 $ - $ 27,906,374
Special revenue 7,520,065 105,854 - 7,625,919
Public utilities 26,624,432 931,256 9,538 27,546,150
Industrial and miscellaneous 356,443,373 16,227,385 2,831,478 369,839,280
Mortgage-backed securities 10,552,547 134,512 - 10,687,059
------------------------------------------------------------------
$ 417,965,327 $ 17,793,412 $ 2,841,016 $ 432,917,723
==================================================================
</TABLE>

8
<PAGE> 168
IL Annuity and Insurance Company

Notes to Financial Statements (continued)

3. INVESTMENTS (CONTINUED)

<TABLE>
<CAPTION>
1997
--------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trading:
United States government $ 1,286,404 $ 1,014 $ 2,966 $ 1,284,452
Special revenue 100,457 - 9,457 91,000
Public utilities 1,740,617 26,053 1,235 1,765,435
Industrial and miscellaneous 24,577,946 488,545 173,848 24,892,643
--------------------------------------------------------------------
$ 27,705,424 $ 515,612 $ 187,506 $ 28,033,530
====================================================================
</TABLE>

<TABLE>
<CAPTION>
1997
--------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to maturity:
United States government $ - $ - $ - $ -
Special revenue - - - -
Public utilities - - - -
Industrial and miscellaneous 8,036,013 440,017 - 8,476,030
--------------------------------------------------------------------
$ 8,036,013 $ 440,017 $ - $ 8,476,030
====================================================================
</TABLE>

Fixed maturity securities consist of the following at December 31:

<TABLE>
<CAPTION>
1996
-------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
United States government $ 11,363,771 $ 134,194 $ 16,700 $ 11,481,265
Public utilities 947,154 5,155 3,639 948,670
Industrial and miscellaneous 25,232,136 328,157 209,524 25,350,769
-------------------------------------------------------------------
$ 37,543,061 $ 467,506 $ 229,863 $ 37,780,704
===================================================================
</TABLE>

9
<PAGE> 169
IL Annuity and Insurance Company

Notes to Financial Statements (continued)

3. INVESTMENTS (CONTINUED)

<TABLE>
<CAPTION>
1996
--------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trading:
Public utilities $ 32,919 $ 706 $ - $ 33,625
Industrial and miscellaneous 51,804 633 - 52,437
--------------------------------------------------------------------
$ 84,723 $ 1,339 $ - $ 86,062
====================================================================
</TABLE>

<TABLE>
<CAPTION>
1996
----------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Held to maturity:
Industrial and miscellaneous $ 2,000,000 $ - $ - $ 2,000,000
----------------------------------------------------------------------
$ 2,000,000 $ - $ - $ 2,000,000
======================================================================
</TABLE>

The amortized cost and fair value of fixed maturity securities at December 31,
1997, by contractual average maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
AVAILABLE FOR SALE TRADING HELD TO MATURITY
------------------------------------------------------------------------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Due in one year or less $ 3,972,914 $ 3,975,540 $ - $ - $ - $ -
Due after one year through
five years 166,105,008 173,858,883 1,832,320 1,869,812 1,000,000 1,003,020
Due after five years
through ten years 143,798,003 146,742,183 24,258,532 24,569,288 6,036,013 6,424,820
Due after ten years 104,089,402 108,341,117 1,614,572 1,594,430 1,000,000 1,048,190
Mortgage-backed securities 10,552,547 10,687,059 - - - -
------------------------------------------------------------------------------------
$ 417,965,327 $ 432,917,723 $ 27,705,424 $ 28,033,530 $ 8,036,013 $ 8,476,030
====================================================================================
</TABLE>

10
<PAGE> 170

IL Annuity and Insurance Company

Notes to Financial Statements (continued)

3. FIXED MATURITY SECURITIES (CONTINUED)

Net unrealized gains on available for sale securities are as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Gross unrealized gains $17,793,412 $ 467,506
Gross unrealized losses 2,841,016 229,863
----------- -----------
14,952,396 237,643
Deferred income taxes 5,233,339 83,174
Allocated to future policy
benefit reserves 9,468,942 -
----------- -----------
$ 250,115 $ 154,469
=========== ===========
</TABLE>

Proceeds from sales of available for sale securities during 1997 and 1996 were
$31,468,962 and $4,355,352, respectively. Gross gains of $2,819,617 and
$109,450 and gross losses of $29,328 and $ - were realized during 1997 and
1996, respectively.

4. REINSURANCE

The Company has entered into a modified coinsurance cession agreement
covering flexible premium deferred annuity policies distributed through Legacy
Marketing Group (a third-party administrator). The agreement is effective
January 1, 1997, and is retroactive to policies issued on or after August 1,
1996. Future policy benefit reserves includes reinsurance payable of
$424,318,398 at December 31, 1997.

The Company remains liable for ceded risks in the event that the reinsurer does
not meet its obligations. Management believes its reinsurer will meet its
obligations under existing contracts.

5. FEDERAL INCOME TAXES

Significant components of current federal income taxes (benefit), which
are current federal income taxes (benefit), consist of the following:

<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------
<S> <C> <C> <C>
Federal income taxes (benefit) at 35% $ 601,468 $(681,194) $(207,464)
Effect of net operating losses/
valuation allowance (698,193) 693,452 203,677
Other, net 135,486 (2,624) (122)
---------------------------------------------
Federal income taxes (benefit) $ 38,761 $ 9,634 $ (3,909)
============================================
</TABLE>

11
<PAGE> 171

IL Annuity and Insurance Company

Notes to Financial Statements (continued)

5. FEDERAL INCOME TAXES (CONTINUED)

At December 31, 1997 and 1996 the financial statements included deferred tax
assets of $7,152,369 and $2,235,015, offset by a valuation allowance of $200,153
and $501,560 and deferred tax liabilities of $12,185,555 and $1,817,099,
respectively. The significant components of the Company's deferred tax assets
and liabilities were net operating losses, deferred acquisition costs,
amortization of goodwill and bond discount and unrealized investment gains and
losses.

6. SHAREHOLDER'S EQUITY

Massachusetts insurance regulations require the Company to maintain a minimum
capital and surplus of $1,200,000. Statutory capital and surplus at December
31, 1997 and 1996 was $13,292,585 and $13,683,197, respectively. Statutory net
loss for 1997, 1996 and 1995 was $6,047,816, $3,252,584 and $489,852,
respectively.

Generally, the maximum amount of dividends which can be paid to its stockholder
without prior approval of the Insurance Commissioner of the State of
Massachusetts is 10% of statutory surplus at the prior year end.

7. RELATED PARTY TRANSACTIONS

The Company was allocated expenses of $1,999,903 and $1,436,861 for various
administrative services from Indianapolis Life for 1997 and 1996, respectively,
in conjunction with expense allocation agreements.

8. IMPACT OF YEAR 2000 (UNAUDITED)

The Company utilizes certain computer systems and programs maintained by
Indianapolis Life. Indianapolis Life is converting and upgrading its
information systems architecture from mainframe-based to LAN-based systems.
This process has been underway for several years and is planned to be completed
during 1998. Indianapolis Life and the Company believe that upon completion of
the conversion, the Year 2000 Issue will not pose significant operational
problems for its computer systems.

The Company has begun formal communications with all of its service
providers and significant suppliers to see that they are developing plans to
address their own Year 2000 problems as they relate to the Company's interface
systems. If modifications of data processing systems of either the Company or
its service providers are not completed timely, the Year 2000 problem could
have a material impact on the operations of the Company.

12
<PAGE> 172
Financial Statements

IL Annuity and Insurance Company Separate
Account 1

Years ended December 31, 1997 and 1996
with Report of Independent Auditors

<PAGE> 173

IL Annuity and Insurance Company Separate Account 1

Financial Statements

Years ended December 31, 1997 and 1996

<TABLE>
<CAPTION>
CONTENTS

<S> <C>
Report of Independent Auditors.........................................1

Audited Financial Statements

Statement of Net Assets................................................2
Statement of Operations................................................3
Statements of Changes in Net Assets....................................5
Notes to Financial Statements..........................................7
</TABLE>

<PAGE> 174

Report of Independent Auditors

Board of Directors
IL Annuity and Insurance Company

We have audited the accompanying statement of net assets of IL Annuity and
Insurance Company Separate Account 1 (the Account) as of December 31, 1997, and
the related statement of operations for the year then ended and statements of
changes in net assets for each of the two years in the period then ended. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997 by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IL Annuity and Insurance
Company Separate Account 1 at December 31, 1997, the results of its operations
for the year then ended and the changes in its net assets for each of the two
years in the period then ended in conformity with generally accepted accounting
principles.

/s/ Ernst & Young, LLP

April 17, 1998

<PAGE> 175
IL Annuity and Insurance Co. Separate Account 1

Statement of Net Assets

December 31, 1997

<TABLE>
<CAPTION>
VALUE IN UNITS IN
PERCENT OF ACCUMULATION ACCUMULATION
NET ASSETS PERIOD AND NET ASSETS PERIOD UNIT VALUE
------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments at net asset value:
Alger American Fund:
Alger American MidCap Growth Portfolio--149,364.587
shares at $24.18 per share (cost--$3,376,694) 4.23% $ 3,611,636 294,506 $ 12.263
Alger Small Capitalization Portfolio--93,044.892 shares at
$43.75 per share (cost--$3,859,206) 4.77% 4,070,714 372,229 10.936

Fidelity Variable Insurance Products Fund and Fund II:
Fidelity Asset Manager Portfolio--166,268.907 shares at
$18.01 per share (cost--$2,826,589) 3.51% 2,994,503 212,897 14.066
Fidelity Contra Portfolio--474,704.316 shares
at $19.94 per share (cost--$8,410,859) 11.09% 9,465,604 638,524 14.824
Fidelity Equity Income Portfolio--496,740.714 shares at
$24.28 per share (cost--$10,847,291) 13.84% 11,818,065 781,937 15.114
Fidelity Growth Portfolio--165,007.671 shares at $37.10
per share (cost--$5,507,763) 7.17% 6,121,785 462,381 13.240
Fidelity Index 500 Portfolio--120,413.136 shares
at $114.39 per share (cost--$12,394,019) 16.13% 13,774,059 826,178 16.672
Fidelity Investment Grade Bond Portfolio--244,645.050
shares at $12.56 per share (cost--$2,982,497) 3.60% 3,072,742 274,009 11.214
Fidelity Money Market Portfolio--5,292,079.6 shares
at $1.00 per share (cost--$5,219,840) 6.20% 5,292,080 486,050 10.888

Oppenheimer Capital Accumulation Trust:
OCC Managed Portfolio--240,451.64 shares at $42.38
per share (cost--$9,648,920) 11.93% 10,190,341 672,203 15.160
OCC Small Capitalization Portfolio--90,232.857 shares
at $26.37 per share (cost--$2,186,616) 2.79% 2,379,440 162,435 14.649

T. Rowe Price International Series, Inc.:
T. Rowe Price International Stock Portfolio--346,184.450
shares at $12.74 per share (cost--$4,508,429) 5.17% 4,410,390 368,187 11.979

T. Rowe Price Fixed Income Series, Inc.:
T. Rowe Price Limited-term Bond Portfolio--184,381.256
shares at $4.96 per share (cost--$ 1,464,614) 1.73% 1,474,047 136,902 10.767

Van Eck Worldwide Insurance Trust:
Van Eck Hard Assets Portfolio--
126,681.427 shares at $15.72 per share (cost--$2,132,538) 2.33% 1,991,432 166,188 11.983
Van Eck Worldwide Balanced Portfolio--81,291.327
shares at $12.03 per share (cost--$956,033) 1.15% 977,935 81,483 12.002

SAFECO Resource Fund:
Safeco Equity Portfolio--43,670.911
shares at $25.18 per share (cost--$1,077,995) 1.29% 1,099,634 104,775 10.495
Safeco Growth Portfolio--58,252.053
shares at $23.35 per share (cost--$1,321,463) 1.59% 1,360,185 122,625 11.092

Royce Fund:
Royce Micro Capitalization Portfolio--130,106.504
shares at $5.80 per share (cost--$761,607) 0.88% 754,618 69,105 10.920

The SoGen Funds:
SoGen Overseas Variable Portfolio--53,966.532
shares at $9.77 per share (cost--$544,476) 0.62% 527,253 56,558 9.322
------------------------------

Total investments and net assets (cost--$80,027,449) 100.00% $85,386,463
==============================
</TABLE>

See accompanying notes.

2
<PAGE> 176
IL Annuity and Insurance Co. Separate Account 1

Statement of Operations

Year ended December 31, 1997

<TABLE>
<CAPTION>
ALGER AMERICAN ALGER SMALL
MIDCAP GROWTH CAPITALIZATION FIDELITY ASSET FIDELITY CONTRA
COMBINED PORTFOLIO PORTFOLIO MANAGER PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income $ 829,534 $ 1,249 $ - $ 29,038 $ 24,395
Mortality and expense charges (662,091) (33,411) (39,116) (21,270) (109,011)
Net realized gain on investments 807,617 30,451 94,350 72,840 64,473
Net change in unrealized appreciation
(depreciation) on investments 5,246,583 258,518 239,994 165,946 977,429
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 6,221,643 $ 256,807 $ 295,228 $ 246,554 $ 957,286
=========================================================================================
</TABLE>

<TABLE>
<CAPTION>
FIDELITY EQUITY FIDELITY GROWTH FIDELITY INDEX 500
INCOME PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------
<S> <C> <C> <C>
Dividend income $ 50,007 $ 14,443 $ 35,542
Mortality and expense charges (79,769) (50,698) (92,518)
Net realized gain on investments 251,422 64,652 72,120
Net change in unrealized appreciation
(depreciation) on investments 1,025,392 615,219 1,562,275
-----------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 1,247,052 $ 643,616 $ 1,577,419
===========================================================
</TABLE>

<TABLE>
<CAPTION>
FIDELITY
INVESTMENT GRADE FIDELITY MONEY
BOND PORTFOLIO MARKET PORTFOLIO
---------------------------------
<S> <C> <C>
Dividend income $ 38,551 $ 183,471
Mortality and expense charges (15,965) (42,708)
Net realized gain on investments - -
Net change in unrealized appreciation
(depreciation) on investments 82,688 47
---------------------------------
Net increase (decrease) in net assets
resulting from operations $ 105,274 $ 140,810
=================================
</TABLE>

See accompanying notes.

3
<PAGE> 177

IL Annuity and Insurance Co. Separate Account 1

Statement of Operations (continued)

Year ended December 31, 1997

<TABLE>
<CAPTION>
VAN ECK GOLD VAN ECK
OCC SMALL T. ROWE PRICE T. ROWE PRICE AND NATURAL WORLDWIDE
OCC MANAGED CAPITALIZATION INTERNATIONAL LIMITED-TERM RESOURCES BALANCED
PORTFOLIO PORTFOLIO STOCK PORTFOLIO BOND PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C>
Dividend income $ 23,293 $ 4,014 $ 40,561 $ 33,206 $ 30,297 $ 7,317
Mortality and expense charges (63,261) (17,708) (36,772) (29,879) (18,412) (7,112)
Net realized gain on investments 71,541 28,307 57,461 - - -
Net change in unrealized appreciation
(depreciation) on investments 576,315 186,669 (116,048) 6,871 (115,720) 32,448
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 607,888 $ 201,282 $ (54,798) $ 10,198 $ (103,835) $ 32,653
===========================================================================================
</TABLE>

<TABLE>
<CAPTION>
ROYCE SOGEN
SAFECO EQUITY SAFECO GROWTH MICRO-CAP OVERSEAS
----------------------------------------------------

<S> <C> <C> <C> <C>
Dividend income $ 77,014 $208,167 $ 28,969 $ -
Mortality and expense charges (1,506) (1,372) (953) (650)
Net realized gain on investments - - - -
Net change in unrealized appreciation
(depreciation) on investments (54,039) (168,827) (9,616) (18,978)
----------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 21,469 $ 37,968 $ 18,400 $ (19,628)
====================================================
</TABLE>

See accompanying notes.

4
<PAGE> 178
IL Annuity and Insurance Co. Separate Account 1

Statements of Changes in Net Assets

ALGER
AMERICAN ALGER SMALL FIDELITY ASSET FIDELITY
MIDCAP GROWTH CAPITALIZATION MANAGER CONTRA
COMBINED PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at December 31, 1995 $ 287,171 $ 27,052 $ 16,531 $ 2,095 $ 57,832
Changes from 1996 operations:
Dividend income 60,811 - - 302 -
Mortality and expense charges (105,371) (6,658) (10,322) (4,254) (14,269)
Net realized gain on investments 23,983 6,277 1,331 249 1,185
Net change in unrealized
appreciation
(depreciation) on investments 971,570 45,600 (3,859) 48,435 234,561
-------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 950,993 45,219 (12,850) 44,732 221,477
Net increase from contract purchases 25,697,169 1,400,011 2,250,168 1,057,510 2,620,184
Net decrease from
redemptions-withdrawals (7,130,905) (283,443) (448,471) (377,441) (431,745)
-------------------------------------------------------------------------------
Total increase in net assets 19,517,257 1,161,787 1,788,847 724,801 2,409,916
-------------------------------------------------------------------------------
Net assets at December 31, 1996 19,804,428 1,188,839 1,805,378 726,896 2,467,748

Changes from 1997 operations:
Dividend income 829,534 1,249 - 29,038 24,395
Mortality and expense charges (662,091) (33,411) (39,116) (21,270) (109,011)
Net realized gain on investments 807,617 30,451 94,350 72,840 64,473
Net change in unrealized
appreciation
(depreciation) on investments 5,246,583 258,518 239,994 165,946 977,429
-------------------------------------------------------------------------------
Net increase (decrease) in net
assets
resulting from operations 6,221,643 256,807 295,228 246,554 957,286
Net increase from contract purchases 90,037,395 2,759,201 2,738,621 2,496,478 7,215,827
Net decrease from
redemptions-withdrawals (30,677,003) (593,211) (768,513) (475,425) (1,175,257)
-------------------------------------------------------------------------------
Total increase in net assets 65,582,035 2,422,797 2,265,336 2,267,607 6,997,856
-------------------------------------------------------------------------------
Net assets at December 31, 1997 $ 85,386,463 $ 3,611,636 $ 4,070,714 $ 2,994,503 $ 9,465,604
===============================================================================
</TABLE>

ALGER FIDELITY
FIDELITY FIDELITY FIDELITY INVESTMENT FIDELITY
EQUITY INCOME GROWTH INDEX 500 GRADE BOND MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at December 31, 1995 $ 40,226 $ 21,116 $ 37,200 $ 17,090 $ -
Changes from 1996 operations:
Dividend income 93 96 760 1,427 37,449
Mortality and expense charges (13,031) (10,781) (9,452) (3,531) (10,051)
Net realized gain on investments 2,672 2,434 1,952 - -
Net change in unrealized
appreciation
(depreciation) on investments 146,988 74,508 151,359 19,544 9
-------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 136,722 66,257 144,619 17,440 27,407
Net increase from contract purchases 2,563,577 1,898,462 2,475,413 811,171 5,071,581
Net decrease from
redemptions-withdrawals (403,926) (193,209) (189,366) (246,664) (3,222,143)
-------------------------------------------------------------------------
Total increase in net assets 2,296,373 1,771,510 2,430,666 581,947 1,876,845
-------------------------------------------------------------------------
Net assets at December 31, 1996 2,336,599 1,792,626 2,467,866 599,037 1,876,845

Changes from 1997 operations:
Dividend income 50,007 14,443 35,542 $38,551 $183,471
Mortality and expense charges (79,769) (50,698) (92,518) (15,965) (42,708)
Net realized gain on investments 251,422 64,652 72,120 - -
Net change in unrealized
appreciation
(depreciation) on investments 1,025,392 615,219 1,562,275 82,688 47
-------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 1,247,052 643,616 1,577,419 105,274 140,810
Net increase from contract purchases 10,039,658 4,367,280 12,303,249 3,041,263 20,381,070
Net decrease from
redemptions-withdrawals (1,805,244) (681,737) (2,574,475) (672,832) (17,106,645)
-------------------------------------------------------------------------
Total increase in net assets 9,481,466 4,329,159 11,306,193 2,473,705 3,415,235
-------------------------------------------------------------------------
Net assets at December 31, 1997 $ 11,818,065 $ 6,121,785 $ 13,774,059 $ 3,072,742 $ 5,292,080
=========================================================================
</TABLE>

See accompanying notes.

5
<PAGE> 179
IL Annuity and Insurance Co. Separate Account 1

Statements of Changes in Net Assets (Continued)

<TABLE>
<CAPTION>
OCC SMALL T. ROWE PRICE T. ROWE PRICE
CAPITALIZATION INTERNATIONAL STOCK LIMITED-TERM BOND
OCC MANAGED PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at December 31, 1995 $ 1,672 $ 12,274 $ 26,529 $ 14,916
Changes from 1996 operations:
Dividend income 27 464 11,229 7,667
Mortality and expense charges (6,402) (2,004) (8,956) (1,814)
Net realized gain on investments 17 1,193 6,672 -
Net change in unrealized appreciation
(depreciation) on investments 110,869 34,676 71,734 1,258
------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 104,511 34,329 80,679 7,111
Net increase from contract purchases 1,815,229 562,799 1,836,213 347,111
Net decrease from
redemptions-withdrawals (248,774) (123,189) (496,435) (97,356)
------------------------------------------------------------------------------------
Total increase in net assets 1,670,966 473,939 1,420,457 256,866
------------------------------------------------------------------------------------
Net assets at December 31, 1996 1,672,638 486,213 1,446,986 271,782

Changes from 1997 operations:
Dividend income 23,293 4,014 40,561 33,206
Mortality and expense charges (63,261) (17,708) (36,772) (29,879)
Net realized gain on investments 71,541 28,307 57,461 -
Net change in unrealized appreciation
(depreciation) on investments 576,315 186,669 (116,048) 6,871
------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 607,888 201,282 (54,798) 10,198
Net increase from contract purchases 9,373,918 2,011,359 3,808,234 2,248,833
Net decrease from
redemptions-withdrawals (1,464,103) (319,414) (790,032) (1,056,766)
------------------------------------------------------------------------------------
Total increase in net assets 8,517,703 1,893,227 2,963,404 1,202,265
------------------------------------------------------------------------------------
Net assets at December 31, 1997 $ 10,190,341 $ 2,379,440 $ 4,410,390 $ 1,474,047
====================================================================================
</TABLE>

<TABLE>
<CAPTION>
VAN ECK
VAN ECK GOLD AND WORLDWIDE
NATURAL RESOURCES BALANCED SAFECO SAFECO ROYCE SOGEN
PORTFOLIO PORTFOLIO EQUITY GROWTH MICRO-CAP OVERSEAS
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets at December 31, 1995 $ 612 $ 12,027 $ - $ - $ - $ -
Changes from 1996 operations:
Dividend income 1,164 133 - - - -
Mortality and expense charges (1,738) (2,108) - - - -
Net realized gain on investments - - - - - -
Net change in unrealized appreciation
(depreciation) on investments 12,945 22,943 - - - -
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 12,371 20,968 - - - -
Net increase from contract purchases 500,604 487,137 - - - -
Net decrease from
redemptions-withdrawals (143,039) (225,705) - - - -
-----------------------------------------------------------------------------------------
Total increase in net assets 369,936 282,400 - - - -
-----------------------------------------------------------------------------------------
Net assets at December 31, 1996 370,548 294,427 - - - -

Changes from 1997 operations:
Dividend income 30,297 7,317 77,014 208,167 28,969 -
Mortality and expense charges (18,412) (7,112) (1,506) (1,372) (953) (650)
Net realized gain on investments - - - - - -
Net change in unrealized appreciation
(depreciation) on investments (115,720) 32,448 (54,039) (168,827) (9,616) (18,978)
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (103,835) 32,653 21,469 37,968 18,400 (19,628)
Net increase from contract purchases 2,208,978 885,565 1,287,790 1,449,284 797,553 623,234
Net decrease from
redemptions-withdrawals (484,259) (234,710) (209,625) (127,067) (61,335) (76,353)
-----------------------------------------------------------------------------------------
Total increase in net assets 1,620,884 683,508 1,099,634 1,360,185 754,618 527,253
-----------------------------------------------------------------------------------------
Net assets at December 31, 1997 $ 1,991,432 $ 977,935 $ 1,099,634 $ 1,360,185 $ 754,618 $ 527,253
=========================================================================================
</TABLE>

See accompanying notes.

6
<PAGE> 180

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements

December 31, 1997

1. ACCOUNTING POLICIES

THE ACCOUNT

IL Annuity and Insurance Company Separate Account 1 (the "Account") is a
segregated investment account of the IL Annuity and Insurance Company (the
"Company"), an indirectly majority owned subsidiary of Indianapolis Life
Insurance Company. The Account was established under Massachusetts law on
November 1, 1994, commenced operations in November, 1995 and is registered
under the Investment Company Act of 1940, as amended, as a unit investment
trust.

INVESTMENTS

The Account invests in the following Funds:

Alger American Portfolio--Midcap Growth Portfolio, Small Capitalization
Portfolio

Fidelity Variable Insurance Products Fund and Fund II--Asset Manager
Portfolio, Contra Portfolio, Equity Income Portfolio, Growth Portfolio,
Index 500 Portfolio, Investment Grade Bond Portfolio, Money Market Portfolio

Oppenheimer Capital Accumulation Trust--Managed Portfolio, Small
Capitalization Portfolio

T. Rowe Price International Series, Inc.--International Stock Portfolio

T. Rowe Price Fixed Income Series, Inc.--Limited-term Bond Portfolio

Van Eck Worldwide Investment Trust--Hard Assets Portfolio,
Worldwide Balanced Portfolio

SAFECO Mutual Funds --Equity Resource Fund, Growth Resource Fund

Royce Fund-Micro Capitalization Fund

The SoGen Funds -Overseas Variable Fund

<PAGE> 181

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

INVESTMENTS (CONTINUED)

Investments in funds are stated at the closing net asset value per share on
December 31.

Investment transactions are accounted for on a trade date basis and the cost of
investments sold is determined by the average cost method.

DIVIDENDS

Dividends paid to the Account are automatically reinvested in shares of the
Funds on the payable date.

FEDERAL INCOME TAXES

Operations of the Account form a part of, and are taxed with, operations of the
Company, which is taxed as a "life insurance company" as defined by the Internal
Revenue Code. Based on current law, no federal income taxes are payable with
respect to the Account's net investment income and the net realized gain on
investments.

2. MORTALITY AND EXPENSE GUARANTEES AND OTHER TRANSACTIONS WITH AFFILIATE

Amounts are paid to the Company for mortality and expense guarantees at the rate
of 0.003404% of the current value of the Account per day (1.25% on an annual
basis). The Account also pays the Company for other expenses such as contract
fees ($7.50 per contract at the end of each quarter), and asset-based
administration and investment advisory fees (.15% on an annual basis).

Accordingly, the Company is responsible for all sales, general and
administrative expenses applicable to the Account.

<PAGE> 182

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements (continued)

3. NET ASSETS

Net assets at December 31, 1997 consist of the following:

<TABLE>
<CAPTION>
ALGER
AMERICAN
MIDCAP ALGER SMALL FIDELITY ASSET FIDELITY
GROWTH CAPITALIZATION MANAGER CONTRA
COMBINED PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Contract purchases $ 116,029,799 $ 4,187,906 $ 5,005,087 $ 3,558,018 $ 9,895,452

Redemptions-
withdrawals (37,817,916) (878,629) (1,216,984) (854,870) (1,609,007)

Accumulated net
investment income 122,884 (38,823) (49,439) 3,816 (98,876)

Accumulated realized
gains on investments 831,617 36,728 95,681 73,089 65,676

Accumulated net change
in unrealized appreciation
(depreciation) on
investments 6,220,079 304,454 236,369 214,450 1,212,359
------------------------------------------------------------------------------------------------

$ 85,386,463 $ 3,611,636 $ 4,070,714 $ 2,994,503 $ 9,465,604
================================================================================================
</TABLE>

FIDELITY FIDELITY
FIDELITY EQUITY FIDELITY INVESTMENT MONEY
INCOME GROWTH FIDELITY INDEX GRADE BOND MARKET
PORTFOLIO PORTFOLIO 500 PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Contract purchases $ 12,643,252 $ 6,288,725 $ 14,815,743 $ 3,869,483 $ 25,452,651

Redemptions-
withdrawals (2,209,170) (876,946) (2,763,841) (919,496) (20,328,788)

Accumulated net
investment income (42,700) (46,940) (65,668) 20,482 168,161

Accumulated realized
gains on investments 254,094 67,086 74,072 - -

Accumulated net change
in unrealized appreciation
(depreciation) on
investments 1,172,589 689,860 1,713,753 102,273 56
------------------------------------------------------------------------------------------

$ 11,818,065 $ 6,121,785 $ 13,774,059 $ 3,072,742 $ 5,292,080
==========================================================================================

</TABLE>

9
<PAGE> 183

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements (continued)

3. NET ASSETS (CONTINUED)

<TABLE>
<CAPTION>
T. ROWE PRICE VAN ECK GOL
OCC OCC SMALL INTERNATIONAL T. ROWE PRICE AND NATURAL
MANAGED CAPITALIZATION STOCK LIMITED-TERM RESOURCES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Contract purchases $ 11,190,789 $ 2,588,339 $ 5,670,719 $ 2,610,859 $ 2,710,195

Redemptions-
withdrawals (1,712,877) (444,626) (1,286,467) (1,154,122) (627,298)

Accumulated net
investment income (46,344) (15,235) 6,062 9,180 11,311

Accumulated realized
gains on investments 71,558 29,500 64,133 - -

Accumulated net change
in unrealized appreciation
(depreciation) on
investments 687,215 221,462 (44,057) 8,130 (102,776)
----------------------------------------------------------------------------------------------------

$ 10,190,341 $ 2,379,440 $ 4,410,390 $ 1,474,047 $ 1,991,432
====================================================================================================
</TABLE>

<TABLE>
<CAPTION>
VAN ECK SAFECO SAFECO
WORLDWIDE EQUITY GROWTH ROYCE MICRO SOGEN
BALANCED RESOURCE RESOURCE CAPITALIZATION OVERSEAS
PORTFOLIO FUND FUND FUND VARIABLE FUND
---------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Contract purchases $ 1,384,720 $ 1,287,790 $ 1,449,284 $ 797,553 $ 623,234

Redemptions-
withdrawals (460,415) (209,625) (127,067) (61,335) (76,353)

Accumulated net
investment income (1,772) 75,508 206,795 28,016 (650)

Accumulated realized
gains on investments - - - - -

Accumulated net change
in unrealized appreciation
(depreciation) on
investments 55,402 (54,039) (168,827) (9,616) (18,978)
---------------------------------------------------------------------------------------

$ 977,935 $ 1,099,634 $ 1,360,185 $ 754,618 $ 527,253
=======================================================================================
</TABLE>

10
<PAGE> 184

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements (continued)

4. PURCHASES AND SALES OF SECURITIES

The aggregate cost of investments purchased and the aggregate proceeds from
investments sold were as follows for 1997.

<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of Proceeds
Purchases from Sales
----------- -----------
<S> <C> <C>
Alger American Midcap Growth Portfolio $ 2,599,824 $ 435,357
Alger Small Capitalization Portfolio 2,569,050 543,716
Fidelity Asset Manager Portfolio 2,471,625 370,064
Fidelity Contra Portfolio 6,610,811 589,941
Fidelity Equity Income Portfolio 9,458,226 1,001,959
Fidelity Growth Portfolio 4,080,399 366,467
Fidelity Index 500 Portfolio 11,394,706 1,650,697
Fidelity Investment Grade Bond Portfolio 2,856,601 466,589
Fidelity Money Market Portfolio 13,507,435 10,091,760
OCC Managed Portfolio 8,659,564 718,152
OCC Small Capitalization Portfolio 1,879,087 172,541
T. Rowe Price International Stock Portfolio 3,558,715 479,271
T. Rowe Price Limited-term Bond Portfolio 1,974,677 783,281
Van Eck Gold and Natural Resources Portfolio 2,143,487 406,605
Van Eck Worldwide Balanced Portfolio 871,146 220,089
SafeCo Equity Resource Fund 1,167,866 91,480
SafeCo Growth Resource Fund 1,345,584 24,677
Royce Micro-Capitalization Fund 761,537 2
SoGen Overseas Variable Fund 548,793 2,562
----------- -----------
$78,459,133 $18,415,210
=========== ===========
</TABLE>

11
<PAGE> 185

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements (continued)

5. SUMMARY OF UNIT TRANSACTIONS

<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------------------------------
1997 1996
-------------------------------------------------------------------------
Units Amount Units Amount
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
Contract purchases 239,151 $ 2,759,201 135,937 $ 1,400,011
Redemptions-withdrawals (51,416) (593,211) (27,521) (283,443)

ALGER SMALL CAPITALIZATION
PORTFOLIO
Contract purchases 262,182 2,738,621 229,258 2,250,168
Redemptions-withdrawals (73,574) (768,513) (45,692) (448,471)

FIDELITY ASSET MANGER PORTFOLIO
Contract purchases 192,905 2,496,478 105,535 1,057,510
Redemptions-withdrawals (36,736) (475,425) (37,667) (377,441)

FIDELITY CONTRA PORTFOLIO
Contract purchases 535,915 7,215,827 236,095 2,620,184
Redemptions-withdrawals (87,286) (1,175,257) (38,903) (431,745)

FIDELITY EQUITY INCOME PORTFOLIO
Contract purchases 741,701 10,039,658 227,127 2,563,577
Redemptions-withdrawals (133,366) (1,805,244) (35,787) (403,926)

FIDELITY GROWTH PORTFOLIO
Contract purchases 362,310 4,367,280 185,469 1,898,462
Redemptions-withdrawals (56,557) (681,737) (18,875) (193,209)

FIDELITY INDEX 500 PORTFOLIO
Contract purchases 836,785 12,303,249 212,957 2,475,413
Redemptions-withdrawals (175,099) (2,574,475) (16,291) (189,366)

FIDELITY INVESTMENT GRADE
BOND PORTFOLIO
Contract purchases 281,130 3,041,263 78,492 811,171
Redemptions-withdrawals (62,196) (672,832) (23,868) (246,664)

FIDELITY MONEY MARKET PORTFOLIO
Contract purchases 1,909,770 20,381,070 485,040 5,071,581
Redemptions-withdrawals (1,602,946) (17,106,645) (308,162) (3,222,143)

OCC MANAGED PORTFOLIO
Contract purchases 676,158 9,373,918 158,211 1,815,229
Redemptions-withdrawals (105,608) (1,464,103) (21,682) (248,774)
</TABLE>

<PAGE> 186

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements (continued)

5. SUMMARY OF UNIT TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------
1997 1996
----------------------------------------------------------------------
Units Amount Units Amount
----------------------------------------------------------------------

<S> <C> <C> <C> <C>
OCC SMALL CAPITALIZATION
PORTFOLIO
Contract purchases 150,118 2,011,359 49,947 562,799
Redemptions-withdrawals (23,840) (319,414) (10,933) (123,189)

T. ROWE PRICE INTERNATIONAL
STOCK PORTFOLIO
Contract purchases 320,572 3,808,234 164,927 1,836,213
Redemptions-withdrawals (66,504) (790,032) (44,589) (496,435)

T. ROWE PRICE LIMITED-TERM
BOND PORTFOLIO
Contract purchases 217,142 2,248,833 34,732 347,111
Redemptions-withdrawals (102,039) (1,056,766) (9,741) (97,356)

VAN ECK GOLD AND NATURAL
RESOURCES PORTFOLIO
Contract purchases 181,518 2,208,978 43,574 500,604
Redemptions-withdrawals (39,793) (484,259) (12,451) (143,039)

VAN ECK WORLDWIDE BALANCED
PORTFOLIO
Contract purchases 76,935 885,565 46,330 487,137
Redemptions-withdrawals (20,391) (234,710) 21,466 (225,705)

SAFECO EQUITY RESOURCE FUND
Contract purchases 122,705 1,287,790 - -
Redemptions-withdrawals (19,974) (209,625) - -

SAFECO GROWTH RESOURCE FUND
Contract purchases 130,660 1,449,284 - -
Redemptions-withdrawals (11,456) (127,067) - -

ROYCE MICRO-CAPITALIZATION
FUND
Contract purchases 73,036 797,553 - -
Redemptions-withdrawals 5,617 (61,335) - -
</TABLE>

13
<PAGE> 187

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements (continued)

5. SUMMARY OF UNIT TRANSACTIONS (CONTINUED)

<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------------------------------------------------
1997 1996
-------------------------------------------------------------------------------------------
Units Amount Units Amount
-------------------------------------------------------------------------------------------

<S> <C> <C>
SOGEN OVERSEAS VARIABLE FUND
Contract purchases 66,856 623,234 - -
Redemptions-withdrawals (8,191) (76,353) - -
-------------------------- ---------------------------

Net increase from unit
transactions $ 59,360,392 $ 18,566,277
========================== ===========================
</TABLE>

14
<PAGE> 188
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

All required financial statements are included in Part B of this
Registration Statement.

(b) Exhibits

(1) Certified resolution of the Board of Directors of IL Annuity
and Insurance Company (the "Company") authorizing
establishment of IL Annuity and Insurance Co. Separate Account
1 (the "Separate Account").5/

(2) Not applicable.

(3) (a) Form of Distribution Agreement among the Company, the
Separate Account and IL Securities, Inc. ("IL
Securities").5/

(b) Form of Sales Agreement among the Company, IL
Securities, Inc. and a broker-dealer.5/

(4) (a) (i) Form of Contract for the Visionary Flexible
Premium Deferred Variable Annuity.2/

(ii) Form of Contract for the Visionary Choice
Flexible Premium Deferred Variable
Annuity.3/

(b) Form of Qualified Plan Endorsement, IRA Endorsement,
Endorsement for Qualified 403(b) Annuity, Unisex
Rider, Additional Waiver of Withdrawal Charge Rider -
Hospitalization, Additional Waiver of Withdrawal
Charge Rider - Terminal Illness, Additional Waiver of
Withdrawal Charge Rider - Long Term Care, Additional
Waiver of Withdrawal Charge Rider - Post Secondary
Education.1/

(5) (a) Form of Application for the Visionary Flexible
Premium Deferred Variable Annuity.2/

(b) Form of Application for the Visionary Choice Flexible
Premium Deferred Variable Annuity.3/

(6) (a) Articles of Incorporation of IL Annuity and Insurance
Company.1/

(b) By-Laws of IL Annuity and Insurance Company.1/

(7) Not Applicable.

(8) (a) Form of Participation Agreement between Fidelity
Variable Insurance Products Fund and IL Annuity and
Insurance Company.5/

(b) Form of Participation Agreement between Fidelity
Variable Insurance Products Fund II and IL Annuity
and Insurance Company.5/

(d) Form of Participation Agreement between T. Rowe Price
International Series, Inc. and IL Annuity and
Insurance Company.5/

C-1
<PAGE> 189

(e) Form of Participation Agreement between T. Rowe Price
Fixed Income Series, Inc. and IL Annuity and
Insurance Company.5/

(f) Form of Participation Agreement between Quest for
Value Accumulation Trust and IL Annuity and Insurance
Company.5/

(g) Form of Participation Agreement between The Alger
American Fund and IL Annuity and Insurance Company.5/

(h) Form of Services Agreement between Financial
Administration Services, Inc. and IL Annuity and
Insurance Company.2/

(i) Participation Agreement between Royce Capital Fund
and IL Annuity and Insurance Company.4/

(j) Participation Agreement among SAFECO Resource Series
Trust, SAFECO Asset Management Company, and IL
Annuity and Insurance Company.4/

(k) Participation Agreement among SoGen Variable Funds,
Inc., Societe Generale Securities Corporation, and IL
Annuity and Insurance Company.4/

(l) Form of Services Agreement between USA Administration
Services, Inc. and IL Annuity and Insurance
Company.4/

(9) Opinion and Consent of Janis B. Funk, Esq.5/

(10) (a) Consent of Sutherland, Asbill & Brennan LLP.5/

(b) Consent of Ernst & Young LLP. 5/

(11) No financial statements will be omitted from Item 23.

(12) Not applicable.

(13) Schedule of Performance Computations. 4/

(14) Not applicable.

(15) Powers of Attorney. 5/

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

1/ Incorporated herein by reference to registrant's initial filing of this Form
N-4 Registration Statement filed with the SEC on January 31, 1995 (File No.
33-89028).

2/ Incorporated herein by reference to registrant's Pre-Effective Amendment No.
1 to this Form N-4 Registration Statement filed with the SEC on August 29, 1995
(File No. 33-89028).

3/ Incorporated herein by reference to registrant's Post-Effective Amendment No.
2 to this Form N-4 Registration Statement filed with the SEC via EDGARLINK on
October 23, 1996 (File No. 33-89028).

4/ Incorporated herein by reference to registrant's Post-Effective Amendment No.
5 to this Form N-4 Registration Statement filed with the SEC via EDGARLINK on
August 8, 1997 (File No. 33-89028).

5/ Filed herewith via EDGARLINK.

C-2
<PAGE> 190

ITEM 25. DIRECTORS AND OFFICERS OF IL ANNUITY AND INSURANCE COMPANY

<TABLE>
<CAPTION>
Name and Principal Business Address* Position and Office with Depositor
- ------------------------------------ ----------------------------------
<S> <C>
Larry R. Prible Chairman of the Board and Director
Gregory J. Carney President, Chief Executive Officer and
Director
Lisa Foxworthy-Parker Secretary
John J. Fahrenbach Director
Larry A. Halbach Director
Garrett P. Ryan Director
Stephen J. Shorrock** Director
Karla K. Vest Director
Richard G. Darragh Controller
Gene E. Trueblood Treasurer
Rebecca Rissen Assistant Secretary
</TABLE>

* Unless otherwise indicated, the principal business address is 2960 North
Meridian Street, Indianapolis, Indiana 46208.

** The Principal Business Address of Mr. Shorrock is 65 Froehlich Farm Blvd.,
Woodbury, NY 11797-9847.

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
DEPOSITOR OR REGISTRANT

<TABLE>
<CAPTION>
Percent of Voting
Name Jurisdiction Securities Owned Principal Business
- ---- ------------ ---------------- ------------------
<S> <C> <C> <C>
Indianapolis Life Indiana Mutual Company Life & Health
Insurance Company* Insurance
("Indianapolis Life")

American United Indiana Mutual Company Life & Health
Life Insurance Insurance
Company

The Indianapolis Life Group Indiana Indianapolis Life Holding Company
of Companies, Inc. (71.43%)
("The Indianapolis Group") American United Life
Insurance Company
(28.41%)

IL Securities, Inc.* Indiana All voting securities Broker/Dealer
owned by The
Indianapolis Group

IL Term Insurance Indiana All voting securities Life & Health
Company* owned by The Insurance
Indianapolis Group

Bankers Life Insurance New York All voting securities Life & Health
Company of New York* owned by Insurance
Indianapolis Life
</TABLE>

C-3
<PAGE> 191

<TABLE>
<S> <C> <C> <C>
Western Security Life Arizona All voting securities Life & Health
Insurance Company* owned by Indianapolis Insurance
Life
</TABLE>

* Files Separate Financial Statements.

ITEM 27. NUMBER OF CONTRACTOWNERS

As of April 1, 1998 there were a total of 1,864 Visionary Contracts
in force -- 587 non-qualified and 1,277 qualified and a total of
1,364 Visionary Choice Contracts in force -- 506 non-qualified and
858 qualified.

ITEM 28. INDEMNIFICATION

The By-Laws of IL Annuity and Insurance Company provide, in Article X,
as follows:

ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS

Any director or officer or his legal representative shall be
indemnified by the Company against reasonable expenses including the
cost of any settlement and counsel fees paid or incurred in connection
with any action, suit or proceeding to which any such director or
officer or his legal representative may be made a party by reason of
his being or having been such director or officer, provided it shall
not be determined by a final determination thereof on the merits that
such director or officer was in any substantial way derelict in the
performance of his duties, or provided that such action, suit or
proceeding shall be settled without a final determination on the merits
and it shall be determined that such officer or director had not in any
substantial way been derelict in the performance of his duties as
charged therein, such determination to be made by a majority of the
members of the Board of Directors who were not parties to such action,
suit or proceedings, though less than a quorum, or by any one or more
disinterested persons to whom the question may be referred by the Board
of Directors. The foregoing right of indemnification shall not be
exclusive of any other rights to which any director or officer may be
entitled as a matter of law or which may be lawfully granted to him.

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by

C-4
<PAGE> 192

controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

ITEM 29. PRINCIPAL UNDERWRITER

(a) IL Securities, Inc. is the registrant's principal
underwriter.

(b) Officers and Directors of IL Securities, and their addresses, are as
follows:

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* With the Underwriter with Registrant
- ----------------- -------------------- ---------------
<S> <C> <C>
Larry R. Prible Chairman of the Board Chairman of the Board
Gregory J. Carney President, Chief Executive President, Chief Executive
Officer and Director Officer and Director
Lisa Foxworthy-Parker Secretary and Director Secretary
William L. Boyd Director Director
John J. Fahrenbach Director Director
Garrett P. Ryan Director Director
Joe C. Lowe Vice-President None
Gene E. Trueblood Treasurer Treasurer
</TABLE>

* All of the persons listed above have as their principal business address:
P.O. Box 1230, 2960 North Meridian Street, Indianapolis, Indiana 46208.

<TABLE>
<CAPTION>
(c)(1) (2) (3) (4) (5)
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ----------- ----------- ---------- ----------- ------------
<S> <C>
IL Securities, $637,722.49
Inc.
</TABLE>

Commissions are paid by the Company directly to agents who are registered
representatives of the principal underwriter, or to broker-dealers that have
entered into a selling agreement with the principal underwriter, or
broker-dealers having selling agreements with such broker-dealers with respect
to the sales of the Visionary and Visionary Choice Contracts.

ITEM 30. LOCATION OF BOOKS AND RECORDS

All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by IL Annuity and Insurance Company at its home
office and, with regard to the Visionary Contract, at the offices of Financial
Administrative Services, Inc., 1290 Silas Deane Highway, Wethersfield,

C-5
<PAGE> 193

CT 06109-4303, and with regard to the Visionary Choice Contract, at the offices
of USA Administration Services, Inc., P.O. Box 29163, Overland Park, KS 66201.

ITEM 31. MANAGEMENT SERVICES

All management contracts are discussed in Part A or Part B of this
registration statement.

ITEM 32. UNDERTAKINGS AND REPRESENTATIONS

(a) The registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for as long as purchase payments under the contracts offered
herein are being accepted.

(b) The registrant undertakes that it will include either (1) as
part of any application to purchase a contract offered by the
prospectus, a space that an applicant can check to request a
statement of additional information, or (2) a post card or
similar written communication affixed to or included in the
prospectus that the applicant can remove and send to IL
Annuity and Insurance Company for a statement of additional
information.

(c) The registrant undertakes to deliver any statement of
additional information and any financial statements required
to be made available under this Form N-4 promptly upon written
or oral request to the Company at the address or phone number
listed in the prospectus.

(d) The Company represents that in connection with its offering of
the contracts as funding vehicles for retirement plans meeting
the requirements of Section 403(b) of the Internal Revenue
Code of 1986, it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance
(Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and
27(d) of the Investment Company Act of 1940, and that
paragraphs numbered (1) through (4) of that letter will be
complied with.

(e) The Company hereby represents that the fees and charges
deducted under the Contracts, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by the Company.

C-6
<PAGE> 194

As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, IL Annuity and Insurance Co. Separate Account 1,
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this registration statements and has caused this Post-Effective
Amendment No. 6 to its registration statement to be signed on its behalf, in the
City of Indianapolis, and the State of Indiana, on this 30th day of April, 1998.

IL ANNUITY AND INSURANCE CO.
SEPARATE ACCOUNT 1 (Registrant)

Attest: /s/ Janis B. Funk By: /s/ Gregory J. Carney
----------------- ---------------------
Janis B. Funk Gregory J. Carney
President

By: IL ANNUITY AND INSURANCE
COMPANY (Depositor)

Attest: /s/ Janis B. Funk By: /s/ Gregory J. Carney
----------------- ---------------------
Janis B. Funk Gregory J. Carney
President

As required by the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and April 30, 1998
- --------------------------- Director
Larry R. Prible

* President, Chief Executive April 30, 1998
- --------------------------- Officer and Director
Gregory J. Carney

* Treasurer April 30, 1998
- --------------------------- (Principal Financial Officer)
Gene E. Trueblood

* Controller April 30, 1998
- --------------------------- (Chief Accounting Officer)
Richard G. Darragh
</TABLE>

C-7
<PAGE> 195

<TABLE>
<S> <C> <C>
* Director April 30, 1998
- ---------------------------
John J. Fahrenbach

* Director April 30, 1998
- ---------------------------
Larry A. Halbach

* Director April 30, 1998
- ---------------------------
Garrett P. Ryan

* Director April 30, 1998
- ---------------------------
Stephen J. Shorrock

* Director April 30, 1998
- ---------------------------
Karla K. Vest
</TABLE>

<TABLE>
<S> <C>
/s/ Janis B. Funk On April 30, 1998, as Attorney-in-Fact pursuant
- --------------------------- to powers of attorney filed herewith.
* By Janis B. Funk
</TABLE>

C-8
<PAGE> 196

EXHIBIT INDEX

(1) Certified resolution of the Board of Directors of IL Annuity
and Insurance Company authorizing establishment of IL Annuity
and Insurance Co. Separate Account 1

(3) (a) Form of Distribution Agreement among the Company, the
Separate Account and IL Securities, Inc.

(b) Form of Sales Agreement among the Company, IL
Securities, Inc. and a broker-dealer

(4) (c) Form of Roth IRA Endorsement

(8) (a) Form of Participation Agreement between Fidelity
Variable Insurance Products Fund and IL Annuity and
Insurance Company

(b) Form of Participation Agreement between Fidelity
Variable Insurance Products Fund II and IL Annuity
and Insurance Company

(d) Form of Participation Agreement between T. Rowe
Price International Series, Inc. and IL Annuity and
Insurance Company

(e) Form of Participation Agreement between T. Rowe
Price Fixed Income Series, Inc. and IL Annuity and
Insurance Company

(f) Form of Participation Agreement between Quest
for Value Accumulation Trust and IL Annuity and
Insurance Company

(g) Form of Participation Agreement between The
Alger American Fund and IL Annuity and Insurance
Company

(9) Opinion and Consent of Janis B. Funk, Esq.

(10) (a) Consent of Sutherland, Asbill & Brennan LLP

(b) Consent of Ernst & Young LLP

(15) Powers of Attorney

C-9

<PAGE> 1
EXHIBIT 1

I, Margaret M. McKinney, do hereby certify that the attached is a true copy of
the Resolution of the Board of Directors of IL Annuity and Insurance Company as
enacted November 1, 1994 by written consent.

Witness my hand and seal of said Corporation on this 7th day of December, 1994.

/s/ Margaret M. McKinney
------------------------
Margaret M. McKinney
Secretary

<PAGE> 2

SEPARATE ACCOUNT I RESOLUTION

BE IT RESOLVED, by the Board of Directors of IL ANNUITY AND INSURANCE COMPANY,
that the Company, pursuant to the provisions of Indiana Code Section 27-1-5-1,
hereby establishes a separate account designated, "SEPARATE ACCOUNT I" for the
following use and purposes, and subject to such conditions as hereinafter set
forth; and

FURTHER RESOLVED, that SEPARATE ACCOUNT I shall be established for the purpose
of providing for the issuance by the Company of such variable annuities or such
other variable contracts ("Contracts") as the President and Chief Executive
Officer may designate for such purpose. SEPARATE ACCOUNT I shall constitute a
separate account into which are allocated amounts paid to or held by the Company
under such Contracts; and

FURTHER RESOLVED, that the income, gains and losses, whether or not realized,
from assets allocated to SEPARATE ACCOUNT I shall, in accordance with the
Contracts, be credited to or charged against such account without regard to
other income, gains, or losses of any other separate account or of the Company;
and

FURTHER RESOLVED, that the portion of the assets of SEPARATE ACCOUNT I equal to
the reserves and other contract liabilities with respect to SEPARATE ACCOUNT I
shall not be chargeable with liabilities arising out of any other business the
Company may conduct; and

FURTHER RESOLVED, that the fundamental investment policy of SEPARATE ACCOUNT I
shall be to invest or reinvest the assets of SEPARATE ACCOUNT I in securities
issued by investment companies registered under the Investment Company Act of
1940; and

FURTHER RESOLVED, that fourteen investment divisions be, and hereby are
established within SEPARATE ACCOUNT I to which net premiums under the Contracts
will be allocated in accordance with instructions received from contract
holders, and that the President and Chief Executive Officer be, and hereby is,
authorized to increase or decrease the number of investment divisions in
SEPARATE ACCOUNT I as he deems necessary or appropriate; and

FURTHER RESOLVED, that the Board of Directors expressly reserves the right to
add, combine, or remove any investment divisions of SEPARATE ACCOUNT I as it may
hereafter deem necessary or appropriate; and

FURTHER RESOLVED, that each such investment division shall invest only in the
shares of a single mutual fund or a single mutual fund portfolio of an
investment company organized as a series fund pursuant to Rule 18f-2 of the
Investment Company Act of 1940; and

FURTHER RESOLVED, that the income, gains and losses, whether or not realized,
from assets allocated to each investment division of SEPARATE ACCOUNT I shall,
in accordance with the Contracts, be credited to or charged against such
investment division of SEPARATE ACCOUNT I without regard to other income, gains
or losses of any other investment division of SEPARATE ACCOUNT I; and

<PAGE> 3

FURTHER RESOLVED, that the President and Chief Executive Officer and the
Treasurer be, and they hereby are, authorized to deposit an amount or amounts
not exceeding $500,000 in the aggregate in SEPARATE ACCOUNT I as may be
necessary or appropriate to facilitate the commencement of the Account's
operations; and

FURTHER RESOLVED, that the President and Chief Executive Officer and the
Treasurer be, and they hereby are, authorized to transfer funds from time to
time between the Company's General Account and SEPARATE ACCOUNT I as deemed
necessary or appropriate and consistent with the terms of the Contracts; and

FURTHER RESOLVED, that the President and Chief Executive Officer of the Company
be, and is hereby, authorized to change the designation of SEPARATE ACCOUNT I to
such other designation as he may deem necessary or appropriate; and

FURTHER RESOLVED, that the appropriate officers of the Company, with such
assistance from the Company's auditors, legal counsel and independent
consultants or others as they may require, be, and they hereby are, authorized
and directed to take all action necessary to: (a) register SEPARATE ACCOUNT I as
a unit investment trust under the Investment Company Act of 1940, as amended,
and to change the classification under which SEPARATE ACCOUNT I is registered or
to de-register SEPARATE ACCOUNT I as they deem necessary or appropriate; (b)
register the Contracts in such amounts, which may be an indefinite amount, as
the Officers of the Company shall from time to time deem appropriate under the
Securities Act of 1933; and (c) take all other actions which are necessary in
connection with the offering of said Contracts for sale and the operation of
SEPARATE ACCOUNT I in order to comply with the Investment Company Act of 1940,
the Securities Exchange Act of 1934, the Securities Act of 1933, and other
applicable federal laws, including the filing of any amendments to registration
statement, any undertakings, and any applications for exemptions from the
Investment Company Act of 1940 or other applicable federal laws as the Officers
of the Company shall deem necessary or appropriate; and

FURTHER RESOLVED, that the President and Chief Executive Officer, the Secretary
and the Vice President and General Counsel, and each of them with full power to
act without the others, hereby are severally authorized and empowered to
prepare, execute and cause to be filed with the Securities and Exchange
Commission on behalf of SEPARATE ACCOUNT I , and by the Company as sponsor and
depositor, forms of Notification of Registration and Registration Statements
under the Securities Act of 1933 registering the Contracts, and under the
Investment Company Act of 1940 registering SEPARATE ACCOUNT I, and any exemptive
application, and any and all amendments to the foregoing on behalf of SEPARATE
ACCOUNT I and the Company and on behalf of and as attorneys for the principal
executive officer and/or the principal financial officer and/or the principal
accounting officer and/or any other officer of the Company; and

FURTHER RESOLVED, that Margaret M. McKinney and Stephen E. Roth are hereby
appointed as agents for service under any such registration statement duly
authorized to receive communications and notices from the Securities and
Exchange Commission with respect thereto; and

<PAGE> 4

FURTHER RESOLVED, that the appropriate Officers of the Company be, and they
hereby are, authorized on behalf of SEPARATE ACCOUNT I and on behalf of the
Company to take any and all action that they may deem necessary or advisable in
order to sell the Contracts, including any registrations, filings and
qualifications of the Company, its officers, agents and employees, and the
Contracts under the insurance and securities laws of any of the states of the
United States of America or other jurisdictions, and in connection therewith to
prepare, execute, deliver and file all such applications, reports, covenants,
resolutions, applications for exemptions, consents to service of process and
other papers and instruments as may be required under such laws, and to take any
and all further action which said officers or counsel of the Company may deem
necessary or desirable (including entering into whatever agreements and
contracts may be necessary) in order to maintain such registrations or
qualifications for as long as said officers or counsel deem it to be in the best
interests of SEPARATE ACCOUNT I and the Company; and

FURTHER RESOLVED, that the President and Chief Executive Officer, and the
Secretary of the Company be, and they hereby are, authorized in the names and on
behalf of SEPARATE ACCOUNT I and the Company to execute and file irrevocable
written consents on the part of SEPARATE ACCOUNT I and of the Company to be used
in such states wherein such consents to service of process may be requisite
under the insurance or securities laws therein in connection with said
registration or qualification of Contracts and to appoint the appropriate state
official, or such other person as may be allowed by said insurance or securities
laws, agent of SEPARATE ACCOUNT I and of the Company for the purpose of
receiving and accepting process; and

FURTHER RESOLVED, that the President and Chief Executive Officer of the Company
may, to the extent deemed necessary or appropriate, institute procedures for
providing voting rights for owners of such Contracts with respect to securities
owned by SEPARATE ACCOUNT I, and

FURTHER RESOLVED, that the President and Chief Executive Officer of the Company
is hereby authorized to execute such agreement or agreements as deemed necessary
and appropriate (i) with a qualified entity which will be appointed principal
underwriter and distributor for the Contracts and (ii) with one or more
qualified banks or other qualified entities to provide administrative and/or
custodial services in connection with the establishment and maintenance of
SEPARATE ACCOUNT I and the design, issuance, and administration of the
Contracts; and

FURTHER RESOLVED, that, since it is expected that SEPARATE ACCOUNT I will invest
in the securities issued by one or more investment companies, the appropriate
officers of the Company are hereby authorized to execute whatever agreement or
agreements as may be necessary or appropriate to enable such investments to be
made; and

FURTHER RESOLVED, that the appropriate officers of the Company, are hereby
authorized to execute and deliver all such documents and papers and to do or
cause to be done all such acts and things as he may deem necessary or desirable
to carry out the foregoing resolutions and the intent and purposes thereof.

This resolution is effective November 1, 1994 and supersedes any previous
resolutions in conflict herewith.

<PAGE> 1
EXHIBIT 3(a)

DISTRIBUTION AGREEMENT

AGREEMENT dated as of _________________ by and between IL ANNUITY AND
INSURANCE COMPANY ("Insurer"), a Massachusetts insurance company, on its behalf
and on behalf of each separate account identified in Schedule 1 hereto, and IL
SECURITIES, INC. ("Distributor"), an Indiana corporation.

WITNESSETH:

WHEREAS, Distributor is a broker-dealer that engages in the
distribution of variable insurance products and other investment products; and

WHEREAS, Insurer desires to issue certain variable insurance products
described more fully below to the public through Distributor acting as
principal underwriter;

NOW, THEREFORE, in consideration of their mutual promises, Insurer and
Distributor hereby agree as follows:

1. Additional Definitions

a. Contracts -- The class or classes of variable insurance
products set forth on Schedule 1 to this Agreement as in
effect at the time this Agreement is executed, and such other
classes of variable insurance products that may be added to
Schedule 1 from time to time in accordance with Section 11.b
of this Agreement, and including any riders to such contracts
and any other contracts offered in connection therewith. For
this purpose and under this Agreement generally, a "class of
Contracts" shall mean those Contracts issued by Insurer on the
same policy form or forms and covered by the same Registration
Statement.

b. Registration Statement -- At any time that this Agreement is
in effect, each currently effective registration statement
filed with the SEC under the 1933 Act on a prescribed form, or
currently effective post-effective amendment thereto, as the
case may be, relating to a class of Contracts, including
financial statements included in, and all exhibits to, such
registration statement or post-effective amendment. For
purposes of Section 9 of this Agreement, the term
"Registration Statement" means any document which is or at any
time was a Registration Statement within the meaning of this
Section 1.b.

c. Prospectus -- The prospectus included within a Registration
Statement, except that, if the most recently filed version of
the prospectus (including any supplements thereto) filed
pursuant to Rule 497 under the 1933 Act subsequent to the date
on which a Registration Statement became effective differs
from the prospectus included within such Registration
Statement at the time it became effective, the term
"Prospectus" shall refer to the most recently filed prospectus

<PAGE> 2
filed under Rule 497 under the 1933 Act, from and after the
date on which it shall have been filed. For purposes of
Section 9 of this Agreement, the term "any Prospectus" means
any document which is or at any time was a Prospectus within
the meaning of this Section 1.c.

d. Fund -- An investment company in which the Separate Account
invests.

e. Variable Account -- A separate account supporting a class or
classes of Contracts and specified on Schedule 1 as in effect
at the time this Agreement is executed, or as it may be
amended from time to time in accordance with Section 11.b of
this Agreement.

f. 1933 Act -- The Securities Act of 1933, as amended.

g. 1934 Act -- The Securities Exchange Act of 1934, as amended.

h. 1940 Act -- The Investment Company Act of 1940, as amended.

i. SEC -- The Securities and Exchange Commission.

j. NASD -- The National Association of Securities Dealers, Inc.

k. Regulations -- The rules and regulations promulgated by the
SEC under the 1933 Act, the 1934 Act and the 1940 Act as in
effect at the time this Agreement is executed or thereafter
promulgated.

l. Selling Broker-Dealer -- A person registered as a
broker-dealer and licensed as a life insurance agent or
affiliated with a person so licensed, and authorized to
distribute the Contracts pursuant to a sales agreement as
provided for in Section 4 of this Agreement.

m. Agents Manual -- The agents manual and other written rules,
regulations and procedures provided by Insurer to insurance
agents appointed to sell its insurance contracts, as revised
from time to time.

n. Representative -- When used with reference to Distributor or a
Selling Broker-Dealer, an individual who is an associated
person, as that term is defined in the 1934 Act.

o. Application -- An application for a Contract.

p. Premium -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.

- 2 -
<PAGE> 3
q. Annuity Service Center -- The service office identified in the
Prospectus as the location at which Premiums and Applications
are accepted.

2. Authorization and Appointment

a. Scope of Authority. Insurer hereby authorizes Distributor on
an exclusive basis, and Distributor accepts such authority,
subject to the registration requirements of the 1933 Act and
the 1940 Act and the provisions of the 1934 Act and conditions
herein, to be the distributor and principal underwriter for
the sale of the Contracts to the public in each state and
other jurisdiction in which the Contracts may lawfully be sold
during the term of this Agreement. Insurer hereby appoints
Distributor as its independent general agent for sale of the
Contracts. Insurer hereby authorizes Distributor to grant
authority to Selling Broker-Dealers to solicit Applications
and Premiums to the extent Distributor deems appropriate and
consistent with the marketing program for the Contracts or a
class of Contracts, subject to the conditions set forth in
Section 4 of this Agreement. The Contracts shall be offered
for sale and distribution at premium rates set from time to
time by Insurer. Distributor shall use its best efforts to
market the Contracts actively, directly and/or through Selling
Broker-Dealers in accordance with Section 4 of this Agreement,
subject to compliance with applicable law, including rules of
the NASD.

b. Limits on Authority. Distributor shall act as an independent
contractor and nothing herein contained shall constitute
Distributor or its agents, officers or employees as agents,
officers or employees of Insurer solely by virtue of their
activities in connection with the sale of the Contracts
hereunder. Distributor and its Representatives shall not have
authority, on behalf of Insurer: to make, alter or discharge
any Contract or other insurance policy or annuity entered into
pursuant to a Contract; to waive any Contract forfeiture
provision; to extend the time of paying any Premium; or to
receive any monies or Premiums (except for the sole purpose of
forwarding monies or Premiums to Insurer). Distributor shall
not expend, nor contract for the expenditure of, the funds of
Insurer. Distributor shall not possess or exercise any
authority on behalf of Insurer other than that expressly
conferred on Distributor by this Agreement.

3. Solicitation Activities

a. Distributor Representatives. No Distributor Representative
shall solicit the sale of a Contract unless at the time of
such solicitation such individual is duly registered with the
NASD and duly licensed with all applicable state insurance and
securities regulatory authorities, and is duly appointed as an
insurance agent of Insurer.

- 3 -
<PAGE> 4
b. Solicitation Activities. All solicitation and sales
activities engaged in by Distributor and the Distributor
Representatives with respect to the Contracts shall be in
compliance with all applicable federal and state securities
laws and regulations, as well as all applicable insurance laws
and regulations and the Agents Manual. In particular, without
limiting the generality of the foregoing:

(1) Distributor shall train, supervise and be solely
responsible for the conduct of Distributor
Representatives in their solicitation of Applications
and Premiums and distribution of the Contracts, and
shall supervise their compliance with applicable
rules and regulations of any insurance or securities
regulatory agencies that have jurisdiction over
variable insurance product activities.

(2) Neither Distributor nor any Distributor
Representative shall offer, attempt to offer, or
solicit Applications for, the Contracts or deliver
the Contracts, in any state or other jurisdiction
unless Insurer has notified Distributor that such
Contracts may lawfully be sold or offered for sale in
such state, and has not subsequently revised such
notice.

(3) Neither Distributor nor any Distributor
Representative shall give any information or make any
representation in regard to a class of Contracts in
connection with the offer or sale of such class of
Contracts that is not in accordance with the
Prospectus for such class of Contracts, or in the
then-currently effective prospectus or statement of
additional information for a Fund, or in current
advertising materials for such class of Contracts
authorized by Insurer.

(4) All Premiums paid by check or money order that are
collected by Distributor or any of its
Representatives shall be remitted promptly, and in
any event not later than two business days, in full,
together with any Applications, forms and any other
required documentation, to IL ANNUITY AND INSURANCE
COMPANY as directed in the Agent's Manual. Checks or
money orders in payment of Premiums shall be drawn to
the order of "IL ANNUITY AND INSURANCE COMPANY
ANNUITY." Premiums may be transmitted by wire order
from Distributor to the Annuity Service Office in
accordance with the procedures set forth in the
Agents Manual. If any Premium is held at any time by
Distributor, Distributor shall hold such Premium in a
fiduciary capacity and such Premium shall be remitted
promptly, and in any event not later than two
business days, to Insurer. Distributor acknowledges
that all such Premiums, whether by check, money order
or wire, shall be the property of Insurer.
Distributor acknowledges that Insurer shall have the

- 4 -
<PAGE> 5
unconditional right to reject, in whole or in part,
any Application or Premium.

c. Representations and Warranties of Distributor. Distributor
represents and warrants to Insurer that Distributor is and
shall remain registered during the term of this Agreement as a
broker-dealer under the 1934 Act, is a member with the NASD,
and is duly registered under applicable state securities laws,
and that Distributor is and shall remain during the term of
this Agreement in compliance with Section 9(a) of the 1940
Act.

4. Selling Broker-Dealers. Distributor shall ensure that sales of the
Contracts by Selling Broker-Dealers comply with the following
conditions, and any additional conditions Insurer may specify from
time to time.

a. Every Selling Broker-Dealer shall be both registered as a
broker-dealer with the SEC and a member of the NASD and
licensed as an insurance agent with authority to sell variable
products or associated with an insurance agent so licensed.
Any individuals to be authorized to act on behalf of Selling
Broker-Dealer shall be duly registered with the NASD as
representatives of Selling Broker-Dealer shall be duly
registered with the NASD as representatives of Selling
Broker-Dealer with authority to sell variable products, and
shall be licensed as insurance agents with authority to sell
variable products. Distributor shall verify that Selling
Broker-Dealer and its Representatives are duly licensed under
applicable state insurance law to sell the Contracts (or, if
Broker-Dealer is not so licensed, that it is associated with
an entity so licensed).

b. Every Selling Broker-Dealer (or, if applicable, its associated
general insurance agency) and each of its Representatives
shall have been appointed by Insurer, provided that Insurer
reserves the right to refuse to appoint any proposed person,
or once appointed, to terminate such appointment.

c. Every Selling Broker-Dealer must enter into a written sales
agreement with Distributor which sales agreement, among other
things, will require such Selling Broker-Dealer to use its
best efforts to solicit applications for Contracts and to
comply with applicable laws and regulations, including the
Insurer's rules and regulations as reflected in the Agents
Manual or otherwise communicated to agents appointed by
Insurer, and will contain such other provisions as the
Distributor deems to be consistent herewith.

d. In view of Insurer's desire to ensure that Contracts will be
sold to purchasers for whom the Contracts will be suitable,
the written Sales Agreement shall require that Selling
Broker-Dealers and their Representatives not make
recommendations to an applicant to purchase a Contract in the
absence of reasonable grounds to

- 5 -
<PAGE> 6
believe that the purchase of the Contract is suitable for the
applicant. While not limited to the following, a
determination of suitability shall be based on information
supplied by an applicant after a reasonable inquiry concerning
the applicant's other security holdings, insurance and
investment objectives, financial situation and needs, and the
likelihood that the applicant will continue to make any
premium payments contemplated by the Contract applied for and
will keep the Contract in force for a sufficient period of
time so that Insurer's acquisition costs are amortized over a
reasonable period of time.

5. Marketing Materials

a. Preparation and Filing. Insurer shall be primarily
responsible for the design and preparation of all promotional,
sales and advertising material relating to the Contracts.
Insurer shall be responsible for filing such material, as
required, with the NASD and any state securities regulatory
authorities, on behalf of the Distributor. Insurer shall be
responsible for filing all promotional, sales or advertising
material, as required, with any state insurance regulatory
authorities. Insurer shall be responsible for preparing the
Contract forms and filing them with applicable state insurance
regulatory authorities, and for preparing the Prospectuses and
Registration Statements and filing them with the SEC and state
regulatory authorities, to the extent required.

b. Use in Solicitation Activities. Insurer shall be responsible
for furnishing Distributor with such Applications,
Prospectuses and other materials for use by Distributor and
any Selling Broker-Dealers in their solicitation activities
with respect to the Contracts. Insurer shall notify
Distributor of those states or jurisdictions which require
delivery of a statement of additional information with a
prospectus to a prospective purchaser.

6. Compensation and Expenses

a. Insurer shall pay compensation for sales of the Contracts in
accordance with Schedule 2 hereto. Insurer shall pay
compensation payable to Distributor Representatives and to
Selling Broker-Dealers, on Distributor's behalf.

b. Insurer shall pay all expenses in connection with:

(1) the preparation and filing of each Registration
Statement (including each pre-effective and
post-effective amendment thereto) and the preparation
and filing of each Prospectus (including any
preliminary and each definitive Prospectus);

- 6 -
<PAGE> 7
(2) the preparation, underwriting, issuance and
administration of the Contracts;

(3) any registration, qualification or approval or other
filing of the Contracts or Contract forms required
under the securities or insurance laws of the states
in which the Contracts will be offered;

(4) all registration fees for the Contracts payable to
the SEC; and

(5) the printing of all promotional materials definitive
Prospectuses for the Contracts and any supplements
thereto for distribution to existing Contractowners.

c. Distributor shall pay any expenses incurred by Distributor or
its Representatives or employees for the purpose of carrying
out the obligations of Distributor hereunder.

7. Compliance

a. Maintaining Registration and Approvals. Insurer shall be
responsible for maintaining the registration of the Contracts
with the SEC and any state securities regulatory authority
with which such registration is required, and for gaining and
maintaining approval of the Contract forms where required
under the insurance laws and regulations of each state or
other jurisdiction in which the Contracts are to be offered.

b. Confirmations and 1934 Act Compliance. Insurer, as agent for
Distributor, shall confirm to each applicant for and purchaser
of a Contract in accordance with Rule 10b-10 under the 1934
Act acceptance of Premiums and such other transactions as are
required by Rule 10b-10 or administrative interpretations
thereunder. Insurer shall maintain and preserve such books
and records with respect to such confirmations in conformity
with the requirements of Rules 17a-3 and 17a-4 under the 1934
Act to the extent such requirements apply. Insurer shall
maintain all such books and records and hold such books and
records on behalf of and as agent for Distributor whose
property they are and shall remain, and acknowledges that such
books and records are at all times subject to inspection by
the SEC in accordance with Section 17(a) of the 1934 Act.

- 7 -
<PAGE> 8
c. Issuance and Administration of Contracts. Insurer shall be
responsible for issuing the Contracts and administering the
Contracts and the Variable Account, provided, however, that
Distributor shall have full responsibility for the securities
activities of all persons employed by the Insurer, engaged
directly or indirectly in the Contract operations, and for the
training, supervision and control of such persons to the
extent of such activities.

8. Investigations and Proceedings

a. Cooperation. Distributor and Insurer shall cooperate fully in
any securities or insurance regulatory investigation or
proceeding or judicial proceeding arising in connection with
the offering, sale or distribution of the Contracts
distributed under this Agreement. Without limiting the
foregoing, Insurer and Distributor shall notify each other
promptly of any customer complaint or notice of any regulatory
investigation or proceeding or judicial proceeding received by
either party with respect to the Contracts.

9. Indemnification

a. By Insurer. Insurer shall indemnify and hold harmless
Distributor and each person who controls or is associated with
Distributor within the meaning of such terms under the federal
securities laws, and any officer, director, employee or agent
of the foregoing, against any and all losses, claims, damages
or liabilities, joint or several (Including any investigative,
legal and other expenses reasonably incurred in connection
with, and any amounts paid in settlement of, any action, suit
or proceeding or any claim asserted), to which distributor
and/or any such person may become subject, under any statute
or regulation, any NASD rule or interpretation, at common law
or otherwise, insofar as such losses, claims, damages or
liabilities:

(1) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading, in light of
the circumstances in which they were made, contained
in any (i) Registration Statement or in any
Prospectus or (ii) blue-sky application or other
document executed by Insurer specifically for the
purpose of qualifying any or all of the Contracts for
sale under the securities laws of any jurisdiction;
provided that Insurer shall not be liable in any such
case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or
alleged omission made in reliance upon information
furnished in writing to Insurer by

- 8 -
<PAGE> 9
Distributor specifically for use in the preparation
of any such Registration Statement or any such
blue-sky application or any amendment thereof or
supplement thereto;

(2) result from any breach by Insurer of any provision of
this Agreement.

This indemnification agreement shall be in addition to any
liability that Insurer may otherwise have; provided,however,
that no person shall be entitled to indemnification pursuant
to this provision if such loss, claim, damage or liability is
due to the willful misfeasance, bad faith, gross negligence or
reckless disregard of duty by the person seeking
indemnification.

b. By Distributor. Distributor shall indemnify and hold harmless
Insurer and each person who controls or is associated with
Insurer within the meaning of such terms under the federal
securities laws, and any officer, director, employee or agent
of the foregoing, against any and all losses, claims, damages
or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection
with, and any amounts paid in settlement of, any action, suit
or proceeding or any claim asserted), to which Insurer and/or
any such person may become subject under any statute or
regulation, any NASD rule or interpretation, at common law or
otherwise, insofar as such losses, claims, damages or
liabilities:

(1) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact
required to be stated therein or necessary in order
to make the statements therein not misleading, in
light of the circumstances in which they were made,
contained in any (i) Registration Statement or in any
Prospectus, or (ii) blue-sky application or other
document executed by Insurer specifically for the
purpose of qualifying any or all of the Contracts for
sale under the securities laws of any jurisdiction;
in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue
statement or omission or alleged omission was made in
reliance upon information furnished in writing by
Distributor to Insurer specifically for use in the
preparation of any such Registration Statement or any
such blue-sky application or any amendment thereof or
supplement thereto

(2) result because of any use by Distributor or any
Distributor Representative of promotional, sales or
advertising material not authorized by Insurer or any
verbal or written misrepresentations by Distributor
or any Distributor Representative or any unlawful
sales practices concerning the Contracts by

- 9 -
<PAGE> 10
Distributor or any Distributor Representative under
federal securities laws or NASD regulations; or

(3) result from any breach by distributor of any
provision of this Agreement.

This indemnification shall be in addition to any liability
that Distributor may otherwise have; provided, however, that
no person shall be entitled to indemnification pursuant to
this provision if such loss, claim, damage or liability is due
to the willful misfeasance, bad faith, gross negligence or
reckless disregard of duty by the person seeking
indemnification.

c. General. Promptly after receipt by a party entitled to
indemnification ("indemnified person") under this Section 9 of
notice of the commencement of any action as to which a claim
will be made against any person obligated to provide
indemnification under this Section 9 ("indemnifying party"),
such indemnified person shall notify the indemnifying party in
writing of the commencement thereof as soon as practicable
thereafter, but failure to so notify the indemnifying party
shall not relieve the indemnifying party from any liability
which it may have to the indemnified person otherwise than on
account of this Section 9. The indemnifying party will be
entitled to participate in the defense of the indemnified
person but such participation will not relive such
indemnifying party of the obligation to reimburse the
indemnified person for reasonable legal and other expenses
incurred by such indemnified person in defending himself or
itself.

The indemnification provisions contained in this Section 9
shall remain operative in full force and effect, regardless of
any termination of this Agreement. A successor by law of
Distributor or Insurer, as the case may be, shall be entitled
to the benefits of the indemnification provisions contained in
this Section 9.

10. Termination. This Agreement shall terminate automatically if it is
assigned by a party without the prior written consent of the other
party. This Agreement may be terminated at any time for any reason by
either party upon 30 days' written notice to the other party, without
payment of any penalty. (The term "assigned" shall not include any
transaction exempted from Section 15(b)(2) of the 1940 Act.) This
Agreement may be terminated at the option of either party to this
Agreement upon the other party's material breach of any provision of
this Agreement or of any representation or warranty made in this
Agreement, unless such breach has been cured within 10 days after
receipt of notice of breach from the non-breaching party. Upon
termination of this Agreement all authorizations, rights and
obligations shall cease except the obligation to settle accounts
hereunder, including commissions on Premiums subsequently received for
Contracts in effect at the time of termination or issued pursuant to
Applications received by Insurer prior to termination.

- 10 -
<PAGE> 11
11. Miscellaneous

a. Binding Effect. This Agreement shall be binding on and shall
inure to the benefit of the respective successors and assigns
of the parties hereto provided that neither party shall assign
this Agreement or any rights or obligations hereunder without
the prior written consent of the other party.

b. Schedules. The parties to this Agreement may amend Schedule 1
to this Agreement from time to time to reflect additions of
any class of Contracts and Variable Accounts. The provisions
of this Agreement shall be equally applicable to each such
class of Contracts and each Variable Account that may be added
to the Schedule, unless the context otherwise requires.
Insurer may amend Schedule 2 unilaterally, from time to time.
Any other change in the terms or provisions of this Agreement
shall be by written agreement between Insurer and Distributor.

c. Rights, Remedies, and Obligations are Cumulative. The rights,
remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws. Failure of
either party to insist upon strict compliance with any of the
conditions of this Agreement shall not be construed as a
waiver of any of the conditions, but the same shall remain in
full force and effect. No waiver of any of the provisions of
this Agreement shall be deemed, or shall constitute, a waiver
of any other provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver.

d. Notices. All notices hereunder are to be made in writing and
shall be given:

<TABLE>
<S> <C>
if to Insurer, to: Gregory J. Carney
IL Annuity and Insurance Company
2960 N. Meridian Street
Indianapolis, IN 46208

if to Distributor, to: Joe C. Lowe
IL Securities, Inc.
2960 N. Meridian Street
Indianapolis, IN 46208
</TABLE>

or such other address as such party may hereafter specify in
writing. Each such notice to a party shall be either hand
delivered or transmitted by registered or certified United
States mail with return receipt requested, or by overnight
mail by a nationally recognized courier, and shall be
effective upon delivery.

- 11 -
<PAGE> 12
e. Interpretation; Jurisdiction. This Agreement constitutes the
whole agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior oral or
written understandings, agreements or negotiations between the
parties with respect to such subject matter. No prior
writings by or between the parties with respect to the subject
matter hereof shall be used by either party in connection with
the interpretation of any provision of this Agreement. This
Agreement shall be construed and its provisions interpreted
under and in accordance with the internal laws of the state of
Indiana without giving effect to principles of conflict of
laws.

f. Severability. This is a severable Agreement. In the event
that any provision of this Agreement would require a party to
take action prohibited by applicable federal or state law or
prohibit a party from taking action required by applicable
federal or state law, then it is the intention of the parties
hereto that such provision shall be enforced to the extent
permitted under the law, and, in any event, that all other
provisions of this Agreement shall remain valid and duly
enforceable as if the provision at issue had never been a part
hereof.

g. Section and Other Headings. The headings in this Agreement
are included for convenience of reference only and in no way
define or delineate any of the provisions hereof or otherwise
affect their construction or effect.

h. Counterparts. This Agreement may be executed in two or more
counterparts, each of which taken together shall constitute
one and the same instrument.

i. Regulation. This Agreement shall be subject to the provisions
of the 1933 Act, 1934 Act and 1940 Act and the Regulations and
the rules and regulations of the NASD, from time to time in
effect, including such exemptions from the 1940 Act as the SEC
may grant, and the terms hereof shall be interpreted and
construed in accordance therewith.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by such authorized officers on the date specified below.

IL ANNUITY AND INSURANCE COMPANY

By:
---------------------------------------------

Name: Gregory J. Carney
-------------------------------------------

Title: President and Chief Executive Officer
------------------------------------------

- 12 -
<PAGE> 13
IL SECURITIES, INC.

By:
----------------------------------------------

Name: Joe C. Lowe
--------------------------------------------

Title: Vice President, Director of Marketing
-------------------------------------------

- 13 -
<PAGE> 14
SCHEDULE 1

IL Annuity and Insurance Company Separate Account I

The Visionary: Flexible Premium Deferred Variable Annuity

<PAGE> 15
SCHEDULE 2

COMPENSATION

IL Annuity and Insurance Company shall pay IL Securities, Inc. a concession on
all contracts sold by it or by Selling Broker-Dealers to whom it has authorized
to participate in the sale of the contracts.

IL Annuity and Insurance Company shall, on behalf of IL Securities, Inc., pay
to Broker-Dealer and concession on each Contract for which the Broker-Dealer is
the Broker-of-Record. The concession shall be determined in accordance with
the Compensation Schedule attached to and made a part of the Selling Broker's
Selling Agreement.

Concessions payable to IL Securities shall be determined in accordance with
this Schedule.

1. Sales by IL Securities:

a. Concession Schedule for the Visionary. IL Securities may
select one of the following Options for each Agent. Once an Option is
selected for an Agent it may not be changed and the Option is
applicable for each and every contract on which that Agent is the
writing Agent.

<TABLE>
<CAPTION>
NEW PREMIUM ASSET TRAIL
-----------------------------------------------------------------------------------------------
YEARS 1-9 YEARS 10+ ALL YEARS
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Option A 6.00% 1.00% -0-
-----------------------------------------------------------------------------------------------
Option B 4.75% 1.00% 0.25%
-----------------------------------------------------------------------------------------------
Option C 3.50% 1.00% 0.50%
-----------------------------------------------------------------------------------------------
Option D 1.00% 1.00% 1.00%
-----------------------------------------------------------------------------------------------
</TABLE>

Asset trails concessions are paid on the value of a Contract as of its
contract anniversary day.

b. Concessions on Withdrawn Premium. IL Securities will repay
all concession paid on premiums which were withdrawn or removed from a
Contract within 12 months of the date of the premium payment.

c. Concessions on Replacements. Concession on a Contract which
replaces an existing contract issued by IL Annuity and Insurance
Company (or any of its affiliated companies) shall be paid as follows:

- 1 -
<PAGE> 16
1. The concession on premium paid in excess of the cash
surrender value of the existing contract will be payable at
the first year rate.

2. The concession on premiums equal to the excess of the
cash surrender value of the existing contract will be payable
at the rate for year 10.

Replacement is defined as the issue of a new contract where an
existing contract(s) is (are) surrendered within one year of the issue
of the new contract.

2. Sales by Selling Broker-Dealers.

NEW PREMIUM
<TABLE>
<CAPTION>
-------------------------------------------------
Years 1-10 Years 10+
-------------------------------------------------
<S> <C>
1.00% .15%
-------------------------------------------------
</TABLE>

- 2 -

<PAGE> 1
EXHIBIT 3(b)

SALES AGREEMENT

Agreement dated as of ___________, 1995, by and among IL ANNUITY AND
INSURANCE COMPANY ("Insurer"), a Massachusetts stock insurance company, IL
SECURITIES, INC. ("Distributor"), an Indiana corporation, _____________________
("Broker-Dealer"), a _________________ corporation.

RECITALS:

A. Pursuant to an agreement with Distributor (the "Distribution
Agreement"), the Insurer has appointed Distributor as the principal underwriter
of the class or classes of variable insurance contracts identified in Schedule
1 to this Agreement at the time that this Agreement is executed, and such other
class or classes of variable insurance products that may be added to Schedule 1
from time to time in accordance with Section 11 of this Agreement (each, a
"class of Contracts"; all such classes, the "Contracts"). Each class of
Contracts will be issued by Insurer through one or more separate accounts of
Insurer ("Separate Accounts"). Pursuant to the Distribution Agreement, Insurer
has authorized Distributor to enter into separate written agreements with
broker-dealers pursuant to which such broker-dealers would be authorized to
participate in the sale of the Contracts and would agree to use their best
efforts to solicit applications for the Contracts.

B. Broker-Dealer is engaged in the business of selling various
investment products, including variable insurance products.

C. The parties to this Agreement desire that Broker-Dealer be
authorized to solicit applications for the sale of the Contracts, subject to
the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and of the mutual
promises and covenants hereinafter set forth, the parties agree as follows:

1. DEFINITIONS

(a) Registration Statement - With respect to each class of
Contracts, the most recent effective registration statement(s)
filed with the SEC or the most recent effective post-effective
amendment(s) thereto, including financial statements included
therein and all exhibits thereto.

(b) Prospectus - With respect to each class of Contracts, the
prospectus for such class of Contracts included within the
Registration Statement for such class of Contracts; provided,
however, that, if the most recently filed prospectus filed
pursuant to Rule 497 under the 1933 Act subsequent to the date
on which the Reg istration Statement became effective differs
from the prospectus on file at the time the Registration
Statement became effective, the term "Prospectus" shall refer
to

<PAGE> 2
the most recently filed prospectus filed under Rule 497 from
and after the date on which it shall have been filed.

(d) 1934 Act - The Securities Exchange Act of 1934, as amended.

(e) 1940 Act - The Investment Company Act of 1940, as amended.

(f) Agent - An individual associated with Broker-Dealer who is
appointed by Insurer as an agent for the purpose of soliciting
applications.

(g) Premium - A payment made under a Contract to purchase benefits
under such Contract.

(h) Annuity Service Office - The service office identified in the
Agent's Manual.

(i) Agents Manual - The manual and other written rules,
regulations and procedures provided by Insurer to insurance
agents appointed to sell the Contracts, as revised from time
to time.

(j) SEC - The Securities and Exchange Commission.

(k) NASD - The National Association of Securities Dealers, Inc.

2. AUTHORIZATION OF BROKER-DEALER

(a) Pursuant to the authority granted to it in the Distribution
Agreement, Distributor hereby authorizes Broker-Dealer under
the securities laws, and Insurer hereby authorizes
Broker-Dealer under the insurance laws, in a non-exclusive
capacity, to sell the Contracts. Broker-Dealer accepts such
authorization and shall use its best efforts to find
purchasers for the Contracts acceptable to Insurer.
Distributor and Insurer acknowledge that Broker-Dealer is an
independent contractor in the performance of its respective
duties and obligations under this Agreement. Accordingly,
Broker-Dealer is not obliged or expected to give full time and
energies to the performance of its obligations hereunder, nor
is Broker-Dealer obliged or expected to represent Distributor
or Insurer exclusively. Nothing here in contained shall
constitute Broker-Dealer, the Agents or any agents or
representatives of Broker-Dealer as employees of Distributor
or Insurer in connection with the solicitation of applications
and premiums for the Contracts.

(b) Broker-Dealer acknowledges that no territory is exclusively
assigned hereunder, and that Insurer and Distributor may in
their sole discretion establish or appoint

- 2 -
<PAGE> 3
one or more broker-dealers or insurance agencies in any
jurisdiction in which Broker-Dealer transacts business.

(c) Broker-Dealer is vested under this Agreement with power and
authority to select and recommend individuals associated with
it for appointment as Agents of the Insurer, and only
individuals so recommended by Broker-Dealer shall become
Agents, provided that the conditions of Section 3 are
satisfied, and provided further that Insurer reserves the
right to refuse to appoint any proposed agent or, once
appointed, to terminate the same at any time with or without
cause. Initial and renewal state appointment fees for
Broker-Dealer as an insurance agency and appointees of
Broker-Dealer as Agents of Insurer will be paid by Insurer in
accordance with its then-applicable requirements.

(d) Broker-Dealer shall not expend or contract for the expenditure
of the funds of Distributor or Insurer, except as they may
otherwise agree. Broker-Dealer shall pay all expenses
incurred by each of it in the performance of this Agreement,
unless otherwise specifically provided for in this Agreement
or unless Distributor and Insurer shall have agreed in advance
in writing to share the cost of any such expenses.
Broker-Dealer shall not possess or exercise any authority on
behalf of Insurer or Distributor other than that expressly
conferred on Broker-Dealer by this Agreement. In particular,
and without limiting the foregoing, Broker-Dealer shall not
have any authority, nor shall either grant such authority to
any Agent, on behalf of Insurer: to make, alter or discharge
any Contract or other insurance policy or annuity entered into
pursuant to a Contract; to waive any Contract forfeiture
provision; to extend the time of paying any Premiums; or to
receive any monies or Premiums from applicants for or
purchasers of the Contracts (except for the sole purpose of
forwarding monies or Premiums to Insurer).

(e) Broker-Dealer acknowledges that Insurer has the right in its
sole discretion to reject any applications or Premiums
received by it and to return or refund to an applicant such
applicant's Premium.

3. LICENSING AND REGISTRATION OF BROKER-DEALER AND AGENTS

(a) Broker-Dealer represents and warrants that it is a
broker-dealer registered with the SEC under the 1934 Act, and
is a member of the NASD. Broker-Dealer must, at all times
when performing its functions and fulfilling its obligations
under this Agreement, be duly registered as a broker-dealer
under the 1934 Act and in each state or other jurisdiction in
which Broker-Dealer intends to perform its functions and
fulfill its obligations hereunder, and be a member in good
standing of the NASD.

- 3 -
<PAGE> 4
(b) Broker-Dealer represents and warrants that it is a licensed
life insurance agent where required to solicit applications.
Broker-Dealer must, at all times when per forming its
functions and fulfilling its obligations under this Agreement,
be duly licensed to sell the Contracts in each state or other
jurisdiction in which Broker-Dealer intends to perform its
functions and fulfill its obligations hereunder.

(c) Broker-Dealer shall ensure that no individual shall offer or
sell the Contracts on its behalf in any state or other
jurisdiction in which the Contracts may lawfully be sold
unless (i) such individual is an associated person of
Broker-Dealer (as that term is defined in Section 3(a)(18) of
the 1934 Act) and duly registered with the NASD and any
applicable state securities regulatory authority as a
registered person of Broker-Dealer qualified to sell the
Contracts in such state or jurisdiction, (ii) duly licensed,
registered or otherwise qualified to offer and sell the
Contracts to be offered and sold by such individual under the
insurance laws of such state or jurisdiction, and (iii) duly
appointed by Insurer with respect to such Contracts and such
state or jurisdiction. Broker-Dealer shall be solely
responsible for background investigations of the Agents to
determine their qualifications, good character, and moral
fitness to sell the Contracts. All matters concerning the
licensing of any individuals recommended for appointment by
Broker-Dealer under any applicable state insurance law shall
be a matter directly between Broker-Dealer and such
individual, and Broker-Dealer shall furnish Insurer with proof
of proper licensing of such individual or other proof,
reasonably acceptable to Insurer, of satisfaction by such
individual of licensing requirements prior to Insurer
appointing any such individual as an Agent of Insurer.
Insurer and Broker-Dealer shall notify Insurer and Distributor
immediately upon termination (for whatever reason) of an
Agent's association with Broker-Dealer.

(d) Broker-Dealer Agent shall notify Insurer immediately in
writing if Broker-Dealer fails to comply with any such terms
and conditions.

4. BROKER-DEALER AND AGENT COMPLIANCE

(a) Broker-Dealer shall be responsible for securities training,
supervision and control of the Agents in connection with their
solicitation activities with respect to the Contracts and
shall supervise Agents' compliance with applicable federal and
state securities law and NASD requirements in connection with
such solicitation activities.

(b) Broker-Dealer hereby represents and warrants that it is duly
in compliance with all applicable federal and state securities
laws and regulations, and all applicable insurance laws and
regulations. Broker-Dealer shall carry out its obligations
under this Agreement in continued compliance with such laws
and regulations.

- 4 -
<PAGE> 5
Further, Broker-Dealer shall comply, and shall ensure that
Agents comply, with the rules and procedures set forth in the
Agent's Manual, and the rules set forth below, and
Broker-Dealer shall be solely responsible for such compliance.

(i) Broker-Dealer and Agents shall not offer or attempt
to offer the Contracts, nor solicit applications for
the Contracts, nor deliver Contracts, in any state or
jurisdiction in which the Contracts have not been
approved for sale. For purposes of determining where
the Contracts may be offered and applications
solicited, Broker-Dealer may rely on written
notification, as revised from time to time, that it
receives from Insurer pursuant to this Agreement.

(ii) Broker-Dealer and Agents shall not solicit
applications for the Contracts without delivering the
Prospectus for the Contracts, and, where required by
state insurance law, the then-currently effective
statement of additional information for the
Contracts, and the then-currently effective
prospectus(es) for the Fund(s).

(iii) Broker-Dealer and Agents shall not recommend the
purchase of a Contract to an applicant unless each
has reasonable grounds to believe that such purchase
is suitable for the applicant in accordance with,
among other things, applicable regulations of any
state insurance regulatory authority, the SEC and the
NASD. While not limited to the following, a determi
nation of suitability shall be based on information
supplied by the applicant after a reasonable inquiry
concerning the applicant's insurance and investment
objectives and financial situation and needs and
shall entail a review by Broker-Dealer of all
applications for suitability and completeness and
correctness as to form as well as review and
endorsement on an internal record of Broker-Dealer.

(iv) Broker-Dealer and Agents shall not encourage a
prospective purchaser to surrender or exchange an
insurance policy or contract in order to purchase a
Contract or, conversely, to surrender or exchange a
Contract in order to purchase another insurance
policy or contract subject to applicable NASD Rules
of Fair Practice and any other applicable laws,
regulations and regulatory guidelines.

(v) Broker-Dealer and all Agents shall accept initial
premiums in the form of a check or money order only
if made payable to "IL ANNUITY AND INSURANCE COMPANY"
and signed by the applicant for the Contract.
Broker-Dealer and Agent shall not accept third-party
checks or cash for Premiums.

- 5 -
<PAGE> 6
(vi) Broker-Dealer shall ensure that all checks and money
orders and applications for the Contracts received by
either it or an Agent shall be remitted promptly, and
in any event not later than 2 business days after
receipt, to the Insurer. In the event that any other
Premiums are sent to an Agent or Broker-Dealer,
rather than to the Service Office, Broker-Dealer
shall promptly (and in any event, not later than 2
business days) remit such Premiums to the Insurer as
set forth in the Agent's Manual. Broker-Dealer
acknowledges that if any Premium is held at any
time, such Premium shall be held on behalf of
Insurer, and Broker-Dealer shall segregate such
Premium from its own funds and promptly (and in any
event, within 2 business days) remit such Premium to
the Insurer. All such Premiums, whether by check,
money order or wire, shall at all times be the
property of Insurer.

(vii) Upon issuance of a Contract by Insurer and delivery
of such Contract to Broker-Dealer, Broker-Dealer
shall promptly deliver such Contract to its
purchaser. For purposes of this provision,
"promptly" shall be deemed to mean not later than
five calendar days. Broker-Dealer shall return
promptly to Insurer all receipts for delivered
Contracts, all undelivered Contracts and all receipts
for cancellation, in accordance with the instructions
set forth in the Agent's Manual. Insurer will assume
that a Contract will be delivered by Broker-Dealer to
the purchaser of such Contract within five calendar
days for purposes of determining when to transfer
Premiums initially allocated to the Money Market
Account available under such Contract to the
particular investment options specified by such
purchaser. As a result, if a purchaser exercises the
free look provisions under a Contract, Broker-Dealer
shall indemnify Insurer for any loss incurred by
Insurer that results from Broker-Dealer's failure to
deliver such Contract to its purchaser within the
contemplated five calendar day period.

(viii) Broker-Dealer and the Agents in connection with the
offer or sale of the Contracts, shall not give any
information or make any representations or
statements, written or oral, concerning the
Contracts, a Fund or Fund Shares, other than or
inconsistent with information or representations
contained in the Prospectuses, statements of
additional information and Registration Statements
for the Contracts, or a Fund, or in reports or proxy
statements therefor, or in promotional, sales or
advertising material or other information supplied
and approved in writing by Distributor and Insurer.

(c) Broker-Dealer understands, acknowledges, and represents that
Contracts and Premiums thereunder shall not be solicited,
offered, or sold in connection with

- 6 -
<PAGE> 7
any so-called "market timing" or "asset allocation" program,
plan, arrangement or service. Should Distributor or Insurer
determine at its sole discretion that Broker-Dealer is
soliciting, offering, or selling, or has solicited, offered,
or sold, Contracts or Premiums subject to any so-called
"market timing" or "asset allocation" program, plan,
arrangement or service, Distributor or Insurer may take such
action which is necessary, at its sole discretion, to halt
such solicitations, offers or sales. Furthermore, in addition
to any indemnification provided in Section 11 of this
Agreement and any other liability that Broker-Dealer might
have, Broker-Dealer shall be liable to Distributor and Insurer
and each Fund affected by any so-called "market timing" or
"asset allocation" program, plan, arrangement or service, for
any damages or losses, actual or consequential, sustained by
Distributor or Insurer or any Fund, as a result of any
so-called "market timing" or "asset allocation" program, plan,
arrangement or service which causes such losses or damages
following solicitation, offer, or sale of a Contract or
Premium subject to "market timing" or "asset allocation" or
similar service by Broker-Dealer.

(d) Broker-Dealer shall promptly furnish to Insurer or its
authorized agent any reports and information that Insurer may
reasonably request for the purpose of meeting Insurer's
reporting and recordkeeping requirements under the insurance
laws of any state, under any applicable federal and state
securities laws, rules and regulations.

(e) Broker-Dealer shall secure and maintain a fidelity bond
(including coverage for larceny and embezzlement), issued by a
reputable bonding company, covering all of its directors,
officers, agents and employees who have access to funds of
Insurer or Distributor. This bond shall be maintained at
Broker-Dealer's expense in at least the amount prescribed
under Article III, Section 32 of the NASD Rules of Fair
Practice. Broker-Dealer shall provide Distributor with a copy
of said bond before executing this Agreement. Broker-Dealer
shall also secure and maintain errors and omissions insurance
acceptable to Insurer and covering Broker-Dealer and
Representatives. Broker-Dealer hereby assigns any proceeds
received from a fidelity bonding company, errors and omissions
or other liability coverage, to Insurer or Distributor as
their interest may appear, to the extent of their loss due to
activities covered by the bond, policy or other liability
coverage. If there is any deficiency amount, whether due to a
deductible or otherwise, Broker-Dealer shall promptly pay such
amounts on demand. Broker-Dealer hereby indemnifies and holds
harmless Insurer and Distributor from any such deficiency and
from the costs of collection thereof, including reasonable
attorneys' fees.

5. SALES MATERIALS

- 7 -
<PAGE> 8
(a) During the term of this Agreement, Distributor and Insurer
will provide Broker-Dealer, without charge, with as many
copies of Prospectuses (and any supplements thereto), current
Fund prospectus(es) (and any supplements thereto), and
applications for the Contracts, as Broker-Dealer may
reasonably request. Upon termination of this Agreement,
Broker-Dealer will promptly return to Distributor any
Prospectuses, applications, Fund prospectuses, and other
materials and supplies furnished by Distributor or Insurer to
Broker-Dealer or to the Agents.

(b) During the term of this Agreement, Distributor and Insurer
will be responsible for providing and approving all
promotional, sales and advertising material to be used by
Broker-Dealer in the course of its solicitation activities
hereunder. Distributor will file such materials or will cause
such materials to be filed with the SEC, the NASD, and/or with
any state securities regulatory authorities, as appropriate.
Broker-Dealer shall not use or implement, nor shall it allow
any Agent to use or implement, any promotional, sales or
advertising material relating to the Contracts or otherwise
advertise the Contracts without the prior written approval of
Distributor and Insurer.

6. COMMISSIONS AND EXPENSES

(a) During the term of this Agreement, Insurer shall pay to
Broker-Dealer, as compensation for Contracts for which it is
the Broker-of-Record, the concessions and fees set forth in
Schedule 2 to this Agreement, as such Schedule 2 may be
amended or modified upon 30 days prior notice. Any amendment
to Schedule 2 will be applicable to any Contract for which an
application or premium is received by the Service Office on or
after the effective date of such amendment or which is in
effect after the effective date of such amendment.
Compensation with respect to any Contract shall be paid to
Broker-Dealer only for so long as Broker-Dealter is the
Broker-of-Record for such Contract.

(b) Broker-Dealer recognize that all compensation payable to
Broker-Dealer hereunder will be disbursed by or on behalf of
Insurer after Premiums are received and accepted by Insurer
and that no compensation of any kind other than that
described in this Agreement is payable to Broker-Dealer for
the performance of its obligations hereunder.

(c) Refund of Compensation. No compensation shall be payable, and
Broker-Dealer agrees to reimburse Distributor for any
compensation paid to Broker-Dealer or its Representatives
under each of the following conditions: (i) if Insurer, in
its sole discretion, determines not to issue the Contact
applied for; (ii) if Insurer refunds the Premiums upon the
applicant's surrender or withdrawal pursuant to any
"free-look" privilege; (iii) if Insurer refunds the Premiums
paid by applicant as a result of a complaint by applicant,
recognizing that Insurer has sole discretion to refund

- 8 -
<PAGE> 9
Premiums; and (iv) if Insurer determines that any person
signing an application who is required to be licensed or any
other person or entity receiving compensation for soliciting
purchase of the Contracts is not duly licensed to sell the
Contracts in the jurisdiction of such sale or attempted sale.

(d) If the former Agent becomes registered and licensed with
another selling broker-dealer and is appointed by Insurer for
the sale of Contracts, and a Contract owner files a written
request (change of dealer authorization) with Insurer that
such owner's Contracts be serviced through the Agent's current
selling broker-dealer and the former Broker-Dealer shall not
be entitled to any compensation based on such Contracts after
the date of such transfer. Broker-Dealer agrees that no
compensation of any kind other than described in this Section
6 of this Agreement is payable by Insurer or Distributor to
Broker-Dealer.

(e) Indebtedness and Right of Setoff. Nothing contained herein
shall be construed as giving Broker-Dealer or Agent the right
to incur any indebtedness on behalf of Insurer or Distributor.
Broker-Dealer hereby authorizes Insurer and Distributor to set
off liabilities of Broker-Dealer to Insurer and Distributor
against any and all amounts otherwise payable to
Broker-Dealer.

(f) Broker-Dealer represent that no concessions or other
compensation will be paid for services rendered in soliciting
the purchase of the contracts by any person or entity not duly
registered or licensed by the required authorities and
appointed by Insurer to sell the Contract in the state in
which such solicitation occurred; provided however, that this
provision shall not prohibit the payment of compensation of
the surviving spouse or other beneficiary of a person
entitled to receive such compensation pursuant to a bona fide
contract calling for such payment.

7. INTERESTS IN AGREEMENT.

Agents shall have no interest in this Agreement or right to
any concessions to be paid to Broker-Dealer hereunder.
Broker-Dealer shall be solely responsible for the payment of
any commission, concession or consideration of any kind to
Agents. Broker-Dealer shall be solely responsible under
applicable tax laws for the reporting of compensation paid to
Agents. Broker-Dealer shall have no right to withhold or
deduct any concession from any Premiums in respect of the
Contracts which it may collect. Broker-Dealer shall have no
interest in any compensation paid by Insurer to Distributor,
now or hereafter, in connection with the sale of any Contracts
hereunder.

8. TERM AND EXCLUSIVITY OF AGREEMENT.

- 9 -
<PAGE> 10
This Agreement may not be assigned except by written mutual
consent and shall continue for an indefinite term, subject to
the termination by any party by ten-days' advance written
notice to the other parties, except that in the event
Distributor or Broker-Dealer ceases to be a registered
broker-dealer or a member of the NASD, this Agreement shall
immediately terminate. Upon its termination, all
authorizations, rights and obligations shall cease, except the
agreements in Sections 11 and the payment of any accrued but
unpaid compensation to Broker-Dealer.

9. COMPLAINTS AND INVESTIGATIONS

(a) Distributor, Insurer and Broker-Dealer each shall cooperate
fully in any securities or insurance regulatory investigation
or proceeding or judicial proceeding arising in connection
with the Contracts marketed under this Agreement.
Broker-Dealer will be notified promptly of any customer
complaint or notice of any regulatory investigation or
proceeding or judicial proceeding received by Distributor or
Insurer with respect to Broker-Dealer or any Agent; and
Broker-Dealer will promptly notify Distributor and the Insurer
of any written customer complaint or notice of any regulatory
investigation or proceeding or judicial proceeding received by
Broker-Dealer or with respect to it or any Agent in connection
with this Agreement or any Contract.

(b) In the case of a customer complaint, Distributor, Insurer and
Broker-Dealer will cooperate in investigating such complaint
and any response by Broker-Dealer to such complaint will be
sent to Distributor for approval not less than five business
days prior to its being sent to the customer or regulatory
authority, except that if a more prompt response is required,
the proposed response shall be communicated by telephone or
facsimile.

10. MODIFICATION OF AGREEMENT.

This Agreement supersedes all prior agreements, either oral or
written, between the parties relating to the Contracts and,
except for any amendment of Schedule 1 pursuant to the terms
of Section 2 hereof or Schedule 2 pursuant to the terms of
Section 6 hereof, may not be modified in any way unless by
written agreement signed by all of the parties.

11. INDEMNIFICATION

(a) Broker-Dealer shall indemnify and hold harmless Distributor
and Insurer and each person who controls or is associated with
Distributor or Insurer within the meaning of such terms under
the federal securities laws, and any officer, director,
employee or agent of the foregoing, against any and all
losses, claims, damages or

- 10 -
<PAGE> 11
liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection
with, and any amounts paid in settlement of, any action, suit
or proceeding or any claim asserted), to which they or any of
them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based on:

(i) violation(s) by Broker-Dealer or an Agent of federal
or state securities law or regulation(s), insurance
law or regulation(s), or any rule or requirement of
the NASD;

(ii) any unauthorized use of promotional, sales or
advertising material, any oral or written
misrepresentations, or any unlawful sales practices
concerning the Contracts, by Broker-Dealer or an
Agent;

(iii) claims by the Agents or other agents or
representatives of Broker-Dealer for concessions or
other compensation or remuneration of any type;

(iv) any failure on the part of Broker-Dealer or an Agent
to submit Premiums or applications to Insurer, or to
submit the correct amount of a Premium, on a timely
basis and in accordance with this Agreement and the
Agent's Manual, subject to applicable law;

(v) any failure on the part of the Broker-Dealer or an
Agent to deliver Contracts to purchasers thereof on a
timely basis and in accordance with the Agent's
Manual; or

(vi) a breach by Broker-Dealer of any provision of this
Agreement.

This indemnification will be in addition to any liability
which Broker-Dealer may otherwise have.

(b) Distributor and Insurer, jointly and severally, shall
indemnify and hold harmless Broker-Dealer and each person who
controls or is associated with Broker-Dealer within the
meaning of such terms under the federal securities laws, and
any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities,
joint or several (including any investigative, legal or other
expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding
or any claim asserted), to which they or any of them may
become subject under any statute or regulation, NASD rule or
regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are
based upon any breach by Distributor or Insurer of any
provision of this Agreement. This indemnification will be in

- 11 -
<PAGE> 12
addition to any liability which Distributor and Insurer,
jointly and severally, may otherwise have.

(c) Promptly after receipt by a party entitled to indemnification
("indemnified person") under this Section 11 of notice of the
commencement of any action as to which a claim will be made
against any person obligated to provide indemnification under
this Section 11 ("indemnifying party"), such indemnified
person shall notify the indemnifying party in writing of the
commencement thereof as soon as practicable thereafter, but
failure to so notify the indemnifying party shall not relieve
the indemnifying party from any liability which it may have to
the indemnified person otherwise than on account of the
Section 11. The indemnifying party will be entitled to
participate in the defense of the indemnified person but such
participation will not relieve such indemnifying party of the
obligation to reimburse the indemnifed person for reasonable
legal and other expenses incurred by such indemnified person
in defending himself or itself.

The indemnification provisions contained in this Section 11 shall
remain operative in full force and effect, regardless of any
termination of this Agreement. A successor by law of Distributor or
Insurer, as the case may be, shall be entitled to the benefits of the
indemnification provisions contained in this Section 11. After
receipt by a party entitled to indemnification ("indemnified party")
under this Section 11 of notice of the commencement of any action, if
a claim in respect thereof is to be made against any person obligated
to provide indemnification under this Section 11 ("indemnifying
party"), such indemnified party will notify the indemnifying party in
writing of the commencement thereof as soon as practicable thereafter,
provided that the omission so to notify the indemnifying party will
not relieve it from any liability under this Section 11, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a
result of the failure to give such notice. The indemnifying party,
upon the request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent to the
indemnified party and any others the indemnifying party may designate
in such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel or (ii)
the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement
of any proceeding effected without its written consent, but if such
proceeding is settled with such consent or if final judgment is
entered in such proceeding for the plaintiff, the indemnifying party
shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.

- 12 -
<PAGE> 13

12. RIGHTS, REMEDIES, AND OBLIGATIONS ARE CUMULATIVE.

The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws. Failure of a party to
insist upon strict compliance with any of the conditions of this
Agreement shall not be construed as a waiver of any of the
conditions, but the same shall remain in full force and effect. No
waive of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provisions, whether or not
similar, nor shall any waiver constitute a continuing waiver.

13. NOTICES. All notices hereunder are to be made in writing and shall be
given:

<TABLE>
<S> <C>
If to Insurer, to: Gregory J. Carney
IL Annuity and Insurance Company
2960 N. Meridian Street
Indianapolis, IN 46208

if to Distributor, to: Joe C. Lowe
IL Securities, Inc.
2960 N. Meridian Street
Indianapolis, IN 46208

if to Broker-Dealer, to:
</TABLE>

or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered or
transmitted by registered or certified United States mail with return
receipt requested, or by overnight mail by a nationally recognized
courier, and shall be effective upon delivery.

14. INTERPRETATION, JURISDICTION, ETC.

This Agreement constitutes the whole agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all
prior oral or written understandings, agreements or negotiations
between the parties with respect to the subject matter hereof. No
prior writings by or between the parties hereto with respect to the
subject matter hereof shall be used by a party in connection with the
interpretation of any provision of

- 13 -
<PAGE> 14
this Agreement. This Agreement shall be construed and its provisions
interpreted under and in accordance with the internal laws of the
state of Indiana without giving effect to principles of conflict of
laws.

15. ARBITRATION.

Any controversy or claim arising out of or relating to this Agreement,
or the breach hereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.

16. HEADINGS.

The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.

17. COUNTERPARTS.

This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.

18. SEVERABILITY.

This is a severable Agreement. In the event that any provision of
this Agreement would require a party to take action prohibited by
applicable federal or state law or prohibit a party from taking action
required by applicable federal or state law, then it is the intention
of the parties hereto that such provisions shall be enforced to the
extent permitted under the law, and, in any event, that all other
provisions of this Agreement shall remain valid and duly enforceable
as if the provision at issue had never been a part hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

IL ANNUITY AND INSURANCE COMPANY

By:
---------------------------------

Name:
-------------------------------

Title:
------------------------------

- 14 -
<PAGE> 15
IL SECURITIES, INC.

By:
-------------------------------

Name:
-----------------------------

Title:
----------------------------

[Broker-Dealer]

By:
-------------------------------

Name:
-----------------------------

Title:
----------------------------

- 15 -
<PAGE> 16
SCHEDULE 1

CONTRACTS SUBJECT TO THIS AGREEMENT

The Visionary (flexible premium variable annuity, Form VA-95)

Effective July 1, 1995

<PAGE> 17
SCHEDULE 2

COMPENSATION

IL Annuity and Insurance Company shall, on behalf of IL Securities, Inc., pay
to Broker-Dealer a concession on each Contract for which the Broker-Dealer is
the Broker-of-Record.

Concessions shall be payable weekly to the Broker-Dealer. The Broker-Dealer is
responsible for compensating its Agents.

Broker-Dealer may select one of the following Options for each Agent. Once an
Option is selected for an Agent it may not be changed and the Option is
applicable for each and every contract on which the Agent is the writing Agent.

Asset trails concessions are paid on the value of a Contact as of its contract
anniversary day.

1. Concession Schedule for the Visionary

<TABLE>
<CAPTION>
NEW PREMIUM ASSET TRAIL
--------------------------------------------------------------------------------------------------
YEARS 1-9 YEARS 10+ ALL YEARS
--------- ---------
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Option A 6.00% 1.00% -0-
--------------------------------------------------------------------------------------------------
Option B 4.75% 1.00% 0.25%
--------------------------------------------------------------------------------------------------
Option C 3.50% 1.00% 0.50%
--------------------------------------------------------------------------------------------------
Option D 1.00% 1.00% 1.00%
--------------------------------------------------------------------------------------------------
</TABLE>

2. Concessions on Withdrawn Premium

The Broker-Dealer will repay all concession paid on premiums which are
withdrawn or removed from a Contract within 12 months of the date of
the premium payment.

3. Concessions on Replacements

Concession on a Contract which replaces an existing contract issued by
IL Annuity and Insurance Company (or any of its affiliated companies)
shall be paid as follows:

1. The concession on premium paid in excess of the cash
surrender value of the existing contract will be
payable at the first year rate.

2. The concession on premiums equal to the excess of the
cash surrender value of the existing contract will be
payable at the rate for year 10.

Replacement is defined as the issue of a new contract where an
existing contract(s) is (are) surrendered within one year of the issue
of the new contract.

<PAGE> 1
IL ANNUITY AND INSURANCE COMPANY
ENDORSEMENT FOR ROTH INDIVIDUAL RETIREMENT ANNUITY

This endorsement is attached to and made a part of this Contract. Where a
provision of the endorsement conflicts with a provision of the Contract, the
provision of the endorsement will govern. This endorsement applies only if the
application states this Contract is a Roth Individual Retirement Annuity (Roth
IRA).

This Contract is issued as a Roth Individual Retirement Annuity under Section
408A of the Internal Revenue Code (Code). To qualify, Your Contract must meet
the following requirements:

1. You may not change ownership of this Contract at any time.

2. Your entire interest in the Contract is nonforfeitable. It is established
for the exclusive benefit of You or Your beneficiaries.

3. Your Contract is not transferable and may not be used as security for a
loan.

4. You must be the Annuitant, and no joint owner or contingent owner is
permitted.

5. If this Roth IRA is not designated as a Roth Conversion IRA, then, except
in the case of a rollover contribution described in section 408A(e), We will
accept only cash contributions and only up to a maximum amount of $2,000 for
any tax year. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same tax
year will be accepted.

A Roth Conversion IRA is a Roth IRA that accepts only IRA Conversion
Contributions made during the same year. IRA Conversion Contributions are
amounts rolled over, transferred, or considered transferred from a nonRoth IRA
to Roth IRA. A nonRoth IRA is an individual retirement account or annuity
described in section 408(a) or 408(b), other than a Roth IRA.

6. The $2,000 limit described in Paragraph 5 is gradually reduced to $0
between certain levels of adjusted gross income (AGI). If You are single, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
if You are married and file jointly, between AGI of $150,000 and $160,000; and
if You are married and file separately, between $0 and $10,000. In the case of
a conversion, We will not accept IRA Conversion Contributions in a tax year if
Your AGI for that tax year exceeds $100,000 or if You are married and file a
separate return. Adjusted gross income is defined in section 408A(c)(3) and
does not include IRA Conversion Contributions.

7. In the event of Your death, Your entire interest in this Contract must be
distributed in conformity with the regulations described below. The Contract's
provisions relating to the death of the Annuitant/Owner are changed to the
extent necessary to conform with those regulations.

1-IRA-R98 IL PAGE 1

<PAGE> 2
If You die before Your entire interest is distributed to You, and Your surviving
spouse is not the sole beneficiary, the entire remaining interest will, at Your
election or, if You have not so elected, at the election of the beneficiary or
beneficiaries, either:

(a) Be distributed by December 31 of the year containing the fifth
anniversary of Your death, or

(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of
Your death.

If distributions do not begin by the date described in (b), distribution method
(a) will apply.

In the case of distribution method (b) above, to determine the minimum annual
payment for each year, divide Your entire interest in the Contract as of the
close of business on December 31 of the preceding year by the life expectancy
of the designated beneficiary using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence and subtract 1 for each subsequent year.

If Your spouse is the sole beneficiary on Your date of death, he or she will
then be treated as the Owner.

8. You agree to provide Us with information necessary for Us to prepare any
reports required under sections 408(i) and 408A(d)(3)(E), Regulations sections
1.408-5 and 1.408-6, and under guidance published by the Internal Revenue
Service. We agree to submit reports to the Internal Revenue Service and You
prescribed by the Internal Revenue Service.

9. You will have the sole responsibility for determining that contributions,
transfers and distributions under this Contract comply with the Code and this
endorsement. We shall not be responsible for any penalties, taxes, judgements
or expenses You incur in connection with this IRA, and We shall have no duty to
determine whether any contributions to or distributions from this IRA comply
with the Code, regulations or rulings.

We retain the right to further amend the Contract at any time without Your
consent as necessary to conform with changes in the Code or regulations or
rulings related thereto.

IL ANNUITY AND INSURANCE COMPANY

/s/ MARGARET M. McKINNEY

SECRETARY

2-IRA-R98 IL PAGE 2

<PAGE> 1
EXHIBIT 8(a)

PARTICIPATION AGREEMENT

Among

VARIABLE INSURANCE PRODUCTS FUND,

FIDELITY DISTRIBUTORS CORPORATION

and

IL ANNUITY AND INSURANCE COMPANY

THIS AGREEMENT, made and entered into as of the 1st day of
March, 1995 by and among IL ANNUITY AND INSURANCE COMPANY, (hereinafter the
"Company"), a Massachusetts corporation, on its own behalf and on behalf of
each segregated asset account of the Company set forth on Schedule A hereto as
may be amended from time to time (each such account hereinafter referred to as
the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.

WHEREAS, the Fund engages in business as an open-end
management investment company and is available to act as the investment vehicle
for separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, the "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements with the Fund and the Underwriter (hereinafter "Participating
Insurance Companies"); and

WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular
managed portfolio of securities and other assets, any one or more of which may
be made available under this Agreement, as may be amended from time to time by
mutual agreement of the parties hereto (each such series hereinafter referred
to as a "Portfolio"); and

WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and

<PAGE> 2
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and

WHEREAS, Fidelity Management & Research Company (the
"Adviser") is duly registered as an investment adviser under the federal
Investment Advisers Act of 1940 and any applicable state securities law; and

WHEREAS, the Company has registered or will register certain
variable life insurance or variable annuity contracts under the 1933 Act; and

WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors
of the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and

WHEREAS, the Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and

WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission ("SEC") under the Securities Exchange
Act of 1934, as amended, (hereinafter the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and

WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid variable life and
variable annuity contracts and the Underwriter is authorized to sell such
shares to unit investment trusts such as each Account at net asset value;

NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:

ARTICLE I

Sale of Fund Shares

1.1. The Underwriter agrees to sell to the Company those
shares of the Fund which each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Fund. For purposes of this Section
1.1, the Company shall be the designee of the Fund for receipt of such orders
from each Account and receipt by such designee shall constitute receipt by the
Fund; provided that the Fund receives notice of such order by 9:00 a.m. Boston
time on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock

2
<PAGE> 3
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.

1.2. The Fund agrees to make its shares available
indefinitely for purchase at the applicable net asset value per share by the
Company and its Accounts on those days on which the Fund calculates its net
asset value pursuant to rules of the Securities and Exchange Commission and the
Fund shall use reasonable efforts to calculate such net asset value on each day
which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Board acting in good faith and in light of their fiduciary duties under federal
and any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.

1.3. The Fund and the Underwriter agree that shares of the
Fund will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.

1.4. The Fund and the Underwriter will not sell Fund
shares to any insurance company or separate account unless an agreement
containing provisions substantially the same as Articles I, III, V, VII and
Section 2.5 of Article II of this Agreement is in effect to govern such sales.

1.5. The Fund agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of the request for redemption. For
purposes of this Section 1.5, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such request for redemption on the next following Business Day.

1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable annuity contracts with the
form number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto, (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereof, or in
the Company's general account, provided that such amounts may also be invested
in an investment company other than the Fund if (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of all the
Portfolios of the Fund which are actually used by the Company to fund the
Contracts; or (b) the Company gives the Fund and the

3
<PAGE> 4
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Underwriter prior to their signing this Agreement (a list of such
funds appearing on Schedule C to this Agreement); or (d) the Fund or
Underwriter consents to the use of such other investment company.

1.7. The Company shall pay for Fund shares on the next
Business Day after an order to purchase Fund shares is made in accordance with
the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. For purpose of Section 2.10 and 2.11, upon receipt by the
Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.

1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to the Company or any
Account. Shares ordered from the Fund will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.

1.9. The Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.

1.10. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.

ARTICLE II

Representations and Warranties

2.1. The Company represents and warrants that the
Contracts are or will be registered under the 1933 Act; that the Contracts will
be issued and sold in compliance in all material respects with all applicable
Federal and State laws and that the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 175:132G of the

4
<PAGE> 5
Massachusetts Insurance Code and has registered or, prior to any issuance or
sale of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.

2.2. The Fund represents and warrants that Fund shares
sold pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Massachusetts and all applicable federal and state securities laws and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend
the Registration Statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.

2.3. The Fund represents that it is currently qualified as
a Regulated Investment Company under Subchapter M of the Internal Revenue Code
of 1986, as amended, (the "Code") and that it will make every effort to
maintain such qualification (under Subchapter M or any successor or similar
provision) and that it will notify the Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.

2.4. So long as the Fund complies with the diversification
requirements noted in Article VI, the Company represents that the Contracts are
currently treated as endowment, annuity or life insurance contracts, under
applicable provisions of the Code and that it will make every effort to
maintain such treatment and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.

2.5. The Fund currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or otherwise, although it may make such payments in the future. The Fund
has adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.

2.6. The Fund makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states except that the Fund represents that the Fund's investment
policies, fees and expenses are and shall at all times remain in compliance
with the laws of the State of Massachusetts and Indiana and the Fund and the
Underwriter represent that their respective operations are and shall at all
times remain in material compliance with the laws of the State of Massachusetts
to the extent required to perform this Agreement.

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<PAGE> 6
2.7. The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and distribute
the Fund shares in accordance with the laws of the State of Massachusetts and
all applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.

2.8. The Fund represents that it is lawfully organized and
validly existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act.

2.9. The Underwriter represents and warrants that the
Adviser is and shall remain duly registered in all material respects under all
applicable federal and state securities laws and that the Adviser shall perform
its obligations for the Fund in compliance in all material respects with the
laws of the State of Massachusetts and any applicable state and federal
securities laws.

2.10. The Fund and Underwriter represent and warrant that
all of their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.

2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
that any amounts received under such bond in connection with claims that arise
from the arrangements described in this Agreement will be held by the Company
for the benefit of the Fund. The Company agrees to make all reasonable efforts
to see that this bond or another bond containing these provisions is always in
effect, and agrees to notify the Fund and the Underwriter in the event that
such coverage no longer applies.

ARTICLE III

Prospectuses and Proxy Statements: Voting

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<PAGE> 7
Information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
Statement of Additional Information for the Fund is amended during the year) to
have the prospectus for the Contracts and the Fund's prospectus printed
together in one document, and to have the Statement of Additional Information
for the Fund and the Statement of Additional Information for the Contracts
printed together in one document. Alternatively, the Company may print the
Fund's prospectus and/or its Statement of Additional Information in combination
with other fund companies' prospectuses and statements of additional
information. The Fund will make reasonable efforts to create a separate
prospectus and Statement of Additional Information for each Portfolio, but does
not guarantee that such prospectuses or SAIs will be generated in any
particular year.

Except as provided in the following three sentences, all expenses of printing
and distributing Fund prospectuses and Statements of Additional Information
shall be the expense of the Company. For prospectuses and Statements of
Additional Information provided by the Company to its existing owners of
Contracts in order to update disclosure as required by the 1933 Act and/or the
1940 Act, the cost of printing shall be borne by the Fund. If the Company
chooses to receive camera-ready film or computer diskettes in lieu of receiving
printed copies of the Fund's prospectus, the Fund will reimburse the Company in
an amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Fund's per
unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.

The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.

3.2. The Fund's prospectus shall state that the Statement
of Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).

3.3. The Fund, at its expense, shall provide the Company
with copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3.1) to shareholders in such quantity
as the Company shall reasonably require for distributing to Contract owners.

3.4. If and to the extent required by law the Company
shall:

(i) solicit voting instructions from Contract
owners;

(ii) vote the Fund shares in accordance with
instructions received from Contract owners;
and

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<PAGE> 8
(iii) vote Fund shares for which no instructions
have been received in a particular separate
account in the same proportion as Fund shares
of such portfolio for which instructions have
been received in that separate account,

so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule B attached hereto and incorporated herein by this reference,
which standards will also be provided to the other Participating Insurance
Companies.

3.5. The Fund will comply with all provisions of the 1940
Act requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.

ARTICLE IV

Sales Material and Information

4.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee, each piece of sales literature or other
promotional material in which the Fund or its investment adviser or the
Underwriter is named, at least fifteen Business Days prior to its use. No such
material shall be used if the Fund or its designee reasonably objects to such
use within fifteen Business Days after receipt of such material.

4.2. The Company shall not give any information or make
any representations or statements on behalf of the Fund or concerning the Fund
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.

8
<PAGE> 9
Days prior to its use. No such material shall be used if the Company or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.

4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for each Account which
are in the public domain or approved by the Company for distribution to
Contract owners, or in sales literature or other promotional material approved
by the Company or its designee, except with the permission of the Company.

4.5. The Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses, Statements of
Additional Information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such document with the
Securities and Exchange Commission or other regulatory authorities.

4.6. The Company will provide to the Fund at least one
complete copy of all registration statements, prospectuses, Statements of
Additional Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.

4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and
registration statements, prospectuses, Statements of Additional Information,
shareholder reports, and proxy materials.

ARTICLE V

Fees and Expenses

5.1. The Fund and Underwriter shall pay no fee or other
compensation to the

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<PAGE> 10
Company under this agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution expenses,
then the Underwriter may make payments to the Company or to the Underwriter for
the Contracts if and in amounts agreed to by the Underwriter in writing and
such payments will be made out of existing fees otherwise payable to the
Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.

5.2. All expenses incident to performance by the Fund
under this Agreement shall be paid by the Fund. The Fund shall see to it that
all its shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the Fund,
in accordance with applicable state laws prior to their sale. The Fund shall
bear the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.

5.3. The Company shall bear the expenses of distributing
the Fund's prospectus, proxy materials and reports to owners of Contracts
issued by the Company.

ARTICLE VI

Diversification

6.1. The Fund will at all times invest money from the
Contracts in such a manner as to ensure that the Contracts will be treated as
variable contracts under the Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will at all times comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event of a breach of this Article VI by the Fund, it
will take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.

ARTICLE VII

Potential Conflicts

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<PAGE> 11
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.

7.2. The Company will report any potential or existing
conflicts of which it is aware to the Board. The Company will assist the Board
in carrying out its responsibilities under the Shared Funding Exemptive Order,
by providing the Board with all information reasonably necessary for the Board
to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.

7.3. If it is determined by a majority of the Board, or a
majority of its disinterested trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a
vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.

7.4. If a material irreconcilable conflict arises because
of a decision by the Company to disregard contract owner voting instructions
and that decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Fund's election, to withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
members of the Board. Any such withdrawal and termination must take place
within six (6) months after the Fund gives written notice that this provision
is being implemented, and until the end of that six month period the
Underwriter and Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.

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<PAGE> 12
7.5. If a material irreconcilable conflict arises because
a particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.

7.6. For purposes of Sections 7.3 through 7.6 of this
Agreement, a majority of the disinterested members of the Board shall determine
whether any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board
determines that any proposed action does not adequately remedy any
irreconcilable material conflict, then the Company will withdraw the Account's
investment in the Fund and terminate this Agreement within six (6) months after
the Board informs the Company in writing of the foregoing determination,
provided, however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as determined by a
majority of the disinterested members of the Board.

7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.

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<PAGE> 13
ARTICLE VIII

Indemnification

8.1. Indemnification By The Company

8.1(a). The Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:

(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the Registration Statement or prospectus
for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Fund for use in the
Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or

(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its
control) or wrongful conduct of the Company or
persons under its control, with respect to the sale
or distribution of the Contracts or Fund Shares; or

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading if such

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<PAGE> 14
a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of
the Company; or

(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or

(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Company in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.

8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.

8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Company of any such
claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the
Company's decision to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof
other than reasonable costs of investigation.

8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against
them in connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.

8.2. Indemnification by the Underwriter

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<PAGE> 15
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:

(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Registration Statement or prospectus
or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement or prospectus
for the Fund or in sales literature (or any amendment
or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of
the Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Fund; or

15
<PAGE> 16
with the diversification requirements specified in
Article VI of this Agreement); or

(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.

8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is
applicable.

8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.

8.2(d). The Company agrees promptly to notify the Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.

8.3. Indemnification By the Fund

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<PAGE> 17
in settlement with the written consent of the Fund) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of the Board
or any member thereof, be related to the operations of the Fund and:

(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure to
comply with the diversification requirements
specified in Article VI of this Agreement); or

as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.

8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or each
Account, whichever is applicable.

8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.

8.3(d). The Company and the Underwriter agree promptly to
notify the Fund of the commencement of any litigation or proceedings against it
or any of its respective officers or

17
<PAGE> 18
directors in connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of either Account, or the sale or
acquisition of shares of the Fund.

ARTICLE IX

Applicable Law

9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.

9.2. This Agreement shall be subject to the provisions of
the 1933, 1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant (including, but
not limited to, the Shared Funding Exemptive Order) and the terms hereof shall
be interpreted and construed in accordance therewith.

ARTICLE X

Termination

10.1. This Agreement shall continue in full force and
effect until the first to occur of:

(a) termination by any party for any reason by six
months' advance written notice delivered to the other
parties; or

(b) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Portfolio based upon the Company's determination that
shares of such Portfolio are not reasonably available
to meet the requirements of the Contracts; or

(c) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Portfolio in the event any of the Portfolio's shares
are not registered, issued or sold in accordance with
applicable state and/or federal law or such law
precludes the use of such shares as the underlying
investment media of the Contracts issued or to be
issued by the Company; or

(d) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Portfolio in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or
similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or

18
<PAGE> 19

(e) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Portfolio in the event that such Portfolio fails to
meet the diversification requirements specified in
Article VI hereof; or

(f) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company and/or its affiliated
companies has suffered a material adverse change in
its business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or

(g) termination by the Company by written notice to the
Fund and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that either the Fund or the Underwriter has
suffered a material adverse change in its business,
operations, financial condition or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or

(h) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund
and the Underwriter the written notice specified in
Section 1.6(b) hereof and at the time such notice was
given there was no notice of termination outstanding
under any other provision of this Agreement;
provided, however any termination under this Section
10.1(h) shall be effective sixty (60) days after the
notice specified in Section 1.6(b) was given.

10.2. Effect of Termination. Notwithstanding any
termination of this Agreement, the Fund and the Underwriter shall at the option
of the Company, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate investments
in the Fund, redeem investments in the Fund and/or invest in the Fund upon the
making of additional purchase payments under the Existing Contracts. The
parties agree that this Section 10.2 shall not apply to any terminations under
Article VII and the effect of such Article VII terminations shall be governed
by Article VII of this Agreement.

19
<PAGE> 20
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the Underwriter 90 days notice of its intention to do so.

ARTICLE XI

Notices

Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.

<TABLE>
<S> <C>
If to the Fund: 82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer

If to the Company: IL Annuity and Insurance Company
2960 North Meridian Street
P.O. Box 7149
Indianapolis, IN 46206
Attention: Margaret M. McKinney, Esq.

If to the Underwriter: 82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
</TABLE>

ARTICLE XII

Miscellaneous

12.1 All persons dealing with the Fund must look solely to
the property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.

20
<PAGE> 21
except as permitted by this Agreement, shall not disclose, disseminate or
utilize such names and addresses and other confidential information until such
time as it may come into the public domain without the express written consent
of the affected party.

12.3 The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.

12.4 This Agreement may be executed simultaneously in two
or more counterparts, each of which taken together shall constitute one and the
same instrument.

12.5 If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.

12.6 Each party hereto shall cooperate with each other
party and all appropriate governmental authorities (including without
limitation the SEC, the NASD and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the foregoing, each
party hereto further agrees to furnish the California Insurance Commissioner
with any information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain whether the
insurance operations of the Company are being conducted in a manner consistent
with the California Insurance Regulations and any other applicable law or
regulations.

12.7 The rights, remedies and obligations contained in
this Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws.

12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed
and registered to perform the obligations of the Underwriter under this
Agreement. In the event that Underwriter assigns this Agreement it will make
reasonable efforts to inform Company in advance of the assignment of the
identity of its assignee and the effective date of the assignment.

12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following reports:

(a) the Company's annual statement (prepared
under statutory accounting principles) and
annual report (prepared under generally

21
<PAGE> 22
accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event
within 90 days after the end of each fiscal
year;

(b) the Company's quarterly statements
(statutory) (and GAAP, if any), as soon as
practical and in any event within 45 days
after the end of each quarterly period;

(c) any financial statement, proxy statement,
notice or report of the Company sent to
stockholders and/or policyholders, as soon as
practical after the delivery thereof to
stockholders;

(d) any registration statement (without exhibits)
and financial reports of the Company filed
with the Securities and Exchange Commission
or any state insurance regulator, as soon as
practical after the filing thereof;

(e) any other report submitted to the Company by
independent accountants in connection with
any annual, interim or special audit made by
them of the books of the Company, as soon as
practical after the receipt thereof, unless
the sharing of such material would subject
the Company to the disclosure of confidential
information.

22
<PAGE> 23
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.

IL ANNUITY AND INSURANCE COMPANY

By:
--------------------------

Name:
------------------------

Title:
-----------------------

VARIABLE INSURANCE PRODUCTS FUND

By:
--------------------------

Name:
------------------------

Title:
-----------------------

FIDELITY DISTRIBUTORS CORPORATION

By:
--------------------------

Name:
------------------------

Title:
-----------------------

23
<PAGE> 24
Schedule A

Separate Accounts and Associated Contracts

Name of Separate Account and Policy Form Numbers of Contracts Funded

<TABLE>
<S> <C>
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
IL Annuity and Insurance Co. Separate Account I VA-95
</TABLE>

<PAGE> 25
SCHEDULE B

PROXY VOTING PROCEDURE

The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Fund by the Underwriter, the Fund and
the Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the
steps delineated below.

1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of
the Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.

2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status
of the Customers' accounts as of the Record Date.

Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call
in the number of Customers to Fidelity, as soon as possible, but no
later than two weeks after the Record Date.

3. The Fund's Annual Report no longer needs to be sent to each Customer
by the Company either before or together with the Customers' receipt
of a proxy statement. Underwriter will provide the last Annual Report
to the Company pursuant to the terms of Section 3.3 of the Agreement
to which this Schedule relates.

4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:

a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes

B-1
<PAGE> 26
(already on Cards as printed by the Fund)

(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)

5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:

a Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.

6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Fidelity
Legal.

7. Package mailed by the Company.

* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.

8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.

Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by Fidelity in the past.

9. Signatures on Card checked against legal name on account registration
which was printed on the Card.

B-2
<PAGE> 27

Note: For example, if the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.

10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have "kicked out" (e.g., mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.

11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.

12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of shares.)
Fidelity Legal must review and approve tabulation format.

13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00 a m.
Boston time. Fidelity Legal may request an earlier deadline if
required to calculate the vote in time for the meeting.

14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provide a standard form for each
Certification.

15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.

16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.

B-3
<PAGE> 28
SCHEDULE C

Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:

The Alger American Fund
Quest for Value Accumulation Trust
T. Rowe Price Fixed Income Series, Inc.
Van Eck Worldwide Insurance Trust

C-1

<PAGE> 1
EXHIBIT 8(b)

PARTICIPATION AGREEMENT

Among

VARIABLE INSURANCE PRODUCTS FUND II,

FIDELITY DISTRIBUTORS CORPORATION

and

IL ANNUITY AND INSURANCE COMPANY

THIS AGREEMENT, made and entered into as of the 1st day of
March, 1995 by and among IL ANNUITY AND INSURANCE COMPANY, (hereinafter the
"Company"), a Massachusetts corporation, on its own behalf and on behalf of
each segregated asset account of the Company set forth on Schedule A hereto as
may be amended from time to time (each such account hereinafter referred to as
the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.

WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
<PAGE> 2
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and

WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and

WHEREAS, the Company has registered or will register certain variable
life insurance or variable annuity contracts under the 1933 Act; and

WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts; and

WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and

WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;

NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:

ARTICLE I

Sale of Fund Shares

1.1. The Underwriter agrees to sell to the Company those shares of
the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 9:00 a m. Boston time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading

2
<PAGE> 3
and on which the Fund calculates its net asset value pursuant to the rules of
the Securities and Exchange Commission.

1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.

1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.

1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 25 of Article II
of this Agreement is in effect to govern such sales.

1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.

1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available under the variable annuity contracts with the form
number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto, (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in
the Company's general account, provided that such amounts may also be invested
in an investment company other than the Fund if (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of all the
Portfolios of the Fund which are actually used by the Company to fund the
Contracts; or (b) the Company gives the Fund and the Underwriter 45 days
written notice of its intention to make such other investment company available
as a funding

3
<PAGE> 4
vehicle for the Contracts; or (c) such other investment company was available
as a funding vehicle for the Contracts prior to the date of this Agreement and
the Company so informs the Fund and Underwriter prior to their signing this
Agreement (a list of such funds appearing on Schedule C to this Agreement); or
(d) the Fund or Underwriter consents to the use of such other investment
company.

1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. For purpose of Section 2.10 and 2.11, upon receipt by the
Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.

1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any
Account. Shares ordered from the Fund will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.

1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio.
The Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.

1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30 p
m. Boston time) and shall use its best efforts to make such net asset value per
share available by 7 p m. Boston time.

ARTICLE II

Representations and Warranties

2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 175:132G of the Massachusetts Insurance Code and
has registered or, prior to any issuance or sale of the

4
<PAGE> 5
Contracts, will register each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.

2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Massachusetts and all applicable federal and state securities laws and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend
the Registration Statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.

2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.

2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.

2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Massachusetts and Indiana and the Fund and the Underwriter represent
that their respective operations are and shall at all times remain in material
compliance with the laws of the State of Massachusetts to the extent required
to perform this Agreement.

5
<PAGE> 6
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Massachusetts and all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act, and the 1940 Act.

2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.

2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws
of the State of Massachusetts and any applicable state and federal securities
laws.

2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.

2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage, and that said bond is issued by a reputable
bonding company, includes coverage for larceny and embezzlement, and is in an
amount not less than $5 million. The Company agrees that any amounts received
under such bond in connection with claims that arise from the arrangements
described in this Agreement will be held by the Company for the benefit of the
Fund. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.

ARTICLE III

Prospectuses and Proxy Statements; Voting

3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film or computer diskettes
containing the Fund's prospectus and Statement of Additional Information, and
such other assistance as is reasonably necessary in order for the Company once
each year (or more frequently if the prospectus and/or Statement of Additional

6
<PAGE> 7
Information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document, and
to have the Statement of Additional Information for the Fund and the Statement
of Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies'
prospectuses and statements of additional information. The Fund will make
reasonable efforts to create a separate prospectus and Statement of Additional
Information for each Portfolio, but does not guarantee that such prospectuses
or SAIs will be generated in any particular year.

The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.

3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).

3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3.1) to shareholders in such quantity
as the Company shall reasonably require for distributing to Contract owners.

3.4. If and to the extent required by law the Company shall:

(i) solicit voting instructions from Contract owners;

(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and

(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such

7
<PAGE> 8
portfolio for which instructions have been received
in that separate account,

3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.

ARTICLE IV

Sales Material and Information

4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.

4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.

4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably
objects to such use within fifteen Business Days after receipt of such
material.

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<PAGE> 9
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.

4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.

4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.

4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communications distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.

ARTICLE V

Fees and Expenses

5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or
any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by

9
<PAGE> 10
the Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made
directly by the Fund. Currently, no such payments are contemplated.

5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.

5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.

ARTICLE VI

Diversification

6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.

ARTICLE VII

Potential Conflicts

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<PAGE> 11
(c) an administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.

7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.

7.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a
vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.

7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Fund shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of the Fund.

7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state

11
<PAGE> 12
regulators, then the Company will withdraw the affected Account's investment in
the Fund and terminate this Agreement with respect to such Account within six
months after the Board informs the Company in writing that it has determined
that such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Underwriter and Fund shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares
of the Fund.

7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.

7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3 5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.

ARTICLE VIII

Indemnification

8.1. Indemnification By The Company

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<PAGE> 13
8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:

(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the Registration Statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or

(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terns of this
Agreement; or

(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.

8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an

13
<PAGE> 14
Indemnified Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund,
whichever is applicable.

8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the Action. After notice from the Company to such party
of the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.

8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.

8.2. Indemnification by the Underwriter

8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:

14
<PAGE> 15
be stated therein or necessary to make the statements
therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement or prospectus
for the Fund or in sales literature (or any amendment
or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of
the Contracts or Fund shares; or

(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification requirements
specified in Article VI of this Agreement); or

15
<PAGE> 16
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.

8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.

8.3. Indemnification By the Fund

8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements result
from the gross negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and;

as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.

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<PAGE> 17
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties under
this Agreement or to the Company, the Fund, the Underwriter or each Account,
whichever is applicable.

8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.

8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.

ARTICLE IX

Applicable Law

9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.

9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to,
the Shared Funding Exemptive Order) and the terms hereof shall be interpreted
and construed in accordance therewith.

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<PAGE> 18
ARTICLE X

Termination

10.1. This Agreement shall continue in full force and effect until
the first to occur of:

(a) termination by any party for any reason by six months' advance
written notice delivered to the other parties; or

(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the
Contracts; or

(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or

(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or

(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or

(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in
its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity; or

(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or

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<PAGE> 19
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 1.6(b) was given.

10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of
this Agreement.

10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
or approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the Underwriter 90 days notice of its intention to do so.

ARTICLE XI

Notices

Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.

If to the Fund: 82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer

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<PAGE> 20
If to the Company: IL Annuity and Insurance Company
2960 North Meridian Street
P.O. Box 7149
Indianapolis, IN 46206
Attention: Margaret M. McKinney, Esq.

If to the Underwriter: 82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer

ARTICLE XII

Miscellaneous

12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.

12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.

12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.

12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.

12.6. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a

20
<PAGE> 21
manner consistent with the California Insurance Regulations and any other
applicable law or regulations.

12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.

12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed
and registered to perform the obligations of the Underwriter under this
Agreement. In the event that Underwriter assigns this Agreement it will make
reasonable efforts to inform Company in advance of the assignment of the
identity of its assignee and the effective date of the assignment.

12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:

(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each
fiscal year,

(b) the Company's quarterly statements (statutory) (and
GAAP, if any), as soon as practical and in any event
within 45 days after the end of each quarterly
period:

(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the
delivery thereof to stockholders;

(d) any registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state
insurance regulator, as soon as practical after the
filing thereof;

(e) any other report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of the
books of the Company, as soon as practical after the
receipt thereof, unless the sharing of such material
would subject the Company to the disclosure of
confidential information.

21
<PAGE> 22
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.

IL ANNUITY AND INSURANCE COMPANY

By:
--------------------------------

Name:
--------------------------------

Title:
--------------------------------

VARIABLE INSURANCE PRODUCTS FUND II

By:
--------------------------------

Name:
--------------------------------

Title:
--------------------------------

FIDELITY DISTRIBUTORS CORPORATION

By:
--------------------------------

Name:
--------------------------------

Title:
--------------------------------

22
<PAGE> 23
Schedule A

Separate Accounts and Associated Contracts

Name of Separate Account and Policy Form Numbers of Contracts Funded

<TABLE>
<CAPTION>
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------

<S> <C>
IL Annuity and Insurance Co. Separate Account I VA-95
</TABLE>
<PAGE> 24
SCHEDULE B

PROXY VOTING PROCEDURE

a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units

B-1
<PAGE> 25
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed by
the Fund)

(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)

a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-pad by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.

6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
review and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Fidelity
Legal.

7. Package mailed by the Company.

Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by Fidelity in the past.

B-2
<PAGE> 26
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.

Note: For Example, if the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.

13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00 a
m. Boston time. Fidelity Legal may request an earlier deadline if
required to calculate the vote in time for the meeting.

16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.

B-3
<PAGE> 27
SCHEDULE C

Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:

The Alger American Fund
Quest for Value Accumulation Trust
T. Rowe Price Fixed Income Series, Inc.
Van Eck Worldwide Insurance Trust

C-1

<PAGE> 1
EXHIBIT 8(c)

FUND PARTICIPATION AGREEMENT

IL Annuity and Insurance Company ("Insurance Company"), Van Eck Worldwide
Insurance Trust ("Trust") and the Trust's investment adviser, Van Eck
Associates Corporation ("Adviser") hereby agree that shares of the series of
the Trust as listed on Exhibit A, as it may from time to time be amended
("Portfolios"), shall be made available to serve as an underlying investment
medium for Individual Deferred Variable Annuity Contracts ("Contracts") to be
offered by Insurance Company subject to the following provisions:

1. Insurance Company represents that it has established the IL Annuity
and Insurance Co. Separate Account 1 (the "Variable Account") as a
separate account under Massachussetts law, and has registered it as a
unit investment trust under the Investment Company Act of 1940 ("1940
Act") to serve as an investment vehicle for the Contracts. The
Contracts provide for the allocation of net amounts received by
Insurance Company to separate series of the Variable Account for
investment in the shares of specified investment companies selected
among those companies available through the Variable Account to act as
underlying investment media. Selection of a particular investment
company is made by the Contract owner who may change such selection
from time to time in accordance with the terms of the applicable
Contract.

2. The Insurance Company represents and warrants that the Contracts are
or will be registered under the 1933 Act; and that the Contracts will
be issued and sold in compliance in all material respects will all
applicable Federal and State laws. The Insurance Company further
represents and warrants that it is an insurance company duly organized
and in good standing under applicable law.

3. The Trust represents and warrants that Portfolio shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold to the Insurance Company in
compliance with the laws of the Commonwealth of Massachusetts and the
laws of the Insurance Company's state of domicile and all applicable
federal and state securities laws, and that the Trust is and shall
remain, while Portfolio shares are offered for sale, registered under
the 1940 Act. The Trust shall amend the Registration Statement for
its shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its shares.
The Trust shall register and qualify Portfolio shares for sale in
accordance with the laws of the various states if and to the extent
required by applicable law.

4. The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to
maintain such qualification (under Subchapter M or any successor or
similar provision), and that it will notify the Insurance Company
immediately in the event that there is a reasonable basis for
believing that the Trust has ceased to so qualify or that it might not
so qualify in the future.
<PAGE> 2
5. Subject to Section 20 hereof, the Insurance Company represents that
the Contracts are currently treated as endowment, life insurance, or
annuity contracts under applicable provisions of the Code, and that it
will make every effort to maintain such treatment, and that it will
notify the Trust immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.

6. The Trust currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to a
Rule 12b-1 plan, the Trust undertakes to have the Board of Trustees, a
majority of whom are not interested persons of the Trust, formulate
and approve any plan under Rule 12b-1 to finance distribution
expenses. In the event that the Trust determines to finance
distribution expenses pursuant to a Rule 12b-1 plan, the Trust shall
immediately notify the Insurance Company.

7. The Trust and the Adviser have provided Insurance Company certain
written information requested by Insurance Company and represent that
the information is accurate in all material respects as of the date
provided; further the Trust represents and warrants that its
investment policies, fees and expenses are and shall at all times
remain in compliance with insurance and other applicable laws of
Insurance Company's state of domicile and any other applicable state,
to the extent such laws are specifically identified to Trust and
Adviser in writing by Insurance Company.

8. The Adviser represents and warrants that it is and shall remain duly
registered under all applicable federal and state securities laws and
that it shall perform its obligations to the Trust in compliance in
all material respects with the securities laws of the Commonwealth of
Massachusetts and any applicable state and federal securities laws.

9. The Trust represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act.

10. The Adviser represents and warrants that the Trust's principal
underwriter, Van Eck Securities Corporation ("Underwriter"), is
registered as a broker-dealer with the SEC, and is a member in good
standing of the National Association of Securities Dealers, Inc. The
Adviser further represents and warrants that the Underwriter is and
shall remain duly registered in all material respects under all
applicable federal and state securities laws and that the Underwriter
shall perform its obligations to the Trust in compliance in all
material respects with the securities laws of the Insurance Company's
state of domicile and any applicable state and federal securities
laws.

2
<PAGE> 3
11. Insurance Company agrees to make every reasonable effort to market its
Contracts. It will use its best efforts to give equal emphasis and
promotion to shares of the Trust as is given to other underlying
investments of the Variable Account. In marketing its Contracts,
Insurance Company will comply with all applicable state or Federal
laws.

12. The Trust or the Adviser will provide closing net asset value,
dividend and capital gain information at the close of trading each
business day (in any event, by 6:30 p.m. Eastern time) to Insurance
Company. Insurance Company will use this data to calculate unit
values, which will in turn be used to process that same business day's
Variable Account unit value. Any error in the calculation of the
Trust's net asset value per share shall be reported immediately to the
Insurance Company. The Variable Account processing will be done the
same evening, and orders will be placed the morning of the following
business day. Orders will be sent directly to the Trust or its
specified agent. The Trust will sell to Insurance Company those
shares of the Portfolios which the Variable Account orders at the
applicable net asset value next computed pursuant to the rules of the
Securities and Exchange Commission ("SEC"); provided, however, that
the Trust reserves the right to reject a purchase order if such action
is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Trust's officers, acting in good
faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of the Portfolio. For purposes of this section,
Insurance Company shall be the designee of the Trust for receipt of
purchase orders, and receipt by such designee shall constitute receipt
by the Trust. "Business day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust calculates
the net asset value of the Portfolios pursuant to the rules of the
SEC. Dividends and capital gains distributions shall be reinvested in
additional shares at the ex-date net asset value.

13. The Trust agrees to redeem for cash, on Insurance Company's request,
any full or fractional shares of the Portfolios, executing such
requests on a daily basis at the net asset value next computed after
receipt by the Trust or its designee of the request for redemption.
For purposes of this section, Insurance Company shall be the designee
of the Trust for receipt of requests for redemption and receipt by
such designee shall constitute receipt by the Trust.

14. Insurance Company shall pay for Portfolio shares on the next Business
Day after an order to purchase Trust shares is made in accordance with
the provisions of Section 12 hereof. Payment shall be in federal
funds transmitted by wire and/or by a credit for any shares redeemed
the same day as the purchase.

15. The Trust shall normally pay and transmit the proceeds of redemptions
of Portfolio shares on the next Business Day after a redemption order
is received in accordance with Section 13 hereof. Payment shall be in
federal funds transmitted by wire and/or a credit for any shares
purchased the same day as the redemption.

3
<PAGE> 4
16. All expenses incident to the performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall pay the cost of
registration of Trust shares with the Securities and Exchange
Commission ("SEC"). The Trust shall distribute, to the Variable
Account, sufficient quantities of Trust proxy material, periodic Trust
reports to shareholders and other material the Trust may require to be
sent to Contract owners. The Trust shall pay the cost of qualifying
Trust shares in states where required. The Trust shall provide to the
Insurance Company on printer-ready diskette the Trust's current
prospectus(es) describing only the Portfolios listed on Exhibit A
hereto (a "Stand-Alone Prospectus") in order for the Insurance Company
once each year (or more frequently if the prospectus for the Trust is
amended more frequently) to have the prospectus for the Contracts and
the Stand-Alone Prospectus printed together in one document. The
Trust shall provide the Insurance Company with a copy of the Trust's
Statement of Additional Information suitable for duplication. The
Trust or the Adviser shall bear the expense of printing or reproducing
copies of the Trust's prospectus(es) and statement of additional
information that will be distributed to existing Contract owners who
are also beneficial owners of the Trust's shares, and the Insurance
Company shall bear the expense of printing or reproducing copies of
the Trust's prospectus(es) and statement of additional information
that are used in connection with offering the Contracts.

17. Insurance Company and its agents shall make no representations
concerning the Trust or Trust shares except those contained in the
then current Registration Statement, prospectus(es), or statement of
additional information of the Trust, as such Registration Statement or
prospectus or statement of additional information may be amended or
supplemented from time to time, or in current printed sales literature
or promotional material (in accordance with any limitation contained
therein) approved by the Adviser, the Trust, or their respective
designee, except with the permission of the Adviser or the Trust.

18. The Trust, the Adviser, and their respective agents shall make no
representations concerning the Insurance Company, the Variable
Account, or the Contracts, except those contained in the then-current
Registration Statement, prospectus(es), or statement of additional
information for the Contracts and the Variable Account, as such
Registration Statement or prospectus or statement of additional
information may be amended or supplemented from time to time, or in
current printed sales literature or promotional material (in
accordance with any limitation contained therein) approved by the
Insurance Company or its respective designee, except with the
permission of the Insurance Company or its designee.

19. Administrative services to Contract owners shall be the responsibility
of Insurance Company, and shall not be the responsibility of the Trust
or the Adviser. The Trust and Adviser recognize that Insurance
Company will be the sole shareholder of Trust shares issued pursuant
to the Contracts. Such arrangement will result in multiple share
orders.

4
<PAGE> 5
20. The Trust and the Adviser represent and warrant that each Portfolio of
the Trust complies, and shall continue to comply, with Sections 817(h)
and 851 of the Internal Revenue Code of 1986, if applicable,
Subchapter M of the Code, and the regulations thereunder, and the
applicable provisions of the 1940 Act relating to the diversification
requirements for variable annuity, endowment, and life insurance
contracts. Upon request, the Trust shall provide Insurance Company
with a letter from the appropriate Trust officer certifying the
Trust's compliance with the diversification requirements and
qualification as a regulated investment company.

21. The Trust or Adviser will notify Insurance Company immediately upon
having a reasonable basis for believing that the Trust or any
Portfolio has ceased to comply with the aforesaid Section 817(h)
diversification or Subchapter M qualification requirements or might
not so comply in the future.

22. Insurance Company agrees to inform the Board of Trustees of the Trust
of the existence of, or any potential for, any material irreconcilable
conflict of interest between the interests of the Contract owners of
the Variable Account investing in the Trust and/or any other separate
account of any other insurance company investing in the Trust.

The Board of Trustees of the Trust shall monitor the Trust for the
existence of any material irreconcilable conflict between the
interests of the Contract owners of all separate accounts investing in
the Trust. A material irreconcilable conflict may arise for a variety
of reasons, including:

(a) an action by any state insurance or other regulatory
authority;

(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private
letter ruling, or any similar action by insurance, tax or
securities regulatory authorities;

(d) the manner in which the investments of any Portfolio are being
managed;

(e) a difference in voting instructions given by the Contract
owners and variable annuity insurance contract owners or by
variable annuity or life insurance contract owners of
different life insurance companies utilizing the Trust; or

(f) a decision by Insurance Company to disregard the voting
instructions of contract owners.

5
<PAGE> 6
Insurance Company will be responsible for assisting the Board of Trustees of
the Trust in carrying out its responsibilities by providing the Board with all
information reasonably necessary for the Board to consider any issue raised,
including information as to a decision by Insurance Company to disregard voting
instructions of Contract owners.

It is agreed that if it is determined by a majority of the members of the Board
of Trustees of the Trust or a majority of its disinterested Trustees that a
material irreconcilable conflict exists affecting Insurance Company , Insurance
Company shall, at its own expense, take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, which steps may include, but
are not limited to,

(a) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium,
including another Portfolio of the Trust or submitting the
questions of whether such segregation should be implemented to
a vote of all affected Contract owners and, as appropriate,
segregating the assets of any particular group (i.e., annuity
Contract owners, life insurance Contract owners or qualified
Contract owners) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making
such a change;

(b) establishing a new registered management investment company
or managed separate account.

If a material irreconcilable conflict arises because of Insurance Company's
decision to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, Insurance
Company may be required, at the Trust's election, to withdraw the Variable
Account's investment in the Trust. No charge or penalty will be imposed
against the Variable Account as a result of such withdrawal. Insurance Company
agrees that any remedial action taken by it in resolving any material conflicts
of interest will be carried out with a view only to the interests of Contract
owners.

For purposes hereof, a majority of the disinterested members of the Board of
Trustees of the Trust shall determine whether any proposed action adequately
remedies any material irreconcilable conflict. In no event will the Trust be
required to establish a new funding medium for any Contracts. Insurance
Company shall not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of
majority of Contract owners adversely affected by the irreconcilable material
conflict.

The Trust will undertake to promptly make known to Insurance Company the Board
of Trustees' determination of the existence of a material irreconcilable
conflict and its implications.

6
<PAGE> 7
23. (a) This Agreement may be terminated as to the sale and issuance
of new Contracts:

(1) at the option of Insurance Company, the Adviser or
the Trust, upon six months' advance written notice to
the other parties;

(2) at the option of Insurance Company, if Trust shares
are not available for any reason to meet the
requirements of Contracts as determined by Insurance
Company. Reasonable advance notice of election to
terminate shall be furnished by Insurance Company;

(3) at the option of Insurance Company, the Adviser or
the Trust, upon institution of formal proceedings
against the Broker-Dealer or Broker-Dealers marketing
the Contracts, the Variable Account, the Insurance
Company, the Adviser or the Trust by the National
Association of Securities Dealers ("NASD"), the SEC
or any other regulatory body;

(4) upon a decision by Insurance Company, in accordance
with regulations of the SEC, to substitute such Trust
shares with the shares of another investment company
for Contracts for which the Trust shares have been
selected to serve as the underlying investment
medium. Insurance Company will give 60 days' written
notice to the Trust and the Adviser of any proposed
action to replace Trust shares;

(5) upon assignment of this Agreement unless made with
the written consent of each other party;

(6) in the event Trust shares are not registered, issued
or sold in conformance with Federal law or such law
precludes the use of Trust shares as an underlying
investment medium of Contracts issued or to be issued
by Insurance Company. Prompt notice shall be given
by either party to the other in the event the
conditions of this provision occur.

(7) at the option of Insurance Company by written notice
to the Trust and Adviser with respect to any
Portfolio in the event that such Portfolio fails to
meet the Section 817(h) diversification requirements
or Subchapter M qualifications specified in Section
20 hereof or if Insurance Company reasonably believes
that the Portfolio may fail to meet either of those
requirements;

(8) at the option of Insurance Company by written notice
to the Trust and Adviser, if Insurance Company shall
determine, in its sole judgment exercised in good
faith, that the Trust or Adviser has suffered a
material adverse change in its business, operations,
financial condition or prospects

7
<PAGE> 8
since the date of this Agreement or is the subject
of material adverse publicity; or

(9) at the option of the Trust or Adviser by written
notice to Insurance Company, if the Trust or Adviser
shall determine, in its sole judgment exercised in
good faith, that the Insurance Company has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of
this Agreement or is the subject of material adverse
publicity.

(b) This Agreement may be terminated as to existing Contracts:

(1) at the option of Insurance Company, the Adviser, or
the Trust, upon six months' advance written notice to
the other parties, provided that such termination
shall not be effective unless and until all
regulatory approvals necessary in light of such
termination, including any necessary order of the SEC
pursuant to Section 26(b) of the 1940 Act have been
obtained.

(2) in accordance with the terms of Section 22 of this
Agreement; or

(3) as required by state and/or federal laws or
regulations or judicial or other legal precedent of
general application.

24. (a) Termination of this Agreement with respect to the sale and
issuance of new Contracts only shall not affect the Trust's
obligation to furnish Trust shares for Contracts then in force
for which the shares of the Trust serve or may serve as an
underlying medium. Specifically, and without limitation, the
owners of Contracts then in force shall be permitted to
reallocate investments in the Trust, redeem investments in the
Trust and/or invest in the Trust upon the making of additional
purchase payments under the Contracts then in force. The
purchase and redemption of Trust shares pursuant to this
Section 24 shall be effected in accordance with the terms of
this Agreement. The parties agree that this section shall not
apply to any terminations under Section 22 and the effect of
such Section 22 terminations shall be governed by Section 22
of this Agreement. Termination of this Agreement with respect
to existing Contracts shall not affect the Trust's obligation
to furnish shares in connection with the reinvestment of
dividends and other distributions with respect to existing
Portfolio shares.

(b) Notwithstanding any termination of this Agreement, each
party's obligation under Section 28 to indemnify other parties
shall survive and not be affected by any termination of this
Agreement. A successor by law of the parties to this
Agreement shall be entitled to the benefits of the
indemnification contained in Section 28.

8
<PAGE> 9
25. Each notice required by this Agreement shall be given by wire and
confirmed in writing to:

IL Annuity and Insurance Company
2960 North Meridian
P.O. Box 1230
Indianapolis, Indiana 46206
Attn: Margaret M. McKinney, Esq.

Van Eck Worldwide Insurance Trust
99 Park Avenue
New York, New York 10016
Attn: President

Van Eck Associates Corporation
99 Park Avenue
New York, New York 10016
Attn: President

26. Advertising and sales literature with respect to the Trust prepared by
Insurance Company or its agents for use in marketing its Contracts
will be submitted to the Trust for review before such material is
submitted to the SEC or NASD for review. Advertising and sales
literature that refers to the Insurance Company, the Variable Account,
or the Contracts that is prepared by the Trust, the Adviser, or any
affiliate thereof, will be submitted to the Insurance Company for
review and approval before such material is submitted to the NASD or
SEC for review.

27. Insurance Company will distribute all proxy material furnished by the
Trust and will vote Trust shares in accordance with instructions
received from the Contract owners of such Thrust shares. Insurance
Company shall vote the Trust shares for which no instructions have
been received in the same proportion as Trust shares for which said
instructions have been received from Contract owners so long as and to
the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for Contract owners. The Insurance
Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, if and to the extent permitted by law.
Subject to any legal requirements, Insurance Company and its agents
will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Trust shares held
for such Contract owners.

28. (a) Insurance Company agrees to indemnify and hold harmless the
Trust, the Adviser, and each of its trustees, directors,
officers, employees, agents and each person, if any, who
controls the Trust within the meaning of the Securities Act of
1933 (the "Act") (the Trust and such persons collectively,
"Trust Indemnified Person")

9
<PAGE> 10
against any such losses, claims, damages or liabilities to
which a Trust Indemnified Person may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon

(i) any untrue statement or alleged untrue statement of
any material fact contained in written information
furnished by Insurance Company specifically for use
in the Registration Statement or prospectus of the
Trust, or in the Registration Statement or prospectus
for the Variable Account, or arise out of or are
based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading; or

(ii) arise out of or as a result of conduct, statement or
representations (other than statements or
representations contained in the Trust's registration
statement or prospectus, or sales literature of the
Trust prepared by the Trust or its designee) of
Insurance Company or its agents with respect to the
sale and distribution of contracts for which Trust
shares are an underlying investment; or

(iii) arise out of Insurance Company's material breach of
this Agreement;

and Insurance Company will reimburse any legal or other
expenses reasonably incurred by a Trust Indemnified Person in
connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that
the Insurance Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or omission
or alleged omission made in the Registration Statement or
prospectus for the Contracts and the Variable Account in
conformity with written information furnished to the Insurance
Company by the Trust or its designee specifically for use
therein or in Insurance Company-prepared sales literature.
This indemnity agreement will be in addition to any liability
which Insurance Company may otherwise have.

(b) The Trust agrees to indemnify and hold harmless Insurance
Company and each of its directors, officers, employees, agents
and each person, if any, who controls Insurance Company within
the meaning of the Act (Insurance Company and such persons
collectively, "Insurance Company Indemnified Person") against
any losses, claims, damages or liabilities to which an
Insurance Company Indemnified Person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or
are based upon

10
<PAGE> 11
(i) any untrue statement or alleged untrue statement of
any material fact contained in written information
furnished by the Trust or its designee specifically
for use in the Registration Statement or prospectus
for the Contracts and the Variable Account, or in the
Registration Statement or prospectus or sales
literature of the Trust, or arise out of or are based
upon the omission or the alleged omission to state
therein a material fact required to be stated therein
or necessary to make the statements therein not
misleading; or

(ii) arise out of or as a result of conduct, statements or
representations of the Trust or its agents with
respect to the sales of Trust shares; or

(iii) arise out of or are based upon the failure to keep
the Trust and each of the Portfolios fully
diversified and qualified as a regulated investment
company as required by the applicable provision of
the Internal Revenue Code, the Investment Company Act
of 1940, and any other law or regulation; or

(iv) arise out of Trust's material breach of this
Agreement;

and the Trust will reimburse any legal or other expenses
reasonably incurred by an Insurance Company Indemnified Person
in connection with investigating or defending any such loss,
claim, damage liability or action; provided, however, that the
Trust will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or omission or alleged omission
made in the Registration Statement or prospectus for the Trust
in conformity with written information furnished to the Trust
by Insurance Company specifically for use therein or in
Trust-prepared sales literature. This indemnity agreement will
be in addition to any liability which the Trust may otherwise
have.

(c) The Adviser agrees to indemnify and hold harmless each
Insurance Company Indemnified Person against any losses,
claims, damages or liabilities to which an Insurance Company
Indemnified Person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon

(i) any untrue statement or alleged untrue statement of
any material fact contained in written information
furnished by the Trust or its designee specifically
for use in the Registration Statement or prospectus
for the Contracts and the Variable Account, or in the
Registration Statement or prospectus or sales
literature of the Trust, or arise out of or are based
upon the omission or the alleged omission to state
therein a material fact

11
<PAGE> 12
required to be stated therein or necessary to make
the statements therein not misleading; or

(ii) arise out of or as a result of conduct, statements or
representations of the Adviser or its agents with
respect to the sales of Trust shares; or

(iii) arise out of or are based upon the failure of the
Trust and each Portfolio to remain fully diversified
and qualified as a regulated investment company as
required by the applicable provision of the Internal
Revenue Code, the 1940 Act, and any other law or
regulation; or

(iv) arise out of Adviser's material breach of this
Agreement;

and the Adviser will reimburse any legal or other expenses
reasonably incurred by each Insurance Company Indemnified
Person in connection with investigating or defending any such
loss, claim, damage liability or action; provided, however,
that the Adviser will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or omission or
alleged omission made in the Registration Statement or
prospectus for the Trust in conformity with written
information furnished to the Adviser by Insurance Company
specifically for use therein or in Trust- or Adviser-prepared
sales literature. This indemnity agreement will be in addition
to any liability which the Adviser may otherwise have.

(d) The Trust and the Adviser shall indemnify and hold Insurance
Company harmless against any and all liability, loss, damages,
costs or expenses which Insurance Company may incur, suffer or
be required to pay directly due to the Trust's or Adviser's
(or their designated agent's) (i) incorrect calculation of the
daily net asset value, dividend rate or capital gain
distribution rate; (ii) incorrect reporting of the daily net
asset value, dividend rate or capital gain distribution rate;
or (iii) untimely reporting of the net asset value, dividend
rate or capital gain distribution rate. Any gain accruing to
the Insurance Company attributable to the Trust's or Adviser's
(or their designated agent's) incorrect calculation or
reporting of the daily net asset value shall be returned to
the Trust by the Insurance Company upon receipt of notice from
the Trust or the Adviser regarding such incorrect calculation
or reporting.

(e) Promptly after receipt by an indemnified party under this
paragraph of notice of the commencement of action, such
indemnified party will, if a claim in respect thereof is to be
made against the indemnifying party under this paragraph,
notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any
indemnified party otherwise than under this paragraph. In
case any

12
<PAGE> 13
such action is brought against any indemnified party, and it
notified the indemnifying party of the commencement thereof,
the indemnifying party at its expense will be entitled to
participate therein and, to the extent that it may wish,
assume the defense thereof, with counsel satisfactory to such
indemnified party. After notice from the indemnifying party
to such indemnified party of indemnifying party's election to
assume the defense thereof, the indemnified party shall bear
the fees and expense of any additional counsel retained by it,
and the indemnifying party will not be liable to such party
under this paragraph for any legal or other expenses
subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of
investigation.

(f) The indemnifying party shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation to which an indemnified
party would otherwise be subject by reason of such indemnified
party's willful misfeasance, bad faith, or negligence in the
performance of such indemnified party's duties or by reason of
such indemnified party's reckless disregard of obligations or
duties under this Agreement or to the indemnifying party,
whichever is applicable.

(g) Each indemnified party will promptly notify the indemnifying
party of the commencement of any litigation or proceedings
against it in connection with the issuance or sale of the
Trust shares or the Contracts or the operation or existence of
the Trust or the Variable Account.

(h) Nothing herein shall entitle an indemnified party to special,
consequential or exemplary damages or damages of like kind or
nature, and with respect to section 28(d) hereof, all
liability, loss and damages shall be limited to the amount
required to correct the value of the account as if there had
been no incorrect calculation or reporting or untimely
reporting of net asset value, dividend rate or capital gain
distribution rate.

29. If, in the course of future marketing of the Contracts, Insurance
Company or its agents shall request the continued assistance of the
Trust's sales personnel, compensation (which will be negotiated by the
Trust and Insurance Company) shall be paid by Insurance Company to the
Trust.

30. The term "Van Eck Worldwide Insurance Trust" means and refers to the
Trustees from time to time serving under the Master Trust Agreement of
the Trust dated January 7, 1986 as the same may subsequently thereto
have been, or subsequently hereto be, amended. It is expressly agreed
that the obligations of the Trust hereunder shall not be binding upon
any Trustees, shareholders, nominees, officers, agents or employees of
the Trust, personally, but bind only the assets and property of the
Trust, as provided in the Amended and Restated Master Trust Agreement
of the Trust.

13
<PAGE> 14

IL ANNUITY AND INSURANCE COMPANY

By
- ------------------------- -----------------------------
Date

VAN ECK WORLDWIDE INSURANCE TRUST

By
- ------------------------- -----------------------------
Date

VAN ECK ASSOCIATES CORPORATION

By
- ------------------------- -----------------------------
Date

14
<PAGE> 15
EXHIBIT A

Van Eck Gold and Natural Resource Fund

Van Eck Worldwide Balanced Fund

<PAGE> 1
EXHIBIT 8(d)

PARTICIPATION AGREEMENT

AMONG

T. ROWE PRICE INTERNATIONAL SERIES, INC,

T. ROWE PRICE INVESTMENT SERVICES, INC

AND

IL ANNUITY AND INSURANCE COMPANY

THIS AGREEMENT, made and entered into as of this__ day of May, 1995 by
and among IL ANNUITY AND INSURANCE COMPANY (hereinafter, the "Company"), a
Massachusetts insurance company, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may
be amended from time to time (each account hereinafter referred to as the
"Account"), and the undersigned funds, each, a corporation organized under the
laws of Maryland (hereinafter referred to as the "Fund") and T. Rowe Price
Investment Services, Inc (hereinafter the "Underwriter"), a Maryland
corporation.

WHEREAS, the Fund engages in business as an open-end management
investment company and is or will be available to act as the investment vehicle
for separate accounts established for variable life insurance and variable
annuity contracts (the "Variable Insurance Products") to be offered by
insurance companies which have entered into participation agreements with the
Fund and Underwriter (hereinafter "Participating Insurance Companies"); and

WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest
in a particular managed portfolio of securities and other assets; and

WHEREAS, the Fund has filed an application to obtain an order from the
Securities and Exchange Commission ("SEC") granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and
Rules 6e-2(b)(15) and 6e-3(T) (b)(15) thereunder, if and to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding
Exemptive Order"); and

WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under
the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
<PAGE> 2
WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming
International, Inc. (each hereinafter referred to as the "Adviser") are each
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940, as amended, and any applicable state securities laws; and

WHEREAS, the Company has registered or will register certain variable
life insurance or variable annuity contracts supported wholly or partially by
the Account (the "Contracts") under the 1933 Act, and said Contracts are listed
in Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and

WHEREAS, the Account is duly established and maintained as a
segregated asset account, established by resolution of the Board of Directors
of the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid Contracts; and

WHEREAS, the Company has registered or will register the Account as a
unit investment trust under the 1940 Act; and

WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc (hereinafter "NASD"); and

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;

NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:

ARTICLE I

Sale of Fund Shares

1.1 The Underwriter agrees to sell to the Company those shares of
the Designated Portfolios which the Account orders, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the order for the shares of the Designated Portfolios.

1.2 The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by the
Company and the Account on those days on which the Fund calculates its net
asset value pursuant to rules of the SEC, and the Fund shall use its best

- 2 -
<PAGE> 3
efforts to calculate such net asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board of
Directors of the Fund (hereinafter the "Board") may refuse to sell shares of
any Designated Portfolio to any person, or suspend or terminate the offering of
shares of any Designated Portfolio if such action is required by law or by
regulatory authorities having jurisdiction, or is, in the sole discretion of
the Board acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Designated Portfolio.

1.3 The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Designated Portfolios will be sold to the general
public. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I and VII of this Agreement is in effect to
govern such sales.

1.4 The Fund agrees to redeem, on the Company's request, any full
or fractional shares of the Designated Portfolios held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of the request for redemption, except
that the Fund reserves the right to suspend the right of redemption or postpone
the date of payment or satisfaction upon redemption consistent with Section
22(e) of the 1940 Act and any sales thereunder, and in accordance with the
procedures and policies of the Fund as described in the then current
prospectus.

1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and
the Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading and on which the Fund calculate its net
asset value pursuant to the rules of the SEC.

1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.

1.7 The Company shall pay for Fund shares on the next Business Day
after receipt of an order to purchase Fund shares. Payment shall be in federal
funds transmitted by wire by 4:00 p.m. Baltimore time. If payment in Federal
Funds for any purchase is not received or is received by the Fund after 4:00
p.m. Baltimore time on such Business Day, the Company shall promptly, upon the
Fund's request, reimburse the Fund for any charges, costs, fees, interest or
other expenses incurred by the Fund in connection with any advances to, or
borrowings or overdrafts by, the Fund, or any similar expenses incurred by the
Fund, as a result of portfolio transactions effected by the Fund based upon
such purchase request. For purposes of Section 2.8 and 2.9 hereof, upon
receipt by the Fund of the federal funds so wired, such funds shall cease to be
the responsibility of the Company and shall become the responsibility of the
Fund.

- 3 -
<PAGE> 4
1.8 Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any
Account. Shares ordered from the Fund will be recorded in an appropriate title
for each Account or the appropriate subaccount of each Account.

1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares. The
Company hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on Designated Portfolio shares in additional
shares of that Portfolio. The Company reserves the right to revoke this
election and to receive all such income dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions. The Fund
shall use its best efforts to furnish advance notice of the day such dividends
and distributions are expected to be paid.

1.10 The fund shall make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated
(normally by 6:30 p.m. Baltimore time) and shall use its best efforts to make
such net asset value per share available by 7 p.m. Baltimore time.

1.11 The Parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may be sold
to other insurance companies (subject to Section 1.3 and Article VI hereof) and
the cash value of the Contracts may be invested in other investment companies,
provided, however, that (a) such other investment company, or series thereof,
has investment objectives or policies that are different from the investment
objectives and policies of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts or (c)
such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Underwriter prior to their signing this Agreement: or (d) the fund or
Underwriter consents to the use of such other investment company, such consent
not to be unreasonably withheld.

ARTICLE II

Representations and Warranties

2.1 The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Account prior to any issuance of sale thereof as a segregated
asset account under the Massachusetts insurance laws and has registered or,
prior to any

- 4 -
<PAGE> 5
issuance or sale of the Contracts, will register the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as
a segregated investment account for the Contracts.

2.2 The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the
Commonwealth of Massachusetts and all applicable federal and state securities
laws and that the Fund is and shall remain registered under the 1940 Act. The
Fund shall amend the Registration Statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund or the Underwriter.

2.3 The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act,
although it may make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1, the Fund will
undertake to have a Board, a majority of whom are not interested persons of the
Fund, formulate and approve any plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution expenses.

2.4 The Fund makes no representations as to whether any aspect of
its operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the Commonwealth of Massachusetts to the extent required to perform this
Agreement.

2.5 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.

2.6 The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Massachusetts and any
applicable state and federal securities laws.

2.7 The Underwriter represents and warrants that the Adviser is
and shall remain duly registered under all applicable federal and state
securities laws and that the Adviser shall perform its obligations for the Fund
in compliance in all material respects with the laws of the State of
Massachusetts and any applicable state and federal securities laws.

2.8 The Fund and the Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals or entities dealing with the money and/or securities of the Fund
are and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be

- 5 -
<PAGE> 6
promulgated from time to time. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.

2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund. The Company agrees to make all reasonable efforts to see
that this bond or another bond containing these provisions is always in effect,
and agrees to notify the Fund and the Underwriter in the event that such
coverage no longer applies. The Company agrees to exercise its best efforts to
ensure that other individuals/entities not employed or controlled by the
Company and dealing with the money and/or securities of the Fund maintain a
similar bond or coverage in a reasonable amount.

ARTICLE III

Prospectuses, Statements of Additional Information, and
Proxy Statements; Voting

3.1 The Underwriter shall provide the Company with as many copies
of the Fund's current prospectus (describing only the Designated Portfolios
listed on Schedule A) as the Company may reasonably request. If requested by
the Company in lieu thereof, the Fund shall provide such documentation
(including a final copy of the new prospectus as set in type at the Fund's
expense) and other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the prospectus for the Fund is
amended) to have the prospectus for the Contracts and the Fund's prospectus
printed together in one document. The Fund shall bear the expense of printing
its current prospectus for distribution to existing Contract owners, and the
Company shall bear the expense of printing the Fund's current prospectus for
distribution to prospective Contract owners.

3.2 The Fund's prospectus shall state that the current Statement
of Additional Information ("SAI ") for the Fund is available from the Company
(or, in the Fund's discretion, from the Fund), and the Underwriter (or the
Fund), at its expense, shall print, or otherwise reproduce, and provide a copy
of such SAI free of charge to the Company for itself and for any owner of a
Contract who requests such SAI.

3.3 The Fund, at its expense, shall provide the Company with
copies of its proxy material, reports to shareholders, and other communications
to shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.

3.4 The Company shall:

(i) solicit voting instructions from Contract owners;

- 6 -
<PAGE> 7
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and

(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such Designated Portfolio for which instructions have
been received,

so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners or to
the extent otherwise required by law. The Company reserves the right to vote
Fund shares held in any segregated asset account in its own right, to the
extent permitted by law.

3.5 Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in a Designated
Portfolio calculates voting privileges as required by the Shared Funding
Exemptive Order and consistent with any reasonable standards that the Fund may
adopt.

3.6 The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
or trustees and with whatever rules the SEC may promulgate with respect
thereto.

ARTICLE IV

Sales Material and Information

4.1 The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material that the Company develops or uses and in which the Fund (or a
Portfolio thereof) or the Adviser or the Underwriter is named, at least fifteen
calendar days prior to its use. No such material shall be used if the Fund or
its designee reasonably object to such use within fifteen calendar days after
receipt of such material The Fund or its designee reserves the right to
reasonably object to the continued use of such material, and no such material
shall be used if the Fund or its designee so object.

4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI
for the Fund shares, as such registration statement and prospectus or SAI may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales

- 7 -
<PAGE> 8
literature or other promotional material approved by the Fund or its designee
or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.

4.3 The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at
least fifteen calendar days prior to its use. No such material shall be used
if the Company reasonably objects to such use within fifteen calendar days
after receipt of such material. The Company reserves the right to reasonably
object to the continued use of such material and no such material shall be used
if the Company so objects.

4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
the Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners,
or in sales literature or other promotional material approved by the Company or
its designee, except with the permission of the Company.

4.5 The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Fund or its shares, contemporaneously with the filing
of such document(s) with the SEC or other regulatory authorities.

4.6 The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, SAIs, reports, solicitations
for voting instructions, sales literature and other promotional materials,
applications for exemptions, requests for no action letters, and all amendments
to any of the above, that relate to the Contracts or the Account,
contemporaneously with the filing of such document(s) with the SEC or other
regulatory authorities.

4.7 For purposes of this Article IV, the phrase "sales literature
and other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.

- 8 -
<PAGE> 9
ARTICLE V

Fees and Expenses

5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or
any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing, and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter, or other
resources available to the Underwriter. No such payments shall be made
directly by the Fund. Currently, no such payments are contemplated.

5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, except as otherwise provided herein. The
Fund shall see to it that all its shares are registered and authorized for
issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state laws prior to
their sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and
reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, and all taxes on the issuance or transfer
of the Fund's shares.

5.3 The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials, and reports to Contract owners and prospective
Contract owners.

ARTICLE VI

Diversification and Qualification

6.1 Subject to the Company's maintaining the treatment of the
Contracts as life insurance, endowment, or annuity contracts under applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations issued thereunder (or any successor provisions), the Fund will
invest its assets in such a manner as to ensure that the Contracts will be
treated as annuity, endowment, or life insurance contracts, whichever is
appropriate, under the Code and the regulations issued thereunder (or any
successor provisions). Without limiting the scope of the foregoing, the Fund
will comply with Section 817(h) of the Code and Treasury Regulation Section
1.817-5 and any Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts, and any amendments or other modifications or successor provisions to
such Section or Regulations. In the event of a breach of this Article VI by
the Fund, it will take all reasonable steps (a) to notify the Company of such
breach and (b) to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Regulation 817.5.

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<PAGE> 10
6.2 The Fund represents that it is or will be qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
make every effort to maintain such qualification (under Subchapter M or any
successor or similar provisions) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so quality or that it might not so quality in the future.

6.3 Subject to the Fund's compliance with Section 817(h) of the
Code and Treasury Regulation Section 1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, any amendments or other modifications
or successor provisions to such Sections or Regulations, the Company represents
that the Contracts are currently, and at the time of issuance shall be, treated
as life insurance, endowment contracts, or annuity insurance contracts, under
applicable provisions of the Code, and that it will make every effort to
maintain such treatment, and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing the Contracts have
ceased to be so treated or that they might not be so treated in the future.
The Company agrees that any prospectus offering a contract that is a "modified
endowment contract" as that term is defined in Section 7702A of the Code (or
any successor or similar provision), shall identify such contract as a modified
endowment contract.

ARTICLE VII

Potential Conflicts

The following provisions apply effective upon investment in the Fund
by a separate account of a Participating Insurance Company supporting variable
life insurance contracts.

7.1 The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no action or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and
the implications thereof.

7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.

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<PAGE> 11
7.3 If it is determined by a majority of the Board, or a majority
of its disinterested members, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a
vote of all affected contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to
the affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.

7.4 If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.

7.5 If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Fund shall continue to accept and implement orders by the company
for the purchase (and redemption) of shares of the Fund.

7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable

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<PAGE> 12
material conflict, then the Company will withdraw the Account's investment in
the Fund and terminate this Agreement within six (6) months after the Board
informs the Company in writing of the foregoing determination; provided,
however, that such withdrawal and termination shall be limited to the extent
required by any such material irreconcilable conflict as determined by a
majority of the disinterested members of the Board.

7.7 If and to the extent the Shared Funding Order contains terms
and conditions different from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and
7.5 of this Agreement, or Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3
is adopted, to provide exemptive relief from any provision of the 1940 Act or
the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive
Order, then (a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and
7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.

ARTICLE VIII

Indemnification

8.1 Indemnification By the Company

8.1(a). The Company agrees to indemnify and hold harmless
the Fund and the Underwriter and each of their officers and directors and each
person, if any, who controls the Fund or the Underwriter within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:

(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement, prospectus, or statement of
additional information for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information

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<PAGE> 13
furnished to the Company by or on behalf of the Fund for use
in the Registration Statement, prospectus or statement of
additional information for the Contracts or in the Contracts
or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts
or Fund shares; or

(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
Fund not supplied by the Company or persons under its control)
or wrongful conduct of the Company or persons under its
authorization or control, with respect to the sale or
distribution of the Contracts or Fund Shares; or

(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Company; or

(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms
of this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
qualification requirements specified in Article VI of this
Agreement); or

(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company,

as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.

8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of its obligations or duties under this
Agreement.

- 13 -
<PAGE> 14
Party, the Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action and
to settle the claim at its own expense; provided, however, that no such
settlement shall, without the Indemnified Parties' written consent, include any
factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Company to such party of the Company's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.

8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.

8.2 Indemnification by the Underwriter

8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts; and

(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or SAI or sales
literature of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading provided that this agreement
to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by or on
behalf of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund or Underwriter or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or

- 14 -
<PAGE> 15
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of the Fund; or

(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article VI
of this Agreement); or

(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;

as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.

8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.

8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Party, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. After notice from the Underwriter to
such party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses

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<PAGE> 16
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.

8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.

8.3 Indemnification By the Fund

8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of
the Fund and:

(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article VI
of this Agreement); or

as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.

8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Fund, the Underwriter or the Account,
whichever is applicable.

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<PAGE> 17
to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense; provided, however, that no
such settlement shall, without the Indemnified Parties' written consent,
include any factual stipulation referring to the Indemnified Parties or their
conduct. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.

8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contract, the operation of the Account, or the sale or
acquisition of shares of the Fund.

ARTICLE IX

Applicable Law

9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.

9.2 This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, any Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance
therewith.

ARTICLE X

Termination

10.1 This Agreement shall continue in full force and effect until
the first to occur of:

(a) termination by any party, for any reason with respect
to some or all Designated Portfolios, by six (6)
months' advance written notice delivered to the other
parties; or

(b) termination by the Company by written notice to the
Fund and the underwriter with respect to any
Designated Portfolio based upon the Company's
determination that shares of the Fund are not
reasonably available

- 17 -
<PAGE> 18
to meet the requirements of the Contracts; provided
that such termination shall apply only to the
Designated Portfolio not reasonably available; or

(c) termination by the Company by written notice to the
Fund and the Underwriter in the event any of the
Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of
such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or

(d) termination by the Fund or Underwriter in the event
that formal administrative proceedings are
instituted against the Company by the NASD, the SEC,
the Insurance Commissioner or like official of any
state or any other regulatory body regarding the
Company's duties under this Agreement or related to
the sale of the Contracts, the operation of any
Account, or the purchase of the Fund shares,
provided, however, that the Fund or Underwriter
determines in its sole judgment exercised in good
faith, that any such administrative proceedings will
have a material adverse effect upon the ability of
the Company to perform its obligations under this
Agreement; or

(e) termination by the Company in the event that formal
administrative proceedings are instituted against the
Fund or Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body, provided, however, that the Company
determines in its sole judgment exercised in good
faith, that any such administrative proceedings will
have a material adverse effect upon the ability of
the Fund or Underwriter to perform its obligations
under this Agreement; or

(f) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Designated Portfolio in the event that such
Designated Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M or fails to
comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if
the Company reasonably believes that such Designated
Portfolio may fail to so qualify or comply; or

(g) termination by the Fund or Underwriter by written
notice to the Company in the event that the Contracts
fail to meet the qualifications specified in Article
VI hereof; or

(h) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company has suffered a material
adverse change in its business, operations,

- 18 -
<PAGE> 19
financial condition, or prospects since the date of
this Agreement or is the subject of material adverse
publicity; or

(i) termination by the Company by written notice to the
Fund and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund or the Underwriter has suffered
a material adverse change in its business,
operations, financial condition or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or

(j) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund
and the Underwriter the written notice specified in
Section 1.11 hereof and at the time such notice was
given there was no notice of termination outstanding
under any other provision of this Agreement;
provided, however, any termination under this Section
10.1.(j) shall be effective sixty days after the
notice specified in Section 1.11 was given.

10.2 Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall, at the option of the
Company, continue to make available additional shares of the Fund pursuant to
the terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, the owners of the Existing Contracts may
be permitted to reallocate investments in the Fund, redeem investments in the
Fund and/or invest in the Fund upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 10.2 shall
not apply to any termination under Article VII and the effect of such Article
VII termination shall be governed by Article VII of this Agreement. The
parties further agree that this Section 10.2 shall not apply to any termination
under Section 10.1(g) of this Agreement.

10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
or approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the Underwriter 90 days notice of its intention to do so.

10.4 Notwithstanding any termination of this Agreement, each
party's obligation under Article VIII to indemnify the other parties shall
survive.

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<PAGE> 20
10.5 Any successor by law of the parties hereto shall be entitled
to the benefits of the indemnification provisions contained in Article VIII.

ARTICLE XI

Notices

Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.

If to the Fund: T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.

If to the Company: IL Annuity and Insurance Company
2960 North Meridian Street
Indianapolis, Indiana 46208
Attention: Margaret M. McKinney, Esq.
Associate General Counsel
and Secretary

If to Underwriter: T. Rowe Price Investment Services
l00 East Pratt Street
Baltimore, Maryland 21202
Attention: Terrie Western
Copy to: Henry H. Hopkins, Esq.

ARTICLE XII

Miscellaneous

12.1 All persons dealing with the Fund must look solely to the
property of such Fund, and in the case of a series company, the respective
Designated Portfolio listed on Schedule A hereto as though such Designated
Portfolio had separately contracted with the Company and the Underwriter for
the enforcement of any claims against the Fund. The parties agree that neither
the Board, officers, agents or shareholders assume any personal liability or
responsibility for obligations entered into by or on behalf of the Fund.

12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contract and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and

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<PAGE> 21
other confidential information without the express written consent of the
affected party until such time as such information may come into the public
domain.

12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.

12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.

12.6 Each party hereto shall cooperate with each other party and
all appropriate govern-mental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transaction
contemplated hereby. Notwithstanding the generality of the foregoing, each
party hereto further agrees to furnish the Massachusetts Insurance Commissioner
with any information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain whether the
variable annuity operations of the Company are being conducted in a manner
consistent with Massachusetts variable annuity laws and regulations and any
other applicable law or regulations.

12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies,
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.

12.8 This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto.

IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.

COMPANY: IL ANNUITY AND INSURANCE COMPANY

By its authorized officer

By:
-----------------------------

Title:
--------------------------

Date:
---------------------------

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<PAGE> 22
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.

By its authorized officer

By:
-------------------------------------

Title:
----------------------------------

Date:
-----------------------------------

UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC

By its authorized officer

By:
-------------------------------------

Title:
----------------------------------

Date:
-----------------------------------

- 22 -
<PAGE> 23
SCHEDULE A

<TABLE>
<CAPTION>
Name of Separate Account and Contracts Funded by
Date Established by Board of Directors Separate Account Designated Portfolios
- -------------------------------------- ------------------- ---------------------
<S> <C> <C>
IL Annuity and Insurance Co. VA-95 T. Rowe Price International Series. Inc.
----------------------------------------
Separate Account 1 (11-1-94) T. Rowe Price International Stock Portfolio
</TABLE>

- 23 -

<PAGE> 1
EXHIBIT 8(e)
PARTICIPATION AGREEMENT

AMONG

T. ROWE PRICE FIXED INCOME SERIES, INC.,

T. ROWE PRICE INVESTMENT SERVICES, INC.
AND

IL ANNUITY AND INSURANCE COMPANY

THIS AGREEMENT, made and entered into as of this __ day of May, 1995 by
and among IL ANNUITY AND INSURANCE COMPANY (hereinafter, the "Company"), a
Massachusetts insurance company, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each account hereinafter referred to as the
"Account"), and the undersigned funds, each, a corporation organized under the
laws of Maryland (hereinafter referred to as the "Fund") and T. Rowe Price
Investment Services, Inc. (hereinafter the "Underwriter"), a Maryland
corporation.

WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and

WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and

WHEREAS, the Fund has filed an application to obtain an order from the
Securities and Exchange Commission ("SEC") granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and
Rules 6e-2(b)(15) and 6e-3(T) (b)(15) thereunder, if and to the extent necessary
to permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and

<PAGE> 2

WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming
International, Inc. (each hereinafter referred to as the "Adviser") are each
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940, as amended, and any applicable state securities laws; and

WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts supported wholly or partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and

WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and

WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and

WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and

NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:

ARTICLE I

SALE OF FUND SHARES

1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.

1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by the Company and the
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the SEC, and the Fund

- 2 -

<PAGE> 3

shall use its best efforts to calculate such net asset value on each day which
the New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of Directors of the Fund (hereinafter the "Board") may refuse to sell
shares of any Designated Portfolio to any person, or suspend or terminate the
offering of shares of any Designated Portfolio if such action is required by law
or by regulatory authorities having jurisdiction, or is, in the sole discretion
of the Board acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Designated Portfolio.

1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Designated Portfolios will be sold to the general public. The Fund
and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I and VII of this Agreement is in effect to govern such sales.

1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.

1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.

1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.

1.7 The Company shall pay for Fund shares on the next Business Day after
receipt of an order to purchase Fund shares. Payment shall be in federal funds
transmitted by wire by 4:00 p.m. Baltimore time. If payment in Federal Funds for
any purchase is not received or is received by the Fund after 4:00 p.m.
Baltimore time on such Business Day, the Company shall promptly, upon the Fund's
request, reimburse the Fund for any charges, costs, fees, interest or other
expenses incurred by the Fund in connection with any advances to, or borrowings
or overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon such purchase
request. For purposes of Section 2.8 and 2.9

- 3 -

<PAGE> 4

hereof, upon receipt by the Fund of the federal funds so wired, such funds shall
cease to be the responsibility of the Company and shall become the
responsibility of the Fund.

1.8 Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.

1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Designated Portfolios' shares. The Company hereby
elects to receive all such income, dividends, and capital gain distributions as
are payable on Designated Portfolio shares in additional shares of that
Portfolio. The Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions. The Fund shall use its best efforts to furnish
advance notice of the day such dividends and distributions are expected to be
paid.

1.10 The Fund shall make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Baltimore time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Baltimore time.

1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies, provided,
however, that (a) such other investment company, or series thereof, has
investment objectives or policies that are different from the investment
objectives and policies of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c) such
other investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents to the use of such other investment company, such consent
not to be unreasonably withheld.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

- 4 -

<PAGE> 5

represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Account prior to any issuance or sale thereof as a segregated
asset account under the Massachusetts insurance laws and has registered or,
prior to any issuance or sale of the Contracts, will register the Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.

2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws and that the
Fund is and shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.

2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have a
Board, a majority of whom are not interested persons of the Fund, formulate and
approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.

2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the Commonwealth of Massachusetts to the extent required to perform this
Agreement.

2.5 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940 Act.

2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Massachusetts and any applicable
state and federal securities laws.

2.7 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance in
all material respects with the laws of the State of Massachusetts and any
applicable state and federal securities laws.

- 5 -

<PAGE> 6

2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.

2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund. The Company agrees to make all reasonable efforts to see
that this bond or another bond containing these provisions is always in effect,
and agrees to notify the Fund and the Underwriter in the event that such
coverage no longer applies. The Company agrees to exercise its best efforts to
ensure that other individuals/entities not employed or controlled by the Company
and dealing with the money and/or securities of the Fund maintain a similar bond
or coverage in a reasonable amount.

ARTICLE III

PROSPECTUSES, STATEMENTS OF ADDITIONAL INFORMATION, AND PROXY STATEMENTS; VOTING

3.1 The Underwriter shall provide the Company with as many copies of the
Fund's current prospectus (describing only the Designated Portfolios listed on
Schedule A) as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund shall provide such documentation (including a final
copy of the new prospectus as set in type at the Fund's expense) and other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus for the Fund is amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document. The Fund shall bear the expense of printing its current prospectus for
distribution to existing Contract owners, and the Company shall bear the expense
of printing the Fund's current prospectus for distribution to prospective
Contract owners.

3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shale print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.

- 6 -

<PAGE> 7

3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.

3.4 The Company shall:

(i) solicit voting instructions from Contract owners;

(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and

(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Designated
Portfolio for which instructions have been received,

so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.

3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.

3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.

ARTICLE IV

SALES MATERIAL AND INFORMATION

4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material
that the Company develops or uses and in which the Fund (or a Portfolio thereof)
or the Adviser or the Underwriter is named, at least fifteen calendar days prior
to its use. No such material shall be used if the Fund or its designee
reasonably object to such use within fifteen calendar days after receipt of such

- 7 -

<PAGE> 8

material. The Fund or its designee reserves the right to reasonably object to
the continued use of such material, and no such material shall be used if the
Fund or its designee so object.

4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for the Fund
shares, as such registration statement and prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.

4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
fifteen calendar days prior to its use. No such material shall be used if the
Company reasonably objects to such use within fifteen calendar days after
receipt of such material. The Company reserves the right to reasonably object to
the continued use of such material and no such material shall be used if the
Company so objects.

4.4 The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.

4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, contemporaneously with the filing of such
document(s) with the SEC or other regulatory authorities.

4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, contemporaneously with the
filing of such document(s) with the SEC or other regulatory authorities.

- 8 -

<PAGE> 9

newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, and registration
statements, prospectuses, SAIs, shareholder reports, proxy materials, and any
other communications distributed or made generally available with regard to the
Funds.

ARTICLE V

FEES AND EXPENSES

5.1 The Fund and the Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.

5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, except as otherwise provided herein. The Fund shall
see to it that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Fund, in accordance with applicable state laws prior to their
sale. The Fund shall bear the expenses for the cost of registration and
qualification of the Fund's shares, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.

5.3 The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials, and reports to Contract owners and prospective
Contract owners.

ARTICLE VI

DIVERSIFICATION AND QUALIFICATION

6.1 Subject to the Company's maintaining the treatment of the Contracts as
life insurance, endowment, or annuity contracts under applicable provisions of
the Internal Revenue

- 9 -

<PAGE> 10

Code of 1986, as amended (the "Code") and the regulations issued thereunder (or
any successor provisions), the Fund will invest its assets in such a manner as
to ensure that the Contracts will be treated as annuity, endowment, or life
insurance contracts, whichever is appropriate, under the Code and the
regulations issued thereunder (or any successor provisions). Without limiting
the scope of the foregoing, the Fund will comply with Section 817(h) of the Code
and Treasury Regulation Section 1.817-5, and any Treasury interpretations
thereof, relating To the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify
the Fund so as to achieve compliance within the grace period afforded by
Regulation Section 817.5.

6.2 The Fund represents that it is or will be qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provisions) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.

6.3 Subject to the Fund's compliance with Section 817(h) of the Code and
Treasury Regulation Section 1.817-5, and any Treasury interpretations thereof,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts, any amendments or other modifications or successor
provisions to such Sections or Regulations, the Company represents that the
Contracts are currently, and at the time of issuance shall be, treated as life
insurance, endowment contracts, or annuity insurance contracts, under applicable
provisions of the Code, and that it will make every effort to maintain such
treatment, and that it will notify the Fund and the Underwriter immediately upon
having a reasonable basis for believing the Contracts have ceased to be so
treated or that they might not be so treated in the future. The Company agrees
that any prospectus offering a contract that is a "modified endowment contract"
as that term is defined in Section 7702A of the Code (or any successor or
similar provision), shall identify such contract as a modified endowment
contract.

ARTICLE VII

POTENTIAL CONFLICTS

The following provisions apply effective upon investment in the Fund by a
separate account of a Participating Insurance Company supporting variable life
insurance contracts.

- 10 -

<PAGE> 11

or interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.

7.2 The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.

7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets h a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.

7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six
month period the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.

7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state

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<PAGE> 12

regulators, then the Company will withdraw the affected Account's investment in
the Fund and terminate this Agreement with respect to such Account within six
months after the Board informs the Company in writing that it has determined
that such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by the company for the purchase (and redemption) of shares of the Fund.

7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.

7.7 If and to the extent the Shared Funding Order contains terms and
conditions different from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of
this Agreement, or Rule 6e-2 and Rule 6e 3(T) are amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act or the
rules promulgated thereunder with respect to mixed or shared funding (as defined
in the Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Shared Funding Exemptive Order, then (a)
the Fund and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are applicable; and
(b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.

ARTICLE VIII

INDEMNIFICATION

8.1 Indemnification By the Company

8.1(a)The Company agrees to indemnify and hold harmless the Fund and
the Underwriter and each of their officers and directors and each person, if
any, who controls the

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<PAGE> 13

Fund or the Underwriter within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of the Fund's shares or
the Contracts and:

(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
Fund not supplied by the Company or persons under its control)
or wrongful conduct of the Company or persons under its
authorization or control, with respect to the sale or
distribution of the Contracts or Fund Shares; or

(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Company; or

- 13 -

<PAGE> 14

comply with the qualification requirements specified in
Article VI of this Agreement); or

(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company,

as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.

8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.

8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.

8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
iwth the issuance of sale of the Fund Shares or the Contracts or the operation
of the Fund.

8.2 Indemnification by the Underwriter

- 14 -

<PAGE> 15

this Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares or the Contracts; and

(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or SAI or sales
literature of the Fund (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Fund by or on
behalf of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts of Fund shares; or

(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplies by the Underwriter or persons under its
control) or wrongful conduct of the Fund or Underwriter or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of the Fund; or

(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article VI
of this Agreement); or

- 15 -

<PAGE> 16

(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter;

as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.

8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance or such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Account, whichever is applicable.

8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.

8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.

8.3 Indemnification By the Fund

- 16 -

<PAGE> 17

amounts paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may be
required to pay or may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, expenses, damages, liabilities
or expenses (or actions in respect thereof) or settlements, are related to the
operations of the Fund and:

as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.

8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.

8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense; provided, however, that no
such settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.

- 17 -

<PAGE> 18

8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.

ARTICLE IX

APPLICABLE LAW

9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.

9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.

ARTICLE X

TERMINATION

10.1 This Agreement shall continue in full force and effect until the
first to occur of:

(a) termination by any party, for any reason with respect to some
or all Designated Portfolios, by six (6) months' advance
written notice delivered to the other parties; or

(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio based
upon the Company's determination that shares of the Fund are
not reasonably available to meet the requirements of the
Contracts; provided that such termination shall apply only to
the Designated Portfolio not reasonably available; or

(c) termination by the Company by written notice to the Fund and
the Underwriter in the event any of the Designated Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or

- 18 -

<PAGE> 19

(d) termination by the Fund or Underwriter in the event that
formal administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance Commissioner or
like official of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of any Account, or
the purchase of the Fund shares, provided, however, that the
Fund or Underwriter determines in its sole judgment exercised
in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Company
to perform its obligations under this Agreement; or

(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the
ability of the Fund or Underwriter to perform its obligations
under this Agreement; or

(f) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio in
the event that such Designated Portfolio ceases to qualify as
a Regulated Investment Company under Subchapter M or fails to
comply with the Section 817(h) diversification requirements
specified in Article VI hereof, or if the Company reasonably
believes that such Designated Portfolio may fail to so qualify
or comply; or

(g) termination by the Fund or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the
qualifications specified in Article VI hereof; or

(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations, financial condition, or prospects since the date
of this Agreement or is the subject of material adverse
publicity; or

(i) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or

- 19 -

<PAGE> 20

prospects since the date of this Agreement or is the subject
of material adverse publicity, or

(j) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.11
hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of
this Agreement; provided, however, any termination under this
Section 10.1(j) shall be effective sixty days after the notice
specified in Section 1.11 was given.

10.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be permitted
to reallocate investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.2 shall not apply to
any termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement. The parties further agree
that this Section 10.2 shall not apply to any termination under Section 10.1(g)
of this Agreement.

10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.

10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.

10.5 Any successor by law of the parties hereto shall be entitled to the
benefits of the indemnification provisions contained in Article VII.

- 20 -

<PAGE> 21

ARTICLE XI

NOTICES

Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.

If to the Fund:

T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.

If to the Company

IL Annuity and Insurance Company
2960 North Meridian Street
Indianapolis, Indiana 46208
Attention: Margaret M. McKinney, Esq.
Associate General Counsel and Secretary

If to Underwriter:

T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Terrie Westren
Copy to: Henry H. Hopkins, Esq.

ARTICLE XII

MISCELLANEOUS

12.1 All persons dealing with the Fund must look solely to the property of
such Fund, and in the case of a series company, the respective Designated
Portfolio listed on Schedule A hereto as though such Designated Portfolio had
separately contracted with the Company and the Underwriter for the enforcement
of any claims against the Fund. The parties agree that neither the Board,
officers, agents or shareholders assume any personal liability or responsibility
for obligations entered into by or on behalf of the Fund.

- 21 -

<PAGE> 22

12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain.

12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.

12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Massachusetts Insurance Commissioner with any information
or reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with
Massachusetts variable annuity laws and regulations and any other applicable law
or regulations.

12.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.

12.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.

COMPANY: IL ANNUITY AND INSURANCE COMPANY

By its authorized officer

By:
-------------------------------

- 22 -

<PAGE> 23

Title:
-------------------------------

Date:
--------------------------------

FUND: T. ROWE PRICE FIXED INCOME SERIES, INC
By its authorized officer

By:
----------------------------------

Title:
-------------------------------

Date:
--------------------------------

UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC
By its authorized officer

By:
----------------------------------

Title:
-------------------------------

Date:
--------------------------------

- 23 -

<PAGE> 24

SCHEDULE A

<S> <C> <C>
IL Annuity and Insurance Co. VA-95 T. Rowe Price Fixed Income Series. Inc.
Separate Account 1(11-1-94) ---------------------------------------
T. Rowe Price Limited Term Bond
Portfolio
</TABLE>

- 24 -

<PAGE> 1
EXHIBIT 8(f)

PARTICIPATION AGREEMENT

By and Among

QUEST FOR VALUE ACCUMULATION TRUST

And

IL ANNUITY AND INSURANCE COMPANY

And

QUEST FOR VALUE DISTRIBUTORS

THIS AGREEMENT, made and entered into this _ day of August 1995 by
and among IL ANNUITY AND INSURANCE COMPANY, a Massachusetts Corporation
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time (each account referred to as the "Account"), QUEST FOR VALUE
ACCUMULATION TRUST, an open-end diversified management investment company
organized under the laws of the State of Massachusetts (hereinafter the "Fund")
and QUEST FOR VALUE DISTRIBUTORS, a Delaware general partnership (hereinafter
the "Underwriter").

WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving as
the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
WHEREAS, beneficial interests in the Fund are divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and

<PAGE> 2

WHEREAS, the Fund has obtained an order from the Securities & Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"), dated
February 23, 1995 (File No. 812-9290), granting Participating Insurance
Companies and variable annuity separate accounts and variable life insurance
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity separate accounts and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and qualified
pension and retirement plans (hereinafter the "Mixed and Shared Funding
Exemptive Order"), and

WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and

WHEREAS, the Company has registered or will register certain variable
annuity contracts (the "Contracts") under the 1933 Act; and

WHEREAS, the Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company under the insurance laws of the State of Massachusetts, to set aside and
invest assets attributable to the Contracts; and

WHEREAS, the Company has registered the Account as a unit investment trust
under the 1940 Act; and

- 2 -

<PAGE> 3

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named in
Schedule 2 on behalf of the Account to fund the Contracts and the Underwriter is
authorized to sell such shares to unit invest ment trusts such as the Account at
net asset value;

NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:

ARTICLE I

SALE OF FUND SHARES

1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which the Company orders on behalf of the Account, executing such orders on
a daily basis at the net asset value next computed after receipt and acceptance
by the Fund or its designee of the order for the shares of the Fund. For
purposes of this Section 1.1, the Company shall be the designee of the Fund for
receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Eastern Time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.

- 3 -

<PAGE> 4

1.2. The Company shall pay for Fund shares on the next Business Day after
it places an order to purchase Fund shares in accordance with Section 1.1
hereof. Payment shall be in federal funds transmitted by wire.

1.3. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the SEC; provided, however, that the
Board of Trustees of the Fund (hereinafter the "Directors") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Directors,
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of any Portfolio.

1.4. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated thereunder, the sale
to which will not impair the tax treatment currently afforded the contracts. No
shares of any Portfolio will be sold to the general public.

1.5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this Agreement are in
effect to govern such sales. The Fund shall make available upon written request
from the Company (i) a list of all other Participating Insurance

- 4 -

<PAGE> 5

Companies and (ii) a copy of the Participation Agreement executed by any other
Participating Insurance Company.

1.6. The Fund agrees to redeem for cash, upon the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its designee of the request for redemption. For
purposes of this Section 1.6, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided the Fund receives notice
of request for redemption by 10:00 a.m. Eastern Time on the next following
Business Day. Payment shall be in federal funds transmitted by wire to the
Company's account as designated by the Company in writing from time to time, on
the same Business Day the Fund receives notice of the redemption order from the
Company except that the Fund reserves the right to delay payment of redemption
proceeds, but in no event may such payment be delayed longer than the period
permitted under Section 22(e) of the 1940 Act. Neither the Fund nor the
Underwriter shall bear any responsibility whatsoever for the proper disbursement
or crediting of redemption proceeds; the Company alone shall be responsible for
such action. If notification of redemption is received after 11:00 a.m. Eastern
Time, payment for redeemed shares will be made on the next following Business
Day.

1.7. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 2 offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the Contracts shall be invested in the
Fund, or in the Company's general account; provided that such

- 5 -

<PAGE> 6

amounts may also be invested in an investment company other than the Fund if (a)
such other investment company, or series thereof, has investment objectives or
policies that are substantially different from the investment objectives and
policies of the Portfolios of the Fund named in Schedule 2; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Fund and Underwriter prior to their signing this Agreement; or (d)
the Fund or Underwriter consents in writing to the use of such other investment
company.

1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.

1.9. The Fund shall furnish notice as soon as reasonably practicable to
the Company of any income, dividends or capital gain distributions payable on
the Fund's shares. The Company hereby elects to receive all such dividends and
distributions as are payable on the Portfolio shares in the form of additional
shares of that Portfolio. The Company reserves the right to revoke this election
and to receive all such dividends and distributions in cash. The Fund shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions.

1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is

- 6 -

<PAGE> 7

calculated and shall use its best efforts to make such net asset value per share
available by 5:30 p.m., Eastern Time, each business day.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and sold in
compliance with all applicable federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registration for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as required in order to
effect the continuous offering of the Contracts or as may otherwise be required
by applicable law. The Company shall register and qualify the Contracts for sale
in accordance with the securities laws of the various states only if and to the
extent deemed necessary by the Company.

2.2. Subject to Article VI hereof, the Company represents that it believes
that the Contracts are currently and at the time of issuance will be treated as
annuity contracts under applicable provisions of the Internal Revenue Code and
that it will make every effort to maintain such treatment and that it will
notify the Fund and the Underwriter immediately upon having a

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<PAGE> 8

reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.

2.3. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for as long as the Fund shares are sold. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accor dance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.

2.4. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.

2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply to
the Fund. To the extent feasible and consistent with market conditions, the Fund
will adjust its investments to comply with the insurance and other applicable
laws of the Company's state of domicile upon written notice from the Company of
such requirements and proposed adjustments, it being agreed and understood that
in any such case the Fund shall be allowed a reasonable period of time under the
circumstances after receipt of such notice to make any such adjustment. The
Company alone

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<PAGE> 9

shall be responsible for informing the Fund of any additional restrictions
imposed by state laws which are applicable to the Fund.

2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have its Board of Trustees, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b- 1 to finance distribution
expenses. The Fund shall notify the Company immediately upon determining to
finance distribution expenses pursuant to Rule 12b-1.

2.7. The Underwriter represents and warrants that it is a member in good
standing of the National Association of Securities Dealers, Inc., ("NASD") and
is registered as a broker-dealer with the SEC. The Underwriter further
represents that it will sell and distribute the Fund shares in accordance with
all applicable federal and state securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.

2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of Massachusetts and that it does and will comply with
applicable provisions of the 1940 Act.

2.9. The Underwriter represents and warrants that the Fund's Adviser,
Quest for Value Advisors, is and shall remain duly registered under all
applicable federal and state securities laws and that the Adviser will perform
its obligations to the Fund in accordance with the laws of Massachusetts and any
applicable state and federal securities laws.

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<PAGE> 10

2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.

2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage in an amount not less than $5 million. The aforesaid
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company. The Company agrees that any amounts received under such bond in
connection with claims that derive from arrangements described in this Agreement
will be held by the Company for the benefit of the Fund. The Company agrees to
make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.

ARTICLE III

PROSPECTUSES AND PROXY STATEMENTS; VOTING

3.1. The Underwriter shall provide the Company, at the Company's expense,
with as many copies of the Fund's current prospectus describing only those
Portfolios set forth on Schedule 2, as the Company may reasonably request for
use with prospective contractowners and applicants. The Underwriter shall print
and distribute, at the Fund's or Underwriter's expense, as

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<PAGE> 11

many copies of said prospectus as necessary for distribution to existing
contractowners or partici pants. If requested by the Company in lieu thereof,
the Fund shall provide such documentation including a final copy of a current
prospectus describing only those Portfolios set forth on Schedule 2, set in type
at the Fund's expense and other assistance as is reasonably necessary in order
for the Company at least annually (or more frequently if the Fund prospectus is
amended more frequently) to have the new prospectus for the Contracts and the
Fund's new prospectus printed together in one document, in such case the Fund
shall bear its share of expenses as described above.

3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or alternatively from
the Company (or, in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund), and the Underwriter (or the Fund) shall
provide such Statement, at its expense, to the Company and to any owner of or
participant under a Contract who requests such Statement or, at the Company's
expense, to any prospective contractowner and applicant who requests such
statement.

3.3. The Fund, at its expense, shall provide the Company with copies of
its proxy material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and shall
bear the costs of distributing them to existing contractowners or participants.

3.4. If and to the extent required by law the Company shall:

(i) solicit voting instructions from contractowners or
participants;

(ii) vote the Fund shares held in the Account in accordance with
instructions received from contractowners or participants; and

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<PAGE> 12

(iii) vote Fund shares held in the Account for which no timely
instructions have been received, in the same proportion as
Fund shares of such Portfolio for which instructions have been
received from the Company's contractowners or participants;

so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contractowners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. Participating Insurance Companies
shall be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner consistent
with other Participating Insurance Companies and as required by the Mixed and
Shared Funding Exemptive Order.

3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular as required, the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.

ARTICLE IV

SALES MATERIAL AND INFORMATION

4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Fund's adviser or the Underwriter is named, at
least fifteen business days prior to its use. No

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<PAGE> 13

such material shall be used if the Fund or the Underwriter reasonably objects in
writing to such use within fifteen business days after receipt of such material.

4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.

4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least fifteen business days prior to its use. No such material shall
be used if the Company reasonably objects in writing to such use within fifteen
business days after receipt of such material.

4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to contractowners or participants,
or in sales literature or other promotional material approved by the Company,
except with the

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<PAGE> 14

permission of the Company. The Company agrees to respond to any request for
approval on a prompt and timely basis.

4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the SEC or other regulatory authorities.

4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.

4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally

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<PAGE> 15

available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.

4.8. The Company agrees and acknowledges that Oppenheimer Capital is the
sole owner of the name and mark "Quest for Value" and that all use of any
designation comprised in whole or part of such name or mark under this Agreement
shall inure to the benefit of Oppenheimer Capital. Except as provided in Section
4.1, the Company shall not use any such name or mark on its own behalf or on
behalf of each Account in connection with marketing the Contracts without prior
written consent of Oppenheimer Capital. Upon termination of this Agreement for
any reason, the Company shall cease all use of any such name or mark.

ARTICLE V

FEES AND EXPENSES

5.1. The Fund and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Under writer in
writing. Currently, no such payments are contemplated.

5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. All Fund shares will
be duly authorized for issuance and registered in accordance with applicable
federal law and to the extent deemed advisable by the Fund, in accordance with
applicable state law, prior to sale. The Fund shall bear the expenses

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<PAGE> 16

for the cost of registration and qualification of the Fund's shares, preparation
and filing of the Fund's prospectus and registration statement, Fund proxy
materials and reports, setting in type, printing and distributing the
prospectuses, the proxy materials and reports to existing shareholders and
contractowners, the preparation of all statements and notices required by any
federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.

ARTICLE VI

DIVERSIFICATION

6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Internal Revenue Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will comply with Section 81 7(h)
of the Internal Revenue Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify the Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Treasury Regulation 1.817-5.

ARTICLE VI

POTENTIAL CONFLICTS

7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the
Fund for the existence of any material irreconcilable conflict among the
interests of the contractowners of

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<PAGE> 17

all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by Participating Insurance Companies or by variable annuity
contract and variable life insurance contractowners; or (f) a decision by an
insurer to disregard the voting instructions of contractowners. The Board shall
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof. A majority of the Fund Board shall
consist of persons who are not "interested" persons of the Fund.

7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. As set forth in the Mixed and Shared Funding Exemptive
Order, the Company will report any potential or existing conflicts of which it
is aware to the Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities under the Mixed and Shared Funding Exemptive
Order, by providing the Fund Board with all information reasonably necessary for
the Fund Board to consider any issues raised. This includes, but is not limited
to, an obligation by the Company to inform the Fund Board whenever contractowner
voting instructions are disregarded. The Fund Board shall record in its minutes
or other appropriate records, all reports received by it and all action with
regard to a conflict.

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<PAGE> 18

7.3. If it is determined by a majority of the Fund Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and rein vesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contractowners and, as appropriate, segregating the assets of
any appropriate group (i.e., variable annuity contractowners or variable life
insurance contractowners, of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.

7.4. If the Company's disregard of voting instructions could conflict with
the majority of contractowner voting instructions, and the Company's judgment
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement with respect to such Account. Any such
withdrawal and termination shall take place within six (6) months after written
notice is given that this provision is being implemented. Until such withdrawal
and termination is implemented, the Underwriter and the Fund shall continue to
accept and implement orders by the Company for the purchase and redemption of
shares of the Fund. Such

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<PAGE> 19

withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of
disinterested Directors.

7.5. If a particular state insurance regulator's decision applicable to
the Company conflicts with the majority of other state insurance regulators,
then the Company will withdraw the Account's investment in the Fund and
terminate this Agreement with respect to such Account within six (6) months
after the Fund informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict. Until such withdrawal
and termination is implemented, the Underwriter and the Fund shall continue to
accept and implement orders by the Company for the purchase and redemption of
shares of the Fund. Such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of disinterested Directors.

7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event with the Fund be required to establish a new funding medium for
the Contracts. The Company shall not be required by Section 7.3 to establish a
new funding medium for the Contracts if an offer to do so has been declined by
vote of a majority of contractowners materially adversely affected by the
irreconcilable material conflict.

7.7. The Company shall at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so that the
Fund Board may fully carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive

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<PAGE> 20

Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Fund Board.

7.8. If and to the extent that Rule 6e-2 and Rule 6e-3 (T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, (a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3 (T), as amended, and Rule 6e-3, as adopted, to the extent such rules
are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.

ARTICLE VIII

INDEMNIFICATION

8.1. Indemnification By The Company

(a) The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each of the Fund's or the Underwriter's directors, officers,
employees or agents and each person, if any, who controls the Fund or the
Underwriter within the meaning of such terms under the federal securities laws
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the Indemnified Parties may
become subject under any statute,

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<PAGE> 21

regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements:

(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement, prospectus or statement
of information for the Contracts or contained in the
Contracts or sales literature or other promotional
material for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they
were made; provided that this agreement to indemnify
shall not apply as to any indemnified party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Company by or on
behalf of the Fund for use in the registration
statement, prospectus or statement of information for
the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or

(ii) arise out of or as a result of statements or
representations by or on behalf of the Company (other
than statements or representations contained in the Fund
registration statement, Fund prospectus or sales
literature or other promotional material of the Fund not
supplied by the Company or persons under its control) or
wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the
Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, Fund prospectus, statement of
additional information or sales literature or other
promotional material of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading in light of the circumstances in
which they were made, if such a statement or omission
was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Company or persons under its control; or

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<PAGE> 22

(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or to
make any payments under the terms of this Agreement; or

(v) arise out of any material breach of any representation
and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach by
the Company of this Agreement;

except to the extent provided in Sections 8.1(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Company may
otherwise have.

(b) No party shall be entitled to indemnification if such loss,
claim, damage, liability or litigation is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.

(c) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.

8.2. Indemnification By the Underwriter

(a) The Underwriter, on its own behalf and on behalf of the Fund,
agrees to indemnify and hold harmless the Company and each of its directors,
officers, employees or agents and each person, if any, who controls the Company
within the meaning of such terms under the federal securities laws
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including reasonable legal and other expenses) to which the Indemnified Parties
may become subject under any statute,

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<PAGE> 23

regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements:

(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement, prospectus or statement
of additional information for the Fund or sales
literature or other promotional material of the Fund (or
any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify shall not apply as to any
indemnified party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the registration statement, prospectus or
statement of additional information for the Fund or in
sales literature of the Fund (or any amendment or
supplement thereto) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or

(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in the
Contract or Fund registration statement, the Contract or
Fund prospectus, statement of additional information, or
sales literature or other promotional material for the
Contracts or of the Fund not supplied by the Underwriter
or the Fund or persons under the control of the
Underwriter or the Fund respectively) or wrongful
conduct of the Underwriter or the Fund or persons under
the control of the Underwriter or the Fund respectively,
with respect to the sale or distribution of the
Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material covering the Contracts (or any amendment
thereof or supplement thereto), or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement or statements therein not misleading in light
of the circumstances in which they were made, if such
statement or omission was made in reliance upon and in

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<PAGE> 24

conformity with information furnished to the Company by
or on behalf of the Underwriter or the Fund or persons
under the control of the Underwriter or the Fund; or

(iv) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms
of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements and procedures
related thereto specified in Article VI of this
Agreement); or

(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter
or the Fund in this Agreement or arise out of or result
from any other material breach of this Agreement by the
Underwriter or the Fund;

except to the extent provided in Sections 8.2(b) and 8.3 hereof. This
indemnification shall be in addition to any liability which the Underwriter may
otherwise have.

(c) The Indemnified Parties will promptly notify the Underwriter of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Contracts or the operation of the Account.

8.3. Indemnification Procedure

Any person obligated to provide indemnification under this Article
VIII ("Indemnifying Party" for the purpose of this Section 8.3) shall not be
liable under the indemnification provisions of this Article VIII with respect to
any claim made against a party entitled to indemnification under this Article
VIII ("Indemnified Party" for the purpose of this Section 8.3) unless such
indemnified party shall have notified the indemnifying party in writing

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<PAGE> 25

within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
indemnified party (or after such party shall have received notice of such
service on any designated agent), but failure to notify the indemnifying party
of any such claim shall not relieve the indemnifying party from any liability
which it may have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to the extent
that the failure to notify results in the failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a result of
failure to give such notice. In case any such action is brought against the
indemnified party, the indemnifying party will be entitled to participate, at
its own expense, in the defense thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the indemnifying party to the indemnified
party of the indemnifying party's election to assume the defense thereof, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there be a final judgment for the
plaintiff,

- 25 -

<PAGE> 26

the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.

A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.

ARTICLE IX

APPLICABLE LAW

9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.

9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to the Mixed and Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.

ARTICLE X

TERMINATION

10.1. This Agreement shall terminate:

(a) at the option of any party upon six months advance written
notice to the other parties unless otherwise agreed in a separate written
agreement among the parties; or

- 26 -

<PAGE> 27

(b) at the option of the Company if shares of the Portfolios
delineated in Schedule 2 are not reasonably available to meet the requirements
of the Contracts as determined by the Company; or

(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the SEC, the insurance commission of any state
or any other regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the administration of the Contracts,
the operation of the Account, or the purchase of the Fund shares, which would
have a material adverse effect on the Company's ability to perform its
obligations under this Agreement; or

(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Underwriter by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body, which
would have a material adverse effect on the Underwriter's or the Fund's ability
to perform its obligations under this Agreement; or

(e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals or the vote of the contractowners having an
interest in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will give
30 days prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares; or

(f) at the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an

- 27 -

<PAGE> 28

irreconcilable material conflict exists among the interests of (i) all
contractowners of variable insurance products of all separate accounts or (ii)
the interests of the Participating Insurance Companies investing in the Fund as
delineated in Article VII of this Agreement; or

(g) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or

(h) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof or if the Company
reasonably believes that the Fund will fail to meet such requirements; or

(i) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or

(j) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon the business
and operations of the Company; or

(k) at the option of the Fund or Underwriter, if the Fund or
Underwriter respectively, shall determine in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund or Underwriter; or

- 28 -

<PAGE> 29

(l) subject to the Fund's compliance with Article VI hereof, at the
option of the Fund in the event any of the Contracts are not issued or sold in
accordance with applicable requirements of federal and/or state law. Termination
shall be effective immediately upon such occurrence without notice.

10.2 Notice Requirement

(a) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.

(b) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1 (b) - (d) or 10.1 (g) - (i), prompt written
notice of the election to terminate this Agreement for cause shall be furnished
by the party terminating the Agreement to the non-terminating parties, with said
termination to be effective upon receipt of such notice by the non-terminating
parties.

(c) In the event that any termination of this Agreement is based
upon the provisions of Sections 10.1(j) or 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the party
terminating this Agreement to the non terminating parties. Such prior written
notice shall be given by the party terminating this Agreement to the
non-terminating panics at least 30 days before the effective date of
termination.

10.3. [NO HEADING?] It is understood and agreed that the right to
terminate this Agreement pursuant to Section 10.1 (a) may be exercised for any
reason or for no reason.

10.4. Effect of Termination

- 29 -

<PAGE> 30

(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement and subject to Section 1.3 of this Agreement, the
Company may require the Fund and the Underwriter to, continue to make available
additional shares of the Fund for so long after the termination of this
Agreement as the Company desires pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.4 shall not apply to any terminations under Article VII and
the effect of such Article VII terminations shall be governed by Article VII of
this Agreement.

(b) If shares of the Fund continue to be made available after
termination of this Agreement pursuant to this Section 10.4, the provisions of
this Agreement shall remain in effect except for Section 10.1(a) and thereafter
the Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the other party,
such notice to be for a period that is reasonable under the circumstances but
need not be for more than 90 days.

10.5. [NO HEADING] Except as necessary to implement contractowner
initiated or approved transactions, or as required by state insurance laws or
regulations, the Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account), and the Company shall not prevent contractowners

- 30 -

<PAGE> 31

from allocating payments to a Portfolio that was otherwise available under the
Contracts, until 90 days after the Company shall have notified the Fund or
Underwriter of its intention to do so.

ARTICLE XI

NOTICES

Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt or by certified mail, return receipt requested, to the other
party at the address of such party set forth below or at such other address as
such party may from time to time specify in writing to the other party. All
notices shall be deemed given three business days after the date received or
rejected by the addressee.

If to the Fund: Mr. Bernard H. Garil
President
Quest For Value Advisors
200 Liberty Street
New York, NY 10281

If to the Company: Margaret M. McKinney, Esq.
IL Annuity and Insurance Company
2960 North Meridian
P.O. Box 1230
Indianapolis, Indiana 46206

If to the Underwriter: Mr. Thomas E. Duggan
Secretary
Quest for Value Distributors
200 Liberty Street
New York, NY 10281

- 31 -

<PAGE> 32

ARTICLE XII

MISCELLANEOUS

12.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Directors, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.

12.2. Subject to law and regulatory authority, each party hereto shall
treat as confidential all information reasonably identified as such in writing
by any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this Agreement,
shall not disclose, disseminate or utilize such confidential information until
such time as it may come into the public domain without the express prior
written consent of the affected party.

12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.

12.6. This Agreement shall not be assigned by any party hereto without the
prior written consent of all the parties.

12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance

- 32 -

<PAGE> 33

regulators) and shall permit each other and such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.

12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.

12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund.

- 33 -

<PAGE> 34

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized representative as
of the date and year first written above.

Company:

IL ANNUITY AND INSURANCE COMPANY

By:
-------------------------------

Fund:

QUEST FOR VALUE ACCUMULATION TRUST

By:
-------------------------------

Underwriter:

QUEST FOR VALUE DISTRIBUTORS

By:
-------------------------------

- 34 -

<PAGE> 35

SCHEDULE 1

Participation Agreement
Among
Quest for Value Accumulation Trust, IL Annuity and Insurance Company
and
Quest for Value Distributors

The following separate accounts of IL Annuity and Insurance Company are
permitted in accordance with the provisions of this Agreement to invest in
Portfolios of the Fund shown in Schedule 2:

IL Annuity and Insurance Co. Separate Account I

August __, 1995

<PAGE> 36

SCHEDULE 2

Participation Agreement
Among
Quest for Value Accumulation Trust, IL Annuity and Insurance Company
and
Quest for Value Distributors

The Separate Account(s) shown on Schedule 1 may invest in the following
Portfolios of the Quest for Value Accumulation Trust:

Quest for Value Managed Portfolio

Quest for Value Small Cap Portfolio

August __, 1995

<PAGE> 1
EXHIBIT 8(g)

PARTICIPATION AGREEMENT

Among

THE ALGER AMERICAN FUND,

FRED ALGER & COMPANY, INCORPORATED

and

IL ANNUITY AND INSURANCE COMPANY

THIS AGREEMENT, made and entered into as of the ___ day of
_____________, 1995 by and among IL ANNUITY AND INSURANCE COMPANY (hereinafter
the "Company"), a Massachusetts corporation, on its own behalf and on behalf of
each segregated asset account of the Company set forth on Schedule A hereto as
may be amended from time to time (each such account hereinafter referred to as
the "Account"), THE ALGER AMERICAN FUND, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund"), and FRED ALGER & COMPANY, INCORPORATED (hereinafter the "Distributor"),
a Delaware corporation.

WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
to which the Fund is a party (hereinafter "Participating Insurance Companies");
and

WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and

WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated February 17, 1989 (File No. 812-7076), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of Sections 9(a),
13(a), 15(a) and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and

<PAGE> 2

WHEREAS, the Fund's investment adviser, Fred Alger Management, Inc.,
is duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended, and any applicable state securities laws; and

WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and

WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and

WHEREAS, the Company has registered or will register each Account as
a unit investment trust under the 1940 Act; and

WHEREAS, the Distributor is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and

WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life or variable
annuity contracts and the Distributor is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;

NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Distributor agree as follows:

ARTICLE I

SALE OF FUND SHARES

1.1. Shares of the Fund which each Account orders will be sold to
the Company, and such orders will be executed on a daily basis at the net asset
value next computed after receipt by the Fund or its designee of the order for
the shares of the Fund. For purposes of this Section 1.1, the Company shall be
the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 9:30 a.m. on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its next asset value pursuant
to the rules of the Securities and Exchange Commission.

<PAGE> 3

1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asst value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission, and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders of
such Portfolio.

1.3. Shares of the Fund will be sold only to Participating Insurance
Companies and their separate accounts and to such other entities as may be
permitted by Section 817(h) of the Code, which may include the Distributor or
its affiliates. No shares of any Portfolio will be sold to the general public.

1.4. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption by 9:30 a.m. on the next following Business Day.

1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that the
Portfolios of the Fund specified on Schedule A attached hereto and incorporated
herein by reference will be made available under the variable annuity contracts
with the form number(s) which are listed on Schedule A, as such Schedule A may
be amended from time to time hereafter by mutual written agreement of all the
parties hereto (the "Contracts"). The Fund acknowledges that the investment
companies which are listed on Schedule B attached hereto and incorporated herein
by reference, as such schedule may be updated from time to time hereafter by the
Company, are also available under the Contracts.

1.6. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire
with the reasonable expectation of receipt by the Fund by 2:00 p.m. Eastern
Time.

1.7. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.

<PAGE> 4

1.8. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.

1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on each Business Day as soon as reasonably
practical after the net asset value per share is calculated, and shall use its
best efforts to make such net asset value per share available by 7 p.m. Eastern
time. If the Fund provides incorrect share net asset value information, the
Company shall be entitled to an adjustment to the number of shares purchased or
redeemed to reflect the correct net asset value per share. Any error in the
calculation or reporting of net asset value per share, dividend or capital gains
information, shall be reported promptly upon discovery to the Company.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; and that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that it has
legally and validly established each Account prior to any issuance or sale
thereof as a segregated asset account under the laws of the Company's state of
domicile and has registered or, prior to any issuance or sale of the Contracts,
will register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts.

2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Company's state of domicile
and all applicable federal and state securities laws and that the Fund is and
shall remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares.

2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision),
and that it will notify the Company immediately in the event that there is a
reasonable basis for believing that the Fund has ceased to so qualify or that it
might not so qualify in the future.

<PAGE> 5

2.4. Subject to Article VI hereto, the Company represents that the
Contracts are currently treated as endowment, life insurance, or annuity
contracts under applicable provisions of the Code, and that it will make every
effort to maintain such treatment, and that it will notify the Fund immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.

2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have a board of trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.

2.6. The Fund represents and warrants that it will use its best
efforts to ensure that the investment policies, fees and expenses of the
Portfolios are and shall at all times remain in compliance with applicable
insurance and other applicable laws of the Commonwealth of Massachusetts and the
State of Indiana and any other applicable state, to the extent required to
perform this Agreement or to the extent specifically requested in writing by the
Company.

2.7. The Distributor represents and warrants that it is registered
as a broker-dealer with the SEC, and is a member in good standing of the
National Association of Securities Dealers, Inc. The Distributor further
represents that it shall perform its obligations to the Fund in accordance with
the laws of the Company's state of domicile and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.

2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.

2.9. The Distributor represents and warrants that it is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws and that the Distributor shall perform its obligations for
the Fund in compliance in all material respects with the laws of the Company's
state of domicile and any applicable state and federal securities laws.

ARTICLE III

PROSPECTUSES AND PROXY STATEMENTS: VOTING

3.1. The Distributor shall provide the Company with as many copies
of the Fund's current prospectus(es) describing only the Portfolio(s) listed on
Schedule A hereto as the Company may reasonably request. If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the new prospectus as set in type at the Fund's expense) and other
assistance as is reasonably necessary in order for the Company once

<PAGE> 6

each year (or more frequently if the prospectus for the Fund is amended more
frequently) to have the prospectus for the Contracts and the Fund's prospectus
printed together in one document. The Fund shall bear the expense of printing
copies of its current prospectus and statement of additional information that
will be distributed to existing Contract owners, and the Company shall bear the
expense of printing copies of the Fund prospectus that are used in connection
with offering the Contracts issued by the Company.

3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Fund, and the
Distributor, at its expense, shall print and provide such Statement free of
charge to the Company and to any owner of a Contract or prospective owner who
requests such Statement.

3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to current shareholders, and other
communications to current shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.

3.4. So long as, and to the extent that, the Commission interprets
the 1940 Act to require pass-through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners whose
cash values are invested, through the registered Accounts, in shares of one or
more Portfolios of the Fund. The Fund shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Fund. With respect to each registered Account,
the Company will vote shares of each Portfolio of the Fund held by a registered
Account and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares for which voting instructions
are received. The Company reserves the right, to the extent permitted by law, to
vote shares held in any Account in its sole discretion.

3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.

ARTICLE IV

SALES MATERIAL AND INFORMATION

4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Distributor is named, at least fifteen
Business Days prior to its use. No such material shall be used if the Fund or
its designee reasonably objects to such use within fifteen Business Days after
receipt of such material.

<PAGE> 7

4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund or its designee.

4.3. The Fund, the Distributor, or the designee of either, shall
furnish, or shall cause to be furnished, to the Company or its designee, each
piece of sales literature or other promotional material in which the Company,
any affiliate of the Company, and/or any of the Company's separate account(s),
is named at least fifteen Business Days prior to its use. No such material shall
be used if the Company or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.

4.4. The Fund and the Distributor shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.

4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.

4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.

<PAGE> 8

reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, Statements of Additional Information, shareholder
reports, and proxy materials.

ARTICLE V

FEES AND EXPENSES

5.1. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting in type and printing the Fund's
prospectus (except the cost of printing Fund prospectuses that will not be
distributed to then-current Contract owners investing in the Fund, such cost to
be borne by the Company), setting in type and printing the proxy materials and
reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, and all taxes on the issuance or transfer
of the Fund's shares.

5.2. The Company shall bear the expenses of distributing the Fund's
prospectus to owners of Contracts issued by the Company and of distributing the
Fund's proxy materials and reports to such Contract owners.

ARTICLE VI

DIVERSIFICATION

6.1. The Fund will at all times invest assets of the Portfolios in
such manner to permit the Portfolios to be used for investment by separate
accounts of life insurance companies funding variable annuity or variable life
insurance contracts, as set forth under the Code and regulations thereunder.
Without limiting the scope of the foregoing, the Fund will at all times comply
with Section 817(h) of the Code and Treasury Regulation Section 1.817-5,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts and any amendments or other modifications to such
Section or Regulations. In the event of a breach of this Article VI by the Fund,
it will take all reasonable steps (a) to notify Company of such breach and (b)
to adequately diversify the Fund so as to achieve compliance with the grace
period afforded by Regulation Section 1.817-5.

ARTICLE VII

<PAGE> 9

POTENTIAL CONFLICTS

7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners or by contract owners of different life insurance companies
investing in the Fund; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.

This includes, but is not limited to, an obligation by the Company to inform the
Board whenever contract owner voting instructions are disregarded.

7.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflicts up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether (i) withdrawal of assets from the Fund or (ii)
segregation of assets should be implemented and, as appropriate, withdrawing or
segregating the assets of any particular group (i.e., annuity contract owners,
life insurance contract owners or qualified contract owners) that votes in favor
of such withdrawal or segregation, or offering to the affected contract owners
the option of making such a change; and (2) establishing a new registered
management investment company or managed separate account.

<PAGE> 10

against an Account or the Company as a result of such withdrawal. The Company
agrees that any remedial action taken by it in resolving any material conflicts
of interest will be carried out with a view only to the interests of Contract
owners.

7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.

7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement, provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.

7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.

ARTICLE VIII

INDEMNIFICATION

8.1. Indemnification By The Company

8.1(a). The Company agrees to indemnify and hold harmless the
Distributor, the Fund and each of its trustees, officers, employees and agents,
and each person, if any, who controls the Fund within the meaning of Section 15
of the 1933 Act (collectively, the

<PAGE> 11

"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:

(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement or prospectus for the Contracts or contained
in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Fund or the Distributor for use in
the Registration Statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or

(ii) arise out of or as a result of statements or
representations (other than statements or representations contained
in the Registration Statement or prospectus or sales literature of
the Fund not supplied by the Company, or by persons under its
control) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Contracts
or Fund Shares; or

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Company; or

(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.l(b) and 8.l(c) hereof; or

(v) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the
terms of this Agreement; or

<PAGE> 12

(vi) arise out of or result from the provision by the Company
to the Fund of insufficient or incorrect information regarding the
purchase or sale of shares of any Portfolio, or the failure of the
Company to provide such information on a timely basis.

8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.

8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.

8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.

8.2. Indemnification by the Distributor

8.2(a). The Distributor agrees to indemnify and hold harmless the
Company and each of its directors, officers, employees, and agents and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Distributor) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:

<PAGE> 13

(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the Fund
(or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Distributor or Fund by or on
behalf of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or

(ii) arise out of or as a result of statements or
representations (other than statements or representations contained
in the Registration Statement, prospectus or sales literature for
the Contracts not supplied by the Distributor or persons under his
control) or wrongful conduct of the Fund, Distributor or persons
under their control, with respect to the sale or distribution of the
Contracts or Fund shares; or

(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund; or

(iv) arise as a result of any failure by the Fund whether
unintentional or in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of this
Agreement; or

(v) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Distributor; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c) hereof;
or

(vi) arise out of or result from any failure by the
Distributor or the Fund to provide the services or furnish the
materials required under the terms of this Agreement; or

(vii) arise out of or result from the provision by the Fund or
the Distributor to the Company of insufficient or incorrect
information regarding the

<PAGE> 14

net asset value per share of any Portfolio, or the failure of the
Fund or the Distributor to provide such information by 7 p.m.
Eastern time.

8.2(b). The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.

8.2(c). The Distributor shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Distributor in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Distributor
of any such claim shall not relieve the Distributor from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Distributor will be entitled to
participate, at its own expense, in the defense thereof. The Distributor also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Distributor to such party
of the Distributor's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Distributor will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.

8.2(d). The Company agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.

8.3. Indemnification By the Fund

8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:

<PAGE> 15

(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement, or to comply with the diversification requirements
specified in Article VI of this Agreement; or

(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund; as limited by and in accordance with the
provisions of Sections 8.3(b) and 8.3(c) hereof; or

(iii) arise out of or result from the provision by the
Distributor or the Fund to the Company of insufficient or incorrect
information regarding the net asset value per share of any
Portfolio, or the failure of the Distributor or Fund to provide such
information by 7 p.m. Eastern time.

8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Distributor, or each Account, whichever is
applicable.

8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.

8.3(d). The Company and the Distributor agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.

ARTICLE IX

APPLICABLE LAW

<PAGE> 16

9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.

9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.

ARTICLE X

TERMINATION

10.1. This Agreement shall continue in full force and effect until the
first to occur of:

(a) termination by any party for any reason by six (6) months
advance written notice delivered to the other parties unless a
shorter time is mutually agreed to by the parties; or

(b) termination by the Company by written notice to the Fund
and the Distributor with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts; or

(c) termination by the Company by written notice to the Fund
and the Distributor with respect to any Portfolio in the event any
of the Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment media
of the Contracts issued) or to be issued by the Company; or

(d) termination by the Company by written notice to the Fund
and the Distributor with respect to any Portfolio in the event that
such Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or

(e) termination by the Company by written notice to the Fund
and the Distributor with respect to any Portfolio in the event that
such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or

(f) termination by either the Fund or the Distributor by
written notice to the Company, if either one or both of the Fund or
the Distributor respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in its

<PAGE> 17

business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or

(g) termination by the Company by written notice to the Fund
and the Distributor, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Distributor has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity.

(h) termination by the Fund or the Distributor if the
Contracts issued by the Company cease to qualify as annuity
contracts or endowment contracts or life insurance contracts, as
applicable, under the Code or if the Contracts are not registered,
issued or sold in accordance with applicable state and/or federal
law; or

(i) termination by any party by 180 days written notice upon a
determination by a majority of the Trustees of the Fund, or a
majority of its disinterested Trustees, that a material
irreconcilable conflict exists.

10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not apply
to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.

ARTICLE XI

NOTICES

Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.

If to the Fund:

The Alger American Fund
75 Maiden Lane
New York, New York 10038
Attention:
------------------

If to the Company:

<PAGE> 18

IL Annuity and Insurance Company
2960 North Meridian
P.O. Box 1230
Indianapolis, Indiana 46206
Attention:
--------------------

If to the Distributor:

Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
Attention: Gregory S. Duch

ARTICLE XII

MISCELLANEOUS

12.1. All liabilities of the Fund arising, directly or indirectly, under
this Agreement, of any and every nature, shall be satisfied solely out of the
assets of the Fund and no Trustee, officer, agent or holder of shares of
beneficial interest of the Fund shall be personally liable for any such
liabilities.

12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.

12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.

12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.

<PAGE> 19

agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.

12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.

12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.

IL ANNUITY AND INSURANCE COMPANY

By:
------------------------------------

Name:
----------------------------------

Title:
-----------------------------------

THE ALGER AMERICAN FUND

By:
------------------------------------

Name:
----------------------------------

Title:
---------------------------------

FRED ALGER & COMPANY, INCORPORATED

By:
------------------------------------

Name:
----------------------------------

Title:
---------------------------------

<PAGE> 20

SCHEDULE A

Separate Accounts, Associated Contracts, and Fund Portfolios
------------------------------------------------------------

<TABLE>
<CAPTION>
Name of Separate Policy Form Numbers Portfolios of the Fund
Account and Date of Contracts Funded Available Under
Established by By Separate Account the Contracts
Board of Directors ------------------- -------------
- ------------------

<S> <C> <C>
IL Annuity and Insurance VA-95 MidCap Growth
Co. Separate Account 1 Portfolio

Small Capitalization
Portfolio
</TABLE>

<PAGE> 21

SCHEDULE B

Other investment companies currently available under the Contracts:

<PAGE> 1
EXHIBIT 9

[LETTERHEAD OF IL ANNUITY]

April 30, 1998

IL Annuity and Insurance Company
Separate Account 1
P.O. Box 7149
Indianapolis, Indiana 46206

Gentlemen and Ladies:

In my capacity as Counsel of IL Annuity and Insurance Company (the
"Company"), I am rendering the following opinion in connection with the filing
with the Securities and Exchange Commission of a Registration Statement on Form
N-4 under the Securities Act of 1933 and the Investment Company Act of 1940.
This Registration Statement is being filed with respect to flexible variable
annuity contracts (the "Contracts") issued by IL Annuity and Insurance Company
Separate Account 1 (the "Account").

In forming the following opinion, I have made such examination of
law and examined such records and other documents as in my judgment are
necessary and appropriate.

It is my opinion that:

1. The Account is a separate investment account of the Company
and is duly created and validly existing pursuant to the laws
of the State of Massachusetts.

2. The Contracts, when issued in accordance with the Prospectus
of the Account and in compliance with applicable local law,
are and will be legal and binding obligations of the Company
in accordance with their terms.

3. Assets attributable to reserves and other contract liabilities
and held in the Account will not be chargeable with
liabilities arising out of any other business the Company may
conduct.

I consent to the filing of this opinion as an exhibit to the
above-mentioned Registration Statement and to the inclusion of my name under the
caption "Legal Matters" in the Statement of Additional Information filed as part
of this Registration Statement on Form N-4.

Very truly yours,

/s/ Janis B. Funk
---------------------------
Janis B. Funk
Counsel

<PAGE> 1
EXHIBIT 10(a)

Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404

STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]

April 24, 1998

Board of Directors
IL Annuity and Insurance Company
2960 North Meridian Street
Indianapolis, Indiana 46208

Ladies and Gentlemen:

We hereby consent to the reference to our name under the caption
"Legal Matters" in the Statement of Additional Information filed as part of the
Post-Effective Amendment No. 6 to the registration statement on Form N-4 for IL
Annuity and Insurance Co. Separate Account 1. In giving this consent, we do not
admit that we are in the category of the persons whose consent is required under
Section 7 of the Securities Act of 1933.

Very truly yours,

SUTHERLAND, ASBILL & BRENNAN LLP

By: /s/ Stephen E. Roth
---------------------------
Stephen E. Roth

<PAGE> 1
Exhibit 10(b)

Consent of Ernst & Young LLP, Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated April 17, 1998, in Post Effective Amendment No. 6 to
the Registration Statement (Form N-4 No. 33-89028) and related Statement of
Additional Information of IL Annuity and Insurance Co. Separate Account 1 dated
May 1, 1998.

ERNST & YOUNG LLP

April 30, 1998

<PAGE> 1
EXHIBIT 15

POWER OF ATTORNEY

We, the undersigned directors and officers of IL Annuity and
Insurance Company, a Massachusetts corporation, hereby constitute and appoint
Janis B. Funk, our true and lawful attorney, with full power to her to sign for
us and in our names and in the capacities indicated below, the Registration
Statements filed with the Securities and Exchange Commission for the purpose of
registering IL Annuity and Insurance Company Separate Account 1, established by
IL Annuity and Insurance Company on November 1, 1994 as a unit investment trust
under the Investment Company Act of 1940 and the variable annuity contracts
issued by said separate account under the Securities Act of 1933, and any and
all amendments thereto, hereby ratifying and confirming our signatures as they
may be signed by our said attorney to said Registration Statements and any and
all amendments thereto.

Witness our hands on the date set forth below.

Signature Title Date
- --------- ----- ----

/s/ Larry R. Prible Chairman of the Board and April 9, 1998
- ------------------- Director
Larry R. Prible

/s/ Gregory J. Carney President, Chief Executive April 9, 1998
- --------------------- Officer and Director
Gregory J. Carney

/s/ Gene E. Trueblood Treasurer April 9, 1998
- ---------------------
Gene E. Trueblood

/s/ John J. Fahrenbach Director April 9, 1998
- ----------------------
John J. Fahrenbach

/s/ Garrett P. Ryan Director April 9, 1998
- -------------------
Garrett P. Ryan

/s/ Richard G. Darragh Controller April 9, 1998
- ----------------------
Richard G. Darragh

/s/ Larry A. Halbach Director April 9, 1998
- --------------------
Larry A. Halbach

/s/ Stephen J. Shorrock Director April 9, 1998
- -----------------------
Stephen J. Shorrock

/s/ Karla K. Vest Director April 9, 1998
- -----------------
Karla K. Vest