<PAGE> 1
1933 Act File No. 2-87072
1940 Act File No. 811-3875
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. 17 X
---- -------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 X
-------
SENTRY VARIABLE ACCOUNT II
- --------------------------------------------------------------------------------
(Exact Name of Registrant)
SENTRY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
(Name of Depositor)
1800 North Point Drive
Stevens Point, Wisconsin 54481
- --------------------------------------------------------------------------------
(Address of Depositor's Executive Offices and Zip Code)
Telephone (715) 346-6000
- --------------------------------------------------------------------------------
(Depositor's Telephone Number, Including Area Code)
William M. O'Reilly
Sentry Life Insurance Company
1800 North Point Drive
Stevens Point, WI 54481
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Copy to:
Judith A. Hasenauer
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203)226-7866
It is proposed that this filing will become effective (check appropriate box)
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on May 1, 1997, pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(i) of Rule 485
_____ on (date) pursuant to paragraph (a)(i) of Rule 485
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Investment Company Act Rule 24f-2 under the Investment Company Act
of 1940, the Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933. The Rule 24f-2 Notice for the
year ended December 31, 1996, was filed with the Securities and Exchange
Commission on or about February 28, 1997.
<PAGE> 2
CROSS REFERENCE SHEET
(Required by Rule 495)
<TABLE>
<CAPTION>
Item No. Location
- -------- --------
<S> <C>
PART A
1 Cover Page .............................. Cover Page
2 Definitions ............................. Definitions
3 Synopsis or Highlights .................. Synopsis
4 Condensed Financial Information ......... Condensed Financial Information
5 General Description of Registrant,
Depositor, and Portfolio Companies ....... The Company; The Variable
Account; Neuberger & Berman
Advisers Management Trust
6 Deductions .............................. Charges and Deductions
7 General Description of Variable
Annuity Contracts ....................... The Contracts
8 Annuity Period .......................... Annuity Provisions
9 Death Benefit ........................... The Contracts; Annuity Provisions
10 Purchases and Contract Value ............. Purchases and Contract Value
11 Redemptions ............................. Purchases and Contract Value
12 Taxes ................................... Taxes
13 Legal Proceedings ....................... Legal Proceedings
14 Table of Contents of the Statement
of Additional Information ................ Table of Contents of the
Statement of Additional
Information
PART B
15 Cover Page .............................. Cover Page
16 Table of Contents ....................... Table of Contents
17 General Information and History .......... The Company
18 Services ................................ Not Applicable
19 Purchase of Securities Being Offered ..... Not Applicable
20 Underwriters ............................ Distribution of Contracts
21 Calculation of Performance Data .......... Yield Calculation for Liquid
Asset Sub-Account
22 Annuity Payments ........................ Amount of Annuity Payments
23 Financial Statements ..................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement
<PAGE> 3
[SENTRY LIFE INSURANCE COMPANY LOGO]
SENTRY VARIABLE ACCOUNT II
THE PATRIOT
A FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
FUNDED BY NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
[LOGO]
APPLICATION AND PROSPECTUS
MAY 1, 1997
SENTRY LIFE INSURANCE COMPANY
<PAGE> 4
SENTRY LIFE INSURANCE COMPANY
HOME OFFICE: ANNUITY SERVICE OFFICE:
1800 NORTH POINT DRIVE P.O. BOX 867
STEVENS POINT, WI 54481 STEVENS POINT, WI 54481
TELEPHONE: (800) 533-7827
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE ANNUITY CONTRACTS
ISSUED BY
SENTRY VARIABLE ACCOUNT II
AND
SENTRY LIFE INSURANCE COMPANY
The Individual Flexible Purchase Payment Deferred Variable Annuity Contracts
(the "Contracts") described in this Prospectus provide for accumulation of
Contract Values and payment of monthly annuity payments on a variable basis.
The Contracts are designed for use by individuals in retirement plans on a
Qualified or Non-Qualified basis. The types of Qualified Plans which may
purchase the Contracts are retirement plans that receive favorable tax
treatment under Sections 403, 408 or 457 of the Internal Revenue Code. (See
"Definitions" and "Taxes.")
Purchase Payments for the Contracts will be allocated to a segregated
investment account of Sentry Life Insurance Company (the "Company") which
account has been designated Sentry Variable Account II (the "Variable
Account"). The Variable Account invests in shares of Neuberger & Berman
Advisers Management Trust ("the Trust") at their net asset value. (See
"Neuberger & Berman Advisers Management Trust"). Contract Owners bear the
complete investment risk for all amounts allocated to the Variable Account.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
CONTRACT OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE
SURRENDERED, THE VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENT.
This Prospectus provides the basic information you should know before
investing. Please keep this Prospectus for future reference.
A Statement of Additional Information dated May 1, 1997, incorporated herein by
reference and containing further information about the Contracts, has been
filed with the Securities and Exchange Commission. You can obtain a copy at no
charge by calling or writing Sentry Equity Services, Inc., 1800 North Point
Drive, Stevens Point, WI 54481, (800) 533-7827. The Table of Contents of the
Statement of Additional Information can be found on page 25 of this Prospectus.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, the Contracts in any jurisdiction in which such offer or
solicitation may not be lawfully made.
INQUIRIES: Inquiries should be directed to the Annuity Service Office
given above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED
MAY 1, 1997.
<PAGE> 5
TABLE OF CONTENTS
PAGE
----
Definitions............................................................. 4
Synopsis................................................................ 5
Fee Table............................................................... 6
Condensed Financial Information......................................... 8
Yield Calculation for Liquid Asset Sub-Account.......................... 8
Performance Information................................................. 8
Financial Statements.................................................... 9
The Company............................................................. 9
The Variable Account.................................................... 9
Neuberger & Berman Advisers Management Trust............................ 9
AMT Liquid Asset Investments........................................... 9
AMT Growth Investments................................................. 10
AMT Limited Maturity Bond Investments.................................. 10
AMT Balanced Investments............................................... 10
Variable Account Voting Rights......................................... 10
Substitution of Securities............................................. 11
Charges and Deductions.................................................. 11
Contingent Deferred Sales Charge....................................... 11
Reduction or Elimination of Contingent Deferred Sales Charge........... 12
Deduction for Mortality and Expense Risk Premium....................... 12
Deduction for Contract Maintenance Charge.............................. 12
Deduction for Premium Taxes and Other Taxes............................ 13
Other Deductions and Charges........................................... 13
The Contracts........................................................... 13
Transfers.............................................................. 13
Change in Purchase Payments............................................ 14
No Default............................................................. 14
Modification of the Contract........................................... 14
Contract Value......................................................... 14
Ownership.............................................................. 14
Assignment............................................................. 15
Beneficiary............................................................ 15
Annuity Provisions...................................................... 15
Income Date and Settlement Options..................................... 15
Change in Income Date.................................................. 15
Change in Settlement Option............................................ 15
Settlement Options..................................................... 16
Mortality and Expense Guarantee........................................ 16
Frequency of Annuity Payments.......................................... 16
Annuity Unit........................................................... 16
Amount of Annuity Payments............................................. 16
Additional Provisions.................................................. 17
<PAGE> 6
TABLE OF CONTENTS (CONTINUED)
PAGE
----
Death Benefit.......................................................... 17
Death of the Annuitant................................................ 17
Death of the Contract Owner........................................... 17
Purchases and Contract Value........................................... 18
Purchase Payments..................................................... 18
Allocation of Purchase Payments....................................... 18
Accumulation Units.................................................... 18
Distribution of Contracts............................................. 19
Surrenders............................................................. 19
Limitations on Withdrawals from 403(b) Annuities...................... 19
Texas Optional Retirement Program..................................... 19
Taxes.................................................................. 20
General............................................................... 20
Diversification....................................................... 20
Multiple Contracts.................................................... 21
Contracts Owned by Other than Natural Persons......................... 21
Tax Treatment of Assignments.......................................... 21
Income Tax Withholding................................................ 22
Tax Treatment of Withdrawals - Non-Qualified Contracts and Section
457 Contracts......................................................... 22
Qualified Plans....................................................... 22
Tax Treatment of Withdrawals - Qualified Contracts.................... 23
Tax Sheltered Annuities - Withdrawal Limitations...................... 24
Section 457 - Deferred Compensation Plans............................. 24
Legal Proceedings...................................................... 24
Table of Contents of Statement of Additional Information............... 25
<PAGE> 7
DEFINITIONS
ACCUMULATION UNIT - An accounting unit of measure used to calculate Contract
Values prior to the Income Date.
ANNUITANT - The person upon whose continuation of life any annuity payment
involving life contingencies depends.
ANNUITY UNIT - An accounting unit of measure used to calculate annuity payments
after the Income Date.
COMPANY - Sentry Life Insurance Company at its Annuity Service Office.
CONTINGENT DEFERRED SALES CHARGE - The sales charge that may be applied against
amounts surrendered.
CONTINGENT OWNER - The Contingent Owner, if any, must be the spouse of the
Contract Owner named in the application.
CONTRACT ANNIVERSARY - An anniversary of the Effective Date of the Contract.
CONTRACT OWNER - The Contract Owner is named in the application, unless
changed, and has all rights under the Contract.
CONTRACT VALUE - The dollar value as of any Valuation Date of all amounts
accumulated under the Contract.
CONTRACT YEAR - Any period of 12 months commencing with the Effective Date and
each Contract Anniversary thereafter.
EFFECTIVE DATE - The date shown as the Effective Date on the Contract Data Page
of the Contract.
ELIGIBLE MUTUAL FUND - A mutual fund designated on the Contract Data Page of
the Contract.
INCOME DATE - The date on which annuity payments are to commence.
NON-QUALIFIED CONTRACTS - Contracts issued under Non-Qualified Plans.
NON-QUALIFIED PLANS - Retirement plans that do not receive favorable tax
treatment under Sections 403, 408 or 457 of the Internal Revenue Code of 1986,
as amended (the "Code").
PORTFOLIO - A segment of an Eligible Mutual Fund that constitutes a separate
and distinct class of shares.
QUALIFIED CONTRACTS - Contracts issued under Qualified Plans.
QUALIFIED PLANS - Retirement plans that receive favorable tax treatment under
Sections 403, 408 or 457 of the Code.
VALUATION DATE - Each day that the New York Stock Exchange is open for business
which is Monday through Friday, except for New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
VALUATION PERIOD - The period commencing at the close of business on the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date as well as any other day when the
Variable Account is valued because there was a sufficient degree of trading in
the Variable Account so that the net asset value of the Accumulation Unit and
Annuity Unit was materially affected.
VARIABLE ACCOUNT - A separate investment account of the Company, designated as
Sentry Variable Account II, into which Net Purchase Payments will be allocated.
<PAGE> 8
SYNOPSIS
THE CONTRACTS
The Individual Flexible Purchase Payment Deferred Variable Annuity Contracts
(the "Contracts") described in this Prospectus provide for accumulation of
Contract Values and payment of monthly annuity payments on a variable basis.
The Contracts are designed for use by individuals in retirement plans on a
Qualified or Non-Qualified basis. (See "Definitions" and "Taxes.")
THE VARIABLE ACCOUNT
Purchase Payments for the Contracts will be allocated to a segregated
investment account of Sentry Life Insurance Company (the "Company") which has
been designated Sentry Variable Account II (the "Variable Account"). The
Variable Account invests in shares of Neuberger & Berman Advisers Management
Trust at their net asset value. (See "Neuberger & Berman Advisers Management
Trust") Contract Owners bear the investment risk for all amounts allocated to
the Variable Account.
CONTINGENT DEFERRED SALES CHARGE
There are no deductions made from Purchase Payments for sales charges at time
of purchase. However, a Contingent Deferred Sales Charge may be deducted in
the event of a surrender. The Contingent Deferred Sales Charge is intended to
reimburse the Company for expenses incurred that relate to Contract sales. The
Contingent Deferred Sales Charge, if any, is based on a graded table of charges
but in no event will the aggregate charges exceed 6% of the total Purchase
Payments made. (See "Charges and Deductions - Contingent Deferred Sales
Charge.")
TEN-DAY FREE LOOK
Within 10 days (or longer in states where required) of the day the Contract is
received, it may be returned to the Company or to the agent through whom it was
purchased. When the Contract is received by the Company it will be voided as
if it had never been in force. The Purchase Payments will then be refunded in
full.
MORTALITY AND EXPENSE RISK PREMIUM
A Mortality had Expense Risk Premium is deducted from the Variable Account on a
daily basis which is equal on an annual basis to 1.20% of the daily net asset
value of the Variable Account. (See "Charges and Deduction - Deduction for
Mortality and Expense Risk Premium.")
CONTRACT MAINTENANCE CHARGE
The Company deducts an annual Contract Maintenance Charge of $30 from the
Contract Value by cancelling Accumulation Units to reimburse it for
administrative expense relating to maintenance of the Contract. Prior to the
Income Date, the Company does not guarantee the amount of the Contract
Maintenance Charge, and there is no guarantee that it will not be changed in the
future. After the Income Date, the amount of the Contract Maintenance Charge
will not be changed from the amount of the annual Contract Maintenance Charge
in effect during the Contract Year immediately preceding the Income Date.
After the Income Date, the Contract Maintenance Charge will be collected on a
monthly basis and will result in a reduction of the monthly benefit. (See
"Charges and Deductions - Deduction for Contract Maintenance Charge.")
PREMIUM TAXES
Premium taxes payable to a state or other governmental entity will be charged
against the Contract Value. Currently such premium taxes range from 0% to
4.0%. (See "Charges and Deductions - Deduction for Premium Taxes and Other
Taxes.")
TAX PENALTY UPON SURRENDER
There is a 10% federal income tax penalty applied to the income portion of any
distribution from Non-Qualified Contracts. However, the 10% penalty is not
imposed on amounts received: (1) after the taxpayer reaches age 59 1/2; (2)
after the death of the Contract Owner; (3) if the taxpayer is totally disabled
(for this purpose, disability is as defined in Section 72(m)(7) of the
Code);(4) a series of substantially equal periodic payments are made not less
frequently than annually for the life (or life expectancy) of the taxpayer or
for the joint lives (or joint life expectancies) of the taxpayer and his or her
beneficiary; (5) under an immediate annuity; or (6) which are allocable to
purchase payments made prior to August 14, 1982. The Contracts provide that if
the Annuitant dies prior to the Income Date, the Death Benefit will be paid to
the Beneficiary. A Death Benefit paid upon the death of an Annuitant who is
not the Contract Owner does not qualify for the death-of-Contract Owner
exception described above and will be subject to the 10%
5
<PAGE> 9
distribution penalty unless the Beneficiary is age 59 1/2 or one of the other
exceptions to the penalty applies. For federal income tax purposes,
withdrawals are deemed to be on a last-in-first-out basis. This discussion
also applies to Qualified Contracts issued pursuant to plans qualified under
Section 457 of the Internal Revenue Code but does not apply to Qualified
Contracts issued pursuant to plans qualified under Sections 401, 403(b) or 408
of the Code. Separate tax withdrawal penalties and restrictions apply to such
Qualified Contracts. For a further discussion of the taxation of the
Contracts, see "Taxes."
See "Tax Status - Diversification" for a discussion of Contract Owner control
of the underlying investments in a variable annuity contract.
LIMITATIONS ON WITHDRAWALS FROM 403(b) ANNUITIES
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to the occurrence of one of the following events: the Contract Owner
attains age 59 1/2, separates from service, dies or becomes disabled (within
the meaning of Section 72(m)(7) of the Code), or in a case of hardship.
However, withdrawals for hardship are restricted to the Contract Owner's
Contract Value representing contributions made by the Contract Owner and does
not include any investment results. The limitations on withdrawals became
effective January 1, 1989, and apply only to salary reduction contributions
made after December 31, 1988, to income attributable to such contributions and
to income attributable to amounts held as of December 31, 1988. The
limitations on withdrawals do not affect rollovers or transfers between certain
Qualified Plans. Tax penalties may also apply. (See "Taxes - Treatment of
Withdrawals - Qualified Contracts.") Contract Owners should consult their
owner tax counsel or other tax adviser regarding any distributions. (See
"Taxes - Tax Sheltered Annuities - Withdrawal Limitations.")
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same Contract Owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Contract Owners should consult a tax adviser prior
to purchasing more than one non-qualified annuity contract in any calendar year.
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES
Contingent Deferred Sales Charge (see number 3 of the explanations on the
following page)(as a percentage of purchase payments)
<TABLE>
<CAPTION>
TIME BETWEEN RECEIPT OF ALLOCATED
PURCHASE PAYMENT AND DATE OF SURRENDER PERCENTAGE
-------------------------------------- ----------
<S> <C>
Less than 1 year.......................................................... 6%
At least 1 year but less than 2 years..................................... 5%
At least 2 year but less than 3 years..................................... 4%
At least 3 year but less than 4 years..................................... 3%
At least 4 year but less than 5 years..................................... 2%
At least 5 year but less than 6 years..................................... 1%
At least 6 years.......................................................... 0%
</TABLE>
Contract Maintenance Charge $30 per Contract per year
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of daily net asset value)
Mortality and Expense Risk Premium 1.20%
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST AND ADVISERS MANAGERS TRUST
ANNUAL EXPENSES(1)
(As a percentage of the average daily net assets of a portfolio)
<TABLE>
<CAPTION>
INVESTMENT
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO AND ADMINISTRATION FEES EXPENSES EXPENSE
- --------- ----------------------- -------- ------------
<S> <C> <C> <C>
Liquid Asset (2) 0.44% 0.56% 1.00%
Balanced 0.85% 0.24% 1.09%
Growth 0.83% 0.09% 0.92%
Limited Maturity Bond 0.65% 0.13% 0.78%
</TABLE>
6
<PAGE> 10
(1) The Trust is divided into eight portfolios ("Portfolios"), four of which
are available through the Variable Account. Each Portfolio invests all of
its net investable assets in a corresponding series ("Series") of Advisers
Managers Trust. The figures reported under "Investment Management and
Administration Fees" include the aggregate of the administration fees paid
by the Portfolio and the management fees paid by its corresponding Series.
Similarly, "Other Expenses" include all other expenses of the Portfolio and
its corresponding Series.
(2) Expenses reflect expense reimbursement. N&B Management has undertaken to
reimburse the Liquid Asset Portfolio for certain operating expenses
including the compensation of N&B Management and excluding certain other
expenses that exceed, in the aggregate, 1% of the Portfolio's average daily
net asset value. Absent such reimbursement, the "Total Annual Expenses" for
the year ended December 31, 1996 would have been 1.21% for the Liquid Asset
Portfolio. This expense reimbursement policy is subject to termination
upon 60 days written notice and there can be no assurance that it will be
continued thereafter.
EXAMPLES
A Contract Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
1) upon surrender at the end of each time period;
2) if the Contract is not surrendered.
<TABLE>
<CAPTION>
TIME PERIODS
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Portfolio a) $72.00 $ 98.00 $126.00 $252.00
b) $22.00 $ 68.00 $116.00 $252.00
Liquid Asset Portfolio a) $73.00 $100.00 $130.00 $261.00
b) $23.00 $ 70.00 $120.00 $261.00
Limited Maturity Bond Portfolio a) $71.00 $ 94.00 $119.00 $237.00
b) $21.00 $ 64.00 $109.00 $237.00
Balanced Portfolio a) $74.00 $103.00 $134.00 $268.00
b) $24.00 $ 73.00 $124.00 $268.00
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
1. The purpose of the above table is to assist the Contract Owner in
understanding the various costs and expenses that will be incurred by the
Contract Owner, directly or indirectly. The table reflects expenses of the
Variable Account as well as the Trust. For additional information, see
"Charges and Deductions" in this Prospectus and "Management of the Trust -- The
Investment Adviser/Sub-Adviser" in the Trust Prospectus.
2. Premium taxes are not reflected. Premium taxes may apply. See "Charges
and Deductions -- Deduction for Premium Taxes and Other Taxes."
3. The examples do not reflect the fact that after the first Contract Year, a
Contract Owner may, not more than once annually on a non-cumulative basis, make
a surrender per Contract Year of up to 10% of aggregate Purchase Payments (less
any withdrawals) free from a Contingent Deferred Sales Charge provided the
Contract Value prior to the surrender exceeds $10,000.
4. Neither the fee table nor the examples include a transfer fee. Currently,
the Company does not impose any charge for effecting transfers; however, it
does reserve the right to assess a transfer fee in the future. (See "The
Contracts -- Transfers.")
5. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
7
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CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
The following table includes Accumulation Unit Values for the periods
indicated. This data has been taken from the Variable Account's financial
statements which have been audited for all periods by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon is included in the Statement of
Additional Information. This information should be read in conjunction with the
Variable Account's financial statements and related notes included in the
Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED
1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
LIQUID ASSET SUB-ACCOUNT
Beginning of Period $16.247 $15.683 $15.311 $15.127 $14.825 $14.207 $13.386
End of Period 16.779 16.247 15.653 15.311 15.127 14.825 14.207
Number of Accum.
Units Outstanding 145,387 162,165 217,211 270,994 414,153 554,747 646,044
GROWTH SUB-ACCOUNT
Beginning of Period $36.783 $28.257 $30.098 $28.524 $26.357 $20.558 $22.662
End of Period 39.662 36.783 28.257 30.098 28.524 26.357 20.558
Number of Accum.
Units Outstanding 847,224 938,909 1,049,256 1,156,057 1,231,668 1,363,149 1,375,719
LIMITED MATURITY BOND
SUB-ACCOUNT
Beginning of Period $22.342 $20.381 $20.658 $19.607 $18.867 $17.147 $16.026
End of Period 23.024 22.342 20.381 20.653 19.607 18.867 17.147
Number of Accum.
Units Outstanding 317,877 384,749 460,025 527,775 624,082 696,573 765,968
BALANCED SUB-ACCOUNT
Beginning of Period $16.367 $13.382 $14.010 $13.323 $12.480 $10.288 $10.000
End of Period 17.283 16.367 13.382 14.010 13.323 12.480 10.288
Number of Accum.
Units Outstanding 519,812 550,216 618,542 654,955 565,977 284,777 164,053
YEAR ENDED
1989 1988 1987 1986
---- ---- ---- ----
<S> <C> <C> <C> <C>
LIQUID ASSET SUB-ACCOUNT
Beginning of Period $12.459 $11.820 $11.325 $10.832
End of Period 13.368 12.459 11.820 11.325
Number of Accum.
Units Outstanding 502,722 484,760 508,546 151,524
GROWTH SUB-ACCOUNT
Beginning of Period $17.711 14.226 15.124 $13.320
End of Period 22.662 17.711 14.226 15.124
Number of Accum.
Units Outstanding 1,503,684 1,481,380 1,758,913 1,408,039
LIMITED MATURITY BOND
SUB-ACCOUNT
Beginning of Period $14.639 $13.823 $13.592 $12.076
End of Period 16.026 14.639 13.823 13.592
Number of Accum.
Units Outstanding 837,082 885,951 827,125 698,875
BALANCED SUB-ACCOUNT
Beginning of Period No Accumulation Unit Values for
End of Period this period. Sales of the
Contracts in connection with
Number of Accum. this Portfolio commenced on
Units Outstanding September 14, 1990.
</TABLE>
YIELD CALCULATION FOR LIQUID ASSET SUB-ACCOUNT
For the seven calendar days ended December 31, 1996, the annualized yield for
the sub-account funded by the Liquid Asset Portfolio was 3.35%
PERFORMANCE INFORMATION
Periodically, the Company may advertise performance data for the various
sub-accounts under the Contracts. Such data will show the percentage change in
the value of an Accumulation Unit based on the performance of an investment
medium over a period of time, usually a calendar year, determined by dividing
the increase (decrease) in value for that Unit by the Accumulation Unit value
at the beginning of the period. This percentage figure will reflect the
deduction of any asset-based charges and any applicable contract Maintenance
Charges under the Contracts, but will not reflect the deduction of any
Contingent Deferred Sales Charge. The deduction of any Contingent Deferred
Sales Charge would reduce any percentage increase or make greater any
percentage decrease.
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of any applicable Contract Maintenance Charges and
Contingent Deferred Sales Charges, as well as any asset-based charges.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the Portfolios against
established market indices such as the Standard & Poor's 500 Composite Stock
Price Index, the Dow Jones Industrial Average or other management investment
companies which have investment objectives similar to the Portfolio being
compared.
The Balanced Portfolio of the Trust was made available for investment in
connection with the Contracts on September 14, 1990. In order to demonstrate how
the actual investment performance of the Balanced Portfolio affects Accumulation
Unit Values, the Company may advertise hypothetical performance information
based on the historical experience of the Balanced Portfolio from February 28,
1989 (the date on which the Balanced Portfolio commenced operations).
8
<PAGE> 12
FINANCIAL STATEMENTS
There are no financial statements contained in this Prospectus. Financial
statements for the Company and the Variable Account are found in the Statement
of Additional Information.
THE COMPANY
Sentry Life Insurance Company (the "Company") is a stock life insurance company
incorporated in 1958 pursuant to the laws of the State of Wisconsin. Its home
office is located at 1800 North Point Drive, Stevens Point, Wisconsin. It is
licensed to conduct life, annuity, and accident and health insurance business in
the District of Columbia and in all states, except New York. The Company is a
wholly-owned subsidiary of Sentry Insurance a Mutual Company ("SIAMCO").
SIAMCO is a mutual insurance company incorporated under the laws of Wisconsin
with headquarters at 1800 North Point Drive, Stevens Point, Wisconsin, SIAMCO
owns and controls directly, or through subsidiary companies, a group of
insurance and related companies, including Sentry Life Insurance Company of New
York and Sentry Equity Services, Inc.
THE VARIABLE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Wisconsin insurance law on August 2,
1983. This segregated asset account has been designated "Sentry Variable
Account II" (the "Variable Account"). The Company has caused the Variable
Account to be registered with the Securities and Exchange Commission as a unit
investment trust pursuant to the provisions of the Investment Company Act of
1940. Such registration does not involve supervision of the management of the
Variable Account or the Company by the Securities and Exchange Commission.
The assets of the Variable Account are the property of the Company. The assets
of the Variable Account, equal to the reserves and other contract liabilities
with respect to the Variable Account, are not chargeable with liabilities
arising out of any other business the Company may conduct. The Company does
not guarantee the investment performance of the Variable Account. the Contract
Value and the amount of variable annuity payments will vary with the value of
the assets which underlie the Variable Account.
The Variable Account meets the definition of a "separate account" under federal
securities laws.
Income, gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Variable Account without regard
to other income, gains or losses of the Company. Company obligations arising
under the Contracts are general corporate obligations of the Company.
The assets of the Variable Account are segregated by Portfolio, thus
establishing a series of sub-accounts within the Variable Account.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust (the "Trust") is the funding
vehicle for the Contracts. Each Portfolio of the Trust invests all of its net
investable assets in its corresponding series (each a "Series") of Advisers
Managers Trust ("Managers Trust"), an open-end management investment company.
All Series of Managers Trust are managed by Neuberger & Berman Management
Incorporated ("N&B Management"). Each Series invests in securities in
accordance with an investment objective, policies, and limitations identical
to those of its corresponding Portfolio. This "master/feeder fund" structure
is different from that of many other investment companies which directly
acquire and manage their own portfolios of securities. For more information
regarding this structure, see the Trust's Prospectus. There are eight
Portfolios, four of which are currently available in connection with the
Contracts. In that the investment objective of each Portfolio matches that of
its corresponding Series, the following information is presented in terms of
the applicable Series of Managers Trust. The investment objective of each
Series follows.
AMT Liquid Asset Investments. The investment objective of AMT Liquid Asset
Investments is to provide the highest current income consistent with safety and
liquidity. The Series invests in high quality U.S. dollar-denominated money
market instruments of U.S. and foreign issuers, including governments and their
agencies and instrumentalities, banks and other financial institutions, and
corporations, and may invest in repurchase agreements with respect to these
instruments. An investment in the Liquid Asset Portfolio is neither insured
nor guaranteed by the U.s. Government.
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<PAGE> 13
AMT Growth Investments. AMT Growth Investments seeks capital appreciation
without regard to income by investing in securities believed to have the
maximum potential for long-term capital appreciation. It does not seek to
invest in securities that pay dividends or interest, and any such income is
incidental. The Series expects to be almost fully invested in common stocks,
often of companies that may be temporarily out of favor in the market.
AMT Limited Maturity Bond Investments. The investment objective of AMT Limited
Maturity Bond Investments is to provide the highest current income consistent
with low risk to principal and liquidity; and secondarily, total return. The
Series invests in a diversified portfolio of fixed and variable rate debt
securities and seeks to increase income and preserve or enhance total return by
actively managing average portfolio maturity in light of market conditions and
trends. These are short-to-intermediate term debt securities. The Series'
dollar-weighted average portfolio maturity may range up to five years.
AMT Balanced Investments. The investment objective of AMT Balanced Investments
is long-term capital growth and reasonable current income without undue risk to
principal. The investment adviser anticipates that the Series' investments will
normally be managed so that approximately 60% of the Series' total assets will
be invested in common stocks and the remaining assets will be invested in debt
securities. However, depending on the investment adviser's view regarding
current market trends, the common stock portion of the Series' investments may
be adjusted downward to as low as 50% or upward to as high as 70%. At least
25% of the Series' assets will be invested in fixed-income senior securities.
VARIABLE ACCOUNT VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote
the shares of the Trust held in the Variable Account at special meetings of the
shareholders of the Trust in accordance with instructions received from persons
having a voting interest in the Variable Account. The Company will vote shares
for which it has not received instructions in the same proportion as it votes
shares for which it has received instructions. The Company will vote shares
that it owns in the same proportion as it votes shares for which it has
received instructions. The Trust does not hold regular meetings of
shareholders. (For a further discussion of voting, see the Prospectus for the
Trust.)
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended, or if the present interpretation thereof should change,
resulting in a determination by the Company that it is permitted to vote the
shares of the Trust in its own right, it may elect to do so.
The person having the voting interest under a Contract shall be the Contract
Owner. During the annuity payment period after the Income Date, the votes
attributable to a Contract Owner decrease as the reserves underlying the
Contract decrease.
The number of shares that a person has the right to vote will be determined as
of a date to be chosen by the Company not more than 60 days prior to the
meeting of the Trust. Voting instructions will be solicited by written
communication at least 14 days prior to such meeting.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to the Trust and/or Portfolio in which he or she has
an interest, proxy material, and a form with which to give voting instructions
with respect to the proportion of the shares held in the Variable Account
corresponding to his or her interest in the Variable Account.
Shares of the Trust are issued and redeemed in connection with investment in
and payments under variable contracts issued through separate accounts of the
life companies which may or may not be affiliated with the Trust. Shares of
the Balanced Portfolio are also offered directly to qualified pension and
retirement plans ("Qualified Plans"). Shares of the Trust are purchased and
redeemed at net asset value. The Boards of Trustees of the Trust and Managers
Trust have undertaken to monitor the Trust and Managers Trust, respectively,
for the existence of any material irreconcilable conflict between the interests
of the variable contract owners of the life companies and to determine what
action, if any, should be taken in the event of a conflict. The life companies
and N&B Management are responsible for reporting any potential or existing
conflicts to the Boards. Due to differences of tax treatment and other
considerations, the interests of various variable contract owners participating
in the Trust and Managers Trust and the interests of Qualified Plans investing
in the Trust and Managers Trust may conflict. If such a conflict were to
occur, one or more life company separate accounts or Qualified Plans might
withdraw their investment in the Trust. This might force Managers Trust to
sell portfolio securities at disadvantageous prices.
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SUBSTITUTION OF SECURITIES
If the shares of any of the Eligible Mutual Funds, or any Portfolio within an
Eligible Mutual Fund, should no longer be available for investment by the
Variable Account or, if in the judgment of the Company's Board of Directors,
further investment in such Eligible Mutual Fund shares should become
inappropriate in view of the purpose of the Contract, the Company may
substitute shares of another mutual fund for fund shares already purchased or
to be purchased in the future by Purchase Payments under the Contract. No
substitution of securities in any sub-account may take place without prior
approval of the Securities and Exchange Commission and under such requirements
as it may impose.
CHARGES AND DEDUCTIONS
CONTINGENT DEFERRED SALES CHARGE
The Contracts are offered without the imposition of a sales charge deduction at
time of sale. However, the Contracts contain a provision that imposes a
deferred sales charge on surrenders of Purchase Payments within six years after
their being made. Thereafter the charge is equal to zero. The charge is
referred to as a Contingent Deferred Sales Charge and is intended to reimburse
the Company for expenses incurred relating to Contract sales. To the extent
the charge is insufficient to cover all distribution costs, the Company may use
the Mortality and Expense Risk Premium to make up any difference.
If all or a portion of the Contract is surrendered (see "Surrenders"), a
Contingent Deferred Sales Charge will be calculated at the time of the
surrender and will be deducted from the Contract Value. In calculating the
Contingent Deferred Sales Charge:
(1) Purchase Payments will be allocated to the amount surrendered on a
first-in-first-out basis.
(2) In no event will aggregate Contingent Deferred Sales Charges exceed 6%
of the total Purchase Payments made.
The amount of the Contingent Deferred Sales Charge is calculated by:
(1) allocating Purchase Payments to the amount surrendered; and
(2) multiplying each such allocated Purchase Payment by the appropriate
percentage determined on the basis of the table below; and
(3) adding the products of each multiplication in (2) above.
<TABLE>
<CAPTION>
TIME BETWEEN RECEIPT ALLOCATED
PURCHASE PAYMENT AND DATE OF SURRENDER PERCENTAGE
-------------------------------------- ----------
<S> <C>
Less than 1 year................................................. 6%
At least 1 year but less than 2 years............................ 5%
At least 2 years but less than 3 years........................... 4%
At least 3 years but less than 4 years........................... 3%
At least 4 years but less than 5 years........................... 2%
At least 5 years but less than 6 years........................... 1%
At least 6 years................................................. 0%
</TABLE>
For a partial surrender, the Contingent Deferred Sales Charge will be deducted
from the remaining Contract Value, if sufficient; otherwise it will be deducted
from the amount surrendered. The Contingent Deferred Sales Charge percentage
will be applied against the amount requested for a partial surrender. The
amount deducted from the Contract Value will be determined by cancelling
Accumulation Units from each applicable sub-account in the ratio that the value
of each sub-account bears to the total Contract Value. The Contract Owner must
specify in writing in advance which units are to be cancelled if other than the
above method of cancellation is desired.
After the first Contract Anniversary, a Contract Owner may, but not more
frequently than once annually on a non-cumulative basis, make a surrender per
Contract Year of up to 10% of aggregate Purchase Payments (less any
withdrawals) free from Contingent Deferred Sales Charges provided the Contract
Value prior to the surrender exceeds $10,000. No Contingent Deferred Sales
Charge will be deducted from Purchase Payments which have been held under the
Contract for more than six years or from distributions made upon death or as
annuity payments. The Company may also periodically waive the Contingent
Deferred Sales Charges under the Company procedures then in effect. (See
"Charges and Deductions--Reduction or Elimination of Contingent Deferred Sales
Charge.")
For purposes of determining the Contingent Deferred Sales Charge, surrenders
will be attributed to Purchase Payments on a first-in-first-out basis.
Contract Owners should note that this is contrary to the allocation method that
will be used for determining tax obligations. (See "Taxes--General.")
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<PAGE> 15
REDUCTION OR ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals or to
a group of individuals that result in sales expense savings. Entitlement to
such a reduction of the Contingent Deferred Sales Charge will be determined by
the Company based on the following factors:
(1) The size and type of group to which sales are to be made will
be considered. Generally, the sales expenses for a larger group are less than
for a smaller group because of the ability to issue large numbers of Contracts
with fewer sales contacts.
(2) The total amount of Purchase Payments to be received will be
considered. Per Contract sales expenses are likely to be less on larger
Purchase Payments than on smaller ones.
(3) Any prior or existing relationship with the Company will be
considered. Per Contract sales expenses are likely to be less when there is a
prior or existing relationship because of the likelihood of issuing a Contract
with fewer sales contracts.
(4) There may be other circumstances of which the Company is not
presently aware that could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines that
there will be a reduction in sales expenses, the Company may provide for a
reduction in the Contingent Deferred Sales Charge.
The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director or employee of the Company or any of its
affiliates (including an employee's spouse and children under 21 years of age).
In no event will a reduction or elimination of the Contingent Deferred Sales
Charge be permitted where such reduction or elimination will be unfairly
discriminatory to any person.
DEDUCTION FOR MORTALITY AND EXPENSE RISK PREMIUM
Although variable annuity payments will vary in accordance with the performance
of the investments of the Variable Account, they will not be affected by the
mortality experience (death rate) of persons receiving such payments or of the
general population nor will such payments be affected by any increases in
expenses. The Company deducts a Mortality and Expense Risk Premium from the
daily net asset value of the Variable Account. This Premium compensates the
Company for providing the mortality guarantees, the death benefit, the expense
guarantee after the Income Date and the waiver of the Contingent Deferred Sales
Charge, if any, upon the death of the Annuitant. After the Income Date, the
Company guarantees that the amount of annuity payments will not be adversely
affected by variations in mortality experience or increases in expenses to
administer the Contract. In event that the Contingent Deferred Sales Charge
is insufficient to cover distribution costs, the Mortality and Expense Risk
Premium will be used to make up the difference. This charge is also used to
defray some of the Company's expected costs that are not reimbursed from the
Contract Maintenance Charge. These costs include compensation for internal
personnel and accompanying overhead expenses, such as rent, supplies,
telephones, furniture and equipment.
The Mortality and Expense Risk Premium is deducted on a daily basis and is equal
on an annual basis to 1.20% of the daily net asset value of the Variable
Account. Of this charge, 80% will be for mortality risks and 40% will be for
the expense risks. If this amount is insufficient to cover the actual costs,
the loss will be borne by the Company; conversely, if the amount deducted proves
more than sufficient, the excess will be a profit to the Company.
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE
The Company deducts an annual Contract Maintenance Charge of $30 from the
Contract Value by cancelling Accumulation Units to reimburse it for
administrative expenses relating to maintenance of the Contract. The Contract
Maintenance Charge will be deducted from the Contract Value on each Contract
Anniversary that the Contract is in force. The number of Accumulation Units to
be cancelled will be from each applicable sub-account in the ratio that the
value of each sub-account bears to the total Contract Value. The Contract
Maintenance Charge will be deducted whether or not Purchase Payments are made.
The Company will not realize a profit from this Charge.
When the Contract is surrendered for its full Surrender Value, or other than
the Contract Anniversary, the Contract Maintenance Charge will be deducted at
the time of the surrender. Prior to the Income Date, the Company does not
guarantee the amount of the Contract Maintenance Charge and there is no
guarantee that it will not be changed in the future. After the Income Date,
the amount of the Contract
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<PAGE> 16
Maintenance Charge will not be changed from the amount of the annual Contract
Maintenance Charge in effect during the Contract Year immediately preceding the
Income Date. After the Income Date, the Contract Maintenance Charge will be
collected on a monthly basis and will result in a reduction of the monthly
benefit.
DEDUCTION FOR PREMIUM TAXES AND OTHER TAXES
Any premium tax payable to any governmental entity as a result of the existence
of the Contracts or the Variable Account will be charged against the Contract
Value. Premium taxes currently imposed by certain states range from 0% to
4.0%. Some states assess premium taxes at the time Purchase Payments are made;
other's assess premium taxes at the time of annuitization. For Contracts issued
in those states assessing premium taxes at the time Purchase Payments are made,
the Company currently advances such premium taxes. The Company currently
deducts the premium taxes from a Contract Owner's Contract Value at the time of
annuitization or surrender. The applicable rates of states and other
governmental entities that impose premium taxes on annuity Purchase Payments
are subject to change or amendment by state legislatures, administrative
interpretations or judicial acts. Premium taxes will depend on, among other
things, the state of residence of the Contract Owner, the status of the Company
within the state and the insurance tax laws of the state.
The Company deducts from the Contract Owner's Contract Value any income taxes
resulting from the operation of the Variable Account. The Company does not
currently anticipate incurring any income taxes.
The Company will deduct any withholding taxes required by applicable law.
OTHER DEDUCTIONS AND CHARGES
There are other deductions from and expenses paid out of the assets of
Neuberger & Berman Advisers Management Trust which are described in the
accompanying Trust Prospectus.
THE CONTRACTS
In accordance with the selection made by the Contract Owner, Net Purchase
Payments applied to the Variable Account will be invested in one or more of the
available Portfolios of Neuberger & Berman Advisers Management Trust at net
asset value in accordance with the selection made by the Contract Owner in the
application subject to the terms and conditions imposed on such selection by
the Company. The assets of the Variable Account are segregated by Portfolios,
thus establishing a series of sub-accounts within the Variable Account. The
Company may, from time to time, add new mutual funds and, when appropriate,
portfolios within a mutual fund as Eligible Mutual Funds. Contract Owners may
change their investment selection prospectively without fee, penalty or other
charge upon advance written notice to the Company.
TRANSFERS
The Contract Owner may direct the transfer of all or part of the Contract Value
between Eligible Mutual Fund(s) or Portfolio(s) no more than four times in any
Contract Year prior to the Income Date and no more than one time in any
Contract Year after the Income Date, subject to the following conditions:
(1) The Contract Owner will pay the Company any transfer fee due.
Currently, the Company does not impose a fee for effecting transfers; however,
it does reserve the right to assess a transfer fee in the future. In the event
the Company does impose such a fee, all Contract Owners will be notified in
advance. The transfer fee is not guaranteed and may be changed by the Company at
any time. The transfer fee will be deducted from the amount transferred.
(2) The minimum amount which may be transferred from an Eligible Mutual
Fund or Portfolio is (a) $250; or, (b) if less, the remaining Contract Value in
such Eligible Mutual Fund or Portfolio.
(3) No partial transfer shall be made if the Contract Owner's remaining
Contract Value for each Eligible Mutual Fund or Portfolio will be less than
$250.
(4) Transfers shall be effected using the values determined as of the next
Valuation Period following receipt by the Company of a written transfer
direction (containing all required information). However, no such transfer may
be made effective within 7 calendar days of the date on which the first annuity
payment is due; and no initial Purchase Payment nor any amounts previously
transferred including increments thereon, may be transferred until 30 days after
receipt of such initial Purchase Payment; provided, however, the Contract Owner,
during the 30-day period prior to the date on which the first annuity payment is
due, may direct an additional transfer, to be effective no later than the
seventh calendar day prior to such due date.
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<PAGE> 17
(5) Any transfer direction must clearly specify:
(a) the amount to be transferred; and
(b) the name(s) of the Eligible Mutual Fund(s) or Portfolio(s) to be
affected.
(6) Prior to the Income Date transfers may be made from the Liquid Asset
Portfolio or the Limited Maturity Bond Portfolio to the Growth Portfolio or the
Balanced Portfolio on a pre-authorized basis. Such transfers will be made only
upon written agreement between the Contract Owner and the Company. Transfers
will be made monthly with a minimum transfer amount of $250 per month.
(7) The Company reserves the right to terminate, suspend or modify the
transfer privileges described above at any time and without notice to any
person.
When new mutual funds or portfolios are added, the Contract Owner may be
permitted to select the new Eligible Mutual Funds or Portfolios as investments
to underlie the Contract. However, the right to make any selection will be
limited by terms and conditions imposed by the Company on such transactions.
Subject to the above-identified restrictions on transfers, a Contract Owner may
elect to effect transfers between Eligible Mutual Fund(s) or Portfolio(s) by
telephone by completing the applicable section of the application.
The Company will employ reasonable procedures to confirm that telephone
transfer requests are legitimate. If it does not, the Company may be liable for
any losses due to unauthorized or fraudulent practices. The Company will not be
liable for complying with telephone transfer requests it believes to be
legitimate and for which it follows reasonable procedures to ensure legitimacy.
A telephone transfer may be effected by contacting the Annuity Service Office
identified on Page 1 and providing specific account information, including the
Contract Owner's name, Contract number, social security number and/or date of
birth. The Company may request additional information concerning the account
and/or Contract Owner to verify the validity of the request. The Company
maintains the right to reject any telephone transfer request.
Telephone transfer requests received on any business day before 3 p.m., Central
Standard Time, will effect transfers as of that day. Telephone transfer
requests received after 3 p.m., Central Standard Time, will effect transfers
on the next business day following the request.
CHANGE IN PURCHASE PAYMENTS
The Contract Owner may elect to increase, decrease or change the frequency or
the amount of Purchase Payments.
NO DEFAULT
Unless surrendered for the full Surrender Value, the Contract remains in force
until the Income Date and will not be in default even though no additional
Purchase Payments are made.
MODIFICATION OF THE CONTRACT
The Contract may not be modified by the Company without the consent of the
Contract Owner except as modifications may be required by applicable law.
CONTRACT VALUE
The Contract Value is the sum of the values for each sub-account. The value of
each sub-account is determined by multiplying the number of Accumulation Units
attributable to the sub-account by the value of an Accumulation Unit for the
sub-account.
OWNERSHIP
The Contract Owner has all rights and may receive all benefits under the
Contract. During the lifetime of the Annuitant and prior to the Income Date,
the Contract Owner shall be the person designated as such in the application,
unless changed. On and after the Income Date, the Contract Owner shall be the
Annuitant. On and after the death of the Annuitant, the Beneficiary shall be the
Contract Owner.
The Contract Owner may name a Contingent Owner or a new Contract Owner at any
time. However, a Contract Owner's spouse is the only person eligible to be the
Contingent Owner. If the Contract Owner dies, the Contingent Owner becomes the
Contract Owner. Any new choice of Contract Owner or Contingent Owner will
automatically revoke any prior choice of Contract Owner or Contingent Owner.
Any request for change must be received by the Company in writing. The change
will become effective as of the date
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<PAGE> 18
the written request is signed. A new choice of Contract Owner or Contingent
Owner will not affect any payment made or action taken by the Company prior to
the time a request for change is received. Contract Owners should consult a
competent tax adviser prior to changing Contract Owners.
For Non-Qualified Contracts, in accordance with Code Section 72(u), a deferred
annuity contract held by a corporation or other entity that is not a natural
person is not treated as an annuity contract for tax purposes. Income on the
contract is treated as ordinary income received by the owner during the taxable
year. However, for purposes of Code Section 72(u), an annuity contract held
by a trust or other entity as agent for a natural person is considered held by
a natural person and treated as an annuity contract for tax purposes. Tax
advice should be sought prior to purchasing a Contract which is to be owned by
a trust or other non-natural person.
ASSIGNMENT
The Contract Owner may assign the Contract at any time during the lifetime of
the Annuitant prior to the Income Date. The Company will not be bound by any
assignment until written notice is received by the Company. The Company is not
responsible for the validity of any assignment. The Company shall not be
liable for any payment or other settlement made by the Company before receipt
of the assignment.
If the Contract is issued pursuant to a Qualified Plan, it may not be assigned,
pledged or transferred except under conditions set forth in applicable law.
Inasmuch as an assignment may be a taxable event, Contract Owners should
consult a competent tax adviser before assigning their Contracts.
(See "Taxes-General.")
BENEFICIARY
The Beneficiary named in the application, unless changed, is entitled to
receive the benefits payable at the death of the Annuitant or Contract Owner,
as applicable.
Unless the Contract Owner provides otherwise, such benefits will be paid in
equal shares or all to the survivor as follows:
(1) to the primary Beneficiaries who survives the Annuitant's or
Contract Owner's (as applicable) death; or, if there are none,
(2) to the Contingent Beneficiaries who survive the Annuitant's or
Contract Owner's (as applicable) death; or, if there are none,
(3) to the Contract Owner, or to the estate of the Contract Owner.
The Contract Owner may change the Beneficiary(ies) or Contingent
Beneficiary(ies) at any time during the lifetime of the Annuitant. Any such
change must be made in writing in a form acceptable to the Company. The change
will take effect as of the date the notice of change is signed, but the Company
will not be liable for any payment made or action taken before it records the
change.
ANNUITY PROVISIONS
INCOME DATE AND SETTLEMENT OPTION
The Contract Owner selects an Income Date and Settlement Option at the time of
application. The Income Date must always be the first day of a calendar month
and must be at least one month after the Effective Date. The Income Date may
not be later than the first day of the calendar month following the Annuitant's
85th birthday, unless the Contract has been issued pursuant to a Qualified Plan
that requires an earlier date.
CHANGE IN INCOME DATE
The Contract Owner may, with at least 30 days' prior written notice to the
Company, change the Income Date. In no event shall the Income Date be other
than the first day of a calendar month. However, the Income Date may not be
deferred beyond the first day of the calendar month following the Annuitant's
85th birthday, unless the Contract has been issued pursuant to a Qualified Plan
that requires an earlier date.
CHANGE IN SETTLEMENT OPTION
The Contract Owner may, with at least 30 days' written notice to the Company at
any time prior to the Income Date, elect a different Settlement Option or any
other option satisfactory to the Company and the Contract Owner.
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<PAGE> 19
SETTLEMENT OPTIONS
The net proceeds payable upon settlement of the Contract may be paid under one
of the following options or any other option acceptable to the Company:
OPTION 1 - LIFE ANNUITY
An annuity payable monthly during the lifetime of the Annuitant.
Payments will cease at the death of the Annuitant. IT IS POSSIBLE
UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE PAYEE
DIES AFTER RECEIPT OF THE FIRST PAYMENT, OR TO RECEIVE ONLY TWO
PAYMENTS IF THE PAYEE DIES AFTER RECEIPT OF THE SECOND PAYMENT,
AND SO ON.
OPTION 2 - LIFE ANNUITY WITH 120 MONTHLY PAYMENTS GUARANTEED
An annuity payable monthly during the lifetime of the Annuitant
with the guarantee that if, at the death of the Annuitant,
payments have been made for less than 120 months, payments will
continue to be made to the Beneficiary for the remainder of the
guarantee period.
If the Beneficiary does not desire payments to continue for the
remainder of the guarantee period, he or she may elect to have
the present value of the guaranteed annuity payments remaining,
as of the date notice of death is received by the Company,
computed at the assumed investment rate of 4%, and paid in a
single sum within 7 days of receipt of such request.
OPTION 3 - JOINT AND LAST SURVIVORSHIP
An annuity payable monthly during the joint lifetime of the
Annuitant and a designated second person and continuing
thereafter during the life of the survivor. IT IS POSSIBLE UNDER
THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF BOTH PAYEES
DIE AFTER THE RECEIPT OF THE FIRST PAYMENT OR TO RECEIVE ONLY
TWO ANNUITY PAYMENTS IF BOTH PAYEES DIE AFTER RECEIPT OF THE
SECOND PAYMENT, AND SO ON.
If no Settlement Option is elected, Option 1 will automatically be applied.
MORTALITY AND EXPENSE GUARANTEE
The Company guarantees that the dollar amount of each annuity payment after the
first will not be affected by variations in mortality or expense experience of
the Company. The Company also guarantees certain death benefits.
FREQUENCY OF ANNUITY PAYMENTS
Annuity payments will be made as monthly installments. However, if the net
amount available under any Settlement Option is less than $5,000, the Company
will have the right to pay such amount in a single lump sum. In addition, if
the installments would be or become less than $30, the Company shall have the
right to change the frequency of installments so that the amount of each
installment payment will be at least $30.
ANNUITY UNIT
The value of an Annuity Unit when the first Eligible Mutual Fund shares were
purchased for each subaccount was arbitrarily set at $10. The value for any
later Valuation Period is determined as follows: the Annuity Unit value for a
sub-account for the last Valuation Period is multiplied by the Net Investment
Factor for the sub-account for the next Valuation Period and the result is
divided by the assumed investment factor for that Valuation Period. The Net
Investment Factor may be greater or less than one; therefore, the Annuity Unit
value may increase or decrease. (See "Net Investment Factor" in the Statement
of Additional Information.)
AMOUNT OF ANNUITY PAYMENTS
A Variable Annuity is an annuity with payments that (1) are not predetermined
as to dollar amount; and (2) will vary in amount with the net investment
results of the applicable sub-account(s) of the Variable Account. At the
Income Date, the Contract Value of the sub-accounts will be applied to the
applicable Annuity Tables contained in the Contract. The Annuity Table used
will depend on the Settlement Option chosen. The same Contract Value amount
applied to each Settlement Option may produce a different initial annuity
payment. If, as of the Income Date, the then current Settlement Option rate
applicable to this class of Contracts will provide a larger income than that
guaranteed for the same form of annuity under the Contracts offered hereby, the
larger amount will be paid.
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The actual dollar amount of variable amount of variable aunnuity payments
depends on (1) the Contract Value at the time of annuitization; (2) the annuity
table specified in the Contract; (3) the Settlement Option selected; and (4)
the investment performance of the Portfoliio selected.
The annuity tables contained in the Contract are based on a 4% assumed
investment rate. If the actual net investment rate exceeds 4%, payments will
increase. Conversely, if the actual rate is less than 4% annuity payments will
decrease.
If a higher assumed interest rate were used, the initial payment would be
higher, but the actual net investment rate would have to be higher in order for
annuity payments to increase.
The Annuitant receives the value for the fixed number of Annuity Units each
month. The value of a fixed number of Annuity Units will reflect the investment
performance of the Portfolio selected, and the amount of each annuity payment
will vary accordingly. (See "Amount of Annuity Payments" in the Statement of
Additional Information for the calculation of the amount of the annuity
payment.)
ADDITIONAL PROVISIONS
The Company may require proof of the Annuitant's age before making any life
annuity payment provided for by the Contract. If the Annuitant's age has been
misstated, the amount payable will be the amount that the Purchase Payments
would have provided at the correct age. Once monthly life income payments have
begun, any underpayments will be made up in one sum with the next annuity
payment; overpayments will be deducted from the future annuity payments until
the total is repaid.
The Contract must be returned to the Company upon any settlement. Prior to the
settlement of a death claim, proof of the Annuitant's or Contract Owner's
death, as applicable, must be submitted to the Company.
Where any benefits under the Contract are contingent upon the recipient being
alive on a given date, the Company may require proof to its satisfaction that
such condition has been met.
The United States Supreme Court has determined that there may be a violation of
Title VII of the Civil Rights Act of 1964, as amended, under certain
circumstances when retirement benefits derived from contributions or
retirement payments made or to be made are determined on the basis of the sex
of the recipient. The conracts offered by this Prospectus contain annuity
tables which are not based on the sex of the Annuitant.
DEATH-BENEFIT
DEATH OF THE ANNUITANT
If an Annuitant who is not the Contract Owner dies prior to the Income Date,
the death benefit will be paid to the Beneficiary designated by the Conract
Owner. The value of the death benefit will be determined as of the next
Valuation Period following the date on which both proof of death and an
election for a single sum Payment or Settlement Option are received by the
Company. If a single sum settlement is requested, the proceeds will be paid
within seven days of receipt of such election and proof of death. If a
Settlement Option is desired, election may be made by the Beneficiary during
the 60-day period commencing on the date notification of death is received;
otherwise, a single sum settlement will be made to the Beneficiary at the end
of such 60-day period. The amount of the death benefit will be the greater of
(1) the sum of all Purchase Payments made, less any amounts surrendered; or (2)
the Contract Value. Death Benefits will be paid in accordance with any
applicable laws or regulations governing payment of death proceeds.
If the Annuitant dies after the Income Date, the Death Benefit, if any, will be
paid as specified in the Settlement Option elected. The Company will require
proof or the Annuitant's death.
DEATH OF THE CONTRACT OWNER
In the event that the Contract is issued under a Non-Qualified Plan and the
Contract Owner (regardless of whether he or she is the Annuitant) dies prior to
the Income Date, the Death Benefit will be paid as follows:
(1) If the Contract Owner dies before the Income Date, the entire Contract
Value must be distributed within five years of the date of death, unless:
(a) it is payable over the lifetime of a designated Beneficiary with
distributions beginning within one year of the date of death; or
(b) the Contingent Owner, if any, continues the Contract in his or her
own name.
(2) The Contingent Owner must be the spouse of the Contract Owner.
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If the Contract Owner is a non-natural person, for purposes of the Death
Benefit, the Annuitant will be treated as the Contract Owner and the death of
the Annuitant or a change of the Annuitant will be treated as the death of or a
change of the Contract Owner.
PURCHASES AND CONTRACT VALUE
PURCHASE PAYMENTS
The Contracts may be purchased under a flexible purchase payment plan. Purchase
payments are payable at the Annuity Service Office of the Company as frequently
and in the amount selected in the application by the Contract Owner. The
initial purchase payment is due on the Effective Date. The initial purchase
payment on both Non-Qualified and Qualified Contracts must be at least $1,000.
Subsequent purchase payments must be at least $100. However, for purchase
payments made under an employer-sponsored payroll deduction plan, the minimum
initial purchase payment is $50 for both Non-Qualified and Qualified Contracts.
The minimum subsequent purchase payment under an employer-sponsored payroll
deduction plan is $50 per month. The Company reserves the right to reject any
application or purchase payment. The Company also reserves the right to
establish administrative rules that may decrease the minimum purchase payment
requirements.
ALLOCATION OF PURCHASE PAYMENTS
Purchase Payments are allocated to the appropriate sub-account within the
Variable Account. Upon allocation to the appropriate sub-account, Purchase
Payments are converted into Accumulation Units of the sub-account. Purchase
Payments allocated to a sub-account are divided by the value of an Accumulation
Unit for the particular sub-account for the Valuation Period during which such
allocation occurs to determine the number of Accumulation Units attributable to
the Purchase Payments. (See "Accumulation Units.") For initial Purchase
Payments, if the application for a Contract is in good order, the Company will
apply the Purchase Payment to the Variable Account and credit the Contract with
Accumulation Units within two business days of receipt. If the application for a
Contract is not in good order, the Company will attempt to get it in good order
or the Company will return the application and the Purchase Payment within five
business days. Once the application is deemed to be in good order, the Company
will apply the Purchase Payment to the Variable Account and credit the Contract
with Accumulation Units within two business days from the time the application
is deemed to be in good order. For subsequent Purchase Payments, the Company
will apply the Purchase Payment to the Variable Account and credit the Contract
with Accumulation Units during the next Valuation Period following the Valuation
Period in which the Purchase Payment was received in good order.
ACCUMULATION UNITS
Purchase Payments are converted into Accumulation Units. This is done by
dividing each Purchase Payment by the value of an Accumulation Unit for the
Valuation Period during which the Purchase Payment is allocated to the Variable
Account. The Accumulation Unit Value for each sub-account was arbitrarily set
initially at $10. The Accumulation Unit Value for any later Valuation Period is
determined by subtracting (2) from (1) and dividing the result by (3) where:
(1) is the net result of
(a) the assets of the sub-account, i.e., the aggregate value of
the underlying Fund shares held at the end of such Valuation Period, plus
or minus
(b) the cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the investment operation of
the sub-account;
(2) is the cumulative unpaid charge for the mortality and expense
risks; and
(3) is the number of Accumulation Units outstanding at the end of such
Valuation Period.
The Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period and is affected by investment performance of the Portfolio,
expenses and deduction of certain charges. The Accumulation Unit Value is
determined Monday through Friday (except for Federal Holidays) as of 5:00 p.m.
Eastern Standard Time. The Federal Holidays are as follows:
New Year's Day Independence Day
President's Day Labor Day
Good Friday Thanksgiving Day
Memorial Day Christmas Day
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DISTRIBUTION OF CONTRACTS
Sentry Equity Services, Inc. ("Sentry Equity"), 1800 North Point Drive, Stevens
Point, Wisconsin, a wholly-owned subsidiary of SIAMCO, is the principal
underwriter of the Contracts. The Contracts are sold through licensed
insurance agents in those states where the Contracts may be lawfully sold. The
agents are registered representatives of broker-dealers that are registered
under the Securities Exchange Act of 1934 and are members of the National
Association of Securities Dealers, Inc. Sentry Equity will be paid first-year
and renewal commissions for its services in distributing the Contracts, not to
exceed 4.7% of Purchase Payments. Sentry Equity will, in turn, pay all or a
portion of these amounts to a selling agent or agency.
SURRENDERS
While the Contract is in force and before the earlier of the Income Date or
the death of the Annuitant, the Company will, upon written request of the
Contract Owner, allow the surrender of all or a portion of the Contract for its
Surrender Value. Surrenders will result in the cancellation of Accumulation
Units from each applicable sub-account in the ratio that the value of each
sub-account bears to the total Contract Value. The Contract Owner must specify
in writing in advance which units are to be cancelled if other than the
above-specified method of cancellation is desired. The Company will pay the
amount of any surrender within seven days of receipt of such request.
The Surrender Value will be the Contract Value for the next Valuation Period
following the Valuation Period during which the written request to the Company
for surrender is received reduced by the sum of:
(1) the total of any applicable premium taxes not previously deducted;
(2) any applicable Contract Maintenance Charge; and
(3) any applicable Contingent Deferred Sales Charge.
Because of the potential tax consequences of a surrender, including tax
penalties, Contract Owners should consult a competent tax adviser before
making a surrender. (See "Taxes" below.)
Election to surrender must be made in writing to the Company at its Annuity
Service Office. The Company may suspend the right of withdrawal or delay
payment for more than seven days: (1) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings); (2)
when trading on the New York Stock Exchange is restricted; (3) when an
emergency exists as a result of which disposal of the Variable Account's or a
Portfolio's investments or determination of Accumulation Unit Value is not
reasonably practicable; or (4) when the Securities and Exchange Commission by
order so permits for protection of Contract Owners; provided that applicable
rules or regulations of the Securities and Exchange Commission will govern as
to whether the conditions in (2) and (3) exist.
LIMITATIONS ON WITHDRAWALS FROM 403(B) ANNUITIES
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to the occurrence of one of the following events: the Contract Owner
attains age 59 1/2, separates from service, dies, or becomes disabled (within
the meaning of Section 72(m)(7) of the Code), or in a case of hardship.
However, withdrawals for hardship are restricted to the portion of the Contract
Owner's Contract Value representing contributions made by the Contract Owner
and does not include any investment results. The limitations on withdrawals
became effective January 1, 1989, and apply only to salary reduction
contributions made after December 31, 1988, to income attributable to such
contributions and to income attributable to amounts held as of December 31,
1988. However, these limitations will apply to all amounts (regardless of when
or how contributions were originally made) which are transferred or rolled over
from a custodial account (as defined in Section 403(b)(7)) into the Contract
Owner's account. The limitations on withdrawals do not affect rollovers or
transfers between certain Qualified Plans. Tax penalties may also apply. (See
"Tax Treatment of Withdrawals - Qualified Contracts.") Contract Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
TEXAS OPTIONAL RETIREMENT PROGRAM
Any Contract issued to a participant in the Texas Optional Retirement Program
("ORP") will contain an ORP endorsement that will amend the contract in two
ways. First, if for any reason the second year of ORP participation is not
begun, the total amount of the State of Texas' first-year contribution will be
returned to the appropriate institution of higher education upon its request.
Second, no benefits will be payable, through surrender of the Contract or
otherwise, unless the participant dies, accepts retirement, terminates
employment in all Texas institutions of higher education or attains the age of
70 1/2. The value
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of the Contract may, however, be transferred to other contracts or carriers
during the period of ORP participation. A participant in ORP is required to
obtain a certificate of termination from the participant's employer before a
Contract can be redeemed.
TAXES
NOTE: The following description is based on the Company's understanding of
current federal income tax law applicable to annuities in general. The Company
cannot predict the probability that any changes in these laws will be made.
Purchasers are cautioned to seek competent tax advice regarding the possibility
of any changes. The Company does not guarantee the tax status of the
Contracts. Purchasers bear the complete risk that the Contracts may not be
treated as "annuity contracts" under federal income tax laws. It should be
further understood that the following discussion is not exhaustive and that
special rules not described in this Prospectus may be applicable in certain
situations. Moreover, no attempt has been made to consider any applicable state
or other tax laws.
GENERAL
Section 72 of the Internal Revenue Code of 1986, as amended, ("Code") governs
taxation of annuities in general. A Contract Owner is not taxed on increases in
the value of a Contract until distribution occurs, either in the form of a lump
sum payment or as annuity payments under the Settlement Option elected. For a
lump sum payment received as a total surrender (total withdrawal), the
recipient is taxed on the portion of such payment that exceeds the cost basis
of the Contract. For Non-Qualified Contracts, this cost basis is generally the
Purchase Payments, while for Qualified Contracts there may be no cost basis.
The taxable portion of the lump sum payment is taxed at ordinary income tax
rates.
For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments based
on a variable settlement option is determined by dividing the cost basis of the
Contract (adjusted for any period certain or refund guarantee) by the number of
years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e., when the total of the
excludable amount equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning
of Section 72 of the Code. Contract Owners, Annuitants and Beneficiaries under
the Contracts should seek competent financial advice about the tax
consequences of any distribution.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable Account is not a separate entity from the
Company and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"),adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income
tax to the Contract Owner with respect to earnings allocable to the Contract
prior to the receipt of payments under the Contract. The Code contains a safe
harbor provision which provides that annuity contracts such as the Contracts
meet the diversification requirements if, as of the close of each quarter, the
underlying assets meet the diversification standards for a regulated investment
company and no more than 55% of the total assets consist of cash, cash items,
U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5) which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The regulations
amplify the diversification requirements for variable contracts set forth in
the Code and provide an alternative to the safe harbor provision described
above. Under the regulations, an investment portfolio will be deemed adequately
diversified if (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments. For purpose of these regulations, all securities of the same
issuer are treated as a single investment.
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The Code provides that for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable
contracts by Section 817(h) of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."
The Company intends that all Eligible Mutual Funds underlying the Contracts
will be managed by the investment adviser(s) for the Eligible Mutual Funds so
as to comply with these diversification requirements.
The Treasury Department has indicated that the diversification regulations do
not provide guidance regarding the circumstances in which Contract Owner
control of the investments of the Variable Account will cause the Contract
Owner to be treated as the owner of the assets of the Variable Account, thereby
resulting in the loss of favorable tax treatment for the Contract. At this
time it cannot be determined whether additional guidance will be provided and
what standards may be contained in such guidance.
The amount of Contract Owner control which may be exercised under the Contract
is different in some respects from the situations addressed in published
rulings issued by the Internal Revenue Service in which it was held that the
policy owner was not the owner of the assets of the separate account. It is
unknown whether these differences, such as the Contract Owner's ability to
transfer among investment choices or the number and type of investment choices
available, would cause the Contract Owner to be considered the owner of the
assets of the Variable Account resulting in the imposition of federal income
tax to the Contract Owner with respect to earnings allocable to the Contract
prior to receipt of payments under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth a
new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance is not considered to set
forth a new position, it may be applied retroactively resulting in the Contract
Owner being determined to retroactively be the owner of the assets of the
Variable Account.
Due to uncertainty in this area, the Company reserves the right to modify the
Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts that are issued
within a calendar year to the same Contract Owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Contract Owners should consult a tax adviser prior
to purchasing more than one non-qualified annuity contract in any calendar
year.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSON
Under Section 72(u) of the Code, the investment earnings on premiums for the
Contracts will be taxed currently to the Contract Owner if the Owner is a
non-natural person, e.g., a corporation, or certain other entities. Such
Contracts generally will not be treated as annuities for federal income tax
purposes. However, this treatment is not applied to Contracts held by a trust
or other entity as an agent for a natural person, nor to Contracts held by
Qualified Plans. Purchasers should consult their own tax counsel or other
tax adviser before purchasing a Contract to be held by a non-natural person.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Contract Owners
should consult a tax adviser before assigning or pledging their Contracts.
INCOME TAX WITHHOLDING
All distributions, or the portion thereof which is includible in the gross
income of the Contract Owner are subject to federal income tax withholding.
Generally, amounts are withheld from periodic payments at the same rate as
wages, and at the rate of 10% from non-periodic payments. However, Contract
Owners, in most cases, may elect not to have taxes withheld or to have
withholding done at a different rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code that are not directly
rolled over to another eligible retirement plan or individual retirement
account or individual retirement annuity, are subject to mandatory 20%
withholding for federal income tax. The 20% withholding requirement generally
does not apply to:
(1) a series of substantially equal payments made at least annually for the
life or life expectancy of the participant or joint and last survivor expectancy
of the participant and a designated beneficiary, or distributions for a
specified period of 10 years or more; or
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(2) distributions that are required minimum distributions; or
(3) the portion of the distributions that is not includible in gross income
(i.e., the return of any after-tax contributions).
Participants should consult their own tax counsel or other tax advisor
regarding withhold requirements.
TAX TREATMENT OF WITHDRAWALS- NON-QUALIFIED CONTRACTS AND SECTION 457 CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate
purchase payments made, any amount withdrawn will be treated as coming first
from the earnings and then, only after the income portion is exhausted, as
coming from the principal. Withdrawn earnings are includible in gross income.
It further provides that a 10% penalty will apply to the income portion of any
distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 59 1/2;(b) after the death of the Contract
Owner; (c) if the taxpayer is totally disabled (for this purpose, disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently that annually for the life
(of life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) that are allocable to purchase payments made prior to August
14, 1982.
The Contracts provide that if the Annuitant dies prior to the Income Date, the
Death Benefit will be paid to the Beneficiary. Such payments made upon the
death of an Annuitant who is not the Contract Owner do not qualify for the
death of Contract Owner exception described above and will be subject to the
10% distribution penalty unless the Beneficiary is age 59 1/2 or one of the
other exceptions to the penalty applies.
The above information applies to Qualified Contracts issued pursuant to Section
457 of the Code, but does not apply to other Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such other
Qualified Contracts. (See "Tax Treatment or Withdrawals-Qualified Contracts.")
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of Plan and terms and conditions of each
specific Plan. Contract Owners, Annuitants and Beneficiaries are cautioned that
benefits under a Qualified Plan may be subject to the terms and conditions of
the Plan, regardless of the terms and conditions of the Contracts issued
pursuant to the Plan. Some retirement plans are subject to distribution and
other requirements that are not incorporated into the Company's administrative
procedures. Contract Owners, participants and beneficiaries are responsible
for determining that contributions, distributions and other transactions with
respect to the Contracts comply with applicable law. Following are general
descriptions of the types of Qualified Plans with which the Contracts may be
used. These descriptions are not exhaustive and are for general informational
purposes only. The tax rules regarding Qualified Plans are very complex and
will have differing applications depending on individual facts and
circumstances. Each purchaser should obtain competent tax advice prior to
purchasing a Contract issued under a Qualified Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available and described
in this Prospectus. Generally, Contracts issued pursuant to Qualified Plans
are not transferable except upon surrender or annuitization. Various penalty
and excise taxes may apply to contributions or distributions made in
violation of applicable limitations. Furthermore, certain withdrawal penalties
and restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts.")
The Contracts are no longer being offered in connection with H.R. 10 Plans and
Corporate Pension and Profit-Sharing Plans. The information provided below with
respect to such Plans is being included herein for purposes of providing such
disclosure to Contract Owners who have previously purchased Contracts in
connection with H.R. 10 Plans and Corporate Pension and Profit-Sharing Plans.
(1) H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish
Qualified Plans for themselves and their employees, commonly referred to as
"H.R. 10" or "Keogh"Plans. Contributions made to the Plan for the benefit of
the employees will not be included in the gross income of the employees until
distributed from the Plan. The tax consequences to participants may vary
depending upon the particular Plan design. However, the Code places limitations
and restrictions on all Plans including on such items as amount of allowable
contributions; form, manner, and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility
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and participation; and the tax treatment of distributions, withdrawals
and surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts.") Purchasers of Contracts for use with an H.R. 10 Plan
should obtain competent tax advice as to the tax treatment and
suitability of such an investment.
(2) Tax Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501(c)(3) of the Code.
These qualifying employers may make contributions to the Contracts for
the benefit of their employees. Such contributions are not includible
in the gross income of the employees until the employees receive
distributions from the Contracts. The amount of contributions to the
tax-sheltered annuity is limited to certain maximums imposed by the
Code. Furthermore, the Code sets forth additional restrictions
governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals
- Qualified Contracts.") An employee should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
(3) Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute
to an individual retirement program known as an "Individual Retirement
Annuity" ("IRA"). Under applicable limitations, certain amounts may be
contributed to an IRA which will be deductible from the individual's
gross income. These IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. (See "Tax Treatment
of Withdrawals - Qualified Contracts.") Under certain conditions,
distributions from other IRAs and other Qualified Plans may be rolled
over or transferred on a tax-deferred basis into an IRA. Sales of
Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational
disclosure be given to persons desiring to establish an IRA.
Purchasers of Contracts to be qualified as IRAs should obtain
competent tax advice as to the tax treatment and suitability of
such an investment.
(4) Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These
retirement plans may permit the purchase of the Contracts to provide
benefits under the Plan. Contributions to the Plan for the benefit of
employees will not be includible in the gross income of the employees
until distributed from the Plan. The tax consequences to participants
may vary depending upon the particular plan design. However, the Code
places limitations and restrictions on all plans, including on such
items as amount of allowable contributions; form, manner and timing of
distributions; transferability of benefits; vesting and
nonforfeitability of interests; nondiscrimination in eligibility and
participation; and the tax treatment of distributions, withdrawals and
surrenders. (See "Tax Treatment of Withdrawals - Qualified
Contracts.") Purchasers of Contracts for use with Corporate Pension or
Profit-Sharing Plans should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion of
the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (H.R. 10 and
Corporate Pension and Profit-Sharing Plans), 403(b) (Tax Sheltered Annuities)
and 408(b) (IRAs). To the extent amounts are not includible in gross income
because they have been rolled over to an IRA or to another eligible Qualified
Plan, no tax penalty will be imposed. The tax penalty will not apply to the
following distributions: (1) distributions made on or after the date on which
the Contract Owner or Annuitant (as applicable) reaches age 59 1/2; (2)
distributions following the death or disability of the Contract Owner or
Annuitant (as applicable (for this purpose disability is as defined in Section
72(m)(7) of the Code); (3) after separation from service, distributions that
are part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Contract Owner or Annuitant
(as applicable) or the joint lives (or joint life expectancies) of such
Contract Owner or Annuitant (as applicable) and his or her designated
Beneficiary; (4) distributions to a Contract Owner or Annuitant (as applicable)
who has separated from service after age 55; (5) distributions made to the
Contract Owner or Annuitant (as applicable) to the extent such distributions do
not exceed the amount allowable as a deduction under Code Section 213 to the
Contract Owner or Annuitant (as applicable) for amounts paid during the taxable
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year for medical care; (6) distributions made to an alternate payee pursuant to
a qualified domestic relations order; and (7) distributions from an Individual
Retirement Annuity for the purchase of medical insurance (as described in
Section 213(d)(1)(D) of the Code) for the Contract Owner or Annuitant (as
applicable) and his or her spouse and dependents if the Contract Owner or
Annuitant (as applicable) has received unemployment compensation for at least
12 weeks. This exception no longer applies after the Contract Owner or
Annuitant (as applicable) has been re-employed for at least 60 days.
The exceptions stated in items (4) and (6) above do not apply in the case of an
IRA. The exceptions stated in (3) above applies to an IRA without the
requirement that there be a separation from service.
Generally, distributions from a qualified plan must commence no later than
April 1 of the calendar year following (1) the calendar year in which the
employee attains age 70 1/2, or (2) the calendar year in which the employee
retires, whichever is later. Required distributions must be over a period not
exceeding the life expectancy of the individual or the joint lives or life
expectancies of the individual and his or her designated beneficiary. If the
required minimum distributions are not made, a 50% penalty tax is imposed on
the amount not distributed.
TAX SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to occurrence of one of the following events: the Contract Owner
attains age 59 1/2, separates from service, dies, or becomes disabled (within
the meaning of Section 72(m)(7) of the Code), or in a case of hardship.
However, withdrawals for hardship are restricted to the portion of the Contract
Owner's Contract Value which represents contributions made by the Contract
Owner and does not include any investment results. The limitations on
withdrawals became effective on January 1, 1989, and apply only to salary
reduction contributions made after December 31, 1988, to income attributable to
such contributions and to income attributable to amounts held as of December
31, 1988. However, these limitations will apply to all amounts (regardless of
when or how contributions were originally made) which are transferred or rolled
over from a custodial account (as defined in Section 403(b)(7)) into the
Contract Owner's account. The limitations on withdrawals do not affect
rollovers or transfers between certain Qualified Plans. Tax penalties may also
apply. (See "Tax Treatment of Withdrawals-Qualified Contracts," above.)
Contract Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
SECTION 457-DEFERRED COMPENSATION PLANS
Under Section 457 of the Code, governmental and certain other tax-exempt
employers may establish deferred compensation plans, which may invest in
annuity contracts, for the benefit of their employees. The Code, as with
Qualified Plans, establishes limitations and restrictions on eligibility,
contributions and distributions. Under these Plans, contributions made for the
benefit of the employees will not be includible in the employees' gross income
until distributed from the Plan. Under a Section 457 Plan, the plan assets
remain solely the property of the employer, subject only to the claims of the
employer's general creditors, until such time as made available to the
participant or beneficiary. However, for Plans established after August 20,
1996, it is required that plan assets must be held in trust for the benefit of
plan participants are not subject to the claims of the general creditors of the
employer. Furthermore, this requirement must be met for all Plans no later
than January 1, 1999.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the principal
underwriter is a party. The Company is engaged in various kinds of routine
litigation which, in the opinion of the Company, are not material in relation
to the total capital and surplus of the Company.
24
<PAGE> 28
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
ITEM PAGE
- ---- ----
THE COMPANY.......................................................... 3
DISTRIBUTION OF CONTRACTS............................................ 3
ACCOUNTANTS.......................................................... 3
LEGAL OPINIONS....................................................... 3
YIELD CALCULATION FOR LIQUID ASSET SUB-ACCOUNT....................... 3
PERFORMANCE INFORMATION.............................................. 4
AMOUNT OF ANNUITY PAYMENTS........................................... 5
Net Investment Factor............................................... 5
FINANCIAL STATEMENTS................................................. 6
25
<PAGE> 29
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE ANNUITY CONTRACTS
ISSUED BY
SENTRY VARIABLE ACCOUNT II
AND
SENTRY LIFE INSURANCE COMPANY
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INDIVIDUAL FLEXIBLE PURCHASE
PAYMENT DEFERRED VARIABLE ANNUITY CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY PRESENTS INFORMATION THAT A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE THE
COMPANY AT: 1800 NORTH POINT DRIVE, STEVENS POINT, WISCONSIN 54481, (800)
533-7827.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE PROSPECTUS ARE DATED MAY 1,
1997.
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DISTRIBUTION OF CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
YIELD CALCULATION FOR LIQUID ASSET SUB-ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . 3
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
AMOUNT OF ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
2
<PAGE> 31
THE COMPANY
Sentry Life Insurance Company (the "Company") is a stock life insurance
company incorporated in 1958, pursuant to the laws of the State of Wisconsin.
Its home office is located at 1800 North Point Drive, Stevens Point, Wisconsin.
It is licensed to conduct life, annuity and accident and health insurance
business in the District of Columbia and in all states except New York. The
Company is a wholly-owned subsidiary of Sentry Insurance a Mutual Company
("SIAMCO"). SIAMCO is a mutual insurance company incorporated under the laws
of Wisconsin with headquarters at 1800 North Point Drive, Stevens Point,
Wisconsin. SIAMCO owns and controls directly, or through subsidiary companies,
a group of insurance and related companies, including Sentry Life Insurance
Company of New York and Sentry Equity Services, Inc.
The Company and Sentry Life Insurance Company of New York each contributed
$100,000 to Neuberger & Berman Advisers Management Trust (the "Trust"). The
companies do not intend to remove those assets from the Trust at this time.
The Company is rated A+ (superior) by A.M. Best, an independent analyst of the
insurance industry. The financial strength of the Company may be relevant
insofar as the ability of the Company to make fixed annuity payments from its
general account.
DISTRIBUTION OF CONTRACTS
Sentry Equity Services, Inc. ("Sentry Equity"), 1800 North Point Drive,
Stevens Point, Wisconsin, a wholly-owned subsidiary of SIAMCO, serves as the
principal underwriter of the Contracts. The Contracts are sold through licensed
insurance agents in those states where the Contracts may be lawfully sold. The
agents are registered representatives of broker-dealers that are registered
under the Securities Exchange Act of 1934 and are members of the National
Association of Securities Dealers, Inc. Sentry Equity will be paid first-year
and renewal commissions for its services in distributing the Contracts, not to
exceed 4.7% of Purchase Payments. Sentry Equity will, in turn, pay all or a
portion of these amounts to a selling agent or agency. The Contracts are sold
on a continuous basis.
Sentry Equity also acts as principal underwriter for Sentry Fund, Inc., an
open-end management investment company. Sentry Equity was paid underwriter
commissions in the aggregate for the years 1994, 1995 and 1996 of $287,619,
$293,144 and $338,226 respectively. Of those amounts it retained $237,626,
$238,582 and $286,484 respectively.
ACCOUNTANTS
The statutory financial statements of the Company as of December 31, 1996 and
1995, and for the years then ended, and the financial statements of the
Variable Account as of December 31, 1996 and 1995, and for each of the two
years in the period then ended, have been audited by Coopers & Lybrand L.L.P.,
203 North LaSalle Street, Chicago, Illinois, independent accountants, whose
reports appear herein and have been included in reliance on their authority as
experts in accounting and auditing.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
YIELD CALCULATION FOR LIQUID ASSET SUB-ACCOUNT
The Liquid Asset sub-account of the Variable Account will calculate its current
yield based upon the seven days ended on the date of calculation. For the seven
calendar days ended December 31, 1996, the annualized yield for the Liquid
Asset sub-account 3.35%.
The current yield of the Liquid Asset sub-account is computed by determining
the net change (exclusive of capital changes) in the value of a hypothetical
pre-existing Contract Owner account having a balance of one Accumulation Unit
of the sub-account at the beginning of the period, subtracting the Mortality
and Expense Risk Premium and Contract Maintenance Charge, dividing the
difference by the value of the account at the beginning of the same period to
obtain the base period return and multiplying the result by (365/7).
3
<PAGE> 32
Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not.
The yields quoted should not be considered a representation of the yield of the
Liquid Asset sub-account in the future since the yield is not fixed. Actual
yields will depend not only on the type, quality and maturities of the
investments held by the Liquid Asset sub-account and changes in the interest
rates on such investments, but also on changes in the Liquid Asset sub-account's
expenses during the period.
Yield information may be useful in reviewing the performance of the Liquid
Asset sub-account and for providing a basis for comparison with other
investment alternatives. However, the Liquid Asset sub-account's yield
fluctuates, unlike bank deposits or other investments which typically pay a
fixed yield for a stated period of time. The yield information does not reflect
the deduction of any applicable Contingent Deferred Sales Charge at the time
of the surrender. (See "Charges and Deductions - Contingent Deferred Sales
Charge" in the Prospectus.)
PERFORMANCE INFORMATION
The cumulative total return and average annual total return figures for the
one- five- and ten-year periods to December 31, 1996, are as follows:
<TABLE>
<CAPTION>
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN TOTAL RETURN
TEN TEN
ONE YEAR FIVE YEARS YEARS ONE YEAR FIVE YEARS YEARS
----------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Liquid Asset
Portfolio (1.93%) 10.76% 44.71% (1.93%) 2.06% 3.77%
Limited Maturity
Bond Portfolio (3.68%) 12.04% 49.00% (3.68%) 2.30% 4.07%
Growth Portfolio (2.14%) 45.17% 150.40% (2.14%) 7.74% 9.61%
Balanced Portfolio* .09% 34.99% 88.50% .09% 6.19% 8.42%
</TABLE>
*Date of inception is February 28, 1989. Ten-year column represents since
inception.
The above figures include the deduction of a 1.20% Mortality and Expense Risk
Premium, a $30 Contract Maintenance Charge and the Investment Management and
Administration Fees and other expenses paid by the Trust's Portfolios and their
corresponding Series of Managers Trust. As of May 1, 1995, the fees paid to the
manager changed. Such fees and the Trust's operating expenses are disclosed and
explained in the Fee Table within the Prospectus. The returns reported above
also reflect the deduction of the Contract's Contingent Deferred Sales Charge
from each Portfolio's one year total return, when such charge equals 5% of a
surrendered Purchase Payment, and from each Portfolio's five year total return,
when such charge equals 1% of a surrendered Purchase Payment.
The Balanced Portfolio of the Trust was made available for investment in
connection with the Contracts on September 14, 1990. If the Balanced Portfolio
had been available in connection with the Contracts from February 28, 1989, the
date on which it commenced operations, the cumulative total return and average
total return quotation figures for the Balanced Portfolio under the Contracts
would have been as shown above.
The hypothetical value of a Contract purchased for the time periods
described above is determined by using the actual Accumulation Unit values for
an initial $1,000 Purchase Payment, and deducting any applicable Contract
Maintenance Charges and any applicable Contingent Deferred Sales Charge to
arrive at the ending hypothetical value. The average annual total return is then
determined by computing the fixed interest rate that a $1,000 Purchase Payment
would have to earn annually, compounded annually, to grow to the hypothetical
value at the end of the time periods described above, as the case may be. The
formula used in these calculations is:
P (1 + T)n = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the one- five- and ten year
periods to December 31, 1996 (or fractional portion thereof), of a
hypothetical $1,000 payment made at the beginning of each period
presented to December 31, 1996.
4
<PAGE> 33
The calculation of the cumulative total return for the Portfolios under the
Contract issued by the Company is not subject to a standardized formula. The
hypothetical value of a Contract purchased for the time periods described above
is determined by using the actual Accumulation Unit values for an initial
$1,000 Purchase Payment and deducting any applicable Contract Maintenance
Charge and any applicable Contingent Deferred Sales Charge to arrive at the
ending hypothetical value. The total return percentage is then determined by
subtracting the initial investment from the ending hypothetical value and
dividing the difference by the initial investment and expressing the result as
a percentage.
The cumulative total return quotation figures were calculated using the
following assumptions:
(1) The one-year figure assumes that values based on a $1,000 payment made on
December 31, 1995, were redeemed on December 31, 1996;
(2) The five-year figure assumes that values based on a $1,000 payment made on
December 31, 1991, were redeemed on December 31, 1996;
(3) For the Liquid Asset, Growth and Limited Maturity Bond Portfolios, the
ten-year figures assume that values based on a $1,000 payment made on December
31, 1986, were redeemed on December 31, 1996. For the Balanced Portfolio, the
figures for the period since inception assume that values based on a $1,000
payment on February 28, 1989, were redeemed on December 31, 1996.
ALL QUOTATION FIGURES ABOVE REPRESENT PAST PERFORMANCE OF EACH INVESTMENT
OPTION. THE TOTAL RETURN FIGURES FLUCTUATE DAILY, SO THE ABOVE QUOTATIONS ARE
NOT REPRESENTATIVE OF FUTURE RESULTS.
AMOUNT OF ANNUITY PAYMENTS
The dollar amount of annuity payments after the first payment is determined as
follows:
(1) The dollar amount of the first annuity payment is divided by the
value of an Annuity Unit as of the Income Date. This establishes the number
of Annuity Units for each monthly payment. The number of Annuity Units
remains fixed during the annuity payment period, subject to any transfers.
(2) The fixed number of Annuity Units is multiplied by the Annuity Unit
value for the last Valuation Period of the month preceding the month for
which the payment is due. This result is the dollar amount of the payment.
The total dollar amount of each Variable Annuity payment is the sum of all
sub-account Variable Annuity payments less any applicable Contract Maintenance
Charge.
The sub-account Annuity Unit value at the end of any Valuation Period is
determined by multiplying the sub-account Annuity Unit value for the
immediately preceding Valuation Period by the quotient of (1) and (2), where:
(1) is the Net Investment Factor for the Valuation Period for which the
sub-account Annuity Unit value is being determined; and
(2) is the assumed investment factor for such Valuation Period. The
assumed investment factor adjusts for the interest assumed in determining
the first Variable Annuity payment. Such factor for any Valuation Period
shall be the accumulated value of $1.00 deposited at the beginning of such
period at the assumed investment rate of 4.0%.
NET INVESTMENT FACTOR
The Net Investment Factor for any sub-account for any Valuation Period is
determined by dividing (1) by (2) and subtracting (3) from the result where:
(1) is the net result of:
(a) the net asset value per share of the Eligible Mutual Fund or
Portfolio held in the sub-account determined as of the current Valuation
Period; plus
(b) the per share amount of any dividend or capital gain
distribution made by the Eligible Mutual Fund or the Portfolio held in
the sub-account if the "ex-dividend" date occurs during the current
Valuation Period; plus or minus
(c) a per share charge or credit, which is determined by the
Company, for changes in tax reserves resulting from investment
operations of the sub-account;
5
<PAGE> 34
(2) is the net result of:
(a) the net asset value per share of the Eligible Mutual Fund or
Portfolio held in the sub-account determined as of the immediately
preceding Valuation Period; plus or minus
(b) the per share charge or credit for any changes in tax
reserve for the immediately preceding Valuation Period; and
(3) is the percentage factor representing the Mortality and Expense Risk
Premium.
The Net Investment Factor may be greater or less than one; therefore, the
Annuity Unit value may increase or decrease.
FINANCIAL STATEMENTS
The financial statements of the Company included herein should be considered
only as bearing upon the ability of the Company to meet its obligations under
the Contracts.
6
<PAGE> 35
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE ACCOUNT II
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
7
<PAGE> 36
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS
SENTRY LIFE INSURANCE COMPANY
AND
THE CONTRACT OWNERS OF
SENTRY VARIABLE ACCOUNT II:
We have audited the accompanying statement of assets, liabilities and contract
owners' equity of the Liquid Asset Portfolio, Growth Portfolio, Limited
Maturity Bond Portfolio and Balanced Portfolio of the Sentry Variable Account
II as of December 31, 1996, and the related statements of operations and
changes in contract owners' equity for each of the two years in the period then
ended. These financial statements are the responsibility of Sentry Life
Insurance Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit 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, 1996 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 audit provides 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 the Liquid Asset
Portfolio, Growth Portfolio, Limited Maturity Bond Portfolio and Balanced
Portfolio of the Sentry Variable Account II as of December 31, 1996, and the
results of their operations and the changes in their contract owners' equity for
each of the two years in the period then ended in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 10, 1997
8
<PAGE> 37
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE ACCOUNT II
STATEMENT OF ASSETS, LIABILITIES
AND CONTRACT OWNERS' EQUITY
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Neuberger & Berman Advisers Management Trust:
Liquid Asset Portfolio, 2,430,868
shares (cost $2,430,868) $ 2,430,868
Growth Portfolio, 1,303,592
shares (cost $29,291,223) 33,606,604
Limited Maturity Bond Portfolio, 521,001
shares (cost $7,272,368) 7,320,058
Balanced Portfolio, 563,835
shares (cost $8,559,253) 8,976,246
-----------
Total investments 52,333,776
Dividends receivable 9,259
-----------
Total assets 52,343,035
LIABILITIES:
Accrued expenses 7,033
-----------
CONTRACT OWNERS' EQUITY (NET ASSETS) $52,336,002
===========
</TABLE>
The accompanying notes are an integral part of these financial statements
9
<PAGE> 38
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE ACCOUNT II
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
---------------------------
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
--------------------------- -----------------------------
1996 1995 1996 1995
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Income:
Dividends $ 112,796 $ 148,465 $ 13,015 $ 71,275
Expenses:
Mortality and expense risk 30,775 36,040 411,883 400,743
---------- ---------- ----------- -----------
Net investment income (loss) 82,021 112,425 (398,868) (329,468)
---------- ---------- ----------- -----------
Realized net investment gain -- -- 1,247,219) 1,608,647
Unrealized appreciation (depreciation), net -- -- (1,352,086) 6,319,592
Capital gain distributions received -- -- 3,045,396 955,092
---------- ---------- ----------- -----------
Realized and unrealized gain (loss)
on investments and capital
gain distributions, net -- -- 2,940,529 8,883,331
---------- ---------- ----------- -----------
Net increase in contract owners'
equity from operations 82,021 112,425 2,541,661 8,553,863
---------- ---------- ----------- -----------
Purchase payments 128,608 139,601 1,183,119 1,288,052
Transfers between subaccounts, net 9,828 105,468 (72,898) 351,441
Withdrawals (410,053) (1,111,786) (4,519,118) (5,232,234)
Contract maintenance fees (4,001) (4,820) (44,776) (48,549)
Surrender charges (1,655) (6,123) (21,399) (25,366)
---------- ---------- ----------- -----------
Net decrease in contract owners'
equity derived from principal transactions (277,273) (877,660) (3,475,072) (3,666,656)
---------- ---------- ----------- -----------
Total increase (decrease) in contract
owners' equity (195,252) (765,235) (933,411) 4,887,207
Contract owners' equity at beginning of year
2,634,700 3,399,935 34,535,970 29,648,763
---------- ---------- ---------- -----------
Contract owners' equity at end of year $2,439,448 $2,634,700 $33,602,559 $34,535,970
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
10
<PAGE> 39
<TABLE>
<CAPTION>
LIMITED MATURITY BALANCED
BOND PORTFOLIO PORTFOLIO TOTAL
- -------------------------- ---------------------------- ------------------------------
1996 1995 1996 1995 1996 1995
- ------------ ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 703,238 $ 501,148 $ 208,712 $ 157,249 $ 1,037,761 $ 878,137
94,708 107,118 108,809 106,166 646,175 650,067
- ------------ ------------ ----------- ----------- ----------- ------------
608,530 394,030 99,903 51,083 391,586 228,070
- ------------ ------------ ----------- ----------- ----------- ------------
42,361 112,466 199,074 300,179 1,488,654 2,021,292
(430,554) 319,897 (978,800) 1,348,677 (2,761,440) 7,988,166
-- -- 1,160,642 50,544 4,206,038 1,005,636
- ------------ ------------ ----------- ----------- ----------- ------------
(388,193) 432,363 380,916 1,699,400 2,933,252 11,015,094
- ------------ ------------ ----------- ----------- ----------- ------------
220,337 826,393 480,819 1,750,483 3,324,838 11,243,164
- ------------ ------------ ----------- ----------- ----------- ------------
107,526 159,828 604,683 711,656 2,023,936 2,299,137
(170,136) 4,170 233,206 (461,079) -- --
(1,423,044) (1,752,030) (1,328,115) (1,250,692) (7,680,330) (9,346,742)
(9,073) (10,934) (10,399) (11,256) (68,249) (75,559)
(2,793) (7,177) (9,939) (11,734) (35,786) (50,400)
- ------------ ------------ ----------- ----------- ----------- ------------
(1,497,520) (1,606,143) (510,564) (1,023,105) (5,760,429) (7,173,564)
- ------------ ------------ ----------- ----------- ----------- ------------
(1,277,183) (779,750) (29,745) 727,378 (2,435,591) 4,069,600
8,595,913 9,375,663 9,005,010 8,277,632 54,771,593 50,701,993
- ------------ ------------ ----------- ----------- ----------- ------------
$ 7,318,730 $ 8,595,913 $ 8,975,265 $ 9,005,010 $52,336,002 $ 54,771,593
============ ============ =========== =========== =========== ============
</TABLE>
11
<PAGE> 40
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
1. ORGANIZATION AND CONTRACTS
The Sentry Variable Account II (the Variable Account) is a segregated
investment account of the Sentry Life Insurance Company (the Company) and
is registered with the Securities and Exchange Commission as a unit
investment trust pursuant to the provisions of the Investment Company Act
of 1940. The Variable Account was established by the Company on August 2,
1983 and commenced operations on May 3, 1984. Accordingly, it is an
accounting entity wherein all segregated account transactions are
reflected.
The assets of the Variable Account are invested in one or more of the
portfolios of Neuberger & Berman Advisers Management Trust (the Trust) at
the portfolio's net asset value in accordance with the selection made by
the contract owners.
A copy of the Neuberger & Berman Advisers Management Trust Annual Report
is included in the Variable Account's Annual Report.
2. SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS
Investments in the Trust are valued by using net asset values which are
based on the daily closing prices of the underlying securities in the
Trust's portfolios.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date (the date the
order to buy and sell is executed). Dividend income is recorded on the
ex-dividend date. The cost of investments sold and the corresponding
investment gains and losses are determined on a specific identification
basis.
FEDERAL INCOME TAXES
The Company is taxed as a life insurance company under the provisions of
the Internal Revenue Code. The operations of the Variable Account are
part of the total operations of the Company and are not taxed as a
separate entity.
Under Federal income tax law, net investment income and net realized
investment gains of the Variable Account which are applied to increase
contract owners' equity are not taxed.
3. EXPENSES
A mortality and expense risk premium is deducted by the Company from the
Variable Account on a daily basis which is equal, on an annual basis, to
1.20% (.80% mortality and .40% expense risk) of the daily net asset value
of the Variable Account. This mortality and expense risk premium
compensates the Company for assuming these risks under the variable
annuity contract. The liability for accrued mortality and expense risk
premium amounted to $7,033 at December 31, 1996.
The Company deducts, on the contract anniversary date, an annual
contract maintenance charge of $30, per contract holder, from the contract
value by canceling accumulation units. If the contract is surrendered for
its full surrender value, on other than the contract anniversary, the
contract maintenance charge will be deducted at the time of such
surrender. This charge reimburses the Company for administrative expenses
relating to maintenance of the contract.
12
<PAGE> 41
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
There are no deductions made from purchase payments for sales charges at
the time of purchase. However, a contingent deferred sales charge may be
deducted in the event of a surrender to reimburse the Company for
expenses incurred which are related to contract sales. Contingent
deferred sales charges apply to each purchase payment and are graded from
6% during the first contract year to 0% in the seventh contract year.
Any premium tax payable to a governmental entity as a result of the
existence of the contracts or the Variable Account will be charged
against the contract value. Premium taxes up to 4% are currently imposed
by certain states. Some states assess their premium taxes at the time
purchase payments are made; others assess their premium taxes at the time
of annuitization. In the event contracts would be issued in states
assessing their premium taxes at the time purchase payments are made, the
Company currently intends to advance such premium taxes and deduct the
premium taxes from a contract owner's contract value at the time of
annuitization or surrender.
4. INITIAL CAPITALIZATION
Initial capital of $100,000 was provided by the Company for the
establishment of the Variable Account. The Company removed the investment
during 1996. The value at the disposal date was $277,479.
5. CONTRACT OWNERS' EQUITY
Contract owners' equity is represented by accumulation units in the
related Variable Account.
At December 31, 1996 ownership of the Variable Account was represented by
the following accumulation units and accumulation unit values:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION
UNITS UNIT VALUE VALUE
------------ ------------ -----------
<S> <C> <C> <C>
Liquid Asset Portfolio 145,387 $16.78 $ 2,439,448
Growth Portfolio 847,224 39.66 33,602,559
Limited Maturity Bond Portfolio 317,877 23.02 7,318,730
Balanced Portfolio 519,312 17.28 8,975,265
-----------
Total contract owners' equity $52,336,002
===========
</TABLE>
At December 31, 1995 ownership of the Variable Account was represented by the
following accumulation units and accumulation unit values:
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION
UNITS UNIT VALUE VALUE
------------ ------------ -----------
<S> <C> <C> <C>
Liquid Asset Portfolio 162,165 $16.25 $ 2,634,700
Growth Portfolio 938,909 36.78 34,535,970
Limited Maturity Bond Portfolio 384,749 22.34 8,595,913
Balanced Portfolio 550,216 16.37 9,005,010
-----------
Total contract owners' equity $54,771,593
===========
</TABLE>
13
<PAGE> 42
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. PURCHASES AND SALES OF SECURITIES
In 1996, purchases and proceeds on sales of the Trust's shares aggregated
$9,395,710 and $10,552,842, respectively, and were as follows:
<TABLE>
<CAPTION>
LIQUID ASSET GROWTH LIMITED MATURITY BALANCED
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO TOTAL
------------- --------- ---------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Purchases $ 763,954 $5,037,322 $1,100,285 $2,494,149 $ 9,395,710
Proceeds on sales 957,938 5,862,984 1,988,567 1,743,353 10,552,842
</TABLE>
In 1995, purchases and proceeds on sales of the Trust's shares aggregated
$7,134,067 and $13,071,544, respectively, and were as follows:
<TABLE>
<CAPTION>
LIQUID ASSET GROWTH LIMITED MATURITY BALANCED
PORTFOLIO PORTFOLIO BOND PORTFOLIO PORTFOLIO TOTAL
------------- --------- ---------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Purchases $1,127,073 $3,829,670 $ 979,314 $1,198,010 $ 7,134,067
Proceeds on sales 1,887,956 6,871,957 2,191,308 2,120,323 13,071,544
</TABLE>
14
<PAGE> 43
SENTRY LIFE INSURANCE COMPANY
REPORT ON AUDITS OF STATUTORY-BASIS FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
15
<PAGE> 44
[COOPERS & LYBRAND L.L.P. LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Sentry Life Insurance Company
We have audited the accompanying statutory-basis balance sheets of Sentry Life
Insurance Company (the Company) as of December 31, 1996 and 1995, and the
related statutory-basis statements of operations, changes in capital stock and
surplus and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
report on these financial statements based on our audits.
We conducted our audits of the accompanying financial statements 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.
As discussed more fully in Note 1 to the financial statements, the
Company prepared these financial statements using accounting practices
prescribed or permitted by the insurance department of the state of Wisconsin,
which practices differ from generally accepted accounting principles (GAAP). We
have only been engaged by the Company to audit the accompanying financial
statements on a statutory basis of accounting. The Company is not required to
prepare GAAP financial statements and does not prepare GAAP financial
statements. The effects on the financial statements of the variances between the
statutory basis of accounting and GAAP, although not reasonably determinable,
are presumed to be material. We are therefore required in the following
paragraph to issue an adverse opinion on GAAP.
In our opinion, because of the effects of the matter discussed in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of Sentry Life Insurance Company as of December 31, 1996 and
1995, or the results of its operations and its cash flows for the years then
ended.
In our opinion, the statutory-basis financial statements referred to above
present fairly, in all material respects, the admitted assets, liabilities, and
policyholders' surplus of Sentry Life Insurance Company as of December 31, 1996
and 1995, and the results of its operations and its cash flows for the years
then ended in conformity with accounting practices prescribed or permitted by
the insurance department of the state of Wisconsin.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 14, 1997
16
<PAGE> 45
SENTRY LIFE INSURANCE COMPANY
STATUTORY-BASIS BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
- ------ ---- ----
<S> <C> <C>
Investments:
Bonds . . . . . . . . . . . . . . . . . . . . . . . . $1,055,154,229 $1,052,280,485
Investments in subsidiaries . . . . . . . . . . . . . . 9,600,499 9,802,566
Mortgage loans . . . . . . . . . . . . . . . . . . . . 150,967 266,690
Policy loans . . . . . . . . . . . . . . . . . . . . . 25,389,248 26,032,529
Cash and short-term investments . . . . . . . . . . . . 28,736,493 24,511,847
-------------- --------------
Total investments . . . . . . . . . . . . . . . . 1,119,031,436 1,112,894,117
Accrued investment income . . . . . . . . . . . . . . . . 17,006,071 17,081,696
Premiums deferred and uncollected . . . . . . . . . . . . 4,233,837 4,314,558
Due from affiliates . . . . . . . . . . . . . . . . . . . 11,382,247 3,137,723
Other assets . . . . . . . . . . . . . . . . . . . . . . 3,435,235 4,133,884
Assets held in separate accounts . . . . . . . . . . . . 433,345,943 353,150,081
-------------- --------------
Total admitted assets . . . . . . . . . . . . . . . $1,588,434,769 $1,494,712,059
============== ==============
</TABLE>
The accompanying notes are an integral part of these statutory-basis financial
statements.
17
<PAGE> 46
SENTRY LIFE INSURANCE COMPANY
STATUTORY-BASIS BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
LIABILITIES 1996 1995
- ----------- ---- ----
<S> <C> <C>
Future policy benefits:
Life . . . . . . . . . . . . . . . . . . . . . . . . $ 249,630,411 $ 249,333,860
Accident and health . . . . . . . . . . . . . . . . . . . 8,169,020 5,440,914
Annuity . . . . . . . . . . . . . . . . . . . . . . . . . 140,074,886 144,504,621
Policy and contract claims . . . . . . . . . . . . . . . . . . 3,951,309 3,950,311
Premium and other deposit funds . . . . . . . . . . . . . . . . 596,529,186 592,383,093
Other policyholder funds . . . . . . . . . . . . . . . . . . . 10,334,943 9,770,566
Accounts payable and other liabilities . . . . . . . . . . . . 3,061,854 3,157,210
Federal income taxes accrued . . . . . . . . . . . . . . . . . 10,908,272 10,055,993
Asset valuation reserve . . . . . . . . . . . . . . . . . . . . 11,457,217 11,347,291
Interest maintenance reserve . . . . . . . . . . . . . . . . . 6,722,122 8,755,251
Liabilities related to separate accounts . . . . . . . . . . . 433,345,943 353,150,081
-------------- --------------
Total liabilities . . . . . . . . . . . . . . . . . . $1,474,185,163 $1,391,849,191
============== ==============
<CAPTION>
CAPITAL STOCK AND SURPLUS
- -------------------------
Capital stock, $10 par value; authorized 400,000 shares; issued
and outstanding 316,178 shares in 1996 and 1995 . . . . . . 3,161,780 3,161,780
Paid-in surplus . . . . . . . . . . . . . . . . . . . . . . . . 43,719,081 43,719,081
Earned surplus, unappropriated . . . . . . . . . . . . . . . . 67,368,745 55,982,007
-------------- --------------
Total capital stock and surplus . . . . . . . . . . . 114,249,606 102,862,868
-------------- --------------
Total liabilities, capital stock and surplus . . . . . $1,588,434,769 $1,494,712,059
============== ==============
</TABLE>
The accompanying notes are an integral part of these statutory-basis financial
statements.
18
<PAGE> 47
SENTRY LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Premiums and other income:
Premiums and annuity considerations . . . . . . . . . . $ 70,779,015 $ 73,310,642
Other fund deposits . . . . . . . . . . . . . . . . . . 53,285,412 53,522,784
Commissions and expense allowances on
reinsurance ceded . . . . . . . . . . . . . . . . . . 28,309,773 27,816,523
Net investment income . . . . . . . . . . . . . . . . . 90,382,873 95,506,086
Other income . . . . . . . . . . . . . . . . . . . . . 7,721,815 7,337,287
------------ ------------
Total premiums and other income . . . . . . . 250,478,888 257,493,322
------------ ------------
Benefits and expenses:
Policyholder benefits and fund withdrawals . . . . . . . 153,162,041 139,196,562
Increase in future life policy benefits
and other reserves . . . . . . . . . . . . . . . . . . 648,550 74,648,971
Commissions . . . . . . . . . . . . . . . . . . . . . . 16,144,524 15,210,518
Other expenses . . . . . . . . . . . . . . . . . . . . . 34,145,149 34,133,546
Transfers to (from) separate accounts, net . . . . . . . 16,984,014 (37,938,202)
------------ ------------
Total benefits and expenses. . . . . . . . . . 221,084,278 225,251,395
------------ ------------
Income before federal income tax expense
and net realized losses on investments . . . . . . . . . 29,394,610 32,241,927
Federal income tax expense, less tax on net realized
losses and transfers to the IMR . . . . . . . . . . . 9,381,864 9,009,062
------------ ------------
Income before net realized losses on investments . . . . 20,012,746 23,232,864
Net realized losses on investments . . . . . . . . . 151,872 259,451
------------ ------------
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 19,860,874 $ 22,973,414
============ ============
</TABLE>
The accompanying notes are an integral part of these statutory-basis financial
statements.
19
<PAGE> 48
SENTRY LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CHANGES IN CAPITAL STOCK AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Capital stock, beginning and end of year . . . . . . $ 3,161,780 $ 3,161,780
------------ ------------
Paid-in surplus, beginning and end of year . . . . . 43,719,081 43,719,081
------------ ------------
Earned surplus, unappropriated:
Balance at beginning of year . . . . . . . . . . . 55,982,007 60,896,553
Net income . . . . . . . . . . . . . . . . . . . . 19,860,874 22,973,414
Change in non-admitted assets . . . . . . . . . . 9,224 28,536
Change in asset valuation reserve . . . . . . . . . (109,926) (283,066)
Dividend to stockholder . . . . . . . . . . . . . . (8,000,000) (25,000,000)
Change in net unrealized gains on investments . . . (373,434) (2,633,430)
------------ ------------
Balance at end of year . . . . . . . . . . . . . . 67,368,745 55,982,007
------------ ------------
Total capital stock and surplus. . . . . . . . . $114,249,606 $102,862,868
============ ============
</TABLE>
The accompanying notes are an integral part of these statutory-basis financial
statements.
20
<PAGE> 49
SENTRY LIFE INSURANCE COMPANY
STATUTORY-BASIS STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Premiums and annuity considerations . . . . . . . . . . . . . $ 70,913,344 $ 73,042,879
Other fund deposits . . . . . . . . . . . . . . . . . . . . . 53,285,412 53,522,784
Other premiums, considerations and deposits . . . . . . . . . 260,805 417,089
Allowances and reserve adjustments received on
reinsurance ceded . . . . . . . . . . . . . . . . . . . . . 30,458,213 26,569,280
Investment income received (excluding realized gains
and losses and net of investment expenses) . . . . . . . . . 87,375,424 91,417,021
Other income received . . . . . . . . . . . . . . . . . . . . 7,443,291 6,920,198
Life and accident and health claims paid . . . . . . . . . . (21,418,597) (22,360,188)
Surrender benefits . . . . . . . . . . . . . . . . . . . . . (85,880,726) (72,363,693)
Other benefits to policyholders paid . . . . . . . . . . . . (45,644,421) (45,839,143)
Commissions, other expenses, and taxes paid
(excluding federal income taxes) . . . . . . . . . . . . . (50,351,320) (48,454,751)
Net transfers (to) from separate accounts . . . . . . . . . . (16,899,050) 38,008,886
Dividends to policyholders paid . . . . . . . . . . . . . . . (322,084) (317,157)
Federal income taxes paid . . . . . . . . . . . . . . . . . . (8,474,783) (6,917,151)
Net (increase) decrease in policy loans . . . . . . . . . . . 643,281 (76,668)
------------- -------------
Net cash from operations . . . . . . . . . . . . . . . . . 21,388,789 93,569,386
------------- -------------
Proceeds from investments sold, matured, or repaid:
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,548,892 95,892,606
Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . - 383,095
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . 115,725 90,113
Tax on net capital gains . . . . . . . . . . . . . . . . . . 52,062 (1,572,115)
------------- -------------
Total investment proceeds . . . . . . . . . . . . . . . 122,716,679 94,793,699
------------- -------------
Other cash provided . . . . . . . . . . . . . . . . . . . . . 1,288,793 54,568
------------- -------------
Total cash provided . . . . . . . . . . . . . . . . . . 145,394,261 188,417,653
------------- -------------
Cost of investments acquired:
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,810,078 151,782,015
Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . - 392,158
------------- -------------
Total investments acquired . . . . . . . . . . . . . . 124,810,078 152,174,173
Other cash applied: . . . . . . . . . . . . . . . . . . . .
Dividend to stockholder . . . . . . . . . . . . . . . . . . 8,000,000 25,000,000
Other applications, net . . . . . . . . . . . . . . . . . . 8,359,537 6,522,276
------------- -------------
Total cash applied . . . . . . . . . . . . . . . . . . 141,169,615 183,696,449
------------- -------------
Net change in cash and short-term investments . . . . . 4,224,646 4,721,204
Cash and short-term investments:
Beginning of year . . . . . . . . . . . . . . . . . . . . . 24,511,847 19,790,643
------------- -------------
End of year . . . . . . . . . . . . . . . . . . . . . . . . $ 28,736,493 $ 24,511,847
============= =============
</TABLE>
The accompanying notes are an integral part of these statutory-basis financial
statements.
21
<PAGE> 50
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SIGNIFICANT STATUTORY-BASIS ACCOUNTING POLICIES
BASIS OF PRESENTATION
Sentry Life Insurance Company (the Company) is a wholly-owned subsidiary
of Sentry Insurance a Mutual Company (SIAMCO). The accompanying
statutory-basis financial statements of the Company have been prepared in
conformity with the accounting practices prescribed or permitted by the
Insurance Department of the State of Wisconsin, which is a comprehensive
basis of accounting other than generally accepted accounting principles
(GAAP).
The Company writes life and health insurance products in all states
except New York primarily through direct writers to market the Company's
individual life insurance, annuities and group health and pension products.
The Company also uses direct mail and third party administrators for the
marketing of its group life and health products.
Prescribed statutory accounting principles include a variety of
publications of the National Association of Insurance Commissioners (NAIC),
as well as state laws, regulations, and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices
not so prescribed. The Company does not employ any material permitted
practices in the preparation of its statutory financial statements.
The accompanying statutory-basis financial statements have been prepared
in accordance with statutory accounting principles. The preparation of
financial statements in conformity with statutory accounting principles
requires management to make estimates and assumptions that affect the
reported assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
SIGNIFICANT STATUTORY ACCOUNTING POLICIES
A. INVESTMENT SECURITIES
Investments are valued in accordance with the requirements of
the National Association of Insurance Commissioners (NAIC). Bonds which
qualify for amortization are stated at amortized cost; bonds not
qualifying are carried at the lesser of amortized cost or NAIC market
values. For purposes of determining fair value disclosure,the market
value of bonds in these statutory financial statements is primarily
based on values supplied by independent pricing services. Under GAAP,
bonds would be classified as either trading, available for sale, or
held-to-maturity. Bonds classified as trading or as available for sale
would be carried at market with unrealized gains and losses, net of
applicable taxes recognized as net income (trading securities) or as a
direct surplus adjustment (available for sale). Common stock of the
Company's unconsolidated subsidiary is carried at its underlying
statutory capital and surplus. The change in the subsidiary's underlying
equity between years is reflected as a change in unrealized gains
(losses). Under GAAP, this entity's balance sheet and results of
operations would be consolidated with the Company. Mortgage loans on
real estate are carried at their aggregate unpaid principal balances.
Policy loans are carried at the aggregate of unpaid principal balances
plus accrued interest and are not in excess of cash surrender values of
the related policies.
Short-term investments are carried at amortized cost, which
approximates market value. Investment income is recorded when earned.
Market value adjustments are reflected in earned surplus as unrealized
gains (losses) on investments. Realized gains and losses are determined
on the specific identification method and are recorded directly in the
statements of operations, net of federal income taxes and after
transfers to the Interest Maintenance Reserve, as prescribed by the
NAIC.
Income on mortgage-backed securities is recognized using a
constant effective yield based on anticipated prepayments and the
estimated economic life of the securities. When actual prepayments
differ significantly from anticipated prepayments, the effective yield
is recalculated to reflect actual payments to date and anticipated
future payments. The net
22
<PAGE> 51
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
investment in the securities is adjusted to the amount that would have
existed had the new effective yield been applied since the acquisition of
the securities. This adjustment is reflected in net investment income.
B. SEPARATE ACCOUNT BUSINESS AND LIABILITY FOR PREMIUM AND OTHER DEPOSIT FUNDS
The Company issues group annuity contracts both to affiliated companies
and others. The deposits received in connection with these contracts are
placed in deposit administration funds and in separate accounts. The Company
also issues variable annuity contracts and variable universal life
contracts. Deposits for those contracts are also placed in separate
accounts. A separate account is an accounting entity segregated as a
discrete operation within an insurance company. The stockholder of the
Company and its policyholders have no claim to assets held in the separate
accounts. The contract holders are the only persons having rights to any
assets in the separate accounts or to income arising from these assets. All
separate and variable accounts held by the Company are non-guaranteed and
represent funds where the benefit is determined by the performance of the
investments held in the separate account. Assets are carried at market value
and reserves are calculated using the cash value of the contract. All
reserves fall into the category allowing discretionary withdrawals at market
value. For the variable annuity, if the contract has been in effect at least
six years, there is no surrender charge. For the variable life, there is a
surrender charge through the ninth year. The admitted asset value of
separate accounts consists primarily of common stock.
C. NON-ADMITTED ASSETS
For statutory accounting purposes, certain assets designated as
"non-admitted" (principally certain receivables) have been excluded from
the statutory-basis balance sheets and charged to earned surplus. Under
GAAP, such assets would be recognized at net realizable value.
Non-admitted assets totaled $2,172 and $11,396 at December 31, 1996 and
1995, respectively.
D. POLICY BENEFITS
Liabilities for traditional life and limited-payment life contracts are
computed using methods, mortality and morbidity tables and interest rates
which conform to the valuation laws of the State of Wisconsin. The
liabilities are primarily calculated on a modified reserve basis. The
effect of using a modified reserve basis partially offsets the effect of
immediately expensing acquisition costs by providing a policy benefit
reserve increase in the first policy year which is less than the reserve
increase in renewal years.
Future policy benefits for life policies and contracts were primarily
determined using the Commissioner's reserve valuation method with interest
rates ranging from 2.5% to 6%.
Future policy benefits for annuity contracts, primarily for individual and
group deferred annuities, were primarily determined using the
Commissioner's annuity reserve valuation method with interest rates ranging
from 3% to 11%. Future policy benefits for accident and health policies
consist primarily of a rate credit reserve.
Reserves for universal life-type and investment contracts are based on
the contract account balance, if future benefit payments in excess of the
account balance are not guaranteed, or on the present value of future
benefit payments when such payments are guaranteed.
GAAP reserves are based on mortality, lapse, withdrawal and interest rate
assumptions that are based on Company experience.
E. INTEREST MAINTENANCE RESERVE (IMR)
Realized capital gains and losses on bonds attributable to interest rate
changes are deferred in the IMR account. The IMR is recorded as a liability
and amortized into investment income over the approximate remaining
maturities of the bonds sold. This policy for recognition of such realized
gains and losses is prescribed by the NAIC in order to alter the impact of
such activity on the Company's surplus. For GAAP purposes, there is no such
reserve.
23
<PAGE> 52
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
F. ASSET VALUATION RESERVE (AVR)
The AVR mitigates fluctuations in the values of invested assets including
bonds, mortgage loans, real estate, and other invested assets. The AVR is
recorded as a liability and changes are charged or credited directly to
earned surplus. For GAAP purposes, a valuation allowance is established on
an individual asset basis for those securities whose cost exceeds market
value and the decline is other than temporary.
G. REVENUE AND EXPENSE RECOGNITION
Premiums for traditional life insurance policies and limited-payment
contracts are taken into income over the premium paying periods of the
policies. For investment contracts without mortality risk (such as deferred
annuities and immediate annuities with benefits paid for a period certain)
and contracts that permit the insured to make changes in the contract terms
(such as universal life products), deposits are recorded as revenue when
received. Under GAAP, deposits are recorded as increases to liabilities and
revenue is recognized as mortality and other assessments are made to
policyholders.
As the Company has no direct employees and does not own equipment, it
utilizes services provided by employees and equipment of SIAMCO and occupies
space in SIAMCO's office building. Accordingly, the Company participates in
an expense allocation system with certain affiliated companies. Expenses of
the Company consist of direct charges incurred and an allocation of expenses
(principally salaries, salary-related items, rent, and data processing
services) between certain affiliated companies. The Company recognized
expenses of $34,859,721 and $34,643,002 for 1996 and 1995, respectively,
under this allocation agreement.
H. ACQUISITION COSTS
Costs directly related to the acquisition of insurance premiums, such as
commissions and premium taxes, are charged to operations as incurred. Under
GAAP, such acquisition costs would be capitalized and amortized over the
policy periods.
I. FEDERAL INCOME TAX
The Company is included in the consolidated federal income tax return of
SIAMCO. Income taxes payable or recoverable are determined on a separate
return basis by the Company in accordance with a written tax allocation
agreement. Deferred federal income taxes are not provided for temporary
differences between tax and financial reporting as they would be under
GAAP. Additionally, federal income taxes are not provided for unrealized
gains (losses) on investments.
J. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
The Company participates with SIAMCO and certain other affiliated companies
in a defined benefit pension plan which covers substantially all of their
employees. Generally, the companies' funding and accounting policies are to
make the maximum contribution required under applicable regulation and to
charge such contributions to expense in the year they are deductible for
tax purposes. GAAP periodic net pension expense is based on the cost of
incremental benefits for employee service during the period, interest on
the projected benefit obligation, actual return on plan assets and
amortization of actuarial gains and losses.
In addition to providing the pension benefits, the Company, with SIAMCO
and its affiliated subsidiaries, provides certain health care, dental and
life insurance benefits to retired employees and their dependents.
Substantially all of the employees may become eligible for those benefits if
they reach normal retirement age while working for the Companies. The
expected costs of providing those benefits to employees and the employees'
beneficiaries and covered dependents are accounted for on an accrual basis
during the years that employees render service in accordance with NAIC
policy. SIAMCO is amortizing its transition obligation,
24
<PAGE> 53
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
created upon the initial valuation of post retirement benefits, over a
period of twenty years and a portion of the annual expense is
allocated to the Company.
(2) INVESTMENTS
The book value and estimated market value of bonds are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
BOOK UNREALIZED UNREALIZED MARKET
AT DECEMBER 31, 1996 VALUE GAINS LOSSES VALUE
----- ---------- ---------- ---------
<S> <C> <C> <C> <C>
US Treasury securities and
obligations of US Government
corporations and agencies $ 53,916,579 $ 2,167,246 $ (369,858) $ 55,713,967
Obligations of states and
political subdivisions $ 437,987 55,839 0 493,826
Corporate securities 691,186,142 30,898,142 (7,126,855) 714,957,429
Mortgage-backed securities 309,613,521 14,702,270 (1,366,354) 322,949,437
-------------- ------------ ----------- --------------
Total $1,055,154,229 $ 47,823,497 $(8,863,067) $1,094,114,659
============== ============ =========== ==============
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
BOOK UNREALIZED UNREALIZED MARKET
AT DECEMBER 31, 1995 VALUE GAINS LOSSES VALUE
----- ---------- ---------- ---------
<S> <C> <C> <C> <C>
US Treasury securities and
obligations of US Government
corporations and agencies $ 47,003,017 $ 4,227,481 $ (369) $ 51,230,129
Obligations of states and
political subdivisions $ 436,311 102,552 0 $ 538,863
Corporate securities 681,937,726 64,330,054 (2,076,597) 744,191,183
Mortgage-backed securities 322,903,431 28,207,436 (68,731) 351,042,136
-------------- ------------ ----------- --------------
Total $1,052,280,485 $ 96,867,523 $(2,145,697) $1,147,002,311
============== ============ =========== ==============
</TABLE>
Book value and estimated market value of bonds at December 31, 1996, by
contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because certain issuers have the right to call or prepay
obligations with or without call or prepayment penalties. Because most
mortgage-backed securities provide for periodic payments throughout their lives,
they are listed below in a separate category.
<TABLE>
<CAPTION>
BOOK ESTIMATED
VALUE VALUE
----- ---------
<S> <C> <C>
Due in one year or less $ 21,492,722 $ 21,905,864
Due after one year through five years 63,942,173 67,339,425
Due after five years through ten years 129,780,929 133,370,661
Due after ten years 530,324,884 548,549,272
-------------- --------------
Subtotal 745,540,708 771,165,222
Mortgage-backed securities 309,613,521 322,949,437
-------------- --------------
Total $1,055,154,229 $1,094,114,659
============== ==============
</TABLE>
25
<PAGE> 54
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
The bond portfolio distribution by quality rating (primarily Moody's) at
December 31, 1996 is summarized as follows:
<TABLE>
<S> <C>
Aaa 35%
Aa 6%
A 37%
Baa 20%
Ba & below and not rated 2%
---
100%
====
</TABLE>
Generally, bonds with ratings Baa and above are considered to be
investment grade.
Proceeds from sales of bonds during 1996 and 1995,
including maturities and calls, were $122,548,892 and $95,892,606,
respectively. In 1996 and 1995, respectively, gross gains of $1,339,605
and $1,063,112, and gross losses of $2,589,270 and $1,915,551 were
realized on these sales before transfer to the IMR liability.
At December 31, 1996 and 1995, investments carried at $4,470,358 and
$4,512,880, respectively, were on deposit with various governmental
agencies as required by law.
(3) UNCONSOLIDATED SUBSIDIARIES
---------------------------
The Company wholly owed Sentry Life Insurance Company of New York (SLONY)
during 1996 and 1995. Condensed financial information regarding SLONY is
shown as follows:
<TABLE>
<CAPTION>
SLONY
------------------------
1996 1995
---- ----
<S> <C> <C>
Investments $35,216,814 $37,758,583
Total assets 38,478,481 41,821,067
Policy reserves and benefits 20,136,829 19,714,180
Total liabilities 28,877,982 32,018,501
Statutory capital and surplus 9,600,499 9,802,566
Premium income 10,696,198 9,462,202
Net investment income 2,917,728 3,341,559
Benefits and expenses 12,945,335 11,066,418
Net income 716,983 1,283,176
</TABLE>
(4) NET INVESTMENT INCOME AND NET REALIZED AND UNREALIZED GAINS (LOSSES)
Sources of net investment income for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Dividends received from affiliates $ 800,000 $ 4,000,000
Interest:
Bonds 86,148,877 87,815,295
Short-term investments 908,456 1,190,421
Other investments 1,782,534 1,743,892
Amortization of IMR 1,220,848 1,218,220
----------- ----------
Total investment income 90,860,715 95,967,828
Investment expense 477,842 461,742
----------- -----------
Net investment income $90,382,873 $95,506,086
=========== ===========
</TABLE>
26
<PAGE> 55
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
The components of net realized gains (losses) and changes in net
unrealized gains (losses) on investments which are reflected in the
accompanying statutory-basis financial statements are as follows:
<TABLE>
<CAPTION>
REALIZED UNREALIZED
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Bonds $(1,249,665) $ (852,439)
Stocks 178,648 (8,971) $ (171,367) $ 44,139
Less deferred realized losses 1,249,665 845,995
Common stock of
unconsolidated subsidiaries (202,067) (2,677,569)
Less related federal income tax (330,520) (244,036)
----------- ---------- ---------- -----------
$ (151,872) $ (259,451) $ (373,434) $(2,633,430)
=========== ========== ========== ===========
</TABLE>
(5) INCOME TAXES
Federal income tax expense in the statutory-basis statements of
operations differs from that computed based on the federal statutory
corporate income tax rate of 35%. The reasons for these differences are
as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Federal income tax calculated at statutory rate
of 35% of income before federal income taxes and
net realized gains on investments $ 10,288,113 $11,284,674
Changes in liability for dividends $ 864,932 $ (296,979)
Accrual of bond discount $ (891,625) $ (398,747)
Adjustment for deferred acquisition costs $ (14,741) $ 86,902
Dividends received from subsidiaries $ (280,000) $(1,400,000)
Amortization of interest maintenance reserve $ (427,296) $ (426,377)
Other, net $ (157,519) $ 159,589
------------ -----------
Total $ 9,381,864 $ 9,009,062
============ ===========
</TABLE>
Under pre-1984 life insurance company income tax laws, a portion of a life
insurance company's "gain from operations" was not subject to current
income taxation but was accumulated, for tax purposes, in a memorandum
account designated as the "policyholders' surplus account." The amounts
included in this account are includable in taxable income of later years
at rates then in effect if the life insurance company elects to distribute
tax basis policyholders' surplus to stockholders as dividends or takes
certain other actions. Any distributions are first made from another tax
memorandum account known as the "stockholders' surplus account." The
accumulation in the tax policyholders' surplus and stockholders' surplus
accounts of the Company were $5,605,000 and $66,509,000, respectively, at
December 31, 1996.
Federal income tax returns of SIAMCO have been examined through 1993.
During 1996, the Company and the Internal Revenue Service reached
agreement on all issues relating to 1993 and prior years. In the opinion
of management, the Company has adequately provided for the possible effect
of future assessments related to prior years.
(6) DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 (SFAS 107),
"Disclosures about Fair Values of Financial Instruments," requires
disclosure of fair value information about financial instruments, whether
or not recognized in the balance sheets, for which it is practicable to
estimate those values. SFAS 107 defines fair value of a financial
instrument as the amount at which that instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidated sale.
The fair values presented on the next page represent management's best
estimates and may not be substantiated by comparisons to independent
markets and, in many cases, could not be realized in immediate settlement
of the instruments. Certain financial instruments and all nonfinancial
instruments are exempt from the disclosure requirements of SFAS 107.
Financial instruments which are exempt include life policy benefits with
mortality or morbidity risk. Therefore, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
27
<PAGE> 56
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL
For cash and short-term investments and accrued investment income, the carrying
amount approximates fair value.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
BONDS
Estimated fair value is generally based on quotes provided by independent
pricing services. If a quoted market price is not available, fair value is
estimated by management based on the quoted market price of comparable
instruments.
POLICY LOANS
Policy loans have no stated maturity dates; therefore, no reasonable estimate of
fair value can be made. Interest rates range from 5 to 8 percent.
SEPARATE ACCOUNTS
The fair value of the assets held in separate accounts and offsetting
liabilities are estimated based on the fair value of the underlying assets.
AGGREGATE RESERVES FOR INVESTMENT-TYPE CONTRACTS
The fair value of investment-type insurance contracts is estimated by reducing
the policyholder liability for applicable surrender charges.
STRUCTURED SETTLEMENTS
The fair value of the liability for structured settlements is estimated by
discounting future cash flows using the current rates being offered for similar
settlements.
LIABILITY FOR PREMIUM AND OTHER DEPOSIT FUNDS
The fair value for contracts with stated maturities is estimated by discounting
future cash flows using current rates being offered for similar contracts. For
those contracts with no stated maturity, the fair value is estimated by
calculating the surrender value.
The estimated fair values of the Company's financial instruments are as follows:
<TABLE>
<CAPTION>
STATEMENT ESTIMATED
AT DECEMBER 31, 1996 VALUE FAIR VALUE
--------- ----------
<S> <C> <C>
Assets:
Bonds $1,055,154,229 $1,094,114,659
Assets held in separate accounts 433,345,943 433,345,943
Liabilities:
Aggregate reserves for
investment-type contracts 86,160,277 85,534,609
Structured settlements 48,033,522 55,410,157
Liability for premium and
other deposit funds 596,529,186 591,498,214
Liabilities related to
separate accounts 433,345,943 433,345,943
</TABLE>
<TABLE>
<CAPTION>
STATEMENT ESTIMATED
AT DECEMBER 31, 1995 VALUE FAIR VALUE
--------- ----------
<S> <C> <C>
Assets:
Bonds $1,052,280,485 $1,147,002,311
Assets held in separate accounts 353,150,081 353,150,081
Liabilities:
Aggregate reserves for
investment-type contracts 91,340,270 90,337,319
Structured settlements 46,564,331 51,072,172
Liability for premium and
other deposit funds 592,383,093 591,225,611
Liabilities related to
separate accounts 353,150,081 353,150,081
</TABLE>
28
<PAGE> 57
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
(7) PENSION AND 401K PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company participates with SIAMCO and certain other affiliated
companies in a defined benefit pension plan which covers substantially
all of their employees. The benefits are based on years of service, the
average of the three highest of the last fifteen years of an employee's
compensation and primary social security benefits, as defined in the
plan. The Company is not a separately assignable entity for purposes of
allocation of accumulated plan benefits or assets. The Company was
allocated pension expense by SIAMCO of approximately $722,000 and
$1,256,000 in 1996 and 1995, respectively.
The Company participates with SIAMCO and its affiliated subsidiaries in a
qualified 401k Plan. Employees who meet certain eligibility requirements
may elect to participate in the Plan. Participants must contribute at
least one percent but no more than 16 percent of base compensation. Highly
compensated employees may contribute a maximum of 10 percent on a pre-tax
basis. For non-highly compensated employees, the entire 16% may be
deposited on a pre-tax basis. The Company matches up to 25% of employee
contributions up to the first 6 percent of base salary deposited by an
employee. The Company may make additional annual contributions to the Plan
based on operating profit. The Company was allocated approximately
$355,000 and $474,000 by SIAMCO for 401k Plan benefits in 1996 and 1995,
respectively.
In addition to the above-mentioned benefits, the Company, with SIAMCO and
its affiliated subsidiaries, provides certain health care, dental and life
insurance benefits to retired employees and their covered dependents. The
retiree health care benefits allocated to the Company by SIAMCO were
approximately $625,000 for 1996 and $588,000 for 1995.
(8) REINSURANCE
The Company had entered into reinsurance contracts for participation in
reinsurance pools and surplus protection for its wholly-owned
subsidiaries. Assumed life in-force amounted to approximately 30% and 29%
of total in-force (before ceded reinsurance) at December 31, 1996 and
1995, respectively.
The Company has entered into reinsurance ceded contracts to limit the net
loss potential arising from large risks. Generally, life benefits in
excess of $250,000 and all group health liabilities, except for certain
rate credit reserves, are ceded to reinsurers. The group health
liabilities are ceded to SIAMCO.
The Company cedes insurance to other insurers under various contracts
which cover individual risks or entire classes of business. Although the
ceding of insurance does not discharge the Company from its primary
liability to policyholders in the event any reinsurer might be unable to
meet the obligations assumed under the reinsurance agreements, it is the
practice of insurers to reduce their balances for amounts ceded. The
amounts included in the accompanying statutory-basis financial statements
for reinsurance were as follows:
<TABLE>
<CAPTION>
1996
(000'S OMITTED)
---------------
AFFILIATED UNAFFILIATED
---------- ------------
ASSUMED CEDED ASSUMED CEDED
------- ----- ------- -----
<S> <C> <C> <C> <C>
Premiums $ 346 $112,914 $7,117 $4,377
Benefits 49 108,034 7,157 2,215
Commissions 6 27,693 (1) 617
Future Policy Benefits:
Life & Annuities 37 - 28 1,282
Accident & Health - 232,583 343 77
Intercompany Receivable - 9,188 - -
</TABLE>
29
<PAGE> 58
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
1995
(000'S OMITTED)
---------------
AFFILIATED UNAFFILIATED
---------- ------------
ASSUMED CEDED ASSUMED CEDED
------- ----- ------- -----
<S> <C> <C> <C> <C>
Premiums $ 289 $101,267 $7,289 $3,819
Benefits 585 89,339 7,236 2,058
Commissions 5 27,213 (6) 604
Future Policy Benefits:
Life & Annuities 37 - 29 1,130
Accident & Health - 226,669 386 79
Intercompany Receivable - 6,130 - -
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
In the normal course of business, there are various legal actions and
proceedings pending against the Company. In the opinion of management and
counsel, the ultimate resolution of these matters will not have a
material adverse impact on the Company's statutory-basis financial
statements.
State guaranty funds can assess the Company for losses of insolvent or
rehabilitated companies. Mandatory assessments may be partially recovered
through a reduction in future premium taxes in some states. The Company
believes that its accrual for these assessments is adequate.
(10) OTHER RELATED PARTY TRANSACTIONS
The Company is the direct writer of certain employee benefit plans for
SIAMCO. Premiums included in the accompanying statutory-basis statements
of operations (net of ceded premiums) are approximately $20,364,000 and
$23,892,000 in 1996 and 1995, respectively. Because of the existence of
experience return agreements, the effect of these plans on the Company's
net income is not significant.
The Company has provided coverage in the form of annuity contracts as
structured settlements for SIAMCO workers' compensation claims. Reserves
for future policy benefits at December 31, 1996 and 1995 included
$48,033,522 and $46,564,331, respectively, relating to these contracts.
Also, see Notes 7 and 8 for other related party transactions.
(11) WITHDRAWAL CHARACTERISTICS OF ANNUITY RESERVES AND DEPOSIT LIABILITIES
Annuity reserves and deposits of approximately $1,104.2 million and
$1,022.2 million in 1996 and 1995, respectively, are subject to
withdrawal at the discretion of the annuity contract holders.
Approximately 94% and 93%, respectively, carry surrender charges.
30
<PAGE> 59
SENTRY LIFE INSURANCE COMPANY
SUPPLEMENTAL SCHEDULE OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1996
31
<PAGE> 60
SENTRY LIFE INSURANCE COMPANY
SUPPLEMENTAL SCHEDULE OF ASSETS AND LIABILITIES
FOR THE YEAR ENDED DECEMBER 31, 1996
SCHEDULE 1 - SELECTED FINANCIAL DATA
The following is a summary of certain financial data included in other exhibits
and schedules subjected to audit procedures by independent auditors and utilized
by actuaries in the determination of reserves.
<TABLE>
<S> <C>
Investment Income Earned:
Government Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 862,032
Other bonds (unaffiliated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,286,845
Common stocks of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,135
Premium notes, policy loans and liens . . . . . . . . . . . . . . . . . . . . . . . . . 1,732,363
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 908,456
Aggregate write-ins for investment income . . . . . . . . . . . . . . . . . . . . . . . 27,036
--------------
Gross investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89,639,867
==============
Mortgage Loans - Book Value:
Residential mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,967
==============
Mortgage Loans By Standing - Book Value:
Good standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 150,967
==============
Bonds and Stocks of Parents, Subsidiaries and Affiliates - Book Value:
Common stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,600,499
==============
Bonds and Short-Term Investments by Class and Maturity:
Bonds by Maturity - Statement Value
Due within one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,145,413
Over 1 year through 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,618,015
Over 5 years through 10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,365,547
Over 10 years through 20 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,944,594
Over 20 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302,080,660
--------------
Total by Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,055,154,229
==============
</TABLE>
32
<PAGE> 61
<TABLE>
<S> <C>
Bonds by Class - Statement Value
Class 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 799,791,380
Class 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,472,128
Class 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,890,721
Class 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Class 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Class 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
--------------
Total by Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,055,154,229
==============
Total Bonds Publicly Traded . . . . . . . . . . . . . . . . . . . . . . . $1,049,528,624
==============
Total Bonds Privately Placed . . . . . . . . . . . . . . . . . . . . . . $ 5,625,605
==============
Short-Term Investments - Book Value . . . . . . . . . . . . . . . . . . . . $ 28,736,493
==============
Cash on Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
==============
Life Insurance In Force (000's omitted):
Ordinary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,884,443
==============
Group Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,389,581
==============
Amount of Accidental Death Insurance In Force Under Ordinary
Policies (000's omitted) . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,808
==============
Life Insurance Policies with Disability Provisions In Force:
Ordinary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,873
==============
Group Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
==============
Supplementary Contracts In Force:
Ordinary - Not Involving Life Contingencies
Amount on Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 411,989
==============
Income Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 437,099
==============
Ordinary - Involving Life Contingencies
Income Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 105,651
==============
</TABLE>
33
<PAGE> 62
<TABLE>
<S> <C>
Annuities:
Ordinary
Immediate - Amount of Income Payable . . . . . . . . . . . . . . . . . . $ 1,619,549
==============
Deferred - Fully paid account balance . . . . . . . . . . . . . . . . . . $ 22,932,623
==============
Deferred - Not fully paid account balance . . . . . . . . . . . . . . . . $ 80,401,376
==============
Group
Amount of income payable . . . . . . . . . . . . . . . . . . . . . . . . $ 4,811,873
==============
Fully paid account balance . . . . . . . . . . . . . . . . . . . . . . . $ 12,356,153
==============
Not fully paid account balance . . . . . . . . . . . . . . . . . . . . . $ 993,677,327
==============
Accident and Health Insurance - Premiums In Force:
Ordinary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 241,752
==============
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 116,721,360
==============
Deposit Funds and Dividend Accumulations:
Dividend Accumulations - Account Balance . . . . . . . . . . . . . . . . . $ 333,019
==============
Claim Payments 1996:
Group Accident and Health Year - Ended December 31, 199X
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (162,408)
==============
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (53,908)
==============
1994 & prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0
==============
Other Accident & Health
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,118
==============
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,223
==============
1994 & prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,082
==============
</TABLE>
34
<PAGE> 63
PART C
OTHER INFORMATION
ITEM 24 Financial Statements and Exhibits
(a) Financial Statements of Sentry Variable Account II
Included in Part A:
Condensed Financial Information
Included in Part B:
Report of Independent Accountants
Statement of Assets, Liabilities and Contract Owners'
Equity, December 31, 1996
Statements of Operations and Changes in Contract
Owners' Equity for the years ended December 31, 1996
and 1995
Notes to Financial Statements, December 31, 1996 and 1995
Financial Statements of Sentry Life Insurance Company
Included in Part B:
Report of Independent Accountants
Statutory-Basis Balance Sheets, December 31, 1996 and 1995
Statutory-Basis Statements of Operations for the years
ended December 31, 1996 and 1995
Statutory-Basis Statements of Changes in Capital Stock and
Surplus for the years ended December 31, 1996 and 1995
Statutory-Basis Statements of Cash Flow for the years
ended December 31, 1996 and 1995
Notes to Statutory-Basis Financial Statements
<PAGE> 64
ITEM 24
(b) Exhibits
(1) Resolutions of the Board of Directors of Sentry Life
Insurance Company
(2) Not Applicable
(3)(i) Principal Underwriter Agreement
(3)(ii) Registered Representatives Agreement
(3)(iii) General Agent Agreement
(4)(i) Individual Flexible Purchase Payment Deferred
Variable Annuity Contract
(4)(ii) Contract Amendment pursuant to Tax Reform Act of 1984
(5) Application Form
(6)(i) Articles of Incorporation of Sentry Life Insurance
Company
(6)(ii) Bylaws
(7) Not Applicable
(8)(i) Sales Agreement (Fund Participation Agreement)
(8)(ii) Assignment and Modification Agreement*
(9) Opinion and Consent of Counsel
(10) Consent of Independent Accountants
(11) Not Applicable
(12) Agreement Governing Contribution to Sentry Variable
Account II
(13) Calculation of Performance Information
(27) Not applicable
* Exhibit (8)(ii) is incorporated herein by reference to such exhibit
in Registrant's Post-Effective Amendment No. 16 to Form N-4 filed
electronically on or about April 29, 1996.
ITEM 25 Directors and Officers of the Depositor
The following persons are the officers and directors of Sentry Life
Insurance Company. The principal business address for each director
and officer of the Depositor is 1800 North Point Drive, Stevens Point,
Wisconsin 54481.
Positions and Offices
Name With Depositor
---- --------------------
Larry C. Ballard Director and Chairman of the Board
Dale R. Schuh Director and President
Richard A. Huseby Vice President
David M. Potts Vice President
William M. O'Reilly Director and Secretary
Thomas H. Weingarten Treasurer
Steven R. Boehlke Director
<PAGE> 65
ITEM 26 Persons Controlled By or Under Common Control With Depositor
The following is a description of all persons who might be considered to be
directly or indirectly controlled by or under common control with the
Depositor:
1. The Depositor, a Wisconsin corporation, is a wholly-owned subsidiary of
Sentry Insurance a Mutual Company ("Sentry Insurance"), a Wisconsin
corporation.
2. The following companies are also wholly-owned subsidiaries of Sentry
Insurance:
(a) Middlesex Insurance Company ("Middlesex"), a Wisconsin corporation;
(b) Dairyland Insurance Company ("Dairyland"), a Wisconsin corporation;
(c) Sentry Fund, Inc., a Maryland corporation;
(d) Parker Stevens Agency, Inc., a Wisconsin corporation;
(e) Parker Stevens Agency of Mass., Inc., a Massachusetts corporation;
(f) Sentry Investment Management, Inc., a Delaware corporation;
(g) Sentry Equity Services, Inc., a Delaware corporation;
(h) Sentry Services, Inc., a Wisconsin corporation;
(i) Sentry Aviation Services, Inc., a Wisconsin corporation; and
(j) WAULECO, Inc., a Wisconsin corporation.
3. Sentry Insurance is also affiliated with Sentry Insurance Foundation, Inc.,
a Wisconsin corporation.
4. Sentry Insurance is also affiliated with Sentry Lloyd's of Texas, a Texas
Lloyd's corporation.
5. Patriot General Insurance Company, a Wisconsin corporation, is a
wholly-owned subsidiary of Middlesex.
6. Sentry Life Insurance Company of New York, a New York corporation, is a
wholly-owned subsidiary of the Depositor.
7. Dairyland County Mutual Insurance Company of Texas, a Texas corporation, is
affiliated with Dairyland.
ITEM 27 Number of Contract Owners
As of April 1, 1997, there were 1,563 qualified contract owners and 582
non-qualified contract owners.
ITEM 28 Indemnification
Under the Bylaws of Sentry Life Insurance Company, each director and officer of
the Company shall be indemnified by the Company against all costs and expenses
actually and necessarily incurred by him or her in connection with the defense
of any action, suit or proceeding in which he or she is made a party by reason
of his or her being or having been a director or officer of the Company,
whether or not he or she continues to be a director or officer at the time of
incurring such costs or expense, except in relation to matters as to which he
or she shall be adjudged in such action, suit or proceeding to be liable for
gross negligence or willful misconduct in the performance of his or her duties
as such director or officer. This right of indemnification shall not be
exclusive of other rights to which any director or officer may be entitled as a
matter of law or agreement.
Sentry Equity Services, Inc., the principal underwriter, is a Delaware
corporation. The Delaware General Corporation Law, Section 145, provides for
indemnification of directors, officers, employees and agents as follows:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS -(a) A
corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably
<PAGE> 66
incurred by the person in connection with such action, suit or proceeding
if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe the person's conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and conditions, if any,
as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
<PAGE> 67
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw,
agreement, vote of stockholders or disinterested directors, or otherwise.
The Court of Chancery may summarily determine a corporation's obligation to
advance expenses (including attorneys' fees).
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 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 controlling precedent,
submit to a court of appropriate jurisdiction the question of 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) Sentry Equity Services, Inc., the Principal Underwriter for the
Contracts, also acts as Principal Underwriter for:
<PAGE> 68
Sentry Variable Account I
Sentry Variable Life Account I
Sentry Fund, Inc.
(b) The following persons are the officers and directors of Sentry
Equity Services, Inc. The principal business address for each
director and officer of the Principal Underwriter is 1800 North
Point Drive, Stevens Point, Wisconsin 54481:
Positions and Offices
Name With Underwriter
---- ----------------------
Larry C. Ballard Director and Chairman of the Board
John A. Stenger President
David M. Potts Vice President
William M. O'Reilly Secretary
Thomas H. Weingarten Treasurer
Dale R. Schuh Director
(c)
Name of Net Underwriting
Principal Discounts & Compensation On Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ----------- ---------------- --------------- ----------- ------------
Sentry Equity
Services, Inc. $ 51,742 $ 0.00 $ 0.00 $ 338,226
ITEM 30 Location of Accounts and Records
As required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder, Sentry
Equity Services, Inc. and Sentry Life Insurance Company maintain
physical possession of the accounts, books or documents of the
Separate Account at 1800 North Point Drive, Stevens Point, Wisconsin
54481.
ITEM 31 Management Services
Not Applicable.
ITEM 32 Undertakings
(a) Registrant hereby undertakes to 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 sixteen (16) months old for so
long as payments under the variable annuity contracts may be
accepted.
(b) Registrant hereby undertakes to 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 postcard or
similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement
of Additional Information.
(c) Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statement required to
be made available under this Form promptly upon written or oral
request.
<PAGE> 69
(d) Sentry Life Insurance Company ("Company") hereby represents that
the fees and charges deducted under the Contracts described in
the Prospectus, in the aggregate, are reasonable in relation to
the services rendered, the expenses to be incurred and the risks
assumed by the Company.
REPRESENTATIONS
The Registrant hereby represents that it is relying upon a No Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88), and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions imposed
by Section 403(b)(11) in each Registration Statement, including the
Prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions imposed
by Section 403(b)(11) in any sales literature used in connection with the
offer of the contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants; and
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of: (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his or her contract value.
<PAGE> 70
Signatures
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has caused
this Registration Statement to be signed on its behalf, in the City of Stevens
Point, State of Wisconsin, on the 21st day of April, 1997.
Sentry Variable Account II
Registrant
By: Sentry Life Insurance Company
By: s/Dale R. Schuh
-------------------------------------
Dale R. Schuh, President and Director
Sentry Life Insurance Company
Depositor
By: s/Dale R. Schuh
-------------------------------------
Dale R. Schuh, President and Director
<PAGE> 71
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
s/Larry C. Ballard Chairman of the Board and April 21, 1997
- ------------------------ Director
Larry C. Ballard
s/Dale R. Schuh President and Director April 21, 1997
- ------------------------
Dale R. Schuh
s/Steven R. Boehlke Director April 21, 1997
- ------------------------
Steven R. Boehlke
s/William M. O'Reilly Secretary and Director April 21, 1997
- ------------------------
William M. O'Reilly
s/Thomas H. Weingarten Treasurer April 21, 1997
- ------------------------
Thomas H. Weingarten
s/Richard A. Huseby Vice President April 21, 1997
- ------------------------
Richard A. Huseby
s/David M. Potts Vice President April 21, 1997
- ------------------------
David M. Potts
<PAGE> 72
INDEX TO EXHIBITS
Exhibit
- -------
99.B 1 Resolutions of the Board of Directors of Sentry Life Insurance
Company
99.B 3(i) Principal Underwriter Agreement
3(ii) Registered Representatives Agreement
3(iii) General Agent Agreement
99.B 4(i) Individual Flexible Purchase Payment Deferred Variable Annuity
Contract
4(ii) Contract Amendment pursuant to Tax Reform Act of 1984
99.B 5 Application Form
99.B 6(i) Articles of Incorporation of Sentry Life Insurance Company
6(ii) Bylaws
99.B 8(i) Sales Agreement (Fund Participation Agreement)
99.B 9 Opinion and Consent of Counsel
99.B 10 Consent of Independent Accountants
99.B 12 Agreement Governing Contribution to Sentry Variable Account II
99.B 13 Calculation of Performance Information
<PAGE> 1
EXHIBIT 99.B1
SENTRY LIFE INSURANCE COMPANY
RECORD OF DIRECTORS MINUTES AUGUST 2, 1983
APPENDIX TO MINUTES OF DIRECTORS MEETING OF AUGUST 2, 1983
ITEM 1
VARIABLE
ANNUITY
WHEREAS, the Company is desirous of developing and marketing certain
types of variable and fixed annuity contracts which may be required to register
with the Securities and Exchange Commission pursuant to the various securities
laws; and
WHEREAS, it will be necessary to take certain actions including, but
not limited to, establishing separate accounts for segregation of assets and
seeking approval of regulatory authorities;
NOW, THEREFORE, BE IT RESOLVED: That the Company is hereby authorized
to develop the necessary program in order to effectuate the issuance and sale
of variable and fixed annuity contracts; and
FURTHER RESOLVED: That this Company is hereby authorized to establish
and to designate one or more separate accounts of this Company in accordance
with the provisions of state insurance law. The purpose of any such separate
account shall be to provide an investment medium for such variable an fixed
annuity contracts issued by this Company as may be designated as participating
therein. Any such separate account shall receive, hold, invest, and reinvest
only the monies arising from (i) premiums, contributions or payments made
pursuant to the variable and fixed annuity contracts participating therein,
(ii) such assets of the Company as shall be deemed appropriate to be invested
in the same manner as the assets applicable to the Company's reserve liability
under the variable and fixed annuity contracts participating in such separate
accounts; or as may be necessary for the establishment of such separate
accounts; (iii) the dividends, interest and gains produced by the foregoing;
and
FURTHER RESOLVED: That the proper officers of the Company are hereby
authorized;
(i) to register the variable and fixed annuity contracts
participating in any such separate accounts under the
provisions of the Securities Act of 1933 to the extent that it
shall be determined that such registration is necessary;
(ii) to register any such separate accounts with the Securities and
Exchange Commission under the provisions of the
Investment Company Act of 1940 to the extent that it shall be
determined that such registration is necessary;
(iii) to prepare, execute and file such amendments to any
registration statements filed under the aforementioned
Acts (including post-effective amendments), supplements and
exhibits thereto as they may be deemed necessary or desirable;
<PAGE> 2
SENTRY LIFE INSURANCE COMPANY
RECORD OF DIRECTORS MINUTES AUGUST 2, 1983
APPENDIX TO MINUTES OF DIRECTORS MEETING OF AUGUST 2, 1983
(iv) to apply for exemption from those provisions of the
aforementioned Acts as shall be deemed necessary and to
take any and all other actions which shall be deemed necessary,
desirable, or appropriate in connection with such Acts;
(v) to file the variable and fixed annuity contracts participating
in any such separate accounts with the appropriate
state insurance departments and to prepare and execute all
necessary documents to obtain approval of the insurance
departments;
(vi) to prepare or have prepared and execute all necessary
documents to obtain approval of, or clearance with, or
other appropriate actions required, of any other regulatory
authority that may be necessary; and
FURTHER RESOLVED: That for the purpose of facilitating the execution
and filing of any registration statement and of remedying any deficiencies
therein by appropriate amendments (including post-effective amendments) or
supplements thereto, the President of the Company and the Secretary of the
Company, and each of them, are hereby designed as attorneys and agents of the
Company and the appropriate officers of the Company be, and they hereby are,
authorized and directed to grant the power of attorney of the Company to the
President of the Company and the Secretary of the Company by executing and
delivering to such individuals, on behalf of the Company, a power of attorney;
and
FURTHER RESOLVED: That in connection with the offering and sale of the
fixed and variable annuity contracts in the various States of the United
States, as and to the extent necessary, the appropriate officers of the Company
be, and they hereby are, authorized to take any and all such action, including
but not limited to the preparation, execution and filing with proper State
authorities, on behalf of and in the name of the Company, of such applications,
notices, certificates, affidavits, powers of attorney, consents to service of
process, issuer's covenants, certified copies of minutes of shareholders' and
directors' meetings, bonds, escrow and impounding agreements and other writings
and instruments, as may be required in order to render permissible the offering
and sale of the fixed and variable annuity contracts in such jurisdictions; and
FURTHER RESOLVED: That the forms of any resolutions required by any
State authority to be filed in connection with any of the documents or
instruments referred to in any of the preceding resolutions be, and the same
hereby are, adopted as if fully set forth herein if (1) in the opinion of the
appropriate officers of the Company, the adoption of the resolutions is
advisable and (2) the Secretary or any Assistant Secretary of the Company
evidences such adoption by inserting into these minutes copies of such
resolutions; and
<PAGE> 3
SENTRY LIFE INSURANCE COMPANY
RECORD OF DIRECTORS MINUTES AUGUST 2, 1983
APPENDIX TO MINUTES OF DIRECTORS MEETING OF AUGUST 2, 1983
FURTHER RESOLVED: That the officers of this Company, and each of them,
are hereby authorized to prepare and to execute the necessary documents and to
take such further actions as may be deemed necessary or appropriate, in their
discretion, to implement the purpose of these resolutions.
/s/ Loraine R. Przybylski
-------------------------
Temporary Secretary
<PAGE> 1
EXHIBIT 99.B3(i)
PRINCIPAL UNDERWRITER'S AGREEMENT
IT IS HEREBY AGREED by and between SENTRY LIFE INSURANCE COMPANY
("INSURANCE COMPANY") on behalf of SENTRY VARIABLE ACCOUNT II (the "Variable
Account") and Sentry Equity Services, Inc. ("PRINCIPAL UNDERWRITER") as follows:
I
INSURANCE COMPANY proposes to issue and sell variable annuity
contracts ("Annuity Contracts") to the public through Principal Underwriter.
The PRINCIPAL UNDERWRITER agreed to provide sales service subject to the terms
and conditions hereof. Annuity Contracts to be sold are more fully described in
the registration statement and the prospectus hereinafter mentioned. Such
Annuity Contracts will be issued by Insurance Company through the Variable
Account.
II
INSURANCE COMPANY grants PRINCIPAL UNDERWRITER the exclusive
right, during the term of this Agreement, subject to registration requirements
of the Securities Act of 1933 and the Investment Company Act of 1940 and the
provisions of the Securities Exchange Act of 1934, to be the distributor of
Annuity Contracts issued through the Variable Account. PRINCIPAL UNDERWRITER
will sell Annuity
<PAGE> 2
Contracts under such terms as set by Insurance Company and will make such sales
to purchasers permitted to buy such Annuity Contracts as specified in the
prospectus.
III
PRINCIPAL UNDERWRITER agrees that it shall undertake at its own
expense, to perform all duties and functions which are necessary and proper for
the distribution of the Annuity Contracts.
IV
PRINCIPAL UNDERWRITER shall be compensated for its distribution
service in the amount of 4.7% of all Annuity Purchase Payments accepted by
Insurance Company on the Annuity Contracts covered hereby.
V
On behalf of the Variable Account, INSURANCE COMPANY shall
furnish PRINCIPAL UNDERWRITER with copies of all prospectuses, financial
statements and other documents with PRINCIPAL UNDERWRITER reasonably requests
for use in connection with the distribution of Annuity Contracts. INSURANCE
COMPANY shall provide to PRINCIPAL UNDERWRITER such number of copies of the
current effective prospectus as Principal Underwriter shall request.
<PAGE> 3
VI
PRINCIPAL UNDERWRITER is not authorized to give any information,
or to make any representations concerning Variable Account of Insurance Company
other than those contained in the current registration statement or prospectus
filed with the Securities and Exchange commission or such sales literature as
may be authorized by INSURANCE COMPANY.
VII
Both Parties to this Agreement agree to keep the necessary
records as indicated by applicable state and federal law and to render the
necessary assistance to one another for the accurate and timely preparation of
such records.
VIII
This Agreement shall be effective upon the execution hereof and
will remain in effect unless terminated as hereinafter provided. This Agreement
shall automatically be terminated in the event of its assignment by PRINCIPAL
UNDERWRITER. This Agreement may at any time be terminated by either party
hereto upon not less than 60 days' written notice to the other party.
IX
All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have
<PAGE> 4
been given on the date of service if served personally on the party to whom
notice is to be given, or on the date of mailing if sent by First Class Mail,
Registered or Certified, postage prepaid and properly addressed.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be signed on their behalf by their respective officers thereunto
duly authorized.
EXECUTED this 1st day of May, 1984.
INSURANCE COMPANY
SENTRY LIFE INSURANCE COMPANY
By: Thomas H. Weingarten
-------------------------
Assistant Treasurer
ATTEST: Caroline E. Fribance
-------------------------
Secretary
PRINCIPAL UNDERWRITER
SENTRY EQUITY SERVICES, INC.
By: John E. Stenger
-------------------------
President
ATTEST: Caroline E. Fribance
-------------------------
Secretary
<PAGE> 1
EXHIBIT 99.B3(ii)
SENTRY LIFE INSURANCE COMPANY
SENTRY EQUITY SERVICES, INC.
Home Office:
1800 North Point Drive
Stevens Point, WI 54481
REGISTERED REPRESENTATIVES AGENT AGREEMENT
Agreement by and between Sentry Life Insurance Company ("Sentry"), Sentry
Equity Services, Inc. ("SESI"), and Registered Representative_________________
______________________________________________________________________________
_______________________________ ("Representative") of_________________________
______________________________________________________________________________
______________________________________________________________________________
__________ ("Broker-Dealer").
Sentry, in consideration of and subject to the terms and conditions set forth
below, appoints Representative as its agent solely for the solicitation of
applications for the sales of certain insurance and annuity contracts ("Plans")
which are deemed to be securities under the Securities Act of 1933.
I. PLANS
The Plans issued by Sentry to which this Agreement applies are listed in the
Broker-Dealer's Compensation Schedule currently in effect.
II. THE BROKER-DEALER
The Broker-Dealer shall at all times during the continuance of this Agreement
be a registered broker-dealer with the Securities and Exchange Commission
("SEC"), a member of the National Association of Securities Dealers, Inc.
("NASD") and shall have a Broker-Dealer Supervisory and Service Agreement in
effect with Sentry and SESI, or if SESI is the Broker-Dealer the Principal
Underwriters Agreement shall be in effect between SESI and Sentry.
III. REGISTRATION AND LICENSING
(a) Representative, when soliciting for sales or selling the Plans, shall at
all time be associated with a SEC and NASD registered Broker-Dealer as a NASD
Registered Representative, and, if the particular jurisdiction requires, shall
be licensed or registered as a securities agent of the Broker-Dealer with which
the Representative is associated.
(b) Representative, when soliciting for sales or selling the Plan, must at all
time be validly licensed, registered or appointed by Sentry as an agent in
accordance with the jurisdictional requirements of the place where the
solicitations and sales take place.
(c) Representative may solicit for and sell the Plans any place the Plans are
filed or approved for sale by the governmental authorities having jurisdiction,
provided Representative, the Broker-Dealer with whom the Representative is
associated and Sentry are all validly licensed, registered or otherwise
qualified, as required for solicitation and sales of the Plans.
IV. COMPLIANCE WITH LAWS, RULES AND REGULATIONS
Representative shall comply strictly with: (a) the laws, rules and regulations
of all state or local governmental jurisdictions in which Representative
solicits applications for and sells Plans; (b) the laws, rules and regulations
of the SEC; (c) the rules of NASD; (d) the rules of the Broker-Dealer with
which he or she is associated; (e) the rules of SESI; (f) the rules of Sentry.
Representative understands that failure to comply with such laws, rules and
regulations may result in disciplinary action against the Representative by the
SEC, a state or other local regulatory agency that has jurisdiction, the NASD,
the Broker-Dealer with which the Representative is associated, SESI and Sentry.
Before any solicitations or sales of the Plans are made, Representative shall
become familiar with and abide by the laws, rules and regulations of all of the
above mentioned agencies or parties as are currently in effect and as they may
be changed from time to time.
V. COMPENSATION
Representative shall be entitled to receive through the Broker-Dealer with
which he or she has been associated, compensation based on all premiums and/or
purchase payments received by Sentry while this Agreement is in force from
applicants pursuant to applications for the Plans issued by Sentry provided
such applications were obtained by Representative and submitted to Sentry
through the Broker-Dealer with which Representative is associated.
The amount of compensation Representative shall receive from the Broker-Dealer
with which he or she is associated shall be determined in accordance with the
Broker-Dealer's compensation schedule for the Plans in effect at the time a
premium or a purchase payment is received by Sentry. Representative also
agrees that Sentry is not responsible for Representative's compensation and
that Representative shall look to and seek such compensation only from the
Broker-Dealer with which Representative is associated.
Representative shall not be entitled to any compensation based on premiums
and/or purchase payments received by Sentry after termination of this
Agreement.
<PAGE> 2
VI. APPLICATION PROCEDURES
Representative shall have all applications for the Plans accurately completed
or reviewed and signed by the applicant and shall submit the applications to
Sentry through the Broker-Dealer with which Representative is associated
together with all payments received from applicants without any reductions.
Representative shall cause all checks or orders to be made payable to Sentry
Life Insurance Company. Representative shall also comply with any other
application procedures that may be established by the Broker-Dealer, SESI and
Sentry which may be in effect from time to time and of which Representative is
notified.
VII. GENERAL PROVISIONS
A. RIGHT TO REJECTION.
Broker-Dealer and/or Sentry each in their sole discretion, may reject any
applications or payment remitted by Representative through the Broker-Dealer
and may refund an applicant's payments to the applicant. In the event such
refunds are made and if Representative has received compensation based on an
applicant's payment that is refunded, Representative shall promptly repay such
compensation to the Broker-Dealer. If repayment is not promptly made, the
Broker-Dealer may at its sole option deduct any amounts due it from
Representative from future commissions otherwise payable to Representative.
B. REPRESENTATIONS.
Representative shall not make any statements concerning the Plans except those
that are contained in the current prospectuses and sales literature approved by
the Broker-Dealer, SESI and Sentry and shall not solicit for applications or
make sales through the use of mailings, advertisements or other methods of
contact unless the material and method has the written approval of the
Broker-Dealer.
C. REPRESENTATIVE'S METHOD OF OPERATIONS.
Representative has the sole responsibility for developing prospects for
sales and is free to determine subject to any applicable regulatory
requirements, to whom, where and how solicitations and sales shall be made.
Representative is not required to devote any particular portion of
Representative's time to developing Plans business or as a Representative
associated with the Broker-Dealer or as an agent of Sentry, and shall not be
reimbursed for any operational or administrative expenses, but must pay such
expenses out of compensation which is described in Paragraph V above.
D. RELATIONSHIP.
The relationship of Representative to Sentry and SESI is that of independent
contractor solely for the sale of the Plans and nothing herein shall be
construed to create an employee-employer relationship between Representative
and SESI and Sentry. This Agreement does not create any exclusive rights of
any kind for either Representative, Broker-Dealer, SESI or Sentry.
E. ASSIGNMENT.
Neither this Agreement nor any of its benefits may be assigned by
Representative without the written consent of SESI and Sentry and any
assignment of this Agreement, compensation or other benefits of obligations
hereunder shall not be valid if made without such consent.
VIII. TERMINATION
This Agreement may be terminated by Sentry or on Sentry's behalf, by SESI or by
the Representative upon five (5) days written notice sent by certified mail to
the last address of record of the other party, and automatically terminates if:
(a) Representative ceases to be validly licensed, appointed and NASD
registered, or (b) the Broker-Dealer with which Representative is associated
ceases to have a Broker-Dealer Supervisory and Service Agreement for the Plans
in effect or ceases to be SEC or NASD registered.
Upon termination of this Agreement, any prospectus, applications or other
material and supplies furnished by Sentry, SESI or Broker-Dealer shall be
promptly returned to SESI or the Broker-Dealer.
IX. SESI AS BROKER-DEALER
If SESI and Broker-Dealer are the same person or legal entity, such person or
legal entity shall have the rights and obligations hereunder of both SESI and
Broker-Dealer and this Agreement shall be binding and enforceable by and
against such person or legal entity in both capacities.
X. MISCELLANEOUS
This Agreement may not be modified unless the modification is in writing signed
by all parties; however, if an application for a Plan is submitted to Sentry by
the Representative after Sentry has notified Representative of a modification
in this Agreement, such modification shall automatically be effective for
business submitted after such notice.
This Agreement shall be governed by the laws of the State of Wisconsin.
This Agreement shall be effective upon execution by SESI.
Approved and Accepted:
___________________________________________
Broker-Dealer (if other than SESI)
By ________________________________________
___________________________________________
Registered Representative
Dated _____________________________________
SENTRY LIFE INSURANCE COMPANY
By [SIG]
________________________________________
Assistant Secretary
SENTRY EQUITY SERVICES, INC.
By ________________________________________
Dated _____________________________________
<PAGE> 3
SENTRY REGISTERED REPRESENTATIVE
COMMISSION SCHEDULES
EFFECTIVE JUNE 15, 1988
Attached to and made a part of the REGISTERED REPRESENTATIVES AGENT AGREEMENT
between SENTRY LIFE INSURANCE COMPANY, ("SENTRY"), SENTRY EQUITY SERVICES, INC.
("SESI") AND REGISTERED REPRESENTATIVE ("PAYEE").
COMMISSIONS
Commissions will be paid by SESI to PAYEE based on gross premiums or purchase
payments paid in cash or check and accepted by Sentry on plans made available
by SENTRY under said REGISTERED REPRESENTATIVES AGENT AGREEMENT, except that
commissions will not be paid on premiums or purchase payments submitted
directly from surrender proceeds of fixed annuity products issued by SENTRY
Commissions will be paid at rates determined in accordance with the following
schedule:
VARIABLE ANNUITIES
COMMISSION RATE (% OF PREMIUM)
3.00% - All contracts except for;
1.00% - Contracts issues to Sentry employees or members of their immediate
family.
VARIABLE UNIVERSAL LIFE
<TABLE>
<CAPTION>
COMMISSION RATES
INCREASES ABOVE PREVIOUS
NEW POLICIES HIGH SPECIFIED AMOUNT
<S> <C> <C>
First Year Premium
Up to Target Premium 50.0% 30.0%
First Year Premium in
Excess of Target Premium 3.5% 1.5%
Renewal Premium 1.5% 1.5%
</TABLE>
For the purposes of this schedule, First Year Premium shall mean the premium
produced during the first 12 months following the effective date of the policy
increase in Specified Amount. Commissions will be annualized in the first
contract year for policies written on salary savings or ABC modes of payment.
SERVICE FEES
Service Fees will be paid annually by SESI to PAYEE based on a percentage rate
of aggregate in force contract values with respect to plans sold by Payee.
Service Fees will be paid at rates determined in accordance with the following
schedule:
VARIABLE ANNUITIES
A service fee will be paid by SESI to PAYEE at the annual rate of .10% of
the cash values of variable annuities attributable to PAYEE and in force during
the year.
VARIABLE UNIVERSAL LIFE
A service fee will be paid by SESI to PAYEE at the annual rate of .13% of
the cash value under the Variable Universal Life Policies attributable to Payee
and in force during the year.
Note: Variable Annuity and Variable Universal Life Service Fee payments are
contingent upon SESI's receipt of distribution expense reimbursement from
Advisers Management Trust. (12(b) 1 Revenue)
REPAYMENT OF COMMISSIONS
In the event that a contract is surrendered within the first year of the issue
date, a portion of the commission paid thereon shall be charged back to the
PAYEE based on the following schedule:
VARIABLE ANNUITIES
<TABLE>
<CAPTION>
CHARGE BACK AS A %
OF COMMISSIONS RECEIVED
DURATION THAT CONTRACT DURING THE FIRST
WAS IN-FORCE CONTRACT YEAR
<S> <C>
Less than 3 months 100%
Greater than or equal to 3 months,
but less than 6 months 75%
Greater than or equal to 6 months,
but less than 9 months 50%
Greater than or equal to 9 months,
but less than 12 months 25%
</TABLE>
VARIABLE UNIVERSAL LIFE
If a policy on which commissions have been annualized lapses or surrenders
during the first contract year, the charge back will equal the commission paid
on the excess of annualized premium over actual premium paid.
OTHER PROVISIONS
In the event a policy, contract, or certificate is returned to SENTRY pursuant
to the so called "ten day free look" or "right to return contract" provisions
of the policy or contract, the full commission paid thereon shall be charged
back to the PAYEE. It should be noted that the ten day period in which an
Owner may return the contract commences upon receipt of the contract by the
Owner. If a contract is mailed to the PAYEE for delivery to the Owner, such a
"ten day free look" must be exercised within 30 days of the mailing date to be
timely. If an owner returns a contract within 10 days after receipt by the
Owner, but it is more than 30 days after mailing to the PAYEE, the PAYEE shall
be responsible for paying to the Owner any loss in contract value as a result
of late delivery.
REFUNDS
Should any premium or purchase payment on any policy, contract, or certificate
issued by SENTRY be refunded, for any reason, PAYEE shall repay or return
commissions received by it with respect to such premiums or purchase payment.
<PAGE> 4
ASSOCIATE/INDEPENDENT AGENT
COMMISSION SCHEDULES
EFFECTIVE JUNE 15, 1988
Attached to and made a part of the REGISTERED REPRESENTATIVES AGENT AGREEMENT
between SENTRY LIFE INSURANCE COMPANY, ("SENTRY"), SENTRY EQUITY SERVICES, INC.
("SESI") AND REGISTERED REPRESENTATIVE ("PAYEE").
COMMISSIONS
Commissions will be paid by SESI to PAYEE based on gross premiums or purchase
payments paid in cash or check and accepted by Sentry on plans made available
by Sentry under said REGISTERED REPRESENTATIVES AGENT AGREEMENT, except that
commissions will not be paid on premiums or purchase payments submitted
directly from surrender proceeds of fixed annuity products Issued by SENTRY
Commissions will be paid at rates determined in accordance with the following
schedule:
VARIABLE ANNUITIES
COMMISSION RATE (% OF PREMIUM)
3.40% - All contracts except for;
1.00% - Contracts issues to Sentry employees or members of their immediate
family.
VARIABLE UNIVERSAL LIFE
<TABLE>
<CAPTION>
COMMISSION RATES
INCREASES ABOVE PREVIOUS
NEW POLICIES HIGH SPECIFIED AMOUNT
<S> <C> <C>
First Year Premium
Up to Target Premium 70.0% 40.0%
First Year Premium in
Excess of Target Premium 4.25% 1.75%
Renewal Premium 1.75% 1.75%
</TABLE>
For the purposes of this schedule, First Year Premium shall mean the premium
produced during the first 12 months following the effective date of the policy
increase in Specified Amount. Commissions will be annualized in the first
contract year for policies written on salary savings or ABC modes of payment.
SERVICE FEES
Service Fees will be paid annually by SESI to Payee based on a percentage rate
of aggregate in force contract values with respect to plans sold by Payee.
Service Fees will be paid at rates determined in accordance with the following
schedule:
VARIABLE ANNUITIES
A service fee will be paid by SESI to PAYEE at the annual rate of .10% of the
cash values of variable annuities attributable to Payee and in force during the
year.
VARIABLE UNIVERSAL LIFE
A service fee will be paid by SESI to PAYEE at the annual rate of .13% of
the cash value under the Variable Universal Life Policies attributable to PAYEE
and in force during the year.
NOTE: Variable Annuity and Variable Universal Life Service Fee payments are
contingent upon SESI's receipt of distribution expense reimbursement from
Advisers Management Trust. (12(b) 1 Revenue)
REPAYMENT OF COMMISSIONS
In the event that a contract is surrendered within the first year of the issue
date, a portion of the commission paid thereon shall be charged back to the
PAYEE based on the following schedule:
VARIABLE ANNUITIES
<TABLE>
<CAPTION>
CHARGE BACK AS A %
OF COMMISSIONS RECEIVED
DURATION THAT CONTRACT DURING THE FIRST
WAS IN-FORCE CONTRACT YEAR
<S> <C>
Less than 3 months 100%
Greater than or equal to 3 months,
but less than 6 months 75%
Greater than or equal to 6 months,
but less than 9 months 50%
Greater than or equal to 9 months,
but less than 12 months 25%
</TABLE>
VARIABLE UNIVERSAL LIFE
If a policy on which commissions have been annualized lapses or surrenders
during the first contract year, the charge back will equal the commission paid
on the excess of annualized premium over actual premium paid.
OTHER PROVISIONS
In the event a policy, contract, or certificate is returned to SENTRY pursuant
to the so called "ten day free look" or "right to return contract" provisions
of the policy or contract, the full commission paid thereon shall be charged
back to the PAYEE. It should be noted that the ten day period in which an
Owner may return the contract commences upon receipt of the contract by the
Owner. If a contract is mailed to the PAYEE for delivery to the Owner, such a
"ten day free look" must be exercised within 30 days of the mailing date to be
timely. If an owner returns a contract within 10 days after receipt by the
Owner, but it is more than 30 days after mailing to the PAYEE, the PAYEE shall
be responsible for paying to the Owner any loss in contract value as a result
of late delivery.
REFUNDS
Should any premium or purchase payment on any policy, contract, or certificate
issued by SENTRY be refunded, for any reason, PAYEE shall repay or return
commissions received by it with respect to such premiums or purchase payment.
<PAGE> 5
PRODUCER AGENT
COMMISSION SCHEDULES
EFFECTIVE JUNE 15, 1988
Attached to and made a part of the REGISTERED REPRESENTATIVES AGENT AGREEMENT
between SENTRY LIFE INSURANCE COMPANY, ("SENTRY"), SENTRY EQUITY SERVICES, INC.
("SESI") AND REGISTERED REPRESENTATIVE ("PAYEE").
COMMISSIONS
Commissions will be paid by SESI to PAYEE based on gross premiums or purchase
payments paid in cash or check and accepted by Sentry on plans made available
by SENTRY under said REGISTERED REPRESENTATIVES AGENT AGREEMENT, except that
commissions will not be paid on premiums or purchase payments submitted
directly from surrender proceeds of fixed annuity products issued by SENTRY
Commissions will be paid at rates determined in accordance with the following
schedule:
VARIABLE ANNUITIES
COMMISSION RATE (% OF PREMIUM)
3.10% - All contracts except for;
1.00% - Contracts issues to Sentry employees or members of their immediate
family.
VARIABLE UNIVERSAL LIFE
<TABLE>
<CAPTION>
COMMISSION RATES
INCREASES ABOVE PREVIOUS
NEW POLICIES HIGH SPECIFIED AMOUNT
<S> <C> <C>
First Year Premium
Up to Target Premium 55.0%, 33.0%
First Year Premium in
Excess of Target Premium 3.5% 1.5%
Renewal Premium 1.5% 1.5%
</TABLE>
For the purposes of this schedule, First Year Premium shall mean the premium
produced during the first 12 months following the effective date of the policy
increase in Specified Amount. Commissions will be annualized in the first
contract year for policies written on salary savings or ABC modes of payment.
SERVICE FEES
Service Fees will be paid annually by SESI to PAYEE based on a percentage rate
of aggregate in force contract values with respect to plans sold by Payee.
Service Fees will be paid at rates determined in accordance with the following
schedule:
VARIABLE ANNUITIES
A service fee will be paid by SESI to PAYEE at the annual rate of .10% of
the cash values of variable annuities attributable to PAYEE and in force during
the year.
VARIABLE UNIVERSAL LIFE
A service fee will be paid by SESI to PAYEE at the annual rate of .13% of
the cash value under the Variable Universal Life Policies attributable to Payee
and in force during the year.
Note: Variable Annuity and Variable Universal Life Service Fee payments are
contingent upon SESI's receipt of distribution expense reimbursement from
Advisers Management Trust. (12(b) 1 Revenue)
REPAYMENT OF COMMISSIONS
In the event that a contract is surrendered within the first year of the issue
date, a portion of the commission paid thereon shall be charged back to the
PAYEE based on the following schedule:
VARIABLE ANNUITIES
<TABLE>
<CAPTION>
CHARGE BACK AS A %
OF COMMISSIONS RECEIVED
DURATION THAT CONTRACT DURING THE FIRST
WAS IN-FORCE CONTRACT YEAR
<S> <C>
Less than 3 months 100%
Greater than or equal to 3 months,
but less than 6 months 75%
Greater than or equal to 6 months,
but less than 9 months 50%
Greater than or equal to 9 months,
but less than 12 months 25%
</TABLE>
VARIABLE UNIVERSAL LIFE
If a policy on which commissions have been annualized lapses or surrenders
during the first contract year, the charge back will equal the commission paid
on the excess of annualized premium over actual premium paid.
OTHER PROVISIONS
In the event a policy, contract, or certificate is returned to SENTRY pursuant
to the so called "ten day free look" or "right to return contract" provisions
of the policy or contract, the full commission paid thereon shall be charged
back to the PAYEE. It should be noted that the ten day period in which an
Owner may return the contract commences upon receipt of the contract by the
Owner. If a contract is mailed to the PAYEE for delivery to the Owner, such a
"ten day free look" must be exercised within 30 days of the mailing date to be
timely. If an owner returns a contract within 10 days after receipt by the
Owner, but it is more than 30 days after mailing to the PAYEE, the PAYEE shall
be responsible for paying to the Owner any loss in contract value as a result
of late delivery.
REFUNDS
Should any premium or purchase payment on any policy, contract, or certificate
issued by SENTRY be refunded, for any reason, PAYEE shall repay or return
commissions received by it with respect to such premiums or purchase payment.
<PAGE> 1
EXHIBIT 99.B3(iii)
SENTRY LIFE INSURANCE COMPANY
SENTRY EQUITY SERVICES, INC.
HOME OFFICE:
1800 North Point Drive
Stevens Point, WI 54481
GENERAL AGENT AGREEMENT
AGREEMENT by and between Sentry Life Insurance Company (hereinafter referred to
as Sentry), a Wisconsin Corporation, Sentry Equity Services, Inc. (hereinafter
referred to as SESI), a registered broker-dealer with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and a member of
the National Association of Securities Dealers, Inc.; and
__________________________________________________ (hereinafter referred to as
Broker-Dealer), also a registered broker-dealer with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and a member of
the National Association of Securities Dealers, Inc.; and _____________________
______________________________________________________________________
(hereinafter referred to as General Agent), as follows:
I WITNESSETH
WHEREAS, Sentry has agreed with General Agent to have General Agent's insurance
agents (hereinafter referred to as sub-agents) solicit and sell certain
Insurance and Annuity Plans (the "Plans") and, because certain of said Plans
may be deemed to be securities under the Securities Act of 1933 and applicable
state laws, Sentry desires that the General Agent and the sub-agents be
associated with Broker-dealer and Broker-dealer hereby covenants that each such
General Agent and the sub-agent is registered as its registered representative
with the National Association of Securities Dealers Inc. (hereinafter referred
to as NASD) and may engage in the offer or sale of such of the Plans which
constitute a security under federal or state law; and
WHEREAS, Sentry has agreed with SESI that SESI shall be responsible for the
training and supervision of such sub-agents, with respect to the solicitation
and offer or sale of any of said Plans which constitute a security under
federal and state law, and also for the training and supervision of any other
"persons associated" with Broker-dealer who are engaged directly or indirectly
therewith; and SESI wishes to, and hereby does, delegate, to the extent legally
permitted, said supervisory duties to Broker-dealer, who hereby agrees to
accept such delegation; and
WHEREAS, Sentry has agreed with General Agent that General Agent and its
sub-agents will limit solicitations to those jurisdictions where it has been
duly licensed to solicit sales of the Plans and General Agent agrees to provide
Sentry, with a list of such jurisdictions and agrees further to notify Sentry
of any change to such list; and General Agent hereby agrees that General Agent
shall be responsible for the training and supervision of such sub-agents with
respect to the solicitation and sale of any said Plans which are regulated by
the jurisdiction's insurance department or similar regulatory agency; and
NOW tHEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agrees as follows:
II APPOINTMENT OF GENERAL AGENT FOR PLANS
A. APPOINTMENT
Sentry and SESI, hereby appoint General Agent as a general agent of Sentry
and SESI, for the solicitation of sales of the Plans.
III AUTHORITY OF GENERAL AGENT
A. DISTRIBUTION AUTHORITY
General Agent is authorized to procure, through the sub-agents appointed by
it, applications for the plans. Sentry, in its sole discretion and without
notice to General Agent, may suspend sales of any Plans hereunder or may amend
any policies or contracts evidencing such plans.
The Plans issued by Sentry to which this agreement applies are those for which
a Commission Schedule is attached hereto. The Commission Schedule may be
amended from time to time by Sentry.
B. APPOINTMENT OF SUB-AGENTS
General Agent is authorized to appoint sub-agents to solicit sales of the
Plans hereunder. All sub-agents appointed by General Agent pursuant to this
Agreement shall be duly licensed under the applicable insurance laws to sell
the said Plans by the proper authorities within the applicable jurisdictions
where General Agent proposes to offer the Plans and where Sentry is duly
authorized to conduct business. Sentry will provide General Agent with a list
which shows: (1) the jurisdictions where Sentry is authorized to do business;
and (2) any limitations on the availability of the Plans in any of such
jurisdictions. General Agent agrees to fulfill all requirements set forth in
the General Letter of Recommendation attached as Exhibit A in conjunction with
the submissions of licensing/appointment papers for all applicants as
sub-agents submitted by General Agent.
C. SECURING APPLICATIONS
All applications for the Plans covered hereby shall be made on application
forms supplied by Sentry, and all payments collected by General Agents or any
sub-agent of General Agent shall be remitted promptly in full, together with
such application forms and any other required documentation, directly to Sentry
at the address indicated on such application or to such other address as Sentry
may, from time to time designate in writing. Checks or money orders in payment
on any such plan shall be drawn to the order of Sentry Life Insurance Company.
All applications are subject to acceptance or rejection by Sentry at its sole
discretion.
D. SUPERVISION OF SUB-AGENTS
1. General Agent shall supervise any sub-agents appointed by it to solicit
sales of the Plans hereunder and General Agent shall be responsible,
without regard to any technical distinction between this relationship and
that which exists in law between principal and agent, for all acts and
omissions of each sub-agent within the scope of his agency appointment at
all times. General Agent shall exercise all responsibilities required by
the applicable federal and state law and regulations other than those
responsibilities which under applicable securities laws are the
responsibilities of Broker-dealer;
<PAGE> 2
provided however, Broker-dealer shall continue to have full responsibility
under applicable securities laws for such sub-agents in their capacity as
registered representatives including by example, but without limitation,
training and supervisory duties over such sub-agents. Nothing contained in
this Agreement or otherwise shall be deemed to make any sub-agents appointed by
General Agent an employee or agent of Sentry.
Sentry shall not have any responsibility for the supervision of any sub-agents
of General Agent and if the act or omission of a sub-agent or any other
employee of General Agent is the proximate cause of any claim, damage or
liability to Sentry (including reasonable attorney's fees), General Agent shall
be responsible and liable therefore.
2. Sentry may, by written notice to General Agent, refuse to permit any
sub-agent to solicit applications for the sale of any of the Plans
hereunder and may, by such notice, require General Agent to cause any such
sub-agent to cease any such solicitation or sales, and, Sentry may require
General Agent to cancel the appointment of any sub-agent.
3. General Agent is responsible for the selection or appointment of sub-agents
for the sales of the Plans hereunder. General Agent is responsible for
preparation and transmission of the proper appointment and licensing forms
and to insure that all sales personnel are appropriately licensed.
4. General Agent will pay all fees to state insurance regulatory authorities in
connection with obtaining necessary licenses and appointments for
sub-agents appointed hereunder. All fees payable to such regulatory
authorities in connection with the initial appointment of sub-agents who
already possess necessary licenses will be paid by Sentry. Any renewal
license fees due after the initial appointment of sub-agent hereunder will
be paid by General Agent.
5. Before a sub-agent is permitted to sell the Plans, General Agent,
Broker-dealer and sub-agent shall have entered into an agreement
pursuant to which the sub-agent will be appointed a sub-agent of General
Agent and a registered representative of Broker-dealer and in which the sub-
agent will agree that his selling activities relating to the
securities-regulated Plans will be under the supervision and control of
Broker- dealer and his selling activities relating to the
insurance-regulated Plans will be under the supervision and control of
General Agent; and that the sub-agent's right to continue to sell such Plans
is subject to his continued compliance with such agreement.
E. MONEY RECEIVED BY GENERAL AGENT
All money payable in connection with any of the Plans, whether as premium,
purchase payment or otherwise and whether paid by or on behalf of any
policyholder, contract owner or certificateholder or anyone else having an
interest in the Plans is the property of Sentry and shall be transmitted
immediately in accordance with the administrative procedures of Sentry without
any deduction or offset for any reason, including by example but not
limitation, any deduction or offset for compensation claims by General Agent.
IV COMPENSATION
A. COMMISSIONS
Commissions payable to General Agent or any sub-agent in connection with
the Plans shall be paid by SESI to the person(s) entitled thereto through
General Agent or as otherwise required by law. Sentry will provide General
Agent with a copy of its current Commission Schedule. Commissions will be paid
as a percentage of premiums or purchase payments (Premiums and Purchase
Payments are hereinafter referred to collectively as "Payments") received in
cash or other legal tender and accepted by Sentry on applications obtained by
the various sub-agents appointed by General Agent hereunder. Upon termination
of this Agreement, all compensation to the General Agent hereunder shall cease,
however, General Agent shall continue to be liable for any chargebacks pursuant
to the provisions of said Commission Schedule or for any other amounts advanced
by or otherwise due hereunder.
B. TIME OF PAYMENT
SESI will pay any compensation due General Agent hereunder within fifteen
(15) days after the end of the calendar month in which Payments upon which such
compensation is based are accepted by Sentry.
C. AMENDMENT OF SCHEDULES
Sentry may, upon at least ten (10) days prior written notice to General Agent
change the commission schedule. Any such change shall be by written amendment
of the commission schedule and shall apply to compensation due on applications
received by Sentry after the effective date of such notice.
D. PROHIBITION AGAINST REBATES
If General Agent or any sub-agent of General Agent shall rebate or offer to
rebate all or any part of a Payment on a policy or contract or certificate
issued hereunder, or if General Agent or any sub-agent of General Agent
shall withhold any Payment on any policy or contract or certificate issues
hereunder, the same may be grounds for termination of this Agreement by Sentry.
If General Agent or any sub-agent of General Agent shall at any time induce or
endeavor to induce any owner of any policy or contract issued hereunder or any
certificate holder to discontinue Payments or to relinquish any such policy or
contract or certificate except under circumstances where there is reasonable
grounds for believing the policy, contract or certificate is not suitable for
such person, any and all compensation due General Agent hereunder shall cease
and terminate.
E. INDEBTEDNESS
Nothing in this Agreement shall be construed as giving General Agent the right
to incur any indebtedness on behalf of Sentry. General Agent hereby authorizes
Sentry to set off liabilities of General Agent to Sentry against any and all
amounts otherwise payable to General Agent by Sentry.
V DUTIES OF BROKER DEALER
A. SUPERVISION OF REGISTERED REPRESENTATIVES
Broker-dealer agrees that it has full responsibility for the training and
supervision of all persons, including General Agent and its sub-agents,
associated with Broker-dealer who are engaged directly or indirectly in the
offer or sale of such of the Plans as are subject to the federal securities
laws and that all such persons shall be subject to the control of Broker-dealer
with respect to such persons' securities-regulated activities in connection
with such Plans. Broker-dealer will cause the General Agent and its
sub-agents, in their capacity as registered representatives to be trained in
the sale of such of the Plans as are subject to the federal securities laws;
will use its best efforts to cause such General Agent and its sub-agents to
qualify under applicable federal and state laws to engage in the sale of
contracts; and will cause such sub-agents to be registered representatives of
Broker-dealer before such General Agent and sub-agents engage in the
solicitation of any of such contracts. Broker-dealer shall cause such General
Agent and sub-agents qualifications to be certified to the satisfaction of
Sentry and shall notify Sentry if any of said General Agent and sub-agents
cease to be registered representatives of Broker-dealer.
B. REGISTERED REPRESENTATIVES AGREEMENT
Broker-dealer agrees that it shall train and supervise the General Agent
and its sub-agents in connection with such of the Plans as are subject to the
federal securities law and agrees that, before a sub-agent shall be permitted
to sell such Plans, such sub-agent will be appointed a registered
representative of Broker-dealer and, along with Broker-dealer and General
Agent, such sub-agent will have entered into the agreement more particularly
described in Section III, Paragraph E5.
<PAGE> 3
C. COMPLIANCE WITH NASD RULES OF FAIR PRACTICE AND FEDERAL AND STATE SECURITIES
LAWS
Broker-dealer will fully comply with the requirements of the National
Association of Securities Dealers, Inc. and of the Securities Exchange Act of
1934 and all other applicable federal or state laws and will establish such
rules and procedures as may be necessary to cause diligent supervision of the
securities activities of the General Agent and the sub-agents. Upon request by
Sentry, Broker-dealer shall furnish such appropriate records as may be
necessary to establish such diligent supervision.
D. NOTICE OF SUB-AGENT NoNCOMPLIANCE
In the event a sub-agent fails or refuses to submit to supervision of
Broker-dealer in accordance with this Agreement, or otherwise fails to meet the
rules and standards imposed by Broker-dealer on its registered representatives,
Broker-dealer shall certify such fact to Sentry and General Agent and shall
immediately notify such sub-agent that he is no longer authorized to sell the
Plans, and Broker-dealer and General Agent shall take whatever additional
action may be necessary to terminate the sales activities of such sub-agent
relating to the Plans.
E. PROSPECTUSES, SALES PROMOTION MATERIAL AND ADVERTISING
General Agent shall be provided, without any expense to General Agent, with
prospectuses relating to those of the Plans which are subject to federal
securities laws and such other material as Sentry determines to be necessary or
desirable for use in connection with sales of those Plans. No sales promotion
materials or any advertising relating to any of the securities-regulated Plans
shall be used by General Agent or its sub-agents unless the specific item has
been approved in writing by SESI.
VI GENERAL PROVISIONS
A. WAIVER
Failure of any 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.
B. INDEPENDENT CONTRACTORS
Both Sentry and SESI are independent contractors with respect both to
Broker-dealer and to General Agent.
C. LIMITATIONS
No party other than Sentry shall have the authority on behalf of Sentry to
make, alter, or discharge any contract or certificate issued by Sentry to waive
any forfeiture or to grant, permit, nor to extend the time of making any
payments, nor to guarantee dividends, nor to alter the forms which Sentry may
prescribe or substitute other forms in place of those prescribed by Sentry nor
to enter into any proceeding in a court of law or before a regulatory agency in
the name of or on behalf of Sentry.
D. FIDELITY BOND
General Agent represents that all directors, officers, employees and
sub-agents of General Agent who are licensed pursuant to this agreement as
Sentry agents for state insurance law purposes or who have access to funds of
Sentry, including but not limited to funds submitted with applications for the
plans or funds being returned to owners or certificate holders, are and shall
be covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall be
maintained by General Agent at General Agent's expense. Such bond shall be, at
least, of the form, type, and amount required under the NASD Rules of Fair
Practice, endorsed to extend coverage to General Agent's life insurance and
fixed annuity transactions. Sentry, may require evidence, satisfactory to it,
that such coverage is in force and General Agent shall give prompt written
notice to Sentry of any notice of cancellation or change of coverage.
General Agent assigns any proceeds received from the fidelity bonding company
to Sentry to the extent of Sentry's loss due to activities covered by the bond.
If there is any deficiency amount, whether due to a deductible or otherwise,
General Agent shall promptly pay Sentry such amount on demand and General Agent
hereby indemnifies and holds harmless Sentry from any such deficiency and from
the costs of collection thereof (including reasonable attorneys' fees).
E. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of the
parties to it and their respective successors and assigns provided that neither
Broker-dealer nor General Agent may assign this Agreement or any rights or
obligations hereunder without the prior written consent of Sentry.
F. REGULATIONS
All parties agree to observe and comply with the existing laws and rules or
regulations of applicable local, state, or federal regulatory authorities and
with those which may be enacted or adopted during the term of this Agreement
regulating the business contemplated hereby in any jurisdiction in which the
business described herein is to be transacted.
G. NOTICES
All notices or communications shall be sent to the address shown in sub
paragraph VI N of this Agreement or to such other address as the party may
request by giving written notice to the other parties.
H. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by the
laws of the State of Wisconsin.
I. AMENDMENT OF AGREEMENT
Sentry reserves the right to amend this Agreement at any time and the General
Agent's submission of an application after notice of any such amendment has
been sent to the other parties shall constitute the other parties' agreement to
any such amendment.
J. SALES PROMOTION MATERIALS AND ADVERTISING
Neither Broker-dealer, General Agent nor any of its sub-agents shall print,
publish or distribute any advertisement, circular or any document relating to
the Plans distributed pursuant to this Agreement or relating to Sentry unless
such advertisement, circular or document shall have been approved in writing by
Sentry or by SESI and in the case of items within the scope of Section V,
Paragraph E approved in writing by Sentry. Provided, however, that nothing
herein shall prohibit Broker-dealer, General Agent or any sub-agent from
advertising life insurance and annuities in general or on a generic basis.
K. GENERAL AGENT AS BROKER-DEALER
If Broker-dealer and General Agent are the same person or legal entity, such
person or legal entity shall have the rights and obligations hereunder of
both Broker-dealer and General Agent and this Agreement shall be binding and
enforceable by and against such person or legal entity in both capacities.
L. TERMINATION
This Agreement may be terminated, without cause, by any party upon thirty
(30) days prior written notice; and may be terminated, for cause, by any party
immediately; and shall be terminated if SESI or Broker-dealer shall cease to be
a registered Broker-dealer under the Securities Exchange Act of 1934 and a
member of the NASD.
M. SESI AS BROKER-DEALER
If SESI and Broker-dealer are the same person or legal entity, such person or
legal entity shall have the rights and obligations hereunder of both SESI and
Broker-dealer and this Agreement shall be binding and enforceable by and
against such person or legal entity in both capacities.
<PAGE> 4
N. ADDRESS FOR NOTICES
<TABLE>
<S> <C>
Sentry Life Insurance Company Sentry Equity Services, Inc.
1800 North Point Drive 1800 North Point Drive
Stevens Point, WI 54481 Stevens Point, WI 54481
Approved and Accepted: This Agreement shall be effective upon execution by Sentry Equity
Services, Inc.
- -------------------------------------------------- SENTRY LIFE INSURANCE COMPANY
Broker-Dealer (if other than Sentry Equity Services, Inc.)
By Emil Fleischauer, Jr.
------------------------------------------------
By Emil Fleischauer, Jr., Secretary
-----------------------------------------------
SENTRY EQUITY SERVICES, INC.
- --------------------------------------------------
General Agent By
------------------------------------------------
Dated Dated
-------------------------------------------- ---------------------------------------------
</TABLE>
EXHIBIT A
GENERAL LETTER OF RECOMMENDATION
General Agent hereby certifies to Sentry and SESI that all the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as sub-agents submitted by
General Agent. General Agent will, upon request, forward proof of compliance
with same to Sentry in a timely manner.
1. We have made a thorough and diligent inquiry and investigation
relative to each applicant's identity, residence and business
reputation and declare that each applicant is personally known to us,
has been examined by us, is known to be of good moral character, has a
good business reputation, is reliable, is financially responsible and
is worthy of a license. Each individual is trustworthy, competent and
qualified to act as an agent for Sentry to hold himself out in good
faith to the general public. We vouch for each applicant.
2. We have on file a B-300, B-301, or U-4 form which was completed by each
applicant. We have fulfilled all the necessary investigative
requirements for the registration of each applicant as a registered
representative through our NASD member firm, and each applicant is
presently registered as an NASD registered representative.
The above information in our files indicates no fact or condition which
would disqualify the applicant from receiving a license and all the
findings of all investigative information is favorable.
3. We certify that all educational requirements have been met for the
specific state each applicant is requesting a license in, and that,
all such persons have fulfilled the appropriate examination,
education and training requirements.
4. If the applicant is required to submit his picture, his signature, and
securities registration in the state in which he is applying for a
license, we certify that those items forwarded to Sentry are those
of the applicant and the securities registration is a true copy of the
original.
5. We hereby warrant that the applicant is not applying for a license
with Sentry in order to place insurance chiefly and solely on his
life or property, lives or property of his relatives, or property or
liability of his associates.
6. We certify that each applicant will receive close and adequate
supervision, and that we will make inspection when needed of any or
all risks written by these applicants, to the end that the insurance
interest of the public will be property protected.
7. We will not permit any applicant to transact insurance as an agent
until duly licensed therefore. No applicants have been given a
contract or furnished supplies, nor have any applicants been permitted
to write, solicit business, or act as an agent in any capacity, and
they will not be so permitted until the certificate of authority or
license applied for is received.
<PAGE> 5
GENERAL AGENT
COMMISSION SCHEDULES
EFFECTIVE JUNE 15, 1988
Attached to and made a part of the General Agent Agreement between Sentry Life
Insurance Company, ("Sentry"), Sentry Equity Services, Inc. ("SESI") and
General Agent ("Payee").
COMMISSIONS
Commissions will be paid by SESI to Payee based on gross premiums or purchase
payments paid in cash or check and accepted by Sentry on plans made available
by Sentry under said General Agent Agreement, except that commissions will not
be paid on premiums or purchase payments submitted directly from surrender
proceeds of fixed annuity products issued by Sentry. Commissions will be paid
at rates determined in accordance with the following schedule:
VARIABLE ANNUITIES
------------------
Direct Product-Commission Rate
(% of Premium)
------------------------------
3.50% - All contracts except for;
1.00% - Contracts issues to Sentry
employees or members of
their immediate family.
Variable Universal Life
-----------------------
Direct Production - Commission Rates
Increases Above Previous
New Policies High Specified Amount
First Year Premium
Up to Target Premium 80.0% 50.0%
First Year Premium in
Excess of Target Premium 5.0% 2.0%
Renewal Premium 2.0% 2.0%
For the purposes of this schedule, First Year Premium shall mean the premium
produced during the first 12 months following the effective date of the policy
increase in Specified Amount. Commissions will be annualized in the first
contract year for policies written on salary savings or ABC modes of payment.
SERVICE FEES
Service Fees will be paid annually by SESI to Payee based on a percentage rate
of aggregate in force contract values with respect to plans sold by Payee.
Service Fees will be paid at rates determined in accordance with the following
schedule:
VARIABLE ANNUITIES
------------------
A service fee will be paid by SESI to Payee at the annual rate of .15% of
the cash values of variable annuities attributable to Payee and in force during
the year.
VARIABLE UNIVERSAL LIFE
-----------------------
A service fee will be paid by SESI to Payee at the annual rate of .20% of
the cash value under the Variable Universal Life Policies attributable to Payee
and in force during the year.
Note: Variable Annuity and Variable Universal Life Service Fee payments are
contingent upon SESI's receipt of distribution expense reimbursement from
Advisers Management Trust. (12(b) 1 Revenue)
REPAYMENT OF COMMISSIONS
In the event that a contract is surrendered within the first year of the issue
date, a portion of the commission paid thereon shall be charged back to the
Payee based on the following schedule:
VARIABLE ANNUITIES
------------------
CHARGE BACK AS A %
OF COMMISSIONS RECEIVED
DURATION THAT CONTRACT DURING THE FIRST
WAS IN-FORCE CONTRACT YEAR
Less than 3 months 100%
Greater than or equal to 3 months,
but less than 6 months 75%
Greater than or equal to 6 months,
but less than 9 months 50%
Greater than or equal to 9 months,
but less than 12 months 25%
VARIABLE UNIVERSAL lIFE
-----------------------
If a policy on which commissions have been annualized lapses or surrenders
during the first contract year, the charge back will equal the commission paid
on the excess of annualized premium over actual premium paid.
OTHER PROVISIONS
In the event a policy, contract, or certificate is returned to Sentry pursuant
to the so called "ten day free look" or "right to return contract" provisions
of the policy or contract, the full commission paid thereon shall be charged
back to the Payee. It should be noted that the ten day period in which an
Owner may return the contract commences upon receipt of the contract by the
Owner. If a contract is mailed to the Payee for delivery to the Owner, such a
"ten day free look" must be exercised within 30 days of the mailing date to be
timely. If an owner returns a contract within 10 days after receipt by the
Owner, but it is more than 30 days after mailing to the Payee, the Payee shall
be responsible for paying to the Owner any loss in contract value as a result
of late delivery.
REFUNDS
Should any premium or purchase payment on any policy, contract, or certificate
issued by Sentry be refunded, for any reason, Payee shall repay or return
commissions received by it with respect to such premiums or purchase payment.
<PAGE> 1
EXHIBIT 99.B4(i)
[SENTRY LIFE INSURANCE COMPANY LOGO]
SENTRY LIFE INSURANCE COMPANY, 1800 North Point Drive, Stevens Point,
Wisconsin, ("the Company") will make income payments to the annuitant in
accordance with the terms set forth in this Contract beginning on the Income
Date.
This Contract is issued in consideration of the application, a copy of which is
attached and made a part of the Contract, and of the payment of Purchase
Payments in accordance with the terms and conditions of this Contract.
TEN DAY FREE LOOK
Within ten days of the day the Contract is received, it may be returned to the
Company or to the agent through whom it was purchased. When the Contract is
received by the Company it will be voided as if it had never been in force.
The Purchase Payments paid on it will then be refunded in full.
Signed for the Company.
Caroline E. Fribance Peter P. Trapp
Secretary President
VARIABLE ANNUITY
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED, NON-PARTICIPATING
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
FOR DETERMINATION OF VARIABLE BENEFITS PLEASE SEE THE VARIABLE ACCOUNT
PROVISIONS, PAGE 5, AND THE VARIABLE ANNUITY PROVISION, PAGE 8.
<PAGE> 2
POLICY INDEX
GENERAL PROVISIONS
The Contract ......................................................... 4
Non-Participation in Surplus ......................................... 4
Incontestability ..................................................... 4
Misstatement of Age .................................................. 4
Contract Settlement .................................................. 4
Reports .............................................................. 4
Taxes ................................................................ 4
Evidence of Survival ................................................. 4
Protection of Proceeds ............................................... 4
Modification of Contract ............................................. 4
OWNERSHIP, ASSIGNMENT PROVISION ......................................... 4
Ownership ............................................................ 4
Assignment ........................................................... 4
BENEFICIARY PROVISIONS .................................................. 5
Beneficiary .......................................................... 5
Change of Beneficiary ................................................ 5
PURCHASE PROVISIONS ..................................................... 5
Purchase Payments .................................................... 5
Net Purchase Payments ................................................ 5
Change in Purchase Payments .......................................... 5
No Default ........................................................... 5
VARIABLE ACCOUNT PROVISIONS ............................................. 5
The Variable Account ................................................. 5
Investments of the Variable Account .................................. 5
Valuation of Assets .................................................. 5
Contract Value ....................................................... 6
Transfers ............................................................ 6
Accumulation Units ................................................... 6
Valuation Periods and Dates .......................................... 7
Mortality and Expense Risk Premium ................................... 7
Mortality and Expense Guarantee ...................................... 7
Annuity Unit ......................................................... 7
CONTRACT MAINTENANCE CHARGE ............................................. 7
Deduction for Contract
Maintenance Charge ................................................. 7
ANNUITY PROVISIONS ...................................................... 7
Income Date and Settlement Option .................................... 7
Change in Income Date ................................................ 7
Change in Settlement Option .......................................... 7
Settlement Options ................................................... 7
Frequency and Amount of Annuity Payment .............................. 8
Variable Annuity ..................................................... 8
Net Investment Factor ................................................ 8
PAYMENTS ................................................................ 9
Payments on the Death of the
Annuitant Prior to the Income Date ................................. 9
Payments on the Death of the
Annuitant After the Income Date .................................... 9
SURRENDER PROVISIONS .................................................... 9
Surrender ............................................................ 9
Calculation of Contingent Deferred
Sales Charge ....................................................... 9
SUSPENSION OF PAYMENTS ................................................. 10
TABLES ................................................................. 11
Life Income ......................................................... 11
Life Income-Joint and Survivor ...................................... 12
Annuity Purchase Rates .............................................. 13
<PAGE> 3
CONTRACT DATA PAGE
ANNUITANT: MARK SENTRY
CONTRACT NUMBER: 378102371
CONTRACT OWNER: MARK SENTRY
EFFECTIVE DATE: 06/11/1996
INCOME DATE: 02/01/2049
CONTRACT MAINTENANCE CHARGE: GUARANTEED NEVER TO EXCEED $45 PER YEAR.*
*PRIOR TO THE INCOME DATE, THE CONTRACT MAINTENANCE CHARGE IS NOT GUARANTEED
AND MAY BE CHANGED FOR FUTURE YEARS. AFTER THE INCOME DATE, THE AMOUNT OF THE
CONTRACT MAINTENANCE CHARGE WILL NOT BE CHANGED FROM THE AMOUNT OF THE ANNUAL
MAINTENANCE CHARGE IN EFFECT DURING THE CONTRACT YEAR IMMEDIATELY PRECEDING THE
INCOME DATE. AFTER THE INCOME DATE, THE CONTRACT MAINTENANCE CHARGE WILL BE
COLLECTED ON A MONTHLY BASIS.
MORTALITY AND EXPENSE RISK PREMIUM: EQUAL ON AN ANNUAL BASIS TO 1.2% OF THE
DAILY NET ASSET VALUE OF THE VARIABLE
ACCOUNT.
TRANSFER FEE: GUARANTEED NEVER TO EXCEED $20.
ELIGIBLE MUTUAL FUNDS: NEUBERGER AND BERMAN ADVISERS MANAGEMENT TRUST
- GROWTH PORTFOLIO
- LIMITED MATURITY BOND PORTFOLIO
- LIQUID ASSET PORTFOLIO
- BALANCED PORTFOLIO
VARIABLE ACCOUNT: SENTRY VARIABLE ACCOUNT II
ANNUITY SERVICE OFFICE: P.O. BOX 867, STEVENS POINT, WISCONSIN 54481
FOR DETERMINATION OF VARIABLE BENEFITS PLEASE SEE THE VARIABLE ACCOUNT
PROVISIONS, PAGE 5, AND THE VARIABLE ANNUITY PROVISION, PAGE 8.
FOR USE WITH SENTRY VARIABLE ACCOUNT II
A SEPARATE INVESTMENT ACCOUNT OF
SENTRY LIFE INSURANCE COMPANY
<PAGE> 4
DEFINITIONS
ACCUMULATION UNIT - An accounting unit of measure used to calculate the
Contract Value prior to the Income Date.
ANNUITANT - The person upon whose continuation of life any annuity payment
involving life contingencies depends.
ANNUITY UNIT - An accounting unit of measure used to calculate annuity payments
after the Income Date.
COMPANY - Sentry Life Insurance Company at its Annuity Service Office
designated on the Contract Data Page.
CONTINGENT OWNER - The Contingent Owner, if any, is as named in the
application, unless changed.
CONTRACT ANNIVERSARY - An anniversary of the Effective Date of this Contract.
CONTRACT OWNER - The Contract Owner is named in the application, unless
changed, and has all rights under this contract.
CONTRACT VALUE - The dollar value as of any Valuation Date of all amounts
accumulated under the Contract.
CONTRACT YEAR - Any period of twelve (12) months commencing with the Effective
Date and each Contract Anniversary thereafter.
EFFECTIVE DATE - The date shown as the Effective Date on the Contract Data
Page.
ELIGIBLE MUTUAL FUND(S) - A Mutual Fund designated on the Contract Data Page.
INCOME DATE - The date on which annuity payments are to commence.
PORTFOLIO - A segment of an Eligible Mutual Fund which constitutes a separate
and distinct class of shares.
VALUATION DATE - Each day that the New York Stock Exchange is open for
business.
VALUATION PERIOD - The period commencing at the close of business on the New
York Stock Exchange on each Valuation Date and ending at the close of business
for the next succeeding Valuation Date.
VARIABLE ACCOUNT - A separate investment account of the Company designated on
the Contract Date Page into which net purchase payments will be allocated.
3
<PAGE> 5
GENERAL PROVISIONS
THE CONTRACT - The entire Contract consists of this Contract and the
application, a copy of which is attached. This Contract may be changed or
altered only by the President or the Secretary of the Company.
NON-PARTICIPATION IN SURPLUS - This Contract will not share in any distribution
of profits or surplus of the Company.
INCONTESTABILITY - The Company will not contest this Contract from its
Effective Date.
MISSTATEMENT OF AGE - The Company may require proof of age of the Annuitant
before making any life annuity payment provided for by this Contract. If the
age of the Annuitant has been misstated, the amount payable will be the amount
that the purchase payments would have provided at the correct age.
Once monthly life income payments have begun, any underpayments will be made
upon in one sum with the next annuity payment; overpayments will be deducted
from the future annuity payments until the total is repaid.
CONTRACT SETTLEMENT - This Contract must be returned to the Company upon any
settlement. Prior to any settlement as a death claim, due proof of the
Annuitant's death must be submitted to the Company.
REPORTS - The Company will furnish the Contract Owner with a report showing the
Contract Value at least one each calendar year. This report will be sent to
the last known address of the Contract Owner.
TAXES - Any taxes paid to any governmental entity will be charged against the
Contract Value. The Company will, in its sole discretion, determine when such
taxes have resulted from: the investment experience of the Variable Account;
the receipt by the Company of the purchase payment(s); or commencement of
annuity payments.
EVIDENCE OF SURVIVAL - Where any benefits under this Contract are contingent
upon the recipient being alive on a given date, the Company may require proof
satisfactory to it that such condition has been met.
PROTECTION OF PROCEEDS - No beneficiary may commute, encumber, alienate or
assign any payments under this Contract before they are due. To the extent
permitted by law, no payments shall be subject to the debts, contracts or
engagements of any beneficiary nor to any judicial process to levy upon or
attach the same for payment thereof.
MODIFICATION OF CONTRACT - This Contract may not be modified by the Company
without the consent of the Contract Owner except as may be required by
applicable law.
OWNERSHIP, ASSIGNMENT PROVISION
OWNERSHIP - The Contract Owner has all rights, and may receive all benefits
under this Contract. During the lifetime of the Annuitant and prior to the
Income Date, the Contract Owner shall be the person designated in the
application, unless changed. On and after the Income Date, the Contract Owner
shall be the Annuitant. On and after the death of the Annuitant, the
Beneficiary shall be the Contract Owner.
The Contract Owner may name a Contingent Owner or a new Contract Owner at any
time. If the Contract Owner dies, the Contingent Owner becomes the Contract
Owner. Any new choice of Contract Owner or Contingent Owner will automatically
revoke any prior choice of Contract Owner or Contingent owner. Any request for
change must be: (1) made in writing; and (2) received at the Company. The
change will become effective as of the date the written request is signed. A
new choice of Contract Owner or Contingent Owner will not apply to any payment
made or action taken by the Company prior to the time it was received.
ASSIGNMENT - The Contract Owner may assign this Contract at any time during the
lifetime of the Annuitant prior to the Income Date. The Company will not be
bound by any assignment until written notice is received at the Company. The
Company is not responsible for the validity of any assignment. The Company
shall not be liable as to any payment or other settlement made by the Company
before receipt of the assignment.
If this Contract is issued pursuant to a retirement plan which receives
favorable tax treatment under the provisions of Section 401, 403, 404, 408 or
457 of the Internal Revenue Code, then it may not be assigned, pledged or
otherwise transferred except under such conditions as may be allowed under
applicable law.
4
<PAGE> 6
BENEFICIARY PROVISIONS
BENEFICIARY - The Beneficiary, named in the application unless changed, is the
party entitled to receive the benefits to be paid at the death of the
Annuitant.
Unless the Contract Owner provides otherwise, such benefits will be paid in
equal shares or all to the survivor as follows:
(1) to the primary Beneficiaries who survive the Annuitant's death; or, if
there are none,
(2) to the Contingent Beneficiaries who survive the Annuitant's death; or,
if there are none,
(3) to the Contract Owner; or to the estate of the Contract Owner.
CHANGE OF BENEFICIARY - The Contract Owner may change the Beneficiary or
Contingent Beneficiary at any time during the lifetime of the Annuitant. Any
such change must be made in writing on a form acceptable to the Company. The
change will take effect as of the date such notice is signed. But the Company
shall not be liable for any payment made or action taken before it records the
change.
PURCHASE PROVISIONS
PURCHASE PAYMENTS - Subject to the limitations contained herein, purchase
payments are payable according to the frequency and in the amount selected by
the Contract Owner in the application. The initial purchase payment is due on
the Effective Date and must be at least $1,000. Subsequent purchase payments
must be at least $100. In the event that the Contract is issued to retirement
plans which qualify for favorable tax treatment under Section 401, 403, 404,
408, or 457 of the Internal Revenue Code, the amount of the initial purchase
payment must be at least $1,000. Subsequent purchase payments must be at least
$100. The Company reserves the right to reject any application or purchase
payment.
NET PURCHASE PAYMENTS - A net purchase payment is equal to the purchase payment
less any applicable premium taxes.
CHANGE IN PURCHASE PAYMENTS - The Contract Owner may elect to increase or
decrease or to change the frequency of purchase payments.
NO DEFAULT - Unless surrendered for the full Surrender Value, this Contract
remains in force until the Income Date and will not be in default even though
no additional purchase payments are made.
VARIABLE ACCOUNT PROVISIONS
THE VARIABLE ACCOUNT - The Variable Account is the separate investment account
of the Company. It is named on the Contract Data Page. The Company has
allocated a part of its assets for this and certain other contracts to the
Variable Account. The assets of the Variable Account are the property of the
Company. However, they are not chargeable with the liabilities arising out of
any other business the Company may conduct.
INVESTMENTS OF THE VARIABLE ACCOUNT - Net purchase payments applied to the
Variable Account will be invested in the Eligible Mutual Fund(s) and the
Portfolio(s), if any, within an Eligible Mutual Fund listed on the Contract
Data Page. Such investment will be made in accordance with the selection made
by the Contract Owner in the Application. The selection of investment is
subject to the terms and conditions imposed on such selection by the Company.
The Contract Owner may change such selection prospectively without fee, penalty
or other charge upon written notice to the Company. Such change will be
effective for net purchase payments received after receipt of such notice. The
assets of the Variable Account are segregated by Eligible Mutual Fund(s),
Portfolio(s) within the Eligible Mutual Fund(s) and type of Contract.
Therefore, a series of sub-accounts is established within the Variable Account.
The Company may, from time to time, add additional Eligible Mutual Fund(s) or
Portfolio(s) to those listed on the Contract Data Page. In such an event, the
Contract Owner may be permitted to select such Eligible Mutual Fund(s) or
Portfolio(s) as investments to underlie this Contract. However, the right to
make any such selection will be limited by the terms and conditions imposed on
such transactions by the Company.
5
<PAGE> 7
If the shares of any of the Eligible Mutual Funds, or any Portfolio within
these Funds become unavailable for investment by the Variable Account, or the
Company's Board of Directors deems further investment in these shares
inappropriate, the Company may substitute shares of another mutual fund for
fund shares already purchased or to be purchased by Purchase Payments under the
Contract.
CONTRACT VALUE - Net purchase payments are allocated among the various
sub-accounts within the variable account. For each sub-account, the net
purchase payments are converted into Accumulation Units. The number of the
Accumulation Units credited to the Contract is determined by dividing the Net
Purchase Payment allocated to the sub-account by the value of the Accumulation
Unit for the sub-account. The value of the Contract is the sum of the values
for each sub-account. The value of each sub-account is determined by
multiplying the number of Accumulation Units attributable to the sub-account by
the value of an Accumulation Unit for the sub-account.
TRANSFERS - The Contract Owner may, no more frequently than four times in any
one Contract Year prior to the Income Date and no more frequently than one time
in any one Contract Year after the Income Date, direct the transfer of all or
part of the Contract Values between Eligible Mutual Fund(s) or Portfolio(s)
subject to the following conditions:
(a) The Contract Owner will pay to the Company a Transfer Fee for each
transfer as initially shown on the Contract Data Page in effect
at the time of the transfer. The Transfer Fee is not guaranteed and
may be changed by the Company at any time. The Transfer Fee will be
deducted from the amount which is transferred.
(b) The minimum amount which may be transferred from an Eligible Mutual
Fund or Portfolio is (i) $250; or, (ii) if smaller, the remaining value
of the Contract's interest in such Eligible Mutual Fund or Portfolio.
(c) No partial transfer shall be made if the Contract Owner's remaining
Contract Value for each Eligible Mutual Fund or Portfolio will be less
than $250.
(d) Transfers shall be effected during the Valuation Period next following
receipt by the Company of a written transfer direction (containing all
required information). However, no such transfer may be made
effective within seven calendar days of the date on which the first
annuity payment is due; and no initial Purchase Payment nor any amounts
previously transferred including increments thereon, may be transferred
until thirty (30) days after receipt of such initial Purchase Payment;
provided, however, the Contract Owner, during the 30-day period prior
to the date on which the first annuity payment is due, may direct an
additional transfer, to be effective no later than the seventh calendar
day prior to such due date.
(e) Any transfer direction must clearly specify:
(1) the amount which is to be transferred; and
(2) the name(s) of the Eligible Mutual Fund(s) or Portfolio(s) which are
to be affected.
(f) The Company reserves the right at any time and without prior notice to
any party to terminate, suspend or modify the transfer privileges
described above.
ACCUMULATION UNIT - Net Purchase Payments are converted into Accumulation
Units. This is done by dividing each Net Purchase Payment by the value of an
Accumulation Unit for the Valuation Period during which the net Purchase
Payment is allocated to the Variable Account. The Accumulation Unit value for
each sub-account was arbitrarily set initially at $10. The Accumulation Unit
Value for any later Valuation Period is determined by subtracting (b) from (a)
and dividing the result by (c) where:
(a) Is the net result of
(1) The Assets of the sub-account, that is, the aggregate value of the
underlying Fund shares held at the end of such Valuation Period,
plus or minus
(2) The cumulative charge or credit for taxes reserved which is
determined by the Company to have resulted from the investment
operation of the sub-account;
6
<PAGE> 8
(b) Is the cumulative unpaid charge for the mortality and expense risks; and
(c) Is the number of Accumulation Units outstanding at the end of such
Valuation Period.
The Accumulation Unit value may increase or decrease from Valuation
Period to Valuation Period.
VALUATION PERIODS AND DATES - A Valuation Period is the period commencing at
the close of business of the New York Stock Exchange for each Valuation Date
and ending at the close of business for the succeeding Valuation Date. A
Valuation Date is each day that the New York Stock Exchange is open for
business.
MORTALITY AND EXPENSE RISK PREMIUM - The Company deducts a Mortality and
Expense Risk Premium equal on an annual basis to the amount set forth on the
Contract Data Page. The Mortality and Expense Risk Premium compensates the
Company for assuming the mortality and expense risks under this Contract. Such
deductions are made daily from the Contract Value.
MORTALITY AND EXPENSE GUARANTEE - The Company guarantees that the dollar amount
of each annuity payment after the first will not be affected by variations in
mortality or expense experience.
ANNUITY UNIT - The value of an Annuity Unit for each sub-account was
arbitrarily set initially at $10. This was done when the first Eligible Mutual
Fund shares were purchased. The value for any later Valuation Period is
determined as follows: the Annuity Unit value for a sub-account for the last
Valuation Period is multiplied by the Net Investment Factor for the sub-account
for the next Valuation period and the result is divided by the assumed
investment factor for that Valuation Period.
CONTRACT MAINTENANCE CHARGE
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE - The Company deducts an annual
Contract Maintenance Charge shown on the Contract Data Page, from the Contract
Value by cancelling Accumulation Units to reimburse it for administration
expenses relating to maintenance of this Contract. The Contract Maintenance
Charge will be deducted from the Contract Value on each Contract Anniversary
this Contract is in force. The number of Accumulation Units to be cancelled
will be from each applicable sub-account in the ratio that the value of each
sub-account bears to the total Contract Value.
When this Contract is surrendered for its full Surrender Value, on other than
the Contract Anniversary, the Contract Maintenance Charge will be deducted at
the time of such surrender. Prior to the Income Date, the Company does not
guarantee the amount of the Contract Maintenance Charge, and there is no
guarantee that it will not be changed in the future. After the Income Date,
the amount of the Contract Maintenance Charge will not be changed from the
amount of the annual Contract Maintenance Charge in effect during the Contract
Year immediately preceding the Income Date. After the Income Date the Contract
Maintenance Charge will be collected on a monthly basis and will result in the
reduction of the monthly benefit.
ANNUITY PROVISIONS
INCOME DATE AND SETTLEMENT OPTION - The Contract Owner selects an Income Date
and Settlement Option at the time of application. Such date must always be the
first day of a calendar month and must be at least one month after the
Effective Date, and may not be later than the first day of the first calendar
month following the Annuitant's 85th birthday.
CHANGE IN INCOME DATE - The Contract Owner may, upon at least thirty (30) days
prior written notice to the Company, change the Income Date. The date to which
such a change may be made shall be the first day of a calendar month. However,
the Income Date may not be deferred beyond the first day of the calendar month
following the Annuitant's 85th birthday.
CHANGE IN SETTLEMENT OPTION - The Contract Owner may, upon at least thirty (30)
days prior written notice to the Company, at any time prior to the Income Date,
elect a different Settlement Option or any other option satisfactory to the
Company and the Contract Owner.
SETTLEMENT OPTIONS - The net proceeds payable upon settlement of this Contract
may be paid under one of the following options or any other option acceptable
to the Company:
Option 1 - LIFE ANNUITY. An annuity payable monthly during the lifetime of
the Annuitant. Payments cease at the death of the Annuitant.
7
<PAGE> 9
Option 2 - LIFE ANNUITY WITH 120 MONTHLY PAYMENTS GUARANTEED. An annuity
payable monthly during the lifetime of the Annuitant with the
guarantee that, if at the death of the Annuitant, payments have
been made for less than 120 months, payments will be continued to
the beneficiary for the remainder of the guaranteed period. If
the beneficiary does not desire payments to continue for the
remainder of the guarantee period, he or she may elect to have
the present value of the guaranteed annuity payments remaining,
as of the date notice of death is received by the Company,
commuted at the assumed investment rate, and paid in a single sum
within seven (7) days of receipt of such request.
Option 3 - JOINT AND LAST SURVIVOR ANNUITY. An annuity payable monthly
during the joint lifetime of the Annuitant and a designated
second person and continuing thereafter during the life of the
survivor.
If no settlement option is elected, Option 1 will automatically be applied.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS - Annuity payments will be paid as
monthly installments. However, if the net amount available to apply under any
settlement option is less than $5,000, the Company shall have the right to pay
such amount in one single lump sum. In addition, if the payments provided for
would be or become less than $30, the Company shall have the right to change
the frequency of payments to such intervals as will result in payments of at
least $30.
VARIABLE ANNUITY - A Variable Annuity is an annuity with payments which: (1)
are not predetermined as to dollar amount; and (2) will vary in amount with the
net investment results of the applicable sub-account(s) of the Variable
Account. At the Income Date the sub-account(s) Contract Value will be applied
to the applicable Annuity Tables. The Annuity Table used will depend upon the
Settlement Option chosen. The amount payable for the first payment for each
$1,000 so applied is shown in the Tables on pages 11 and 12. If, as of the
Income Date, the then current settlement option rates applicable to this class
of contracts will provide a larger income than that guaranteed for the same
form of annuity under this Contract, the larger amount will be paid. The
dollar amount of annuity payments after the first is determined as follows:
(1) The dollar amount of the first annuity payment is divided by the value
of an Annuity Unit as of the Income Date. This establishes the number
of Annuity Units for each monthly payment. The number of Annuity
Units remains fixed during the annuity payment period.
(2) The fixed number of Annuity Units is multiplied by the Annuity Unit
value for the last Valuation Period of the month preceding the month
for which the payment is due. This result is the dollar amount of the
payment.
The total dollar amount of each Variable Annuity payment is the sum of all
sub-account Variable Annuity payments reduced by the Contract Maintenance
Charge.
The sub-account Annuity Unit value at the end of any Valuation Period is
determined by multiplying the sub-account Annuity Unit value for the
immediately preceding Valuation Period by the quotient of (a) and (b), where:
(a) is the Net Investment Factor for the Valuation Period for which the
sub-account Annuity Unit value is being determined; and,
(b) is the assumed investment factor for such Valuation Period. The assumed
investment factor adjusts for the interest assumed in determining the
first Variable Annuity payment. Such factor for any Valuation Period
shall be the accumulated value of $1.00 deposited at the beginning of
such period at the Assumed Investment Rate of four (4%) percent.
NET INVESTMENT FACTOR - The Net Investment Factor for any sub-account for any
Valuation Period is determined by dividing (a) by (b) and subtracting (c) from
the result where:
(a) is the net result of:
(1) the net asset value per share of the Eligible Mutual Fund or
Portfolio held in the sub-account determined as of the current
Valuation Period; plus
8
<PAGE> 10
(2) the per share amount of any dividend or capital gain distribution
made by the Eligible Mutual Fund or Portfolio held in the sub-
account if the "exdividend" date occurs during the current
Valuation period; plus or minus
(3) a per share charge or credit, which is determined by the Company,
for changes in tax reserves resulting from investment operations of
the sub-account.
(b) is the net result of:
(1) the net asset value per share of the Eligible Mutual Fund or
Portfolio held in the sub-account determined as of the immediately
preceding Valuation Period; plus or minus
(2) the per share charge or credit for any changes in tax reserve for
the immediately preceding Valuation Period.
(c) is the percentage factor representing the Mortality and Expense Risk
Premium.
The Net Investment Factor may be greater or less than one; therefore, Annuity
Unit value may increase or decrease.
PAYMENTS
PAYMENTS ON THE DEATH OF THE ANNUITANT PRIOR TO THE INCOME DATE - In the event
of the death of the Annuitant prior to the Income Date, a death benefit will be
paid to the beneficiary designated by the Contract owner. The value of the
death benefit will be determined as of the Valuation period next following the
date both due proof of death and an election for a single sum payment or
Settlement Option is received by the Company. If a single sum settlement is
requested, the proceeds will be paid within seven (7) days of receipt of such
election and proof of death. If a single sum settlement is not elected and a
Settlement Option is desired, election may be made by the beneficiary during
the ninety-day period commencing with the date of receipt of notification of
death; otherwise a single sum settlement will be made to the beneficiary at the
end of such ninety-day period. The amount of the death benefit will be the
greater of (i) the sum of all Purchase Payments made, less any amount
surrendered, or (ii) the Contract Value. Death benefits will be made in
accordance with any applicable laws or regulations governing payment of death
proceeds.
PAYMENTS ON THE DEATH OF THE ANNUITANT AFTER THE INCOME DATE - If the Annuitant
dies after the Income Date, the death benefit, if any, shall be as specified in
the Settlement Option elected. The Company will require proof of the
Annuitant's death. Death benefits will be made in accordance with any
applicable laws or regulations governing payment of death proceeds.
SURRENDER PROVISIONS
SURRENDER - While this Contract is in force and before the earlier of the
Income Date or the death of the Annuitant, the Company will, upon written
request to the Company by the Contract Owner, allow the surrender of all or a
portion of this Contract for its Surrender Value. Surrenders will result in
the cancellation of Accumulation Units from each applicable sub-account in the
ratio that the value of each sub- account bears to the total Contract Value.
The Contract Owner must specify in writing in advance which units are to be
cancelled if other than the above mentioned method of cancellation is desired.
The Company will pay the amount of any surrender within seven (7) days of
receipt of such request.
The Surrender Value shall be the Contract Value for the Valuation Period next
following the Valuation Period during which the written request to the Company
for surrender is received reduced by the sum of:
(a) the total of any applicable premium taxes not previously deducted;
(b) any applicable Contract Maintenance Charges;
(c) any applicable Contingent Deferred Sales Charge.
9
<PAGE> 11
CALCULATION OF CONTINGENT DEFERRED SALES CHARGE - If all or a portion of the
Surrender Value is surrendered, a Contingent Deferred Sales Charge will be
calculated at the time of each such surrender and will be deducted from the
Contract Value. In calculating the Contingent Deferred Sales Charge:
(a) Purchase Payments will be allocated to the amount surrendered on a
first-in, first-out basis;
(b) In no event will the aggregate Contingent Deferred Sales Charges exceed 6%
of the total Purchase Payments made.
The amount of the Contingent Deferred Sales Charge is calculated by:
(a) Allocating Purchase Payments to the amount surrendered; and
(b) Multiplying each such allocated Purchase Payment by the appropriate
percentage determined on the basis of the table below;
(c) Adding the products of each multiplication in (b) above.
TIME BETWEEN RECEIPT OF ALLOCATED
PURCHASE PAYMENT AND DATE OF SURRENDER PERCENTAGE
Less than 1 year 6%
At least 1 year but less than 2 years 5%
At least 2 years but less than 3 years 4%
At least 3 years but less than 4 years 3%
At least 4 years but less than 5 years 2%
At least 5 years but less than 6 years 1%
At least 6 years 0%
For a Partial Surrender, the Contingent Deferred Sales Charge will be deducted
from the remaining Contract Value, if sufficient, otherwise it will be deducted
from the amount surrendered. The amount deducted from the Contract Value will
be determined by cancelling Accumulation Units from each applicable sub-account
in the ratio that the value of each sub-account bears to the total Contract
Value. The Contract Owner must specify in writing in advance which units are
to be cancelled if other than the above method if cancellation is desired.
After the first Contract Anniversary, a Contract Owner may, not more frequently
than once annually on a non-cumulative basis, make a surrender per Contract
Year of up to ten (10%) percent of aggregate Purchase Payments free from
Contingent Deferred Sales Charges provided the contract Value prior to the
surrender exceeds $10,000. The Company may also periodically waive the
contingent Sales Charges under the Company procedures then in effect.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone payments hereunder for
any period when:
(1) the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
(2) trading on the Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities held in
the Variable Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Variable Account's
net assets; or
(4) during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of security holder; provided that
applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions described in (2)
and (3) exist.
10
<PAGE> 12
DOLLAR AMOUNT OF THE FIRST MONTHLY
VARIABLE ANNUITY PAYMENT PER $1,000
UNISEX
<TABLE>
<CAPTION>
ADJUSTED LIFE LIFE & 10 YRS
AGE ONLY CERTAIN
<S> <C> <C>
40 4.19 4.18
41 4.24 4.22
42 4.28 4.27
43 4.33 4.31
44 4.38 4.36
45 4.43 4.41
46 4.49 4.46
47 4.55 4.52
48 4.61 4.58
49 4.67 4.64
50 4.74 4.70
51 4.81 4.77
52 4.89 4.83
53 4.97 4.91
54 5.05 4.99
55 5.14 5.07
56 5.23 5.15
57 5.33 5.24
58 5.44 5.34
59 5.55 5.44
60 5.68 5.55
61 5.81 5.66
62 5.95 5.78
63 6.10 5.90
64 6.26 6.03
65 6.43 6.17
66 6.61 6.31
67 6.81 6.46
68 7.01 6.61
69 7.24 6.77
70 7.48 6.94
71 7.74 7.11
72 8.02 7.28
73 8.32 7.46
74 8.64 7.63
75 8.98 7.81
</TABLE>
The Settlement Rates given in the above table are based on the 1983 Individual
Annuitant Mortality Table (a) assuming an interest rate of 4.0% per year
compounded annually. Settlement rates for any age not shown above will be
calculated on the same basis as those rates in the table above. Such rates
will be furnished upon request.
11
<PAGE> 13
DOLLAR AMOUNT OF THE FIRST MONTH
VARIABLE ANNUITY PAYMENT PER $1,000
JOINT & SURVIVOR LIFE INCOME
UNISEX
<TABLE>
<CAPTION>
ANNUITANT SPOUSE ADJUSTED AGE MINUS ANNUITANT ADJUSTED AGE
ADJUSTED -10 -5 +0 +5 +10
AGE ------------------------------------------------
<S> <C> <C> <C> <C> <C>
40 3.73 3.80 3.87 3.94 4.00
41 3.75 3.83 3.90 3.87 4.04
42 3.78 3.85 3.93 4.01 4.07
43 3.80 3.88 3.96 4.04 4.11
44 3.82 3.91 4.00 4.08 4.15
45 3.85 3.94 4.03 4.12 4.20
46 3.88 3.97 4.07 4.16 4.24
47 3.91 4.01 4.11 4.21 4.29
48 3.94 4.04 4.15 4.25 4.34
49 3.97 4.08 4.19 4.30 4.40
50 4.00 4.12 4.24 4.35 4.45
51 4.04 4.16 4.29 4.41 4.51
52 4.07 4.20 4.34 4.46 4.58
53 4.11 4.25 4.39 4.53 4.65
54 4.15 4.30 4.45 4.59 4.72
55 4.20 4.35 4.51 4.66 4.79
56 4.24 4.41 4.57 4.73 4.88
57 4.29 4.46 4.64 4.81 4.96
58 4.34 4.53 4.71 4.90 5.06
59 4.40 4.59 4.79 4.98 5.15
60 4.45 4.66 4.87 5.08 5.26
61 4.51 4.73 4.96 5.18 5.37
62 4.58 4.81 5.06 5.29 5.49
63 4.65 4.90 5.16 5.41 5.62
64 4.72 4.98 5.26 5.53 5.76
65 4.79 5.08 5.38 5.66 5.91
66 4.88 5.18 5.50 5.80 6.07
67 4.96 5.29 5.63 5.95 6.23
68 5.06 5.40 5.77 6.12 6.42
69 5.15 5.53 5.92 6.29 6.61
70 5.26 5.66 6.08 6.48 6.82
71 5.27 5.80 6.25 6.68 7.04
72 5.49 5.95 6.44 6.90 7.28
73 5.62 6.12 6.64 7.13 7.54
74 5.76 6.29 6.85 7.38 7.82
75 5.91 6.48 7.08 7.65 8.11
</TABLE>
The Settlement Rates given in the above table are based on the 1983 Individual
Annuitant Mortality Table (a) assuming an interest rate of 4.0% per year
compounded annually. Settlement rates for any age not shown above will be
calculated on the same basis as those rates in the table above. Such rates
will be furnished upon request.
12
<PAGE> 14
ANNUITY PURCHASE RATES
ADJUSTED AGE
<TABLE>
<CAPTION>
CALENDAR YEAR WHEN INCOME
PAYMENTS COMMENCE ADJUSTED AGE
<S> <C>
1984-1989 Actual Age minus 1
1990-1999 minus 2
2000-2009 minus 3
2010-2019 minus 4
2020-2024 minus 5
2025-2029 minus 6
2030-2934 minus 7
2035-2039 minus 8
</TABLE>
13
<PAGE> 15
[SENTRY LIFE INSURANCE COMPANY LOGO]
VARIABLE ANNUITY
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED, NON-PARTICIPATING
<PAGE> 1
EXHIBIT 99.B4(ii)
CONTRACT AMENDMENT
The purpose of this Amendment is to qualify the policy as an annuity contract
in accordance with Section 72(s) of the Internal Revenue Code of 1954, as
amended. The provisions of this Amendment shall apply even if they differ with
any other provisions of the policy. We reserve the right to change any
provisions in this policy in order to comply with any further requirements,
regulations, or rulings pertaining to Section 72(s).
Pursuant to the requirements of the Tax Reform Act of 1984, this Contract is
amended as follows:
1. A Contingent Owner, if named, must be the spouse of the Contract Owner.
2. If the Contract Owner dies before the Income Date, the entire Contract
Value will be distributed within five (5) years of the date of death
unless:
(i) It is payable over the lifetime of a designated Beneficiary with
distributions beginning within one (1) year of the date of death;
or
(ii) The Contingent Owner, if any, continues the Contract in his or
her own name.
3. An election by a Beneficiary to receive periodic payments in lieu of a
lump sum payment, must be made within sixty (60) days after the date
on which such limp sum first becomes payable.
Sentry Life Insurance Company
--------------------------------
Caroline E. Fribance, Secretary
<PAGE> 1
EXHIBIT 99.5
[SENTRY LIFE INSURANCE COMPANY LOGO]
VARIABLE ANNUITY APPLICATION
<TABLE>
<S><C>
1. ANNUITANT
Name_______________________________________________ Soc. Sec. No.______________________________________
Address____________________________________________ Date of Birth______________________________________
City__________________State___________Zip__________ Sentry Employee? / / Yes / / No Male / /
Income Date. The first day of_____________,________ Spouse? / / Yes / / No Female / /
(Month) (Year)
2. CONTRACT OWNER (Complete only if different from Annuitant.) Date of Birth______________________________________
Name______________________________________________ Soc. Sec. No.______________________________________
Address___________________________________City_____________________State_____________________Zip ____________________
Contingent Owner_____________________________________________________________________________________________________
3. BENEFICIARIES (Show full name[s], relationship[s] and percentage each is to receive.)
Primary Beneficiary________________________________________ Relationship___________________________ _____________%
Contingent Beneficiary_____________________________________ Relationship___________________________ _____________%
4. PURCHASE PAYMENTS PURCHASE PAYMENT ALLOCATION
Initial Purchase Payment $_____________________ Liquid Asset Portfolio.................. ___________ %
Planned Subsequent Purchase Payments* $________ Growth Portfolio........................ ___________ %
Bill Me:_______ Monthly_______ Qtrly_____ Annually Limited Maturity Bond Portfolio ........ ___________ %
Balanced Portfolio ..................... ___________ %
TOTAL ALLOCATION 100%
* Subsequent purchase payments will Total allocation must equal 100%
be allocated as shown unless other directed.
5. PLAN TYPE (CHECK AS MANY BOXES AS APPLY.)
/ / Non-Qualified Annuity / / Qualified Retirement Annuity
/ / 1035 Transfer (Non-Qualified only) / / TSA (Tax Sheltered Annuity)
/ / IRA
Cost Basis of contract being replaced $______ / / New IRA Tax Contribution Year 19___
Original date of contract being replaced_____ / / Rollover IRA / / Transfer IRA
/ / SEP IRA (Please attach form 5305-SEP)
6.a. Make Check Payable To: 6.b. TELEPHONE OR TELEGRAM EXCHANGE PRIVILEGE
SENTRY LIFE INSURANCE COMPANY / / The undersigned Contract Owner hereby
elects the Telephone or Telegram Exchange Privilege and agrees
to the terms and condtions as described on the reverse side
Send Check With Application To: of this application.
ANNUITY SERVICE OFFICE
P.O. Box 867
STEVENS POINT, WI 54481
7. SPECIAL REQUESTS
8. ANNUITANT REQUESTS STATEMENT OF ADDITIONAL INFORMATION. / / Yes / / No
9. IS THE ANNUITY APPLIED FOR INTENDED TO REPLACE OR CHANGE ANY EXISTING LIFE INSURANCE OR ANNUITY? / / Yes / / No
10. I (WE) ACKNOWLEDGE RECEIPT OF THE CURRENT PROSPECTUS OF SENTRY VARIABLE
ACCOUNT II AND NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST. PAYMENTS AND
VALUES PROVIDED BY THE CONTRACT FOR WHICH APPLICATION IS MADE ARE VARIABLE AND
ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. I (WE) CERTIFY UNDER PENALTIES OF
PERJURY THAT THE ABOVE SOCIAL SECURITY NUMBER IS CORRECT.
This application has been signed in______________________________________________________,______________________________________
(City) (State)
on___________________________________ month ________________________________________ day 19____________________________________
Signature Signature of
of Annuitant________________________________________________________________________ Contract Owner____________________________
(Owner unless otherwise indicated) (If other than Annuitant)
11. AGENT'S REPORT
Will the annuity replace an existing life insurance If Yes, indicate type of contract: / / Life Insurance
or annuity contract? / /Yes / / No (Submit any required replacement forms.) / / Annuity
Signature of Agent____________________________________ Phone Number (______ )___________________________________________
Print Agent Name / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / Sales Code / / / / / / / / / / / / / /
Name of Broker Dealer______________________________________________________________________________________________________
</TABLE>
<PAGE> 2
TAX SHELTERED ANNUITIES
403(b) TSA
PARTICIPANT'S ACKNOWLEDGEMENT
I have entered into a salary reduction agreement (as defined in Internal
Revenue Code Section 402(g)(3)(C) with my employer. Under that agreement,
contributions will be made to a retirement plan which receives favorable tax
treatment under Section 403(b) of the Internal Revenue Code. The retirement
plan is funded by a variable annuity contract issued by Sentry Life Insurance
Company.
I hereby acknowledge that I understand the restrictions on redemption imposed
by Section 403(b)(11) of the Internal Revenue Code on the contributions made to
a Section 403(b) retirement plan and the earnings thereon. I also acknowledge
that I understand that there may be other investment alternatives available
under my employer's Section 403(b) arrangement to which I may elect to transfer
by contract value.
I have received a current prospectus for the variable annuity contract which
funds my 403(b) retirement plan, and acknowledge that it includes an
explanation of the withdrawal restrictions imposed by the Internal Revenue
Code.
______________________________________________________
Name of Participant (Please Print)
______________________________________________________ ____________________
Signature of Participant Date
================================================================================
TELEPHONE EXCHANGE PRIVILEGE
The Contract Owner hereby authorizes Sentry Life Insurance company to honor
telephone instructions to effect a transfer of all or part of the Contract
Values between Eligible Mutual Fund(s) or Portfolio(s) of the Contract, subject
to the minimums stated in the contract provisions.
The Company will employ reasonable procedures to confirm that telephone
transfer requests are legitimate. The Company will not be liable for complying
with telephone transfer request it believe to be legitimate and for which it
followed reasonable procedures to ensure legitimacy. Sentry Life Insurance
Company reserves the right to reject any telephone instruction. The Contract
owner understands and agrees that this exchange privilege is for the
convenience of the Contract Owner and may be suspended or revoked for any
reason at anytime without prior notice.
===============================================================================
INSTRUCTIONS FOR TELEPHONE EXCHANGES
When you wish to effect an exchange in your account, telephone the Annuity
Service Office toll free at 1(800)533-7827. Be prepared to state the name of
the account, your account number and your social security number.
If your telephone call is received on any business day BEFORE 3:00 P.M. CENTRAL
TIME, the exchange of accumulation units will be made on the basis of the
Valuation period as of the close of that same day. If your telephone call is
received AFTER 3:00 P.M. cENTRAL tIME, the exchange of accumulation units will
be made on the basis of the Valuation Period NEXT FOLLOWING the day your
telephone call was received.
<PAGE> 1
EXHIBIT 99.B6(i)
AMENDED 06/12/96
ARTICLES OF ORGANIZATION
OF THE
SENTRY LIFE INSURANCE COMPANY
ARTICLE I
BUSINESS TO BE UNDERTAKEN
The undersigned, residents of the State of Wisconsin, hereby associate
themselves together for the purpose of forming a corporation to transact the
business of insuring the lives of persons against any of the hazards as may be
authorized or permitted for similar corporations under the laws of the State of
Wisconsin; and to have, exercise and enjoy all the powers, privileges and
rights conferred upon domestic life insurance companies or permitted to them
under the laws of the State of Wisconsin necessary or convenient to effect any
or all of the purposes for which a similar corporation may be formed, all as
provided in Chapter 206 and the general provisions of Chapters 180 and 201 of
the Wisconsin Statutes of 1957 and acts amendatory thereof and supplementary
thereto.
ARTICLE II
NAME AND LOCATION
The name of this corporation shall be Sentry Life Insurance Company and its
location, Home Office, and principal place of business shall be in the City of
Stevens Point, in the County of Portage, and the State of Wisconsin.
ARTICLE III
CAPITAL STOCK
The Capital Stock of the corporation shall be Four Million Dollars ($4,000,000)
and shall be divided into 400,000 shares of one class only, designated as
Common Shares, of the par value of Ten Dollars ($10) each.
ARTICLE IV
RESTRICTIONS ON TRANSFER OF STOCK
The transfer of shares of stock of the corporation may be restricted provided
that any such restriction shall be stated upon the certificate representing the
shares so restricted.
ARTICLE V
PRE-EMPTIVE RIGHTS
No stockholder shall, because of his ownership of shares, have a pre-emptive or
other right to purchase, subscribe for, or take any part of any shares or any
part of the notes, debentures, bonds, or other securities convertible into or
carrying options or warrants to purchase shares of this corporation issued,
optioned or sold by it after its incorporation.
<PAGE> 2
ARTICLE VI
OFFICERS AND DIRECTORS
1. The principal officers of the Company shall be a President, a Vice
President, a Secretary, and a Treasurer. The office of Treasurer may be
combined with any other office. In addition, the Board of Directors may
elect assistant officers.
2. The number of Directors of the corporation constituting the initial Board of
Directors shall be nine and thereafter the number of Directors of the
corporation shall be not less than three nor more than twenty-one, the
actual number thereof, within said limits, to be fixed by the Bylaws of the
corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall terminate on the 31st day of December
of each year.
ARTICLE VIII
AMENDMENTS
Amendments to these Articles of Organization may be made at any Special Meeting
duly called for that purpose, or at any Annual Meeting, of the stockholders,
provided that a statement of the nature of the proposed amendment is included
in the notice of the meeting, upon receiving the affirmative vote of the
holders of at least two-thirds of the shares entitled to vote thereon.
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<PAGE> 1
EXHIBIT 99.B6(ii)
AMENDED 06/12/96
BYLAWS OF
SENTRY LIFE INSURANCE COMPANY
ARTICLE I
MEMBERS OF THE COMPANY
SECTION 1 QUALIFICATIONS OF MEMBERSHIP
The owners of stock (hereinafter referred to as stockholders), the ownership of
which has been recorded and acknowledged as required by law, and they only
shall be members of the corporation. No certificate shall be issued evidencing
ownership of a fractional share of stock.
A natural person, corporation, association, partnership or trust may be a
stockholder. A corporation, association, partnership or trust, if a
stockholder, may authorize in writing any person to vote and act in its behalf
at any meeting of the stockholders. Until the Company shall have received
written notice to the contrary from a corporation, association, partnership or
trust, or until some other person shall have been authorized in writing to
represent the corporation, association, partnership or trust and the Company
shall have received written notice thereof, the Company may conclusively assume
that any officer of such corporation or association, or member of such
partnership, or trustee of such trust, is the duly authorized representative of
such corporation, association, partnership or trust and entitled to vote and
act on its behalf at any meeting of the stockholders.
Stock held by an administrator, executor, guardian, conservator, trustee in
bankruptcy, receiver, or assignee for creditors may be voted by him, either in
person or by proxy, without a transfer of such stock to his name provided that
his holding of such stock is recorded and acknowledged as provided by law.
A stockholder whose stock is pledged shall be entitled to vote such stock until
the stock has been transferred into the name of the pledgee and recorded and
acknowledged as provided by law, and thereafter, the pledgee shall be entitled
to vote the stock so transferred.
SECTION 2 ANNUAL MEETING OF THE STOCKHOLDERS
The regular annual meeting of the stockholders shall be held at the Home Office
of the Company in the City of Stevens Point, Wisconsin, on the third Wednesday
of April of each year at 10:00 a.m. At such meeting, the stockholders shall
elect Directors and transact such other business as may lawfully come before
them.
<PAGE> 2
SECTION 3 SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders may be called by the Chairman of the
Board, the President, any two directors of the Company or the holders of at
least 10% of the outstanding shares of the Company. The person or persons
calling a special meeting may designate any place, either within or without the
State of Wisconsin, as the place of meeting.
SECTION 4 NOTICE OF MEETINGS OF STOCKHOLDERS
Written notice stating the place, day and hour of the meeting and in case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be delivered not less than 10 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the Secretary
to each stockholder of record entitled to vote at such meeting. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail addressed to the stockholder at his address as it appears on the stock
transfer books of the Company, with postage thereon prepaid.
SECTION 5 QUORUM
A quorum shall be required for the transaction of business at any meeting of
the stockholders. At least one-third of the shares, entitled to vote,
represented in person or by proxy, shall constitute a quorum. At any adjourned
meeting at which a quorum is present, any business may be transacted which
might have been transacted at the meeting if it had been held at the time as
originally fixed therefor.
SECTION 6 VOTING AT MEETINGS OF STOCKHOLDERS
Each stockholder shall be entitled to as many votes as he shall own full shares
of stock in the Company and may vote the same in person or by proxy at each
annual or special meeting of the stockholders, provided, however, that no
stockholder shall be entitled to vote at any such meeting by proxy unless such
proxy be in writing, signed by the stockholder or by his duly authorized
attorney in fact, and filed with the Secretary of the Company no later than at
the opening of such meeting, but no proxy shall be valid after eleven months
from the date of the filing thereof with the Secretary, and the date of filing
as endorsed thereon by the Secretary shall be conclusive. If deemed advisable
by the Board of Directors with respect to any particular meeting of the
stockholders, the Secretary shall mail, or cause to be mailed, to each
stockholder a form of written proxy for use at such meeting, which form of
proxy shall name as proxy a Committee designated by the Board of Directors and
shall contain a blank space in which the stockholder may designate some other
person or persons as proxy in place of such Proxy Committee. Where a proxy is
to two or more, it may be voted by any one or more of the proxies so named, if
present, and if the proxies so named disagree, then the vote shall be recorded
as indicated by the majority of the proxies so present and voting, and if no
majority can agree, then no vote shall be cast by such proxy. All proxies
shall be checked and verified by the Secretary, who shall certify to the
proxies on file with him at the opening of each annual or special meeting of
the stockholders of this Company, and such certificate shall be conclusively
deemed to be correct unless some stockholder shall file specific objections to
some one or more, in which event the objection shall be disposed of by the
stockholders present at such meeting in person and by the stockholders
represented at such meeting by uncontested proxy in such manner as they may
there agree upon.
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<PAGE> 3
ARTICLE II
DIRECTORS
SECTION 1 NUMBER OF DIRECTORS
The number of Directors shall be five.
SECTION 2 ELECTION OF DIRECTORS
Each Director in office as of February 19, 1980, shall hold office until the
expiration of the term for which he was elected or until his prior death,
resignation or removal. Each Director elected or reelected after such date
shall hold office until the next annual meeting of stockholders and until his
successor shall have been elected and qualified or until his prior death,
resignation or removal. Any vacancy in the Board of Directors, unless
otherwise provided by law, may be filled by the affirmative vote of a majority
of the Directors then in office, and such person shall serve until the next
annual election of Directors or until his prior death, resignation or removal.
The Board of Directors may elect a Chairman to preside at meetings of the Board
and to assume any obligations and perform any duties imposed by these Bylaws or
the Board of Directors of the Company, or as required by the laws of any state
in which the Company is licensed to do business.
SECTION 3 POWERS OF DIRECTORS
The Board of Directors shall direct the management of the business and affairs
of the Company. They shall provide a suitable Home Office for the Company in
the City of Stevens Point, and may provide such offices elsewhere as they may
deem necessary. They shall fix the compensation of Directors. They shall,
pursuant to Article I of the Articles of Organization, determine the kind and
nature of hazards against which policyholders may be insured. They shall
direct the investment of the reserve and surplus funds of the Company. They
may grant such powers and assign such duties to Committees of the Board, to
other Committees created by them, to the Chairman of the Board, or to the
officers of the Company as the Board may from time to time deem advisable.
They may make rates for insurance or authorize any Committee of the Board or
other Committee appointed by them or any officer or officers of the Company or
any other person or persons, to determine the rates of insurance or the manner
or method by which such rates shall be established. They may reinsure risks or
classes of risks and may authorize any Committee of the Board or other
Committee created by them or any officer or officers of the Company or any
other person or persons, to reinsure risks or classes of risks and to enter
into contracts in respect thereto. They may classify risks by kind, type or
line of insurance or subdivision thereof, by the degree of hazard assumed or by
any standard they may determine is fair and reasonable and may assign the risks
into groups, divisions or classes. In addition to the duties and powers
enumerated in these Bylaws, the Board of Directors shall have and may exercise
all powers and duties necessary or incident to their office.
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<PAGE> 4
SECTION 4 MEETINGS OF DIRECTORS
Regular meetings of the Board of Directors shall be held at such times and
places as the Board of Directors may from time to time determine. Special
meetings of the Board of Directors shall be called whenever the Chairman of the
Board, the President, a Vice President or any two Directors shall so request.
At least forty-eight hours notice shall be given of such special meetings and
such notice may be given in any manner whatsoever; but the action of a majority
of the Board of Directors at any meeting shall be valid notwithstanding any
defect in the notice for such meeting, and every Director shall for all
purposes be deemed to have been duly notified of a meeting if he shall be
present at such meeting or shall in writing waive notice thereof either before
or after the meeting.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1 ELECTION AND APPOINTMENT
The Board of Directors may elect an Executive Committee to be composed of three
or more members of the Board, including the Chairman of the Board, if any.
Members of the Executive Committee shall serve for a one-year term or until
their successors are elected and qualified.
SECTION 2 POWERS
In addition to the powers expressly conferred by these Bylaws, the Executive
Committee shall have and exercise such powers and shall perform such duties as
may be specified from time to time by resolution of the Board of Directors.
SECTION 3 MEETINGS
Regular meetings of the Executive Committee shall be held at such times and
places as the Committee may determine. Special meetings of the Executive
Committee shall be called whenever any member of the Committee shall so
request. Reasonable notice shall be given of such Special Meetings, but the
action of a majority of the Executive Committee at any meeting shall be valid,
notwithstanding any want of or defect in any such notice.
ARTICLE IV
FINANCE COMMITTEE
SECTION 1 ELECTION AND APPOINTMENT
The Board of Directors may elect a Finance Committee to be composed of three or
more members of the Board, including the Chairman of the Board, if any.
Members of the Finance Committee shall serve for a one-year term or until their
successors are elected and qualified.
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<PAGE> 5
SECTION 2 POWERS
The Finance Committee shall have control of the assets of the Company. It
shall have charge of investing, managing, collecting, selling and otherwise
disposing of the same, and the designation of depositories for the Company's
funds. It shall have power to appoint one or more loan agents and to fix their
salaries. It may, from time to time, borrow money for the use and benefit of
the Company in such amount and on such terms as it shall in each case determine
by resolution, and may authorize and direct designated officials to evidence
such loans by the promissory note of the Company and to pledge as security for
the payment thereof the assets and property specified in such resolution. To
carry out these ends, it may do all such acts and things as it may deem
necessary and proper.
SECTION 3 MEETINGS
Regular meetings of the Finance Committee shall be held at such times and
places as the Committee may determine. Special meetings of the Finance
Committee shall be called whenever any member of the Committee shall so
request. Reasonable notice shall be given of such Special Meetings, but the
action of a majority of the Finance Committee at any meeting shall be valid,
notwithstanding any want of or defect in any such notice.
SECTION 4 REPORTS
The Finance Committee shall keep a record of its transactions, which record
shall be available for inspection at any Regular or Special Meeting of the
Executive Committee or Board of Directors.
ARTICLE V
OTHER COMMITTEES
SECTION 1 COMMITTEES OF THE BOARD
The Board of Directors, by resolution, may at any time elect or may authorize
the Chairman of the Board or the President to appoint three or more Directors
to constitute a Committee of the Board, and may confer such powers and impose
such duties upon any such Committee as the Board may deem advisable. The
Committee may elect a Chairman to preside at meetings of the Committee. Any
such Committee shall make reports at such times and in such form and manner as
the Board may require. Members of any such Committee shall serve at the
pleasure of the Board of Directors, but in no event for a term longer than one
year or until their respective successors are chosen and qualified. Pending
the filling of any vacancy on such Committee, the remaining members shall
exercise its functions.
SECTION 2 OTHER COMMITTEES
The Board of Directors may by resolution provide for such Committees, not
elsewhere herein provided for, as it may deem advisable and select the members
thereof or provide for their selection. Each such Committee shall have such
powers and perform such duties as the Board of Directors may from time to time
prescribe.
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<PAGE> 6
ARTICLE VI
QUORUM OF DIRECTORS AND COMMITTEES
A quorum for the transaction of business at any meeting of the Board of
Directors or at any meeting of the Executive Committee or Finance Committee
shall consist of a majority of the Directors or members of such Committees, as
the case may be, but less than a quorum may adjourn the meeting from time to
time until a quorum shall be present.
Except as otherwise provided in the last preceding paragraph with respect to
the Executive Committee and Finance Committee, a quorum for the transaction of
business at any meeting of any Committee shall consist of a majority of the
then members of the Committee, but less than a quorum may adjourn any such
meeting from time to time until a quorum shall be present.
ARTICLE VII
OFFICERS
SECTION 1 PRINCIPAL OFFICERS
The principal officers of the Company shall be a President, a Vice President, a
Secretary and a Treasurer. The office of Treasurer may be combined with any
other office. In addition, the Board of Directors may elect assistant
officers.
SECTION 2 ELECTION
The principal officers of the Company shall be elected annually by the Board of
Directors at its first meeting following the annual stockholders meeting. Each
principal officer shall hold office until a successor shall have been elected
and qualified, or until the principal officer's prior death, resignation or
removal. Any assistant officer elected by the Board of Directors shall hold
office for a term not to exceed one year or until the assistant officer's prior
death, resignation or removal.
SECTION 3 PRESIDENT
The President shall, subject to the control of the Board of Directors, be
responsible for supervising the day-to-day operations of the Company. The
President shall have authority to sign, execute and acknowledge, on behalf of
the Company, all deeds, mortgages, bonds, stock certificates, contracts,
leases, reports and all other documents or instruments necessary or proper to
be executed in the course of the Company's regular business, or which shall be
authorized by resolution of the Board of Directors; and, except as otherwise
provided by law or by the Board of Directors, the President may authorize the
Vice President or any other officer or agent of the Company to sign, execute
and acknowledge such documents or instruments in the President's place and
stead. In addition, the President shall exercise all other powers and duties
expressly conferred upon or assigned by these Bylaws or the Board of Directors,
or as may be incident to the office of President.
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<PAGE> 7
SECTION 4 VICE PRESIDENT
In the absence of the President or in the event of the President's death,
inability or refusal to act, or in the event that for any reason it shall be
impractical for the President to act personally, the Vice President shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
President may sign, with the Secretary, certificates for shares of the Company
and shall perform such other duties and have such authority as may be delegated
or assigned by the Board of Directors or the President. The execution of any
instrument or document of the Company by the Vice President shall be conclusive
evidence, as to third parties, of the Vice President's authority to act in the
stead of the President.
SECTION 5 SECRETARY
The Secretary shall: (a) keep the minutes of the meetings of the stockholders
and of the Board of Directors; (b) provide any notice required by the
provisions of the Articles of Organization or the Bylaws, or by the laws of any
state in which the Company is licensed to do business; (c) act as custodian of
the corporate records and of the corporate seal and arrange to have the seal
affixed to all documents of which the execution, on behalf of the Company and
under its seal, is duly authorized; (d) maintain a register of the Company's
stockholders and stockholders' addresses; (e) sign, with the Chairman of the
Board, the President or the Vice President, stock certificates which have been
authorized by the Board of Directors; (f) maintain the stock transfer books of
the Company; and (g) generally perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as may be
delegated or assigned by the Board of Directors or the President.
SECTION 6 TREASURER
The Treasurer shall: (a) maintain custody of and be responsible for all funds
and securities of the Company and all accounting therefor; (b) be responsible
for receiving and accounting for all monies due and payable to the Company from
any source whatsoever, and arrange for deposit of all such monies in the name
of the Company in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of these Bylaws; and (c) generally
perform all duties incident to the office of Treasurer and have such other
duties and exercise such authority as may be delegated or assigned by the Board
of Directors or the President.
SECTION 7 ASSISTANT OFFICERS
The Board of Directors may elect any person to act as an assistant officer. An
assistant officer shall have the power to perform all the duties of the office
to which he or she is so elected to be assistant, except as such power or
duties may be otherwise defined or restricted by the Board of Directors.
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<PAGE> 8
ARTICLE VIII
RESIGNATIONS AND VACANCIES
Any Director may resign by giving written notice to the Board of Directors, the
President or the Secretary. Vacancies in the Board of Directors or in any
principal office, however occurring, shall be filled by the Board of Directors.
The person chosen to fill any vacancy shall hold office for the unexpired term
for which his or her predecessor was elected, except as otherwise provided by
law or these Bylaws. The continuing Directors may act notwithstanding any
vacancy on the Board, and all acts of the Board of Directors shall be valid
notwithstanding any defect in the election or qualification of any Director.
ARTICLE IX
RESERVES AND GUARANTY FUND
The Company shall maintain such reserves and guaranty funds as are required by
law. The Board of Directors may, from time to time, by resolution provide for
the establishment and maintenance of such additional reserves and guaranty
funds, if any, as they may deem proper or as may be required by law.
ARTICLE X
PARTICIPATION IN SURPLUS
Surplus accumulations on such contracts of life insurance as may be issued by
the Company upon the participating basis shall be returned in accordance with
the Laws of Wisconsin under the exclusive direction of the Board of Directors.
ARTICLE XI
DISSOLUTION OF COMPANY
If, at any time, the Company shall be dissolved or cease to transact the
business of insurance, then whatever shall remain in the way of assets, reserve
funds or otherwise after the full payment of all losses, expenses and any other
disbursements required by the laws of Wisconsin, shall be divided and
distributed to the stockholders of the Company in proportion to their holdings
unless otherwise required by the laws of Wisconsin.
ARTICLE XII
STOCK TRANSFER BOOKS
Transfer of stock may be made in the manner and with the effect provided by law
and shall be subject to any restrictions imposed thereon pursuant to Article IV
of the Articles of Organization.
Stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or entitled to receive payment of any
dividend, or when it is necessary to make a determination of stockholders for
any other purpose shall be those stockholders registered on the stock transfer
books of the Company at 4:30 p.m., standard time, at the location of the Home
Office of the Company, on the fiftieth (50th) day prior to the date on which
the particular action, requiring such determination of stockholders, is to be
taken.
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<PAGE> 9
ARTICLE XIII
BONDS AND INDEMNIFICATION
Officers and employees of the Company shall give fidelity bonds in such sums as
the Board of Directors may require, these bonds to be paid for by the Company.
Each Director and officer of the Company shall be indemnified by the Company
against all costs and expenses actually and necessarily incurred by him in
connection with the defense of any action, suit or proceeding in which he is
made a party by reason of his being or having been a Director or officer of the
Company, whether or not he continues to be a Director or officer at the time of
incurring such costs or expense, except in relation to matters as to which he
shall be adjudged in such action, suit or proceeding to be liable for gross
negligence or willful misconduct in the performance of his duties as such
Director or officer. The right of indemnification herein provided shall not be
exclusive of other rights to which any Director or officer may be entitled as a
matter of law or agreement.
ARTICLE XIV
AMENDMENTS
These Bylaws may be amended at any Regular or Special Meeting of the Board of
Directors by a vote of the majority of the entire Board. These Bylaws may also
be amended at any Regular or Special Meeting of the stockholders upon receiving
the affirmative vote of the holders of at least the majority of the shares
entitled to vote thereon, provided that a statement of the nature of the
proposed amendment is included in the notice of such meeting of the
stockholders.
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<PAGE> 1
EXHIBIT 99.B8(i)
SALES AGREEMENT
THIS AGREEMENT is made by and between NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST ("TRUST"), a Massachusetts business trust and SENTRY LIFE
INSURANCE COMPANY ("LIFE COMPANY"), a life insurance company organized under
the laws of the State of Wisconsin.
WHEREAS, TRUST is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 ("'40 Act") as an open-end
diversified management investment company; and
WHEREAS, TRUST is organized as a series fund, currently with four
Portfolios: Liquid Asset Portfolio, Limited Maturity Bond Portfolio, Growth
Portfolio and Balanced Portfolio; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable contracts offered by life insurance companies through separate
accounts of such life insurance companies; and
WHEREAS, LIFE COMPANY has or will establish one or more separate
accounts to offer variable contracts and is desirous of having Trust as the
underlying funding vehicle for such variable contracts.
NOW, THEREFORE, it is hereby agreed by and between Trust and LIFE
COMPANY as follows:
1. TRUST will make available to the designated separate accounts of
LIFE COMPANY shares of the selected Portfolios for investment of purchase
payments of variable contracts allocated to the designated separate accounts.
2. TRUST will make the shares available to such separate accounts at
net asset value next computed after receipt of each order by the Trust.
3. Orders shall be placed for such shares with the Trust's custodian
pursuant to procedures which are then in effect and which may be modified from
time to time. TRUST will provide LIFE COMPANY with documentation of all
procedures now in effect and will undertake to inform LIFE COMPANY of any
modifications to such procedures.
4. TRUST will provide LIFE COMPANY camera read copy of the current
TRUST prospectus and any supplements thereto for printing by LIFE COMPANY.
TRUST will provide LIFE COMPANY a copy of the statement of additional
information suitable for duplication. TRUST will provide LIFE COMPANY camera
ready copy of its proxy material suitable for printing. TRUST will provide
LIFE COMPANY annual and semi-annual reports and any supplements thereto, in
camera ready form.
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<PAGE> 2
5. Any materials utilized by LIFE COMPANY which describe TRUST, its
shares, or its adviser shall be submitted to TRUST and its adviser and
distributor, Neuberger & Berman management, Incorporation, for approval prior
to use.
6. LIFE COMPANY shall be solely responsible for its actions in
connection with its use of TRUST and its shares and shall indemnify and hold
harmless TRUST, its officers and Trustees, and its adviser and distributor,
Neuberger & Berman Management Incorporated and its officers and directors from
any liability arising from LIFE COMPANY'S use of TRUST or its shares. LIFE
COMPANY shall exonerate TRUST, its officers and Trustees, and its adviser and
distributor, Neuberger & Berman Management Incorporated and its officers and
directors for any use by LIFE COMPANY of the TRUST or its shares.
7. LIFE COMPANY and its agents will not make any representations
concerning the TRUST or TRUST shares except those contained in the then current
prospectus of the Trust and in current printed sales literature of the TRUST.
8. LIFE COMPANY agrees to inform the Board of Trustees of TRUST of the
existence of or any potential for any material irreconcilable conflict of
interest between the interests of the contract owners of the separate accounts
of LIFE COMPANY investing in the TRUST and/or any other separate account of any
other insurance company investing in TRUST.
Any material irreconcilable 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, 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 owners and variable life insurance contract owners or
by contract owners of different life insurance companies
utilizing TRUST; or
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<PAGE> 3
(f) a decision by LIFE COMPANY to disregard the voting
instructions of contract owners.
LIFE COMPANY will be responsible for assisting the Board of Trustees
of 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 LIFE 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 TRUST or a majority of its disinterested Trustees that
a material irreconcilable conflict exists affecting LIFE COMPANY, LIFE 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 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 LIFE COMPANY's
decision to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the LIFE
COMPANY may be required, at the TRUST's election, to withdraw its separate
account's investment in TRUST. No charge or penalty will be imposed against a
separate account as a result of such a withdrawal. LIFE 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 TRUST shall determine whether or not any proposed action
adequately remedies any material irreconcilable conflict. In no event will
TRUST be required to establish a new finding medium for any variable contracts.
LIFE COMPANY shall not be required by the terms hereof to establish a new
finding medium for any variable contracts if an offer to do so has been
declined by vote of a majority of affected contract
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<PAGE> 4
owners.
TRUST will undertake to promptly make known to LIFE COMPANY the Board
of Trustees' determination of the existence of a material irreconcilable
conflict and its implications.
9. LIFE COMPANY shall provide pass-through voting privileges to all
variable contract owners so long as the Securities and Exchange Commission
continues to interpret the '40 Act to require such pass-through voting
privileges for variable contract owners. LIFE COMPANY shall be responsible for
assuring that each of its separate accounts participant in TRUST calculates
voting privileges in a manner consistent with other life companies utilizing
TRUST. It is a condition of this Agreement that LIFE COMPANY will vote shares
for which it has not received voting instructions as well as shares
attributable to it in the same proportion as it votes shares for which it has
received instructions.
10. This Agreement shall terminate automatically in the event of its
assignment unless made with the written consent of LIFE COMPANY and TRUST.
11. This Agreement may be terminated at any time on 60 days' written
notice to the other party hereto, without the payment of any penalty.
12. This Agreement shall be subject to the provisions of the '40 Act
and the rules and regulations thereunder, including any exemptive relief
therefrom and the orders of the Securities and Exchange Commission setting
forth such relief.
13. It is understood by the parties that this Agreement is not to be
deemed an exclusive arrangement.
Executed this 28th day of September, 1990.
NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST
ATTEST: Claudia A. Brandon By: Stanley Egener
---------------------- ---------------------------
Secretary Stanley Egner, Chairman
SENTRY LIFE INSURANCE COMPANY
Attest: Emil Fleischauer, Jr. By: Peter P. Trapp
------------------------ --------------------------
Emil Fleischauer, Jr. Peter P. Trapp
Secretary President
-4-
<PAGE> 1
EXHIBIT 99.B9
[BLAZZARD, GRODD & HASENAUER, P.C. LETTERHEAD]
April 1, 1997
Board of Directors
Sentry Life Insurance Company
1800 North Point Drive
Stevens Point, WI 54481
RE: Opinion of Counsel - Sentry Variable Account II
Gentlemen:
You have requested our Opinion of Counsel in connection with the filing
with the Securities and Exchange Commission of a Post-Effective Amendment to a
Registration Statement on Form N-4 for Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts (the "Contracts") to be issued by Sentry
Life Insurance Company and its separate account, Sentry Variable Account II.
We have made such examination of the law and have examined such records and
documents as in our judgment are necessary or appropriate to enable us to render
the opinions expressed below.
We are of the following opinions:
1. Sentry Variable Account II is a Unit Investment Trust as that term is
defined in Section 4(2) of the Investment Company Act of 1940 (the "Act"), and
is currently registered with the Securities and Exchange Commission, pursuant to
Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by a Contract Owner
pursuant to a Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such a Contract
Owner will have a legally-issued, fully paid, non-assessable contractual
interest under such Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
<PAGE> 2
[BLAZZARD, GRODD & HASENAUER, P.C. LETTERHEAD]
Board of Directors
Sentry Life Insurance Company
April 1, 1997
Page Two
We consent to the reference to our Firm under the caption "Legal
Opinions" contained in the Statement of Additional Information which forms
a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: Lynn Korman Stone
----------------------------
Lynn Korman Stone
<PAGE> 1
EXHIBIT 99.B10
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Sentry Life Insurance Company
We consent to the inclusion in Post-Effective Amendment No. 17 to the
Registration Statement of Sentry Variable Account II on Form N-4 (File No.
2-87072) of our report dated February 10, 1997 on our audit of the financial
statements of Sentry Variable Account II and our report dated February 14,
1997, on our audits of the statutory financial statements of Sentry Life
Insurance Company. We also consent to the reference to our Firm under the
captions "Condensed Financial Information" in the Prospectus and "Accountants"
in the Statement of Additional Information.
s/Coopers & Lybrand L.L.P.
Chicago, Illinois
April 30, 1997
<PAGE> 1
EXHIBIT 99.B12
AGREEMENT GOVERNING CONTRIBUTION
TO
SENTRY VARIABLE ACCOUNT II
BY
SENTRY LIFE INSURANCE COMPANY
This Agreement is made by and between Sentry Variable Account II (the
"Variable Account"), a separate account of Sentry Life Insurance Company duly
organized under the laws of the State of Wisconsin, and Sentry Life Insurance
Company ("Insurance Company"), a Wisconsin company.
WHEREAS, Insurance Company has established the Variable Account and
proposes to contribute to the Variable Account the sum of $100,000
("Contribution") in the manner hereinafter described; and
WHEREAS, it is necessary and desirable that the terms under which said
Contribution is made and the respective rights of Insurance Company and the
Variable Account with respect thereto be determined; and
NOW, THEREFORE, it is hereby agreed between Insurance Company and the
Variable Account as follows:
I
Insurance Company hereby commits itself to, and does herewith, contribute
to the Variable Account the sum of $100,000. Insurance Company hereby
represents and agrees that it is making such Contribution for investment
purposes and not with a view to redeeming or disposing of any interest in the
Variable Account resulting from such Contribution.
<PAGE> 2
II
In consideration for such Contribution and without deduction of any sales
charges, the Variable Account shall credit Insurance Company with accumulation
units of which Insurance Company shall be the owner. Such accumulation units
shall share pro rata in the investment performance of the Variable Account and
shall be subject to the same valuation procedures and the same periodic charges
as are other accumulation units and annuity units in the Variable Account.
Insurance Company shall have and may exercise voting rights on the same basis as
owners of variable annuity contracts issued or to be issued with respect to the
Variable Account.
III
Insurance Company hereby acknowledges that by making such contribution it
is not and shall not be regarded as a creditor of the Variable Account and that
the relationship of debtor-creditor between the Variable Account and Insurance
Company does not exist with respect to the amount so contributed. Insurance
Company agrees that by making such contribution it is not now and shall not in
the future be, or be deemed to be, the holder of any interest other than as
provided in paragraph 2 of this agreement. Insurance Company agrees that its
interest in the Variable Account as a result of such Contribution shall be
neither senior to nor subordinate to the interests of owners of variable annuity
contracts issued with respect to the Variable Account or of Insurance Company,
however occurring, Insurance Company shall have no preferential rights of any
kind over such contract owner's but shall share ratably with them.
Page 2
<PAGE> 3
IV
All commitments of Insurance Company hereunder shall be forever binding
upon its successor or successors.
V
The Variable Account hereby accepts such Contribution subject to the terms
of the Agreement.
Executed this 1st day of May, 1984.
SENTRY LIFE INSURANCE COMPANY
By: s/Thomas H. Weingarten
Attest:
s/Caroline E. Fribance
SENTRY VARIABLE ACCOUNT II
By: s/Thomas H. Weingarten
Attest:
s/Caroline E. Fribance
Page 3
<PAGE> 1
EXHIBIT 99.B13
SEC Rule 482 - Total Return
SLIC Variable Annuity - One Year
Original Purchase - 12/31/95
Valuation Date - 12/31/96
LIQUID ASSET
====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/95 Purchase 1,000.00 16.247074 61.550 61.550 $1,000.00
09/10/96 Contract Fee (2.01) 16.611965 (0.121) 61.429 $1,020.45
12/31/96 Value Before Surr. Chg. 16.778906 0.000 61.429 $1,030.70
12/31/96 Surrender Charge 0.05 (50.00) 16.778906 (2.980) 58.449 $ 980.70
12/31/96 Remaining Value 16.778906 0.000 58.449 $ 980.70
</TABLE>
GROWTH
====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/95 Purchase 1,000.00 36.783095 27.186 27.186 $1,000.00
09/10/96 Contract Fee (6.28) 36.333374 (0.173) 27.014 $ 981.49
12/31/96 Value Before Surr. Chg. 39.661966 0.000 27.014 $1,071.41
12/31/96 Surrender Charge 0.05 (50.00) 39.661966 (1.261) 25.753 $1,021.41
12/31/96 Remaining Value 39.661966 0.000 25.753 $1,021.41
</TABLE>
<PAGE> 2
BOND
====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/95 Purchase 1,000.00 22.341625 44.760 44.760 $1,000.00
09/10/96 Contract Fee (16.87) 22.401036 (0.753) 44.006 $ 985.79
12/31/96 Value Before Surr. Chg. 23.023765 0.000 44.006 $1,013.19
12/31/96 Surrender Charge 0.05 (50.00) 23.023765 (2.172) 41.835 $ 963.19
12/31/96 Remaining Value 23.023765 0.000 41.835 $ 963.19
</TABLE>
BALANCED
====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/95 Purchase 1,000.00 16.366322 61.101 61.101 $1,000.00
09/10/96 Contract Fee (4.84) 16.213209 (0.299) 60.803 $ 985.80
12/31/96 Value Before Surr. Chg. 17.283010 0.000 60.803 $1,050.85
12/31/96 Surrender Charge 0.05 (50.00) 17.283010 (2.893) 57.910 $1,000.85
12/31/96 Remaining Value 17.283010 0.000 57.910 $1,000.85
</TABLE>
<PAGE> 3
SLIC
VA SEC Ave. Annual Total Return
P(1+t)Nth power = ERV
Value Date 12/31/96
<TABLE>
<CAPTION>
Purchase Years Total Value Avg. Annual Total
Portfolio Amount Invested of Units Held Total Return Return
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Liquid Asset $1,000 1.00 981 -1.93% -1.93%
Growth $1,000 1.00 1,021 2.14% 2.14%
Bond $1,000 1.00 963 -3.68% -3.68%
Balanced $1,000 1.00 1,001 0.09% 0.09%
</TABLE>
<PAGE> 4
SEC Rule 482 - Total Return
SLIC Variable Annuity - Five Years
Original Purchase - 12/31/91
Valuation Date 12/31/96
LIQUID ASSET
=====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/91 Purchase 1,000.00 14.825135 67.453 67.453 $1,000.00
09/10/92 Contract Fee (3.12) 15.057642 (0.207) 67.246 $1,012.56
09/10/93 Contract Fee (2.80) 15.258026 (0.184) 67.062 $1,023.24
09/10/94 Contract Fee (2.70) 15.508169 (0.174) 66.888 $1,037.31
09/10/95 Contract Fee (2.61) 16.064606 (0.162) 66.726 $1,071.92
09/10/96 Contract Fee (2.01) 16.611965 (0.121) 66.605 $1,106.44
12/31/96 Value Before Surr. Chg. 16.778906 0.000 66.605 $1,117.55
12/31/96 Surrender Charge 0.01 (10.00) 16.778906 (0.596) 66.009 $1,107.55
12/31/96 Remaining Value 16.778906 0.000 66.009 $1,107.55
</TABLE>
GROWTH
=====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/91 Purchase 1,000.00 26.356685 37.941 37.941 $1,000.00
09/10/92 Contract Fee (7.42) 26.222802 (0.283) 37.658 $ 987.50
09/10/93 Contract Fee (7.01) 29.686989 (0.236) 37.442 $1,110.94
09/10/94 Contract Fee (6.74) 29.235922 (0.231) 37.191 $1,087.33
09/10/95 Contract Fee (6.37) 38.489914 (0.165) 37.026 $1,425.12
09/10/96 Contract Fee (6.28) 36.333374 (0.173) 36.853 $1,339.00
12/31/96 Value Before Surr. Chg. 39.661966 0.000 36.853 $1,461.67
12/31/96 Surrender Charge 0.01 (10.00) 39.661966 (0.252) 36.601 $1,451.67
12/31/96 Remaining Value 39.661966 0.000 36.601 $1,451.67
</TABLE>
<PAGE> 5
BOND
=====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/91 Purchase 1,000.00 18.866589 53.004 53.004 $1,000.00
09/10/92 Contract Fee (16.22) 19.677253 (0.824) 52.179 $1,026.75
09/10/93 Contract Fee (16.13) 20.708926 (0.779) 51.401 $1,064.45
09/10/94 Contract Fee (16.13) 20.446641 (0.789) 50.612 $1,034.84
09/10/95 Contract Fee (16.56) 21.722485 (0.762) 49.849 $1,082.85
09/10/96 Contract Fee (16.87) 22.401036 (0.753) 49.096 $1,099.81
12/31/96 Value Before Surr. Chg. 23.023765 0.000 49.096 $1,130.38
12/31/96 Surrender Charge 0.01 (10.00) 23.023765 (0.434) 48.662 $1,120.38
12/31/96 Remaining Value 23.023765 0.000 48.662 $1,120.38
</TABLE>
BALANCED
=====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/91 Purchase 1,000.00 12.480499 80.125 80.125 $1,000.00
09/10/92 Contract Fee (3.24) 12.638701 (0.256) 79.869 $1,009.44
09/10/93 Contract Fee (4.06) 13.887021 (0.292) 79.576 $1,105.08
09/10/94 Contract Fee (4.43) 13.714103 (0.323) 79.253 $1,086.99
09/10/95 Contract Fee (4.46) 16.661507 (0.268) 78.986 $1,316.02
09/10/96 Contract Fee (4.84) 16.213209 (0.299) 78.687 $1,275.77
12/31/96 Value Before Surr. Chg. 17.283010 0.000 78.687 $1,359.95
12/31/96 Surrender Charge 0.01 (10.00) 17.283010 (0.579) 78.108 $1,349.95
12/31/96 Remaining Value 17.283010 0.000 78.108 $1,349.95
</TABLE>
<PAGE> 6
SLIC
VA SEC Ave. Annual Total Return
P(1+t)Nth power = ERV
Value Date 12/31/96
<TABLE>
<CAPTION>
Purchase Years Total Value Avg. Annual Total
Portfolio Amount Invested of Units Held Total Return Return
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Liquid Asset $1,000 5.00 1,108 2.06% 10.76%
Growth $1,000 5.00 1,452 7.74% 45.17%
Bond $1,000 5.00 1,120 2.30% 12.04%
Balanced $1,000 5.00 1,350 6.19% 34.99%
</TABLE>
<PAGE> 7
SEC Rule 482 - Total Return
SLIC Variable Annuity - Ten Years
Original Purchase - 12/31/86 (3/1/89 Balanced Portfolio)
Valuation Date - 12/31/96
LIQUID ASSET
=================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/86 Purchase 1,000.00 11.324852 88.301 88.301 $1,000.00
09/10/87 Contract Fee (2.79) 11.647473 (0.240) 88.062 $1,025.70
09/10/88 Contract Fee (3.57) 12.219345 (0.292) 87.770 $1,072.49
09/12/89 Contract Fee (2.69) 13.107002 (0.205) 87.564 $1,147.71
09/11/90 Contract Fee (2.99) 13.953219 (0.214) 87.350 $1,218.82
09/10/91 Contract Fee (3.72) 14.662450 (0.254) 87.096 $1,277.05
09/10/92 Contract Fee (3.12) 15.057642 (0.207) 86.889 $1,308.35
09/10/93 Contract Fee (2.80) 15.258026 (0.184) 86.706 $1,322.96
09/10/94 Contract Fee (2.70) 15.508169 (0.174) 86.532 $1,341.95
09/10/95 Contract Fee (2.61) 16.064606 (0.162) 86.369 $1,387.49
09/10/96 Contract Fee (2.01) 16.611965 (0.121) 86.248 $1,432.75
12/31/96 Value Before Surr. Chg. 16.778906 0.000 86.248 $1,447.15
12/31/96 Surrender Charge 0.00 16.778906 0.000 86.248 $1,447.15
12/31/96 Remaining Value 16.778906 0.000 86.248 $1,447.15
</TABLE>
GROWTH
=================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/86 Purchase 1,000.00 15.123842 66.121 66.121 $1,000.00
09/10/87 Contract Fee (8.65) 19.141253 (0.452) 65.669 $1,256.98
09/10/88 Contract Fee (9.02) 16.534151 (0.546) 65.123 $1,076.76
09/12/89 Contract Fee (6.48) 23.632300 (0.274) 64.849 $1,532.53
09/11/90 Contract Fee (6.15) 20.218175 (0.304) 64.545 $1,304.98
09/10/91 Contract Fee (7.80) 24.162236 (0.323) 64.222 $1,551.75
09/10/92 Contract Fee (7.42) 26.222802 (0.283) 63.939 $1,676.66
09/10/93 Contract Fee (7.01) 29.686989 (0.236) 63.703 $1,891.15
09/10/94 Contract Fee (6.74) 29.235922 (0.231) 63.472 $1,855.68
09/10/95 Contract Fee (6.37) 38.489914 (0.165) 63.307 $2,436.68
09/10/96 Contract Fee (6.28) 36.333374 (0.173) 63.134 $2,293.88
12/31/96 Value Before Surr. Chg. 39.661966 0.000 63.134 $2,504.02
12/31/96 Surrender Charge 0.00 39.661966 0.000 63.134 $2,504.02
12/31/96 Remaining Value 39.661966 0.000 63.134 $2,504.02
</TABLE>
<PAGE> 8
BOND
=================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/86 Purchase 1,000.00 13.591822 73.574 73.574 $1,000.00
09/10/87 Contract Fee (18.55) 13.809750 (1.343) 72.230 $ 997.48
09/10/88 Contract Fee (17.42) 14.496237 (1.202) 71.029 $1,029.65
09/12/89 Contract Fee (13.33) 15.631961 (0.853) 70.176 $1,096.99
09/11/90 Contract Fee (12.65) 16.650894 (0.760) 69.416 $1,155.84
09/10/91 Contract Fee (16.88) 18.039834 (0.936) 68.481 $1,235.38
09/10/92 Contract Fee (16.22) 19.677253 (0.824) 67.656 $1,331.29
09/10/93 Contract Fee (13.13) 20.708926 (0.634) 67.002 $1,387.96
09/10/94 Contract Fee (16.13) 20.446641 (0.789) 66.233 $1,354.25
09/10/95 Contract Fee (16.56) 21.722485 (0.762) 65.471 $1,422.19
09/10/96 Contract Fee (16.87) 22.401036 (0.753) 64.718 $1,449.75
12/31/96 Value Before Surr. Chg. 23.023765 0.000 64.718 $1,490.05
12/31/96 Surrender Charge 0.00 23.023765 0.000 64.718 $1,490.05
12/31/96 Remaining Value 23.023765 0.000 64.718 $1,490.05
</TABLE>
BALANCED
====================
<TABLE>
<CAPTION>
Units This Total Total
Date Transaction Type Rate Amount Unit Value Transaction Units Held Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
03/01/89 Purchase 1,000.00 8.975613 111.413 111.413 $1,000.00
09/11/89 Contract Fee (7.50) 10.376347 (0.723) 110.690 $1,148.56
09/10/90 Contract Fee (0.50) 10.074228 (0.050) 110.641 $1,114.62
09/10/91 Contract Fee (1.60) 11.539053 (0.139) 110.502 $1,275.09
09/10/92 Contract Fee (3.24) 12.638701 (0.256) 110.246 $1,393.36
09/10/93 Contract Fee (4.06) 13.887021 (0.292) 109.953 $1,526.92
09/10/94 Contract Fee (4.43) 13.714103 (0.323) 109.630 $1,503.48
09/10/95 Contract Fee (4.46) 16.661507 (0.268) 109.362 $1,822.14
09/10/96 Contract Fee (4.84) 16.213209 (0.299) 109.064 $1,768.28
12/31/96 Value Before Surr. Chg. 17.283010 0.000 109.064 $1,884.95
12/31/96 Surrender Charge 0.00 17.283010 0.000 109.064 $1,884.95
12/31/96 Remaining Value 17.283010 0.000 109.064 $1,884.95
</TABLE>
<PAGE> 9
SLIC
VA SEC Ave. Annual Total Return
P(1+t)Nth power = ERV
Value Date 12/31/96
<TABLE>
<CAPTION>
Purchase Years Total Value Avg. Annual Total
Portfolio Amount Invested of Units Held Total Return Return
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Liquid Asset $1,000 10.00 1,447 3.77% 44.71%
Growth $1,000 10.00 2,504 9.61% 150.40%
Bond $1,000 10.00 1,490 4.07% 49.00%
Balanced $1,000 7.84 1,885 8.42% 88.50%
(Since inception)
</TABLE>
