<PAGE> 1
1933 Act File No. 2-98441
1940 Act File No. 811-4327
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 13
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust: Sentry Variable Life Account I
B. Name of Depositor: Sentry Life Insurance Company
C. Complete Address of Depositor's Principal Executive Offices:
1800 North Point Drive, Stevens Point, WI 54481
D. Name and Address of Agent for Service:
William M. O'Reilly, Esq.
Sentry Life Insurance Company
1800 North Point Drive
Stevens Point, WI 54481
COPIES 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
____ 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
____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. Title and Amount of Securities Being Registered: Individual Flexible
Premium Variable Life Insurance Policies
Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2 (17
CFR 270.24f-2) and the Rule 24f-2 Notice for Registrant's fiscal year 1996 was
filed on or about February 28, 1997.
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CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 Item Caption in Prospectus
- ----------- ---------------------
<S> <C>
1 .......................... The Company, The Variable Life Account
2 .......................... The Company
3 .......................... Not Applicable
4 .......................... Distribution of the Policy
5 .......................... The Variable Life Account
6(a) .......................... Not Applicable
(b) .......................... Not Applicable
9 .......................... Legal Proceedings
10 .......................... The Policy
11 .......................... Investments of the Variable Life Account
12 .......................... Investments of the Variable Life Account
13 .......................... Charges and Deductions
14 .......................... The Policy
15 .......................... The Variable Life Account
16 .......................... Investments of the Variable Life Account
17 .......................... Policy Benefits and Rights
18 .......................... The Policy
19 .......................... Not Applicable
20 .......................... Not Applicable
21 .......................... Not Applicable
22 .......................... Not Applicable
23 .......................... Not Applicable
24 .......................... Not Applicable
25 .......................... The Company
26 .......................... Management of the Company
27 .......................... The Company
28 .......................... The Company, Management of the Company
29 .......................... The Company
30 .......................... The Company
31 .......................... Not Applicable
32 .......................... Not Applicable
33 .......................... Not Applicable
34 .......................... Not Applicable
35 .......................... The Company
37 .......................... Not Applicable
38 .......................... Distribution of the Policy
39 .......................... Distribution of the Policy
40 .......................... Not Applicable
41(a) .......................... Distribution of the Policy
42 .......................... Not Applicable
43 .......................... Not Applicable
44 .......................... The Policy
45 .......................... Not Applicable
46 .......................... Policy Benefits and Rights
47 .......................... Not Applicable
48 .......................... Not Applicable
49 .......................... Not Applicable
50 .......................... Not Applicable
51 .......................... The Company, The Policy
52 .......................... Investments of the Variable Life Account
53 .......................... Tax Status
54 .......................... Financial Statements
55 .......................... Not Applicable
</TABLE>
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[LOGO]
Sentry Variable Life Account I
SELF-DIRECTED LIFE
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FUNDED BY NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
[LOGO]
PROSPECTUS
MAY 1, 1997
SENTRY LIFE INSURANCE COMPANY
<PAGE> 4
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
ISSUED BY
SENTRY VARIABLE LIFE ACCOUNT I
AND
SENTRY LIFE INSURANCE COMPANY
The Individual Variable Life Insurance Policy ("Policy") described in this
Prospectus is a flexible premium policy. The Policy is designed for maximum
flexibility in meeting the insurance needs of individuals. The Policy provides
death protection until the Policy Anniversary following the Insured's 95th
birthday.
The Cash Value of the Policy will be allocated to a segregated investment
account of Sentry Life Insurance Company ("Company") which account has been
designated Sentry Variable Life Account I ("Variable Life Account"). The
Variable Life Account invests in shares of Neuberger & Berman Advisers
Management Trust at net asset value. Neuberger & Berman Advisers Management
Trust is an open-end diversified management investment company which currently
is comprised of eight separate Portfolios with different investment objectives,
four of which are available in connection with the Policy offered under this
Prospectus. The Owner of the Policy bears the complete investment risk for all
amounts allocated to the Variable Life Account. The Cash Value and, under
certain circumstances, the Death Benefit of the Policy may increase or decrease
depending on the investment experience of the Variable Life Account.
-----------------------
IT MAY NOT BE ADVANTAGEOUS TO PURCHASE THE POLICY ISSUED BY THE VARIABLE LIFE
ACCOUNT AS A REPLACEMENT FOR ANOTHER TYPE OF LIFE INSURANCE. IT ALSO MAY NOT BE
ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO OBTAIN
ADDITIONAL INSURANCE PROTECTION IF THE PURCHASER ALREADY OWNS ANOTHER FLEXIBLE
PREMIUM LIFE INSURANCE CONTRACT.
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.
THE NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST PROSPECTUS ACCOMPANIES THIS
PROSPECTUS.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
SENTRY LIFE INSURANCE COMPANY
1800 North Point Drive
Stevens Point, WI 54481
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE> 5
CHARGES AND DEDUCTIONS ASSOCIATED WITH VARIABLE LIFE CONTRACTS
FROM PREMIUM
Front-end sales expense charge - 5% of each Premium payment. (There is also a
Deferred Sales Charge of 25% of the Target Surrender Premium or 25% of the
actual Premium paid in the first Policy Year, if less. Together these charges
total 30%. See "Charges and Deductions - Deductions from Surrendered
Values.")
Premium taxes - premium taxes are assessed by the Policy Owner's state of
domicile. Premium taxes currently vary from state to state and range from 0%
to 4%.
FROM THE VARIABLE LIFE ACCOUNT
Mortality and Expense Risk Premium - equal on an annual basis to 0.90% of the
daily net asset value of the Variable Life Account.
Death Benefit Guarantee Risk Charge - equal on an annual basis to 0.15% of
the daily net asset value of the Variable Life Account.
Taxes - the Company has reserved the right to make a provision for income
taxes which have resulted from the investment operation of any Subaccount.
The Company is not currently deducting for taxes.
FROM CASH VALUE
Monthly Deduction - deducted from Cash Value at the beginning of each Policy
Month and consists of:
Cost of Insurance for the Policy and any additional benefits provided by
rider for the Policy Month; and
Monthly Administrative Fee - $5 per Policy Month.
FROM SURRENDERED VALUES
Partial Surrender Charge - a percentage of the Full Surrender Charge.
Partial Surrender Administrative Fee - the lesser of 2% of the amount
surrendered or $25.
Full Surrender Charge - remains the same for the first five Policy Years and
declines in Policy Years six through nine until it is zero and is the sum of
the following:
Contingent Deferred Administrative Expense Charge - $3.50 per $1,000 on
the first $100,000 of Specified Amount plus $1.50 per $1,000 on the excess
above first $100,000 of Specified Amount. The maximum Contingent Deferred
Administrative Expense Charge is $750; and
Deferred Sales Charge - 25% of the Target Surrender Premium or of the
actual Premium paid in the first Policy Year, if less; and
Additional Contingent Deferred Administrative Expense Charge and Deferred
Sales Charge which result from an increase in the Specified Amount.
OTHER CHARGES AND FEES
Maximum Transfer Fee - $25
Maximum Service Fee for Additional Projections - $25
For a more complete description of these charges, see "Charges and
Deductions" and "The Policy - Illustrations."
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
The investment manager and administrator (Neuberger & Berman Management
Incorporated) for Neuberger & Berman Advisers Management Trust (the "Trust")
is paid a fee for its services based upon each Portfolio's net assets which are
described below under "Charges and Deductions - Trust and Manager Trust Annual
Expenses" and in the accompanying Trust prospectus.
2
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Definitions ................................... 5
Summary ....................................... 6
The Company ................................... 7
The Variable Life Account ..................... 8
Investments of the Variable Life Account ...... 8
Initial Investment Period ................... 8
Transfers ................................... 8
Neuberger & Berman Advisers Management Trust 9
Substitution of Securities .................. 10
The Policy .................................... 10
General ..................................... 10
Insurance Underwriting ...................... 10
Right to Exchange the Policy ................ 10
Illustrations ............................... 10
Premiums ...................................... 11
Initial Premium ............................. 11
Net Premiums ................................ 11
First Year Minimum Premium .................. 11
Planned Premiums ............................ 11
Additional Premiums ......................... 11
Maximum Premium Limitations ................. 11
Death Benefit Guarantee ..................... 11
Grace Period ................................ 11
Reinstatement ............................... 12
Charges and Deductions ........................ 12
Deductions from Premiums .................... 12
Deductions from the Variable Life Account ... 12
Deductions from Cash Value .................. 12
Deductions from Surrendered Values .......... 13
Trust and Managers Trust Annual Expenses .... 14
Group Arrangements .......................... 14
Policy Benefits and Rights .................... 14
Death Benefit ............................... 14
Corridor Percentages ........................ 15
Illustrations of Death Benefit Options ...... 15
Change of Death Benefit Option .............. 16
Change in the Specified Amount .............. 16
Maturity Benefits ........................... 17
Cash Value .................................. 17
Determination of Accumulation Unit .......... 17
Partial Surrender ........................... 18
Full Surrender .............................. 18
Surrender Requirements ...................... 18
Policy Loans ................................ 18
</TABLE>
3
<PAGE> 7
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Other Policy Provisions ............................ 19
Policy Owner ..................................... 19
Contingent Policy Owner .......................... 19
Change of Policy Owner or Contingent Policy Owner 19
Assignment ....................................... 19
Beneficiary ...................................... 19
Change of Beneficiary ............................ 19
Incontestability ................................. 19
Misstatement of Age or Sex ....................... 19
No Dividends ..................................... 19
Optional Settlement Plans ........................ 19
Suspension of Payments ............................. 20
Tax Status ......................................... 20
Introduction ..................................... 20
Diversification .................................. 20
Tax Treatment of the Policy ...................... 21
Policy Proceeds .................................. 21
Tax Treatment of Loans and Surrenders ............ 21
Multiple Policies ................................ 22
Tax Treatment of Assignments ..................... 22
Qualified Plans .................................. 22
Variable Life Account Voting Rights ................ 22
Disregard of Voting Instructions ................. 23
Management of the Company .......................... 23
Directors and Officers ........................... 23
Distribution of the Policy ......................... 23
Other Policies Issued by the Company ............... 24
State Regulation ................................... 24
Reports to Owners .................................. 24
Legal Proceedings .................................. 24
Experts ............................................ 24
Legal Opinions ..................................... 24
Financial Statements ............................... 24
Appendix A - Illustrations of Benefits ............. 52
</TABLE>
4
<PAGE> 8
DEFINITIONS
ACCUMULATION UNIT - An accounting unit of measure used to calculate Policy
values.
AGE - Age last birthday as determined on the Policy Anniversary on or preceding
the current date.
ANNIVERSARY - The same day and month each year as the Policy Date.
BENEFICIARY - The Beneficiary is named in the application unless changed, and
receives the death benefit at the Insured's death.
CASH SURRENDER VALUE - The Cash Value of the Policy less any Indebtedness and
less the Full Surrender Charge.
COMPANY - Sentry Life Insurance Company at its Home Office located at 1800
North Point Drive, Stevens Point, Wisconsin 54481.
CASH VALUE - The sum of all Subaccount Cash Value and any Cash Value held in
the General Account to secure Policy debt.
ELIGIBLE MUTUAL FUND(S) - The mutual funds designated in the Policy as eligible
investments of the Variable Life Account.
GENERAL ACCOUNT - The general ledger account of the Company.
IN EFFECT - When the Insured's life is covered under the Policy.
INITIAL INVESTMENT PERIOD - A 30 day period commencing on the Policy Issue
Date.
INSURED - The person whose life is covered under the Policy.
MATURITY DATE - The Maturity Date is the date on which the Company will pay the
Policy's Cash Value less any outstanding indebtedness if the Policy is In
Effect on such date.
MONTHLY PROCESSING DAY - The day from which Policy Months are determined.
NET PREMIUMS - Gross Premiums less the charge for front-end sales load and
premium taxes.
PAYEE - A person receiving payments from the Company under an Optional
Settlement Plan.
POLICY DATE - The day, month and year the Policy is put In Effect.
POLICY ISSUE DATE - The day, month and year that underwriting is completed and
the Policy is issued by the Company.
POLICY MONTH - A period of time commencing on any Monthly Processing Day and
ending on the day preceding the next Monthly Processing Day.
POLICY OWNER - The Policy Owner is named in the application, unless changed,
and has all rights under the Policy.
POLICY YEAR - A period of time commencing on any Anniversary and ending on the
day preceding the next Anniversary.
PORTFOLIO - A segment of an Eligible Mutual Fund which constitutes a separate
and distinct class of shares.
SPECIFIED AMOUNT - The amount of the initial death benefit provided by the
Policy plus or minus any changes in the Specified Amount.
SUBACCOUNT - A segment of the Variable Life Account which invests in an
Eligible Mutual Fund or Portfolio.
TARGET SURRENDER PREMIUM - The Premium, shown on the Policy Specifications
Page, that is used to calculate the Deferred Sales Charge. The Target Surrender
Premium is based on the guideline annual premium pursuant to rules adopted
under the Investment Company Act of 1940.
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 4:00 p.m. New York time on each
Valuation Date and ending at 4:00 p.m. New York time for the next succeeding
Valuation Date.
VARIABLE LIFE ACCOUNT - A separate investment account of the Company into which
Net Premiums under the Policy will be allocated.
5
<PAGE> 9
SUMMARY
THE POLICY -- The Policy described in this Prospectus is a flexible premium
variable life insurance policy. The Policy, while providing certain investment
features, is a life insurance policy providing death benefits, cash values, and
other features that are traditionally associated with life insurance.
The Policy is called "flexible" because, unlike the fixed premiums of an
ordinary whole life insurance policy, the frequency and amount of Premium
payments can vary; any form of insurance coverage can be simulated by changing
the Specified Amount of insurance and the death benefit may be changed between
Options 1 and 2.
The Policy is called "variable" because, unlike the fixed benefits of an
ordinary whole life insurance policy, the Cash Value and, under certain
circumstances, the death benefit of the Policy may increase or decrease
depending on the investment experience of the assets underlying the Policy.
Policy Owners bear the complete investment risk for all amounts allocated to
the Variable Life Account. However, if the minimum Premium requirement as set
forth in the Policy is met, the Policy is guaranteed not to lapse, even if the
investment performance causes the full Cash Surrender Value to be insufficient
to cover the Monthly Deductions when due. (See "Premiums - Death Benefit
Guarantee" for a further explanation). There is no guaranteed minimum Cash
Value. For a more complete description of the Policy, see "Policy Benefits and
Rights."
The minimum Specified Amount for which the Company will issue the Policy is
$50,000. If the Death Benefit Guarantee is not In Effect, and if the Cash
Surrender Value is not sufficient to cover the Monthly Deduction when due, a
grace period of 61 days will be allowed for the payment of a Premium sufficient
to cover the Monthly Deduction. If a Premium or a loan repayment sufficient to
cover the Monthly Deduction is still unpaid by the end of the grace period, the
Policy will lapse and all coverage under the Policy will terminate without
value.
The Policy has been designed to comply with the definition of life insurance
contained in Section 7702 of the Internal Revenue Code of 1986, as amended (the
"Code"). However, the law in this regard is very complex and unclear. While
every attempt has been made to comply, there is the risk that the Internal
Revenue Service will not concur with the Company's interpretations of Section
7702 that were made in determining such compliance. For a further discussion,
see "Tax Status - Tax Treatment of the Policy."
THE VARIABLE LIFE ACCOUNT -- The Variable Life Account is a separate account
established by the Company pursuant to the insurance laws of the State of
Wisconsin and registered as a unit investment trust under the Investment
Company Act of 1940. Net Premiums will be allocated to the Variable Life
Account and are currently invested in shares of Neuberger & Berman Advisers
Management Trust at their net asset value. Policy Owners bear the complete
investment risk for amounts allocated to the Variable Life Account. For a more
complete description, see "The Variable Life Account" and "Investments of
the Variable Life Account."
PREMIUMS -- The initial Premium is due on or prior to the Policy Date. The
frequency and amount of subsequent Premium payments can vary. Therefore, an
unlimited number of Premium payment patterns are possible, including single
premium, level premium, limited premium, increasing premium, decreasing
premium, and stop and go premiums. While the Policy provides for flexible
Premium payments, Policy Owners can establish a Planned Premium Payment Plan
which may provide for Premiums to be made annually, semi-annually, quarterly or
by automatic bank check. The Planned Premiums are subject to certain minimum
amounts. There are certain minimum Premium payment requirements that must be
met in order to have the Death Benefit Guarantee in effect.
The Company reserves the right to limit the frequency and amount of additional
Premiums. (See "Premiums.")
MODIFIED ENDOWMENT CONTRACTS -- The Code alters the tax treatment accorded to
loans and certain distributions from life insurance policies which are deemed
to be "modified endowment contracts."
Generally, a Policy will not be a modified endowment contract. Section 7702A of
the Code sets forth the rules for determining when a life insurance policy will
be deemed to be a modified endowment contract. A modified endowment contract is
a contract which is entered into or materially changed on or after June 21,
1988, and fails to meet the 7-pay test. A Policy fails to meet the 7-pay test
when the cumulative amount paid under the Policy at any time during the first 7
Policy Years exceeds the sum of the net level premiums that would have been
paid on or before such time if the Policy provided for paid-up future benefits
after the payment of 7 level annual premiums. A material change would include
any increase in the future benefits or addition of qualified additional
benefits provided under a policy unless the increase is attributable to (1) the
payment of premiums necessary to fund the lowest death benefit and qualified
additional benefits payable in the first 7 policy years; or (2) the crediting
of interest or other earnings (including policyholder dividends) with respect
to such premiums.
Furthermore, any Policy received in exchange for a policy classified as a
modified endowment contract will be treated as a modified endowment contract
regardless of whether it meets the 7-pay test. Due to the flexible premium
nature of the Policy, the determination of whether it qualifies for treatment
as a modified endowment contract depends on the individual circumstances of
each Policy. Policy Owners should consult their tax adviser with respect to any
changes they wish to make to their Policies.
If a Policy is a modified endowment contract, partial or full surrenders and/or
loan proceeds are taxable to the extent of income in the Policy. Such
distributions are deemed to be on a last-in-first-out basis, which means the
taxable income is distributed first. Loan proceeds
6
<PAGE> 10
and/or surrender payments may also be subject to an additional 10% federal
income tax penalty applied to the income portion of loans or surrenders. The
penalty shall not apply to any distribution: (1) made on or after the date on
which the taxpayer reaches age 59-1/2; (2) which is attributable to the taxpayer
becoming disabled (within the meaning of Section 72(m)(7) of the Code); or (3)
which is part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of such taxpayer and
his or her beneficiary. Policy Owners should consult a tax adviser regarding
the possible tax consequences of loans and/or surrenders from the Policy. See
"Tax Status - Tax Treatment of Loans and Surrenders."
MULTIPLE CONTRACTS -- The Internal Revenue Code provides that multiple modified
endowment contracts that are issued within a calendar year to the same Policy
Owner by one company or its affiliates are treated as one modified endowment
contract for purposes of determining the taxable portion of any loans or
distributions. Such treatment may result in adverse tax consequences including
more rapid taxation of the loans or distributed amounts from such combination
of contracts. Policy Owners should consult a tax adviser prior to purchasing
more than one modified endowment contract in any calendar year.
DEATH BENEFIT GUARANTEE -- The Policy will not lapse if the minimum Premium
requirement is met, even if the Cash Surrender Value is insufficient to cover
the Monthly Deduction when due. (See "Premiums - Death Benefit Guarantee.")
GRACE PERIOD -- If the Death Benefit Guarantee is not in effect and if the full
Cash Surrender Value is not sufficient to cover the Monthly Deduction when due,
a grace period of 61 days will be allowed for the payment of a Premium or a
loan repayment sufficient to cover the Monthly Deduction. The Policy will
continue to be In Effect during this grace period. If a Premium or a loan
repayment sufficient to cover the Monthly Deduction is still unpaid by the end
of the grace period, the Policy will lapse and all coverage under the Policy
will terminate without value. (See "Premiums - Grace Period.") After a Policy
lapse, the Policy Owner may request that the Policy be put back In Effect. The
Company will reinstate the Policy subject to certain conditions. (See
"Premiums - Reinstatement.")
FREE LOOK PROVISION -- Unless otherwise required by state law, the Policy may
be returned within 20 days after the Policy Owner receives the Policy, within
20 days after the mailing to the Policy Owner of the notice of the right of
withdrawal, or within 45 days after the Policy Owner completes Part I of the
application for insurance, whichever is later. The returned Policy can be
mailed or delivered to the Company, the agent who sold the Policy, or any agent
of the Company. The returned Policy will be treated as if the Company never
issued it and the Company will refund all Premiums paid. The Free Look
Provision is also applicable when there is an increase the Specified Amount
when such increase is not the result of a change in death benefit option. When
Premiums are paid after an increase in the Specified Amount, all such premiums
paid up to the Target Surrender Premium (see "Charges and Deductions -
Deductions From Surrendered Values") are attributed to the increase. Premiums
in excess of the Target Surrender Premium are attributed to the base plan as
long as the base plan maximum Premium limit is not exceeded. If the maximum is
exceeded the Premiums are again attributed to the increase in the Specified
Amount. All Premiums paid during the Free Look Period that are attributed to
the increase would be refunded upon exercise of the Free Look Provision.
DEATH BENEFIT -- A Policy Owner may elect one of two options to calculate the
amount of the death benefit payable under the Policy. Under Option 1 the death
benefit will be equal to the greater of the Specified Amount or the Cash Value
multiplied by the applicable corridor percentage. Under Option 2 the death
benefit is the greater of the Specified Amount plus the Cash Value or the Cash
Value multiplied by the applicable corridor percentage.
There is a Guaranteed Death Benefit under the Policy while the Policy is In
Effect equal to the Specified Amount, less any Policy indebtedness, provided
that minimum Premiums are paid and subject to certain other conditions. (See
"Premiums - Death Benefit Guarantee.") A Policy Owner may change the death
benefit option as well as the Specified Amount, subject to certain conditions.
(See "Policy Benefits and Rights.")
POLICY LOAN -- A Policy Owner may obtain a cash loan from the Company secured
by the Policy. The maximum loan amount is 90% of the Cash Value minus the Full
Surrender Charge determined at the end of the Valuation Period during which the
loan request is received. The maximum amount that may be borrowed at any time
is the maximum loan amount reduced by any outstanding Policy indebtedness. The
loan will incur interest at an annual rate of 8%. The amount of the loan will
be transferred from the Subaccounts of the Variable Life Account to the
Company's General Account. Cash Value in the General Account will accrue
interest daily at an annual rate of 6%. (See "Policy Benefits and Rights -
Policy Loans" and "Tax Status - Tax Treatment of Loans and Surrenders.")
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.
7
<PAGE> 11
THE VARIABLE LIFE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Wisconsin insurance laws on February 12,
1985. This segregated asset account has been designated "Sentry Variable Life
Account I" (the "Variable Life Account"). The Company has caused the
Variable Life 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 Life Account or the Company by the Securities
and Exchange Commission.
The assets of the Variable Life Account are the property of the Company. The
assets of the Variable Life Account, equal to the reserves and other policy
liabilities with respect to the Variable Life 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 Life
Account. The Cash Values, Cash Surrender Values and, under some circumstances,
death benefits will vary with the value of the assets which underlie the
Variable Life Account and will also vary with the charges deducted from the
Cash Value.
Income, gains and losses, whether or not realized, are, in accordance with the
Policy, credited to or charged against the Variable Life Account without regard
to other income, gains and losses of the Company. Company obligations arising
under the Policy are general corporate obligations of the Company.
INVESTMENTS OF THE VARIABLE LIFE ACCOUNT
Currently, Net Premiums applied to the Variable Life Account will be invested
in one or more of the Portfolios of Neuberger & Berman Advisers Management
Trust at net asset value (see "Neuberger & Berman Advisers Management
Trust"). The assets of the Variable Life Account are segregated by Portfolio,
thus establishing a series of Subaccounts within the Variable Life Account. The
Company may, from time to time, add new mutual funds, and, when appropriate,
portfolios within a mutual fund as Eligible Mutual Funds.
The selection of investments is subject to the terms and conditions imposed by
the Company. The Policy Owner may change a selection prospectively without fee,
penalty or other charge upon written notice to the Company. The change will be
effective for Net Premiums received after receipt of such notice. The Company
may impose certain terms and conditions on these transactions.
INITIAL INVESTMENT PERIOD -- Prior to and during the Initial Investment Period
(a 30-day period commencing on the Policy Issue Date), Net Premiums are applied
to the Variable Life Account and will be invested in the Liquid Asset Portfolio
notwithstanding any selection made by the Policy Owner in the application. At
the end of the Initial Investment Period, the Cash Value then in the Liquid
Asset Portfolio is transferred to the Eligible Mutual Fund(s) or Portfolio(s)
in accordance with the selection made by the Policy Owner in the application.
Such transfer will be made automatically by the Company and without charge.
After the Initial Investment Period has expired, Net Premiums are applied to
the Variable Life Account in accordance with the selection made by the Policy
Owner in the application. The transfer of Net Premiums to the Variable Life
Account is not deemed to be a transfer for purposes of the limitation on the
number of transfers that may be made nor for the purposes of imposing the
Transfer Fee.
TRANSFERS -- The Policy Owner may direct the transfer of all or part of the
Subaccount Cash Values between Portfolio(s) subject to the following
conditions:
(1) The Company has reserved the right to deduct a transfer fee for
transfers, which will be deducted from the amounts transferred. The
Company does not currently deduct a transfer fee but in the event that
it does in the future, the fee will not exceed $25.
(2) The minimum amount that may be transferred is $250, or, if smaller,
the remaining Subaccount Cash Value.
(3) Any transfer direction must clearly specify:
(a) the amount to be transferred; and
(b) the Portfolio(s) to be affected.
(4) Four transfers may be made in any Policy Year. Additional transfers
during the year are subject to approval by the Company.
(5) Transfers will be effected during the Valuation Period next following
receipt by the Company of a written transfer direction containing all
required information.
A transfer request for a transfer from one Portfolio to two Portfolios or from
two Portfolios to one Portfolio will count as one transfer transaction.
The Company reserves the right, at any time and without prior notice to any
party, to terminate, suspend or modify the transfer privilege.
When new Eligible Mutual Funds or Portfolios are added, the Policy Owner may be
permitted to select such Eligible Mutual Funds or Portfolios as investments to
underlie the Policy. However, the right to make any such selection will be
limited by the terms and conditions imposed on such transactions by the
Company.
8
<PAGE> 12
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 genuine. If it does not, the Company may be liable for
any losses due to unauthorized or fraudulent instructions. The Company will not
be liable for complying with telephone transfer requests it believes to be
genuine and for which it followed reasonable procedures to ensure legitimacy.
A telephone transfer may be effected by contacting the Company's Home 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 business day next following the request.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST -- Neuberger & Berman Advisers
Management Trust (the ''Trust'') is the funding vehicle for the Policy. 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 other investment companies which directly acquire and manage their own
portfolios of securities. For more information regarding this structure, see
the Trust's prospectus.
Shares of the Trust are issued and redeemed in connection with investment in
and payments under variable contracts issued through separate accounts of life
companies which may or may not be affiliated with the Trust. Shares of the
Balanced Portfolio of the Trust 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.
There are eight Portfolios, four of which are currently available in connection
with the Policy.* 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.
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.
* NOTE:The Balanced Portfolio is not available in the states of Minnesota, New
Jersey and West Virginia
9
<PAGE> 13
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 Life Account or, if in the judgment of
the Company's Board of Directors, further investment in such shares should
become inappropriate in view of the purpose of the Policy, the Company may
substitute shares of another mutual fund for fund shares already purchased or
to be purchased in the future by Net Premiums under the Policy. No substitution
of securities in any Subaccount may take place without prior approval of the
Securities and Exchange Commission and under such requirements as it may
impose.
THE POLICY
GENERAL -- The Policy offered by this Prospectus is an individual flexible
premium variable life insurance policy. The Policy is designed to provide the
Policy Owner with lifetime insurance protection and significant flexibility in
connection with the frequency and amount of Premium payments and the level of
life insurance proceeds payable under the Policy. Unlike traditional life
insurance, the Policy will not lapse if Premium payments are not made. However,
the Policy will lapse if the Cash Surrender Value is insufficient to pay the
monthly charges due under the Policy and the grace period expires without
sufficient additional Premium payments or a loan repayment having been made.
(See ''Premiums - Grace Period.'') The Policy allows the Policy Owner to vary
the Premium payments. The Policy provides for a Death Benefit Guarantee,
subject to certain conditions including the payment of minimum Premiums. (See
''Premiums - Death Benefit Guarantee.'') In addition, the Policy allows the
Policy Owner to adjust the level of life insurance proceeds payable under the
Policy by increasing or decreasing the Specified Amount of insurance without
having to purchase a new policy. Any increase in the Specified Amount may
require evidence of insurability.
To purchase a Policy, a completed application must be sent to the Company at
its Home Office at 1800 North Point Drive, Stevens Point, Wisconsin 54481. The
Initial Premium is due on or prior to the Policy Date. The initial Specified
Amount cannot be less than $100,000 unless the Company's current administrative
rules specify a lower amount. Acceptance of the application is subject to the
Company's underwriting rules and the Company may, at its sole discretion,
reject any application or Premium for any reason.
INSURANCE UNDERWRITING -- Insurance underwriting is designed to group
applicants of the same age and sex into classifications that can be expected to
produce mortality experience consistent with the actuarial structure for that
class. The Company uses established underwriting guidelines which may or may
not require a medical examination. Your registered representative will advise
you of any medical examination requirements.
The Policy will be issued as either standard non-smoker, special smoker,
substandard smoker or medically substandard. The monthly cost of insurance
charges will depend on the underwriting classification. (See ''Charges and
Deductions - Deductions from Cash Value'' for a discussion of the cost of
insurance.)
RIGHT TO EXCHANGE THE POLICY -- The Policy may be exchanged for a policy of
permanent fixed premium fixed benefit life insurance on the life of the
Insured. This exchange may only be made within 24 months after the Policy Date.
No evidence of insurability is required. All Policy indebtedness must be repaid
before the exchange is made.
The exchange will become effective when the Company receives:
(1) proper written request for the Policy exchange;
(2) surrender of the Policy being exchanged; and
(3) any amount due the Company on exchange.
The new Policy will have the same Policy Date and issue age as the original
Policy and will have the same risk classification. The basic amount of
insurance of the new Policy will be equal to either the initial Specified
Amount of the original Policy or the net amount at risk under the original
Policy on the date of exchange, as selected by the Policy Owner. For purposes
of this provision, net amount at risk is defined as the difference between the
death benefit and the Policy Cash Value. The Policy Owner and Beneficiary of
the new Policy will be the same as those of the original Policy on the
effective date of the exchange.
If there is an increase in the Specified Amount and such increase is not the
result of a change in death benefit option, the Policy Owner will be granted an
exchange privilege with respect to the increase, subject to the conditions
applicable to an exchange of the entire Policy. The Policy Owner will also have
the option to transfer to the new Policy, without charge, on the exchange date,
Cash Value attributable to the increase. The Cash Value attributable to the
increase is the amount by which the total premiums paid exceed the Maximum
Premium Limitation for the Policy calculated as if the increase had not
occurred. However, amounts of Cash Value will not be applied to the exchange if
they would cause the Cash Surrender Value of the remaining Policy to become
negative.
ILLUSTRATIONS -- This Prospectus contains illustrations of both future Cash
Values and death benefits given certain assumed Variable Life Account returns,
which may be helpful in understanding how the Policy works (see Appendix A).
For illustrations not shown, the Policy Owner should contact his or her agent.
The Policy Owner may request a projection of illustrative future death benefits
and Policy values at any time. The request must be in writing. The Company may
charge a maximum service fee of $25 for this projection. The illustration will
be based on assumptions as to the Specified Amount, anticipated earnings and
future Premium payments specified by the Policy Owner, and other assumptions as
are necessary and agreed upon by the Company and the Policy Owner.
10
<PAGE> 14
PREMIUMS
INITIAL PREMIUM -- The Initial Premium is due on or prior to the Policy Date.
It must be paid to the Company at its Home Office. Coverage under the Policy
does not take effect until the Policy has been issued and the Premium paid
during the Insured's lifetime.
NET PREMIUMS -- The Net Premium is equal to 95% of the Premium less any
applicable premium taxes. The 5% deduction is for the front-end sales expense
charge.
FIRST YEAR MINIMUM PREMIUM -- The Initial Premium together with the first year
Planned Premiums must be sufficient to meet the minimum Premium requirement
under the Death Benefit Guarantee for the first year.
PLANNED PREMIUMS -- While the Policy provides for flexible Premium payments,
the Policy Owner can establish a Planned Premium Payment Plan providing for
Premiums to be made annually, semi-annually, quarterly or by automatic bank
check. The Planned Premiums are subject to the following minimum amounts unless
the Company's then current administrative rules specify lower amounts:
<TABLE>
<CAPTION>
PLANNED PREMIUM
MODE OF PAYMENT MINIMUM AMOUNT
-------------------- ---------------
<S> <C>
Annual $200
Semi-Annual 125
Quarterly 75
Automatic Bank Check 15
</TABLE>
The Policy Owner may change the frequency and amount of Planned Premiums by
sending the Company a written notice. The Company reserves the right to limit
the amount of any increase of the Planned Premium. Any Premium which exceeds
the Planned Premium will be considered an Additional Premium subject to the
"Additional Premiums" provision of the Policy described below.
Payment of a Planned Premium will not guarantee that the Policy will remain In
Effect because even if a Premium payment is made, the Policy will lapse any
time the Cash Surrender Value is insufficient to pay the monthly charges and
the grace period expires without a sufficient Premium payment or loan repayment
having been made. However, the Death Benefit Guarantee may be in effect which
will provide a death benefit even if the Cash Surrender Value is insufficient,
provided that certain conditions are met. (See "Premiums - Death Benefit
Guarantee" and "Premiums - Grace Period.")
ADDITIONAL PREMIUMS -- Additional Premium payments of at least $50 may be made
at any time prior to the Maturity Date. The Company reserves the right to limit
the amount of Additional Premium payments to those that conform to the
requirements of the Internal Revenue Code and the regulations thereunder. Even
if there is a loan outstanding, unless the Policy Owner directs to the
contrary, all payments will be deemed to be Premium payments. Premium
limitations for the Policy are set out on the Policy Specifications Page of the
Policy.
MAXIMUM PREMIUM LIMITATIONS -- In order to conform to the requirements of the
Internal Revenue Code, the Company will limit the total amount of Premiums,
both Planned and Additional, that may be paid during each Policy Year (the
"Maximum Premium Limitation"). Because the Maximum Premium Limitation is in
part dependent on the Specified Amount for each Policy, changes in the
Specified Amount may affect this limitation. In the event that a Premium is
paid that exceeds the Maximum Premium Limitation, the Company will accept only
the portion of the Premium up to the maximum limitation and return the excess
to the Policy Owner. Thereafter, no additional Premiums will be accepted until
allowed by the Maximum Premium Limitation.
DEATH BENEFIT GUARANTEE -- If the minimum Premium requirement described below
is met, the Policy will not lapse, even if the Cash Surrender Value is
insufficient to cover the Monthly Deduction when due.
The minimum Premium requirement is met if the sum of all Premiums paid is not
less than:
(1) the sum of all monthly Death Benefit Guarantee Premiums as shown on
the Policy Specifications Page of the Policy, plus
(2) the current Policy indebtedness, plus
(3) the sum of all partial surrenders, Partial Surrender Charges and
Partial Surrender Administrative Fees, plus
(4) the sum of all Monthly Deductions for any additional benefits
provided by a rider.
All sums in the minimum Premium requirement include values for the current
Policy Month.
The initial monthly Death Benefit Guarantee Premium is shown on the Policy
Specifications Page. This Premium will change upon any increase or decrease in
the Specified Amount or a change in the Death Benefit Option. At the time of
the change, the Company will recalculate the monthly Death Benefit Guarantee
Premium based on the Insured's Age, the Death Benefit Option chosen and the new
Specified Amount. Any change in the monthly Death Benefit Guarantee Premium
will be shown on a Policy amendment.
GRACE PERIOD -- If the Death Benefit Guarantee is not in effect, and if the
Cash Surrender Value is not sufficient to cover the Monthly Deduction when due,
a grace period of 61 days will be allowed for the payment of a Premium or loan
repayment sufficient to cover the Monthly Deduction. The grace period begins on
the Monthly Processing Day during which there was insufficient Cash Surrender
Value. The Company will mail a notice that the grace period is In Effect to the
Policy Owner's last known address.
11
<PAGE> 15
The Policy will continue to be In Effect during this grace period. During the
grace period the death benefit will equal the amount of death benefit In Effect
immediately prior to the grace period, less any indebtedness and due and unpaid
charges.
If a Premium or loan repayment sufficient to cover the Monthly Deduction is
still unpaid at the end of the grace period, the Policy will lapse and all
coverage under the Policy will terminate without value.
Under certain circumstances, even if there is insufficient Cash Surrender Value
to cover the Monthly Deduction, the Policy will not lapse if the Death Benefit
Guarantee is In Effect. (See "Premiums - Death Benefit Guarantee.")
REINSTATEMENT -- After a lapse, the Policy Owner may request that the Policy be
put back In Effect. The Company will reinstate the Policy subject to the
following conditions:
(1) the request is in writing and received by the Company within three
years from the date of lapse;
(2) the Company receives satisfactory proof that the Insured is still
insurable; and
(3) a Premium sufficient to cover the Monthly Deductions for the first
two Policy Months following reinstatement is paid.
The Policy will be reinstated on the next Valuation Date following the date
that all of the above conditions have been satisfied. The Company will not
reinstate a Policy surrendered for its full Cash Surrender Value.
CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUMS --
SALES CHARGE - The Company deducts a front-end sales expense charge of 5%
from each Premium Payment. The amount of sales load deducted in any Policy Year
cannot be specifically related to the actual sales expenses incurred in that
year. To the extent that the sales loads are insufficient to recover the actual
sales expenses, such expenses may be recovered from sources other than charges
deducted from Premiums including amounts derived indirectly from the charge for
mortality and expense risks, the deferred sales charge and from mortality
gains.
PREMIUM TAX - The Company deducts the amount of any premium taxes levied
by any state or governmental entity. Premium taxes currently vary from state to
state and range from 0% to 4%.
DEDUCTIONS FROM THE VARIABLE LIFE ACCOUNT --
MORTALITY AND EXPENSE RISK PREMIUM - The Company deducts a Mortality and
Expense Risk Premium equal on an annual basis to 0.90% of the daily net asset
value of the Variable Life Account to compensate the Company for the mortality
and expense risks assumed under the Policy. The mortality risk assumed by the
Company is that the Insureds, as a group, may not live as long as expected. The
expense risk assumed by the Company is that actual expenses may be greater than
those assumed. The Company is responsible for all administration of the
Policies and the Variable Life Account. (See "Deductions from Cash Value -
Monthly Deduction.")
DEATH BENEFIT GUARANTEE RISK CHARGE - The Company deducts a Death Benefit
Guarantee Risk Charge equal on an annual basis to 0.15% of the daily net asset
value of the Variable Life Account to compensate the Company for assuming risks
associated with the Death Benefit Guarantee.
TAXES - The Company reserves the right to make a provision for any income
taxes which result from the investment operation of any Subaccount. The Company
does not currently deduct for taxes.
DEDUCTIONS FROM CASH VALUE --
TRANSFER FEE - The Company may deduct a Transfer Fee for each transfer.
The Transfer Fee will be deducted from the amounts which are transferred. The
Transfer Fee will not exceed $25.
MONTHLY DEDUCTION - The Company makes a Monthly Deduction from the Cash
Value of the Policy at the beginning of each Policy Month that is equal to the
sum of the following:
(1) the cost of insurance for the Policy and any additional benefits
provided by rider for the Policy Month;
(2) a $5 monthly administrative fee. This charge reimburses the Company
for the administration of the Policy and the Variable Life Account. Such
administration includes Policy issuance, underwriting, maintenance of
Policy records, Policy Owner service, premium billing and collection,
reports to Policy Owners and all accounting, reserve calculations,
regulatory and reporting requirements, and auditing of the Variable Life
Account.
The monthly deduction will result in the cancellation of Accumulation Units
(see "Definitions" and "Policy Benefits and Rights - Determination of
Accumulation Unit") from each applicable Subaccount in the ratio that the
value of the Subaccount bears to the sum of the Subaccount Cash Values.
12
<PAGE> 16
The COST OF INSURANCE for the Policy is determined on a Policy Month basis.
This amount will vary from month to month and is dependent upon the Death
Benefit Option In Effect, the Cash Value, the Insured's Sex and Age, as well as
the risk class of the Policy. The cost of insurance is determined by
multiplying the difference between the Death Benefit In Effect divided by
1.0040741 and the Cash Value by the monthly MORTALITY CHARGE. Because insurance
investment performance or the level of Premium payments will affect the Death
Benefit or the Cash Value, they will also affect the cost of insurance.
The cost of insurance for any rider is calculated separately for each rider.
The monthly MORTALITY CHARGE is based on the Company's current mortality rates.
The current mortality rates are based on the Insured's age, sex, and risk
class. The risk class will be determined separately for the initial Specified
Amount and for any subsequent increase in the Specified Amount requiring
evidence of insurability. Current mortality rates are determined by the Company
according to expectations of future mortality experience. These rates are not
guaranteed and may be changed from time to time, but will never exceed the
maximum rates shown in the Table of Guaranteed Maximum Mortality Rates which is
set out in the Policy. Any change in mortality rates will apply to all Insureds
of the same age, sex, and risk class. The guaranteed rates for standard risks
are based on the 1980 Commissioner's Standard Ordinary Mortality Table, Age
Last Birthday ("1980 CSO Table"). The guaranteed rates for Insureds
classified as smokers or medically substandard are based on a multiple of the
1980 CSO Table. Such multiples could be as high as five times the 1980 CSO
Table.
DEDUCTIONS FROM SURRENDERED VALUES --
FULL SURRENDER CHARGE - In the event that the Policy is totally
surrendered prior to the Maturity Date, a Full Surrender Charge may be
assessed. Full surrender of the Policy during the first nine years will result
in the imposition of the Full Surrender Charge, the amount of which is the
total (or a percentage thereof) of the four charges ((1) through (4)) described
below. The Full Surrender Charge will be reduced during that time until it
reaches zero in the tenth year. The amount of the charge due is determined by
multiplying the applicable percentage in the Table set out under (5) below by
the sum of the four charges.
(1) CONTINGENT DEFERRED ADMINISTRATIVE EXPENSE CHARGE. This charge is
calculated as $3.50 per $1,000 on the first $100,000 of the Specified
Amount plus $1.50 per $1,000 on the excess above $100,000 of the
Specified Amount. The maximum Contingent Deferred Administrative Expense
Charge is $750. This charge is designed to cover the administrative
expenses incurred in connection with issuing a Policy. Such expenses
include processing applications, initial underwriting review, medical
examinations, inspection reports, attending physician's statements,
insurance underwriting costs, establishing permanent Policy records,
policy issuance costs, preparation of illustrations to accompany the
Policy, preparation of riders, and initial confirmations.
(2) DEFERRED SALES CHARGE. This charge is calculated as 25% of the Target
Surrender Premium or 25% of the actual premiums paid in the first Policy
Year, if less. The Target Surrender Premium is shown on the Policy
Specifications Page of the Policy and is calculated to be less than or
equal to the guideline annual premium as defined in the applicable rules
and regulations pursuant to the Investment Company Act of 1940.
(3) ADDITIONAL CONTINGENT DEFERRED ADMINISTRATIVE EXPENSE CHARGE. This
charge may result from an increase in the Specified Amount. The maximum
additional Contingent Deferred Administrative Expense Charge is
calculated as $3.50 per $1,000 on the first $100,000 of the increase in
the Specified Amount plus $1.50 per $1,000 on the excess above $100,000
of the increase in the Specified Amount. The maximum Contingent Deferred
Administrative Expense Charge is $750 for each increase in the Specified
Amount.
(4) ADDITIONAL DEFERRED SALES CHARGE. This charge may result from an
increase in the Specified Amount. This charge is 25% of the lesser of:
(a) the Target Surrender Premium for the increase in the Specified
Amount as shown on the Policy amendment; or
(b) the portion of the actual Premiums paid in the first 12 Policy
Months following the effective date of the increase in the Specified
Amount that exceeds the Target Surrender Premium for the Policy that
was in effect prior to the increase in the Specified Amount.
The Target Surrender Premium is based on the Insured's sex and age on the
effective date of the change. The Company reserves the right to require a
minimum Premium payment during the first 12 months following the effective
date of the increase in the Specified Amount.
(5) The applicable percentage is shown in the following Table where Year
is the number of full Policy Years from the original Policy Date or from
the Policy Anniversary on or preceding the date of each increase in the
Specified Amount to the date of surrender.
<TABLE>
<CAPTION>
COMPLETED POLICY YEARS APPLICABLE PERCENTAGE
---------------------- ---------------------
<S> <C>
0-4 100
5 80
6 60
7 40
8 20
9+ 0
</TABLE>
13
<PAGE> 17
However, in no event will the sum of the front-end sales charges and the
Deferred Sales Charges exceed the sales load limitations of applicable federal
securities laws.
The Full Surrender Charge, as calculated above, is reduced by the sum of all
Partial Surrender Charges previously deducted. In no event will the Full
Surrender Charge be less than zero.
A decrease in the Specified Amount will not change any existing surrender
charges.
PARTIAL SURRENDER CHARGE - In the event that the Policy is partially
surrendered, a Partial Surrender Charge may be assessed. The Policy Owner has
the right to partially surrender the Policy by withdrawing Cash Value. (See
"Policy Benefits and Rights - Partial Surrender.") A partial surrender will
result in the imposition of a portion of the Full Surrender Charge described
above which will be equal to the percentage of Cash Surrender Value that the
withdrawal represents. For example, if the partial withdrawal amounts to 20% of
the Policy's Cash Surrender Value (measured at the end of the Valuation Period
following the request for a partial surrender), 20% of the applicable Full
Surrender Charge will be imposed.
PARTIAL SURRENDER ADMINISTRATIVE FEE - In the event the Policy is partially
surrendered, a Partial Surrender Administrative Fee is assessed. This charge is
the lesser of 2% of the amount surrendered or $25, and compensates the Company
for administrative expenses incurred in processing a partial surrender.
The Policy Owner may designate from which Subaccounts the Partial Surrender
Administrative Fee and Partial Surrender Charge will be taken if they are not
to be deducted proportionately from all the Subaccounts in which the Policy is
invested. These charges are in addition to the amounts surrendered.
TRUST AND MANAGERS TRUST ANNUAL EXPENSES
There are deductions from and expenses paid out of the assets of the various
Portfolios, which are summarized below. See the Trust prospectus for a complete
description.
Advisers Management Trust and Advisers Managers Trust Annual Expenses (1) (as a
percentage of the average daily net assets of a Portfolio).
<TABLE>
<S> <C> <C> <C>
INVESTMENT MANAGEMENT TOTAL ANNUAL
PORTFOLIO AND ADMINISTRATION FEES OTHER EXPENSES EXPENSES
--------------------- ----------------------- -------------- ------------
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>
(1) The Trust is divided into eight Portfolios ("Portfolios"), four of which are
available in connection with the Polices. 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 under taken 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.
GROUP ARRANGEMENTS -- The front-end sales charge, monthly administrative
charge, Deferred Sales Charge, Deferred Administrative Expense Charge, minimum
Premium, and minimum amount of insurance may be reduced or eliminated when the
Policy is issued to individuals or a group of individuals that results in a
savings of sales or administrative expenses. Entitlement to such a reduction
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, sales expenses for a larger group are less than
for a smaller group because of the ability to issue large numbers of
Policies with fewer sales contacts.
(2) The total amount of Premiums to be received will be considered. Per
Policy sales expenses are likely to be less on larger Premium payments
than on smaller ones.
(3) Any prior or existing relationship with the Company will be
considered. Per Policy sales and administrative expenses are likely to
be less when there is a prior or existing relationship because of the
likelihood of issuing the Policies with fewer sales contacts and less
administrative effort.
(4) There may be other circumstances of which the Company is not
presently aware that could result in reduced sales or administrative
expenses.
The Company may modify from time to time, on a uniform basis, both the amounts
of reductions and the criteria for qualification. In no event will reduction or
elimination of these charges or other Policy provisions be permitted where such
reduction or elimination will be unfairly discriminatory to any person.
POLICY BENEFITS AND RIGHTS
DEATH BENEFIT -- A death benefit will be paid upon the death of the Insured so
long as the Policy is In Effect. The death benefit payable will be reduced by
any indebtedness and any due and unpaid charges.
14
<PAGE> 18
The death benefit under the Policy is payable to the named Beneficiary when the
Insured dies. All or part of the death benefit may be paid in cash or applied
under one or more of the optional settlement plans.
There are two death benefit options and the amount of death benefit payable
under the Policy will depend upon the death benefit option In Effect at the
time of the Insured's death. A Policy Owner may elect one of two options to
determine the amount of death benefit payable under the Policy. Under Option 1
the death benefit equals the greater of the Specified Amount or the Cash Value
multiplied by the applicable corridor percentage. Under Option 2 the death
benefit is the greater of the Specified Amount plus the Cash Value or the Cash
Value multiplied by a corridor percentage. The Specified Amount and Policy Cash
Value will be calculated at the end of the next Valuation Period following the
date of death of the Insured.
CORRIDOR PERCENTAGES
<TABLE>
<S> <C> <C> <C> <C> <C>
The Corridor Percentages shown in the following table are based on the Insured's Age.
AGE % AGE % AGE %
- --- --- --- --- --- ---
40 or less 250 55 150 70 115
41 243 56 146 71 113
42 236 57 142 72 111
43 229 58 138 73 109
44 222 59 134 74 107
45 215 60 130 75 105
46 209 61 128 76 105
47 203 62 126 77 105
48 197 63 124 78 105
49 191 64 122 79-90 105
50 185 65 120 91 104
51 178 66 119 92 103
52 171 67 118 93 102
53 164 68 117 94 101
54 157 69 116 95+ 100
</TABLE>
The effect of an increase in Cash Value differs under the two death benefit
options. Under either option, both Premium payments and favorable investment
results will increase Cash Value. Under Death Benefit Option 1, increased Cash
Value will decrease the amount of the Monthly Deductions and, therefore, the
amount of additional Premium necessary to keep the Policy In Effect. Under
Death Benefit Option 2, increased Cash Value does not reduce the amount of the
Monthly Deductions but does increase the death benefit. Under either death
benefit option, an increase in Cash Value results in greater amounts being
available to the Policy Owner for policy loans or surrenders.
The insurance goals of the Policy Owner determine the appropriate death benefit
option. Policy Owners who prefer to have favorable investment results reflected
partly in the form of an increased death benefit should choose Option 2. Policy
Owners who are satisfied with the amount of their insurance coverage and wish
to have favorable investment results and additional Premium reflected to the
maximum extent in increasing Cash Values should choose Option 1.
The differences between the death benefit options may be shown graphically as
follows:
ILLUSTRATIONS OF DEATH BENEFIT OPTIONS
DEATH BENEFIT OPTION 1 - Pays a death benefit equal to the Specified
Amount unless exceeded by the Cash Value multiplied by the Corridor Percentages
(as illustrated at Point A).
[GRAPH]
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<PAGE> 19
DEATH BENEFIT OPTION 2 - Pays a death benefit equal to the Specified
Amount plus the Policy's Cash Value unless exceeded by the Cash Value
multiplied by the Corridor Percentages.
[GRAPH]
CHANGE OF DEATH BENEFIT OPTION -- The Policy Owner may change the death benefit
option In Effect by sending the Company a written request. Upon the Company's
acceptance, the effective date of the change will be the Monthly Processing Day
next following receipt of the request. Such a change may result in a new
Specified Amount and may be subject to evidence of insurability satisfactory to
the Company before the change will be made.
A change from Option 2 to Option 1 will increase the Specified Amount by the
Policy's Cash Value calculated at the end of the Valuation Period following the
effective date of the change. When there is a change from Option 2 to Option 1,
the Company may require evidence of insurability.
A change from Option 1 to Option 2 will decrease the Specified Amount by the
Policy's Cash Value calculated at the end of the Valuation Period following the
effective date of the change.
A change of death benefit option will change the cost of insurance charge for
the duration of the Policy. (See "Charges and Deductions - Deductions from
Cash Value.") The mortality charge is the same under both options, but the
difference between the death benefit and the Cash Value varies directly with
Cash Value under Option 1, but is constant under Option 2 unless the death
benefit is derived from the application of the Corridor Percentages.
CHANGE IN THE SPECIFIED AMOUNT -- The Policy Owner may increase or decrease the
Specified Amount. Written requests must be received by the Company and any
change is subject to the following conditions:
(1) No changes in the Specified Amount may be made during the first
Policy Year.
(2) The Specified Amount may be changed only one time in any Policy Year.
(3) The Specified Amount cannot be less than the minimum Specified Amount
of $100,000 unless the Company's current administrative rules specify a
lower amount.
(4) DECREASES IN THE SPECIFIED AMOUNT - Any decrease will become
effective on the Monthly Processing Day following the date the request
is received (see also item (3) above). Decreases in the Specified Amount
will be effected on a last-in-first-out basis. That is, for purposes of
determining cost of insurance (see "Charges and Deductions - Deductions
from Cash Value"), a decrease will apply to the Specified Amount
provided by the most recent increase, then the next most recent increase
successively, then to the initial Specified Amount. The Company will not
allow a decrease in the Specified Amount if such decrease causes the
Policy to violate the Maximum Premium Limitation. There is no Deferred
Sales Charge assessed at the time of a decrease in the Specified Amount.
(5) INCREASES IN THE SPECIFIED AMOUNT - Any request for an increase must
be submitted on a supplemental application. Satisfactory evidence of
insurability must be supplied. Any approved increase will become
effective on the next Monthly Processing Day following the Company's
approval. An increase will not become effective if the Policy's Cash
Surrender Value is insufficient to cover the Monthly Deduction for the
Policy Month following the increase. When there is an increase in the
Specified Amount, the Policy Owner is granted a free-look and exchange
privilege. (See "Summary - Free Look Provision" and "The Policy -
Right to Exchange the Policy.")
Any change in the Specified Amount will result in a change in the cost of
insurance charge because this charge is dependent upon the difference between
the Death Benefit In Effect and the Cash Value. (See "Charges and Deductions -
Deductions from Cash Value" for a discussion of cost of insurance.) (See also
"Policy Benefits and Rights - Illustrations of Death Benefit Options.")
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<PAGE> 20
Any change in the Specified Amount may affect the Premium requirement for the
minimum Death Benefit Guarantee.
Increases in the Specified Amount will result in the assessment of a new Full
Surrender Charge, unless the increase is due to a change from Death Benefit
Option 2 to Death Benefit Option 1 as if a new policy had been issued for that
Specified Amount. No increase will be allowed if the Policy does not have
sufficient Cash Surrender Value to support the additional Deferred Charges. The
Company reserves the right to require the payment of an additional Premium in
an amount equal to the First Year Minimum Premium which would be charged based
on the then Age and risk class for a newly-issued Policy with a Specified
Amount equal to the amount of increase, as a condition following an increase.
(See "Charges and Deductions - Deductions from Surrendered Values - Full
Surrender Charge." ) Since the cost of insurance varies directly with the
difference between the death benefit and the Cash Value of the Policy, an
increase in the Specified Amount will generally require higher Premium payments
to support the Policy. (See "Premiums - Grace Period.")
For example, assume a 40-year old male non-smoker buys a $100,000 policy and
chooses Option 1. Also assume that all Policy charges and deductions are made
and that the net investment return after all asset-based charges are deducted
is 6% (8.08% gross investment return). The following table shows the effect on
Cash Values and Cash Surrender Values under three alternatives: the Specified
Amount is not changed; the Specified Amount is increased to $250,000; or the
Specified Amount is decreased to $50,000. The changes occur five years after
issue.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NO CHANGE IN INCREASE IN SPECIFIED DECREASE IN SPECIFIED
SPECIFIED AMOUNT AMOUNT TO $250,000 AMOUNT TO $50,000
- ---------- ------------------- ------------------------ ------------------------
CASH CASH CASH
END OF CASH SURRENDER CASH SURRENDER CASH SURRENDER
POLICY YR. VALUE VALUE VALUE VALUE VALUE VALUE
- ---------- -------- --------- ----------- ----------- ----------- -----------
05 $ 6,586 $ 6,004 $ 6,586 $ 6,004 $ 6,586 $ 6,004
06 8,105 7,668 10,528 8,932 7,300 6,863
07 9,696 9,405 14,663 13,212 8,046 7,755
10 14,940 14,940 28,328 27,400 10,495 10,495
20 38,636 38,636 90,775 90,775 21,359 21,359
Age 65 55,504 55,504 135,742 135,742 28,941 28,941
</TABLE>
The Premium paid in all cases is assumed to be equal to the minimum Premium
requirement for the Death Benefit Guarantee. This Premium requirement is $1,511
at issue, increases to $4,368 when the Specified Amount increases to $250,000
and decreases to $558 when the Specified Amount decreases to $50,000.
MATURITY BENEFITS -- If the Policy is In Effect on the Maturity Date, the
Company will pay the Policy's Cash Value, less any outstanding Policy
indebtedness, calculated at the end of the Valuation Period following the
Maturity Date. Benefits may be paid in a lump-sum or under any optional
settlement plan acceptable to the Company.
CASH VALUE -- Each Policy will have a Cash Value which may change each
Valuation Date. Cash Values will be determined at the end of every Valuation
Period. The Cash Value of the Policy is equal to the sum of the Subaccount Cash
Values and any Cash Value held in the General Account to secure a Policy debt.
The Cash Value varies with the investment performance of the underlying
Portfolios and with the charges imposed in connection with the Policy. (See
"Charges and Deductions.") THERE IS NO GUARANTEED MINIMUM CASH VALUE.
DETERMINATION OF ACCUMULATION UNIT -- The Cash Value for a Subaccount on any
Valuation Date is determined by multiplying the number of Accumulation Units
attributable to that Subaccount by the value of an Accumulation Unit for the
Subaccount. The Subaccount Cash Values will vary with the investment
performance of the underlying Portfolios.
For each Subaccount, Net Premiums result in Accumulation Units being credited
to the Policy Owner's account. Monthly Deductions and all other charges and
fees affecting the Subaccount will result in the cancellation of Accumulation
Units from the Subaccount. The number of Accumulation Units credited to or
cancelled from the Subaccount is determined by dividing the dollar value of the
transaction by the value of an Accumulation Unit for the Subaccount. The
Subaccount Cash Value is determined by multiplying the number of Accumulation
Units attributable to the Subaccount by the value of an Accumulation Unit for
the Subaccount.
The Accumulation Unit value for each Subaccount 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 Subaccount, i.e., the aggregate value of the
underlying Eligible Mutual Fund or Portfolio shares held at the end
of the 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 Subaccount (the Company is not currently making a
charge for taxes);
(2) is the cumulative unpaid charge for the mortality and expense and
death benefit guarantee risks; and
(3) is the number of Accumulation Units outstanding at the end of such
Valuation Period.
17
<PAGE> 21
The Accumulation Unit value may increase or decrease from Valuation Period to
Valuation Period.
PARTIAL SURRENDER -- While the Policy is In Effect, the Policy Owner may
request a partial surrender of the Policy upon written request to the Company
subject to the following terms and the Surrender Requirements Provision. The
Policy Owner may specify from which Subaccount the Cash Value is to be
withdrawn. Partial Surrenders will result in the cancellation of Accumulation
Units, and unless directed otherwise by the Policy Owner, will be deducted from
each applicable Subaccount in the ratio that the Cash Value of each Subaccount
bears to the sum of the Subaccount Cash Values.
There is a Partial Surrender Administrative Fee, which is the lesser of 2% of
the amount surrendered or $25. There may also be a Partial Surrender Charge
(which is a portion of the Full Surrender Charge) assessed as a result of the
partial surrender. (See "Charges and Deductions.")
The Cash Value and death benefit will be reduced by the sum of any partial
surrenders, Partial Surrender Charges and Partial Surrender Administrative
Fees. If the Policy Owner has selected Death Benefit Option 1, the Specified
Amount will also be reduced by the sum of any partial surrenders, Partial
Surrender Charges, and Partial Surrender Administrative Fees.
The Company reserves the right to limit the number of partial surrenders made
in a Policy Year. There is currently no limit.
There may be tax consequences to a partial surrender to the extent that the
surrender amount exceeds the Premiums for the Policy. Policy Owners may find it
advantageous to obtain a Policy loan if the need for cash is temporary. Policy
Owners should consult their own tax adviser. (See "Policy Loans" below.)
FULL SURRENDER -- While the Policy is In Effect, the Policy Owner may
completely surrender the Policy for its full Cash Surrender Value upon written
request. A full surrender will terminate the Policy.
The full Cash Surrender Value is the Cash Value calculated at the end of the
Valuation Period next following the date on which the request for a surrender
is received, less any indebtedness against the Policy, and less the applicable
surrender charge. The applicable surrender charge is determined by calculating
the Full Surrender Charge as of the end of the Valuation Period next following
the date on which the request for a surrender is received. (For a complete
discussion of Surrender Charges, see "Charges and Deductions.")
SURRENDER REQUIREMENTS -- A request for a partial or full surrender of the
Policy is subject to the following: (1) it must be in writing; (2) it must be
made during the Insured's lifetime; (3) it must be made prior to the Maturity
Date; and (4) it must be made while the Policy is In Effect.
Surrender proceeds will be paid within seven days of the effective date of the
surrender unless a Suspension of Payments is in effect. (See "Suspension of
Payments.")
POLICY LOANS --
LOAN VALUE OF THE POLICY -- As long as the Policy is In Effect, the Policy
Owner may borrow from the Company at any time after the first Policy
Anniversary using the Policy as the only security for the loan. Requests for
Policy loans must be in writing. The maximum loan amount is 90% of the Cash
Value minus the Full Surrender Charge at the end of the Valuation Period during
which the loan request is received. The maximum amount that may be borrowed at
any time is the maximum loan amount reduced by any outstanding Policy
indebtedness. Policy loans will normally be paid within seven days after the
Company receives a loan request. Payments may be postponed under situations
detailed under "Suspension of Payments."
Generally, a Policy will not be a modified endowment contract. However, if a
Policy is a modified endowment contract, loan proceeds may be taxable. (See
"Tax Status - Tax Treatment of Loans and Surrenders.")
ALLOCATION OF LOANS -- At the end of the Valuation Period during which the loan
becomes effective, a portion of the Policy's Cash Value equal to the amount of
the loan will be transferred from the Subaccounts of the Variable Life Account
to the Company's General Account. The amount transferred to the General Account
does not participate in the investment experience of the Variable Life Account.
Any loan interest that is due and unpaid will also be transferred. Such
transfers result in the cancellation of Accumulation Units within the
Subaccounts of the Variable Life Account. Accumulation Units will be cancelled
from each applicable Subaccount in the ratio that the Cash Value of the
Subaccounts bears to the sum of the Subaccount Cash Values. The Policy Owner
must specify in writing in advance which units are to be cancelled if other
than this method is desired.
INTEREST CREDITED -- Cash Value in the General Account will accrue interest
daily at an annual rate of 6%. This interest will be credited at the end of
each Policy Year and transferred to the Subaccounts of the Variable Life
Account in the same manner that Premiums are being allocated to the
Subaccounts.
INTEREST CHARGED -- The Company will charge an annual effective interest rate
of 8% on all Policy loans. Interest is due at the end of each Policy Year.
Unpaid interest will be added to the existing Policy indebtedness and will be
charged interest at the same rate.
18
<PAGE> 22
LAPSE DUE TO LOAN -- Policy indebtedness equals the sum of all outstanding
Policy loans and accrued interest thereon. If the Policy indebtedness causes
the Cash Surrender Value to equal zero or become negative, and the Death
Benefit Guarantee is not in effect, the Company will notify the Policy Owner
and any collateral assignee of record. A payment at least equal to the excess
of the Policy indebtedness over the Cash Value less any remaining surrender
charges must be made to the Company within 61 days from the date notice is
sent, or the Policy will lapse and terminate without value. Policy indebtedness
will affect the applicability of the Death Benefit Guarantee. (See "Premiums
- -- Death Benefit Guarantee.")
LOAN REPAYMENT -- Policy indebtedness may be repaid in full or in part at any
time while the Policy is In Effect. Outstanding Policy indebtedness is
subtracted from death benefit payable on the Insured's death, from the Cash
Value upon full cash surrender, and from Cash Value payable at the Maturity
Date. During the Valuation Period during which a repayment is made, the
Policy's Cash Value in the General Account securing the repaid portion of the
Policy loan will be transferred to the Subaccounts of the Variable Life Account
in the same manner that Premiums are then being allocated to the Subaccounts.
Payments received by the Company will be treated as Premium payments and not as
a repayment of an outstanding loan unless directed to the contrary by the
Policy Owner.
OTHER POLICY PROVISIONS
POLICY OWNER -- The Policy Owner is the Insured, unless otherwise specified in
the application. The Policy Owner may exercise all Policy rights and privileges
while the Insured is living without the consent of any revocable Beneficiary.
CONTINGENT POLICY OWNER -- The Policy Owner, if not the Insured, may name a
Contingent Policy Owner. If the Policy Owner dies before the Insured, the
Contingent Policy Owner named in the application will become the Policy Owner
and will possess all rights of a Policy Owner. If the Contingent Policy Owner
is dead, or if no Contingent Policy Owner has been named at the death of the
Policy Owner, ownership passes to the Policy Owner's estate.
CHANGE OF POLICY OWNER OR CONTINGENT POLICY OWNER -- The Policy Owner may
change the Policy Owner or the Contingent Policy Owner. The change requires
satisfactory written notice to the Company. After the Company records it, the
change is effective on the date of the signed notice. The Insured does not have
to be living when the Company records a change of Policy Owner for it to be
effective. The Policy Owner does not have to be living when the Company records
a change of Contingent Policy Owner for it to be effective. The Company will
not be responsible for any payment made or other action taken before any change
is recorded.
ASSIGNMENT -- The Policy Owner may assign the Policy as collateral. The Company
is not responsible for the validity or effect of any collateral assignment. The
interest of any revocable Beneficiary will be subject to the terms of the
assignment. The Company will not be responsible for knowledge of any assignment
until the written notice has been recorded.
BENEFICIARY -- The Beneficiary is named in the application. If there is no
Beneficiary at the time of the Insured's death, the Company will pay the death
benefit to the Policy Owner or the Policy Owner's estate. If any Beneficiary
dies at the same time or within 10 days of the Insured, the death benefit will
be paid as though the Beneficiary died before the Insured.
CHANGE OF BENEFICIARY -- The Policy Owner may change the Beneficiary. The
change requires satisfactory written notice to the Company. Once the Company
records the change, it becomes effective from the date the written notice was
signed. The Insured does not have to be living at the time the Company records
the change for it to be effective. The Company will not be responsible for any
payment made or other action taken before the change has been recorded.
INCONTESTABILITY -- Except for failure to pay Premiums, the Company will not
contest the validity of the Policy after it has been In Effect during the
Insured's lifetime for two years from the Policy Date. This will not apply to
any riders attached to the Policy. Any increase in the Specified Amount after
the Policy Date will be incontestable only after such increase has been In
Effect during the Insured's lifetime for two years following the effective date
of such increase.
MISSTATEMENT OF AGE OR SEX -- If the Insured's age or sex has been misstated in
an application, the Policy proceeds will be adjusted by the difference between
the Monthly Deductions actually deducted and the Monthly Deductions which would
have been deducted at the correct age and sex. The adjustment will be
accumulated based on investment returns that were credited to the Cash Value.
NO DIVIDENDS -- The Policy is a nonparticipating Policy. It does not pay
dividends and will not share in the Company's profits or surplus.
OPTIONAL SETTLEMENT PLANS -- Any proceeds payable under this Policy will be
paid in one lump sum unless an Optional Settlement Plan is chosen. While the
Insured is living, the Policy Owner may request one of the plans. If no plan
has been requested prior to the Insured's death, the Beneficiary may request a
plan. The request requires satisfactory written notice to the Company. Upon the
Company's acceptance, the request is effective from the date the notice was
signed. The Company will not be responsible for any payment made or other
action taken before the request has been recorded by the Company.
The Policy proceeds payable upon settlement of the Policy may be made under one
of the following plans or any other plan acceptable to the Company.
19
<PAGE> 23
PLAN 1. PROCEEDS HELD AT INTEREST. The Company will hold the Policy proceeds
and make payments at the times and in the amounts agreed upon, as long as the
Policy remains In Effect. The Company will credit the Policy proceeds held
with an annual effective interest rate of at least 4%. When the payee dies,
any remaining Policy proceeds will be paid to his or her estate, unless
otherwise specified.
PLAN 2. LIFETIME PAYMENTS WITH A GUARANTEE. The Company will make monthly
payments for as long as the payee lives. A guaranteed number of payments may
be chosen. If the payee dies before the guaranteed number of payments has
been made, the Company will continue the payments until the guaranteed number
of payments has been made.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone any payment under the
Policy when:
(1) the New York Stock Exchange is closed on other than customary weekend
and holiday closings;
(2) trading on the New York Stock Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities held
in the Variable Life Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Variable Life
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 holders;
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.
TAX STATUS
NOTE: The following description is based upon the Company's understanding of
current federal income tax law applicable to life insurance 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. Section 7702 of the Internal Revenue Code of 1986,
as amended (the "Code"), defines the term "life insurance contract" for the
purposes of the Code. The Company believes that the Policy qualifies as a
"life insurance contract" under Section 7702. However, the Company does not
guarantee the tax status of the Policy. Purchasers bear the complete risk that
the Policy may not be treated as "life insurance" under federal income tax
laws. Purchasers should consult their own tax adviser. 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.
INTRODUCTION -- The discussion contained herein is general in nature and is not
intended as tax advice. Each person concerned should consult a competent tax
adviser. No attempt is made to consider any applicable state or other tax laws.
No representation is made regarding the likelihood of continuation of those
current federal income tax laws or of the current interpretations by the
Internal Revenue Service.
The Company is taxed as a life insurance company under the Code. For federal
income tax purposes, the Variable Life 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 life insurance policies. The
Code provides that a variable life insurance policy will not be treated as life
insurance 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 Policy as a life insurance contract would result in
imposition of federal income tax to the Policy Owner with respect to earnings
allocable to the Policy prior to the receipt of payments under the Policy. The
Code contains a safe harbor provision which provides that life insurance
policies such as the Policy 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. There is an exception for securities issued by
the U.S. Treasury in connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable life insurance policies such as the Policy. 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 purposes of these regulations, all securities of the same
issuer are treated as a single investment. 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 Policy will
be managed by the investment adviser(s) for the Eligible Mutual Funds so as to
comply with these diversification requirements.
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<PAGE> 24
The Treasury Department has indicated that the diversification regulations do
not provide guidance regarding the circumstances in which Policy Owner control
of the investments of the Variable Life Account will cause the Policy Owner to
be treated as the owner of the assets of the Variable Life Account, thereby
resulting in the loss of favorable tax treatment for the Policy. 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 Policy Owner control which may be exercised under the Policy is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that a policy owner
was not the owner of the assets of a separate account. It is unknown whether
these differences, such as the Policy Owner's ability to transfer among
investment choices or the number and type of investment choices available,
would cause the Policy Owner to be considered the owner of the assets of the
Variable Life Account.
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 was not considered to set
forth a new position, it may be applied retroactively resulting in the Policy
Owner being retroactively determined to be the owner of the assets of the
Variable Life Account.
Due to the uncertainty in this area, the Company reserves the right to modify
the Policy in an attempt to maintain favorable tax treatment.
TAX TREATMENT OF THE POLICY -- The Policy has been designed to comply with the
definition of life insurance contained in Section 7702 of the Code. Although
some interim guidance has been provided and proposed regulations have been
issued, final regulations have not been adopted. Section 7702 of the Code
requires the use of reasonable mortality and other expense charges. In
establishing these charges, the Company has relied on the interim guidance
provided in IRS Notice 88-128 and proposed regulations issued on July 5, 1991.
Currently, there is even less guidance as to a Policy issued on a substandard
risk basis and thus it is even less clear whether a Policy issued on such basis
would meet the requirements of Section 7702 of the Code.
While every attempt has been made by the Company to comply with Section 7702,
the law in this area is very complex and unclear. There is a risk, therefore,
that the Internal Revenue Service will not concur with the Company's
interpretations of Section 7702 that were made in determining such compliance.
In the event the Policy is determined not to comply, it would not qualify for
the favorable tax treatment usually accorded life insurance policies. Policy
Owners should consult their tax advisers with respect to the tax consequences
of purchasing the Policy.
POLICY PROCEEDS -- The tax treatment accorded to loan proceeds and/or surrender
payments from the Policy will depend on whether the Policy is considered to be
a modified endowment contract. (See "Tax Treatment of Loans and Surrenders.")
Otherwise the Policy should receive the same federal income tax treatment as
any other type of life insurance. As such, the death benefit thereunder is
excludable from the gross income of the Beneficiary under Section 101(a) of the
Code. Also, the Owner is not deemed to be in constructive receipt of the Cash
Value or Cash Surrender Value, including increments thereon, under a Policy
until actual surrender thereof, or borrowing if a "modified endowment
contract." (See below.)
If the Policy death proceeds are held by the Company at interest, any interest
credited will be includable in the taxable income for the Beneficiary for the
year in which the interest is credited. If the Policy death proceeds are paid
under the Lifetime Payments with a Guarantee plan, the payments will be
prorated between the amount attributable to the death benefit which will be
excludable from the Beneficiary's income and the amount attributable to
interest which will be includable in the Beneficiary's income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership, or receipt of Policy proceeds depend on the
circumstances of each Policy Owner or Beneficiary.
TAX TREATMENT OF LOANS AND SURRENDERS -- Section 7702A of the Code sets forth
the rules for determining when a life insurance policy will be deemed to be a
modified endowment contract. A modified endowment contract is a contract which
is entered into or materially changed on or after June 21, 1988, and fails to
meet the 7-pay test. A Policy fails to meet the 7-pay test when the cumulative
amount paid under the Policy at any time during the first 7 Policy Years
exceeds the sum of the net level premiums which would have been paid on or
before such time if the Policy provided for paid-up future benefits after the
payment of 7 level annual premiums. A material change would include any
increase in the future benefits or addition of qualified additional benefits
provided under a Policy unless the increase is attributable to (1) the payment
of premiums necessary to fund the lowest death benefit and qualified additional
benefits payable in the first 7 Policy Years; or (2) the crediting of interest
or other earnings (including policyholder dividends) with respect to such
premiums.
Furthermore, any policy received in exchange for a policy classified as a
modified endowment contract will be treated as a modified endowment contract
regardless of whether it meets the 7-pay test. However, an exchange under
Section 1035 of the Code of a life insurance policy entered into before June
21, 1988 for the Policy will not cause the Policy to be treated as a modified
endowment contract if no additional premiums are paid.
Due to the flexible premium nature of the Policy, the determination of whether
it qualifies for treatment as a modified endowment contract depends on the
individual circumstances of each Policy.
21
<PAGE> 25
If a Policy is a modified endowment contract, partial or full surrenders and/or
loan proceeds are taxable to the extent of income in the Policy. Such
distributions are deemed to be on a last-in-first-out basis, which means the
taxable income is distributed first. Loan proceeds and/or surrender payments
may also be subject to an additional 10% federal income tax penalty applied to
the income portion of such distribution. The penalty shall not apply to any
distribution (1) made on or after the date on which the taxpayer reaches age
591/2; (2) which is attributable to the taxpayer becoming disabled (within the
meaning of Section 72(m)(7) of the Code); or (3) which is part of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the taxpayer or the joint lives (or joint
life expectancies) of such taxpayer and his or her beneficiary.
If a Policy is not classified as a modified endowment contract, then any
surrenders will be treated first as a recovery of the investment in the Policy
which would not be received as taxable income. However, if a distribution is
the result of a reduction in benefits under the Policy within the first 15
years after the Policy is issued in order to comply with Section 7702, such
distribution will under rules set forth in Section 7702, be taxed as ordinary
income to the extent of income in the Policy.
Any loan from a Policy that is not classified as a modified endowment contract
will be treated as indebtedness of the Policy Owner and not as a distribution.
Upon complete surrender or when maturity benefits are paid, if the amount
received plus loan indebtedness exceeds the total premiums paid that are not
treated as previously surrendered by the Policy Owner, the excess generally
will be treated as ordinary income.
Personal interest payable on a loan under a Policy owned by an individual is
generally not deductible. Furthermore, no deduction will be allowed for
interest on a loan under a Policy covering the life of any employee or officer
of the taxpayer or any person financially interested in the business carried on
by the taxpayer to the extent the indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on Policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
Policy Owners should seek competent advice on the tax consequences of taking
loans, distributions,surrendering any Policy, exchanging or making any material
modifications to their Policy.
MULTIPLE POLICIES -- The 1988 Act further provides that multiple modified
endowment contracts that are issued within a calendar year period to the same
Policy Owner by one company or its affiliates are treated as one modified
endowment contract for purposes of determining the taxable portion of any loans
or distributions. Such treatment may result in adverse tax consequences
including more rapid taxation of the loans or distributed amounts from such
combination of contracts. Policy Owners should consult a tax adviser prior to
purchasing more than one modified endowment contract in any calendar year
period.
TAX TREATMENT OF ASSIGNMENTS -- An assignment or pledge of the Policy may be a
taxable event. Policy Owners should consult a competent tax adviser before
assigning or pledging their Policy.
QUALIFIED PLANS -- The Policy may be used in conjunction with certain qualified
retirement plans. Because the rules governing such use are complex, a purchaser
should consult with a competent pension consultant.
VARIABLE LIFE ACCOUNT VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote
the shares of the Eligible Mutual Funds held in the Variable Life Account at
special meetings of the shareholders of the Eligible Mutual Funds in accordance
with instructions received from persons having a voting interest in the
Variable Life 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 which it owns in the
same proportion as it votes shares for which it has received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended, or if the present interpretation thereof should change, and
as a result the Company determines that it is permitted to vote the shares of
the Eligible Mutual Funds in its own right, it may elect to do so.
The voting interests of the Policy Owner (or the Beneficiary) in the Eligible
Mutual Funds will be determined as follows: Policy Owners may cast one vote for
each $100 of Cash Value of the Policy allocated to the Subaccount on the record
date for the shareholder meeting of the Fund. Fractional votes are counted. If,
however, a Policy Owner has taken a loan secured by the Policy, amounts
transferred from the Variable Life Account to the General Account in connection
with the loan will not be considered in determining the voting interests of the
Policy Owner.
The number of shares which a person has a 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 Eligible Mutual Fund. 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 Life Account will receive
periodic reports relating to the Eligible Mutual Fund in which he or she has an
interest, proxy material, and a form with which to give such voting
instructions with respect to the proportion of the shares held in the Variable
Life Account corresponding to his or her interest in the Variable Life Account.
22
<PAGE> 26
Shares of the Trust are issued and redeemed in connection with investments in
and payments under certain variable annuity contracts and variable life
insurance policies issued through separate accounts of life insurance companies
(the "Life Companies") which may or may not be affiliated. Shares of the
Balanced Portfolio of the Trust are also offered directly to qualified pension
and retirement plans ("Qualified Plans"). The shares of the Trust are
purchased and redeemed at net asset value. The Trust does not foresee any
disadvantage to Policy Owners arising out of the fact that the Trust offers its
shares for products offered by Life Companies which are not affiliated or that
it offers its shares to Qualified Plans. Nevertheless, the Boards of Trustees
of the Trust and Manager's Trust intend to monitor events in order to identify
any material irreconcilable conflict which may possibly arise and to determine
what action, if any, should be taken in response thereto. If such a conflict
were to occur, one or more insurance company separate accounts or Qualified
Plans might withdraw their investment in the Trust. This might force Manager's
Trust to sell portfolio securities at disadvantageous prices.
DISREGARD OF VOTING INSTRUCTIONS -- The Company may, when required to do so by
state insurance authorities, vote shares of the Eligible Mutual Fund without
regard to instructions from Policy Owners if such instructions would require
such shares to be voted to cause the Eligible Mutual Fund to make (or refrain
from making) investments which would result in changes in the
sub-classification or investment objectives of the Eligible Mutual Fund. The
Company may also disapprove changes in the investment policy initiated by the
Policy Owners or directors or trustees of the Eligible Mutual Fund, if such
disapproval is reasonable and is based on a good faith determination by the
Company that the change would violate state law or the change would not be
consistent with the investment objective of the Eligible Mutual Fund or which
varies from the general quality and nature of investments and investment
techniques used by other Eligible Mutual Funds with similar investment
objectives underlying other separate accounts of the Company or of an
affiliated life insurance company. In the event the Company does disregard
voting instructions, a summary of that action and the reasons for such action
will be included in the next semi-annual report to the Policy Owners.
MANAGEMENT OF THE COMPANY
DIRECTORS AND OFFICERS
The Directors and Officers of the Company and their principal occupations are as
follows:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION
- ------------------- ------------------------------------------------------------------------------------
<S> <C>
Larry C. Ballard Chairman of the Board and Director of the Company. Mr. Ballard is Chairman of the
Board, Chief Executive Officer and a Director of SIAMCO.
Dale R. Schuh President and a Director of the Company. Mr. Schuh is President and Chief Operating
Officer of SIAMCO.
Richard A. Huseby Vice President of the Company. Mr. Huseby is Vice President of Life, Health,
Annuity and Pension Operations of SIAMCO.
David M. Potts Vice President of the Company. Mr. Potts is Vice President - Sales of SIAMCO.
William M. O'Reilly Secretary and a Director of the Company. Mr. O'Reilly is Vice President, General
Counsel and Corporate Secretary of SIAMCO.
Thomas H. Weingarten Treasurer of the Company. Mr. Weingarten is Director of Insurance Accounting for
SIAMCO.
Steven R. Boehlke A Director of the Company. Mr. Boehlke is Vice President of SIAMCO.
</TABLE>
DISTRIBUTION OF THE POLICY
Sentry Equity Services, Inc. ("SESI"), a wholly-owned subsidiary of SIAMCO,
serves as principal underwriter of the Policy. The Policy is sold by
individuals who, in addition to being licensed as life insurance agents for the
Company, are also NASD registered representatives for SESI or broker-dealers
who have entered into written sales agreements with SESI.
Agents are compensated for sales of the Policy on a commission and service fee
basis by SESI. The Company reimburses SESI for such compensation and for other
direct and indirect expenses actually incurred in connection with marketing and
selling the Policy. These expenses include field management compensation,
deferred compensation and insurance benefits of writing agents and field
management, advertising and promotion.
Where the Insured is over age 25 the registered representatives will generally
receive a first year commission of no more than 55% of the first year Premium.
Where the Insured is less than age 25 the first year commission may be higher
but in any case will not exceed 80% of the first year Premium. Renewal year
commissions paid to registered representatives will not exceed 2.25% of renewal
Premium. The registered representative may also receive a service fee which
will not exceed .30% of the Cash Value of the Policies attributable to the
representative. Representatives who meet certain production and persistency
requirements may be eligible for additional compensation.
The Policy may also be sold through other broker-dealers authorized by
applicable law and SESI.
23
<PAGE> 27
OTHER POLICIES ISSUED BY THE COMPANY
The Company may, from time to time, offer other policies which may be similar
to the Policy offered herein.
STATE REGULATION
The Company is subject to the laws of Wisconsin governing insurance companies
and to regulation by the Wisconsin Insurance Department. An annual statement in
a prescribed form is filed with the Insurance Department each year covering the
operation of the Company for the preceding year and its financial condition as
of the end of such year. Regulation by the Insurance Department includes
periodic examination to determine the Company's Policy liabilities and reserves
so that the Insurance Department may certify the items are correct. The
Company's books and accounts are subject to review by the Insurance Department
at all times and a full examination of its operations is conducted periodically
by the National Association of Insurance Commissioners. Such regulation does
not, however, involve any supervision of management or investment practices or
policies. In addition, the Company is subject to regulation under the insurance
laws of other jurisdictions in which it may operate.
REPORTS TO OWNERS
Policy Owners will receive confirmation of the following transactions:receipt
of any premiums (except premiums received before the Policy Issue Date and
those received via an automatic premium payment plan); any change of allocation
of premiums; any transfer between Subaccounts; any loan, interest repayment, or
loan repayment; any partial surrenders; or any return of premium necessary to
comply with applicable maximum premium limitations. Policy Owners choosing an
automatic premium payment plan will receive an annual statement showing the
dates and amounts of premiums paid. Upon request, Policy Owners will be
entitled to a receipt for any premium payment. Policy Owners will also receive
confirmation of the following transactions within seven days: exercise of the
free-look privilege; an exchange of the Policy; full surrender of the Policy;
and payment of the death benefit under the Policy.
Within 30 days after each Policy Anniversary, an annual statement will be sent
to Policy Owners. The statement will show the current amount of death benefits
payable under the Policy, the current Cash Value, the current Cash Surrender
Value and current Policy indebtedness. The statement will also show premiums
paid and all charges deducted during the Policy Year and will show all
transactions previously confirmed. The Company will also send to Policy Owners
annual and semi-annual reports of the Variable Life Account.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Life 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 of material
importance in relation to the total capital and surplus of the Company.
EXPERTS
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 Life Account as of December 31, 1996, and for each of the three years
in the period then ended, included in this Prospectus and the Registration
Statement 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 Policy described herein are being passed
upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
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 Policy.
The most current financial statements of the Company are those as of the end of
the most recent fiscal year. The Company does not prepare financial statements
more often than annually and believes that any incremental benefit to
prospective policyholders that may result from preparing and delivering more
current financial statements, though unaudited, does not justify the additional
cost that would be incurred. In addition, the Company represents that there
have been no adverse changes in the financial condition or operations of the
Company between the end of the most current fiscal year and the date of this
Prospectus.
24
<PAGE> 28
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE YEARS ENDED 1996, 1995 AND 1994
25
<PAGE> 29
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS
SENTRY LIFE INSURANCE COMPANY
AND
THE CONTRACT OWNERS OF
SENTRY VARIABLE LIFE ACCOUNT I:
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 Life
Account I as of December 31, 1996, and the related statements of operations and
changes in contract owners' equity for each of the three 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 Life Account I as of December 31, 1996, and the results of
their operations and the changes in their contract owners' equity for each of
the three years in the period then ended in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
February 10, 1997
26
<PAGE> 30
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
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, 219,628
shares (cost $219,628) $ 219,628
Growth Portfolio, 115,547
shares (cost $2,667,400) 2,978,764
Limited Maturity Bond Portfolio, 10,809
shares (cost $150,972) 151,901
Balanced Portfolio, 52,983
shares (cost $816,413) 843,502
----------
Total investments 4,193,795
Dividends receivable 796
----------
Total assets 4,194,591
LIABILITIES:
Accrued expenses 2,539
----------
CONTRACT OWNERS' EQUITY (NET ASSETS) $4,192,052
</TABLE>
The accompanying notes are an integral part of these financial statements
27
<PAGE> 31
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
For the Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
SUB-ACCOUNTS INVESTING IN:
LIQUID ASSET GROWTH
PORTFOLIO PORTFOLIO
------------------------------- ------------------------------------
1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends $ 9,580 $9,124 $6,269 $ 997 $ 4,390 $ 8,224
Expenses:
Risk charges 2,288 1,940 1,979 29,155 23,650 17,946
-------- -------- -------- ---------- ---------- ----------
Net investment income (loss) 7,292 7,184 4,290 (28,158) (19,260) (9,722)
-------- -------- -------- ---------- ---------- ----------
Realized net investment gain (loss) -- -- -- 48,754 46,745 44,083
Unrealized appreciation (depreciation), net -- -- -- (44,382) 473,452 (332,294)
Capital gain distributions received -- -- 210 233,304 58,834 192,558
-------- -------- -------- ---------- ---------- ----------
Realized and unrealized gain (loss)
on investments and capital
gain distributions, net -- -- 210 237,676 579,031 (95,653)
-------- -------- -------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity from operations 7,299 7,184 4,500 209,518 559,771 (105,375)
-------- -------- -------- ---------- ---------- ----------
Purchase payments 96,463 90,888 195,485 549,845 478,225 461,504
Transfers between subaccounts, net (59,472) (54,134) (155,730) 56,399 62,754 162,021
Withdrawals and surrenders (32,192) (1,034) (634) (184,653) (116,440) (159,695)
Monthly deductions (13,163) (12,109) (13,666) (217,320) (183,791) (158,175)
Policy loans (709) (31) (239) (10,421) (37,216) (55,443)
-------- -------- -------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity derived from principal transactions (9,073) 23,580 25,216 193,850 203,532 250,212
-------- -------- -------- ---------- ---------- ----------
Total increase (decrease) in contract
owners' equity (1,781) 30,764 29,716 403,368 763,303 144,837
Contract owners' equity at beginning of year 221,447 190,683 160,967 2,574,908 1,811,605 1,666,768
-------- -------- -------- ---------- ---------- ----------
Contract owners' equity at end of year $219,666 $221,447 $190,683 $2,978,276 $2,574,908 $1,811,605
======== ======== ======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
28
<PAGE> 32
<TABLE>
<CAPTION>
LIMITED MATURITY BALANCED
BOND PORTFOLIO PORTFOLIO TOTAL
- --------------------------------------- -------------------------------------- -------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 15,386 $ 9,541 $ 7,291 $ 18,652 $ 11,714 $ 9,450 $ 44,615 $ 34,769 $ 31,234
1,797 1,908 1,906 8,680 7,621 6,379 41,920 35,119 28,210
- ---------- ---------- -------- -------- ---------- -------- ---------- ---------- ----------
13,589 7,633 5,385 9,972 4,093 3,071 2,695 (350) 3,024
- ---------- ---------- -------- -------- ---------- -------- ---------- ---------- ----------
(2,558) 1,206 (227) 8,235 19,996 11,174 54,431 67,947 55,030
(6,306) 8,032 (8,658) (76,957) 114,203 (55,710) (127,645) 595,687 (396,662)
-- -- 1,080 103,719 3,765 15,613 337,023 62,599 209,461
- ---------- ---------- -------- -------- ---------- -------- ---------- ---------- ----------
(8,864) 9,238 (7,805) 34,997 137,964 (28,923) 263,809 726,233 (132,171)
- ---------- ---------- -------- -------- ---------- -------- ---------- ---------- ----------
4,725 16,871 (2,420) 44,969 142,057 (25,852) 266,504 725,883 (129,147)
- ---------- ---------- -------- -------- ---------- -------- ---------- ---------- ----------
25,849 27,036 23,864 142,335 161,567 111,653 814,492 757,716 792,506
(9,331) (3,276) 4,506 12,404 (5,344) (10,797) -- -- --
(37,994) (12,119) (40,827) (59,749) (29,762) (22,365) (314,588) (159,355) (223,521)
(12,163) (13,030) (13,342) (83,683) (81,053) (67,614) (326,329) (289,983) (252,797)
(306) (3,029) (10) (6,732) (1,715) (14,764) (18,168) (41,991) (70,456)
- ---------- ---------- -------- -------- ---------- -------- ---------- ---------- ----------
(33,945) (4,418) (25,809) 4,575 43,693 (3,887) 155,407 266,387 245,732
- ---------- ---------- -------- -------- ---------- -------- ---------- ---------- ----------
(29,220) 12,453 (28,229) 49,544 185,750 (29,739) 421,911 992,270 116,585
180,182 167,729 195,958 793,604 607,854 637,593 3,770,141 2,777,871 2,661,286
- ---------- ---------- -------- -------- ---------- -------- ---------- ---------- ----------
$ 150,962 $ 180,182 $167,729 $843,148 $ 793,604 $607,854 $4,192,052 $3,770,141 $2,777,871
========== ========== ======== ======== ========== ======== ========== ========== ==========
</TABLE>
29
<PAGE> 33
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
1. ORGANIZATION AND CONTRACTS
The Sentry Variable Life Account I (the Variable Life 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 Life Account was established by the
Company on February 12, 1985 and commenced operations on January 13, 1987.
Accordingly, it is an accounting entity wherein all segregated account
transactions are reflected.
The assets of the Variable Life 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 Life 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 Life Account which are applied to increase
contract owners' equity are not taxed.
3. EXPENSES
A mortality and expense risk premium and a death benefit guarantee risk
charge are deducted by the Company from the Variable Life Account on a
daily basis which is equal, on an annual basis, to 1.05% (.90% mortality
and expense risk and .15% death benefit guarantee risk charge) of the daily
net asset value of the Variable Life Account. These charges compensate the
Company for assuming these risks under the variable life contract. The
liability for accrued mortality and expense risk premium and death benefit
guarantee risk charge amounted to $2,539 at December 31, 1996.
At the beginning of each policy month, the company makes a deduction, per
contract holder, from the cash value of the policy by canceling accumulation
units. This deduction consists of the cost of insurance for the policy and
any additional benefits provided by rider, if any, for the policy month and
a $5 monthly administrative fee. The administrative fee reimburses the
Company for administrative expenses relating to the issuance and
maintenance of the contract.
The Company deducts a front-end sales expense charge of 5.0% from each
premium payment. A surrender charge may be deducted in the event of a
surrender to reimburse the Company for expenses incurred in connection with
issuing a policy. The full surrender charge will be reduced during the
first nine contract years until it reaches zero in the tenth contract year.
The Company deducts from each premium payment the amount of premium taxes
levied by any state or government entity. Premium taxes up to 4% are imposed
by certain states.
30
<PAGE> 34
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INITIAL CAPITALIZATION
Initial capital of $500 was provided by the Company for the establishment of
the Variable Life Account. The Company removed the investment during 1996.
The value at the disposal date was $742.
5. CONTRACT OWNERS' EQUITY
Contract owners' equity is represented by accumulation units in the related
Variable Life Account. At December 31, 1996 ownership of the Variable
Life 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 14,611 $15.03 $ 219,666
Growth Portfolio 131,013 22.73 2,978,276
Limited Maturity Bond Portfolio 19,110 16.57 150,962
Balanced Portfolio 47,830 17.63 843,148
----------
Total contract owners' equity $4,192,052
==========
</TABLE>
At December 31, 1996 significant concentrations of ownership were as follows:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACT OWNERS PERCENTAGE OWNED
--------------- ----------------
<S> <C> <C>
Liquid Asset Portfolio 3 47.6
Limited Maturity Bond Portfolio 1 25.6
</TABLE>
At December 31, 1995 ownership of the Variable Life 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 15,235 $14.54 $ 221,447
Growth Portfolio 122,318 21.05 2,574,908
Limited Maturity Bond Portfolio 11,223 16.05 180,182
Balanced Portfolio 47,615 16.67 793,604
----------
Total contract owners' equity $3,770,141
==========
</TABLE>
At December 31, 1994 ownership of the Variable Life 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 13,639 $13.98 $ 190,683
Growth Portfolio 112,195 16.15 1,811,605
Limited Maturity Bond Portfolio 11,473 14.62 167,729
Balanced Portfolio 44,673 13.61 607,854
----------
Total contract owners' equity $2,777,871
==========
</TABLE>
31
<PAGE> 35
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. PURCHASES AND SALES OF SECURITIES
In 1996, purchases and proceeds on sales of the Trust's shares aggregated
$1,368,190 and $872,040, 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 $153,780 $889,149 $ 44,216 $281,045 $1,368,190
Proceeds on sales 155,168 489,998 63,774 163,100 872,040
</TABLE>
In 1995, purchases and proceeds on sales of the Trust's shares aggregated
$1,062,251 and $733,637, 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 $141,210 $663,423 $ 48,185 $209,433 $1,062,251
Proceeds on sales 110,647 420,666 45,063 157,261 733,637
</TABLE>
In 1994, purchases and proceeds on sales of the Trust's shares aggregated
$1,340,961 and $883,968, 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 $256,685 $879,777 $ 44,442 $160,057 $1,340,961
Proceeds on sales 227,423 446,780 63,883 145,882 883,968
</TABLE>
32
<PAGE> 36
SENTRY LIFE INSURANCE COMPANY
REPORT ON AUDITS OF STATUTORY-BASIS FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
33
<PAGE> 37
[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
34
<PAGE> 38
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
============== ==============
LIABILITIES
-----------
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
============== ==============
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.
35
<PAGE> 39
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 ............................................. 6,144,524 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.
36
<PAGE> 40
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.
37
<PAGE> 41
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 decrease (increase) 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.
38
<PAGE> 42
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 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
39
<PAGE> 43
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
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.
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.
40
<PAGE> 44
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
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 NAICpolicy. SIAMCO is amortizing its transition
obligation, 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>
41
<PAGE> 45
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
<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>
ESTIMATED
BOOK MARKET
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>
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.
42
<PAGE> 46
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
(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>
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>
43
<PAGE> 47
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
(5) INCOME TAXES
<TABLE>
<S> <C> <C>
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:
1996 1995
---- ----
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.
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.
<PAGE> 48
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
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
STATEMENT ESTIMATED
AT DECEMBER 31, 1995 VALUE FAIR VALUE
--------- ----------
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>
(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.
45
<PAGE> 49
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
(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 - -
1995
(000'S OMITTED)
--------------
<CAPTION>
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 - 26,669 386 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.
46
<PAGE> 50
SENTRY LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
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.
47
<PAGE> 51
This page intentionally left blank.
<PAGE> 52
SENTRY LIFE INSURANCE COMPANY
Supplemental Schedule of Assets and Liabilities
For the Year Ended December 31, 1996
49
<PAGE> 53
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
==============
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
==============
</TABLE>
50
<PAGE> 54
<TABLE>
<S> <C>
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
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> ==============
51
<PAGE> 55
APPENDIX A
ILLUSTRATIONS OF BENEFITS
Customized computer generated proposal illustrations tailored to the unique
insurance needs of an individual will play a major role in the sales process.
The tables in Appendix A illustrate the way in which a Policy operates. They
show how the death benefit, Cash Value, and Cash Surrender Value for an Insured
of a given age and annual Premium may vary over an extended period of time. The
tables are based on a standard male age 35 with a Specified Amount of $100,000.
The annual Premium illustrated is the minimum first year Premium for the death
benefit option indicated. The tables illustrate values that would result
assuming the Premiums are paid as indicated, no loans, partial surrenders, or
transfers are made, and the Owner has not requested any changes in Specified
Amount, or illustration of future Policy values. Under these assumptions the
Premium illustrated will meet the Premium requirement under the death benefit
guarantee provision for the Policy illustrated.
The tables illustrate Policy values assuming current mortality charges are
deducted. These tables also illustrate Policy values assuming guaranteed
maximum mortality charges are deducted. Guaranteed maximum mortality charges
are based on the 1980 CSO-ALB mortality tables.
Gross investment returns of 0%, 6%, and 12% are assumed to be level for all
years shown. The values would be different if rates of return averaged 0%, 6%,
and 12% over the period of years but fluctuated above and below those averages
during individual years.
The Cash Values, Cash Surrender Values and death benefits in the tables take
into account all charges and deductions against the Policy (see "Charges and
Deductions.")
The amounts shown for the death benefits and Cash Surrender Values reflect the
fact that the net investment return of the Subaccounts is lower than the gross
investment return on the assets held in the Portfolios because of the charges
levied against the Subaccounts. The daily investment management and
administration fee is assumed to be equivalent to an annual rate of 0.69%of the
average daily net assets of Neuberger & Berman Advisers Management Trust. The
values also assume that Neuberger & Berman Advisers Management Trust will incur
other expenses annually which are assumed to be .26% of the average daily net
assets of the Trust. These assumptions are based on the fee schedule in effect
as of May 1, 1997. The Variable Life Account will be assessed for mortality and
expense risks at an annual rate of .90% of the net asset value of the Account.
The Variable Life Account will also be assessed for the death benefit guarantee
risk at an annual rate of .15% of the net asset value of the Account. After
taking these expenses and charges into consideration, the illustrated gross
annual investment rates of 0%, 6%, and 12% are equivalent to net rates of
(2.00%), 4.00%, and 10.00%.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes against the Variable Life Account, since the Company is
not currently making such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return would
have to exceed 0%, 6%, or 12% by an amount sufficient to cover the tax charges
in order to produce the values illustrated.
52
<PAGE> 56
SENTRY LIFE INSURANCE COMPANY TABLE 1
SELF-DIRECTED LIFE A FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY
Designed for: MARK SENTRY Prepared By: JOE AGENT
Issue Age: 35 MALE Initial Specified Amount: 100000.
Rating Class: STD. NON SMOKER Death Benefit Option 1
Annual Premium: 1168.
State: WI
- -------------------------------------------------------------------------------
Summary of end of year values assuming a 12.00% gross rate of return
This illustration is based on CURRENT mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 01 01168 001226 0000955 0000313 0100000
37 02 02336 002514 0001998 0001356 0100000
38 03 03504 003866 0003135 0002493 0100000
39 04 04672 005286 0004377 0003735 0100000
40 05 05840 006777 0005731 0005218 0100000
41 06 07008 008342 0007209 0006823 0100000
42 07 08176 009985 0008821 0008564 0100000
43 08 09344 011711 0010582 0010453 0100000
44 09 10512 013523 0012505 0012505 0100000
45 10 11680 015426 0014608 0014608 0100000
55 20 23360 040552 0050324 0050324 0100000
65 30 35040 081481 0141649 0141649 0172812
75 40 46720 148149 0367879 0367879 0393631
95 60 70080 433635 2257922 2257922 2280501
- -------------------------------------------------------------------------
</TABLE>
Summary of end of year values assuming a 12.00% gross rate of return
This illustration is based on GUARANTEED mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 01 01168 001226 0000906 0000264 0100000
37 02 02336 002514 0001890 0001248 0100000
38 03 03504 003866 0002957 0002315 0100000
39 04 04672 005286 0004115 0003473 0100000
40 05 05840 006777 0005370 0004856 0100000
41 06 07008 008342 0006730 0006345 0100000
42 07 08176 009985 0008204 0007948 0100000
43 08 09344 011711 0009804 0009676 0100000
44 09 10512 013523 0011541 0011541 0100000
45 10 11680 015426 0013428 0013428 0100000
55 20 23360 040552 0044876 0044876 0100000
65 30 35040 081481 0125772 0125772 0153442
75 40 46720 148149 0326068 0326068 0348893
95 60 70080 433635 1974706 1974706 1994453
------------------------------------------------------------------------
</TABLE>
The hypothetical investment rates of return shown above are illustrative only
and should not be deemed a representation of past or future investment rates of
return. Actual investment returns may be more or less than those shown.
53
<PAGE> 57
TABLE 2
SENTRY LIFE INSURANCE COMPANY
SELF-DIRECTED LIFE A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
Designed for: MARK SENTRY Prepared By: JOE AGENT
Issue Age: 35 MALE Initial Specified Amount: 100000.
Rating Class: STD. NON SMOKER Death Benefit Option 1
Annual Premium: 1168.
State: WI
- --------------------------------------------------------------------------------
Summary of end of year values assuming a 6.00% gross rate of return
This illustration is based on CURRENT mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 01 1168 1226 897 255 100000
37 02 2336 2514 1822 1180 100000
38 03 3504 3866 2775 2133 100000
39 04 4672 5286 3756 3114 100000
40 05 5840 6777 4765 4251 100000
41 06 7008 8342 5801 5416 100000
42 07 8176 9985 6865 6608 100000
43 08 9344 11711 7958 7829 100000
44 09 10512 13523 9079 9079 100000
45 10 11680 15426 10230 10230 100000
55 20 23360 40552 23134 23134 100000
65 30 35040 81481 36824 36824 100000
75 40 46720 148149 44256 44256 100000
95 60 70080 433635 0 0 100000
- ------------------------------------------------------------------------
</TABLE>
Summary of end of year values assuming a 6.00% gross rate of return
This illustration is based on GUARANTEED mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 01 1168 1226 850 208 100000
37 02 2336 2514 1720 1078 100000
38 03 3504 3866 2611 1969 100000
39 04 4672 5286 3521 2879 100000
40 05 5840 6777 4449 3935 100000
41 06 7008 8342 5392 5007 100000
42 07 8176 9985 6351 6094 100000
43 08 9344 11711 7324 7196 100000
44 09 10512 13523 8310 8310 100000
45 10 11680 15426 9308 9308 100000
55 20 23360 40552 19571 19571 100000
65 30 35040 81481 26828 26828 100000
75 40 46720 148149 15386 15386 100000
95 60 70080 433635 0 0 100000
- ------------------------------------------------------------------------
</TABLE>
The hypothetical investment rates of return shown above are illustrative only
and should not be deemed a representation of past or future investment rates of
return. Actual investment returns may be more or less than those shown.
54
<PAGE> 58
TABLE 3
SENTRY LIFE INSURANCE COMPANY
SELF-DIRECTED LIFE A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY
Designed for: MARK SENTRY Prepared By: JOE AGENT
Issue Age: 35 MALE Initial Specified Amount: 100000.
Rating Class: STD. NON SMOKER Death Benefit Option 1
Annual Premium: 1168.
State: WI
Summary of end of year values assuming a 0.00% gross rate of return
This illustration is based on CURRENT mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 01 1168 1226 840 198 100000
37 02 2336 2514 1654 1012 100000
38 03 3504 3866 2444 1802 100000
39 04 4672 5286 3207 2565 100000
40 05 5840 6777 3944 3430 100000
41 06 7008 8342 4653 4267 100000
42 07 8176 9985 5333 5076 100000
43 08 9344 11711 5986 5857 100000
44 09 10512 13523 6609 6609 100000
45 10 11680 15426 7204 7204 100000
55 20 23360 40552 11113 11113 100000
65 30 35040 81481 08617 08616 100000
75 40 46720 148149 0 0 100000
95 60 70080 433635 0 0 100000
- ----------------------------------------------------------------------------
</TABLE>
Summary of end of year values assuming a 0.00% gross rate of return
This illustration is based on GUARANTEED mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 01 1168 1226 794 152 100000
37 02 2336 2514 1558 916 100000
38 03 3504 3866 2293 1651 100000
39 04 4672 5286 2997 2355 100000
40 05 5840 6777 3668 3154 100000
41 06 7008 8342 4304 3919 100000
42 07 8176 9985 4903 4647 100000
43 08 9344 11711 5466 5338 100000
44 09 10512 13523 5990 5990 100000
45 10 11680 15426 6475 6475 100000
55 20 23360 40552 8659 8659 100000
65 30 35040 81481 1951 1951 100000
75 40 46720 148149 0 0 100000
95 60 70080 433635 0 0 100000
- -------------------------------------------------------------------------------
</TABLE>
The hypothetical investment rates of return shown above are illustrative only
and should not be deemed a representation of past or future investment rates of
return. Actual investment returns may be more or less than those shown.
55
<PAGE> 59
<TABLE>
<S><C>
SENTRY LIFE INSURANCE COMPANY TABLE 4
SELF-DIRECTED LIFE A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Designed for: MARK SENTRY Prepared By: JOE AGENT
Issue Age: 35 MALE Initial Specified Amount: 100000.
Rating Class: STD. NON SMOKER Death Benefit Option 2
Annual Premium: 2281.
State: WI
</TABLE>
- -------------------------------------------------------------------------------
Summary of end of year values assuming a 12.00% gross rate of return
This illustration is based on CURRENT mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 1 2281 2395 2092 1446 102092
37 2 4562 4910 4383 3737 104383
38 3 6843 7550 6893 6247 106893
39 4 9124 10323 9641 8995 109641
40 5 11405 13234 12650 12133 112650
41 6 13686 16291 15943 15556 115943
42 7 15967 19501 19549 19291 119549
43 8 18248 22871 23498 23369 123498
44 9 20529 26409 27823 27823 127823
45 10 22810 30125 32559 32559 132559
55 20 45620 79195 113208 113208 213208
65 30 68430 159124 311888 311888 411888
75 40 91240 289321 799723 798723 899723
95 60 136860 846851 4891376 4891376 4991376
- -------------------------------------------------------------------------------
</TABLE>
Summary of end of year values assuming a 12.00% gross rate of return
This illustration is based on GUARANTEED mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
36 01 2281 2395 2043 1397 102043
37 02 4562 4910 4274 3628 104274
38 03 6843 7550 6710 6064 106710
39 04 9124 10323 9370 8724 109370
40 05 11405 13234 12274 11757 112274
41 06 13686 16291 15441 15053 115441
42 07 15967 19501 18897 18638 118897
43 08 18248 22871 22668 22539 122668
44 09 20529 26409 26782 26782 126782
45 10 22810 30125 31273 31273 131273
55 20 45620 79195 106366 106366 206366
65 30 68430 159124 286123 286123 386123
75 40 91240 289321 715002 715002 815002
95 60 136860 846851 4155202 4155202 4255202
- -------------------------------------------------------------------------------
</TABLE>
The hypothetical investment rates of return shown above are illustrative only
and should not be deemed a representation of past or future investment rates of
return. Actual investment returns may be more or less than those shown.
56
<PAGE> 60
<TABLE>
<S><C>
SENTRY LIFE INSURANCE COMPANY TABLE 5
SELF-DIRECTED LIFE A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Designed for: MARK SENTRY Prepared By: JOE AGENT
Issue Age: 35 MALE Initial Specified Amount: 100000.
Rating Class: STD. NON SMOKER Death Benefit Option 2
Annual Premium: 2281.
State: WI
</TABLE>
Summary of end of year values assuming a 6.00% gross rate of return
This illustration is based on CURRENT mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
<S> <C> <C> <C> <C> <C> <C>
36 1 2281 2395 1972 1326 101972
37 2 4562 4910 4013 3367 104013
38 3 6843 7550 6126 5480 106126
39 4 9124 10323 8310 7664 108310
40 5 11405 13234 10569 10052 110569
41 6 13686 16291 12902 12515 112902
42 7 15967 19501 15313 15054 115313
43 8 18248 22871 17802 17673 117802
44 9 20529 26409 20372 20372 120372
45 10 22810 30125 23026 23026 123026
55 20 45620 79195 54196 54196 154196
65 30 68430 159124 92260 92260 192260
75 40 91240 289321 127171 127171 227171
95 60 136860 846851 0 0 100000
</TABLE>
Summary of end of year values assuming a 6.00% gross rate of return
This illustration is based on GUARANTEED mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
<S> <C> <C> <C> <C> <C> <C>
36 1 2281 2395 1924 1278 101924
37 2 4562 4910 3910 3264 103910
38 3 6843 7550 5958 5312 105958
39 4 9124 10323 8069 7423 108069
40 5 11405 13234 10241 9724 110241
41 6 13686 16291 12476 12088 112476
42 7 15967 19501 14772 14513 114772
43 8 18248 22871 17130 17001 117130
44 9 20529 26409 19551 19551 119551
45 10 22810 30125 22033 22033 122033
55 20 45620 79195 50062 50062 150062
65 30 68430 159124 80027 80027 180027
75 40 91240 289321 95204 95204 195204
95 60 136860 846851 0 0 100000
</TABLE>
The hypothetical investment rates of return shown above are illustrative only
and should not be deemed a representation of past or future investment rates of
return. Actual investment returns may be more or less than those shown.
57
<PAGE> 61
<TABLE>
<S><C>
SENTRY LIFE INSURANCE COMPANY TABLE 6
SELF-DIRECTED LIFE A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Designed for: MARK SENTRY Prepared By: JOE AGENT
Issue Age: 35 MALE Initial Specified Amount: 100000.
Rating Class: STD. NON SMOKER Death Benefit Option 2
Annual Premium: 2281.
State: WI
</TABLE>
Summary of end of year values assuming a 0.00% gross rate of return
This illustration is based on CURRENT mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
<S> <C> <C> <C> <C> <C> <C>
36 1 2281 2395 1852 1206 101852
37 2 4562 4910 3658 3012 103658
38 3 6843 7550 5418 4772 105418
39 4 9124 10323 7131 6485 107131
40 5 11405 13234 8796 8279 108796
41 6 13686 16291 10413 10025 110413
42 7 15967 19501 11981 11723 111981
43 8 18248 22871 13502 13373 113502
44 9 20529 26409 14974 14974 114974
45 10 22810 30125 16397 16397 116397
55 20 45620 79195 27536 27536 127536
65 30 68430 159124 30379 30379 130379
75 40 91240 289321 16052 16052 116052
95 60 136860 846851 0 0 100000
</TABLE>
Summary of end of year values assuming a 0.00% gross rate of return
This illustration is based on GUARANTEED mortality costs
<TABLE>
<CAPTION>
PREMIUMS
SUM OF ACCUM.
AGE YEAR PREMIUMS PAID @ 5% CASH VALUE SURRENDER VALUE DEATH BENEFIT
<S> <C> <C> <C> <C> <C> <C>
36 1 2281 2395 01806 01160 101806
37 2 4562 4910 03561 02915 103561
38 3 6843 7550 05264 04618 105264
39 4 9124 10323 06915 06269 106915
40 5 11405 13234 08510 07994 108510
41 6 13686 16291 10050 09662 110050
42 7 15967 19501 11532 11273 111532
43 8 18248 22871 12955 12826 112955
44 9 20529 26409 14319 14319 114319
45 10 22810 30125 15622 15622 115622
55 20 45620 79195 24854 24854 124854
65 30 68430 159124 23488 235488 123488
75 40 91240 289321 0 0 100000
95 60 136860 846851 0 0 100000
</TABLE>
The hypothetical investment rates of return shown above are illustrative only
and should not be deemed a representation of past or future investment rates of
return. Actual investment returns may be more or less than those shown.
58
<PAGE> 62
PART II
UNDERTAKING TO FILE REPORTS
a. Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file
with the Securities and Exchange commission such supplementary and
periodic information, documents and reports as may be prescribed by any
rule or regulation of the Commission theretofore or hereafter duly adopted
pursuant to authority conferred in that section.
b. Pursuant to Investment Company Act Rule 26(e), Sentry Life Insurance
Company ("Company") hereby represents that the fees and charges deducted
under the Policy described in the Prospectus, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by the Company.
INDEMNIFICATION
The Bylaws of the Company and resolutions adopted by SIAMCO provide that any
person who at any time serves as a director or officer of the Company or any
majority-owned ultimate subsidiary of SIAMCO shall be indemnified or reimbursed
against and for any and all claims for which they become subject by reason of
such service.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company 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,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company 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 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.
<PAGE> 63
REPRESENTATIONS
1. Registrant represents that Section (b)(13)(iii)(F) of Rule 6e-3(T) is
being relied on.
2. Registrant represents that the level of the risk charge is reasonable in
relation to the risks assumed by the life insurer under the Policies.
3. Registrant represents that it has analyzed the risk charge taking into
consideration such facts as current charge levels, potential adverse
mortality, the manner in which charges are imposed, the markets in which
the Policy will be offered, anticipated sales and lapse rates.
4. Registrant represents that the Company has concluded that there is a
reasonable likelihood that the distribution financing arrangement of the
Variable Life Account will benefit the Variable Life Account and
policyholders and will keep and make available to the Commission, on
request, a memorandum setting forth the basis for this representation.
5. Registrant represents that the Variable Life Account will invest only in
management investment companies undertaking to have a Board, a majority of
whom are not interested persons of the Company, which formulates and
approves any plan under Rule 12b-1 to finance distribution expenses.
<PAGE> 64
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The Prospectus consisting of 58 pages.
The undertaking to file reports.
The signatures.
Written consents of the following persons:
Dean A. Klingenberg, FSA, MAAA
Coopers & Lybrand L.L.P., Independent Accountants
Blazzard, Grodd & Hasenauer, P.C.
The following exhibits:
A. Copies of all exhibits required by paragraph A of instructions for
exhibits in Form N-8B-2.
1. Resolutions of the Board of Directors of Sentry Life Insurance
Company
2. None
3a. Principal Underwriter's Agreement
3b. Registered Representatives Agreement
3c. General Agent Agreement
4. Not Applicable
5. Flexible Premium Variable Life Insurance Policy
Amendatory Riders for Various States
6a. Articles of Incorporation of the Company
6b. Bylaws of the Company
7. Not Applicable
8. Not Applicable
9a. Sales Agreement (Fund Participation Agreement)
9b. Assignment and Modification Agreement*
10. Application Form
11. Memorandum of Exchange Right
27. Not Applicable
B. Opinion and Consent of Counsel
C. Consent of Independent Accountants
D. Consent of Actuary
* Incorporated herein by reference to Registrant's Post-Effective Amendment
No. 12 filed electronically on or about April 30, 1996.
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
SENTRY VARIABLE LIFE ACCOUNT I and SENTRY LIFE INSURANCE COMPANY have duly
caused this Registration Statement to be signed on their behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Stevens Point, State of Wisconsin, on the 21st day
of April, 1997. The Registrant certifies that it meets the requirements of the
Securities Act Rule 485(b) for effectiveness of this Registration Statement.
Sentry Variable Life Account I, 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> 66
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.
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE> 67
WRITTEN CONSENTS
POST-EFFECTIVE AMENDMENT NO. 13
TO
FORM S-6
FOR
SENTRY VARIABLE LIFE ACCOUNT I
1) Written consent of Actuary
Dean A. Klingenberg, FSA, MAAA
2) Written consent of Independent Accountants
Coopers & Lybrand, L.L.P.
3) Written consent of Counsel
Blazzard, Grodd & Hasenauer
<PAGE> 68
April 4, 1997
To the Board of Directors of
Sentry Life Insurance Company
1800 North Point Drive
Stevens Point, WI 54481
CONSENT OF ACTUARY
I hereby consent to the inclusion of the Illustration of Policy Values
contained in Appendix A in a registration statement, Form S-6, for the Variable
Life Insurance Policies. The Illustrations have been prepared in accordance
with standard actuarial principles and reflect the operation of the Policy by
taking into account all charges under the Policy and in the underlying fund.
s/Dean A. Klingenberg
-------------------------------------
Dean A. Klingenberg, FSA, MAAA
Actuary-Life & Health Product Pricing
<PAGE> 69
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Sentry Life Insurance Company
We consent to the inclusion in Post Effective Amendment No. 13 to the
Registration Statement on Form S-6 of Sentry Variable Life Account I (File No.
2-98441) of our report dated February 10, 1997 on our audit of the financial
statements of Sentry Variable Life Account I 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
caption "Experts".
s/ Coopers & Lybrand L.L.P.
Chicago, IL
April 30, 1997
<PAGE> 70
BLAZZARD, GRODD & HASENAUER, P.C.
ATTORNEYS AT LAW CONNECTICUT OFFICE:
943 POST ROAD EAST - P.O. BOX 5108
NORSE N. BLAZZARD** WESTPORT, CONNECTICUT 06881-5108
LESLIE E. GRODD* TELEPHONE (203) 226-7866
JUDITH A. HASENAUER** FACSIMILE (203) 454-4028
WILLIAM E. HASENAUER*
RAYMOND A. O'HARA III* FLORIDA OFFICE:
LYNN KORMAN STONE* SUITE 213, OCEANWALK MALL
MAUREEN M. MURPHY* 101 NORTH OCEAN DRIVE
HOLLYWOOD, FLORIDA 33019
TELEPHONE (305) 920-6590
FACSIMILE (305) 920-6902
* Admitted in Connecticut
** Admitted in Connecticut and Florida
April 1, 1997
Board of Directors
Sentry Life Insurance Company
1800 North Point Drive
Stevens Point, WI 54481
RE: Opinion of Counsel - Sentry Variable Life Account I
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 S-6 for Individual Flexible Premium Variable
Life Insurance Policies (the "Policies") to be issued by Sentry Life Insurance
Company and its separate account, Sentry Variable Life Account I.
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 Life Account I 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 premium payments made by a Policy Owner pursuant
to a Policy issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such a Policy
Owner will have a legally-issued, fully paid, non-assessable contractual
interest under such Policy.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
<PAGE> 71
BLAZZARD, GRODD & HASENAUER, P.C.
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 Prospectus which forms a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: s/Lynn Korman Stone
---------------------------
Lynn Korman Stone
<PAGE> 72
EXHIBITS TO
POST-EFFECTIVE AMENDMENT NO. 13
TO
FORM S-6
FOR
SENTRY VARIABLE LIFE ACCOUNT I
<PAGE> 73
INDEX TO EXHIBITS
<TABLE>
<S> <C>
Exhibit 99.A(1) Resolutions of Board of Directors of the Company Authorizing the
Variable Life Account
Exhibit 99.A(2) None
Exhibit 99.A(3)(a) Principal Underwriter's Agreement
A(3)(b) Registered Representatives Agreement
A(3)(c) General Agent Agreement
Exhibit 99.A(5) Flexible Premium Variable Life Insurance Policy
Exhibit 99.A(6)(a) Articles of Incorporation of Company
A(6)(b) Bylaws of the Company
Exhibit 99.A(9a) Sales Agreement (Fund Participation Agreement)
A(9b) Assignment and Modification Agreement*
Exhibit 99.A(10)(i) Application Form
A(10)(ii) Customer Account Information Form
Exhibit 99.A(11) Memorandum of Exchange Right
Exhibit 99.B Opinion and Consent of Counsel
Exhibit 99.C Consent of Independent Accountants
Exhibit 99.D Consent of Actuary
</TABLE>
* Incorporated by reference to Registrant's Post-Effective Amendment No. 12
to Form S-6 filed electronically on or about April 30, 1996.
<PAGE> 1
EXHIBIT 99.A(1)
EXHIBIT A(1)
Resolutions of Board of Directors of the Company
Authorizing the Variable Life Account
<PAGE> 2
SENTRY LIFE INSURANCE COMPANY
RECORD OF DIRECTORS MINUTES FEBRUARY 12, 1985
APPENDIX TO MINUTES OF DIRECTORS MEETING OF FEBRUARY 12, 1985
WHEREAS, the Company is desirous of developing and marketing certain types
of variable life insurance 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 life insurance 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 life insurance
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 life insurance 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 life
insurance 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;
<PAGE> 3
SENTRY LIFE INSURANCE COMPANY
RECORD OF DIRECTORS MINUTES FEBRUARY 12, 1985
APPENDIX TO MINUTES OF DIRECOTS MEETING OF FEBRUARY 12, 1985
(i) to register the variable life insurance 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;
(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 life insurance 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 to 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 purposes 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 designated 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
variable life insurance 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
<PAGE> 4
SENTRY LIFE INSURANCE COMPANY
RECORD OF DIRECTORS MINUTES FEBRUARY 12, 1985
APPENDIX TO MINUTES OF DIRECTORS MEETING OF FEBRUARY 12, 1985
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 variable life insurance contracts in such jurisdiction; 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
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 to appropriate, in their
discretion, to implement the purpose of these resolutions.
<PAGE> 5
SENTRY LIFE INSURANCE COMPANY
SENTRY VARIABLE LIFE ACCOUNT I
STANDARDS OF SUITABILITY
WHEREAS, by resolution of February 12, 1985 (the "Resolution"), the Board of
Directors of Sentry Life Insurance Company (the "Company") provided that the
form of any resolution required by any state authority to be filed in
connection with any of the documents or instruments referred to in the
Resolution, be adopted as if fully set forth in the Resolution if (1) in the
opinion of the appropriate officers of the Company, the adoption of the
resolution is advisable and (2) the Secretary or any Assistant Secretary of the
Company evidences such adoption by inserting into the minutes of the Company,
copies of such resolution; and
WHEREAS, in the opinion of the officers of the Company as evidenced by their
signatures below, the adoption of the following resolution by the Company is
advisable.
NOW THEREFORE BE IT RESOLVED, That in connection with the sale of flexible
premium variable life insurance policies issued by Sentry Variable Life Account
I, a separate account sponsored by the Company, the following Standards of
Suitability be and hereby are adopted:
1) No recommendations shall be made to an applicant to purchase a variable
life insurance contract without reasonable grounds to believe that the
purchase of such contract is not unsuitable for such applicant;
2) No variable life insurance contracts shall be issued to an applicant
without reasonable grounds to believe that the purchase of such contract is
not unsuitable for such applicant;
3) All recommendations and issues shall be made after reasonable inquiry of
the applicant's insurance and investment objectives, financial situation
and needs;
4) All recommendations and issues will be based upon information furnished
by the applicant and any other information known to the Company or agent
making the recommendation.
<PAGE> 6
FURTHER RESOLVED: Said Standards of Suitability shall be maintained by the
Company, its officers, directors, employees, affiliates, and agents to
determine the suitability of a flexible premium variable life insurance policy
as an investment for an applicant.
FURTHER RESOLVED: That the officers are hereby directed to take any and all
action necessary to implement and maintain the Standards of Suitability set
forth above.
SENTRY LIFE INSURANCE COMPANY
By: Peter P. Trapp
-----------------------------
Peter P. Trapp, President
Caroline E. Fribance
-----------------------------------
Caroline E. Fribance, Secretary
<PAGE> 7
SENTRY LIFE INSURANCE
SENTRY VARIABLE LIFE ACCOUNT I
STANDARDS OF CONDUCT
WHEREAS, by resolution of February 12, 1985 (the "Resolution"), the Board of
Directors of Sentry Life Insurance Company (the "Company") provided that the
form of any resolution required by any state authority to be filed in
connection with any of the documents or instruments referred to in the
Resolution, be adopted as if fully set forth in the Resolution if (1) in the
opinion of the appropriate officers of the Company, the adoption of the
resolution is advisable and (2) the Secretary or any Assistant Secretary of the
Company evidences such adoption by inserting into the minutes of the Company,
copies of such resolutions; and
WHEREAS, in the opinion of the officers of the Company as evidenced by their
signatures below, the adoption of the following resolution by the Company is
advisable.
NOW THEREFORE BE IT RESOLVED, that in connection with the sale of flexible
premium variable life insurance policies issued by Sentry Variable Life Account
I, a separate account sponsored by the Company, the following Standards of
Conduct are hereby adopted.
The Company or any affiliate thereof without the written approval of the
applicable regulatory agency shall not:
1) Sell to or purchase from any such separate account established by
the insurer any security or other property, other than variable life
insurance policies;
2) Purchase or allow to be purchased for any such separate account any
securities of which the insurer or an affiliate is the issuer;
3) Accept any compensation, other than a regular salary or wage, from
such insurer or affiliate, for the sale or purchase of securities to
or from any such separate account; provided that an affiliate acting
as a broker or dealer in connection with the sale of securities to or
by such separate account and any commission fee or remuneration
changed therefor shall not exceed the minimum broker's commission
established for any such transaction by any national securities
exchange through which such transaction could be effected, or where
such charges are subject to negotiation or where no minimum change is
applicable, then such change shall be consistent with the charges
prevailing in the ordinary course of business in the community where
such transaction is effected;
<PAGE> 8
4) Engage in any joint transaction, participation or common
undertaking whereby such insurer or an affiliate participates
with Sentry Variable Life Account I in any transaction in which
the Company or any of its affiliates obtain an advantage in the
price or quality of the item purchased, in the service received,
or in the cost of such service and the Company or any of its
affiliates is disadvantaged in any of these respects by the same
transaction;
5) Borrow money or securities from Sentry Variable Life Account I
other than under a policy loan provision.
No provision of this Resolution shall be construed to prohibit:
1) The investment of separate account assets in securities issued by one or
more investment companies registered pursuant to the Investment
Company Act of 1940 which is sponsored or managed by the insurer or an
affiliate, and the payment of investment management or advisory fees on
such assets;
2) The combination of orders for the purchase or sale of securities for the
insurer, an affiliate thereof, any separate accounts, or any
one or more of them, which is for their mutual benefits or convenience
so long as any securities so purchased or the proceeds of any sale
thereof are allocated among the participants on some predetermined
basis expressed in writing which is designed to assure the equitable
treatment of all participants;
3) An insurer or an affiliate to act as a broker or dealer in connection
with the sale of securities to or by such separate account;
however, any commission fee or remuneration charged therefor shall not
exceed the minimum broker's commission established for any such
transaction by any national securities exchange through which such
transaction could be effected, or where such charges are subject to
negotiation or where no minimum charge is applicable, then such charge
shall be consistent with the charges prevailing in the ordinary course
of business in the community where such transaction is effected;
4) The rendering of investment management or investment advisory services
by an insurer or affiliate, for a fee, subject to any rule or regulation
promulgated by the applicable regulatory agency.
FURTHER RESOLVED, said Standards of Conduct shall be maintained by the Company,
its officers, directors, employees, and affiliates with respect to investments
of Sentry Variable Life Account I and its operation.
<PAGE> 9
FURTHER RESOLVED: That the officers are hereby directed to take any and all
action necessary to implement and maintain the Standards of Conduct set forth
above.
SENTRY LIFE INSURANCE COMPANY
By: Peter P. Trapp
-----------------------------
Peter P. Trapp, President
Caroline E. Fribance
-----------------------------------
Caroline E. Fribance, Secretary
<PAGE> 1
EXHIBIT A(3)(a)
Principal Underwriter's Agreement
<PAGE> 2
PRINCIPAL UNDERWRITER'S AGREEMENT
IT IS HEREBY AGREED by and between SENTRY LIFE INSURANCE COMPANY
("INSURANCE COMPANY") on behalf of SENTRY VARIABLE LIFE ACCOUNT I (the "Variable
Life Account") and SENTRY EQUITY SERVICES, INC. ("PRINCIPAL UNDERWRITER") as
follows:
I
INSURANCE COMPANY proposes to issue and sell Flexible Premium Variable Life
Insurance Policies ("the Policies") to the public through PRINCIPAL UNDERWRITER.
The PRINCIPAL UNDERWRITER agrees to provide sales service subject to the terms
and conditions hereof. The Policies to be sold are more fully described in the
registration statement and the prospectus hereinafter mentioned. Such Policies
will be issued by INSURANCE COMPANY through the Variable Life 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 the Policies
issued through the Variable Life Account. PRINCIPAL UNDERWRITER will sell the
Policies under such terms as set by
-1-
<PAGE> 3
INSURANCE COMPANY and will make such sales to purchasers permitted to buy such
Policies 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 Policies.
IV
PRINCIPAL UNDERWRITER shall be compensated for its distribution service
based on all commissions and overwrites attributable to Policy Premiums accepted
by INSURANCE COMPANY on the Policies covered hereby according to the schedule
below;
Calendar Year Commissions
and Overwrites Compensation Rate
- ---------------------------------------- -----------------
First 750,000 115%
Next 750,000 110%
Over 1,500,000 105%
V
On behalf of the Variable Life 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 the Policies. INSURANCE COMPANY shall
provide to PRINCIPAL UNDERWRITER such number of copies of the current effective
prospectus as PRINCIPAL UNDERWRITER shall request.
-2-
<PAGE> 4
VI
PRINCIPAL UNDERWRITER is not authorized to give any information, or to make
any representations concerning the Policies or the Variable Life 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.
-3-
<PAGE> 5
IX
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have 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 28 day of February, 1986.
INSURANCE COMPANY
SENTRY LIFE INSURANCE COMPANY
BY: /s/ Peter P. Trapp
-------------------------
President
ATTEST: /s/ Caroline E. Fribance
-----------------------------
Secretary
PRINCIPAL UNDERWRITER
SENTRY EQUITY SERVICES, INC.
BY: /s/ R.L. Baldwin
--------------------------
President
ATTEST: /s/ Caroline E. Fribance
-----------------------------
Secretary
(VL-1)
-4-
<PAGE> 1
EXHIBIT A(3)(b)
Registered Representatives Agreement
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. THE 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 times 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 Plans, must at all
times 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 payments 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 or 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
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 issued to Sentry employees or members of their immediate
family.
<TABLE>
<CAPTION>
VARIABLE UNIVERSAL LIFE
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 inforce 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 inforce 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" provision
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
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.
<TABLE>
<CAPTION>
VARIABLE UNIVERSAL LIFE
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> 5
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 issued to Sentry employees or members of their immediate
family.
<TABLE>
<CAPTION>
VARIABLE UNIVERSAL LIFE
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 inforce 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 inforce 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" provision
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 A(3)(c)
General Agent Agreement
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 issued 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 /s/ Emil Fleischauer, Jr.
By ________________________________________________ ________________________________________________
Emil Fleischauer, Jr., Secretary
___________________________________________________
General Agent SENTRY EQUITY SERVICES, INC.
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 properly 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" provision
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 A(5)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
POLICY SPECIFICATIONS
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
INSURED MARK M SENTRY POLICY DATE JUNE 01, 1986
MALE AGE 35 POLICY ISSUE DATE JUNE 01, 1986
POLICY NUMBER 0700037A MONTHLY PROCESSING DAY 01
INITIAL PREMIUM $ 2,000.00 MATURITY DATE JUNE 01, 2046
PLANNED PREMIUM $ 1,000.00 ANNUALLY
MONTHLY DEATH BENEFIT GUARANTEE PREMIUM $ 97.12
GUIDELINE ANNUAL PREMIUM $ 1,464.22 GUIDELINE SINGLE PREMIUM $ 16,650.04
MAXIMUM PREMIUM LIMITATION - THE TOTAL PREMIUMS PAID CANNOT EXCEED THE GREATER
OF THE GUIDELINE SINGLE PREMIUM OR THE SUM OF THE GUIDELINE ANNUAL PREMIUMS.
DEATH BENEFIT OPTION 1 - SPECIFIED AMOUNT INCLUDES CASH VALUE
SPECIFIED AMOUNT $100,000 RISK CLASS STD NONSMOKER
VARIABLE LIFE ACCOUNT SENTRY VARIABLE LIFE ACCOUNT I
ELIGIBLE MUTUAL FUNDS ADVISERS MANAGEMENT TRUST
- GROWTH PORTFOLIO
- BOND PORTFOLIO
- LIQUID ASSET PORTFOLIO
MAXIMUM FULL SURRENDER CHARGE $ 646.00 TARGET SURRENDER PREMIUM $ 1,184.00
THIS CHARGE ASSUMES THAT A PREMIUM EQUAL TO THE TARGET SURRENDER PREMIUM IS
PAID DURING THE FIRST POLICY YEAR. FOR A FULL EXPLANATION OF THE SURRENDER
CHARGES REFER TO THE FULL SURRENDER CHARGE PROVISION.
** RIDER SPECIFICATIONS ON NEXT PAGE **
BENEFITS PROVIDED BY THIS POLICY ARE
VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
FOR DETERMINATION OF VARIABLE BENEFITS,
PLEASE SEE THE VARIABLE LIFE ACCOUNT
PROVISIONS, PAGE 10, AND THE CASH VALUE
PROVISIONS, PAGE 16.
<PAGE> 2
POLICY SPECIFICATIONS (CONTINUED)
RIDERS ATTACHED
<TABLE>
<CAPTION>
MONTHLY YEARS MATURITY/*
RIDERS COST OF INSURANCE PAYABLE EXPIRY DATE
<S> <C> <C> <C>
OTHER INSURED RIDER(S)
----------------------
</TABLE>
* NOTE IT IS POSSIBLE FOR BENEFITS TO END PRIOR TO THIS DATE WHEN EITHER NO
PREMIUMS ARE PAID AFTER THE INITIAL PREMIUM OR ADDITIONAL PREMIUMS AND
INVESTMENT RETURNS ARE INSUFFICIENT TO CONTINUE THE BENEFIT TO SUCH DATE.
<PAGE> 3
LIST OF Definitions
POLICY
PROVISIONS General Provisions
Insuring Agreement
Contract
Application
Policyowner
Contingent Policyowner
Change of Policyowner or Contingent Policyowner
Collateral Assignment
Beneficiary
Change of Beneficiary
Incontestability
Suicide Exclusion
Policy Proceeds
Misstatement of Age or Sex
Effective Date of Coverage
Policy Change
Annual Statement
No Dividends
Projections of Benefits and Values
Termination
Suspension of Payments
Exchange Provision
Free Look Provision
Premium Provisions
Initial Premium
Planned Premiums
Additional Premiums
Maximum Premium Limitation
Net Premiums
Death Benefit Guarantee
Grace Period
Reinstatement
Variable Life Account Provisions
The Variable Life Account
Investments of the Variable Life Account
Accumulation Units
Risk Charge
Transfers
1
<PAGE> 4
Insurance Provisions
Death Benefit Options
Change of Death Benefit Option
Changes in Specified Amount
Maturity Benefits
Cash Value Provisions
Cash Value
Monthly Deduction
Cost of Insurance
Mortality Charge
Continuation of Insurance
Partial Surrender
Full Surrender Charge
Cash Surrender Value
Surrender Requirements
Policy Loan Provisions
Policy Loans
Loan Interest
Policy Indebtedness
Repayment
Optional Settlement Provisions
Optional Settlement Plans
Optional Settlement Plan Provisions
Optional Settlement Plan Tables
Table of Guaranteed Maximum Mortality Rates
READ THIS POLICY CAREFULLY
IT IS A LEGAL CONTRACT BETWEEN THE POLICYOWNER AND SENTRY
2
<PAGE> 5
DEFINITIONS ACCUMULATION UNIT. An accounting unit of measure used to
calculate policy values.
AGE. Age last birthday as determined on the policy anniversary
on or preceding the current date.
ANNIVERSARY. The same day and month each year as the policy
date.
BENEFICIARY. The beneficiary is named in the application,
unless changed, and receives the death benefit at the insured's
death.
ELIGIBLE MUTUAL FUND(S). A Mutual Fund designated on the Policy
Specifications Page.
GENERAL ACCOUNT. The general ledger account of Sentry.
IN EFFECT. When the insured's life is covered under this
policy.
INITIAL INVESTMENT PERIOD. A thirty (30) day period commencing
on the policy issue date.
INSURED. The person named on the Policy Specifications Page
whose life is covered under this policy.
MATURITY DATE. The maturity date is shown on the Policy
Specifications Page. The date on which Sentry will pay the
policy's cash value less any outstanding indebtedness if the
policy is in effect on such date.
MONTHLY PROCESSING DATE. The monthly processing day is shown on
the Policy Specifications Page. This is the day from which
policy months are determined.
PAYEE. A person receiving payments from Sentry under an
Optional Settlement Plan.
POLICY DATE. The policy date is shown on the Policy
Specifications Page. It is the month, day and year this policy
is put in effect.
POLICY ISSUE DATE. The policy issue date is shown on the Policy
Specifications Page. It is the month, day and year that
underwriting is completed and the policy is issued by Sentry.
POLICY MONTH. A period of time commencing on any monthly
processing day and ending on the day preceding the next monthly
processing day.
POLICY YEAR. A period of time commencing on any anniversary and
ending on the day preceding the next anniversary.
POLICYOWNER. The policyowner is named in the application,
unless changed, and has all rights under this policy.
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<PAGE> 6
PORTFOLIO. A segment of an Eligible Mutual Fund which
constitutes a separate and distinct class of shares.
SENTRY. Sentry Life Insurance Company at its Home Office
located at 1800 North Point Drive, Stevens Point, Wisconsin
54481.
SUBACCOUNT. A segment of the variable life account which
invests in an Eligible Mutual Fund or Portfolio.
SPECIFIED AMOUNT. The amount of death benefit shown on the
Policy Specifications Page or on any subsequent amendment.
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, Washington's Birthday, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
VALUATION PERIOD. The period commencing at 4:00 p.m., New York
time, on each valuation date and ending at 4:00 p.m. New York
time, on the next succeeding valuation date.
VARIABLE LIFE ACCOUNT. A separate investment account of Sentry
designated on the Policy Specifications Page into which net
premiums under this policy will be allocated.
GENERAL INSURING AGREEMENT. Sentry will pay the beneficiary the death
PROVISIONS benefit subject to the terms of this policy, when Sentry
receives due proof that the insured died prior to the maturity
date, and while the policy was in effect. Sentry will pay the
cash value less any indebtedness, if the insured is living on
the maturity date and the policy is still in effect.
CONTRACT. Sentry has issued this policy in consideration of the
required initial premium payment and the application. The
policy, with all its pages and cover, the attached copies of the
application and any supplemental applications, and any attached
amendments or riders form the entire contract. An agent cannot
change the contract. Any change to the policy must be in
writing and approved by an officer of Sentry.
APPLICATION. In issuing this policy, Sentry has relied on
statements in the application. All statements in the
application and any supplemental applications are assumed to be
true and complete to the best of the knowledge and belief of the
person making them. No statement made in the application or
supplemental applications will be used by Sentry to void the
policy or deny a claim unless that statement is a material
misrepresentation.
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<PAGE> 7
POLICYOWNER. The policyowner is the insured, unless otherwise
specified in the application. The policyowner may exercise all
policy rights and privileges while the insured is living without
the consent of any revocable beneficiary.
CONTINGENT POLICYOWNER. The policyowner, if not the insured,
may name a contingent policyowner. If the policyowner dies
before the insured, the contingent policyowner named in the
application will become the policyowner and will possess all
rights of a policyowner. If the contingent policyowner is
dead, or if no contingent policyowner has been named at the
death of the policyowner, ownership of the policy passes to the
policyowner's estate.
CHANGE OF POLICYOWNER OR CONTINGENT POLICYOWNER. The
policyowner may change the policyowner or contingent policyowner
of this policy. The change requires satisfactory written notice
to Sentry. After Sentry records it, the change is effect from
the date of the signed notice. The insured does not have to be
living when Sentry records a change of policyowner for the
change to be effective. The policyowner does not have to be
living when Sentry records a change of contingent policyowner
for the change to be effective. Sentry will not be responsible
for any payment made or other action taken before any change is
recorded.
COLLATERAL ASSIGNMENT. The policyowner may assign this policy
as collateral. Sentry is not responsible for the validity or
effect of any collateral assignment. The interest of any
revocable beneficiary will be subject to the terms of the
collateral assignment. Sentry will not be responsible for
knowledge of any collateral assignment until the written notice
of assignment has been recorded by Sentry.
BENEFICIARY. The beneficiary is named in the application. If
there is no beneficiary at the time of the insured's death,
Sentry will pay the death benefit to the policyowner or the
policyowner's estate. If any beneficiary dies at the same time
or within ten days of the insured, the death benefit will be
paid as though the beneficiary died before the insured.
CHANGE OF BENEFICIARY. The policyowner may change the
beneficiary. The change requires satisfactory written notice to
Sentry. Once Sentry records the change, it becomes effective
from the date the written notice was signed. The insured does
not have to be living at the time Sentry records the change for
it to be effective. Sentry will not be responsible for any
payment made or other action taken before the change has been
recorded by Sentry.
INCONTESTABILITY. Except for failure to pay premiums, Sentry
will not contest the validity of the policy after it has been in
effect during the insured's lifetime for two years from the
policy date. This will not apply to any riders attached to this
policy. Any increase in the specified amount after the policy
date will be incontestable only after such increase has been in
effect during the insured's lifetime for two years following the
effective date of such increase.
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<PAGE> 8
SUICIDE EXCLUSION. If the insured commits suicide within two
years from the policy date, whether sane or insane, Sentry's
liability will be limited to the premiums paid prior to the
insured's death, less any policy indebtedness, less any partial
surrenders and less any partial surrender charges.
If the insured commits suicide, whether sane or insane, within
two years from the effective date of any increase in specified
amount, Sentry's liability with respect to such increase will be
limited to the total cost of insurance for such increase.
POLICY PROCEEDS. Policy proceeds means the amount payable under
this policy on the earliest of the following:
(1) the maturity date;
(2) full surrender of the policy; or
(3) death of the insured.
On the maturity date, the policy proceeds will be the cash value
less any indebtedness. If the policy is surrendered, the policy
proceeds will be the surrender value as described in the Cash
Surrender Value Provision. At the insured's death, the policy
proceeds will be the death benefit as described in the Death
Benefit Options Provision.
MISSTATEMENT OF AGE OR SEX. If the insured's age or sex has
been misstated in an application, the policy proceeds will be
adjusted by the difference between the monthly deductions
actually deducted and the monthly deductions which would have
been deducted at the correct age and sex. The adjustment will
be accumulated based on investment returns that were credited to
the cash value.
EFFECTIVE DATE OF COVERAGE. The effective date of coverage
under this policy is as follows:
(1) The policy date is the effective date for all coverage
provided as a result of the original application; and
(2) The effective date for any increase or addition to coverage
will be the monthly processing day on or next following the
valuation period during which Sentry approves the
supplemental application for the increase or addition to
coverage. This date will be shown in a policy amendment.
POLICY CHANGE. If a change in death benefit option or specified
amount in the policy is made, Sentry will issue an amendment to
the policy. This amendment will state the change, the effective
date of the change and will amend the existing policy from such
effective date.
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<PAGE> 9
ANNUAL STATEMENT. Within 30 days after each policy anniversary,
an annual statement will be sent to each policyowner. The
statement will show the current amount of death benefits payable
under the policy, the current cash value, the current cash
surrender value and current policy indebtedness. The statement
will also show premiums paid, investment returns and all charges
deducted during the policy year.
NO DIVIDENDS. This is a nonparticipating policy. It does not
pay dividends and will not share in Sentry's profits or surplus.
PROJECTIONS OF BENEFITS AND VALUES. The policyowner may request
a projection of illustrative future death benefits and policy
values at any time. Such request must be in writing. Sentry
may charge a maximum service fee of $25 for this projection.
The illustration will be based on:
(1) assumptions as to the specified amount, anticipated earnings
and future premium payments specified by the policyowner;
and
(2) other assumptions as are necessary and agreed upon by Sentry
and the policyowner.
TERMINATION. All coverage under this policy will terminate when
any one of the following events occurs:
(1) you request a full surrender of the policy;
(2) the insured dies;
(3) the policy grace period expires; or
(4) the policy reaches the maturity date.
SUSPENSION OF PAYMENTS. Sentry reserves the right to suspend or
postpone any payment under this policy when:
(1) the New York Stock Exchange is closed on 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 life account is not
reasonably practicable or it is not reasonably practicable
to determine the value of the variable life account's net
assets; or
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<PAGE> 10
(4) during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of
security holders; 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.
EXCHANGE PROVISION. The policy may be exchanged for a policy of
permanent fixed premium, fixed benefit life insurance on the
life of the insured. This exchange may only be made within 24
months after the policy date. Sentry will require no evidence
of insurability. All policy indebtedness must be repaid before
the exchange is made.
The exchange will become effective when Sentry receives all of
the following:
(1) proper written request for the policy exchange;
(2) surrender of the policy being exchanged; and
(3) any amount due Sentry on exchange.
The new policy will have the same policy date and issue age set
forth in the original policy. The new policy will have the same
risk classification as set forth in the original policy. The
basic amount of insurance of the new policy will be equal to
either the initial specified amount of the original policy or
the net amount at risk under the original policy on the date of
exchange, as selected by the policyowner. For purposes of this
provision, net amount at risk is defined as the difference
between the death benefit and the policy cash value. The new
policyowner and beneficiary will be the same as those of the
original policy on the effective date of the exchange.
FREE LOOK PROVISION. The policy may be returned within 10 days
after the policyowner receives the policy, within 10 days after
the mailing to the policyowner of the notice of the right of
withdrawal, or within 45 days after the policyowner completes
Part 1 of the application for insurance, whichever is later.
The returned policy can be mailed or delivered to either Sentry
or the agent who sold the policy. The returned policy will be
treated as if Sentry never issued it and Sentry will refund all
premiums paid.
PREMIUM INITIAL PREMIUM. The initial premium is due on or prior to the
PROVISIONS policy date. The initial premium is shown on the Policy
Specifications Page.
PLANNED PREMIUMS. Planned premiums may be made annually,
semi-annually, quarterly or by automatic bank check. The
planned premiums are subject to the following minimum amounts,
unless Sentry's current administrative rules specify lower
amounts:
<TABLE>
<CAPTION>
PLANNED PREMIUM
MODE OF PAYMENT MINIMUM AMOUNT
--------------- ---------------
<S> <C>
Annual $200
Semi-Annual 125
Quarterly 75
Automatic Bank Check 15
</TABLE>
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<PAGE> 11
The policyowner may change the frequency and amount of planned
premiums by sending Sentry a written notice. Sentry reserves
the right to limit the amount of any increase of the planned
premium.
Any premium which exceeds the planned premium as shown on the
Policy Specifications Page will be considered an additional
premium subject to the following provision.
ADDITIONAL PREMIUMS. Additional premium payments of at least
$50 may be made at any time prior to the maturity date. Sentry
reserves the right to limit the frequency and amount of
additional premium payments.
MAXIMUM PREMIUM LIMITATION. In order to conform to requirements
of the Internal Revenue Code, Sentry will limit the total amount
of premiums, both planned and additional, that may be paid
during each policy year. The applicable maximum premium
limitation is set forth on the Policy Specifications Page or any
subsequent amendment. Because the maximum premium limitation is
in part dependent on the specified amount for each policy,
changes in the specified amount may affect this limitation. In
the event that a premium is paid that exceeds the maximum
premium limitation, Sentry will accept only the portion of the
premium up to the maximum limitation and return the excess to
the policyowner. Thereafter, no additional premiums will be
accepted until allowed by the maximum premium limitation set
forth in the policy.
NET PREMIUMS. The net premium is equal to 95.0% of the premium
less any applicable premium taxes. The 5.0% deduction is a
front-end sales expense charge.
DEATH BENEFIT GUARANTEE. If the minimum premium requirement
described below is met, the policy will not lapse, even if the
cash surrender value is insufficient to cover the monthly
deduction when due.
The minimum premium requirement is met if the sum of all
premiums paid is not less than (1) plus (2) plus (3) plus (4),
where:
(1) is the sum of all monthly death benefit guarantee premiums;
(2) is the current policy indebtedness;
(3) is the sum of all partial surrenders, partial surrender
charges and partial surrender administrative fees; and
(4) is the sum of all monthly deductions for any additional
benefits provided by rider.
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<PAGE> 12
All sums in the minimum premium requirement include values for
the current policy month.
The initial monthly death benefit guarantee premium is shown on
the Policy Specifications Page. This premium will change upon
any increase or decrease in specified amount or a change in the
Death Benefit Option. At the time of the change, Sentry will
recalculate the monthly death benefit guarantee premium based on
the insured's attained age, the Death Benefit Option chosen and
the new specified amount. Any change in the monthly death
benefit guarantee premium will be shown on a policy amendment.
GRACE PERIOD. If the death benefit guarantee is not in effect,
and if the cash surrender value is not sufficient to cover the
monthly deduction when due, a grace period of 61 days will be
allowed for the payment of a premium or loan repayment
sufficient to cover the monthly deduction. Sentry will mail
notice of such premium due to the policyowner's last known
address. The policy will continue to be in effect during this
grace period. If the insured dies during the grace period,
Sentry will deduct any monthly deductions that are due from the
policy proceeds.
If a premium or loan repayment sufficient to cover the monthly
deduction is still unpaid at the end of the grace period, the
policy will lapse and all coverages under the policy will
terminate without value.
REINSTATEMENT. After a policy lapse, the policyowner may
request that the policy be put back in effect. Sentry will
reinstate the policy subject to the following conditions:
(1) The request is in writing and received by Sentry within
three years from the date of policy lapse;
(2) Sentry receives satisfactory proof that the insured is still
insurable; and
(3) A premium sufficient to cover the monthly deductions for the
first two policy months following reinstatement is paid.
The policy will be reinstated on the next valuation date
following the date that all of the above conditions have been
satisfied. Sentry will not reinstate a policy surrendered for
its cash surrender value.
VARIABLE LIFE THE VARIABLE LIFE ACCOUNT. The variable life account is a
ACCOUNT separate investment account of Sentry. It is named on the
PROVISIONS Policy Specifications Page. Sentry has allocated a part of its
assets for this and certain other contracts to the variable life
account. The assets of the variable life account are the
property of Sentry. The assets of the variable life account are
not chargeable with the liabilities arising out of any other
business Sentry may conduct.
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<PAGE> 13
INVESTMENTS OF THE VARIABLE LIFE ACCOUNT. Prior to and during
the initial investment period, net premiums are applied to the
variable life account and will be invested in the Liquid Asset
Portfolio notwithstanding any selection made by the policyowner
in the application. At the end of the initial investment
period, the existing cash value in the Liquid Asset Portfolio
will be transferred to the Eligible Mutual Fund(s) and the
Portfolio(s), if any, within an Eligible Mutual Fund in
accordance with the selection made by the policyowner in the
application. Such transfer will be made automatically by Sentry
without any charge. After the initial investment period has
expired, net premiums will be invested in accordance with the
selection made by the policyowner. The selection of investment
is subject to the terms and conditions imposed on such selection
by Sentry. The policyowner may change such selection
prospectively without fee, penalty or other charge upon written
notice to Sentry. Such change shall be effective for net
premiums received after receipt of such notice. The assets of
the variable life account are segregated by Eligible Mutual
Fund(s) and Portfolio(s) within the Eligible Mutual Fund(s)
resulting in the establishment of a series of subaccounts within
the variable life account. Sentry may add additional Eligible
Mutual Funds or Portfolios to those listed on the Policy
Specifications Page. In such an event, the policyowner may be
permitted to select such Eligible Mutual Funds or Portfolios as
investments to underlie this policy. However, the right to make
such selection will be limited by the terms and conditions
imposed on such transactions by Sentry.
If the shares of any Eligible Mutual Fund or any Portfolio
within these Funds become unavailable for investment by the
variable life account or Sentry's Board of Directors deems
further investment in these shares inappropriate, Sentry may
substitute shares of another mutual fund for shares already
purchased or to be purchased by net premiums under the policy.
The investment policy of the variable life account will not be
materially changed unless a statement of the change is filed
with and approved by the Insurance Commissioner of the State of
Wisconsin. If required, approval of or change of investment
policy for any portfolio will be filed with the Insurance
Departments of the states where the policy has been sold.
ACCUMULATION UNITS. For each subaccount, net premium payments
result in accumulation units being credited to the policyowner's
account. Monthly deductions and all other administrative
charges and fees affecting the subaccount will result in the
cancellation of accumulation units from the subaccount. The
number of accumulation units credited to or cancelled from the
subaccount is determined by dividing the dollar value of the
transaction by the value of an accumulation unit for the
subaccount. The subaccount cash value is determined by
multiplying the number of accumulation units attributable to the
subaccount by the value of an accumulation unit for the
subaccount.
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<PAGE> 14
The accumulation unit value for each subaccount 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 subaccount, that is, the aggregate
value of the underlying Fund shares held at the end of
the valuation period; plus or minus
(b) The cumulative charge or credit for taxes reserved
which is determined by Sentry to have resulted from the
investment operation of the subaccount.
(2) Is the cumulative unpaid risk charge; 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.
RISK CHARGE. Sentry deducts a risk charge from the variable
life account's assets at the end of every valuation period. The
risk charge is calculated on a daily basis and is equivalent to
an effective annual rate of 1.05% of the net asset value of the
variable life account.
The risk charge consists of the following components:
(1) The Mortality and Expense Risk Charge which is equal to an
annual rate of .90%; and
(2) The Death Benefit Guarantee Risk Charge which is equal to an
annual rate of .15%.
The Mortality and Expense Risk Charge compensates Sentry for
assuming the mortality and expense risks under the policy. The
Death Benefit Guarantee Risk Charge compensates Sentry for
assuming risks associated with the Death Benefit Guarantee.
TRANSFERS. The policyowner may direct the transfer of all or
part of the subaccount cash values between Eligible Mutual
Fund(s) or Portfolio(s) subject to the following conditions:
(1) The policyowner may be required to pay Sentry a Transfer Fee
for each transfer. The Transfer Fee will be deducted from
the amounts which are transferred. The Transfer Fee will
never exceed $25.
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<PAGE> 15
(2) The minimum amount which may be transferred is $250, or if
less, the remaining cash value.
(3) Any transfer direction must clearly specify:
(a) the amount which is to be transferred; and
(b) the Eligible Mutual Fund(s) or Portfolio(s) which are to
be affected.
(4) Four transfers may be made in any policy year. Additional
transfers during the year are subject to approval by Sentry.
(5) Transfers shall be effected during the valuation period next
following receipt by Sentry of a written transfer direction
containing all required information.
Sentry reserves the right at any time and without prior notice
to any party to terminate, suspend or modify the transfer
privileges described above.
INSURANCE DEATH BENEFIT OPTIONS. The amount of death benefits payable
PROVISIONS under a policy will depend upon the death benefit option in
effect at the time of the insured's death. The Death Benefit
Option is stated on the Policy Specifications Page. If Option 1
is in effect, the death benefit is the greater of the specified
amount or the policy cash value multiplied by a corridor
percentage. If Option 2 is in effect, the death benefit is the
greater of the specified amount plus the policy cash value or
the policy cash value multiplied by a corridor percentage. The
specified amount and policy cash value will be calculated at the
end of the next valuation period following the date of death.
Corridor percentages are shown in the following table and are
based on the insured's attained age.
<TABLE>
<CAPTION>
Age % Age % Age %
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
40 or less 250 55 150 70 115
41 243 56 146 71 113
42 236 57 142 72 111
43 229 58 138 73 109
44 222 59 134 74 107
45 215 60 130 75 105
46 209 61 128 76 105
47 203 62 126 77 105
48 197 63 124 78 105
49 191 64 122 79-90 105
50 185 65 120 91 104
51 178 66 119 92 103
52 171 67 118 93 102
53 164 68 117 94 101
54 157 69 116 95+ 100
</TABLE>
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<PAGE> 16
The death benefit will be reduced by the amount of any
outstanding policy indebtedness on the date of death.
CHANGE OF DEATH BENEFIT OPTION. The policyowner may change the
death benefit option in effect by sending Sentry a written
request. Upon Sentry's acceptance, the effective date of the
change will be the monthly processing day following receipt of
the request. Such a change may result in a new specified amount
and may be subject to evidence of insurability satisfactory to
Sentry before such a change will be made.
A change from Option 2 to Option 1 will increase the specified
amount by the policy's cash value calculated at the end of the
valuation period following the effective date of the change.
A change from Option 1 to Option 2 will decrease the specified
amount by the policy's cash value calculated at the end of the
valuation period following the effective date of the change.
CHANGES IN SPECIFIED AMOUNT. The policyowner may request an
increase or decrease in the specified amount. Written request
must be received by Sentry and any change is subject to the
following conditions:
(1) No changes in specified amount may be made during the first
policy year;
(2) The specified amount may be changed only one time in any
policy year;
(3) The specified amount cannot be less than the minimum
specified amount of $100,000 unless Sentry's current
administrative rules specify a lower amount;
(4) Decreases in Specified Amount - Any decrease will become
effective on the next monthly processing day following the
date the request is received. Sentry will not decrease the
specified amount, if such decrease causes the policy to
violate the Maximum Premium Limitation Provision. Decreases
in specified amount will be effected on a last in-first out
basis. That is, a decrease will apply to the specified
amount provided by the most recent increase, then the next
most recent increase successively, then to the specified
amount set forth on the Policy Specifications Page; and
(5) Increases in Specified Amount - Any request for an increase
must be applied for on a supplemental application. Sentry
must also be provided with satisfactory evidence of
insurability. Any approved increase will become effective
on the next monthly processing day following Sentry's
approval. The effective date of the increased amount will
be shown on the policy amendment. An increase will not
become effective if the policy's cash surrender value is
insufficient to cover the monthly deduction for the policy
month following the increase.
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<PAGE> 17
An increase in specified amount may be exchanged for a policy of
permanent fixed premium, fixed benefit life insurance on the
life of the insured. The exchange may only be made within 24
months after the effective date of the increase in specified
amount. Sentry will require no evidence of insurability. All
policy indebtedness must be repaid before the exchange is made.
The exchange will become effective when Sentry receives all of
the following:
(1) proper written request for the increase in specified amount
exchange;
(2) surrender of the policy amendment for the increase in
specified amount; and
(3) any amount due Sentry on exchange.
The new policy will have the same policy date as the effective
date of the policy amendment for the increase in specified
amount. The issue age will be the age of the insured on the
effective date of the policy amendment. The new policy will
have the same risk classification as set forth in the policy
amendment. The basic amount of insurance of the new policy will
be equal to either the amount of the increase in specified
amount or the net amount as risk for the increase in specified
amount, as selected by the policyowner.
The net amount at risk for the increase in specified amount is
(1) multiplied by (2), where:
(1) is the difference between the total death benefit and the
cash value; and
(2) is the ratio of the increase in specified amount to the
total specified amount after the increase.
The new policyowner and beneficiary will be the same as those of
the original policy on the effective date of the exchange.
The policy amendment may be returned within 10 days after the
policyowner receives the policy amendment, within 10 days after
the mailing to the policyowner of the notice of the right of
withdrawal, or within 45 days after the policyowner completes
the application for the increase in specified amount, whichever
is later. The returned policy amendment can be mailed or
delivered to either Sentry or the agent who sold the policy
amendment. The returned policy amendment will be treated as if
Sentry never issued it. Premiums paid after the effective date
will be applied to the policy as if the amendment had not been
issued. Premiums in excess of the maximum premium limitation
will be refunded.
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<PAGE> 18
Any change in the specified amount may affect the cost of
insurance rate and the net amount at risk, both of which will
affect the cost of insurance charge for the policy.
A new full surrender charge may be imposed in the event of an
increase in specified amount (see Full Surrender Charge
Provision).
MATURITY BENEFITS. If the policy is in effect on the maturity
date, Sentry will pay the policy's cash value, less any
outstanding policy indebtedness, calculated at the end of the
next valuation period following the maturity date. The maturity
date is shown on the Policy Specifications Page. Benefits may
be paid in a lump sum or under any optional payment plan
acceptable to Sentry.
CASH VALUE PROVISIONS
CASH VALUE. Cash values will be determined at the end of every
valuation period. The cash value of the policy is equal to the
sum of:
(1) The variable life account cash value is the sum of the
subaccount cash values. The cash value of each subaccount
is determined by multiplying the number of accumulation
units attributable to the subaccount by the value of an
accumulation unit for the subaccount; and
(2) Any cash value held in the general account of Sentry to
secure policy debt.
There is no guaranteed minimum policy cash value.
At the end of the next valuation period following the policy
date, the policy cash value is equal to the net premium. At the
end of each subsequent valuation period, the cash value for each
subaccount of the variable life account is determined as (1)
plus (2) plus (3) plus (4) minus (5) minus (6) minus (7), where:
(1) is the subaccount cash value at the end of each subsequent
valuation period;
(2) is net premiums allocated to the subaccount during such
subsequent valuation period;
(3) is net transfer of funds from the general account of Sentry
to the subaccount during each subsequent valuation period
for either securing or repaying policy debt;
(4) is net transfer into the subaccount from other subaccount(s)
during such subsequent valuation period;
(5) is any applicable Transfer Fees assessed against the
subaccount for transfers during such subsequent valuation
period;
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<PAGE> 19
(6) is any partial surrender out of the subaccount during such
subsequent valuation period; and
(7) is any applicable surrender charges for any partial
surrender in the subaccount during such subsequent valuation
period.
In addition, after the policy date, whenever a valuation period
includes the monthly processing day, the policy's cash value at
the end of such valuation period is reduced by the monthly
deduction for that monthly processing day.
MONTHLY DEDUCTION. The monthly deduction is deducted from the
policy cash value at the beginning of each policy month and
calculated as (1) plus (2), where:
(1) is the cost of insurance for the policy and any additional
benefits provided by rider for the policy month; and
(2) is the $5 monthly administrative fee.
The monthly deduction will result in the cancellation of
accumulation units from each applicable subaccount in the ratio
that the value of the subaccount bears to the sum of the
subaccount cash values.
COST OF INSURANCE. The cost of insurance for the policy is
determined on a policy month basis. Such cost is determined as
(1) multiplied by the result of (2) minus (3), where:
(1) is the monthly mortality charge;
(2) is the death benefit at the end of the policy month divided
by 1.0040741; and
(3) is the policy's cash value at the beginning of the policy
month, less the $5 monthly administrative fee and less the
cost of insurance for any riders.
The cost of insurance for any rider is calculated as shown in
the Cost of Insurance Provision of the Rider.
MORTALITY CHARGE. The monthly mortality charge is based on
Sentry's current mortality rates. The current mortality rates
are based on the insured's attained age, sex, and risk class.
The risk class will be determined separately for the initial
specified amount and for any subsequent increase in the
specified amount requiring evidence of insurability. Current
mortality rates are determined by Sentry according to
expectations of future mortality experience. These rates are
not guaranteed and may be changed form time to time but will
never exceed the maximum rates shown in the Table of Guaranteed
Maximum Mortality Rates contained in the Policy. Any change in
mortality rates will apply to all insureds
17
<PAGE> 20
of the same age, sex, and risk class. The guaranteed rates for
standard risks are based on the 1980 Commissioner's Standard
Ordinary Mortality Table, Age Last Birthday. The guaranteed
rates for insureds classified as smokers or medically
substandard are based on percentage multiples of the 1980
Commissioner's Standard Ordinary Mortality Table, Age Last
Birthday.
CONTINUATION OF INSURANCE. If premium payments are stopped or
if insufficient premium payments are made, the policy will
remain in effect until the surrender value is insufficient to
cover the monthly deduction, as provided in the Grace Period
Provision.
This provision will not continue the policy beyond the maturity
date or continue any rider beyond its termination date, as
provided in the rider.
PARTIAL SURRENDER. The policyowner may request a partial
surrender of the policy upon written request to Sentry, subject
to the following terms and the Surrender Requirements Provision.
Partial Surrenders will result in the cancellation of
accumulation units from each applicable subaccount in the ratio
that the cash value of each subaccount bears to the sum of the
subaccount cash values. The policyowner must specify in writing
in advance which accumulation units are to be cancelled if other
than the above method of cancellation is desired. Sentry will
generally pay the amount of any surrender within seven (7) days
of receipt of such request. Postponement of payment may occur in
certain circumstances as detailed by the Suspension of Payments
Provision.
A partial surrender charge may be incurred on each partial
surrender. The partial surrender charge will be calculated as
the result of (1) multiplied by the result of (2) divided by
(3), where:
(1) is the full surrender charge on the date of the partial
surrender;
(2) is the amount of the partial surrender; and
(3) is the cash surrender value at the end of the valuation
period next following the date on which the request for a
partial surrender is received by Sentry.
In addition to the partial surrender charge as calculated above,
a partial surrender administrative fee of the smaller of 2% of
the amount surrendered or $25.00 will be incurred on each
partial surrender. This fee compensates Sentry for the costs
incurred in processing a partial surrender.
Partial surrender charges and partial surrender administrative
fees will result in the cancellation of accumulation units from
each applicable subaccount in the ratio that the value of each
subaccount bears to the sum of the subaccount cash values. The
policyowner must specify in writing in advance which
accumulation units are to be cancelled if other than the above
method of cancellation is desired.
18
<PAGE> 21
The policy cash value and death benefit will be reduced by the
sum of any partial surrenders, partial surrender charges, and
partial surrender administrative fees. If Death Benefit Option
1 is in effect, the specified amount will also be reduced by the
sum of any partial surrenders, partial surrender charges, and
partial surrender administrative fees. Sentry reserves the
right to limit the number of partial surrenders made in a policy
year.
FULL SURRENDER CHARGE. The full surrender charge is calculated
as (1) plus (2) plus (3) plus (4), where:
(1) is the Contingent Deferred Administrative Expense Charge
multiplied by (5). This charge is calculated as $3.50 per
$1,000 on the first $100,000 of initial specified amount
plus $1.50 per $1,000 on the excess above $100,000 of
initial specified amount. The maximum Contingent Deferred
Administrative Expense Charge is $750.
(2) is the Deferred Sales Charge multiplied by (5). This charge
is calculated as 25% of the target surrender premium as
shown on the Policy Specifications Page or the actual
premiums paid in the first policy year, if less.
(3) is the additional Contingent Deferred Administrative Expense
Charge that may result from an increase in specified amount
multiplied by (5). The maximum, additional Contingent
Deferred Administrative Expense Charge is calculated as
$3.50 per $1,000 on the first $100,000 of the increase in
specified amount plus $1.50 per $1,000 on the excess above
$100,000 of the increase in specified amount. The maximum
Contingent Deferred Administrative Expense Charge is $750
for each increase in specified amount.
(4) is the additional Deferred Sales Charge that may result from
an increase in specified amount multiplied by (5). This
charge is 25% of the lesser of (1) or (2), where:
(1) is the target surrender premium as shown on the policy
amendment; and
(2) is the actual premiums paid in the first twelve policy
months following the effective date of the increase in
specified amount.
The target surrender premium is based on the insured's sex and
age on the effective date of the change.
Sentry reserves the right to require a minimum premium payment
during the first twelve months following the effective date of
the increase in specified amount.
19
<PAGE> 22
(5) is the applicable percentage shown in the following Table
where Year is the number of full policy years from the
original policy date or from the date of each increase in
specified amount to the date of surrender.
<TABLE>
<CAPTION>
Year %
---- ---
<S> <C>
0-4 100
5 80
6 60
7 40
8 20
9+ 0
</TABLE>
The full surrender charge as calculated above is reduced by
the sum of all partial surrender charges previously
deducted. In no event will the full surrender charge be
less than zero.
A decrease in specified amount will not change any existing
surrender charges.
CASH SURRENDER VALUE. The policyowner may surrender the policy
for its cash surrender value upon written request to Sentry,
subject to the following terms and the Surrender Requirements
Provision. A full surrender will terminate the policy.
The cash surrender value is calculated as (1) minus (2) minus
(3), where:
(1) is the policy cash value calculated at the end of the
valuation period next following the date on which the
request for a surrender is received by Sentry;
(2) is any indebtedness against the policy; and
(3) is the full surrender charge calculated at the end of the
next valuation period during which the request for a
surrender is received.
SURRENDER REQUIREMENTS. A request for a partial or full
surrender of the policy is subject to the following
requirements:
(1) it must be in writing;
(2) it must be made during the insured's lifetime;
(3) it must be made prior to the maturity date; and
(4) it must be made while the policy is in effect.
Proceeds will generally be paid within seven days of receipt of
a request for a surrender. Postponement of payments may occur
in certain circumstances as detailed by the Suspension of
Payments Provision.
20
<PAGE> 23
POLICY LOAN POLICY LOANS. As long as the policy is in effect, the
PROVISIONS policyowner may borrow from Sentry at any time after the first
policy anniversary using the policy as the only security for the
loan. Requests for policy loans must be in writing. The maximum
loan amount is 90% of the cash value minus the full surrender
charge at the end of the valuation period during which the loan
request is received. The maximum amount that may be borrowed at
any time is the maximum loan amount reduced by any outstanding
policy indebtedness.
Policy loans will normally be paid within seven days after
Sentry receives a loan request. Payments may be postponed under
situations detailed in the Suspension of Payments Provision.
At the end of the valuation period during which the loan becomes
effective, a portion of the policy's cash value sufficient to
secure the loan will be transferred from the subaccounts of the
variable life account to Sentry's general account. Any loan
interest that is due and unpaid will also be transferred. Such
transfers result in the cancellation of accumulation units
within the subaccounts of the variable life account.
Accumulation units will be cancelled from each applicable
subaccount in the ratio that the value of the subaccount bears
to the sum of the subaccount cash values. The policyowner must
specify in writing in advance which accumulation units are to be
cancelled if other than the above method is desired.
Cash value in the general account of Sentry will accrue interest
daily at an annual rate of 6%. This interest will be credited
at the end of each policy year and transferred to the
subaccounts of the variable life account in the same manner that
premiums are being allocated to the subaccounts.
LOAN INTEREST. Sentry will charge an annual effective interest
rate of 8% on all policy loans. Interest is due at the end of
each policy year. Unpaid interest will be added to the existing
policy indebtedness and will be charged interest at the same
rate.
POLICY INDEBTEDNESS. Policy indebtedness equals the sum of all
outstanding policy loans and the accrued interest on such policy
loans. If the policy indebtedness causes the cash surrender
value to equal zero or become negative, Sentry will notify the
policyowner and any collateral assignee of record. A payment at
least equal to the excess of the policy indebtedness over the
cash value less any remaining surrender charges must be made to
Sentry within 61 days from the date notice is sent, or the
policy will lapse and terminate without value.
REPAYMENT. Policy indebtedness may be repaid in full or in part
any time while the policy is in effect. Outstanding policy
indebtedness is subtracted from death benefits payable on the
insured's death, from the policy cash value upon full cash
surrender and from policy cash value payable at the maturity
date. During the valuation period during which a repayment is
made, the policy's cash value in Sentry's general account
securing the repaid portion of the policy loan will be
transferred to the subaccounts of the variable life account in
the same manner that premiums are then being allocated to the
subaccounts.
21
<PAGE> 24
OPTIONAL OPTIONAL SETTLEMENT PLANS. Any policy proceeds payable under
SETTLEMENT this policy will be paid in one sum unless one of the following
PROVISIONS plans is chosen. While the insured is living, the policyowner
may request one of the plans. If no plan has been requested at
the insured's death, the beneficiary may request a plan. The
request requires satisfactory written notice to Sentry. Upon
Sentry's acceptance, the request is effective from the date the
notice was signed. Sentry will not be responsible for any
payment made or other action taken before the request has been
recorded by Sentry.
The policy proceeds payable upon settlement of the policy may be
paid under one of the following plans or any other plan
acceptable to Sentry.
Plan 1. Proceeds held at interest. Sentry will hold the policy
proceeds and make payments at the times and in the
amounts agreed upon, as long as the policy remains in
effect. Sentry will credit the policy proceeds held
with an annual effective interest rate of at least 4%.
When the payee dies, any remaining policy proceeds will
be paid to his or her estate, unless otherwise
specified.
Plan 2. Lifetime Payments With a Guarantee. Sentry will make
monthly payments for as long as the payee lives. A
guaranteed number of payments may be chosen. If the
payee dies before the guaranteed number of payments has
been made, Sentry will continue the payments until the
guaranteed number of payments has been made.
Guaranteed amounts of monthly payments for each plan are shown
in the Optional Settlement Plan Tables. If the net amount
available to apply under any settlement plan is less than
$5,000, Sentry has the right to pay this amount in a single lump
sum. The minimum payment is $50.00. We will consider special
requests.
OPTIONAL SETTLEMENT PLAN PROVISIONS. Proof of age and continued
survival will be required from the payee.
The policy proceeds under any of the settlement plans may not be
assigned or transferred. The policy proceeds held by Sentry, as
well as any payments made by Sentry, are protected from the
claims of any payee's creditors to the extent permitted by law.
22
<PAGE> 25
OPTIONAL SETTLEMENT PLAN TABLES
GUARANTEED AMOUNTS PER $1,000 APPLIED
<TABLE>
<CAPTION>
FIXED PERIOD PAYMENTS MONTHLY LIFE INCOME
NUMBER
OF YEARS MONTHLY ANNUAL AGE OF 10 YEARS 20 YEARS
PAYABLE PAYMENT PAYMENT PAYEE CERTAIN CERTAIN
- ------- ------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
1 $84.84 $1,000.00 40 $4.18 $4.14
2 43.25 509.80 41 4.22 4.17
3 29.40 346.49 42 4.27 4.21
4 22.47 264.89 43 4.31 4.25
5 18.32 215.99 44 4.36 4.29
6 15.56 183.42 45 4.41 4.34
7 13.59 160.20 46 4.46 4.38
8 12.12 142.82 47 4.52 4.43
9 10.97 129.32 48 4.58 4.47
10 10.06 118.55 49 4.64 4.52
11 9.31 109.76 50 4.70 4.57
12 8.69 102.45 51 4.77 4.63
13 8.17 96.29 52 4.83 4.68
14 7.72 91.03 53 4.91 4.74
15 7.34 86.48 54 4.99 4.79
16 7.00 82.52 55 5.07 4.85
17 6.71 79.04 56 5.15 4.91
18 6.44 75.96 57 5.24 4.97
19 6.21 73.21 58 5.34 5.04
20 6.00 70.75 59 5.44 5.10
21 5.81 68.54 60 5.55 5.16
22 5.64 66.54 61 5.66 5.23
23 5.49 64.72 62 5.78 5.29
24 5.35 63.06 63 5.90 5.35
25 5.22 61.55 64 6.03 5.41
26 5.10 60.16 65 6.17 5.47
27 5.00 58.88 66 6.31 5.53
28 4.90 57.70 67 6.46 5.59
29 4.80 56.62 68 6.61 5.64
30 4.72 55.61 69 6.77 5.69
70 6.94 5.73
If payments are made each 3 months, The amount of monthly income is
they will be 25.37% of the annual based on the payee's age last
payment. If payments are made each 6 birthday on the date of the first
months, they will be 50.49% of the monthly payment. Monthly amounts
annual payment. for ages not shown will be furnished
on request.
</TABLE>
23
<PAGE> 26
TABLE OF GUARANTEED MAXIMUM MORTALITY RATES
STANDARD MORTALITY CLASS
MALE
<TABLE>
<CAPTION>
Attained Annual Rate Attained Annual Rate Attained Annual Rate
Age Per $1,000 Age Per $1,000 Age Per $1,000
- -------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
0 $2.63 32 $1.87 64 $ 24.32
1 1.03 33 1.95 65 26.68
2 0.99 34 2.05 66 29.20
3 0.97 35 2.17 67 31.87
4 0.93 36 2.32 68 34.75
5 0.88 37 2.49 69 37.93
6 0.83 38 2.68 70 41.51
7 0.78 39 2.90 71 45.60
8 0.75 40 3.15 72 50.29
9 0.74 41 3.42 73 55.60
10 0.75 42 3.71 74 61.41
11 0.81 43 4.03 75 67.63
12 0.92 44 4.37 76 74.16
13 1.07 45 4.73 77 80.91
14 1.24 46 5.12 78 87.96
15 1.42 47 5.53 79 95.51
16 1.59 48 5.97 80 103.83
17 1.72 49 6.46 81 113.15
18 1.82 50 7.00 82 123.67
19 1.88 51 7.63 83 135.35
20 1.90 52 8.34 84 147.92
21 1.90 53 9.14 85 161.11
22 1.88 54 10.02 86 174.72
23 1.84 55 10.97 87 188.65
24 1.80 56 11.98 88 202.90
25 1.75 57 13.05 89 217.56
26 1.72 58 14.20 90 232.86
27 1.71 59 15.44 91 249.18
28 1.70 60 16.82 92 267.25
29 1.72 61 18.39 93 288.92
30 1.75 62 20.15 94 318.19
31 1.80 63 22.13
</TABLE>
24
<PAGE> 27
TABLE OF GUARANTEED MAXIMUM MORTALITY RATES
STANDARD MORTALITY CLASS
FEMALE
<TABLE>
<CAPTION>
ATTAINED ANNUAL RATE ATTAINED ANNUAL RATE ATTAINED ANNUAL RATE
AGE PER $1,000 AGE PER $1,000 AGE PER $1,000
- --------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
0 $1.88 32 $1.47 64 $ 13.94
1 0.84 33 1.54 65 15.31
2 0.80 34 1.61 66 16.73
3 0.78 35 1.70 67 18.16
4 0.77 36 1.82 68 19.62
5 0.75 37 1.96 69 21.27
6 0.73 38 2.13 70 23.20
7 0.71 39 2.32 71 25.58
8 0.70 40 2.53 72 28.54
9 0.69 41 2.75 73 32.08
10 0.68 42 2.98 74 36.16
11 0.70 43 3.20 75 40.70
12 0.73 44 3.44 76 45.62
13 0.77 45 3.68 77 50.89
14 0.82 46 3.92 78 56.59
15 0.87 47 4.19 79 62.90
16 0.92 48 4.48 80 70.08
17 0.96 49 4.79 81 78.34
18 1.00 50 5.13 82 87.89
19 1.03 51 5.50 83 98.71
20 1.06 52 5.92 84 110.63
21 1.08 53 6.38 85 123.55
22 1.10 54 6.85 86 137.37
23 1.12 55 7.33 87 152.08
24 1.15 56 7.81 88 167.69
25 1.17 57 8.26 89 184.33
26 1.20 58 8.71 90 202.20
27 1.24 59 9.21 91 221.70
28 1.28 60 9.81 92 243.53
29 1.32 61 10.55 93 269.32
30 1.37 62 11.50 94 302.68
31 1.42 63 12.64
</TABLE>
25
<PAGE> 1
EXHIBIT A(6)(a)
Articles of Incorporation of the Company
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.
<PAGE> 1
EXHIBIT A(6)(b)
Bylaws of the Company
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.
ARTICLE II
<PAGE> 3
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.
<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.
<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.
<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.
<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.
<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.
ARTICLE XIII
<PAGE> 9
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.
<PAGE> 1
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 ready 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.
-i-
<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 Incorporated, 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 of 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
-2-
<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 funding medium for any variable contracts.
LIFE COMPANY shall not be required by the terms hereof to establish a new
funding medium for any variable contracts if an offer to do so has been declined
by vote of a majority of affected contract
-3-
<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 participating 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: /s/ Claudia A. Brandon By: /s/ Stanley Egener
-------------------------- --------------------------
SECRETARY Stanley Egener, Chairman
SENTRY LIFE INSURANCE COMPANY
Attest: /s/ E. Fleischauer By: /s/ Peter Trapp
-------------------------- ---------------------------
Secretary President
-4-
<PAGE> 1
[SENTRY LIFE INSURANCE COMPANY LETTERHEAD]
SUPPLEMENTARY APPLICATION
Proposed Insured(s):____________________________________________________________
The Policy Flexible Premium Variable Life Insurance with
Applied for is:
[ ] Death Benefit Option 1 [ ] Death Benefit Option 2
The Person(s) Who 1) UNDERSTANDS THAT IF DEATH BENEFIT OPTION 1 IS SELECTED,
Sign(s) Below: THE DEATH BENEFIT (EXCEPT ANY SUPPLEMENTARY BENEFITS) WILL
GO UP OR DOWN DEPENDING ON THE POLICY'S INVESTMENT
EXPERIENCE WHEN THE DEATH BENEFIT IS EQUAL TO THE CASH
VALUE MULTIPLIED BY A CORRIDOR PERCENTAGE, AND ALSO,
UNDERSTANDS THAT IF DEATH BENEFIT OPTION 2 IS SELECTED,
THE DEATH BENEFIT (EXCEPT ANY SUPPLEMENTARY BENEFITS) WILL
GO UP OR DOWN DEPENDING ON THE POLICY'S INVESTMENT
EXPERIENCE. HOWEVER, THE DEATH BENEFIT WILL NEVER BE LESS
THAN THE GUARANTEED MINIMUM WHILE THE POLICY IS IN EFFECT
AND THERE IS NO POLICY DEBT.
2) UNDERSTANDS THAT THE CASH VALUES MAY GO UP OR DOWN
DEPENDING ON THE POLICY'S INVESTMENT EXPERIENCE, AND THAT
THERE IS NO GUARANTEED MINIMUM CASH VALUE.
3) UNDERSTANDS THAT THE CASH VALUE WILL BE INVESTED IN THE
LIQUID ASSET PORTFOLIO UNTIL 30 DAYS AFTER THE POLICY
EFFECTIVE DATE.
The net premiums (as described in the prospectus) are to be allocated to the
appropriate subaccount of Sentry Variable Life Account I as follows:
<TABLE>
<CAPTION>
Subaccount Allocation*
---------- -----------
<S> <C>
Growth Portfolio ______%
Balanced Portfolio ______%
Limited Maturity Bond Portfolio ______%
Liquid Asset Portfolio ______%
100 %
</TABLE>
*If any portion of a net premium is allocated to a particular subaccount, that
portion must be at least 10% on the date of the allocation takes effect. All
percentage allocations must be in whole numbers (e.g. 33% can be selected, but
33-1/3% cannot).
YES NO
DID THE POLICYOWNER RECEIVE THE CURRENT PROSPECTUS FOR THE POLICY
CHECKED ABOVE? [ ] [ ]
DOES THE POLICYOWNER BELIEVE THAT THIS POLICY WILL MEET
INSURANCE NEEDS AND FINANCIAL OBJECTIVES? [ ] [ ]
DOES THE POLICYOWNER REQUEST AND HEREBY AGREE TO THE TERMS
AND CONDITIONS OF THE TELEPHONE OR TELEGRAM EXCHANGE PRIVILEGE
AS STATED ON THE REVERSE SIDE? [ ] [ ]
<TABLE>
<S> <C>
____________ ________________________________________ ______________ ___________________________________
Date Signature of Proposed Insured Date Signature of Policyowner
____________ ________________________________________ ______________ ___________________________________
Date Signature of Spouse (if to be insured) Date Signature of Policyowner
____________ _______________________________________________________________________________________________
Date Signature(s) of Legal Aged Children (if to be insured)
</TABLE>
<PAGE> 2
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
TELEPHONE EXCHANGE PRIVILEGE
The policyowner hereby authorizes Sentry Life Insurance Company to honor any
telephone exchange instructions from any person to effect a transfer of all or
part of the Policy Values between Eligible Mutual Fund(s) or Portfolio(s)
subject to the minimums stated in the policy provisions.
The Company will employ reasonable procedure to confirm that telephone transfer
requests are legitimate. The Company will not be liable for complying with
telephone transfer requests it believes to be legitimate and for which it
followed reasonable procedures to ensure legitimacy. Sentry Life Insurance
Company reserves the right to reject any telephone exchange instructions. The
policyowner understands and agrees that this exchange privilege is for the
convenience of the policyowner and may be suspended or revoked for any reason
at any time without prior notice.
INSTRUCTIONS FOR TELEPHONE EXCHANGES
1. The authorization, on the reverse side, must be completed by the
policyowner before any telephone exchange instructions will be honored.
2. When you wish to effect an exchange in your account, telephone the
Variable Life Department at 1-800-533-7827. Be prepared to state the name
of the account, your account number and your social security number.
3. 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
[SENTRY LOGO]
CUSTOMER ACCOUNT INFORMATION
CONFIDENTIAL DATA
The following questions are for the purpose of determining the suitability of
this investment and are asked pursuant to rules established by the National
Association of Securities Dealers, Inc.
Name of Contract Owner(s):____________________________________________________
Occupation:___________________________________________
Name of Employer:_____________________________________________________________
Address of Employer:__________________________________________________________
Telephone:_(___)_______________ _(___)______________
Investment Objective:
[ ] Growth [ ] Growth & Income [ ] Income [ ] Other______________
(Specify)
==============================================================================
Financial Status:
<TABLE>
<CAPTION>
Annual
Household Income Net Worth* Life Insurance
<S> <C> <C> <C>
Below $25,000 [ ] [ ] [ ]
$25,000-$50,000 [ ] [ ] [ ]
$50,000-$100,000 [ ] [ ] [ ]
$100,000-$250,000 [ ] [ ] [ ]
Over $250,000 [ ] [ ] [ ]
</TABLE>
*WISCONSIN RESIDENTS: Do not include value of home/furnishings/auto in net
worth.
[ ] The Applicant Prefers to Withhold Information on Present Assets (other
parts of form MUST still be completed)
==============================================================================
Is Contract Owner employed by or associated with an NASD firm: [ ] Yes [ ] No
If yes, name of NASD firm:____________________________________________
Other significant facts:______________________________________________________
Signatures:___________________________________________________________________
Contract Owner(s):____________________________________________________
Registered Representative:___________________________ Date:___________
Acceptance by Sentry:
Registered Principal:________________________________ Date:___________
SENTRY EQUITY SERVICES, INC.
STEVENS POINT, WI 54481
<PAGE> 1
MEMORANDUM OF EXCHANGE PROVISION
The exchange provision previously described in the prospectus contains as one
requirement that the policyowner pay "any amounts due the company on exchange."
The calculation of this amount depends on the form of the new policy being
issued, the cash value existing under the original policy at the time of
exchange, the premiums that would have been due on the new policy had it been
issued originally, and the expense charges previously deducted under the
original policy. The calculation is intended to be equitable to both the
company and the policyowner.
The new policy that will be offered is the company's permanent fixed benefit
policy currently called Contemporary Life. If in the future the Contemporary
Life policy is no longer offered for sale by the Company its' replacement or a
substantially similar policy will be used. This policy has fixed benefits,
guaranteed surrender values and level required premiums. The level premiums are
based on current mortality rates but may never exceed the stated guaranteed
levels.
The amount due the company on exchange will be calculated as follows:
Amount Due = The premium due under the new policy from date of original issue
to date of exchange plus,
interest at an annual rate of 6% on the premiums due under the
original policy from the date of original due date to the date of
exchange, less
the cash value of the variable policy at the date of the exchange
less
total premium tax and front load sales deductions charged under
the variable policy, less
total monthly deductions charged up to the date of exchange under
the variable policy, plus
the total cost of insurance charges under the variable policy for
any riders that were attached to the variable policy that cannot
be attached to the exchange policy.
This method of exchange treats the policyholder exercising the exchange the same
in all respects except the investment element and risk charge as he/she would
have been treated had this new policy been issued originally. The investment
element is different in that the policyholder is charged interest at a fixed
rate and given credit for the actual investment performance that was earned
while the funds were invested in the variable accounts. This is appropriate
since the policyholder bears the investment risk during the time the funds are
<PAGE> 2
2
invested in the variable accounts and must not be allowed to shift the
investment risk back to the company. If this were allowed, the company would be
subjected to severe antiselection in the exercise of the exchange option.
No credit is given to the policyholder during the exchange for the risk charge
that has been deducted on the variable policy. This amount is small and is used
as an offset to the expenses associated with issuing the new policy.
The exchange provision will also apply to increases in specified amounts. In
the case when the exchange applies to an increase it will be assumed that all
premium paid after the date of increase was applied to the policy as if no
increase had been issued. If this assumption does not cause a violation of the
maximum premium limitation for the basic policy the credit given the
policyholder to be applied against premiums and interest due is the accumulation
of the cost of insurance deductions for the increase that had previously been
deducted from the variable policies cash value. In this case no adjustment will
be made to the variable policies cash value and the surrender charge on the
variable policy will be reduced by the amount that applied to the increase.
In the case when the premium assumption made above causes a violation of the
maximum premium limitation the amount of the excess premium will be applied as
additional credit in the exchange. However this additional credit in the
exchange will be reduced by any amounts necessary to keep the basic policies'
cash surrender value from becoming negative. The cash value of the basic plan
will be reduced by the amount of the addition credit less the front end percent
of premium deductions applicable to this credit i.e., premium tax and front end
sales load. The surrender charge on the variable policy will again be reduced
by the amount applicable to the increase.
<PAGE> 1
EXHIBIT
Opinion and Consent of Counsel
BLAZZARD, GRODD & HASENAUER, P.C.
ATTORNEYS AT LAW CONNECTICUT OFFICE:
943 POST ROAD EAST Y P.O. BOX 5108
NORSE N. BLAZZARD** WESTPORT, CONNECTICUT 06881-5108
LESLIE E. GRODD* TELEPHONE (203) 226-7866
JUDITH A. HASENAUER** FACSIMILE (203) 454-4028
WILLIAM E. HASENAUER*
RAYMOND A. O'HARA III* FLORIDA OFFICE:
LYNN KORMAN STONE* SUITE 213, OCEANWALK MALL
MAUREEN M. MURPHY* 101 NORTH OCEAN DRIVE
HOLLYWOOD, FLORIDA 33019
TELEPHONE (305) 920-6590
FACSIMILE (305) 920-6902
* Admitted in Connecticut
** Admitted in Connecticut and Florida
April 1, 1997
Board of Directors
Sentry Life Insurance Company
1800 North Point Drive
Stevens Point, WI 54481
RE: Opinion of Counsel - Sentry Variable Life Account I
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 S-6 for Individual Flexible Premium Variable
Life Insurance Policies (the "Policies") to be issued by Sentry Life Insurance
Company and its separate account, Sentry Variable Life Account I.
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 Life Account I 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 premium payments made by a Policy Owner pursuant
to a Policy issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such a Policy
Owner will have a legally-issued, fully paid, non-assessable contractual
interest under such Policy.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
<PAGE> 2
BLAZZARD, GRODD & HASENAUER, P.C.
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 Prospectus which forms a part of the Registration Statement.
Sincerely,
BLAZZARD, GRODD & HASENAUER, P.C.
By: s/Lynn Korman Stone
-------------------------
Lynn Korman Stone
<PAGE> 1
EXHIBIT C
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Sentry Life Insurance Company
We consent to the inclusion in Post Effective Amendment No. 13 to the
Registration Statement on Form S-6 of Sentry Variable Life Account I (File No.
2-98441) of our report dated February 10, 1997 on our audit of the financial
statements of Sentry Variable Life Account I 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
caption "Experts".
s/ Coopers & Lybrand L.L.P.
Chicago, IL
April 30, 1997
<PAGE> 1
April 4, 1997
To the Board of Directors of
Sentry Life Insurance Company
1800 North Point Drive
Stevens Point, WI 54481
CONSENT OF ACTUARY
I hereby consent to the inclusion of the Illustration of Policy Values
contained in Appendix A in a registration statement, Form S-6, for the Variable
Life Insurance Policies. The Illustrations have been prepared in accordance
with standard actuarial principles and reflect the operation of the Policy by
taking into account all charges under the Policy and in the underlying fund.
s/Dean A. Klingenberg
-------------------------------------
Dean A. Klingenberg, FSA, MAAA
Actuary-Life & Health Product Pricing
