<PAGE> 1
As filed with the Securities and Exchange Commission on January 12, 1999
File No. 333-44751
File No. 811-08581
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. _____ [ ]
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 3 [X]
THE SAGE VARIABLE ANNUITY ACCOUNT A
(Exact Name of Registrant)
SAGE LIFE ASSURANCE OF AMERICA, INC.
(Name of Depositor)
300 Atlantic Street
Stamford, CT 06901
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (203) 324-6338
James F. Bronsdon
Sage Life Assurance of America, Inc.
300 Atlantic Street
Stamford, CT 06901
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the Registration Statement.
Title of Securities: Interests in a separate account under flexible payment
deferred combination fixed and variable annuity contracts.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant files a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a) AND 495(a)
Showing location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information required by Form N-4
PART A
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ---------------- ------------------
<S> <C>
1. Cover Page .......................................... Cover Page
2. Definitions .......................................... Index of Terms
3. Synopsis ............................................. Fee Table; Profile
4. Condensed Financial Information....................... How is Contract Performance Presented?
5. General
(a) Depositor.................................. What other information should I know?
(b) Registrant................................. What other information should I know?
(c) Portfolio Company.......................... What are my investment options?
(d) Fund Prospectus............................ Cover Page
(e) Voting Rights.............................. What other information should I know?
(f) Administrators............................. What other information should I know?
6. Deductions and Expenses
(a) General ................................... What are the expenses under a Contract?
(b) Sales Load %............................... Fee Table; Example
(c) Special Purchase Plan...................... What are the expenses under a Contract?
(d) Commissions................................ What other information should I know?
(e) Fund Expenses ............................. Fee Table; Example
(f) Expenses - Registrant...................... Fee Table; What are the expenses under a Contract?
(g) Organizational Expenses.................... N/A
7. Contracts
(a) Persons with Rights........................ What are the Contracts?;
What are my income payment options?;
How do I purchase a Contract?;
How do I access my money?;
What other information should I know?
(b) (i) Allocation of Purchase Payments What are my investment options?
(ii) Transfers What are my investment options?
(iii) Exchanges............................ N/A
(c) Changes ................................... What other information should I know?
(d) Inquiries ................................. What are my investment options?;
What other information
should I know?
8. Annuity Period.......................................... What are my income payment options?
9. Death Benefit........................................... Does the Contract have a death benefit?
</TABLE>
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<TABLE>
<S> <C>
10. Purchase and Contract Value
(a) Purchases.................................. How do I purchase a Contract?
(b) Valuation.................................. What are my investment options?
(c) Daily Calculation.......................... What are my investment options?
(d) Underwriter................................ What other information should I know?
11. Redemptions
(a) By Owners................................. How do I access my money?
By Annuitant.............................. What are my income payment options?
(b) Texas OR................................... N/A
(c) Check Delay................................ How do I access my money?
(d) Lapse...................................... N/A
(e) Free Look.................................. What other information should I know?
12. Taxes.................................................. How will my Contract be taxed?
13. Legal Proceedings...................................... What other information should I know?
14. Table of Contents for the Statement of
Additional Information................................. Table of Contents of the Statement of
Additional Information
</TABLE>
PART B
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART B CAPTION
- ---------------- --------------
<S> <C>
15. Cover Page............................................ Cover Page
16. Table of Contents..................................... Table of Contents
17. General Information and History....................... N/A
18. Services
(a) Fees and Expenses of Registrant............ N/A
(b) Management Contracts............. N/A
(c) Custodian ................................. N/A
Independent Accountant..................... Experts
(d) Assets of Registrant....................... N/A
(e) Affiliated Person.......................... N/A
(f) Principal Underwriter...................... Distribution of the Contracts
19. Purchase of Securities Being Offered.................. Distribution of the Contracts
Offering Sales Load............................ N/A
20. Underwriters.......................................... Distribution of the Contracts
21. Calculation of Performance Data....................... Calculation of Historical Performance Data
22. Annuity Payments...................................... Income Payment Provisions
23. Financial Statements.................................. Financial Statements
</TABLE>
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PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART C CAPTION
- ---------------- --------------
<S> <C>
24. Financial Statements and Exhibits..................... Financial Statements and Exhibits
(a) Financial Statements....................... (a) Financial Statements
(b) Exhibits................................... (b) Exhibits
25. Directors and Officers of the Depositor............... Directors and Officers of the Depositor.
26. Persons Controlled By or Under Common
Control with the Depositor or Registrant.............. Persons Controlled By or Under Common Control
with the Depositor or Registrant
27. Number of Contract Owners............................. Number of Contract Owners
28. Indemnification....................................... Indemnification
29. Principal Underwriters................................ Principal Underwriter
30. Location of Accounts and Records...................... Location of Books and Records
31. Management Services................................... Management Services
32. Undertakings.......................................... Undertakings and Representations
Signature Page ....................................... Signatures
</TABLE>
<PAGE> 6
PROFILE DATED _________________________, 1999
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE
ANNUITY CONTRACTS
Issued By
THE SAGE VARIABLE ANNUITY ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.
THIS PROFILE IS A SUMMARY OF SOME IMPORTANT POINTS THAT YOU
SHOULD KNOW AND CONSIDER BEFORE PURCHASING A CONTRACT. THE
CONTRACT IS MORE FULLY DESCRIBED IN THE FULL PROSPECTUS THAT
ACCOMPANIES THIS PROFILE. PLEASE READ THAT PROSPECTUS CAREFULLY.
"We," "us," "our", "Sage Life" or the "Company" refer to Sage Life Assurance of
America, Inc. "You" and "your" refer to the Owner of a Contract.
1. WHAT ARE THE CONTRACTS?
The fixed and variable annuity Contract offered by Sage Life Assurance of
America, Inc. is a contract between you, the Owner, and us, Sage Life, an
insurance company.
We designed the Contract for use in your long-term financial and
retirement planning. It provides a means for allocating amounts on a
tax-deferred basis to our Variable Account and Fixed Account.
INVESTMENT FLEXIBILITY. Through our Variable Account you can invest in up
to 33 different investment portfolios (each a "Fund"). These Funds, listed in
Section 4, are professionally managed and use a broad range of investment
strategies (growth and income, aggressive growth, etc.), styles (growth, value,
etc.) and asset classes (stocks, bonds, international, etc.). You can select a
mix of Funds to meet your financial and retirement needs and objectives,
tolerance for risk, and view of the market. Amounts you invest in these Funds
will fluctuate daily based on underlying investment performance. So, the value
of your investment may increase or decrease.
Through our Fixed Account, you can invest to receive guaranteed rates of
interest for periods of 1, 2, 3, 4, 5, 7, and 10 years. We also guarantee your
principal while it remains in our Fixed Account. However, if you decide to
surrender your Contract, or transfer or access amounts in the Fixed Account
before the end of a Guarantee Period you have chosen, we ordinarily will apply a
Market Value Adjustment. This Adjustment reflects changes in interest rates
since your allocation to the Fixed Account. The Market Value Adjustment may
result in an increase or decrease in the amounts surrendered, transferred, or
accessed.
As your needs or financial or retirement goals change, your investment
mix can change with them. You may transfer funds among any of the investment
choices in our Fixed or Variable Accounts while continuing to defer current
income taxes.
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SAFETY OF SEPARATE ACCOUNTS. Significantly, both the Fixed and Variable
Accounts are considered separate investment accounts of Sage Life. This provides
you with an important safety feature: the assets supporting your allocations to
these Accounts cannot be charged with liabilities arising out of any other
business we may conduct.
The Contract also provides you with other important features, including a
death benefit, access to your money, and income plan options.
ACCESS TO AMOUNTS INVESTED. The Contract provides access to your
investment should you need it. During the savings, or Accumulation Phase, your
investment grows tax free until withdrawn. You decide how much to take and when
to take it (certain restrictions apply after the Accumulation Phase).
Ordinarily, once you access earnings, they are taxed as income. If you
access earnings before you are 59 1/2 years old, you may have to pay an
additional 10% federal tax penalty. Amounts you surrender or withdraw may be
subject to a Market Value Adjustment (positive or negative) if you take the
amount from the Fixed Account.
PROTECTION FOR YOUR BENEFICIARIES. The Contract also provides a death
benefit feature to protect your family should you die during the Accumulation
Phase. In the event of your untimely death, the Beneficiary of your choice will
never receive less than you have invested in the Contract, and may even receive
more. Your Beneficiary will decide how he or she wishes to receive the death
benefit.
INCOME PAYMENTS. The payout, or Income Phase, of your Contract begins
when you inform us you want to start receiving regular income payments under the
various income plans we offer. The amount you accumulated during the
Accumulation Phase determines the amount of income payments you receive during
the Income Phase. You can use your Account Value to provide income payments that
are guaranteed, or income payments that vary with underlying investment
performance, or a combination of both. The income payments can be for life,
which means you can't outlive them!
A portion of each income payment is ordinarily considered a return of
your investment in the Contract. So, only the portion in excess of this amount
is taxed as income!
2. WHAT ARE MY INCOME PAYMENT OPTIONS?
Once the Income Phase of your Contract begins, we apply your Account
Value to provide you with regular income payments.
You can tailor your income to meet your needs by choosing from five
different income plans described below. In explaining the income plans, we are
assuming that you designate yourself as the Annuitant. Of course, you always can
designate someone other than yourself as Annuitant.
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Income Plan 1 - Life Annuity: You will receive payments for your life.
Income Plan 2 - Life Annuity with 10 or 20 Years Certain: You will
receive payments for your life. However, if you die before the end
of the guaranteed certain period you select (10 or 20 years), your
Beneficiary will receive the payments for the remainder of that
period.
Income Plan 3 - Joint and Last Survivor Life Annuity: Payments will be
made as long as either you or a second person you select (such as
your spouse) is alive.
Income Plan 4 - Payments for a Specified Period Certain: You will receive
payments for the number of years you select. However, if you die
before the end of that period, your Beneficiary will receive the
payments for the remainder of the guaranteed certain period.
Income Plan 5 - Annuity Plan: You can use your Account Value to purchase
any other income plan we offer at the time you want to begin
receiving regular income payments for which you and the Annuitant
are eligible.
You tell us how much of your Account Value to apply to fixed income
payments and to variable income payments. During the Income Phase, you still
have all of the investment choices you had prior to beginning income payments.
However, we currently limit transfers among your investment choices.
We will allocate the amount of Account Value you apply to provide fixed
income payments to the Fixed Account. The amount of each income payment is
guaranteed and remains level throughout the period you select.
We will allocate the amount of Account Value you apply to provide
variable income payments to the Variable Account and invest it in the Funds you
select. The amount of each income payment will vary according to the investment
performance of those Funds.
3. HOW DO I PURCHASE A CONTRACT?
In most cases, you may purchase a Contract with $25,000 or more.
In addition, subject to limitations for tax-qualified Contracts, you can
add $1,000 or more to your Contract at any time during the Accumulation Phase.
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4. WHAT ARE MY INVESTMENT OPTIONS?
There are 40 investment options under the Contracts available through our
Variable and Fixed Accounts. These choices are professionally managed and allow
for a broad range of investment strategies, styles and asset classes. Additional
investment options may be available in the future.
Through our Variable Account you can choose to have your money invested
in one or more of the following 33 Funds that are described in the prospectuses
for the Trusts:
- AIM Variable Insurance Funds, Inc.
[ ] AIM V.I. Government Securities Fund
[ ] AIM V.I. Growth and Income Fund
[ ] AIM V.I. International Equity Fund
[ ] AIM V.I. Value Fund
- The Alger American Fund
[ ] Alger American MidCap Growth Portfolio
[ ] Alger American Income and Growth Portfolio
[ ] Alger American Small Capitalization Portfolio
- Liberty Variable Investment Trust
[ ] Colonial High Yield Securities Fund, Variable Series
[ ] Colonial Small Cap Value Fund, Variable Series
[ ] Colonial Strategic Income Fund, Variable Series
[ ] Colonial U.S. Stock Fund, Variable Series
[ ] Liberty All-Star Equity Fund, Variable Series
[ ] Newport Tiger Fund, Variable Series
[ ] Stein Roe Global Utilities Fund, Variable Series
- SteinRoe Variable Investment Trust
[ ] Stein Roe Growth Stock Fund, Variable Series
[ ] Stein Roe Balanced Fund, Variable Series
- MFS(R) Variable Insurance Trust(TM)
[ ] MFS Growth With Income Series
[ ] MFS High Income Series
[ ] MFS Research Series
[ ] MFS Total Return Series
[ ] MFS Value Series
- Morgan Stanley Universal Funds, Inc.
[ ] Global Equity Portfolio
[ ] Mid Cap Value Portfolio
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[ ] Value Portfolio
- Oppenheimer Variable Account Funds
[ ] Oppenheimer Bond Fund
[ ] Oppenheimer Growth Fund
[ ] Oppenheimer Small Cap Growth Fund
- Sage Life Investment Trust
[ ] EAFE Equity Index Fund
[ ] S&P 500 Equity Index Fund
[ ] Money Market Fund
- T. Rowe Price Equity Series, Inc.
[ ] T. Rowe Price Equity Income Portfolio
[ ] T. Rowe Price Mid-Cap Growth Portfolio
[ ] T. Rowe Price Personal Strategy Balanced Portfolio
These Funds do not provide any performance guarantees, and therefore,
their values can increase or decrease depending upon investment performance.
Through our Fixed Account, you can choose to have your money invested in
one or more of 7 different periods for which we will guarantee your principal
and a rate of interest when your investment is left in the Fixed Account for the
entire period of the guarantee. You currently can choose periods of 1, 2, 3, 4,
5, 7, and 10 years. However, if you decide to surrender your Contract, or
transfer or access amounts before the end of a period you have chosen, we
ordinarily will apply a Market Value Adjustment, which may be positive or
negative depending upon current interest rates.
5. WHAT ARE THE EXPENSES UNDER A CONTRACT?
The Contract has insurance and investment features. Each has related
costs. Below is a brief summary of the Contract's charges:
Surrender Charge - None! There are no surrender charges under the
Contract.
Annual Administration Charge - During the first seven Contract Years
only, we will deduct an annual $40 administration charge. However, there is no
charge if, at the time of deduction, your Account Value is at least $50,000.
Asset-Based Charges - We deduct Asset-Based Charges for mortality and
expense risks and for certain administrative costs monthly from the amounts you
allocate to the Variable Account. These charges are equal on an annual basis to
1.40% of Variable Account Value, decreasing to 1.25% after the seventh Contract
Year.
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Purchase Payment Tax Charge - During the first seven Contract Years only,
we will deduct any state premium tax that we incur if you surrender your
Contract or begin receiving regular income payments. This tax charge ranges from
0% to 3.5% depending upon the state. We currently do not intend to deduct this
charge on or after the eighth Contract Year.
Fund Fees and Expenses - There are also Fund fees and expenses that are
based on the average daily value of your money invested in the Funds. These
charges range on an annual basis from 0.55% to 1.25%, depending upon the Fund.
Sage Life's business strategy is to reward our long-term customers. So,
as you can see, after the seventh Contract Year we
eliminate the Annual Administration Charge
eliminate the Purchase Payment Tax Charge, if any
reduce Asset-Based Charges
This means more of your investment is working for you!
The following chart is designed to help you understand expenses under the
Contract.
<TABLE>
<CAPTION>
Examples of
Total Expenses
Total Annual Total Annual Total Annual Paid at the End
Fund Insurance Charges Fund Charges Charges of 1 Year
---- ----------------- ------------ ------- ---------
<S> <C> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. Government Securities Fund 1.53% 0.87% 2.40% $25
AIM V.I. Growth and Income Fund 1.53% 0.69% 2.22% $23
AIM V.I. International Equity Fund 1.53% 0.93% 2.46% $25
AIM V.I. Value Fund 1.53% 0.70% 2.23% $23
THE ALGER AMERICAN FUND:
Alger American MidCap Growth Portfolio 1.53% 0.84% 2.37% $24
Alger American Income and Growth Portfolio 1.53% 0.74% 2.27% $23
</TABLE>
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<TABLE>
<CAPTION>
Examples of
Total Expenses
Total Annual Total Annual Total Annual Paid at the End
Fund Insurance Charges Fund Charges Charges of 1 Year
---- ----------------- ------------ ------- ---------
<S> <C> <C> <C> <C>
Alger American Small Capitalization
Portfolio 1.53% 0.89% 2.42% $25
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities Fund,
Variable Series 1.53% 0.80% 2.33% $24
Colonial Small Cap Value Fund,
Variable Series 1.53% 1.00% 2.53% $26
Colonial Strategic Income Fund,
Variable Series 1.53% 0.80% 2.33% $24
Colonial U.S. Stock Fund, Variable Series 1.53% 0.94% 2.47% $25
Liberty All-Star Equity Fund,
Variable Series 1.53% 1.00% 2.53% $26
Newport Tiger Fund, Variable Series 1.53% 1.25% 2.78% $29
Stein Roe Global Utilities Fund,
Variable Series 1.53% 0.83% 2.36% $24
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock Fund,
Variable Series 1.53% 0.71% 2.24% $23
Stein Roe Balanced Fund,
Variable Series 1.53% 0.66% 2.19% $23
MFS VARIABLE INSURANCE TRUST:
MFS Growth With Income Series 1.53% 1.00% 2.53% $26
MFS High Income Series 1.53% 1.00% 2.53% $26
MFS Research Series 1.53% 0.88% 2.41% $25
MFS Total Return Series 1.53% 1.00% 2.53% $26
MFS Value Series 1.53% 1.00% 2.53% $26
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
Global Equity Portfolio 1.53% 1.15% 2.68% $28
Mid Cap Value Portfolio 1.53% 1.05% 2.58% $27
Value Portfolio 1.53% 0.85% 2.38% $24
</TABLE>
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<TABLE>
<CAPTION>
Examples of
Total Expenses
Total Annual Total Annual Total Annual Paid at the End
Fund Insurance Charges Fund Charges Charges of 1 Year
---- ----------------- ------------ ------- ---------
<S> <C> <C> <C> <C>
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund 1.53% 0.78% 2.31% $24
Oppenheimer Growth Fund 1.53% 0.75% 2.28% $23
Oppenheimer Small Cap Growth Fund 1.53% 0.83% 2.36% $24
SAGE LIFE INVESTMENT TRUST:
EAFE Equity Index Fund 1.53% 0.90% 2.43% $25
S&P 500 Equity Index Fund 1.53% 0.55% 2.08% $21
Money Market Fund 1.53% 0.65% 2.18% $22
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity Income Portfolio 1.53% 0.85% 2.38% $24
T. Rowe Price Mid-Cap Growth Portfolio 1.53% 0.85% 2.38% $24
T. Rowe Price Personal Strategy
Balanced Portfolio 1.53% 0.90% 2.43% $25
</TABLE>
Below is an explanation of what we included in each column of the chart:
The column "Total Annual Insurance Charges" shows the sum of the
Asset-Based Charges and the Annual Administration Charge (for purposes of
the chart, we assume the average Account Value is $30,000 and the Annual
Administration Charge to be 0.13% of the value of an average Contract).
The column "Total Annual Fund Charges" shows the fees and expenses for
each Fund.
A I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its fees. Effective May 1, 1998, the Funds reimburse AIM in an amount up
to 0.25% of the average net asset value of each Fund, for expenses incurred in
providing, or assuring that participating insurance companies provide, certain
administrative services. Currently, the fee only applies to the average net
asset value of each Fund in excess of the net asset value of each Fund as
calculated on April 30, 1998.
Liberty Variable Investment Trust's Colonial High Yield Securities Fund
and Colonial SmallCap Value Fund did not commence Operations until 1998. The
figures shown are based on
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estimates for the current fiscal year. The charges shown for Colonial Strategic
Income Fund and Liberty All-Star Equity Fund during 1997 reflect the fact that
the Funds' investment adviser agreed to reimburse the Colonial Strategic Income
Fund and Liberty All-Star Equity Fund for certain expenses incurred by each
Fund. Without such reimbursements, the expenses for the Colonial Strategic
Income Fund and Liberty All-Star Equity Fund would have been 0.82% and 1.45%,
respectively.
The charges shown for MFS Variable Insurance Trust's Growth with Income
Series, High Income Series, Total Return Series and Value Series during 1997
reflect the fact that the Fund's investment adviser agreed to reimburse MFS
Variable Insurance Trust's Growth with Income Series, High Income Series, Total
Return Series and Value Series for certain expenses incurred by each Fund.
Without such reimbursements, the expenses for the MFS Variable Insurance Trust's
Growth with Income Series, High Income Series, Total Return Series and Value
Series would have been 1.45%, 1.55%, 1.29%, and 3.41%, respectively.
The charges shown for Morgan Stanley Universal Funds, Inc. during 1997
reflect the fact that the Fund's investment advisers agreed to reimburse the
Global Equity Portfolio, Mid Cap Value Portfolio, and Value Portfolio for
certain expenses incurred by each Fund. Without such reimbursements, the
expenses for the Global Equity Portfolio, MidCap Value Portfolio, and Value
Portfolio would have been 2.43%, 2.13% and 1.87%, respectively.
Oppenheimer Variable Account Fund's Small Cap Growth Fund did not
commence operations until 1998. The figures shown are based on estimates for the
current fiscal year.
Sage Life Investment Trust has not commenced operations. The charges
shown are based on estimates and reflect the fact that the Trust's investment
adviser agrees to reimburse each Fund for certain expenses. Without such
reimbursements, the expenses of Sage Life Investment Trust's EAFE Equity Index
Fund, S&P 500 Equity Index Fund, and Money Market Fund would be 1.07%, .72% and
..82%, respectively.
The column "Total Annual Charges" shows the sum of "Total Annual
Insurance Charges" and "Total Annual Fund Charges."
The next column shows you examples of the charges, in dollars, you could
pay under a Contract for each $1,000 you invested. The example assumes that your
Contract earns 5% annually before charges.
For more information about expenses under a Contract, please refer to the
"Fee Table" in the full Prospectus that accompanies this Profile.
6. HOW WILL MY CONTRACT BE TAXED?
During the Accumulation Phase, your earnings are not taxed unless
you take them out. If
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you take money out, earnings come out first and are taxed as income. If you are
younger than 59 1/2 when you take money out, you also may be charged a 10%
federal tax penalty on the withdrawn earnings.
Income payments during the Income Phase are considered partly a return of
your original investment. That part of each payment is not taxable as income.
However, once you have recovered all of your original investment, income
payments will then be fully taxable.
Special tax rules apply to withdrawals from a new type of IRA called the
Roth IRA.
7. HOW DO I ACCESS MY MONEY?
There are a number of ways to withdraw money from your Contract. You can
tailor your income to meet your near-term or lifelong liquidity needs.
During the Accumulation Phase, if you want to take money out of your
Contract, you can choose among several different options.
You can withdraw some of your money.
You can surrender your Contract and take all of your money.
You can take withdrawals using our systematic partial withdrawal program.
You can apply your Account Value to an Income Plan.
Keep in mind that if you take the amount from the Fixed Account, a Market
Value Adjustment ordinarily will apply. If you are younger than 59 1/2 when
you take money out, you may owe a 10% federal tax penalty in addition to the
income tax that will apply to the extent that you have gain in your Contract.
Please remember that withdrawals will reduce your death benefit.
Once you start receiving regular income payments and if you selected the
"payments for a specified period certain" income plan, you may request a
withdrawal.
8. HOW IS CONTRACT PERFORMANCE PRESENTED?
Because our Variable Sub-Accounts have not been in operation for more
than a year, we cannot show you how the Funds performed in the Variable Account.
When they have been in operation for a year or more, we will show you the Funds'
performance using standard methods prescribed by the SEC.
Please remember that the performance data represents past performance.
Amounts you invest in the Variable Account will fluctuate daily based on
underlying Fund investment
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performance, so the value of your investment may increase or decrease.
9. DOES THE CONTRACT HAVE A DEATH BENEFIT?
Your Contract provides a death benefit for your Beneficiary.
We will pay a death benefit to the Beneficiary of your choice in the
event of your untimely death prior to the Income Phase. This provides comfort
knowing your Beneficiary will receive the greatest of the following:
the current Account Value on the date we receive proof of death;
100% of the sum of all purchase payments you have invested in your
Contract, less any withdrawals you have made (including any associated
Market Value Adjustment incurred); or
the highest anniversary value on or before you reach age 80.
The highest anniversary value is equal to the greatest anniversary value
attained in the following manner. When we receive proof of death, we will
calculate an anniversary value for each Contract Anniversary prior to the date
of the Owner's death, but not beyond the Owner's attained age 80. An anniversary
value for a Contract Anniversary is equal to (1) the Account Value on that
Contract Anniversary, (2) increased by the dollar amount of any purchase
payments made since the Contract Anniversary, and (3) reduced proportionately by
any withdrawals (including any associated Market Value Adjustment incurred)
taken since that Contract Anniversary. (By proportionately, we take the
percentage by which the withdrawal decreases the Account Value and we reduce the
sum of (1) and (2) by that percentage.)
10. WHAT OTHER INFORMATION SHOULD I KNOW?
The Contract has several additional features available to you at no
additional charge:
FREE LOOK RIGHT: You have the right to return your Contract to us at our
Customer Service Center or to the registered representative who sold it to you,
and have us cancel the Contract within a certain number of days (usually 10 days
from the date you receive the Contract, but some states require different
periods).
If you exercise this right, we will cancel your Contract as of the
Business Day we receive it and send you a refund equal to your Account Value
plus any charges we have deducted on or before the date we received the returned
Contract, or if required by the law of your state, your initial purchase payment
(less any withdraws previously taken). In the states where we are required to
return purchase payment less withdrawals, if you allocated amounts to the
Variable Account, we will temporarily allocate those amounts to the Money Market
Fund until the Free
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Look Period expires.
DOLLAR-COST AVERAGING PROGRAM: Under our optional Dollar-Cost Averaging
Program, you may choose to transfer a set dollar amount systematically from the
Money Market Fund and/or from specially designated Fixed Sub-Accounts to any
other Variable Sub-Account, subject to certain limitations. By investing the
same amount on a regular basis, you don't have to worry about timing the market.
Since you invest the same amount each period, you automatically acquire more
units when market values fall and fewer units when they rise. The potential
benefit is to lower your average cost per unit. This proven investment technique
does not guarantee that any Fund will gain in value. It also will not protect
against a decline in value if market prices fall. However, if you can continue
to invest regularly throughout changing market conditions, this program can be
an effective strategy to help meet your long-term or retirement goals. Due to
the effect of interest that continues to be paid on the amount remaining in the
Money Market Fund or the specially designated Fixed Sub-Account, the amounts
that we transfer will vary slightly from month to month.
ASSET ALLOCATION PROGRAM: An optional Asset Allocation Program is
available if you do not wish to make your own particular investment decisions.
This investment planning tool is designed to find an asset mix that attempts to
achieve the highest expected return based upon your tolerance for risk, and
consistent with your needs and objectives. Bear in mind, that the use of an
asset-allocation model does not guarantee investment results.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM: Our optional Automatic Portfolio
Rebalancing Program can help prevent a well-conceived investment strategy from
becoming diluted over time. Investment performance will likely cause the
allocation percentages you originally selected to shift. With this program, you
can instruct us to automatically rebalance your Contract to your original
percentages on a quarterly basis. Money invested in the Fixed Account is not
part of this program.
11. HOW CAN I MAKE INQUIRIES?
If you need further information about the Contracts, please write or call
us at our Customer Service Center (877) TEL-SAGE (835-7243), or contact an
authorized registered representative. The address of our Customer Service Center
office is 1290 Silas Deane Highway, Wethersfield, CT 06109.
12
<PAGE> 18
PROSPECTUS DATED ___________, 1999
SAGE LIFE ASSURANCE OF AMERICA, INC.
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY
CONTRACTS
ISSUED BY
THE SAGE VARIABLE ANNUITY ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.
Executive Office: Customer Service Center:
300 Atlantic Street 1290 Silas Deane Highway
Stamford, CT 06901 Wethersfield, CT 06109
Telephone: (877) 835-7243 (Toll Free)
UNLESS OTHERWISE INDICATED, THIS PROSPECTUS DESCRIBES THE OPERATION OF
THE CONTRACTS BEFORE THE INCOME DATE. DEFINITIONS OF CERTAIN TERMS USED IN THIS
PROSPECTUS MAY BE FOUND BY REFERRING TO THE INDEX OF TERMS.
This Prospectus describes flexible payment deferred combination fixed and
variable annuity contracts offered by Sage Life Assurance of America, Inc. We
designed the Contracts for use in your long-term financial and retirement
planning. They provide a means for investing on a tax-deferred basis in our
Variable Account and our Fixed Account. You can purchase a Contract by making a
minimum initial purchase payment. After purchase, you determine the amount and
timing of any additional purchase payments.
You may allocate purchase payments and transfer Account Value to our
Variable Account and also to our Fixed Account within certain limits. We divided
the Variable Account into 33 Sub-Accounts.
Each Variable Sub-Account invests in a corresponding Fund of AIM Variable
Insurance Funds, Inc., The Alger American Fund, Liberty Variable Investment
Trust, SteinRoe Variable Investment Trust, MFS(R) Variable Insurance Trust(TM),
Morgan Stanley Universal Funds, Inc., Oppenheimer Variable Account Funds, Sage
Life Investment Trust, or T. Rowe Price Equity Series, Inc. (collectively, the
"Trusts"). The accompanying prospectuses describe each of the Funds, including
the risks of investing in each Fund, and provide other information about the
Trusts.
Your Account Value will vary daily as a function of the investment
performance of the Variable Sub-Accounts and any interest we credit under our
Fixed Account. We do not guarantee any minimum Account Value for amounts you
allocate to the Variable Account. We guarantee a minimum fixed rate of interest
for specified periods of time on the amounts you allocate to the Fixed Account.
However, amounts withdrawn, surrendered, transferred, or applied to an income
plan from the Fixed Account ordinarily will be subject to a Market Value
Adjustment, which may increase or decrease such amounts. The Contracts provide
additional benefits, including five income plan options, a death benefit upon
any Owner's
<PAGE> 19
death before the Income Date, and optional programs including dollar-cost
averaging, asset allocation, automatic portfolio rebalancing, and systematic
partial withdrawals.
This Prospectus sets forth basic information about the Contracts, the
Variable Account, and the Fixed Account that you should know before purchasing a
Contract. You should read the Prospectus carefully and retain it for future
reference.
The Statement of Additional Information contains more information about
the Contracts and the Variable Account, is dated the same as this Prospectus,
and is incorporated herein by reference. The Table of Contents for the Statement
of Additional Information is on page ____ of this Prospectus. It has been filed
with the Securities and Exchange Commission. You may obtain a copy of the
Statement of Additional Information free of charge by contacting our Customer
Service Center at the address or phone number shown above. You may also obtain a
copy of the Prospectus and Statement of Additional Information by accessing the
Securities and Exchange Commission's website at http://www.sec.gov.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY THE CURRENT PROSPECTUS FOR EACH OF THE TRUSTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<PAGE> 20
TABLE OF CONTENTS
Index of Terms..................................................................
Fee Table.......................................................................
1. What are the Contracts?......................................................
2. What are my Income Payment Options?..........................................
3. How do I Purchase a Contract?................................................
Initial Purchase Payment....................................................
Issuance of a Contract......................................................
Free Look Right to Cancel Contract..........................................
Making Additional Purchase Payments.........................................
4. What are my Investment Options?..............................................
Purchase Payments Allocations...............................................
Variable Sub-Account Investment Options.....................................
Fixed Account Investment Options............................................
Market Value Adjustment.....................................................
Transfers...................................................................
Telephone Transfers.........................................................
Powers of Attorney..........................................................
Dollar-Cost Averaging Program...............................................
Asset Allocation Program....................................................
Automatic Portfolio Rebalancing Program.....................................
Account Value...............................................................
Surrender Value.............................................................
Variable Account Value......................................................
Accumulation Unit Value.....................................................
Net Investment Factor.......................................................
Fixed Account Value.........................................................
5. What are the Expenses under a Contract?......................................
Surrender Charge............................................................
Annual Administration Charge................................................
Transfer Charge.............................................................
Asset-Based Charges.........................................................
Fund Expenses...............................................................
6. How will my Contract be Taxed?...............................................
Tax Status of the Contract..................................................
Tax Treatment of Annuities..................................................
Taxation of a Non-Qualified Contract........................................
Taxation of a Qualified Contract............................................
Other Tax Consequences......................................................
i
<PAGE> 21
7. How do I access my Money?...................................................
Withdrawals................................................................
Systematic Partial Withdrawal Program......................................
IRA Partial Withdrawal Program.............................................
Requesting Payments........................................................
8. How is Contract Performance Presented?......................................
9. Does the Contract have a Death Benefit?.....................................
Proof of Death.............................................................
10. What Other Information Should I Know?.......................................
Separate Accounts..........................................................
Modification...............................................................
Distribution of the Contacts...............................................
Experts....................................................................
Legal Proceedings..........................................................
Reports to Contract Owners.................................................
Assignment.................................................................
Change of Owner, Beneficiary, or Annuitant.................................
Misstatement and Proof of Age, Sex, or Survival............................
Incontestability...........................................................
Authority to Make Agreements...............................................
Preparing for the Year 2000................................................
Financial Statements.......................................................
11. How Can I Make Inquiries?...................................................
12. Additional Information about Sage Life Assurance of America, Inc.
History and Business.......................................................
Selected Financial Data....................................................
Transactions with Sage Insurance Group.....................................
Employees..................................................................
Properties.................................................................
State Regulation...........................................................
Directors and Executive Officers...........................................
FINANCIAL STATEMENTS OF SAGE LIFE ASSURANCE OF AMERICA, INC.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A
APPENDIX B
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
ii
<PAGE> 22
INDEX OF TERMS
We have tried to make this Prospectus as readable and understandable as
possible. However, for you to understand how the Contracts work, we have had to
use certain terms that have special meanings. We define these terms below.
Account Value - The Account Value is the entire amount we hold under your
Contract during the Accumulation Phase. It is equal to the sum of the Variable
Account Value and Fixed Account Value.
Accumulation Phase - The Accumulation Phase is the period during which you
accumulate savings under your Contract.
Accumulation Unit - An Accumulation Unit is the unit of measure we use before
the Income Date to keep track of the value of each Variable Sub-Account.
Annuitant - The Annuitant is the natural person whose age determines the maximum
Income Date and the amount and duration of income payments involving life
contingencies. The Annuitant may also be the person to whom any payment will be
made starting on the Income Date.
Asset-Based Charges - The Asset-Based Charges are charges for mortality and
expense risks and for administrative costs assessed monthly against the assets
of the Variable Account. After the Income Date, these charges are called
Variable Sub-Account Charges and are deducted daily from the assets of the
Variable Account.
Beneficiary - The Beneficiary is the person or persons to whom we pay a death
benefit if any Owner dies before the Income Date.
Business Day - A Business Day is any day the New York Stock Exchange ("NYSE") is
open for trading and we are open for business, exclusive of (i) Federal
holidays, (ii) any day on which an emergency exists making the disposal or fair
valuation of assets in the Variable Account not reasonably practicable, and
(iii) any day on which the Securities and Exchange Commission ("SEC") permits a
delay in the disposal or valuation of assets in the Variable Account.
Code - The Code is the Internal Revenue Code of 1986, as amended.
Contracts - The Contracts are flexible payment deferred combination fixed and
variable annuity contracts offered by us, Sage Life Assurance of America, Inc.
In some jurisdictions, we issue the Contracts directly to individuals. In most
jurisdictions, however, the Contracts are only available as a group contract. We
issue a group Contract to or on behalf of a group. Individuals who are part of a
group to which we issue a Contract receive a certificate that recites
substantially all of
1
<PAGE> 23
the provisions of the group Contract. Throughout this Prospectus and unless
otherwise stated, the term "Contract" refers to individual contracts, group
Contracts, and certificates for group Contracts.
Contract Anniversary - A Contract Anniversary is each anniversary of the
Contract Date.
Contract Date - The Contract Date is the date an individual Contract or a
certificate for a group Contract is issued at our Customer Service Center.
Contract Year - A Contract Year is each and every consecutive twelve-month
period beginning on the Contract Date and the anniversaries thereof.
Customer Service Center - The Customer Service Center is where we provide
service to you. The administrator of our center is Financial Administration
Services, Inc. The mailing address and telephone number of the Customer Service
Center are shown on the first page of this Prospectus.
Executive Office - The Executive Office is our main office. The mailing address
of our Executive Office is shown on the first page of this Prospectus.
Expiration Date - The Expiration Date is the last day in a Guarantee Period. In
the Contract, this is referred to as the "Expiry Date."
Fixed Account - The Fixed Account is The Sage Fixed Interest Account A. It is a
separate investment account of ours under state insurance law (but is not
required to be nor has it been registered under the federal securities laws)
into which purchase payments may be invested or Account Value may be
transferred. In certain states, we refer to the Fixed Account as the Interest
Account.
Fixed Account Value - The Fixed Account Value is the sum of the value of each
Fixed Sub-Account on a Business Day during the Accumulation Phase.
Fixed Sub-Account - A Fixed Sub-Account is established when a purchase payment
is invested or an amount is transferred to the Fixed Account. Each Fixed
Sub-Account is credited with a Guaranteed Interest Rate for a specified
Guarantee Period.
Fund - A Fund is an investment portfolio in which a Variable Sub-Account
invests.
General Account - The General Account consists of all our assets other than
those held in any separate investment accounts.
Guaranteed Interest Rate - A Guaranteed Interest Rate is the effective annual
interest rate that we
2
<PAGE> 24
will credit for a specified Guarantee Period for amounts allocated to a Fixed
Sub-Account. The Guaranteed Interest Rate will never be less than the minimum
shown in your Contract.
Guarantee Period - A Guarantee Period is a period of years for which a specified
effective annual interest rate (Guaranteed Interest Rate) is guaranteed by us.
Interest is credited daily at a rate to yield the declared annual Guaranteed
Interest Rate.
Income Date - The Income Date is the date you select for your income payments to
begin.
Income Phase - The Income Phase starts on the Income Date and is the period
during which you receive income payments.
Income Unit - An Income Unit is the unit of measure we use to calculate the
amount of income payments under a variable income plan option.
Market Value Adjustment - A Market Value Adjustment is a positive or negative
adjustment that may apply to a surrender, withdrawal, or transfer, and to
amounts applied to an income plan from a Fixed Sub-Account before the end of its
Guarantee Period.
Net Asset Value - The Net Asset Value is the price of one share of a Fund.
Owner - The Owner is the person or persons who owns (or own) a Contract.
Provisions relating to action by the Owner mean, in the case of joint Owners,
both Owners acting jointly. In the context of a Contract issued on a group
basis, Owners refer to holders of certificates under the group Contract.
Satisfactory Notice - Satisfactory Notice is a notice or request authorized by
you, in a form satisfactory to us, received at our Customer Service Center.
Surrender Value - The Surrender Value is the amount you receive upon surrender
of your Contract before the Income Date.
Valuation Period - The Valuation Period is the period between one calculation of
an Accumulation Unit value and the next calculation. Normally, we calculate
Accumulation Units once each Business Day, but we can delay this calculation if
an emergency exists, making disposal of or fair valuation of assets in the
Variable Account not reasonably practicable, or if the SEC permits such
deferral.
Variable Account - The Variable Account is The Sage Variable Annuity Account A.
It is a separate investment account of ours under the federal securities laws
into which purchase payments may be invested or Account Value may be
transferred.
3
<PAGE> 25
Variable Account Value - The Variable Account Value is the sum of the value of
each Variable Sub-Account on a Business Day during the Accumulation Phase.
Variable Sub-Account - A Variable Sub-Account is a division of the Variable
Account that invests in shares of a particular Fund.
Variable Sub-Account Charges - Variable Sub-Account Charges are Asset-Based
Charges that are deducted daily from the assets of the Variable Account after
the Income Date.
"We", "us", "our", "Sage Life" or the "Company" is Sage Life Assurance of
America, Inc.
"You" or "your" is the Owner of a Contract. You are entitled to exercise all
rights under a Contract. However, if you designate an irrevocable beneficiary,
you may need the consent of that beneficiary before you exercise your rights
under your Contract. Your death before the Income Date initiates payment of the
death benefit.
4
<PAGE> 26
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the expenses
that you will pay directly or indirectly when you invest in the Contract.
TRANSACTION EXPENSES
Sales Load Imposed on Purchases (as a percentage of purchase
payments)........................................................... None
Surrender Charge.................................................... None
Transfer Charge(1).................................................. $ 0
Annual Administration Charge
Contract Years 1-7(2)................................................ $40
After Contract Year 7................................................ $ 0
In addition, the amount of any state and local taxes levied by any governmental
entity on purchase payments may be deducted from your Account Value when such
taxes are incurred. We reserve the right to defer the collection of this charge
and deduct it against your Account Value on the surrender of a Contract, or on
application of Account Value to provide income payments. We refer to this as the
Purchase Payment Tax Charge.
VARIABLE ACCOUNT ANNUAL EXPENSES(3) (deducted monthly as a percentage of the
Variable Account Value)
Contract Years
--------------
1 - 7 8 +
----- ---
Mortality and Expense Risk Charge 1.25% 1.10%
Asset-Based Administrative Charge 0.15% 0.15%
----- -----
Total Asset-Based Charges 1.40% 1.25%
Fund Charges. The fees and expenses for each of the Funds (as a percentage of
net assets) for the year ended December 31, 1997 are set forth in the following
table. For more information on these fees and expenses, see the prospectuses for
the Trusts that accompany this Prospectus.
5
<PAGE> 27
FUND ANNUAL EXPENSES (as a percentage of average daily net assets of a Fund)
<TABLE>
<CAPTION>
Management Other
Fees (after Expenses (after
fee waiver as reimbursement- Total
Fund applicable) as applicable) Expenses
---- ------------- -------------- --------
<S> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. Government
Securities Fund 0.50% 0.37% 0.87%(4)
AIM V.I. Growth and
Income Fund 0.63% 0.06% 0.69%(4)
AIM V.I. International
Equity Fund 0.75% 0.18% 0.93%(4)
AIM V.I. Value Fund 0.62% 0.08% 0.70%(4)
THE ALGER AMERICAN FUND:
Alger American MidCap
Growth Portfolio 0.80% 0.04% 0.84%
Alger American Income and
Growth Portfolio 0.625% 0.115% 0.74%
Alger American Small
Capitalization Portfolio 0.85% 0.04% 0.89%
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities
Fund, Variable Series 0.60% 0.20% 0.80%(5)
Colonial Small Cap Value Fund,
Variable Series 0.80% 0.20% 1.00%(5)
Colonial Strategic Income Fund,
Variable Series 0.65% 0.15% 0.80%(6)
Colonial U.S. Stock Fund,
Variable Series 0.80% 0.14% 0.94%
Liberty All-Star Equity Fund,
Variable Series 0.80% 0.20% 1.00%(6)
Newport Tiger Fund,
Variable Series 0.90% 0.35% 1.25%
Stein Roe Global Utilities
Fund, Variable Series 0.65% 0.18% 0.83%
</TABLE>
6
<PAGE> 28
<TABLE>
<CAPTION>
Management Other
Fees (after Expenses (after
fee waiver reimbursement- Total
Fund as applicable) as applicable) Expenses
---- -------------- -------------- --------
<S> <C> <C> <C>
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock Fund,
Variable Series 0.65% 0.06% 0.71%
Stein Roe Balanced Fund,
Variable Series 0.60% 0.06% 0.66%
MFS VARIABLE INSURANCE TRUST:
MFS Growth With Income Series 0.75% 0.25%(7) 1.00%(7)
MFS High Income Series 0.75% 0.25%(7) 1.00%(7)
MFS Research Series 0.75% 0.13% 0.88%
MFS Total Return Series 0.75% 0.25%(7) 1.00%(7)
MFS Value Series 0.75% 0.25%(7) 1.00%(7)
MORGAN STANLEY UNIVERSAL
FUNDS, INC.(SM):
Global Equity Portfolio 0.00% 1.15% 1.15%(8)
Mid Cap Value Portfolio 0.00% 1.05% 1.05%(8)
Value Portfolio 0.00% 0.85% 0.85%(8)
OPPENHEIMER VARIABLE FUNDS:
Oppenheimer Bond Fund 0.73% 0.05% 0.78%
Oppenheimer Growth Fund 0.73% 0.02% 0.75%
Oppenheimer Small Cap
Growth Fund 0.75% 0.08% 0.83%(9)
SAGE LIFE INVESTMENT TRUST:
EAFE Equity Index Fund 0.73% 0.17% 0.90%(10)
S&P 500 Equity Index Fund 0.38% 0.17% 0.55%(10)
Money Market Fund 0.48% 0.17% 0.65%(10)
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity Income
Portfolio 0.85% 0.00% 0.85%
T. Rowe Price Mid-Cap
Growth Portfolio 0.85% 0.00% 0.85%
T. Rowe Price Personal
Strategy Balanced Portfolio 0.90% 0.00% 0.90%
</TABLE>
7
<PAGE> 29
(1) Currently, there is no transfer charge. However, we reserve the right to
charge up to $25 for the 13th and each subsequent transfer during a Contract
Year.
(2) We waive the Annual Administration Charge if the Account Value is at
least $50,000 on the date of deduction.
(3) We call the Asset-Based Charges Variable Sub-Account Charges and deduct
them on a daily basis after the Income Date. See "What are the Expenses under
the Contract?" on page __.
(4) A I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its fees. Effective May 1, 1998, the Funds reimburse AIM in an amount up
to 0.25% of the average net asset value of each Fund, for expenses incurred in
providing, or assuring that participating insurance companies provide, certain
administrative services. Currently, the fee only applies to the average net
asset value of each Fund in excess of the net asset value of each Fund as
calculated on April 30, 1998.
(5) Liberty Variable Investment Trust's Colonial High Yield Securities Fund
and Colonial Small Cap Value Fund did not commence operations until 1998. The
figures shown are based on estimates for the current fiscal year.
(6) Without reimbursements, the total expenses for Liberty Variable
Investment Trust's Colonial Strategic Income Fund and Liberty All-Star Equity
Fund during 1997 would have been 0.82% and 1.45%, respectively.
(7) Without reimbursements, the other expenses and total expenses for MFS
Variable Insurance Trust's Growth with Income Series, High Income Series, Total
Return Series and Value Series during 1997 would have been .35% and 1.10%, .40%
and 1.15%, .27% and 1.02%, and 1.33% and 2.08%, respectively.
(8) Without reimbursements, the total expenses for of Morgan Stanley
Universal Funds, Inc.'s Global Equity Portfolio, Mid Cap Value Portfolio, Value
Portfolio would have been 2.43%, 2.13%, and 1.87%, respectively.
(9) Oppenheimer Variable Account Fund's Small Cap Growth Fund did not
commence operations until 1998. The figures shown are based on estimates for the
current fiscal year.
(10) These Funds have not commenced operations. The figures shown are based on
estimates. Without reimbursements, the total expenses of Sage Life Investment
Trust's EAFE Equity Index Fund, S&P 500 Equity Index Fund, and Money Market Fund
would be 1.07%, .72%, and .82%, respectively.
EXAMPLES
The purpose of the following examples is to demonstrate the expenses that
you would pay on a $1,000 investment in the Variable Account. We calculate the
examples based on the fees and charges shown in the tables above. For a more
complete description of these expenses, see "What are the Expenses under a
Contract?" beginning on page __ of this Prospectus, and see
8
<PAGE> 30
the prospectuses for the Trusts. The Examples assume that the average Account
Value is $30,000, and that you have invested all your money in the Variable
Account.
You should not consider the Examples a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In addition,
we do not reflect Purchase Payment Tax Charges. These charges may apply
depending on the state where the Contract is sold. You might also incur transfer
fees if you make more than twelve transfers in a Contract Year.
See "Transfer Charge," page _. The assumed 5% annual rate of return is
hypothetical. You should not consider it to be a representation of past or
future annual returns, which may be greater or less than this assumed rate.
You would pay the following expenses on a $1,000 initial purchase
payment, assuming a 5% annual return on assets and the charges listed in
the Fee Table above.
<TABLE>
<CAPTION>
If you surrender or if you
do not surrender your Contract
Fund at the end of each time period
- ----
1 Year 3 Years
------ -------
<S> <C> <C>
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. Government Securities Fund $25 $78
AIM V.I. Growth and Income Fund $23 $72
AIM V.I. International Equity Fund $25 $80
AIM V.I. Value Fund $23 $72
THE ALGER AMERICAN FUND:
Alger American MidCap Growth Portfolio $24 $77
Alger American Income and Growth Portfolio $23 $74
Alger American Small Capitalization Portfolio $25 $78
</TABLE>
9
<PAGE> 31
<TABLE>
<CAPTION>
If you surrender or if you
do not surrender your Contract
Fund at the end of each time period
- ----
1 Year 3 Years
------ -------
<S> <C> <C>
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities Fund, Variable Series $24 $76
Colonial Small Cap Value Fund, Variable Series $26 $82
Colonial Strategic Income Fund, Variable Series $24 $76
Colonial U.S. Stock Fund, Variable Series $25 $80
Liberty All-Star Equity Fund, Variable Series $26 $82
Newport Tiger Fund, Variable Series $29 $90
Stein Roe Global Utilities Fund, Variable Series $24 $76
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock Fund, Variable Series $23 $73
Stein Roe Balanced Fund, Variable Series $23 $71
MFS VARIABLE INSURANCE TRUST:
MFS Growth With Income Series $26 $82
MFS High Income Series $26 $82
MFS Research Series $25 $78
MFS Total Return Series $26 $82
MFS Value Series $26 $82
MORGAN STANLEY UNIVERSAL FUNDS, INC.:
Global Equity Portfolio $28 $87
Mid Cap Value Portfolio $27 $84
Value Portfolio $24 $77
</TABLE>
10
<PAGE> 32
<TABLE>
<CAPTION>
If you surrender or if you
do not surrender your Contract
Fund at the end of each time period
- ----
1 Year 3 Years
------ -------
<S> <C> <C>
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund $24 $75
Oppenheimer Growth Fund $23 $74
Oppenheimer Small Cap Growth Fund $24 $76
SAGE LIFE INVESTMENT TRUST:
EAFE Equity Index Fund $25 $79
S&P 500 Equity Index Fund $21 $67
Money Market Fund $22 $71
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity Income Portfolio $24 $77
T. Rowe Price Mid-Cap Growth Portfolio $24 $77
T. Rowe Price Personal Strategy Balanced Portfolio $25 $79
</TABLE>
1. WHAT ARE THE CONTRACTS?
The Contracts are flexible payment deferred combination fixed and
variable annuity Contracts offered by us, Sage Life Assurance of America, Inc.
Throughout this Prospectus, the term "Contracts" refers to individual Contracts,
group Contracts, and certificates for group Contracts. We designed the Contracts
for use in long-term financial and retirement planning. They provide a means for
investing amounts on a tax-deferred basis in our Variable Account and our Fixed
Account.
Under the terms of the Contracts, we promise to pay you (or the
Annuitant, if the Owner is other than an individual) regular income payments
after the Income Date. Until the Income Date, you may make additional purchase
payments under the Contract, and will ordinarily not be taxed on increases in
the value of your Contract as long as you do not take distributions. When you
use the Contract in connection with tax-qualified retirement plans, federal
income taxes may be deferred on your purchase payments, as well as on increases
in the value of your Contract. See "How will my Contract be Taxed?" on page ___.
The Contracts may not be available in all states.
11
<PAGE> 33
When you make purchase payments, you can allocate those purchase payments
to one or more of the 33 subdivisions of the Variable Account, known as
"Variable Sub-Accounts." Purchase payments allocated to a Variable Sub-Account
will be invested solely in a Fund, as you direct. Your Account Value in a
Variable Sub-Account will vary according to the investment performance of the
corresponding Fund. Depending on market conditions, your value in each Variable
Sub-Account could increase or decrease. No minimum value is guaranteed. The
total of the values in the Variable Sub-Accounts is called the Variable Account
Value.
You can also allocate purchase payments to our Fixed Account. See "Fixed
Account Investment Option, " page ___. The Fixed Account includes Fixed
Sub-Accounts to which we credit fixed rates of interest for the Guarantee
Periods you select. We currently offer Guarantee Periods with durations of 1, 2,
3, 4, 5, 7, and 10 years. If any amount allocated or transferred remains in a
Guarantee Period until the Expiration Date, its value will be equal to the
amount originally allocated or transferred, multiplied, on an annually
compounded basis, by its Guaranteed Interest Rate. Any surrender, withdrawal,
transfer, or amount applied to an income plan from a Fixed Sub-Account before
its Expiration Date ordinarily will be subject to a Market Value Adjustment that
may increase or decrease the value of the Fixed Sub-Account (or portion thereof)
being surrendered, withdrawn, transferred, or applied to an income plan. See
"Market Value Adjustment" page _____.
You can transfer Account Value from one Variable Sub-Account to another,
and from a Fixed Sub-Account to a Variable Sub-Account and from a Variable
Sub-Account to a Fixed Sub-Account, subject to certain conditions. See
"Transfers," page __.
Sage Life may offer other variable annuity contracts that also invest in
the same Funds offered under the Contracts. These contracts may have different
charges and they may offer different benefits.
2. WHAT ARE MY INCOME PAYMENT OPTIONS?
You choose the Income Date or other agreed upon date when you want
regular income payments to begin. The Income Date you choose must be on or
before the first calendar month following the Annuitant's 95th birthday. We
reserve the right to require that your Income Date be at least two years after
the Contract Date. After you choose the Income Date, you select an income plan
from the list below, and indicate whether you want your income payments to be
fixed or variable or a combination of fixed and variable. You must give
Satisfactory Notice of your choices at least 30 days prior to the Income Date,
and you must have at least $5,000 of Account Value to apply to a variable or
fixed income option.
On the Income Date, the Account Value under the Contract (adjusted for
any Market Value Adjustment, if applicable) will be used to provide income
payments. Unless you request otherwise, we
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will use any Variable Account Value to provide variable income payments, and we
will use any Fixed Account Value to provide fixed income payments. If you have
not chosen an income plan by the Income Date, a "life annuity with 10 years
certain" (described below) will be used.
The available income plans are:
- INCOME PLAN 1 - LIFE ANNUITY. An amount payable during the
lifetime of the Annuitant terminating with the last payment
preceding the death of the Annuitant.
- INCOME PLAN 2 - LIFE ANNUITY WITH 10 OR 20 YEARS CERTAIN. An
amount payable during the lifetime of the Annuitant with the
guarantee that payments be made for a minimum of 10 or 20 years,
as elected.
- INCOME PLAN 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY. An amount
payable during the joint lifetime of the Annuitant and a
designated second person, and thereafter during the remaining
lifetime of the survivor, ceasing with the last payment prior to
the death of the survivor.
- INCOME PLAN 4 - PAYMENTS FOR A SPECIFIED PERIOD CERTAIN. An
amount payable for the number of years selected which may be from
5 to 30 years.
- INCOME PLAN 5 - ANNUITY PLAN. An amount can be used to purchase
any other income plan we offer on the Income Date for which you
and the Annuitant are eligible.
Your first income payment, whether fixed or variable, will be based on
the amount of proceeds applied under the income plan you have selected and on
the "annuity purchase rates" based on the Annuitant's age and sex, and if
applicable upon the age and sex of a second designated person. The annuity
purchase rate we apply will never be lower than the rate shown in your Contract.
If you have told us you want fixed income payments, the amount of each
income payment is guaranteed and remains level throughout the period you
selected.
If you told us you want variable income payments, the amount of each
payment will vary according to the investment performance of the Funds you
selected.
To calculate your initial and future variable income payments, we need
to make an assumption regarding the investment performance of the Funds you
select. We call this your assumed investment rate. This rate is simply the total
return, after expenses, you need to earn to keep your variable income payments
level. Rather than building in our own estimate, we allow you to tailor your
variable income payments to meet your needs by giving you a choice of rates.
You currently may select either 3% or 6%; if you do not select a rate, we will
apply the 3% rate. (We may offer other rates in the future). The lower the
rate, the lower your initial variable income payment, but the better your
payments will keep pace with inflation (assuming positive investment
performance).
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For example, if you select 3%, this means that if the investment
performance, after expenses, of your Funds is less than 3%, then the dollar
amount of your variable income payment will decrease. Conversely, if the
investment performance, after expenses, of your Funds is greater than 3%, then
the dollar amount of your income payments will increase.
If you told us that you want a life annuity, it is possible that you
could only receive one payment.
Your income payments will be made monthly, unless you choose quarterly,
semi-annual or annual payments by giving us Satisfactory Notice at least 30 days
prior to the Income Date. Payments start on the Income Date. If any payment
would be less than $100, we may change the payment frequency to the next longer
interval, but in no event less frequent than annual. Also, if on the Income
Date, the Account Value is less than $5,000, we may pay the Surrender Value on
that date in one sum.
3. HOW DO I PURCHASE A CONTRACT?
INITIAL PURCHASE PAYMENT. Contracts may be purchased for use in
connection with tax-qualified plans ("Qualified Contracts"), or may be purchased
on a non-tax qualified basis ("Non-Qualified Contracts"). To purchase a
Contract, you and the Annuitant you selected may not be more than 85 years old
on the Contract Date. A minimum initial purchase payment of $25,000 is required.
ISSUANCE OF A CONTRACT. Once we receive your initial purchase payment and
your application at our Customer Service Center, we will usually issue your
Contract within two Business Days. However, if you did not give us all the
information we need, we will try to contact you to get the additional needed
information. If we cannot complete the application within five Business Days, we
will either send your money back or obtain your permission to keep your money
until we receive the necessary information. Your Contract Date will be the date
we issue your Contract at our Customer Service Center.
FREE LOOK RIGHT TO CANCEL CONTRACT. During your "Free Look" Period, you
may cancel your Contract. The Free Look Period usually expires 10 days after you
receive your Contract. Some states may require a longer period. If you decide to
cancel your Contract, you must return it to our Customer Service Center or to
one of our authorized registered representatives. You will receive a refund of
your Account Value plus any charges we have deducted on or before the date we
receive your returned Contract at our Customer Service Center, or if required by
the law
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of your state, your initial purchase payment (less any withdrawals previously
taken). In those latter states where this requirement exists, amounts you
allocate to the Variable Account will be temporarily allocated to the Money
Market Fund until the Free Look Period expires. See "What are my Investment
Options," page ___.
MAKING ADDITIONAL PURCHASE PAYMENTS. You may make additional purchase
payments of $1,000 or more at any time before the Income Date, subject to the
following conditions. We will accept additional purchase payments under a
Non-Qualified Contract until the earlier of the year in which you attain age 85
or the year in which the Annuitant attains age 85. We will accept additional
purchase payments under a Qualified Contract until the year in which you attain
70 1/2, except contributions to a Roth IRA or rollover contributions may be made
until the year in which you attain age 85. You must obtain our prior approval
before you make a purchase payment that causes the Account Value of all
annuities that you maintain with us to exceed $1,000,000. We will credit any
purchase payment received after the Contract Date to your Contract as of the
Business Day on which we receive it at our Customer Service Center. Purchase
payments received on other than a Business Day will be deemed received on the
next following Business Day.
In addition, if you have not made a purchase payment for more than two
years and your Account Value is less than $2,000 on a Contract Anniversary, we
may cancel your Contract and pay you the Surrender Value as though you had
surrendered by giving you written notice at your address of record. However, you
will be allowed 61 days from the date of that notice to submit an additional
purchase payment in an amount sufficient to maintain your Account Value at
$2,000 or more. If we have not received the required additional purchase payment
by the end of this period, we may cancel your Contract.
4. WHAT ARE MY INVESTMENT OPTIONS?
PURCHASE PAYMENT ALLOCATIONS. When you apply for a Contract, you specify
the percentage of your purchase payment to be allocated to each Variable
Sub-Account and/or to each Fixed Sub-Account. You can change the allocation
percentages at any time by sending Satisfactory Notice to our Customer Service
Center. The change will apply to all purchase payments we receive on or after
the date we receive your request. Purchase payment allocations must be in
percentages totaling 100%, and each allocation percentage must be a whole
number.
We may, however, require that an initial purchase payment allocated to a
Variable Sub-Account be temporarily invested in the Money Market Fund during the
Free Look Period. We will require this if the law of your state requires us to
refund your full initial purchase payment less any withdrawals previously taken,
should you cancel your Contract during the Free Look Period. At the end of the
Free Look Period, if your initial purchase payment was temporarily allocated to
the Money Market Fund by us, we will transfer the value of what is in the Money
Market Fund to the Variable Sub-Account(s) you specified in your application.
Solely for the
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purpose of processing transfers from the Money Market Fund, we will deem the
Free Look Period to end 15 days after the Contract Date. This transfer from the
Money Market Fund to the Variable Sub-Accounts upon the expiration of the Free
Look Period does not count as a transfer for any other purposes under the
Contract.
VARIABLE SUB-ACCOUNT INVESTMENT OPTIONS. The Variable Account has 33
Sub-Accounts, each investing in a specific Fund. Each of the Funds is either an
open-end diversified management investment company or a separate investment
portfolio of such a company, and is managed by a registered investment adviser.
The Funds, as well as brief descriptions of their investment objectives, are
provided below. There is no assurance that these objectives will be met.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. GOVERNMENT SECURITIES FUND. This Fund seeks to achieve a high
level of current income consistent with reasonable concern for safety of
principal by investing in debt securities issued, guaranteed, or otherwise
backed by the U.S. Government.
AIM V.I. GROWTH AND INCOME FUND. This Fund seeks to provide growth of
capital, with current income as a secondary objective. The Fund seeks to achieve
its objective by generally investing at least 65% of its net assets in stocks of
companies believed by the management to have the potential for above average
growth in revenues and earnings.
AIM V.I. INTERNATIONAL EQUITY FUND. This Fund seeks to provide long-term
growth of capital by investing in a diversified portfolio of international
equity securities, the issuers of which are considered by the Fund's investment
advisor to have strong earnings momentum.
AIM V.I. VALUE FUND. This Fund seeks to achieve long-term growth of
capital by investing primarily in equity securities judged by the Fund's
investment advisor to be undervalued relative to the current or projected
earnings of the companies issuing the securities, or relative to current market
values of assets owned by the companies issuing the securities or relative to
the equity market generally. Income is a secondary objective.
A I M Advisors, Inc. advises the AIM Variable Insurance Funds, Inc.
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO. This Fund seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of equity
securities, primarily of companies with total market capitalization within the
range included in the S&P MidCap 400 Index.
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ALGER AMERICAN INCOME AND GROWTH PORTFOLIO. This Fund seeks to provide a
high level of dividend income through investments in equity securities. Capital
appreciation is a secondary objective of this Fund.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO. This Fund seeks long-term
capital appreciation through investment primarily in equity securities that, at
the time of purchase, have total market capitalization within the range of
companies included in the Russell 2000 Growth Index or the S&P SmallCap 600
Index.
Fred Alger Management, Inc. advises The Alger American Fund.
LIBERTY VARIABLE INVESTMENT TRUST
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES ("High Yield
Securities Fund"). This Fund seeks high current income and total return by
investing primarily in lower rated corporate debt securities (commonly referred
to as "junk bonds").
COLONIAL SMALL CAP VALUE FUND, VARIABLE SERIES ("Small Cap Value Fund").
This Fund seeks long-term growth by investing primarily in smaller
capitalization equity securities.
COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES ("Strategic Income
Fund"). This Fund seeks a high level of current income, as is consistent with
prudent risk and maximizing total return, by diversifying investments primarily
in U.S. and foreign government and lower rated corporate debt securities.
COLONIAL U.S. STOCK FUND, VARIABLE SERIES ("U.S. Stock Fund"). This Fund
seeks long-term growth by investing primarily in large capitalization equity
securities.
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES ("All-Star Fund"). This
Fund seeks total investment return, comprised of long-term capital appreciation
and current income, through investment primarily in a diversified portfolio of
equity securities.
NEWPORT TIGER FUND, VARIABLE SERIES ("Tiger Fund"). This Fund seeks
long-term capital growth by investing primarily in equity securities of
companies located in the nine Tigers of Asia (Hong Kong, Singapore, South Korea,
Taiwan, Malaysia, Thailand, Indonesia, China and the Philippines).
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES ("Global Utilities
Fund"). This Fund seeks current income and long-term growth of capital. The
Global Utilities Fund normally invests at least 65% of its total assets in U.S.
and foreign equity and debt securities of companies engaged in the manufacture,
production, generation, transmission, sale or distribution of electricity,
natural gas or other types of energy, or water or other sanitary services, and
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companies engaged in telecommunication, including telephone, telegraph,
satellite, microwave and other communications media.
Liberty Advisory Services Corp. (formerly "Keyport Advisory Services
Corp.") provides investment management and advisory services to the Liberty
Variable Investment Trust. Colonial Management Associates, Inc. subadvises the
High Yield Securities Fund, the U.S. Stock Fund, the Small Cap Value Fund, and
the Strategic Income Fund. Stein Roe & Farnham Incorporated subadvises the
Global Utility Fund. Newport Fund Management, Inc. subadvises the Tiger Fund.
Liberty Asset Management Company subadvises the All-Star Fund.
STEINROE VARIABLE INVESTMENT TRUST
STEIN ROE GROWTH STOCK FUND. This Fund seeks long-term growth of capital
through investments primarily in common stocks.
STEIN ROE BALANCED FUND. This Fund seeks high total investment return
through a changing mix of equities, debt securities, and cash.
Stein Roe & Farnham Incorporated advises the SteinRoe Variable Investment
Trust.
MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable
current income and long-term growth of capital and income. Under normal market
conditions, the MFS Growth with Income Series will invest at least 65% of its
assets in equity securities of companies that are believed to have long-term
prospects for growth and income.
MFS HIGH INCOME SERIES. This Fund seeks high current income by investing
primarily in a professionally managed diversified portfolio of fixed income
securities, some of which may involve equity features. Fixed income securities
offering the high current income sought by the High Income Series normally
include those fixed income securities which offer a current yield above that
generally available on debt securities in the three highest rating categories by
recognized rating agencies (commonly known as "junk bonds" if rated below the
four highest categories of recognized rating agencies). See the prospectus for
the Trust for more information.
MFS RESEARCH SERIES. This Fund seeks to provide long-term growth of
capital and future income. The MFS Research Series' policy is to invest a
substantial proportion of its assets in equity securities of companies believed
to possess better than average prospects for long-term growth.
MFS TOTAL RETURN SERIES. This Fund seeks primarily to provide
above-average income (compared to a portfolio invested entirely in equity
securities) consistent with the prudent
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employment of capital, and secondarily to provide a reasonable opportunity for
growth of capital and income.
MFS VALUE SERIES. This Fund seeks capital appreciation. Dividend income,
if any, is a consideration incidental to the Fund's objective of capital
appreciation.
MFS Investment Management(R) advises the MFS(R) Variable Insurance
Trust.(SM)
MORGAN STANLEY UNIVERSAL FUNDS, INC.
GLOBAL EQUITY PORTFOLIO. This Fund seeks long-term capital appreciation
by investing primarily in equity securities of issuers throughout the world,
including U.S. issuers, using an approach that is oriented to the selection of
individual stocks that the Fund's investment adviser believes are undervalued.
MID CAP VALUE PORTFOLIO. This Fund seeks above-average total return over
a market cycle of three to five years by investing in common stocks and other
equity securities of issuers with equity capitalizations in the range of
companies represented in the S&P MidCap 400 Index.
VALUE PORTFOLIO. This Fund seeks above-average return over a market cycle
of three to five years by investing primarily in a diversified portfolio of
common stocks and other equity securities that are deemed by the Fund's
investment adviser to be relatively undervalued based on various measures such
as price/earnings ratios and price/book ratios.
Morgan Stanley Asset Management advises the Global Equity Portfolio.
Miller Anderson & Sherrerd, LLP advises the Value Portfolio and the Mid Cap
Value Portfolio.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
OPPENHEIMER BOND FUND. This Fund seeks a high level of current income.
Secondarily, this Fund seeks capital growth when consistent with its primary
objective. The Fund will, under normal market conditions, invest at least 65% of
its total assets in investment grade debt securities.
OPPENHEIMER GROWTH FUND. This Fund seeks to achieve capital appreciation
by investing in securities of well-known, established companies.
OPPENHEIMER SMALL CAP GROWTH FUND. This Fund seeks capital appreciation.
Current income is not an objective. In seeking its investment objective, the
Fund emphasizes investments in securities of "growth type" companies with market
capitalizations of less than $1 billion, including common stocks, preferred
stocks, convertible securities, rights, warrants and options, in proportions
which may vary from time to time.
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Oppenheimer Funds, Inc. manages Oppenheimer Variable Account Funds.
SAGE LIFE INVESTMENT TRUST
EAFE EQUITY INDEX FUND. This Fund seeks to replicate as closely as
possible the performance of the Morgan Stanley Capital International Europe,
Australasia, Far East Index before the deduction of Fund expenses.
S&P 500 EQUITY INDEX FUND. This Fund seeks to replicate as closely as
possible the performance of the S&P 500 Composite Stock Price Index before the
deduction of Fund expenses.
MONEY MARKET FUND. This Fund seeks to provide high current income
consistent with the preservation of capital and liquidity. Although the Fund
seeks to maintain a constant net asset value of $1.00 per share, there can be
no assurance that the Fund can do so on a continuous basis. An investment in
the Money Market Fund is not guaranteed.
Sage Advisors, Inc. is the investment manager to the Sage Life
Investment Trust. State Street Global Advisors subadvises the EAFE Equity
Index Fund and S&P 500 Equity Index Fund. Conning Asset Management Company
subadvises the Money Market Fund.
T. ROWE PRICE EQUITY SERIES, INC.
T. ROWE PRICE EQUITY INCOME PORTFOLIO. This Fund seeks to provide
substantial dividend income and also long-term capital appreciation.
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO. This Fund seeks to provide
long-term capital appreciation by investing primarily in common stocks of
medium-sized (mid-cap) growth companies.
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO. The Fund seeks to
provide the highest total return over time consistent with an emphasis on both
capital appreciation and income. The Personal Strategy Balanced Portfolio
invests in a diversified portfolio of stocks, bonds, and money market
securities.
T. Rowe Price Associates, Inc. provides investment management to the
T. Rowe Price Equity Series, Inc.
The investment objectives and policies of certain Funds may be similar
to the investment objectives and policies of other retail mutual funds which
can be purchased outside of a variable insurance product, and that are managed
by the same investment adviser or manager. The investment results of the
Funds, however, may be higher or lower than the results of such other
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retail mutual funds. There can be no assurance, and no representation is made,
that the investment results of any of the Funds will be comparable to the
investment results of any other retail mutual fund, even if the other retail
mutual fund has the same investment adviser or manager.
Shares of the Funds may be sold to separate accounts of insurance
companies that are not affiliated with us or each other, a practice known as
"shared funding." They also may be sold to separate accounts to serve as the
underlying investment for both variable annuity contracts and variable life
insurance contracts, a practice known as "mixed funding." As a result, there
is a possibility that a material conflict may arise between the interests of
Owners whose Account Values are allocated to the Variable Account, and owners
of other contracts whose contract values are allocated to one or more other
separate accounts investing in any of the Funds. Shares of some of the Funds
may also be sold directly to certain qualified pension and retirement plans
qualifying under Section 401 of the Code. As a result, there is a possibility
that a material conflict may arise between the interest of Owners or owners of
other contracts (including contracts issued by other companies), and such
retirement plans or participants in such retirement plans. In the event of any
such material conflicts, we will consider what action may be appropriate,
including removing a Fund from the Variable Account or replacing the Fund with
another Fund. There are certain risks associated with mixed and shared funding
and with the sale of shares to qualified pension and retirement plans, as
disclosed in each Trust's prospectus.
We have entered into agreements with either the investment adviser or
distributor for each of the Funds pursuant to which the adviser or distributor
pays us a fee ordinarily based upon an annual percentage of the average
aggregate net amount we have invested on behalf of the Variable Account and
other separate accounts. These percentages differ, and some investment
advisers or distributors pay us a greater percentage than other advisers or
distributors. These agreements reflect administrative services we provide.
More detailed information concerning the investment objectives,
policies, and restrictions of the Funds, the expenses of the Funds, the risks
attendant to investing in the Funds and other aspects of their operations can
be found in the current prospectus for each Trust which accompanies this
Prospectus. The Trusts' prospectuses should be read carefully before any
decision is made concerning the allocation of amounts to the Variable
Sub-Accounts.
FIXED ACCOUNT INVESTMENT OPTIONS. Each time you allocate purchase
payments or transfer funds to the Fixed Account, we establish a Fixed
Sub-Account. Each Fixed Sub-Account is guaranteed an interest rate (the
"Guaranteed Interest Rate") for a period of time (a "Guarantee Period"). A
Guaranteed Interest Rate is established on the date that an allocation is made
to the Fixed Sub-Account.
We have no specific formula for establishing the Guaranteed Interest
Rates for the different Guarantee Periods. The determination made will be
influenced by, but not necessarily
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correspond to, interest rates available on fixed income investments that we may
acquire with the amounts we receive as purchase payments or transfers of
Account Value under the Contracts. These amounts will be invested primarily in
investment-grade fixed income securities including: securities issued by the
U.S. Government or its agencies or instrumentalities, which issues may or may
not be guaranteed by the U.S. Government; debt securities that have an
investment grade, at the time of purchase, within the four highest grades
assigned by Moody's Investor Services, Inc., Standard & Poor's Corporation, or
any other nationally recognized rating service; mortgage-backed securities
collateralized by real estate mortgage loans, or securities collateralized by
other assets, that are insured or guaranteed by the Federal Home Loan Mortgage
Association, the Federal National Mortgage Association, or the Government
National Mortgage Association, or that have an investment grade at the time of
purchase within the four highest grades described above; other debt
instruments; commercial paper; cash or cash equivalents. You will have no
direct or indirect interest in these investments, and you do not share in the
investment performance of the assets of the Fixed Account. We will also
consider other factors in determining the Guaranteed Interest Rates, including
regulatory and tax requirements, sales commissions, administrative expenses
borne by us, general economic trends, and competitive factors. THE COMPANY'S
MANAGEMENT WILL MAKE THE FINAL DETERMINATION OF THE GUARANTEED INTEREST RATES
IT DECLARES. WE CANNOT PREDICT OR GUARANTEE THE LEVEL OF FUTURE INTEREST
RATES. HOWEVER, OUR GUARANTEED INTEREST RATES WILL BE AT LEAST 3% PER YEAR.
GUARANTEED INTEREST RATES DO NOT DEPEND UPON AND DO NOT REFLECT THE PERFORMANCE
OF THE FIXED ACCOUNT.
We measure the length of a Guarantee Period from the end of the
calendar month in which you allocated or transferred the amount to the Fixed
Sub-Account. This means that the Expiration Date of any Guarantee Period will
always be the last day of a calendar month. The currently available Guarantee
Periods are 1, 2, 3, 4, 5, 7, and 10 years. We may offer different Guarantee
Periods in the future. Not all Guarantee Periods may be available in all
states. Any Guarantee Period you select cannot be longer than the number of
full years remaining until your Income Date.
We will notify you at least thirty days prior to an Expiration Date of
a Fixed Sub-Account in which you are invested of your options for renewal.
Your options are:
1. Take no action and we will transfer the value of the
expiring Fixed Sub-Account to the Fixed Sub-Account with the
same Guarantee Period, but not longer than five years or
extending beyond the Income Date, as of day the previous Fixed
Sub-Account expires. If such Guarantee Period is not
currently available, your value will be transferred to the
next shortest Guarantee Period. If there is no shorter
Guarantee Period, we will transfer your value to the Money
Market option.
2. Elect a new Guarantee Period(s) from among those
offered by us as of the day the previous Fixed Sub-Account
expires.
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3. Elect to transfer the value of the Fixed Sub-Account
to one or more Variable Sub-Accounts.
Any amounts surrendered, withdrawn, transferred or applied to an
income plan other than during the thirty days before the Expiration Date of the
Guarantee Period are subject to a Market Value Adjustment with the exception of
the following transactions:
- Transfers from specially designated Fixed Sub-Accounts made
automatically under our Dollar Cost Averaging Program, and
- Withdrawals of interest earned made automatically under our
Systematic Partial Withdrawal Program.
In addition, we currently waive any Market Value Adjustment on
withdrawals taken to satisfy IRS minimum distribution requirements in relation
to your Contract.
MARKET VALUE ADJUSTMENT. A Market Value Adjustment reflects the
change in interest rates since a Fixed Sub-Account was established. It
compares: (1) the current Index Rate for a period equal to the time remaining
in the Guarantee Period, and (2) the Index Rate at the time we established the
Fixed Sub-Account for a period equal to the Guarantee Period.
Ordinarily, if the current Index Rate for a period equal to the time
remaining in the Guarantee Period is higher than the applicable Index Rate at
the time the Fixed Sub-Account was established, the Market Value Adjustment
will be negative. Similarly, if the current Index Rate for a period equal to
the time remaining in the Guarantee Period is lower than the applicable Index
Rate at the time the Fixed Sub-Account was established, the Market Value
Adjustment will be positive.
We will apply a Market Value Adjustment as follows:
For a surrender, withdrawal, transfer, or amount applied to an income
plan, the Market Value Adjustment will be calculated on the total amount that
must be surrendered, withdrawn, transferred or applied to an income plan to
provide the amount requested.
- If the Market Value Adjustment is negative, it reduces any
remaining value in the Fixed Sub-Account, or amount of
Surrender Value. Any remaining MarketValue Adjustment then
reduces the amount withdrawn, transferred, or applied to an
income plan.
- If the Market Value Adjustment is positive, it increases any
remaining value in the Fixed Sub-Account. In the case of
surrender, or if the full amount of the Fixed Sub-Account is
withdrawn, transferred or applied to an income plan, the
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Market Value Adjustment increases the amount surrendered,
withdrawn, transferred, or applied to an income plan.
We will compute the Market Value Adjustment by multiplying the factor below by
the total amount that must be surrendered, withdrawn, transferred, or applied
to an income plan from the Fixed Sub-Account in order to provide the amount you
requested.
N/365
[(1+I)/(1+J+.0025)] - 1
Where
I is the Index Rate for a maturity equal to the Fixed
Sub-Account's Guarantee Period at the time we established the
Sub-Account;
J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period at the time of calculation; and
N is the remaining number of days in the Guarantee Period at
the time of calculation.
We currently base the Index Rate for a calendar week on the reported rate for
the preceding calendar week. We reserve the right to set it less frequently
than weekly but in no event less often than monthly. If there is no Index Rate
for the maturity needed to calculate I or J, straight-line interpolation
between the Index Rate for the next highest and next lowest maturities will be
used to determine that Index Rate. If the maturity is one year or less, we
will use the Index Rate for a one-year maturity.
In the states of Maryland and Washington, state insurance law requires
that the Market Value Adjustment be computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to an income plan, by the
greater of the factor above and the following factor: [(1.03)/(1+K)]((G-N)/365))
- - 1, where N is as defined above, K equals the Guarantee Interest Rate for the
Guarantee Period, and G equals the initial number of days in the Guarantee
Period.
Examples of how the Market Value Adjustment works are shown in
Appendix A.
TRANSFERS. Prior to the Income Date and while the Annuitant is
living, you may transfer Account Value from and among the Variable and Fixed
Sub-Accounts at any time. However, in certain states, you may not transfer
Account Value until after the end of the Free Look Period. See "What are my
Investment Options?," page __. The minimum amount of Account Value that may
be transferred from a Variable Sub-Account or a Fixed Sub-Account is $250, or,
if less, the entire remaining Account Value held in that Sub-Account. You must
give us Satisfactory Notice of the Variable Sub-Accounts and/or Fixed
Sub-Accounts from which and to which transfers are
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<PAGE> 46
to be made. Otherwise, we will not transfer your Account Value. A transfer
from a Fixed Sub-Account ordinarily will be subject to a Market Value
Adjustment. There is currently no limit on the number of transfers from and
among the Variable or Fixed Sub-Accounts.
A transfer ordinarily will take effect on the Business Day
Satisfactory Notice is received at our Customer Service Center. Requests
received on other than a Business Day will be deemed received on the next
following Business Day. We may, however, defer transfers to, from, and among
the Variable Sub-Accounts under the same conditions that we may delay paying
proceeds.
We reserve the right to impose a transfer charge of up to $25 on each
transfer in a Contract Year in excess of twelve, and to limit, upon notice, the
maximum number of transfers you may make per calendar month or per Contract
Year. For purposes of assessing any transfer charge, each transfer request
will be considered one transfer, regardless of the number of Variable or Fixed
Sub-Accounts affected by the transfer.
After the Income Date, you must have our prior consent to transfer
value from the Fixed Account to the Variable Account or from the Variable
Account to the Fixed Account. A Market Value Adjustment ordinarily will apply
to transfers from the Fixed Account. We reserve the right to limit the number
of transfers among the Variable Sub-Accounts to one transfer per Contract Year
after the Income Date.
TELEPHONE TRANSACTIONS. You may request transfers or withdrawals by
telephone. We will not be liable for following instructions communicated by
telephone that we reasonably believe to be genuine. To request transfers or
withdrawals by telephone, you must elect the option on our authorization form.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine and may only be liable for any losses due to
unauthorized or fraudulent instructions where we fail to follow our procedures
properly. Such procedures include the following: (a) upon telephoning a
request, you or your authorized representative will be asked to provide certain
identifying information, (b) all such conversations will be tape recorded, and
(c) all such telephone transactions will be followed by a confirmation
statement of the transaction.
Our telephone transaction authorization form may also allow you to
create a power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, such power will be treated as a
durable power of attorney, and shall not be affected by subsequent incapacity,
disability, or incompetency of the Owner. We may cease to honor the power by
sending written notice to you at your last known address. Neither we nor any
person acting on our behalf shall be subject to liability for any act executed
in good faith reliance upon your power of attorney.
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<PAGE> 47
POWER OF ATTORNEY. As a general rule and as a convenience to you, we
allow the use of powers of attorney whereby you can give a third party the
right to make transfers on your behalf. However, when the same third party
possesses powers of attorney executed by many Owners, the result can be
simultaneous transfers involving large amounts of Account Value. Such
transfers can disrupt the orderly management of the Funds, can result in higher
costs to Owners, and are ordinarily not compatible with the long-range goals of
purchasers of the Contracts. We believe that such simultaneous transfers made
by such third parties are not in the best interest of all shareholders of the
Funds, and this position is shared by the managements of the Funds.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, we may not honor such powers of attorney and have instituted or will
institute procedures to assure that the transfer requests that we receive have,
in fact, been made by the Owners in whose names they are submitted. However,
these procedures will not prevent Owners from making their own transfer
requests.
DOLLAR-COST AVERAGING PROGRAM. Our optional dollar-cost averaging
program permits you to systematically transfer on a monthly basis, or as
frequently as we allow, a set dollar amount from the Money Market Sub-Account
to any combination of Variable Sub-Accounts. We also allow dollar-cost
averaging from specially designated Fixed Sub-Accounts ("DCA Fixed
Sub-Accounts"). These DCA Fixed Sub-Accounts may have different Guarantee
Periods and different Guaranteed Interest Rates than the Fixed Sub-Accounts.
Please consult your registered representative about the DCA Fixed Sub-Accounts.
The dollar-cost averaging method of investment is designed to reduce
the risk of making purchases only when the price of Accumulation Units is high.
However, you should carefully consider your financial ability to continue the
program over a long enough period of time to purchase units when their value is
low as well as when high. Dollar-cost averaging does not assure a profit or
protect against a loss. Due to the effect of interest that continues to be
earned on the balance in the Money Market Fund or a DCA Fixed Sub-Account, the
amounts that are actually transferred will vary slightly from month to month.
An example of how our dollar-cost averaging program works is shown in Appendix
B.
You may elect to participate in the dollar-cost averaging program at
any time before the Income Date by sending us Satisfactory Notice. The minimum
transfer amount is $250 from the Money Market Sub-Account or from a DCA Fixed
Sub-Account. All dollar-cost averaging transfers will be made on the day of
each month that corresponds to your Contract Date unless that date is not a
Business Day. Otherwise, the transfer will be made on the next following
Business Day. If you want to dollar-cost average from more than one DCA Fixed
Sub-Account at the same time, certain restrictions may apply.
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<PAGE> 48
Once elected, dollar-cost averaging remains in effect from the date we
receive your request until the Income Date, until the Contract is surrendered,
until the value of the Sub-Account from which transfers are being made is
depleted, or until you cancel the program by written request. If you request
to cancel dollar-cost averaging from a DCA Fixed Sub-Account before the end of
the selected period, we reserve the right to treat this request as a transfer
request, and a Market Value Adjustment ordinarily will be assessed on the
amount canceled. You can request changes by writing us at our Customer Service
Center. There is no additional charge for dollar-cost averaging. A transfer
under this program is not considered a transfer for purposes of assessing a
transfer charge. We reserve the right to discontinue offering this program at
any time and for any reason. Dollar-cost averaging is not available while you
are participating in the systematic withdrawal program.
ASSET ALLOCATION PROGRAM. You may select from six asset allocation
model portfolios, or you may use these models as a guide to help you develop
your own asset allocation model. The models are as follows:
<TABLE>
<CAPTION>
Model Investment and Risk Profile
----- ---------------------------
<S> <C>
I Stable Capital
II Stable Income
III Moderate Income
IV Moderate Growth
V Capital Growth
VI Aggressive Growth
</TABLE>
If you elect to participate in the asset allocation program, all initial and
additional purchase payments will automatically be allocated among the Variable
Sub-Accounts indicated by the model you select. The models do not include
allocations to the Fixed Account. Although you may only use one model at a
time, you may elect to change your selection as your tolerance for risk, and/or
your needs and objectives change. Bear in mind, the use of an asset allocation
model does not guarantee investment results. You may use a questionnaire that
is offered to determine the model that best meets your risk tolerance and time
horizons.
Because each Variable Sub-Account performs differently over time, your
portfolio mix may vary from its initial allocations. We will automatically
rebalance your Fund mix quarterly to bring your portfolio back to its original
allocation percentages.
From time to time the models are reviewed. It may be found that
allocation percentages among the Variable Sub-Accounts or even some of the
Variable Sub-Accounts within a particular model need to be changed. You will
be sent notice at least 30 days before any such change is made, and you will be
given an opportunity NOT to make the change.
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If you participate in the asset allocation program, the transfers made
under the program are not taken into account in determining any transfer
charge. There is no additional charge for this program. We reserve the right
to discontinue offering this program at any time and for any reason.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM. Once your money has been
allocated among the Variable Sub-Accounts, the investment performance of each
Variable Sub-Account may cause your allocation to shift. Prior to the Income
Date, you may instruct us to automatically rebalance (on a calendar quarter,
semi-annual, or annual basis) Variable Account Value to return to your original
allocation percentages. Your request will be effective on the Business Day on
which we receive your request at our Customer Service Center. Requests
received on other than a Business Day will be deemed received on the next
following Business Day. Your allocation percentages must be in whole
percentages. You may start and stop automatic portfolio rebalancing at any
time and make changes to your allocation percentages by written request. There
is no additional charge for using this program. A transfer under this program
is not considered a transfer for purposes of assessing any transfer charge. We
reserve the right to discontinue offering this program at any time and for any
reason. Any money allocated to the Fixed Account will not be included in the
rebalancing.
ACCOUNT VALUE. The Account Value is the entire amount we hold under
your Contract for you. The Account Value serves as a starting point for
calculating certain values under your Contract. It equals the sum of your
Variable Account Value and your Fixed Account Value. We determine your Account
Value first on the Contract Date and thereafter on each Business Day. The
Account Value will vary to reflect: (i) the performance of the Variable
Sub-Accounts you have selected, (ii) interest credited on amounts allocated to
the Fixed Account, and (iii) charges, transfers, withdrawals, and surrenders.
Account Value may be more or less than purchase payments paid.
SURRENDER VALUE. The Surrender Value on a Business Day before the
Income Date, is the Account Value, adjusted for any applicable Market Value
Adjustment that may be positive or negative, less any applicable annual
administration charge, and less any applicable Purchase Payment Tax Charge.
VARIABLE ACCOUNT VALUE. On any Business Day, the Variable Account
Value equals the sum of the values in each Variable Sub-Account. The value in
each Variable Sub-Account equals the number of Accumulation Units attributable
to that Variable Sub-Account multiplied by the Accumulation Unit value for that
Variable Sub-Account on that Business Day. When you allocate a purchase
payment or transfer Account Value to a Variable Sub-Account, we credit your
Contract with Accumulation Units in that Variable Sub-Account. We determine
the number of Accumulation Units by dividing the dollar amount allocated or
transferred to the Variable Sub-Account by the Sub-Account's Accumulation Unit
value for that Business Day. Similarly, when you transfer, withdraw, or
surrender an amount from a Variable Sub-Account, we cancel
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<PAGE> 50
Accumulation Units in that Variable Sub-Account. We determine the number of
Accumulation Units canceled by dividing the dollar amount you transferred,
withdrew, or surrendered by the Variable Sub-Account's Accumulation Unit value
for that Business Day.
ACCUMULATION UNIT VALUE. An Accumulation Unit value varies to reflect
the investment experience of the underlying Fund, and may increase or decrease
from one Business Day to the next. We arbitrarily set the Accumulation Unit
value for each Variable Sub-Account at $10 when we established the Sub-Account.
For each Valuation Period after the date of establishment, the Accumulation
Unit value is determined by multiplying the Accumulation Unit value for a
Sub-Account for the prior Valuation Period by the net investment factor for the
Variable Sub-Account for the Valuation Period.
NET INVESTMENT FACTOR. The net investment factor is an index used to
measure the investment performance of a Variable Sub-Account from one Valuation
Period to the next during the Accumulation Phase. The net investment factor
for any Valuation Period is determined by dividing (a) by (b) where:
(a) is the net result of:
(i) the Net Asset Value of the Fund in which the Variable
Sub-Account invests determined at the end of the current
Valuation Period, plus
(ii) the per share amount of any dividend or capital gain
distributions made by the Fund on shares held in the Variable
Sub-Account if the "ex-dividend" date occurs during the
current Valuation Period, and plus or minus
(iii) a per share charge or credit for any taxes reserved for,
which is determined by us to have resulted from the operations
of the Variable Sub-Account; and
(b) is the Net Asset Value of the Fund in which the Variable
Sub-Account invests determined at the end of the immediately preceding
Valuation Period.
The net investment factor may be more or less than, or equal to, one.
FIXED ACCOUNT VALUE. The Fixed Account Value is the sum of the value
of each Fixed Sub-Account (including a DCA Fixed Sub-Account) on any particular
day. The value in each Fixed Sub-Account is equal to: (1) the portion of the
purchase payment(s) allocated or amount transferred to the Sub-Account; plus
(2) interest at the Guaranteed Interest Rate; minus (3) any transfers from the
Sub-Account; minus (4) any withdrawals (including any associated surrender
charges) from the Sub-Account; and minus (5) any charges allocated to the
Sub-Account. We also adjust the Fixed Sub-Account Value for any Market Value
Adjustment, the value of which could be positive or negative.
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<PAGE> 51
5. WHAT ARE THE EXPENSES UNDER A CONTRACT?
We deduct the charges described below. The charges are for the
services and benefits we provide, costs and expenses we incur, and risks we
assume under the Contracts. Services and benefits we provide include: the
ability of Owners to make withdrawals and surrenders under the Contracts; the
death benefit paid on the death of the Owner; the available investment options,
including dollar-cost averaging, asset allocation, automatic portfolio
rebalancing, and systematic partial withdrawal programs; administration of the
income plan options available under the Contracts; and the distribution of
various reports to Owners. Costs and expenses we incur include those
associated with various overhead and other expenses related to providing the
services and benefits provided by the Contracts, sales and marketing expenses,
and other costs of doing business. Risks we assume include the risks that
Annuitants may live longer than estimated when the annuity factors under the
Contracts were established, that the amount of the death benefit will be
greater than Account Value, and that the costs of providing the services and
benefits under the Contracts will exceed the charges deducted. We may also
deduct a charge for taxes. See "Fee Table," page ___.
We may realize a profit or loss on one or more of the charges. We may
use any such profits for any corporate purpose, including, among other things,
payment of sales expenses.
Unless otherwise specified, charges are deducted proportionately from
all Variable Sub-Accounts and Fixed Sub-Accounts in which you are invested.
Charges under the Contracts may be reduced or eliminated when sales
result in savings, reduction of expenses and/or risks to the Company.
Generally, we will make such reductions based on the following factors:
(i) the size of the group;
(ii) the total amount of purchase payments to be received from the
group;
(iii) the purposes for which the Contracts are purchased;
(iv) the nature of the group for which the Contracts are purchased; and
(v) any other circumstances that could reduce Contract costs and
expenses.
We may also sell the Contracts with lower or no charges to a person
who is an officer, director or employee of Sage Life or of certain affiliates
of ours. Reductions in Contract charges will not be unfairly discriminatory
against any person.
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SURRENDER CHARGE
None! There are no surrender charges under the Contracts.
ANNUAL ADMINISTRATION CHARGE
We will deduct an annual administration charge of $40 during the first
seven Contract Years (i) on each Contract Anniversary, and (ii) on the day of
any surrender if the surrender is not on the Contract Anniversary. We will
waive this fee on and after the eighth Contract Anniversary, or if the Account
Value is at least $50,000 when the annual administration charge would have
otherwise been deducted.
TRANSFER CHARGE
We currently do not deduct this charge. However, we reserve the right
to deduct a transfer charge of up to $25 for the 13th and each subsequent
transfer during a Contract Year. For the purpose of assessing the transfer
charge, each written or telephone request is considered to be one transfer,
regardless of the number of Sub-Accounts affected by the transfer. In the
event that the transfer charge becomes applicable, it will be deducted
proportionately from the Sub-Accounts from which the transfer is made.
Transfers made in connection with the dollar-cost averaging, asset allocation,
and automatic portfolio rebalancing programs will not count as transfers for
purposes of assessing this charge.
ASSET-BASED CHARGES
We deduct Asset-Based Charges for mortality and expense risks and
administrative costs assumed by us. Prior to the Income Date, Asset-Based
Charges are deducted monthly and calculated as a percentage of the Variable
Account Value on the date of deduction. On the Contract Date and monthly
thereafter, the Asset-Based Charges are deducted proportionately from the
Variable Sub-Accounts in which you are invested. After the Income Date,
however, these charges are called Variable Sub-Account Charges and are deducted
daily from the assets of such Variable Sub-Accounts. The maximum charges are:
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<PAGE> 53
<TABLE>
<CAPTION>
Combined Asset-Based Charges
----------------------------
Annual Charge Monthly Charge Daily Charge
------------- -------------- ------------
<S> <C> <C> <C>
Contract Years 1-7 1.40% .116667% .0038626%
Contract Years 8+ 1.25% .104167% .0034462%
</TABLE>
We reserve the right to deduct Asset-Based Charges on the effective date of any
transfer from the Fixed Account, or allocation of purchase payment to the
Variable Account, based on the amount transferred or allocated and based on the
number of days remaining until the next date of deduction. These charges do
not apply to any Fixed Account Value.
FUND EXPENSES
Because the Variable Account purchases shares of the various Funds
chosen by you, the net assets of the Variable Account will reflect the
investment management fees and other operating expenses incurred by those
Funds. A table of each Fund's management fees and other expenses can be found
in the front of this Prospectus in the Fee Table. For a description of each
Fund's expenses, management fees, and other expenses, see the Trusts'
prospectuses.
6. HOW WILL MY CONTRACT BE TAXED?
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.
COUNSEL OR OTHER COMPETENT TAX ADVISERS SHOULD BE CONSULTED FOR MORE COMPLETE
INFORMATION.
INTRODUCTION
The following summary provides a general description of the federal
income tax considerations associated with the Contract and does not purport to
be complete or to cover all tax situations. This discussion is based upon our
understanding of the present federal income tax laws. No representation is made
as to the likelihood of continuation of the present federal income tax laws or
as to how they may be interpreted by the Internal Revenue Service (the "IRS").
The Contract may be purchased on a non-tax-qualified basis or purchased
on a tax-qualified basis. A Qualified Contract is designed for use by
individuals whose purchase payments are comprised solely of proceeds from and/or
contributions under retirement plans that are intended to qualify as plans
entitled to special income tax treatment under Sections 408 or 408A of the
Code. The ultimate effect of federal income taxes on the amounts held under a
Contract, or income payments, depends on the type of retirement plan, on the tax
and employment status of the individual concerned, and on our tax status. In
addition, certain
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<PAGE> 54
requirements must be satisfied in purchasing a Qualified Contract with proceeds
from a tax-qualified plan and receiving distributions from a Qualified Contract
in order to continue receiving favorable tax treatment. Some retirement plans
are subject to distribution and other requirements that are not incorporated
into our Contract administration procedures. Owners, participants, and
Beneficiaries are responsible for determining whether contributions,
distributions, and other transactions with respect to the Contract comply with
applicable law. Therefore, purchasers of a Qualified Contract should seek
competent legal and tax advice regarding the suitability of a Contract for
their situation. The following discussion assumes that the Qualified Contract
is purchased with proceeds from and/or contributions under retirement plans
that qualify for the intended special federal income tax treatment.
TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS. The Code requires that the investments of
the Variable Account be "adequately diversified" in order for the Contract to be
treated as an annuity contract for federal income tax purposes. It is intended
that the Variable Account, through the Funds, will satisfy these diversification
requirements.
In certain circumstances, owners of variable annuity contracts have been
considered for federal income tax purposes to be the owners of the assets of the
variable account supporting their contracts due to their ability to exercise
investment control over those assets. When this is the case, the contract
owners have been currently taxed on income and gains attributable to the
variable account assets. There is little guidance in this area, and some
features of the Contract, such as the flexibility of an Owner to allocate
purchase payments and transfer Account Values, have not been explicitly
addressed in published rulings. While we believe that the Contract does not
give an Owner investment control over Variable Account assets, we reserve the
right to modify the Contract as necessary to prevent an Owner from being treated
as the owner of the Variable Account assets supporting the Contract.
REQUIRED DISTRIBUTIONS. To be treated as an annuity contract for
federal income tax purposes, the Code requires a Non-Qualified Contract to
contain certain provisions specifying how your interest in the Contract will be
distributed in the event of your death. The Non-Qualified Contracts contain
provisions that are intended to comply with these Code requirements, although no
regulations interpreting these requirements have yet been issued. We intend to
review such provisions and modify them if necessary to assure that they comply
with the applicable requirements when such requirements are clarified by
regulation or otherwise.
Other rules may apply to a Qualified Contract.
The following discussion assumes that the Contract will qualify as an
annuity contract for federal income tax purposes.
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TAX TREATMENT OF ANNUITIES
IN GENERAL. We believe that if you are a natural person you will not be
taxed on increases in the value of a Contract until a distribution occurs or
until income payments begin. (An agreement to assign or pledge any portion of
the Account Value, and, in the case of a Qualified Contract, any portion of an
interest in the qualified plan, ordinarily will be treated as a distribution.)
TAXATION OF A NON-QUALIFIED CONTRACT
NON-NATURAL PERSON. The Owner of any annuity contract who is not a
natural person ordinarily must include in income any increase in the excess of
the Account Value over the "investment in the contract" (ordinarily, the
purchase payments or other consideration paid for the contract) during the
taxable year. There are some exceptions to this rule and a prospective Owner
that is not a natural person may wish to discuss these with a tax adviser.
The following discussion generally applies to Contracts owned by natural
persons.
WITHDRAWALS. When a withdrawal (including Systematic Withdrawals) from
a Non-Qualified Contract occurs, the amount received will be treated as
ordinary income subject to tax up to an amount equal to the excess (if any) of
the Account Value immediately before the distribution over the Owner's
investment in the Contract at that time. It is possible that a positive Market
Value Adjustment at the time of a withdrawal may be treated as part of the
Account Value immediately before the distribution. You may want to consult a
tax adviser on the tax consequences of market value adjustments.
SURRENDERS. In the case of a surrender under a Non-Qualified Contract,
the amount received ordinarily will be taxable only to the extent it exceeds
the Owner's investment in the Contract.
PENALTY TAX ON SURRENDER AND CERTAIN WITHDRAWALS. In the case of a
distribution from a Non-Qualified Contract, a federal tax penalty equal to 10%
of the amount treated as income ordinarily will be imposed. In general,
however, there is no penalty on distributions:
- made on or after the taxpayer reaches age 59 1/2;
- made on or after the death of an Owner;
- attributable to the taxpayer's becoming disabled; or
- made as part of a series of substantially equal
periodic payments for the life (or life expectancy) of
the taxpayer.
Other exceptions may be applicable under certain circumstances and
special rules may be applicable in connection with the exceptions enumerated
above. A tax adviser should be consulted regarding exceptions from the penalty
tax.
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INCOME PAYMENTS. Although tax consequences may vary depending on the
payment option elected under an annuity contract, a portion of each income
payment is ordinarily not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an income payment is ordinarily determined in a
manner that is designed to allow you to recover your investment in the Contract
ratably on a tax-free basis over the expected stream of income payments, as
determined when income payments start. Once your investment in the Contract
has been fully recovered, however, the full amount of each income payment is
subject to tax as ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Contract because of your death or the death of the Annuitant. Ordinarily, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a surrender of
the Contract, or (ii) if distributed under an income payment option, they are
taxed in the same way as income payments.
TRANSFERS, ASSIGNMENTS OF A CONTRACT. A transfer or assignment of
ownership of a Contract, the designation of an Annuitant, the designation of a
payee other than yourself, the selection of certain Income Dates, or the
exchange of a Contract may result in certain tax consequences to you that are
not discussed herein. An Owner contemplating any such transfer or assignment
should consult a tax adviser as to the tax consequences.
WITHHOLDING. Annuity distributions are ordinarily subject to
withholding for the recipient's federal income tax liability. Recipients can
ordinarily elect, however, not to have tax withheld from distributions.
MULTIPLE CONTRACTS. All annuity contracts that we or our affiliates
issue to the same Owner during any calendar year are treated as one annuity
contract for purposes of determining the amount includible in such Owner's
income when a taxable distribution occurs.
TAXATION OF A QUALIFIED CONTRACT
The Contract is designed for use with several types of qualified plans.
The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; and in other specified circumstances. Therefore, no
attempt is made to provide more than general information about the use of the
Contract with the various types of qualified retirement plans. Contract Owners,
Annuitants, and Beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but we
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shall not be bound by the terms and conditions of such plans to the extent such
terms contradict the Contract, unless we consent. For IRAs under Section 408
of the Code (described below), distributions generally must commence no later
than April 1 of the calendar year following the calendar year in which the
Owner reaches age 70 1/2. Roth IRAs under Section 408A of the Code do not
require distributions at any time prior to the Owner's death.
WITHDRAWALS. When a withdrawal from a Qualified Contract occurs, a
pro-rata portion of the amount received is taxable, ordinarily based on the
ratio of the Owner's investment in the contract (ordinarily, any non-deductible
purchase payments or other consideration paid for the Contract) to the Owner's
total accrued benefit balance under the retirement plan. For a Qualified
Contract, the investment in the contract can be zero. Special tax rules apply
to withdrawals from Roth IRAs (see below). Distributions from Qualified
Contracts generally are subject to withholding for the Owner's federal income
tax liability. The withholding rate varies according to the type of
distribution and the Owner's tax status. The Owner will be provided the
opportunity to elect not to have tax withheld from distributions.
Brief descriptions follow of the various types of qualified retirement
plans in connection with a Contract. We will endorse the Contract as necessary
to conform it to the requirements of such plan.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits
eligible individuals to contribute to an individual retirement program known as
an "Individual Retirement Annuity" or "IRA." These IRAs are subject to limits
on the amount that may be contributed, the persons who may be eligible, and on
the time when distributions may commence. IRA contributions may be deductible
in whole or in part depending on the Owner's income and whether the Owner is a
participant in a qualified plan. Earnings in the IRA are not taxed until
distributed. Also, distributions from certain other types of qualified
retirement plans may be rolled over on a tax-deferred basis into an IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are subject
to a 10% federal penalty tax.
SIMPLE IRAs. Certain small employers may establish SIMPLE plans as
provided by Section 408(p) of the Code, under which employees may elect to
defer to a SIMPLE IRA a percentage of compensation up to $6,000 (as increased
for cost of living adjustments). The sponsoring employer is required to make
matching or non-elective contributions on behalf of employees. Distributions
from SIMPLE IRAs are subject to the same restrictions that apply to IRA
distributions and are taxed as ordinary income. Subject to certain exceptions,
premature distributions prior to age 59 1/2 are subject to a 10% federal penalty
tax, which is increased to 25% if the distribution occurs within the first two
years after the commencement of the employee's participation in the plan.
ROTH IRAs. Section 408A of the Code permits certain eligible
individuals to contribute to a Roth IRA. Contributions to a Roth IRA, which are
subject to certain limitations, are not
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deductible and must be made in cash or as a rollover or transfer from another
Roth IRA or other IRA. A conversion of an IRA to a Roth IRA may be subject to
tax and other special rules may apply. You should consult a tax adviser before
combining any converted amounts with any other Roth IRA contributions,
including any other conversion amounts from other tax years. Distributions
from a Roth IRA ordinarily are not taxed, except that, once aggregate
distributions exceed contributions to the Roth IRA, income tax and a 10%
federal penalty tax may apply to distributions made (1) before age 59 1/2
(subject to certain exceptions) or (2) during the five taxable years starting
with the year in which the first contribution is made to the Roth IRA. A 10%
federal penalty tax may apply to amounts attributable to a conversion from an
IRA if they are distributed during the five taxable years beginning with the
year in which the conversion was made.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the federal tax
consequences under the Contract are not exhaustive, and special rules are
provided with respect to other tax situations not discussed in this Prospectus.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of distributions under a Contract depend
on the individual circumstances of each Owner or recipient of the distribution.
A competent tax adviser should be consulted for further information.
Further, the federal income tax consequences discussed herein reflect
our understanding of current law, and the law may change. Although the
likelihood of legislative change is uncertain, there is always the possibility
that the tax treatment of the Contracts could change by legislation or other
means. It is also possible that any change could be retroactive (that is,
effective prior to the date of the change). A tax adviser should be consulted
with respect to legislative developments and their effect on the Contract.
7. HOW DO I ACCESS MY MONEY?
You can partially withdraw from or surrender your Contract. When you
surrender your Contract, you can take the proceeds in a single sum, or you can
request that we pay the proceeds under one of our income plans. See "What are
my Income Payment Options?," page __.
WITHDRAWALS
You may withdraw all or part of your Surrender Value at any time before
the Income Date. (If you have elected the "payments for a specified period
certain" income plan option, you may request a full withdrawal after the Income
Date; otherwise, no withdrawals are permitted after the Income Date). You may
make your withdrawal request in writing or by telephone. See "Requesting
Payments," page __. Any withdrawal must be at least $250. We will pay you the
withdrawal amount in one sum. Under certain circumstances, we may delay this
payment. See "Requesting Payments," page __ .
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When you request a withdrawal, you can direct how the withdrawal will
be deducted from your Account Value. If you provide no directions, we will
deduct the withdrawal from your Account Value in the Sub-Accounts on a pro-rata
basis.
A PARTIAL WITHDRAWAL WILL REDUCE YOUR DEATH BENEFIT AND MAY BE SUBJECT
TO A MARKET VALUE ADJUSTMENT. (SEE "WHAT ARE THE EXPENSES UNDER A CONTRACT?"
AND "DOES THE CONTRACT HAVE A DEATH BENEFIT?")
Please note that if your requested withdrawal would reduce your Account
Value below $2,000, we reserve the right to treat the request as a withdrawal
of only the excess over $2,000.
SYSTEMATIC PARTIAL WITHDRAWAL PROGRAM
The systematic partial withdrawal program provides automatic monthly,
quarterly, semi-annual, or annual payments to you from the amounts you have
accumulated in the Variable Sub-Accounts and/or the Fixed Sub-Accounts. You
select the day withdrawals will be taken, but this day can be no later than the
28th day of the month. If a day is not selected, the day of each month that
corresponds to your Contract Date will be used. If that date is not a Business
Day, we will use the next following Business Day. The minimum payment is $100.
You can elect to withdraw either earnings in a prior period (for example, prior
month for monthly withdrawals or prior quarter for quarterly withdrawals) or a
specified dollar amount.
- If you elect earnings, we will deduct the withdrawals from the
Sub-Accounts in which you are invested on a pro-rata basis.
- If you elect a specified dollar amount, we will deduct the
withdrawals from the Sub-Accounts in which you are invested on a
pro-rata basis unless you specify otherwise. Any amount in
excess of interest earned on a Fixed Sub-Account in the prior
period ordinarily will be subject to a Market Value Adjustment
(see "Market Value Adjustment," page ___).
You may elect to participate in the systematic partial withdrawal
program at any time before the Income Date by providing Satisfactory Notice.
Once we have received your request, the program will begin and will remain in
effect until your Account Value drops to zero. You may cancel or make changes
in the program at any time by providing us with Satisfactory Notice. We do not
deduct any other charges for this program. We reserve the right to discontinue
offering the systematic partial withdrawal program at any time and for any
reason. Systematic partial withdrawals are not available while you are
participating in the dollar-cost averaging program.
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IRA PARTIAL WITHDRAWAL PROGRAM
If your Contract is an IRA Contract and you will attain age 70 1/2 in
the current calendar year, distributions may be made to satisfy requirements
imposed by federal tax law. An IRA partial withdrawal provides payout of
amounts required to be distributed by the IRS rules governing mandatory
distributions under qualified plans. A notice before distributions must
commence will be sent, and you may elect this program at that time, or at a
later date.
The IRA Partial Withdrawal program may not be elected while you are
participating in the systematic partial withdrawal program. IRA partial
withdrawals may be taken on a monthly, quarterly, semi-annual, or annual basis.
A minimum withdrawal of $100 is required. You select the day withdrawals will
be taken, but this day can be no later than the 28th day of the month. If a
day is not elected, the day of each month that corresponds to your Contract
date will be used.
REQUESTING PAYMENTS
You must provide us with Satisfactory Notice of your request for
payment. We will ordinarily pay any death benefit, withdrawal, or surrender
proceeds within seven days after receipt at our Customer Service Center of all
the requirements for such a payment. The amount will be determined as of the
date our Customer Service Center receives all such requirements.
We may delay making a payment, applying Account Value to an income
plan, or processing a transfer request if: (1) the disposal or valuation of
the Variable Account's assets is not reasonably practicable because the New
York Stock Exchange is closed for other than a regular holiday or weekend,
trading is restricted by the SEC, or the SEC declares that an emergency exists;
or (2) the SEC, by order, permits postponement of payment to protect our
Contract Owners. We also may defer making payments attributable to a check
that has not cleared (which may take up to 15 days), and we may defer payment
of proceeds from the Fixed Account for a withdrawal, surrender, or transfer
request for up to six months from the date we receive the request. If payment
is deferred 30 days or more, the amount deferred will earn interest at a rate
not less than the minimum required in the jurisdiction in which the Contract is
delivered.
8. HOW IS CONTRACT PERFORMANCE PRESENTED?
We may advertise or include in sales literature yields, effective
yields, and total returns for the Variable Sub-Accounts. Effective yields and
total returns for the Variable Sub-Accounts are based on the investment
performance of the corresponding Funds. THESE FIGURES ARE BASED ON HISTORICAL
PERFORMANCE AND DO NOT INDICATE OR PROJECT FUTURE RESULTS. We may also
advertise or include in sales literature a Variable Sub-Account's performance
compared to certain performance rankings and indexes compiled by independent
organizations, and we may present
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performance rankings and indexes without such a comparison.
The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in the Sub-Account over a specified seven-day
period. The yield is calculated by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in the Money Market Sub-Account is assumed to be reinvested.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a Variable Sub-Account (except the Money Market
Sub-Account) refers to the annualized income generated by an investment in the
Variable Sub-Account over a specified 30-day or one-month period. The yield is
calculated by assuming that the income generated by the investment during that
30-day or one-month period is generated each period over a 12-month period.
The total return of a Variable Sub-Account refers to return quotations
assuming an investment under a Contract has been held in the Variable
Sub-Account for the stated times. Average annual total return of a Variable
Sub-Account tells you the return you would have experienced if you allocated a
$1,000 purchase payment to a Variable Sub-Account for the specified period.
Standardized average annual total return reflects all historical investment
results for the Variable Sub-Account, less all charges and deductions applied
against the Variable Sub-Account, but excluding any deductions for purchase
payment taxes. Standardized total return may be quoted for various periods
including 1 year, 5 years, and 10 years, or from inception of the Variable
Sub-Account if any of those periods are not available. In addition, we may
from time to time disclose average annual total return for non-standard periods
and cumulative total return for a Variable Sub-Account.
We may, from time to time, also disclose yield, standard total returns,
and non-standard total returns for the Funds. We may also disclose yield,
standard total returns, and non-standard total returns of funds or other
accounts managed by the Adviser or Subadviser with investment objectives
similar to those of the Funds, and Variable Sub-Account performance based on
that performance data. Non-standard performance will be accompanied by
standard performance.
In advertising and sales literature, the performance of each Variable
Sub-Account may be compared to the performance of other variable annuity
issuers in general or to the performance of particular types of variable
annuities investing in mutual funds, or investment series of mutual funds with
investment objectives similar to each of the Variable Sub-Accounts. Advertising
and sales literature may also compare the performance of a Variable Sub-Account
to the S&P 500 Composite Stock Price Index, a widely used measure of stock
performance. This unmanaged index assumes the reinvestment of dividends but
does not reflect any deduction for the expense of operating or managing an
investment portfolio. Other independent ranking services and
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indexes may also be used as a source of performance comparison. We may also
report other information, including the effect of tax-deferred compounding on a
Variable Sub-Account's investment returns, or returns in general, which may be
illustrated by tables, graphs, or charts.
9. DOES THE CONTRACT HAVE A DEATH BENEFIT?
Your Contract provides a death benefit for your Beneficiary.
If any Owner dies before the Income Date, we will pay the Beneficiary
the greatest of:
(i) the Account Value determined as of the Business Day we receive
proof of death (if proof of death is received on other than a
Business Day, the proof will be deemed received on the next
following Business Day);
(ii) 100% of the sum of all purchase payments made under the
Contract, reduced by the amount of any prior withdrawal
(including any associated Market Value Adjustment incurred);
or
(iii) the highest anniversary value (the "Highest Anniversary
Value").
The Highest Anniversary Value is equal to the greatest anniversary
value attained in the following manner. When we receive proof of death, we
will calculate an anniversary value for each Contract Anniversary prior to the
date of the Owner's death, but not beyond the Owner's attained age 80. An
anniversary value for a Contract Anniversary is equal to (1) the Account Value
on that Contract Anniversary, (2) increased by the dollar amount of any
purchase payments made since the Contract Anniversary, and (3) reduced
proportionately by any withdrawals (including any associated Market Value
Adjustment incurred) taken since that Contract Anniversary. (By
proportionately, we take the percentage by which the withdrawal decreases the
Account Value and we reduce the sum of (1) and (2) by that percentage.)
If there are multiple Owners, the age of the oldest Owner will be
used to determine the applicable death benefit. If there is no Owner who is a
natural person (that is, an individual), we will treat the Annuitant as Owner
for the purpose of determining when the Owner dies and the Annuitant's age will
determine the death benefit payable to the Beneficiary.
OWNER'S DEATH BEFORE THE INCOME DATE. If an Owner dies before the
Income Date, the Beneficiary has up to five years from the Owner's date of
death to request that the death benefit be paid in one lump sum. If the lump
sum is elected and paid, the Contract will terminate, and we will have no
further obligations under the Contract. Alternatively, the Beneficiary may
provide us with Satisfactory Notice and request that the Contract continue, in
which case we will continue the Contract subject to the following conditions:
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1. If there are joint Owners, the surviving Owner becomes the
new Owner. Otherwise, the Beneficiary becomes the new
Owner.
2. Unless otherwise specified, any excess of the death
benefit over the Account Value will be allocated to and
among the Variable and Fixed Accounts in proportion to
their values as of the date on which the death benefit is
determined. We will establish a new Fixed Sub-Account for
any allocation to the Fixed Account based on the Guarantee
Period the new Owner then elects.
3. No additional purchase payments may be applied to the
Contract.
However, certain distribution rules will apply to the continued
Contract. If the new Owner is not the deceased Owner's spouse, we must
distribute the entire interest in the Contract either: (i) over the life of
the new Owner, but not extending beyond the life expectancy of the new Owner,
with distributions beginning within one year of the prior Owner's death; or
(ii) within five years of the deceased Owner's death. These distributions, if
from the Fixed Account, are subject to our Market Value Adjustment rules.
Alternatively, if the new Owner is the deceased Owner's spouse, the
Contract will continue with the surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary. If no Beneficiary is so named,
the surviving spouse's estate will be the Beneficiary. Upon the death of the
surviving spouse, the death benefit will equal the Account Value as of the
Business Day we receive proof of the spouse's death. We will distribute the
entire interest in this contract to the new Beneficiary in accordance with the
provisions that apply in the case when the new Owner is not the surviving
spouse.
If there is more than one Beneficiary, the distribution provisions
will independently apply to each Beneficiary.
If no Owner of the Contract is an individual, the death of any
Annuitant under the Contract will be treated as the death of an Owner.
In all events, death benefit distributions will be made in accordance
with section 72(s) of the Code, or any applicable successor provision.
OWNER'S DEATH AFTER THE INCOME DATE. If any Owner dies on or after
the Income Date, but before the time the entire interest in the Contract has
been distributed, the remaining portion will be distributed at least as rapidly
as under the method of distribution being used as of the date of the Owner's
death.
If income payments have been selected based on an income plan
providing for payments for a guaranteed period and the Annuitant dies on or
after the Income Date, we will make the
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remaining guaranteed payments to the Beneficiary. Any remaining payments will
be made as rapidly as under the method of distribution being used as of the
date of the Annuitant's death. If no Beneficiary is living, we will commute
any unpaid guaranteed payments to a single sum (on the basis of the interest
rate used in determining the payments) and pay that single sum to the estate of
the last to die of the Annuitant or the Beneficiary.
PROOF OF DEATH. Proof of death must be received at our Customer
Service Center before we will pay any death benefit. We will accept one of the
following items:
1. An original certified copy of an official death certificate; or
2. An original certified copy of a decree of a court of
competent jurisdiction as to the finding of death; or
3. Any other proof satisfactory to us.
10. WHAT OTHER INFORMATION SHOULD I KNOW?
SEPARATE ACCOUNTS
THE SAGE VARIABLE ANNUITY ACCOUNT A. We established the Variable
Account as a separate investment account under Delaware law on December 3,
1997. The Variable Account may invest in mutual funds, unit investment trusts,
and other investment portfolios. We own the assets in the Variable Account and
are obligated to pay all benefits under the Contracts. The Variable Account is
used to support the Contracts as well as for other purposes permitted by law.
The Variable Account is registered with the SEC as a unit investment trust
under the 1940 Act and qualifies as a "separate account" within the meaning of
the federal securities laws. Such registration does not involve any
supervision by the SEC of the management of the Variable Account or Sage Life.
The Variable Account is divided into Variable Sub-Accounts, each of
which currently invests in shares of a specific Fund of AIM Variable Insurance
Funds, Inc., The Alger American Fund, Liberty Variable Investment Trust,
SteinRoe Variable Investment Trust, MFS(R) Variable Investment Trust(TM), Morgan
Stanley Universal Funds, Inc., Oppenheimer Variable Account Funds, Sage Life
Investment Trust, and T. Rowe Price Equity Series, Inc. Variable Sub-Accounts
buy and redeem Fund shares at net asset value without any sales charge. Any
dividend from net investment income and distribution from realized gains from
security transactions of a Fund are reinvested at net asset value in shares of
the same Fund. Income, gains and losses, realized or unrealized, of the
Variable Account are credited to or charged against the Variable Account
without regard to any other income, gains or losses of Sage Life. Assets equal
to the reserves and other Contract liabilities with respect to the Variable
Account are not chargeable with liabilities arising out of any other business
or account of Sage Life. If the assets
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exceed the required reserves and other liabilities, we may transfer the excess
to our General Account.
THE SAGE FIXED INTEREST ACCOUNT A. The Fixed Account is a separate
investment account under state insurance law. It is maintained separate from
our General Account and separate from any other separate account that we may
have. We own the assets in the Fixed Account. Assets equal to the reserves
and other liabilities of the Fixed Account will not be charged with liabilities
that arise from any other business that we conduct. Thus, the Fixed Account
represents pools of assets that provide an additional measure of assurance that
Owners will receive full payment of benefits under the Contracts. We may
transfer to our General Account assets that exceed the reserves and other
liabilities of the Fixed Account. Notwithstanding the foregoing, our
obligations under (and values and benefits under) the Fixed Account do not vary
as a function of the investment performance of the Fixed Account. Owners and
Beneficiaries with rights under the Contracts do not participate in the
investment gains or losses of the assets of the Fixed Account. Such gains or
losses accrue solely to us. We retain the risk that the value of the assets in
the Fixed Account may fall below the reserves and other liabilities that we
must maintain in connection with our obligations under the Fixed Account. In
such an event, we will transfer assets from our General Account to the Fixed
Account to make up the difference. The Fixed Account is not required to be
registered as an investment company under the 1940 Act.
VOTING OF FUND SHARES. We are the legal owner of shares held by the
Variable Sub-Accounts and as such, have the right to vote on all matters
submitted to shareholders of the Funds. However, as required by law, we will
vote shares held in the Variable Sub-Accounts at regular and special meetings
of shareholders of the Funds in accordance with instructions received from
Owners with Account Value in the Variable Sub-Accounts. To obtain voting
instructions from Owners, before a meeting of shareholders of the Funds, we
will send Owners voting instruction materials, a voting instruction form, and
any other related material. Shares held by a Variable Sub-Account for which no
timely instructions are received will be voted by us in the same proportion as
those shares for which voting instructions are received. Should the applicable
federal securities laws, regulations, or interpretations thereof change so as
to permit us to vote shares of the Funds in our own right, we may elect to do
so.
MODIFICATION
When permitted by applicable law, we may modify the Contracts as
follows: (1) deregister the Variable Account under the 1940 Act; (2) operate
the Variable Account as a management company under the 1940 Act if it is
operating as a unit investment trust; (3) operate the Variable Account as a
unit investment trust under the 1940 Act if it is operating as a managed
separate account; (4) restrict or eliminate any voting rights of Owners, or
other persons who have voting rights as to the Variable Account; (5) combine
the Variable Account with other separate accounts; and (6) combine a Variable
Sub-Account with another Variable Sub-Account. We also
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reserve the right, subject to applicable law, to make additions to, deletions
from, or substitutions of shares of a Fund that are held by the Variable
Account or that the Variable Account may purchase; and to establish additional
Variable Sub-Accounts or eliminate Variable Sub-Accounts, if marketing, tax, or
investment conditions so warrant. Subject to any required regulatory
approvals, we reserve the right to transfer assets of a Variable Sub-Account
that we determine to be associated with the class of Contracts to which the
Contract belongs, to another separate account or to another separate account
sub-account.
If the actions we take result in a material change in the underlying
investments of a Variable Sub-Account in which you are invested, we will notify
you of the change. You may then make a new choice of Variable Sub-Accounts.
DISTRIBUTION OF THE CONTRACTS
Sage Distributors, Inc. ("Sage Distributors"), acts as the distributor
(principal underwriter) of the Contracts. Sage Distributors is a corporation
organized under the laws of the state of Delaware in 1997, is registered as a
broker-dealer under the Securities Exchange Act of 1934, and is a member of the
National Association of Securities Dealers, Inc. (the "NASD"). Sage
Distributors is a wholly owned subsidiary of Sage Insurance Group, Inc. We
compensate Sage Distributors for acting as principal underwriter under a
distribution agreement. The Contracts are offered on a continuous basis and we
do not anticipate discontinuing their sale. The Contracts may not be available
in all states.
The Contracts are sold by broker-dealers through registered
representatives of such broker-dealers who are also appointed and licensed as
insurance agents of Sage Life. These broker-dealers receive commissions for
selling Contracts calculated as a percentage of purchase payments (up to a
maximum of 6%). Broker-dealers who meet certain productivity and profitability
standards may be eligible for additional compensation.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements for the year ended December 31, 1997, as set forth in their report,
which is included in this Prospectus. Our financial statements are included in
this Prospectus in reliance on their report, given on their authority as
experts in accounting and auditing.
LEGAL PROCEEDINGS
Sage Life and its subsidiaries, as of the date of this Prospectus, are
not involved in any lawsuits. However, Sage Life's direct and indirect parent
companies, like other companies, are involved in lawsuits. In some lawsuits
involving insurers, substantial damages have been sought and/or material
settlement payments have been made. Although the outcome of any litigation
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cannot be predicted with certainty, Sage Life believes that at the present time
there are no pending or threatened lawsuits that are reasonably likely to have
a material adverse impact on the Variable Account, the Fixed Account, the
General Account, or Sage Life.
REPORTS TO CONTRACT OWNERS
We maintain records and accounts of all transactions involving the
Contracts, the Variable Account, and the Fixed Account at our Customer Service
Center. Each year, or more often if required by law, you will be sent a report
showing information about your Contract for the period covered by the report.
You will also be sent an annual and a semi-annual report for each Fund
underlying a Variable Sub-Account in which you are invested as required by the
1940 Act. In addition, when you make purchase payments, or if you make
transfers or withdrawals, you will receive a confirmation of these
transactions.
ASSIGNMENT
You may assign your Contract at any time prior to the Income Date. No
assignment will be binding on us unless we receive Satisfactory Notice. We
will not be liable for any payments made or actions we take before the
assignment is accepted by us. An absolute assignment will revoke the interest
of any revocable Beneficiary. We are not responsible for the validity of any
assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
CHANGE OF OWNER, BENEFICIARY, OR ANNUITANT
During your lifetime and while your Contract is in force, you can
transfer ownership of your Contract, change the Beneficiary, or change the
Annuitant. However, the Annuitant cannot be changed after the Income Date. To
make any of these changes, you must send us Satisfactory Notice. If accepted,
any change in Owner, Beneficiary, or Annuitant will take effect on the date you
signed the notice. Any of these changes will not affect any payment made or
action taken by us before our acceptance. A CHANGE IN OWNER MAY BE A TAXABLE
EVENT AND MAY ALSO EFFECT THE AMOUNT OF DEATH BENEFIT PAYABLE UNDER YOUR
CONTRACT.
MISSTATEMENT AND PROOF OF AGE, SEX, OR SURVIVAL
We may require proof of age, sex, or survival of any person upon whose
age, sex, or survival any payments depend. If the age or sex of the Annuitant
has been misstated, or if the age of the Owner has been misstated, the benefits
will be those that the Account Value applied would have provided for the
correct age and sex. If we have made incorrect income payments, we will pay
the amount of any underpayment. The amount of any overpayment will be deducted
from future income payments.
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INCONTESTABILITY
Your Contract is incontestable from its Contract Date.
AUTHORITY TO MAKE AGREEMENTS
All agreements made by us must be signed by one of our officers. No
other person, including an insurance agent or registered representative, can
change the terms of your Contract or make changes to it without our consent.
PREPARING FOR THE YEAR 2000
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the year 2000. This potential problem has become known as the "Year 2000
issue." The Year 2000 issue affects virtually all companies and organizations.
Computer applications that are affected by the Year 2000 issue could
impact the Company's business functions in various ways, ranging from a
complete inability to perform critical business functions to a loss of
productivity in varying degrees. Likewise, the failure of some computer
applications could have no impact on critical business functions. The Company
used these issues as critical components in the evaluation and selection of
in-house systems and of third party administrators.
Since the Company plans to outsource most of its operating functions,
there will only be a limited number of in-house systems utilized. At present,
the only in-house system utilized is the accounting system. This system was
certified as Year 2000 compliant before it was selected and installed for
operation. The Company also intends to purchase a reserve valuation system and
a reinsurance system. Year 2000 compliance will be a critical component in the
evaluation and selection process for those two systems.
The Company has various third party administrators (including
investment advisors, brokers, transfer agents, and other financial services
institutions) for the processing of such tasks as contract administration, fund
administration, underwriting and investment administration. The quality of
these third party administrators was of paramount importance in the selection
process.
Although the Company has received assurances from all of its third
party administrators, it is currently working with them to assess all Year 2000
issues associated with the processing of the Company's applications. This
assessment involves the testing of the data being processed by third party
administrators and electronically interfaced into the Company's accounting
system. As to outside organizations from which the Company will not be relying
on electronic interface, the Company will be relying on responses to
questionnaires supplied to these service providers
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as to their status on Year 2000 compliance. Based upon the responses received
from these third party administrators, the Company will develop a plan to
assure Year 2000 compliance by all third party administrators. The Company
anticipates completing all testing well in advance of January 1, 2000. As this
testing has and continues to be done in the normal course of system
development, the Company has not budgeted any costs associated with the Year
2000 issue. In addition, Year 2000 costs have been deemed immaterial.
The failure of any of the Company's third party administrators to
achieve complete compliance could have a material adverse effect on the
Company's ability to conduct its business, including delays in calculating unit
values, redeeming shares, delivering account statements and providing other
information, communication and servicing to Contract Owners. The Company
believes that it has taken the necessary provisions, both through selection and
testing, to assure that it will not experience any material adverse effects on
the Company's ability to conduct its business. The Company does however
realize the importance of this issue and is currently developing a detailed
contingency plan for operations in the unlikely event one or more of its third
party administrators is unable to fulfill its obligations.
FINANCIAL STATEMENTS
No financial statements are presented for the Variable Account because
it has yet to commence operations.
The audited financial statements for Sage Life for the year ended
December 31, 1997 are included in this Prospectus. These financial statements
should be considered only as bearing on the ability of Sage Life to meet its
obligations under the Contracts. They should not be considered as bearing on
the investment performance of the assets held in the Variable Account.
11. HOW CAN I MAKE INQUIRIES?
Inquiries regarding your Contract may be made by writing to us at our
Customer Service Center, by calling us at 877-835-7243 (Toll Free), or by
contacting one of our authorized registered representatives.
12. ADDITIONAL INFORMATION ABOUT SAGE LIFE ASSURANCE OF AMERICA, INC.
HISTORY AND BUSINESS
Ownership
Sage Life Assurance of America, Inc. was incorporated under the laws
of the state of Delaware in 1981. The Company is authorized to write general
life insurance and fixed and variable annuity contracts in all states except
New York, and also is licensed to conduct variable
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life insurance business in a majority of states.
The Company's formation was sponsored in 1981 by Fidelity Mutual Life
Insurance Company, a Pennsylvania insurer, under the name of Fidelity Standard
Life Insurance Company ("Fidelity Life"). Fidelity Life was acquired by
Security First Life Insurance Company ("Security First") of Los Angeles,
California in December 1984. In January 1997, Fidelity Life was acquired by
Sage Insurance Group, Inc. ("Sage Insurance Group") (formerly Finplan
Investment Corp.), a Delaware corporation and an indirect subsidiary of Sage
Group Limited ("Sage Group"), a South African corporation, which is the
Company's ultimate parent. The Company changed to its present name in September
1997. In December 1998, a new company, Sage Life Holdings of America, Inc.,
was formed by the Sage Insurance Group to act as the new immediate parent of
the Company. The transaction is discussed more fully in the section below
entitled "Holding Company Structure and Background."
Prior Business Operations
As a Security First subsidiary, the Company specialized in the
marketing of annuities qualifying under Section 403(b) of the Internal Revenue
Code. Under an assumption reinsurance agreement, Fidelity Life's annuity
business was irrevocably transferred to Security First in January 1997 except
for a small number of contracts. During 1998, all of the remaining annuity
business of Fidelity Life was assumption reinsured by Security First. Security
First is now a subsidiary of The Metropolitan Life Insurance Company.
Holding Company Structure and Background
As mentioned above, the Company is a wholly owned subsidiary of Sage
Life Holdings of America, Inc. ("Sage Life Holdings"), which in turn is a
wholly owned subsidiary of Sage Insurance Group, a holding company for
affiliated entities connected with the life and annuity insurance business in
the United States. The Company is also an indirect wholly owned subsidiary of
Sage Group, a corporation quoted on the Johannesburg Stock Exchange. Sage
Group is a holding company with a thirty-year history of extensive operating
experience in mutual funds, life assurance and investment management. Sage
Group has directly and indirectly engaged in insurance marketing activities in
the United States since 1977 through its financial interests in Independent
Financial Marketing Group Inc., a financial planning and bank insurance
marketing company. Sage Group sold its interest in Independent Financial
Marketing Group in March 1996 to the Liberty Financial Companies of Boston.
Sage Group signed a letter of intent with Swiss Re Life and Health
America, Inc. ("Swiss Re") on December 1, 1998. Swiss Re's ultimate parent is
Swiss Reinsurance Company, Switzerland, one of the world's largest life and
health reinsurance groups. The letter of intent contemplates that Swiss Re
will enter into reinsurance arrangements with the Company. In addition, it
provides for an investment by Swiss Re in a newly formed company, Sage Life
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Holdings, that has become the immediate parent of the Company and a
wholly-owned subsidiary of Sage Insurance Group. The arrangements contemplated
by the letter of intent may be subject to regulatory approval.
SELECTED FINANCIAL DATA
The historical financial results of the Company for the calendar year
1996 and all prior years are not comparable to the results for the years 1997
and 1998 due to the substantial change in the business operations of the
Company. The Company effectively disposed of all in-force business existing as
of December 31, 1996 and, therefore, on January 1, 1997, had no insurance
liabilities under any policy contracts of the Company other than the small
number of contracts that were not 100% assumption reinsured to the Company's
former parent company. These insurance liabilities were subsequently reinsured
during 1998. Effectively, therefore, since January 1997, the Company became
comparable to a new company that had not yet commenced business activities.
The following selected financial data as of December 31, 1997 and for
the year then ended, has been derived from the audited financial statements of
the Company. The following selected financial data as of October 31, 1998 and
for the ten months then ended, has been derived from the unaudited financial
statements of the Company, which have been prepared on the same basis as the
Company's audited financial statements and, in the opinion of management,
contain all adjustments consisting of only normal recurring adjustments
necessary for a fair presentation of the financial position and results of
operations for this period. The results of operations for the ten months ended
October 31, 1998 may not be indicative of results for the full year. The data
set forth below should be read in conjunction with the financial statements,
including related notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Selected Financial Data
(in thousands)
Ten months
ended Year ended
October 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Income Statement Data:
Revenues:
Net investment income $1,075 $ 989
Expenses:
Amortization expense 337 325
General and administrative expenses 1,071 1,016
------- ------
Total expenses 1,408 1,341
Loss before taxes (332) (352)
</TABLE>
50
<PAGE> 72
<TABLE>
<S> <C> <C>
Income tax expense - -
------- -------
Net loss $ (332) $ (352)
======= =======
Balance Sheet Data:
Total Assets $36,317 $36,689
Stockholder's Equity $36,242 $33,202
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Introduction
The following discussion highlights significant factors influencing
the results of operations of the Company. It should be read in conjunction
with the Company's financial statements and the related notes included in this
Prospectus.
History and Business Overview
In early 1999, the Company plans to commence marketing of new variable
insurance products. The Company was acquired by Sage Insurance Group on
December 31, 1996, and since that date has been preparing for the
recommencement of insurance underwriting and marketing activities. (Prior to
the acquisition of the Company, all new business production and marketing
ceased in October 1996.) There has been a total reengineering of the Company's
products, systems and administration since the change of ownership. All of the
Company's current senior management are experienced in the insurance industry
(either in the United States or in South Africa) and most have been recruited
since January 1997. The ongoing business strategy of the Company is to focus
its activities on the development, underwriting, and marketing of variable
insurance products. The Company's obligations under these contracts are (1)
variable accounts -- determined by the value of investments held in separate
accounts, and (2) fixed accounts -- backed by investments held in separate
accounts. Assets of these separate accounts that equal the reserves and other
liabilities supporting the contracts to which they relate, may not be used to
pay any other obligations or creditors of the Company. The Contracts initially
will be distributed through banks. The Company currently anticipates that,
over the long-term, its distribution channels will expand to include
wirehouses, regional broker-dealers and financial planners.
Results of Operations
Net losses for the ten months ended October 31, 1998 were $332,442 and
were $351,786
51
<PAGE> 73
for the year ended December 31, 1997. As the Company is not currently
underwriting or marketing insurance products, all revenue for 1998 and 1997 is
derived from investing activities. Effective investment yields for the
Company's General Account were 5.3% for the ten months ended October 31, 1998,
and 5.4% for the year ended December 31, 1997. General expenses incurred in
financing of the Company's daily activities more than offset investment
revenue. As the Company commences business in 1999, management anticipates
that revenues will increase primarily by charges and fees associated with
products being offered, while expenses will increase by acquisition expenses,
the cost of administering this new business and the payment of benefits.
The Company has capitalized certain costs that have been incurred in
the development and registration of the Company's insurance products and have
been paid for by Sage Insurance Group. These development costs are being
amortized on a straight line basis over fifteen years. Accumulated
amortization at October 31, 1998 and December 31, 1997 was $234,474 and
$93,637, respectively.
In April 1998, Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" (SOP 98-5) was issued. SOP 98-5 requires entities to
charge to expense all start-up costs as incurred. SOP 98-5 is effective for
years beginning after December 15, 1998 (i.e., January 1, 1999). In addition,
SOP 98-5 requires entities upon adoption to write-off as the cumulative effect
of a change in accounting principle any previously unamortized capitalized
start-up costs. Accordingly, the Company will be required to write-off any
unamortized capitalized development costs on January 1, 1999.
Liquidity and Capital Resources
Since the beginning of 1997, the Company's primary cash needs have
been for the development of its insurance products and related infrastructure
and to fund the daily operations of the Company. The Company's cash needs have
been met through interest income and capital contributions from Sage Insurance
Group.
During 1999, the Company expects its cash needs will continue to
increase as its underwriting and marketing activities begin. The Company
anticipates that it will be unable to meet all of its liquidity requirements in
1999 without capital contributions from Sage Insurance Group. However, as
discussed above, Swiss Re has made an equity investment in a newly formed
holding company, Sage Life Holdings, that will provide an additional source of
funds to the Company for new business expenses. In addition, although not
required to do so, the Company believes that Sage Insurance Group will continue
to provide capital to the Company for its non-recurring costs associated with
new products and business development during 1999. The Company's future
marketing efforts could be hampered in the unlikely event that Swiss Re, Sage
Insurance Group and/or their affiliates are unwilling to commit additional
funding.
52
<PAGE> 74
Segment Information
The Company currently plans to conduct its business as a single
segment and anticipates that this segment will eventually include all of the
following products:
- Combination fixed and variable deferred annuities.
- Combination fixed and variable immediate annuities.
- Combination fixed and variable life insurance products.
Reinsurance
The Company intends to enter into a coinsurance reinsurance
arrangement with Swiss Re, pursuant to which Swiss Re will reinsure a
significant portion of the Company's liabilities under its variable insurance
contracts. This arrangement will provide additional capacity for growth of the
Company's variable insurance business.
In addition, the Company intends to reinsure certain mortality risks
associated with the guaranteed minimum death benefit and accidental death
benefit features of the Contracts. The Company intends to use only highly
rated reinsurance companies to reinsure these risks.
Reinsurance does not relieve the Company from its obligations to
Contract Owners. The Company remains primarily liable to its Contract Owners
to the extent that any reinsurer does not meet its obligations under the
reinsurance agreements.
Reserves
In accordance with the insurance laws and regulations under which it
operates, the Company is obligated to carry on its books, as liabilities,
actuarially determined reserves to meet its obligations on outstanding
contracts. Reserves involving life contingencies are based on mortality tables
in general use in the United States and, where applicable, are computed to
equal amounts which, together with interest on such reserves computed annually
at certain assumed rates, will be sufficient to meet the Company's Contract
obligations at their maturities, or the event of the Contract Owner's death. In
the financial statements included in this Prospectus, all reserves have been
determined in accordance with generally accepted accounting principles. As
previously noted, all of Fidelity Life's existing annuity business has been
irrevocably transferred to Security First, resulting in no remaining contract
obligations at October 31, 1998.
Investments
The Company's General Account cash and invested assets of $25.6
million and $25.3 million at October 31, 1998 and December 31, 1997,
respectively, were invested entirely in investment grade securities and money
market funds. It is the stated policy of the Company to
53
<PAGE> 75
refrain from investing in securities having speculative characteristics. The
Company's entire portfolio is classified as available-for-sale, and is reported
at fair value, with resulting unrealized gains or losses included as a separate
component of stockholder's equity.
Dividend Restrictions
The Company is subject to state regulatory restrictions that limit the
maximum amount of dividends payable. Subject to certain net income
carryforward provisions as described below, the Company must obtain approval of
the Insurance Commissioner of the State of Delaware in order to pay, in any
12-month period, "extraordinary" dividends which are defined as those in excess
of the greater of 10% of surplus as regards Contract Owners as of the prior
year-end and statutory net income less realized capital gains for such prior
year. Dividends may be paid by the Company only out of earned surplus. In
addition, the Company must provide notice to the Insurance Commissioner of the
State of Delaware of all dividends and other distributions to shareholders
within five business days after declaration and at least ten days prior to
payment. At December 31, 1997, the maximum amount of dividends the Company
could have paid its parent without prior approval from state regulatory
authorities was $2,501,775.
New Accounting Standards
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130),
which establishes new rules for the reporting and display of comprehensive
income and its components, consisting of net income and other comprehensive
income. The accumulated balance of other comprehensive income is required to
be reported separately in stockholder's equity. The Company's only component
of other comprehensive income is net unrealized gains or losses on
available-for-sale securities, which is reported separately in stockholder's
equity. The adoption of SFAS 130 had no impact on the Company's net income or
stockholder's equity.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131
establishes standards for the reporting of operating segment information in
both annual financial reports and interim financial reports issued to
shareholders. Operating segments are components of an entity for which
separate financial information is available and is evaluated regularly by the
entity's chief operating management. SFAS is effective for fiscal year 1998
and is not anticipated to have a material impact on the Company.
COMPETITION
The Company is engaged in a business that is highly competitive due to
the large number of stock and mutual life insurance companies as well as other
entities marketing insurance
54
<PAGE> 76
products comparable to those being offered by the Company. There are
approximately 1,600 stock, mutual, and other types of insurers in the life
insurance business in the United States, a substantial number of which are
significantly larger than the Company. The Company is unique in that it is one
of the few life insurers that confines its activities to the marketing of
separate account variable insurance products.
TRANSACTIONS WITH SAGE INSURANCE GROUP
In 1997, the Company entered into a Cost Sharing Agreement with Sage
Insurance Group to share personnel costs, office rent and equipment costs.
These costs are allocated between the companies based upon the estimated time
worked, square footage of space utilized and upon monitored usage of the
equipment, respectively. Pursuant to this agreement, the Company has received
$109,923 from Sage Insurance Group for the ten months ended October 31, 1998
and paid expenses of $76,048 for the year ended December 31, 1997. In
addition, Sage Insurance Group provides funds to the Company to meet various
operating expenses. These amounts are paid back to Sage Insurance Group at the
end of each quarter.
Sage Insurance Group has also incurred expenditures in connection with
the costs of establishing new systems, new products, and premises for the
Company. The amount of these developmental costs paid for by companies
affiliated with Sage Life on October 31, 1998 and December 31, 1997 were
$2,749,628 and $1,504,558, respectively. Sage Insurance Group regards these
expenditures as being of a developmental nature and does not intend to recover
these expenditures from the Company. Accordingly, these expenditures have been
capitalized as development costs and reflected as contributed capital in the
Company's financial statements.
EMPLOYEES
Due to the Company's business strategy of outsourcing its primary
administrative and investment functions to organizations that specialize in
these areas, the number of full time personnel employed by the Company will be
limited. As of October 31, 1998, the Company had 14 employees. As of December
31, 1997, the Company had 8 employees.
PROPERTIES
The Company's executive office is located at 300 Atlantic Street, in
Stamford, Connecticut, where the Company's primary records are maintained.
Customer records, however, are maintained at the Company's Customer Service
Center.
Sage Insurance Group leases the Company's office space. The Company
reimburses Sage Insurance Group for the office space under the Cost Agreement
described above.
55
<PAGE> 77
STATE REGULATION
The Company is subject to the laws of the State of Delaware governing
insurance companies and to the regulations of the Delaware Department of
Insurance (the "Insurance Department"). A detailed financial statement in the
prescribed form (the "Statement") is filed with the Insurance Department each
year covering the Company's operations for the preceding year and its financial
condition as of the end of that year. Regulation by the Insurance Department
means that the Insurance Department may examine the Company and its books and
records to determine, among other things, whether contract liabilities and
reserves as stated by the Company are correct. A full examination of the
Company's operations will be conducted periodically by the Insurance Department
under the auspices of the NAIC.
In addition, the Company is subject to regulation under the insurance
laws of all jurisdictions in which it operates. The laws of the various
jurisdictions establish supervisory agencies with broad administrative powers
with respect to various matters, including licensing to transact business,
overseeing trade practices, licensing agents, approving contract forms,
establishing reserve requirements, fixing maximum interest rates on life
insurance contract loans and minimum rates for accumulation of surrender
values, prescribing the form and content of required financial statements and
regulating the type and amounts of investments permitted. The Company is
required to file the Statement with supervisory agencies in each of the
jurisdictions in which it does business, and its operations and accounts are
subject to examination by these agencies at regular intervals.
The NAIC has adopted several regulatory initiatives designed to
improve the surveillance and financial analysis regarding the solvency of
insurance companies in general. These initiatives include the development and
implementation of a risk-based capital formula for determining adequate levels
of capital and surplus. Insurance companies are required to calculate their
risk-based capital in accordance with this formula and to include the results
in their Statement. It is anticipated that these standards will have no
significant effect upon the Company.
Further, many states regulate affiliated groups of insurers, such as
the Company and its affiliates, under insurance holding company legislation.
Under such laws, inter-company transfers of assets and dividend payments from
insurance subsidiaries may be subject to prior notice or approval, depending on
the size of the transfers and payments in relation to the financial positions
of the companies involved.
Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed (up to prescribed limits) for contract owner
losses incurred when other insurance companies have become insolvent. Most of
these laws provide that an assessment may be excused or deferred if it would
threaten an insurer's own financial strength.
Although the federal government ordinarily does not directly regulate
the business of insurance, federal initiatives often have an impact on the
business in a variety of ways. The
56
<PAGE> 78
insurance products of the Company are subject to various federal securities
laws and regulations. In addition, current and proposed federal measures that
may significantly affect the insurance business include regulation of insurance
company solvency, employee benefit regulation, removal of barriers preventing
banks from engaging in the insurance business, tax law changes affecting the
taxation of insurance companies, and the tax treatment of insurance products
and its impact on the relative desirability of various personal investment
vehicles.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Position held with the Other Principal Positions
Name (Age) Company/Year Commenced During Past Five Years
- ---------- ---------------------- ----------------------
<S> <C> <C>
Ronald S. Scowby (1) Director, 1/97 to present, Director, Sage Life Assurance
Age 59 Chairman, 2/98 to present Company of New York, 5/98 to
present; Vice Chairman 2/98
to present, President, 1/97
to 2/98, Director, 1/97 to
present, Sage Insurance
Group Inc.; Director, Sage
Advisors, Inc., 1/98 to
present; President, Chief
Executive Officer, Sage Life
Assurance of America Inc.,
1/97-2/98; Director, Sage
Distributors, Inc., 1/98 to
present; Director,
President, Chief Executive
Officer, Sage Management
Services (USA), Inc., 6/96 to
present; Owner, Sheldon
Scowby Resources 7/95-6/96;
Executive Vice President,
Mutual of America Life
Insurance Group, 6/91-7/95;
President, Mutual of America
Financial Services, 6/91-7/95
Robin I. Marsden (1) Director, 1/97 to Director, Sage Life Assurance
Age 33 present, President and Company of New York, 5/98 to
Chief Executive Officer, present; Director,
2/98 to present President, Sage Advisors,
Inc., 1/98 to present;
Director, Sage Distributors,
Inc., 1/98 to
</TABLE>
57
<PAGE> 79
<TABLE>
S> <C> <C>
present; Director, 1/97 to
present, President and Chief
Executive Officer, 2/98 to present,
Sage Insurance Group, Inc.;
Investments Director, Sage Life
Holdings, Ltd., 11/94 to 1/98;
Executive-Strategic Developments,
Sage Group Ltd., 11/94 to 1/98;
Partner and Management Consultant
Deloitte & Touche 1/89-10/94
H. Louis Shill (2) Director, Director, Sage Life Assurance
Age 68 1/97 to present Company of New York, 5/98 to
present; Chairman, Sage Life
Assurance of America, Inc. 1/97 to
2/98; Chairman, Sage Insurance
Group, Inc., 1/97 to present;
Founder, Chairman, Sage Group
Limited, 1965 to present
Paul C. Meyer(3) Director, Director, Sage Life Assurance
Age 45 1/97 to present Company of New York 5/98 to
present; Partner, Rogers & Wells,
1986 to present
Richard D. Starr(4) Director, Director, Sage Life Assurance
Age 54 1/97 to present Company of New York, 5/98 to
present; President, First
Interstate Securities, 1/95-12/95;
Chairman & Chief Executive Officer,
Financial Institutions Group, Inc.,
10/78 to present
Mitchell R. Katcher(1) Director, 12/97 to Director, Sage Life Assurance
Age 45 present, Senior Company of New York, 5/98 to.
Executive Vice present; Director, Treasurer, Sage
President, Chief Advisors, Inc., 1/98 to present;
Financial Officer, Director, Sage Distributors, Inc.,
Chief Actuary 1/98 to present; Treasurer, 7/97 to
5/97 to present present, Senior Executive Vice
President, 12/97 to present, Sage
Insurance Group, Inc.;
</TABLE>
58
<PAGE> 80
<TABLE>
<S> <C>
Executive
Vice President,
Golden American
Life Insurance
Company, 7/93-2/97.
</TABLE>
(1) The principal business address of these persons is 300 Atlantic
Street, Stamford, CT 06901.
(2) Mr. Shill's principal business address is Sage Centre, 10 Fraser
Street, Johannesburg, South Africa 2000.
(3) Mr. Meyer's principal business address is 200 Park Avenue,
New York, N.Y. 10166.
(4) Mr. Starr's principal business address is 22507 SE 47th Place,
Issaquah, WA 98029.
COMPENSATION
Executive officers of the Company also serve as officers of its parent
and of certain affiliated companies. Cost allocations to the Company have been
made as to certain individual's time devoted to their duties with the Company.
No allocation was made during 1997 nor will any be made for 1998 for the
services of Mr. Shill. No allocation was made during 1997 for the services of
Mr. Marsden.
The following table includes compensation paid by Sage Life for
services rendered in all capacities for the years indicated for the Chief
Executive Officer and the other Executive Officers compensated more than
$100,000 for the year ended December 31, 1997.
<TABLE>
<CAPTION>
Annual Compensation
All Other
Name and Principal Position Year Salary Bonus(1) Compensation(2)
--------------------------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Ronald S. Scowby, 1997 $337,500 $100,000 $0
President and Chief
Executive Officer(3)
Mitchell R. Katcher, 1997 $114,583 $265,000 $0
Senior Executive
Vice President,
Chief Financial
Officer and Chief Actuary
</TABLE>
(1) The amount shown relates to bonuses paid in 1998 for services rendered in
1997.
(2) The amount shown relates to deferred compensation earned in 1997.
(3) Mr. Scowby's salary and bonus are paid by Sage Management Services (USA),
Inc.
Outside directors of the Company are paid $12,000 and $2,000 per meeting
attended. For
59
<PAGE> 81
the year ended December 31, 1997, the outside directors each were paid $20,000.
Directors who are officers or employees of the Company or its affiliates are
not compensated for serving on the Board. Directors do not receive retirement
benefits.
60
<PAGE> 82
Report of Independent Auditors
Board of Directors
Sage Life Assurance of America, Inc.
We have audited the accompanying balance sheet of Sage Life Assurance of
America, Inc. (formerly Fidelity Standard Life Insurance Company) as of
December 31, 1997, and the related statements of operations, stockholder's
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our 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. 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 Sage Life Assurance of
America, Inc. as of December 31, 1997, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Stamford, Connecticut
April 22, 1998
/s/Ernst & Young LLP
61
<PAGE> 83
Sage Life Assurance of America, Inc.
Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31, 1998
(unaudited) DECEMBER 31, 1997
--------------------- -----------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at fair value $3,604,066 $ 3,595,326
Short-term investments 2,579,083 21,530,888
------------ ----------
Total investments 6,183,149 25,126,214
Cash and cash equivalents 19,422,092 228,605
Accrued investment income 130,929 58,039
Receivable from affiliates 48,769 25,941
Reinsurance recoverable - 2,728,284
Other assets 5,000 11,443
Goodwill 6,606,236 6,802,300
Development costs 3,919,711 1,310,921
Separate account assets - 396,992
----------- -----------
Total assets $36,315,886 $36,688,739
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued expenses $ 2,005 $ 180,442
Policy liabilities - 2,728,284
Deferred income taxes 36,220 26,227
Amounts payable to affiliates 36,454 154,366
Separate account liabilities - 396,992
----------- ---------
Total liabilities 74,679 3,486,311
Stockholder's equity:
Common stock, $2,500 par value, 1,000 shares
Authorized, issued and outstanding 2,500,000 2,500,000
Additional paid-in capital 34,355,127 31,005,508
Unrealized gains on investment 70,308 48,706
Retained deficit (684,228) (351,786)
--------- -------------
36,241,207 33,202,428
---------- -------------
$36,315,886 $ 36,688,739
=========== ============
</TABLE>
See accompanying notes to financial statements.
62
<PAGE> 84
Sage Life Assurance of America, Inc.
Statements of Operations
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, 1998 YEAR ENDED
(unaudited) DECEMBER 31, 1997
------------------- -----------------
<S> <C> <C>
REVENUES
Investment income $ 1,075,251 $ 989,494
EXPENSES
Amortization expense 336,901 325,406
General and administrative expenses 1,070,792 1,015,874
--------- ---------
Total expenses 1,407,693 1,341,280
--------- ---------
Loss before taxes (332,442) (351,786)
Income tax expense - -
------------- --------------
Net loss $ (332,442) $ (351,786)
============ ===========
</TABLE>
See accompanying notes to financial statements.
63
<PAGE> 85
Sage Life Assurance of America, Inc.
Statements of Stockholder's Equity
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, 1998 YEAR ENDED
(unaudited) DECEMBER 31, 1997
------------------- -----------------
<S> <C> <C>
Common stock; balance at beginning and end of year: $ 2,500,000 $ 2,500,000
Additional paid-in capital:
Balance at beginning of year 31,005,508 15,505,558
Additional capital contributions 3,349,619 15,500,000
------------ ----------
Balance at end of year 34,355,127 31,005,508
Unrealized investment gains:
Balance at beginning of year 48,706 -
Change in unrealized gain 21,602 48,706
------ ------
Balance at end of year 70,308 48,706
Retained earnings:
Balance at beginning of year (351,786) -
Net loss (332,442) (351,786)
--------- ---------
Balance at end of year (684,228) (351,786)
--------- ---------
Total stockholder's equity $36,241,207 $33,202,428
=========== ===========
</TABLE>
See accompanying notes to financial statements.
64
<PAGE> 86
Sage Life Assurance of America, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
TEN MONTHS ENDED
OCTOBER 31, 1998 YEAR ENDED
(unaudited) DECEMBER 31, 1997
------------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (332,442) $ (351,786)
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities:
Amortization expense 336,901 325,406
Changes in:
Accrued investment income (72,890) (29,638)
Receivable from affiliates (22,828) (25,941)
Other assets 6,443 (11,443)
Accrued expenses (178,437) 116,216
Amounts payable to affiliates (117,912) 154,366
--------- -------
Net cash (used in) provided by operating activities (381,165) 177,180
INVESTING ACTIVITIES
Proceeds from sales, maturities and repayments of - 42,941
fixed maturity securities
Net sales [purchases] of short-term investments 18,974,652 (15,507,987)
---------- ------------
Net cash provided by (used in) investing activities 18,974,652 (15,465,046)
FINANCING ACTIVITIES
Capital contribution from the parent 600,000 15,500,000
------- ----------
Net cash provided by financing activities 600,000 15,500,000
------- ----------
Increase in cash and cash equivalents 19,193,487 212,134
Cash and cash equivalents at beginning of period 228,605 16,471
------- ------
Cash and cash equivalents at end of period $ 19,422,092 $ 228,605
================= ===========
</TABLE>
See accompanying notes to financial statements.
65
<PAGE> 87
Sage Life Assurance of America, Inc.
Notes to Financial Statements
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATION
Sage Life Assurance of America, Inc. (the "Company") is a wholly-owned
indirect subsidiary of Sage Insurance Group, Inc., ("SIGI") which is a
wholly-owned indirect subsidiary of Sage Group Limited, a South African
company.
DESCRIPTION OF BUSINESS
Effective December 31, 1996, SIGI purchased from Security First Life Insurance
Company (SFLIC) all of the outstanding stock of Fidelity Standard Life
Insurance Company (Fidelity Standard), a Delaware domiciled life insurance
company licensed to sell fixed and variable annuity contracts. As a result of
the purchase, Fidelity Standard was renamed Sage Life Assurance of America,
Inc. Effective October 31, 1996, Fidelity Standard entered into a modified
coinsurance arrangement to cede all of its separate account liabilities to its
then parent, SFLIC. Assets equal to the total reserves and related liabilities
were transferred to SFLIC. The remaining general account liabilities were ceded
under a 100% coinsurance arrangement with SFLIC. In connection with the
purchase of Fidelity Standard, the Company entered into a service agreement
with SFLIC to provide all necessary administrative services for all ceded
business.
The Company is in the process of developing and preparing to market variable
annuity and variable life insurance products. The marketing of these products
is expected to begin in the first quarter 1999. Sage Distributors Inc.
(formerly Finplan of America, Inc.), an affiliated broker/dealer, will
distribute the variable products as principal underwriter. (Selling agreements
will be entered into with other broker/dealers that will sell the variable
insurance products). Sage Advisors, Inc., an affiliate, will provide investment
management services to registered investment companies (mutual funds). These
mutual funds are in the process of being developed.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. The information presented herein
with respect to the period as of and for the ten months ended October 31, 1998,
is unaudited.
NEW ACCOUNTING PRONOUNCEMENT
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), which
establishes new rules for the reporting and display of comprehensive income and
its components, consisting of net income and other comprehensive income. The
accumulated balance of other comprehensive income is required to be reported
separately in stockholder's equity. The Company's only component of other
comprehensive income is net unrealized gains or losses on available-for-sale
securities, which is reported separately in stockholder's equity. The adoption
of SFAS 130 had no impact on the Company's net income or stockholder's equity.
66
<PAGE> 88
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards
for the reporting of operating segment information in both annual financial
reports and interim financial reports issued to shareholders. Operating
segments are components of an entity for which separate financial information
is available and is evaluated regularly by the entity's chief operating
management. SFAS 131 is effective for fiscal year 1998 and is not anticipated
to have a material impact on the Company.
INVESTMENTS
The Company has classified all of its fixed maturity investments as
available-for-sale. Those investments are carried at fair value and changes in
unrealized gains and losses are reported as a component of stockholder's
equity, net of applicable deferred income taxes. Fair values are determined by
quoted market prices.
Short-term investments are carried at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined by the
specific identification method and are included in revenues.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity
of three months or less from the date of purchase to be cash equivalents. Cash
and cash equivalents are carried at cost, which approximates fair value.
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying
balance sheet represent funds that are separately administered, principally for
the benefit of certain policyholders who bear the investment risk. The
separate account assets and liabilities are carried at fair value. Revenues and
expenses related to the separate account assets and liabilities, to the extent
of benefits paid or provided to the separate account policyholders, are
excluded from the amounts reported in the accompanying statement of operations.
POLICY LIABILITIES
Policy liabilities consist of deposits received plus credited interest, less
accumulated policyholder charges, assessments, and withdrawals related to
annuities of a nonguaranteed return nature. Interest crediting rates ranged
from 5.5% to 7.0%.
67
<PAGE> 89
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is being amortized on a straight-line basis over
thirty years. The carrying value of goodwill is regularly reviewed for
indications of impairment in value, which, in the view of management, is other
than temporary. Accumulated amortization at October 31, 1998 and December 31,
1997 was $427,833 and $231,769, respectively.
DEVELOPMENT COSTS
The Company has capitalized certain costs that have been incurred in the
development and registration of the Company's insurance products. These
development costs are being amortized on a straight line basis over fifteen
years. Accumulated amortization at October 31, 1998 and December 31, 1997 was
$234,474 and $93,637, respectively.
In April 1998, Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5), was issued. SOP 98-5 requires entities to charge to
expense all start-up costs as incurred. SOP 98-5 is effective for years
beginning after December 15, 1998 (i.e., January 1, 1999). In addition, SOP
98-5 requires entities upon adoption to write-off as the cumulative effect of a
change in accounting principle any previously unamortized capitalized start-up
costs. Accordingly, the Company will be required to write-off any unamortized
capitalized development costs on January 1, 1999.
ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires that management makes estimates and assumptions
that affect the reported amount of 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 those estimates.
INCOME TAXES
Income taxes are accounted for using the liability method. Using this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
68
<PAGE> 90
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
2. INVESTMENTS
Investments in fixed maturity securities as of October 31, 1998 consist of the
following:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COSTS GAINS LOSSES VALUE
--------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government
Obligations $ 3,497,538 $106,528 - $3,604,066
========================================================
</TABLE>
Investments in fixed maturity securities as of December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COSTS GAINS LOSSES VALUE
---------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government
Obligations $3,520,393 $79,120 $4,187 $3,595,326
===================================================
</TABLE>
The amortized cost and fair value of fixed maturity securities by contractual
maturity at October 31, 1998 and December 31, 1997 are summarized below.
Actual maturities will differ from contractual maturities because certain
borrowers have the right to call or prepay obligations.
<TABLE>
<CAPTION>
October 31, 1998 AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less $ 815,082 $ 816,019
Due after five years through ten years 2,682,456 2,788,047
--------- ---------
Total $3,497,538 $3,604,066
========== ==========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997 AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less $ 815,495 $ 811,308
Due after five years through ten years 2,704,898 2,784,018
--------- ---------
Total $3,520,393 $3,595,326
========== ==========
</TABLE>
69
<PAGE> 91
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
Investment income by major category of investment for October 31, 1998 and
December 31, 1997 is summarized as follows:
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Bonds $193,303 $255,778
Short-term investments 823,179 720,556
Cash and cash equivalents 71,892 49,035
------ ------
Total investment income 1,088,374 1,025,369
Investment expenses 13,123 35,875
------ ------
Net investment income $1,075,251 $989,494
========== ========
</TABLE>
At October 31, 1998 and December 31, 1997, investment securities with an
amortized cost value of $6,076,620 and $6,128,048 and a fair value of
$6,184,066 and $6,202,980, respectively, are held by trustees in various
amounts in accordance with the statutory requirements of certain states in
which the Company is licensed to conduct business.
3. INCOME TAXES
The Company has filed a separate life insurance company Federal income tax
return for the period January 1, 1997 through December 31, 1997. The Company
will continue to file a separate life insurance company Federal income tax
return through the year 2001. Beginning in the year 2002, the Company will be
included in the consolidated Federal income tax return of Sage Holdings (USA),
Inc. and its subsidiaries.
The provision for income taxes varies from the amount that would be computed
using the federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Pre-tax loss $ (332,442) $ (351,786)
Application of the federal
statutory tax rate - 34% (113,030) (119,607)
Tax effect of:
State income taxes - (75)
Change in valuation allowance 113,030 119,532
------- -------
Total income tax provision $ - $ -
=========== ==========
</TABLE>
70
<PAGE> 92
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
Significant components of the Company's deferred tax assets and
liabilities as of October 31, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,844,098 $ 756,521
---------------- -----------------
Total deferred tax assets $ 1,844,098 $ 756,521
Deferred tax liabilities:
Unrealized gain on appreciation of
investments (36,220) (26,227)
Amortization of goodwill and
development costs (1,611,536) (636,989)
---------------- -----------------
Total deferred tax liabilities (1,647,756) (663,216)
Valuation allowance for deferred
tax assets (232,562) (119,532)
---------------- -----------------
Net deferred tax liability (36,220) (26,227)
================ =================
</TABLE>
Based upon the lack of historical operating results and the uncertainty of
operating earnings in the future, management has determined that it is not
more likely than not that the deferred tax assets will be fully recognized.
Accordingly, a valuation allowance has been recorded.
At October 31, 1998, the Company has net operating loss carryforwards of $3.2
million for federal income tax purposes that expire in 2013 and $2.2 million
that expire in the year 2012.
4. REINSURANCE AND OTHER AGREEMENTS
Effective September 1, 1998, all of the in-force business of the Company was
novated to SFLIC, a subsidiary of the Metropolitan Life Insurance Company.
5. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS
Statutory-basis capital and surplus and net income are $25,017,752 and $51,133
at and for the year ended December 31, 1997, respectively. The required
statutory capital and surplus at December 31, 1997 is $17,257,518.
The Company is subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions as described below, the Company must obtain approval of the
Insurance Commissioner of the State of Delaware in order to pay, in any
12-month period, "extraordinary" dividends which are defined as those in
excess of the greater of 10% of surplus as regards policyholders as of the
prior year-end and statutory net income less realized capital gains for such
prior year. Dividends may be paid by the Company only out of earned surplus. In
addition, the Company must provide notice to the Insurance Commissioner of the
State of Delaware of all dividends and other distributions to shareholders
within five business days after declaration and at least ten days prior to
payment. At December 31, 1997, the maximum amount of dividends the Company
could pay SIGI without prior approval from state regulatory authorities is
$2,501,775.
71
<PAGE> 93
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
6. RELATED PARTY TRANSACTIONS
In 1997, the Company entered into a Cost Sharing Agreement with SIGI to share
the personnel costs, office rent and equipment costs. These costs are
allocated between the companies based upon the estimated time worked, square
footage of space utilized and upon monitored usage of the equipment,
respectively. Pursuant to this agreement, the Company has recorded income of
$109,923 from SIGI for the ten months ended October 31, 1998 and expenses of
$76,048 for the year ended December 31, 1997. In addition, SIGI provides funds
to the Company to meet various operating expenses. These amounts are paid back
to SIGI at the end of each quarter. At October 31, 1998 and December 31, 1997,
$12,315 and $100,000 of the amounts transferred to the Company remained payable
to SIGI, respectively.
All non-recurring development costs of the Company are paid by SIGI or its
parent, Sage Group Limited, and treated as capital contributions. The amount
of development costs paid for by affiliated companies at October 31, 1998 and
December 31, 1997 were $2,749,628 and $1,504,558, respectively.
72
<PAGE> 94
Table of Contents of the
Statement of Additional Information
Additional information about the Contracts and The Sage Variable Annuity
Account A is contained in the Statement of Additional Information. You can
obtain a free copy of the Statement of Additional Information by writing to us
at the address shown on the front cover or by calling (877) 835-7243 (Toll
Free). The following is the Table of Contents for the Statement of Additional
Information.
Statement of Additional Information
Table of Contents
Page
----
Participation . . . . . . . . . . . . . . . . . . . . . . . . .
Beneficiary Designation. . . . . . . . . . . . . . . . . . . . .
Calculation of Historical Performance Data . . . . . . . . . . .
Money Market Sub-Account Yields . . . . . . . . . . . . . . .
Other Sub-Account Yields . . . . . . . . . . . . . . . . . .
Average Annual Total Returns. . . . . . . . . . . . . . . . .
Other Total Returns . . . . . . . . . . . . . . . . . . . . .
Effect of the Annual Administration Charge on
Performance Data. . . . . . . . . . . . . . . . . . . . . .
Use of Indexes . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . .
Income Payment Provisions. . . . . . . . . . . . . . . . . . . .
Amount of Fixed Income Payments . . . . . . . . . . . . . . .
Amount of Variable Income Payments. . . . . . . . . . . . . .
Income Units . . . . . . . . . . . . . . . . . . . . . . . .
Income Unit Value . . . . . . . . . . . . . . . . . . . . . .
Exchange of Income Units. . . . . . . . . . . . . . . . . . .
Safekeeping of Account Assets. . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information. . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . .
73
<PAGE> 95
APPENDIX A
Market Value Adjustment
We will apply a Market Value Adjustment to amounts surrendered, withdrawn,
transferred or applied to an income plan when taken from a Fixed Sub-Account
more than 30 days before its Expiration Date. We apply a Market Value
Adjustment separately to each Fixed Sub-Account.
For a surrender, withdrawal, transfer or amount applied to an income plan,
we will calculate the Market Value Adjustment by applying the factor below to
the total amount that must be surrendered, withdrawn, transferred or applied to
an income plan in order to provide the amount requested.
(N/365)
[(1+I)/(1+J+.0025)] - 1
Where
- I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period, at the time that we established the Sub-Account;
- J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period, at the time of surrender, withdrawal, transfer, or
application to an income plan; and
- N is the remaining number of days in the Guarantee Period at the time
of calculation.
We will apply Market Value Adjustments as follows:
If the Market Value Adjustment is negative, we first deduct it from any
remaining value in the Fixed Sub-Account. We then deduct any remaining
negative Market Value Adjustment from the amount you surrender, withdraw,
transfer, or apply to an income plan.
If the Market Value Adjustment is positive, we add it to any remaining
value in the Fixed Sub-Account or the amount you surrender. If you
withdraw, transfer or apply to an income plan the full amount of the Fixed
Sub-Account, we add the Market Value Adjustment to the amount you
withdraw, transfer, or apply to an income plan.
MVA EXAMPLES
Example #1: Surrender -- Example of a Negative Market Value Adjustment
Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of
ten years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of
7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a surrender three years into the
Guarantee Period, the Index Rate based on the U.S. Treasury Constant
A-1
<PAGE> 96
Maturity Series for a seven-year Guarantee Period ("J") is 8.0% at the time of
the surrender, and no prior transfers or withdrawals affecting this Fixed
Sub-Account have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Account Value of the Fixed Sub-Account on the date of surrender is
3
$124,230 ($100,000 x 1.075 )
2. N = 2,555 (365 x 7)
2555/365
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0825)] -1} =
- $9,700
Therefore, the amount paid on full surrender is $114,530 ($124,230 - $9,700).
Example #2: Surrender -- Example of a Positive Market Value Adjustment
Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of
ten years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of
7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a surrender three years into the
Guarantee Period, the Index Rate based on the U.S. Treasury Constant Maturity
Series for a seven-year Guarantee Period ("J") is 6.0% at the time of the
surrender, and no prior transfers or withdrawals affecting this Fixed
Sub-Account have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Account Value of the Fixed Sub-Account on the date of surrender is
3
$124,230 ($100,000 x 1.075 )
2. N = 2,555 (365 x 7)
2555/365
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0625)] -1} =
+ $6,270
Therefore, the amount paid on full surrender is $130,500 ($124,230 + $6,270).
Example #3: Withdrawal -- Example of a Negative Market Value Adjustment
Assume you invest $200,000 in a Fixed Sub-Account with a Guarantee Period of
ten years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of
7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a withdrawal of $100,000 three years
into the Guarantee Period, the Index Rate based on the U.S. Treasury Constant
Maturity Series for a seven-year Guarantee Period ("J") is 8.0% at the time of
withdrawal, and no prior transfers or withdrawals affecting this Fixed
Sub-Account have been made.
A-2
<PAGE> 97
1. The Account Value of the Fixed Sub-Account on the date of withdrawal is
3
$248,459 ($200,000 x 1.075 ).
2. N = 2,555 (365 x 7)
2555/365
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0825)] -1} =
- $7,808
Therefore, the amount of the withdrawal paid is $100,000, as requested. The
Fixed Sub-Account will be reduced by the amount of the withdrawal paid,
($100,000) and by the Market Value Adjustment ($7,808), for a total reduction
in the Fixed Sub-Account of $107,808.
Example #4: Withdrawal -- Example of a Positive Market Value Adjustment
Assume you invest $200,000 in a Fixed Sub-Account with a Guarantee Period of
ten years, with a Guaranteed Interest Rate of 7.5% and an initial Index Rate
("I") of 7.0% based on the U.S. Treasury Constant Maturity Series at the time
we established the Sub-Account. You request a withdrawal of $100,000 three
years into the Guarantee Period, the Index Rate based on the U.S. Treasury
Constant Maturity Series for a seven-year Guarantee Period ("J") is 6.0% at the
time of the withdrawal, and no prior transfers or withdrawals affecting this
Fixed Sub-Account have been made.
1. The Account Value of the Fixed Sub-Account on the date of withdrawal is
3
$248,459 ($200,000 x 1.075 )
2. N = 2,555 (365 x 7)
2555/365
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0625)] - 1} =
+ $5,047
Therefore, the amount of the withdrawal paid is $100,000, as requested. The
Fixed Sub-Account will be reduced by the amount of the withdrawal paid
($100,000) and increased by the amount of the Market Value Adjustment ($5,047),
for a total reduction of $94,953.
A-3
<PAGE> 98
APPENDIX B
Below is an example of how the Dollar Cost Averaging Program works.
Assume that the Dollar Cost Averaging Program has been elected and that
$24,000 is invested in a DCA Fixed Sub-Account with a Guarantee Period of two
years and an annual Guaranteed Interest Rate of 6.0%.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Beginning Beginning of Month Dollar Cost Amount Dollar Interest Credited End of Month
of Month Account Value Averaging Cost Averaged For Month Account Value
- -------- ------------- Monthly Factor ------------- --------- -------------
--------------
<S> <C> <C> <C> <C> <C>
1 24,000 - - 117 24,117
2 24,117 1 / 24 1,005 112 23,224
3 23,224 1 / 23 1,010 108 22,323
4 22,323 1 / 22 1,015 104 21,412
5 21,412 1 / 21 1,020 99 20,492
6 20,492 1 / 20 1,025 95 19,562
7 19,562 1 / 19 1,030 90 18,622
8 18,622 1 / 18 1,035 86 17,673
9 17,673 1 / 17 1,040 81 16,715
10 16,715 1 / 16 1,045 76 15,746
11 15,746 1 / 15 1,050 72 14,768
12 14,768 1 / 14 1,055 67 13,780
13 13,780 1 / 13 1,060 62 12,782
14 12,782 1 / 12 1,065 57 11,774
15 11,774 1 / 11 1,070 52 10,756
16 10,756 1 / 10 1,076 47 9,727
17 9,727 1 / 9 1,081 42 8,688
18 8,688 1 / 8 1,086 37 7,639
19 7,639 1 / 7 1,091 32 6,580
20 6,580 1 / 6 1,097 27 5,510
21 5,510 1 / 5 1,102 21 4,429
22 4,429 1 / 4 1,107 16 3,338
23 3,338 1 / 3 1,113 11 2,236
24 2,236 1 / 2 1,118 5 1,124
25 1,124 1 / 1 1,124 - -
</TABLE>
Note:
Column(3) = Column(1) x Column(2)
Column(5) = Column(1) - Column(3) + Column(4)
B-1
<PAGE> 99
To obtain a Statement of Additional Information for this Prospectus, please
complete the form below and mail to:
Sage Life Assurance of America, Inc.
Customer Service Center
1290 Silas Deane Highway
Wethersfield, CT 06109
Please send a Statement of Additional Information to me at the following
address:
- -------------------------------------
Name
- -------------------------------------
Address
- -------------------------------------
City/State Zip Code
<PAGE> 100
STATEMENT OF ADDITIONAL INFORMATION
DATED _____________ ____, 1999
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY
CONTRACTS
issued by
THE SAGE VARIABLE ANNUITY ACCOUNT A AND SAGE LIFE ASSURANCE OF
AMERICA, INC.
Customer Service Center:
1290 Silas Deane Highway
Wethersfield, CT 06109
Telephone: (877) 835-7243
(Toll Free)
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Flexible Deferred Combination Fixed and Variable
Annuity Contracts (the "Contracts" offered by Sage Life Assurance of America,
Inc. ("we," "us," "our," "Sage Life," or the "Company"). You may obtain a copy
of the Prospectus dated ___________, by calling 1-877-835-7243 (Toll Free) or
by writing to our Customer Service Center at the above address. You may also
obtain a copy of the Prospectus by accessing the Securities and Exchange
Commission's website at http://www.sec.gov. Terms used in the current
Prospectus for the Contracts are incorporated into and made a part of this
Statement of Additional Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR
THE CONTRACTS AND THE PROSPECTUSES FOR THE TRUSTS.
<PAGE> 101
Statement of Additional Information
Table of Contents
Page
----
Participation . . . . . . . . . . . . . . . . . . . . . . . . .
Beneficiary Designation . . . . . . . . . . . . . . . . . . . .
Calculation of Historical Performance Data . . . . . . . . . . .
Money Market Sub-Account Yields . . . . . . . . . . . . . . .
Other Variable Sub-Account Yields. . . . . . . . . . . . . . .
Average Annual Total Returns . . . . . . . . . . . . . . . . .
Other Total Returns. . . . . . . . . . . . . . . . . . . . . .
Effect of the Annual Administration Charge on
Performance Data . . . . . . . . . . . . . . . . . . . . . .
Use of Indexes . . . . . . . . . . . . . . . . . . . . . . . .
Other Information. . . . . . . . . . . . . . . . . . . . . . .
Income Payment Provisions . . . . . . . . . . . . . . . . . . .
Amount of Fixed Income Payments. . . . . . . . . . . . . . . .
Amount of Variable Income Payments . . . . . . . . . . . . . .
Income Units . . . . . . . . . . . . . . . . . . . . . . . . .
Income Unit Value. . . . . . . . . . . . . . . . . . . . . . .
Exchange of Income Units . . . . . . . . . . . . . . . . . . .
Safekeeping of Account Assets . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . .
i
<PAGE> 102
PARTICIPATION
The Contracts do not participate in the surplus or profits of the Company,
and the Company does not pay dividends on the Contracts.
BENEFICIARY DESIGNATION
This is as shown in the application. It includes the name of the Beneficiary
and the order and method of payment. If you name "estate" as a Beneficiary, it
means the executors or administrators of your estate. If you name "children" of
a person as a Beneficiary, only children born to or legally adopted by that
person as of an Owner's date of death will be included.
We may rely on an affidavit as to the ages, names, and other facts about all
Beneficiaries. We will incur no liability if we act on such affidavit.
CALCULATION OF HISTORICAL PERFORMANCE DATA
From time to time, we may disclose yields, total returns, and other
performance data of the Variable Sub-Accounts and the Funds. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.
MONEY MARKET SUB-ACCOUNT YIELDS
From time to time, advertisements and sales literature may quote the current
annualized yield of the Variable Sub-Account investing in the Money Market Fund
(the "Money Market Sub-Account") of the Sage Life Investment Trust for a
seven-day period in a manner that does not take into consideration any realized
or unrealized gains or losses on shares of the Money Market Fund.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) at the end of the seven-day period in
the value of a hypothetical account under a Contract having a balance of one
Accumulation Unit of the Money Market Sub-Account at the beginning of the
period, dividing such net change in Account Value by the value of the
hypothetical account at the beginning of the period to determine the base
period return, and annualizing this quotient on a 365-day basis. The net change
in Account Value reflects (i) net income from the Money Market Fund
attributable to the hypothetical account; and (ii) charges and deductions
imposed under a Contract which are attributable to the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical
account for the annual administration charge and the Asset-Based Charges. For
purposes of calculating current yields for a Contract, an average per unit
annual administration charge is used based on the $40 Annual Administration
Charge. Current yield is calculated according to the following formula:
1
<PAGE> 103
<TABLE>
<S> <C>
Current Yield = ((NCS - ES)/UV) (365/7)
Where:
NCS = the net change in the value of the Money Market
Fund (exclusive of realized gains or losses on the
sale of securities, unrealized appreciation and
depreciation, and income other than investment
income) for the seven-day period attributable to a
hypothetical account having a balance of one
Accumulation Unit.
ES = per unit expenses attributable to the hypothetical
account for the seven-day period.
UV = the unit value for the first day of the seven-day
period.
(365/7)
Effective Yield = (1+((NCS - ES)/UV)) -1
Where:
NCS = the net change in the value of the Money Market
Fund (exclusive of realized gains or losses on the
sale of securities, unrealized appreciation and
depreciation and income other than investment
income) for the seven-day period attributable to a
hypothetical account having a balance of one
Accumulation Unit.
ES = per unit expenses attributable to the hypothetical
account for the seven-day period.
UV = the unit value for the first day of the seven-day
period.
</TABLE>
Because of the charges and deductions imposed under the Contracts, the yield
for the Money Market Sub-Account is lower than the yield for the Money Market
Fund.
The current and effective yields on amounts held in the Money Market
Sub-Account normally fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF
FUTURE YIELDS OR RATES OF RETURN. The Money Market Sub-Account's actual yield
is affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Fund, the types and quality of portfolio
securities held by the Money Market Fund and the Money Market Fund's operating
expenses. Yields on amounts held in the Money Market Sub-Account may also be
presented for periods other than a seven-day period.
2
<PAGE> 104
OTHER VARIABLE SUB-ACCOUNT YIELDS
The yield is computed by: 1) dividing the net investment income of the Fund
attributable to the Variable Sub-Account units less expenses allocated to a
Variable Sub-Account for the period; by 2) the maximum offering price per unit
on the last day of the period times the daily average number of Accumulation
Units outstanding for the period; and then 3) compounding that yield for a
six-month period; and then 4) multiplying that result by two (2). Expenses
allocated to a Variable Sub-Account include the Annual Administration Charge
and the Asset-Based Charges. The yield calculation assumes an annual
administration charge of $40 per Contract deducted at the end of each Contract
Year on the Contract Anniversary. For purposes of calculating the 30-day or
one-month yield, an average administration cost charge based on the average
Account Value in the Variable Sub-Account is used to determine the amount of
the charge attributable to the Variable Sub-Account for the 30-day or one-month
period. The 30-day or one-month yield is calculated according to the following
formula:
<TABLE>
<S> <C> 6
Yield = 2 x ((((NI - ES)/(U x UV)) + 1) -1)
Where:
NI = net income of the portfolio for the 30-day or one-month period
attributable to the Variable Sub-Account's units.
ES = expenses of the Variable Sub-Account for the 30-day or one-month
period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the
30-day or one-month period.
</TABLE>
Because of the charges and deductions imposed under the Contracts, the yield
for the Variable Sub-Account is lower than the yield for the corresponding
Fund.
The yield on amounts invested in the Variable Sub-Accounts normally
fluctuates over time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD
IS NOT AN INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. A
Variable Sub-Account's actual yield is affected by the types and quality of
securities held by the corresponding Fund and that Fund's operating expenses.
AVERAGE ANNUAL TOTAL RETURNS
From time to time, sales literature or advertisements may also quote average
annual total returns for one or more of the Variable Sub-Accounts for various
periods of time.
When a Variable Sub-Account or Fund has been in operation for 1, 5, and 10
years, respectively, the average annual total return for these periods will be
provided. Otherwise,
3
<PAGE> 105
average annual total return will be shown from inception of the Variable
Sub-Account. Average annual total returns for other periods of time may, from
time to time, also be disclosed.
Standard average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the Surrender Value of that investment as of the last day
of each of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using Variable
Sub-Account unit values which we calculate on each Business Day based on the
performance of the Variable Sub-Account's underlying Fund. The calculation
assumes that annual Asset-Based Charges of 1.40% during the first seven
Contract Years (decreasing to 1.25% during Contract Years 8 and later) are
deducted monthly beginning on the Contract Date. The calculation also assumes
that the Annual Administration Charge is $40 per year per Contract deducted at
the end of each Contract Year during the first seven contract years. For
purposes of calculating average annual total return, an average per-dollar
per-day annual administration charge attributable to the hypothetical account
for the period is used. The calculation also assumes surrender of Account
Value at the end of the period for the return quotation. The total return is
calculated according to the following formula:
<TABLE>
<S> <C>
1/N
TR = (ESV/P) -1
Where:
TR = the average annual total return for the period.
ESV = the Surrender Value of the hypothetical account at the end of the
period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
</TABLE>
OTHER TOTAL RETURNS
The Company may disclose cumulative total returns in conjunction with the
standard formats described above. The cumulative total returns will be
calculated using the following formula:
<TABLE>
<S> <C>
CTR = (ESV/P) - 1
Where:
CTR = The cumulative total return for the period.
ESV = The ending Surrender Value of the hypothetical investment at the
end of the period net of recurring charges.
</TABLE>
4
<PAGE> 106
<TABLE>
<S> <C>
P = A hypothetical single payment of $1,000.
</TABLE>
EFFECT OF THE ANNUAL ADMINISTRATION CHARGE ON PERFORMANCE DATA
The Contracts provide for a $40 Annual Administration Charge (waived for
Contracts with Account Value of at least $50,000, or beginning on and after the
eighth Contract Year) that is deducted from the Sub-Accounts proportionately.
For purposes of reflecting the Annual Administration Charge in yield and total
return quotations, the average Account Value is assumed to be $30,000, so that
the annual administration charge is .1333%.
USE OF INDEXES
From time to time, the performance of certain historical indexes may be
presented in advertisements or sales literature. The performance of these
indexes may be compared to the performance of certain Variable Sub-Accounts or
Funds, or may be presented without such a comparison.
OTHER INFORMATION
The following is a partial list of those publications which may be noted in the
Funds' sales literature and/or shareholder materials which contain articles
describing investment results or other data relative to one or more of the
Variable Sub-Accounts. Other publications may also be cited.
Broker World Financial World
Across the Board Advertising Age
American Banker Barron's
Best's Review Business Insurance
Business Month Business Week
Changing Times Consumer Reports
The Economist Financial Planning
Forbes Fortune
Inc. Institutional Investor
Insurance Forum Insurance Sales
Insurance Week Journal of Accountancy
Journal of Financial Service Professionals Journal of Commerce
Life Insurance Selling Life Association News
MarketFacts Manager's Magazine
National Underwriter Money
Morningstar, Inc. Nation's Business
New Choices (formerly 50 Plus) The New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker VARDs
The Wall Street Journal Working Woman
INCOME PAYMENT PROVISIONS
AMOUNT OF FIXED INCOME PAYMENTS. On the Income Date, the amount you have
chosen to apply to provide fixed income payments will be applied under the
income plan you have chosen.
5
<PAGE> 107
The monthly income payment factor in effect on the Income Date times that
amount and then divided by $1,000 will be the dollar amount of each monthly
payment. Each of these payments are guaranteed and remain level throughout the
period you selected.
The monthly income payment factor used to determine the amount of the fixed
income payments will not be less than the guaranteed minimum monthly income
payment factor shown in your Contract.
AMOUNT OF VARIABLE INCOME PAYMENTS. These payments will vary in amount.
The dollar amount of each payment attributable to each Variable Sub-Account is
the number of Income Units for each Variable Sub-Account times the Income Unit
value of that Sub-Account. The sum of the dollar amounts for each Variable
Sub-Account is the amount of the total variable income payment. The Income Unit
values for each payment will be determined no earlier than five Business Days
preceding the due date of the variable income payment. We guarantee the payment
will not vary due to changes in mortality or expenses.
INCOME UNITS. On the Income Date, the number of Income Units for an
applicable Variable Sub-Account is determined by multiplying (1) by (2),
dividing the result by (3), and then dividing that result by (4) where:
(1) is the amount you have chosen to allocate to that Variable
Sub-Account;
(2) is the monthly income payment factor for the income plan chosen;
(3) is $1,000; and
(4) is the Income Unit value for the Variable Sub-Account for the
Valuation Period ending on that date.
INCOME UNIT VALUE. The value of an Income Unit is calculated at the same
time that the value of an Accumulation Unit is calculated and is based on the
same values for Fund shares and other assets and liabilities. The Income Unit
value for a Variable Sub-Account's first Business Day was set at $10.
Thereafter, the Income Unit value for every Business Day is determined by
multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined; and
(c) is the daily equivalent of the assumed investment rate that you
have selected and that is shown in your Contract for the number of
days in the Valuation Period.
After the Income Date the net investment factor is calculated slightly
different than before the Income Date. Before the Income Date Asset-Based
Charges are calculated as a percentage of the Variable Account Value on the
date of deduction. These charges are equal on an annual basis to 1.40%,
decreasing to 1.25% after the seventh Contract Year. However, on and after the
Income Date, we call these charges Variable Sub-Account Charges and deduct them
from the assets in each Variable Sub-Account on a daily basis. Therefore, the
"net investment factor" in (b),
6
<PAGE> 108
above, is determined by dividing (i) by (ii), and then subtracting (iii) where:
(i) is the Accumulation Unit value for the current Valuation Period;
(ii) is the Accumulation Unit value for the immediately preceding
Valuation Period; and
(iii) is the daily Variable Sub-Account Charges (adjusted for the
number of days in the Valuation Period).
ILLUSTRATION OF CALCULATION OF INCOME UNIT VALUE
<TABLE>
<S> <C>
1. Accumulation Unit value for current Valuation Period . . . . . . 10.0026116
2. Accumulation Unit value for immediately preceding
Valuation Period . . . . . . . . . . . . . . . . . . . . . . . . 10.0000000
3. Net Investment Factor prior to the Income date (1)/(2) . . . . . 1.00026116
4. Adjustment for Variable Sub-Account Charges. . . . . . . . . . . 0.000038626
5. Net Investment Factor on and after the Income Date (3)-(4) . . . 1.00022253
6. Income Unit value for the immediately preceding Valuation
Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.00000000
7. Daily equivalent of the assumed investment rate for
the number of days in the Valuation Period (assuming you
1/365
select 3%)=(1.03 ) . . . . . . . . . . . . . . . . . . . . 1.00008099
8. Income Unit value for current Valuation Period
[(5) x (6)]/(7) . . . . . . . . . . . . . . . . . . . . . . . . 10.00141533
</TABLE>
7
<PAGE> 109
ILLUSTRATION OF VARIABLE INCOME PAYMENTS
<TABLE>
<S> <C>
1. Number of Accumulation Units . . . . . . . . . . . . . . . . . . . . . 1,000
2. Accumulation Unit value . . . . . . . . . . . . . . . . . . . . 10.0026116
3. Account Value (1) x (2) . . . . . . . . . . . . . . . . . . . . . 10,002.61
4. Minimum monthly income payment factor per $1,000 applied . . . . . . . 10.50
5. First monthly variable income payment [(3) x (4)]/$1,000 . . . . . . 105.03
6. Income Unit value . . . . . . . . . . . . . . . . . . . . . . . 10.00141533
7. Number of Income Units (5)/(6) . . . . . . . . . . . . . . . . . . 10.50151
8. Assume Income Unit value at the end of the second month is . . . . . . 10.05
9. Second monthly variable income payment (7) x (8) . . . . . . . . . . 105.54
10. Assume Income Unit value at the end of the third month is . . . . . . 10.10
11. Third monthly variable income payment (7) x (10) . . . . . . . . . 106.07
</TABLE>
EXCHANGE OF INCOME UNITS. After the Income Date, if there is an exchange of
value of a designated number of Income Units of particular Variable
Sub-Accounts into other Income Units, the value will be such that the dollar
amount of the income payment made on the date of exchange will be unaffected by
the exchange.
SAFEKEEPING OF ACCOUNT ASSETS
The Company holds the title to the assets of the Variable Account. The
assets are kept physically segregated and held separate and apart from the
Company's General Account assets and from the assets in any other separate
account.
Records are maintained of all purchases and redemptions of Fund shares held
by each of the Variable Sub-Accounts.
A fidelity bond in the amount of approximately $10 million per occurrence
covering the Company's directors, officers, and employees has been issued by
Lloyd's of London.
LEGAL MATTERS
All matters relating to Delaware law pertaining to the Contracts, including
the validity of the Contracts and the Company's authority to issue the
Contracts, have been passed upon by James F. Bronsdon, the Company's Vice
President, Legal and Compliance. Sutherland Asbill & Brennan LLP has provided
advice on certain matters relating to the federal securities laws.
8
<PAGE> 110
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended, with respect to the Contracts discussed in this
Statement of Additional Information. Not all the information set forth in the
registration statement, amendments and exhibits thereto has been included in
this Statement of Additional Information. Statements contained in this
Statement of Additional Information concerning the content of the Contracts and
other legal instruments are intended to be summaries. For a complete statement
of the terms of these documents, reference should be made to the instruments
filed with the SEC.
FINANCIAL STATEMENTS
The Statement of Additional Information contains no financial statements for
the Variable Account because the Variable Account had not commenced operations
as of the date of this Statement of Additional Information. Financial
statements of the Company are presented in the Prospectus.
9
<PAGE> 111
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part A. Financial
statements for The Sage Variable Annuity Account A (the "Variable Account")
are not included in Part B because the Variable Account had not yet commenced
operations as of the date of this Registration Statement.
(b) Exhibits
<TABLE>
<S> <C>
(1)(a) Resolutions of the Board of Directors of Sage Life Assurance of
America, Inc. establishing The Sage Variable Annuity Account
A.(1)
(2) Not Applicable.
(3) Form of Distribution Agreement with Sage Distributors, Inc. and
Form of Selling Agreement.(2)
4(a)(i)(B) Amended Form of Individual Contract.
(ii)(B) Amended Form of Individual Contract with Interest Account.
(iii)(B) Amended Form of Group Contract.(3)
(iv)(B) Amended Form of Group Certificate.(3)
(b)(i)(B) Amended Form of Individual IRA Rider.(3)
(ii)(B) Amended Form of Group IRA Rider.(3)
(iii)(B) Amended Form of Individual SIMPLE IRA Rider.(3)
(iv)(B) Amended Form of Group SIMPLE IRA Rider.(3)
(v)(A) Form of Individual Roth IRA Rider.(4)
(vi)(A) Form of Group Roth IRA Rider.(4)
(5)(i) Form of Individual Contract Application.
(ii)(B) Amended Form of Group Certificate Application.
(6)(a) Articles of Incorporation of the Company.(5)
(b) By-Laws of the Company.(5)
</TABLE>
1
<PAGE> 112
<TABLE>
<S> <C>
(7) Not Applicable.
(8)(a)(i) Form of Participation Agreement with AIM Variable Insurance
Funds, Inc.(6)
(ii) Form of Participation Agreement with The Alger American Fund.(6)
(iii) Form of Participation Agreement with Liberty Variable
Investment Trust.*
(iv) Form of Participation Agreement with MFS(R) Variable Insurance
Trust.(TM)(6)
(v) Form of Participation Agreement with Morgan Stanley Universal
Funds, Inc.*
(vi) Form of Participation Agreement with Oppenheimer Variable
Account Funds.*
(vii) Form of Participation Agreement with Sage Life Investment
Trust.(6)
(viii) Form of Participation Agreement with SteinRoe Variable
Investment Trust.*
(ix) Form of Participation Agreement with T. Rowe Price Equity
Series, Inc.*
(b) Form of Services Agreement with Financial Administration
Services, Inc.*
(9)(i) Opinion and Consent of James F. Bronsdon.*
(ii) Consent of Sutherland Asbill & Brennan LLP.*
(10) Consent of Ernst & Young LLP.
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14)(a) Power of Attorney for Paul C. Meyer
* To be filed by Pre-Effective Amendment
</TABLE>
(1) Incorporated herein by reference to Exhibit No. 1 to the Registration
Statement on Form N-4 (File No. 333-43329) filed on December 24, 1997.
(2) Incorporated herein by reference to Exhibit No. 3 Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-4 (File No. 333-43329) filed on
December 31, 1998.
(3) Incorporated herein by reference to Exhibit No. 4 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4 (File No. 333-43329)
filed on December 31, 1998.
(4) Incorporated herein by reference to Exhibit No. 4 to the Registration
Statement on Form N-4 (File No. 333-43329) filed on December 24, 1997.
2
<PAGE> 113
(5) Incorporated herein by reference to Exhibit No. 6 to the Registration
Statement filed on Form N-4 (File No. 33-43329) filed on December 24, 1997.
(6) Incorporated herein by reference to Exhibit No. 8 to Pre-Effective
Amendment No. 1 to the Registration Statement filed on Form N-4 (File No.
333-43329) on December 31, 1998.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Incorporated herein by reference to the section titled "Directors and
Executive Officers" of the Prospectus filed as Part A of this Registration
Statement.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The registrant is a segregated asset account of the Company and therefore
is owned and controlled by the Company. The Company is a stock life insurance
company of which all the voting securities are owned by Sage Life Holdings of
America, Inc., a Delaware Corporation ("Sage Life Holdings"), all of the voting
securities of which are owned by Sage Insurance Group, Inc., a Delaware
corporation. (The Company in turn owns all of the voting securities of Sage
Life Assurance Company of New York, a New York domiciled company which is
pursuing a license to conduct insurance business in that state.) In addition to
Sage Life Holdings, Sage Insurance Group also owns all of the voting securities
of Sage Distributors, Inc. (a broker-dealer), Sage Advisors, Inc. (a registered
investment adviser), and Finplan Holdings, Inc. (a financing company), all of
which are Delaware corporations. All the voting securities of Sage Insurance
Group, Inc. are owned by Sage Insurance Holdings, Inc, a Delaware corporation.
Sage Insurance Holdings, Inc. is a wholly owned subsidiary of Sage Holdings
(USA), Inc., a Delaware corporation. (Sage Holdings (USA), Inc. also owns all
of the voting securities of Sage Properties (USA), Inc., a Virginia corporation
whose principal assets are real estate.) Sage Holdings (USA), Inc. is a wholly
owned subsidiary of Sage Life Holdings Limited, a South African corporation.
The nature of the business of the companies listed above is insurance and
financial services. Sage Life Holdings is 100% owned by Sage Group Limited, a
South African corporation that is the ultimate holding company. Sage Group
Limited is a controlling company operating in life insurance, mutual funds and
investment management. Various companies and other entities controlled by Sage
Group Limited may be considered to be under common control with the registrant
or the Company. Such other companies and entities and the nature of their
businesses are set forth below. These companies are incorporated in South
Africa and are wholly owned subsidiaries unless otherwise noted.
Sage Life Holdings was formed pursuant to a letter of intent between Sage
Group Limited and Swiss Re Life and Health America, Inc. ("Swiss Re"). Swiss
Re's ultimate parent company is Swiss Reinsurance Company, Switzerland, one of
the world's largest life and health reinsurance groups. Pursuant to the letter
of intent, Swiss Re made an equity investment into Sage Life Holdings. The
arrangements contemplated by the letter of intent may be subject to regulatory
approval.
3
<PAGE> 114
DIRECT AND INDIRECT SUBSIDIARIES OF SAGE GROUP LIMITED
<TABLE>
<CAPTION>
COMPANY NAME PRINCIPAL BUSINESS
<S> <C>
Alexotel (Pty) Ltd Property holding
Allied Financial Planning Services (Pty) Ltd Investment consultants
Bentley Office Park (Pty) Ltd Property development &
investment
Blackreef Properties (Pty) Ltd Property holding
Consumer Classics (Pty) Ltd Manufacturing &
distribution
Corporate Marketing Services (Pty) Ltd Investment marketing
Dinwiddie Township (Pty) Ltd Property holding
Edenston Properties (Pty) Ltd Property development
Educational Information Services (Pty) Ltd Publishing
Ensiklopedie Afrikana (Edms) Beperk Publishing
Estromin Properties & Investments (Pty) Ltd Property investment
Everest Construction (Pty) Ltd Construction
FPS (South Vaal) Investments (Pty) Ltd Property investment
FPS (Vaal) Investments (Pty) Ltd Investment holding
FPS Consultants Ltd Investment consultants
FPS Corporate Services (Pty) Ltd Pension advisors
FPS Investment Holdings Ltd Investment holding
FPS Investments (Pty) Ltd Investment holding
FPS Ltd Investment consultants
FPS Marketing & Management Systems (Pty) Ltd Training
Fraser Street Registrars (Pty) Ltd Transfer secretaries
Hatfield Properties (Block A) (Pty) Ltd Property investment
Hatfield Properties (Block B) (Pty) Ltd Property investment
Hatfield Properties (Block C) (Pty) Ltd Property investment
Hatfield Properties (Block D) (Pty) Ltd Property investment
Highrise Home Investments (Pty) Ltd Property investment
Home Mortgage Investments (Pty) Ltd (50% owner) Financing
J van Streepen (Kempton Park) (Pty) Ltd (51% owner) Property development
Kemparkto (Pty) Ltd Property investment &
development
Lakeview Management Properties (Pty) Ltd (75% owner) Property management
Lanrov Investments (Pty) Ltd Investment holding
Lot 26 of Portion 8 Parktown (Pty) Ltd Property development
Lot 26 of Portion 9 Parktown (Pty) Ltd Property investment
Mardin Agency (Pty) Ltd Real estate agents
Marlands Flats (Pty) Ltd Property holding
Meumann & Heyneke (Pty) Ltd Retail merchants
Nedrep Investments Ltd Investment holding
Netherlands Properties (Pty) Ltd Property investment
New Smal Construction Co. (Pty) Ltd Construction
Noordwyk Developments (Pty) Ltd Property development
Palmiet Townships (Pty) Ltd Property development
PJP Properties (Pty) Ltd Investment
R/E 105 Rosebank (Pty) Ltd Investment holding
Residential Mortgage Investments (Pty) Ltd (50% owner) Financing
S A Cultural Holdings (Pty) Ltd Investment
S A Kultuur Beleggings (Edms) Beperk Investment
</TABLE>
4
<PAGE> 115
<TABLE>
<CAPTION>
COMPANY NAME PRINCIPAL BUSINESS
<S> <C>
S.B. Plant Hire (Pty) Ltd Plant hire
SACI Finance (Pty) Ltd Finance company
Sage Business Park (Eight) (Pty) Ltd Property investment
Sage Business Park (Five) (Pty) Ltd Property investment
Sage Business Park (Four) (Pty) Ltd Property investment
Sage Business Park (Nine) (Pty) Ltd Property investment
Sage Business Park (One) (Pty) Ltd Property investment
Sage Business Park (Seven) (Pty) Ltd Property investment
Sage Business Park (Six) (Pty) Ltd Property investment
Sage Business Park (Three) (Pty) Ltd Property investment
Sage Business Park (Two) (Pty) Ltd Property investment
Sage Centre (Pty) Ltd Property investment
Sage Corporate Services (Pty) Ltd Investment holding
Sage Family Benefits (Pty) Ltd Insurance consultants
Sage Holdings Ltd Financial, investment &
management
Sage Investment Trust Ltd Insurance & investment
Sage Land Finance (Pty) Ltd Financiers
Sage Land Holdings (Pty) Ltd Investment holding
Sage Library Gardens Ltd Investment holding
Sage Life Holdings Ltd Investment holding
Sage Life Ltd Life insurance
Sage Management Services (Pty) Ltd Management
Sage Parking (Pty) Ltd Own & operate parking
garages
Sage Personal Investment Marketing (Pty) Ltd Investment consultants
Sage Properties (549 Sandown) (Pty) Ltd Property holding
Sage Properties (Menlyn) (Pty) Ltd Property investment
Sage Properties (Rivonia Four) (Pty) Ltd Property holding
Sage Properties (Sunnyside) (Pty) Ltd Property holding
Sage Properties Ltd Investment holding
Sage Property Holdings Ltd Property holding
Sage Property Management Services (Pty) Ltd Property management
Sage Property Portfolio Managers (Pty) Ltd Property investment &
management
Sage Property Trust Managers, Ltd. (77.2% owner) Management of unit trusts
Sage Schachat Developments (Pty) Ltd Builders
Sage Schachat Ltd Investment holding
Sage Secretarial Services (Pty) Ltd Management & secretarial
Sage Selections (Pty) Ltd Investment
Sage Specialized Insurances Ltd Short term insurance
</TABLE>
5
<PAGE> 116
<TABLE>
<CAPTION>
COMPANY NAME PRINCIPAL BUSINESS
<S> <C>
Sage Strategic Investments (Pty) Ltd Investment holding
Sage Trustees (Pty) Ltd Trustees
Sage Unit Trusts Ltd Management of unit trusts
Sagemed (Pty) Ltd Health & medical insurance
SAK Executive Investments (Pty) Ltd Investment holding
SAK Holdings (Pty) Ltd Investment holding
Sandhurst Properties (Block A) (Pty) Ltd Property investment & management
Sandhurst Properties (Block B) (Pty) Ltd Property investment & management
Sandhurst Properties (Block C) (Pty) Ltd Property investment & management
Sandhurst Properties (Block D) (Pty) Ltd Property investment & management
Sandhurst Properties (Block E) (Pty) Ltd Property investment & management
Sandhurst Properties (Block F) (Pty) Ltd Property investment & management
Sandhurst Properties (Block G) (Pty) Ltd Property investment & management
Sandown Development Holdings (Pty) Ltd Property holding
Sandown Developments (Pty) Ltd Property development
Schachat Ciskei (Pty) Ltd Property development
Schachat Construction (Pty) Ltd Construction
Schachat Cullum (Pty) Ltd Property development & management
Schachat Finance Company (Pty) Ltd Financiers
Schachat Land Resources (Pty) Ltd Investment holding
Schachat Natal (Pty) Ltd Farming & other
Schalab Townships (Pty) Ltd (51% owner) Property development
Sectional Title (Pty) Ltd Property development
SLR Land Development (Pty) Ltd Building contractors
SMH Land Development (Pty) Ltd Property investment
SPTM Holdings (Pty) Ltd Investment holding
SSI Securities (Pty) Ltd Financiers
Stonehouse Investments (Pty) Ltd Property investment
Strandbou (Pty) Ltd Property investment
Sunnyside Erf 26 (Block B) (Pty) Ltd Property investment & management
Sunnyside Erf 26 (Block C) (Pty) Ltd Property investment & management
Sunnyside Erf 26 (Block D) (Pty) Ltd Property investment & management
Table Classics (Pty) Ltd Deal in tableware products
The Gold Jewelry Corporation (Pty) Ltd Manufacture & sale of coins &
jewelry
Townhomes (Pty) Ltd Building contractors
Von Brandis Square Development Co.
(Pty) Ltd Property development
Wereldspekium (Edms) Beperk Distributors & publishers of books
Witch Construction Company (Pty) Ltd Property investment & development
Witch Construction Company (Transvaal)
(Pty) Ltd Property investment & development
Witch Management (Pty) Ltd Management services
Sage International B.V. (Netherlands
corporation) Holding
Sage International Assets Ltd (BVI
corporation) Holding
Sage Management Services (USA), Inc.
(New York corporation) Management services
</TABLE>
<PAGE> 117
ITEM 27. NUMBER OF CONTRACT OWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
Sage Life's Articles of Incorporation provide that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except that (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which would
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived any personal benefit.
Notwithstanding the foregoing, the Articles provide that if the Delaware
General Corporation Law is amended to authorize further limitations of the
liability of a director or a corporation, then a director of the Company, in
addition to circumstances in which a director is not personally liable as set
forth in the preceding sentence, shall be held free from liability to the
fullest extent permitted by the Delaware General Corporation Law as amended.
Sage Life's Bylaws provide that the Company shall indemnify its officers,
directors, employees and agents to the extent permitted by the General
Corporation Law of Delaware.
Further, Section 145 of Delaware General Corporation Law provides that a
corporation shall have power to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had a reasonable cause to believe that his conduct was not
unlawful.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by 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.
7
<PAGE> 118
ITEM 29. PRINCIPAL UNDERWRITER
(a) Sage Distributors, Inc. ("Sage Distributors") is the registrant's
principal underwriter.
(b) Officers and Directors of Sage Distributors
<TABLE>
<CAPTION>
Positions and Offices With
Name and Principal Business Address* Sage Distributors
- ----------------------------------- --------------------------
<S> <C>
Robin I. Marsden Director
Mitchell R. Katcher Director
Ronald S. Scowby Director
James F. Bronsdon President, Chief Executive
Officer, Chief Legal Officer
James F. Renz Chief Financial Officer,
Treasurer, Assistant Secretary
Robert J. Kiggins Secretary
</TABLE>
* The principal business address of all of the persons listed above is 300
Atlantic Street, Stamford, CT 06901, except for Mr. Kiggins whose
principal business address is 11 Martine Avenue, 12th Floor, White Plains,
New York 10606.
ITEM 30. LOCATION OF BOOKS AND RECORDS
All of the accounts, books, records or other documents required to be kept
by Section 31(a) of the Investment Company Act of 1940 and rules thereunder,
are maintained at our Customer Service Center.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this
registration statement.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) The registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in the
statement are never more than 16 months old for as long as
purchase payments under the Contracts offered herein are being
accepted.
(b) The registrant undertakes that it will include either (1) as part of
any application to purchase a Contract offered by the prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that the
applicant can remove and send to the Company for a Statement of
Additional Information.
8
<PAGE> 119
Additional Information.
(c) The registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form N-4 promptly upon written or oral
request to the Company at the address or phone number listed in
the prospectus.
(d) The Company represents that the fees and charges under the Contracts,
in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks
assumed by the Company.
9
<PAGE> 120
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant has caused this Pre-Effective Amendment to be signed on
its behalf, in the City of Stamford, and the State of Connecticut, on this 6th
day of January, 1999.
<TABLE>
<S> <C>
The Sage Variable Annuity Account A
(Registrant)
By: Sage Life Assurance of America, Inc.
Attest: By: /s/Robin I. Marsden
------------------------------
Robin I. Marsden
/s/James F. Bronsdon Director, President, Chief Executive Officer
- ----------------------- Sage Life Assurance of America, Inc.
Sage Life Assurance of America, Inc.
(Depositor)
Attest: By: /s/Robin I. Marsden
------------------------------
Robin I. Marsden
/s/James F. Bronsdon Director, President, Chief Executive Officer
- -----------------------
</TABLE>
<PAGE> 121
As required by the Securities Act of 1933, this Pre-Effective
Amendment has been signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/Ronald S. Scowby
- ---------------------- Chairman January 7, 1999
Ronald S. Scowby
/s/H. Louis Shill
- ----------------------- Director January 7, 1999
H. Louis Shill
/s/Paul C. Meyer *
- ----------------------- Director January 7, 1999
Paul C. Meyer
/s/Richard D. Starr
- ----------------------- Director January 7, 1999
Richard D. Starr
/s/Mitchell R. Katcher
- ---------------------- Director, Senior Executive January 6, 1999
Mitchell R. Katcher Vice President, Chief
Financial Officer,
Chief Actuary
</TABLE>
* By: James F. Bronsdon, Esq. pursuant to Power of Attorney dated December 23,
1998.
<PAGE> 1
EXHIBIT 4(a)(i)(B)
[SAGE LOGO]
A Stock Company
Home Office Customer Service Center
300 Atlantic Street 290 Silas Deane Highway
Stamford, CT 06901 Wethersfield, CT 06109
1-877-TEL-SAGE
PLEASE READ THIS CONTRACT CAREFULLY. This Contract is a legal contract
between the Contractholder (you) and Sage Life Assurance of America, Inc. You
have the rights described in the Contract. We will make Income Payments
beginning on the Income Date shown in the Schedule if the Annuitant is living
on that date.
RIGHT TO EXAMINE THIS CONTRACT:
IF FOR ANY REASON YOU ARE NOT SATISFIED WITH THIS CONTRACT, YOU MAY RETURN IT
TO US OR THE AGENT WHO SOLD IT TO YOU WITHIN 10 DAYS AFTER YOU RECEIVE IT (THE
FREE LOOK PERIOD). WHEN WE RECEIVE IT, WE WILL PROMPTLY REFUND YOU THE ACCOUNT
VALUE PLUS ANY CHARGES SHOWN IN THE SCHEDULE THAT WE HAVE DEDUCTED FROM THE
ACCOUNT VALUE ON OR BEFORE THE DATE THE RETURNED CONTRACT WAS RECEIVED BY US,
OR IF REQUIRED BY THE LAW OF YOUR STATE, THE INITIAL PURCHASE PAYMENT (MINUS
ANY WITHDRAWALS).
ALL PAYMENTS AND VALUES, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT, MAY INCREASE OR DECREASE, DEPENDING ON THIS CONTRACT'S
INVESTMENT RESULTS AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. ALL PAYMENTS
AND VALUES BASED ON THE FIXED ACCOUNT MAY BE SUBJECT TO A MARKET VALUE
ADJUSTMENT, THE OPERATION OF WHICH MAY CAUSE SUCH PAYMENTS AND VALUES TO
INCREASE OR DECREASE.
[SIG]
Chairman
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
Surrender Values while you are living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
DVAZ-9712
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MAKING PURCHASE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . 9
VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
TRANSFERS AMONG ACCOUNTS . . . . . . . . . . . . . . . . . . . . . 13
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE . . . . . . 13
CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
OWNER, ANNUITANT AND BENEFICIARY . . . . . . . . . . . . . . . . . 13
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 16
ANNUITY INCOME BENEFITS . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
Page 2
DVAZ-9712
<PAGE> 3
SCHEDULE
Contract No.:
Owner: Contract Date: XX/XX/XXXX
Issue Age/Sex:
Annuitant: Income Date: XX/XX/XXXX
Issue Age/Sex:
Initial Purchase
Payment: $
This Schedule sets forth additional information that relates to the provisions
in this Contract with the corresponding headings.
MAKING PURCHASE PAYMENTS
The Designated Sub-Account is the Money Market Sub-Account.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than $250.
Additional purchase payments are subject to the following limits:
1. [Non-qualified plan: Additional purchase payments may be made until
the earlier of the year in which you attain age 85 or the year in
which the Annuitant attains age 85.]
OR
[Qualified plan: Additional purchase payments may be made until the
year in which you attain age 70 1/2, except rollover contributions
may be made until the year in which you attain age 85.]
2. The minimum additional purchase payment we will accept is $1,000.
3. Our prior approval is required before you make a purchase payment
that causes the Account Value of all annuities that you maintain with
us to exceed $1,000,000.
VARIABLE ACCOUNT
The Variable Account for this Contract is The Sage Variable Annuity Account A.
It is a unit investment trust variable account.
FIXED ACCOUNT
The Fixed Account for this Contract is The Sage Fixed Interest Account A.
The Minimum Guaranteed Interest Rate is 3%.
The Minimum Deferral Interest Rate is 3%.
Index Rate: The Index Rate is the U.S. Treasury Constant Maturity Series as
reported in Federal Reserve Bulletin Release H.15. We currently base the
Index Rate for a calendar week on the reported rate for the preceding calendar
week. We reserve the right to set it less frequently but in no event less
often than monthly.
Page 3
DVAZ-9712
<PAGE> 4
TRANSFERS AMONG ACCOUNTS
The minimum amount that can be transferred is $250. However, if less remains
in a Sub-Account, that amount may be transferred. If a transfer request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the transfer request as a request to transfer the entire amount.
Your transfer request must clearly state the Sub-Accounts from which and to
which transfers are to be made.
We reserve the right to limit, upon notice, the maximum number of transfers you
may make to one per calendar month or 12 per Contract Year.
After the Income Date, we reserve the right to:
1. disallow transfers from the Fixed Account to the Variable Account, or
from the Variable Account to the Fixed Account; and
2. limit the maximum number of transfers between Variable Sub-Accounts
to 1 per Contract Year.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
The Free Withdrawal Amount is the greater of (a) and (b) where:
(a) is the excess of 10% of the total purchase payments over 100%
of all prior withdrawals including any associated surrender
charges and Market Value Adjustment incurred in that Contract
Year; and
(b) is the excess of the Account Value on the date of withdrawal
over the unliquidated purchase payments.
The minimum amount that can be withdrawn is $250. If a withdrawal request
would reduce the Account Value remaining in a Sub-Account below $250, we will
treat the withdrawal request as a request to withdraw the entire amount.
If a requested withdrawal would reduce the Account Value below $2,000, we
reserve the right to treat the request as a withdrawal of only the excess over
$2,000.
Unless you specify otherwise, we will make withdrawals proportionately from all
Sub-Accounts in which you are invested.
CHARGES
SURRENDER CHARGE - A surrender charge may be imposed upon surrender of this
Contract or when an Excess Withdrawal is made. The surrender charge is applied
to each purchase payment and is a percentage of each purchase payment as
follows:
The maximum surrender charge percentage is 0% for all Contract Years.
Page 4
DVAZ-9712
<PAGE> 5
TRANSFER CHARGE - We reserve the right to charge a maximum of $25 for each
transfer after the 12th in a Contract Year. Each request is considered to be
one transfer regardless of the number of Sub-Accounts affected by the transfer.
The transfer charge will be deducted proportionately from all Sub-Accounts from
which the transfer is made.
ADMINISTRATION CHARGE - $40 a year. This charge is incurred at the beginning
of each Contract Year and deducted on each Contract Anniversary or upon
surrender. The charge will be waived:
1. if the Account Value is at least $50,000 at the time of deduction; or
2. beginning on and after the 8th Contract Anniversary.
PURCHASE PAYMENT TAX CHARGE - The amount of any state and local taxes levied by
any governmental entity on purchase payments may be deducted from the Account
Value when such taxes are incurred. We reserve the right to defer the
collection of this charge and deduct it against your Account Value on the
surrender of this Contract, or Excess Withdrawal, or application of the Account
Value to provide income payments.
ASSET-BASED CHARGES - We deduct asset-based charges to compensate us for
assuming mortality and expense risks, and certain administrative expenses.
Prior to the Income Date asset-based charges are calculated as a percentage of
the Variable Account Value on the date of deduction. On the Contract Date, and
monthly thereafter, the asset-based charges are deducted in proportion to the
Variable Sub-Accounts in which you are invested. The maximum charges are:
<TABLE>
<CAPTION>
Asset-Based Charges Annual Charge Monthly Charge
------------------- ------------- --------------
<S> <C> <C>
Contract Years 1-7 1.40% .116667%
Contract Years 8+ 1.25% .104167%
</TABLE>
We also reserve the right to deduct asset-based charges on the effective date
of any transfer from the Fixed Account, or allocation of purchase payment to
the Variable Account, based on the amount transferred or allocated, and based
on the number of days remaining until the next date of deduction.
VARIABLE SUB-ACCOUNT CHARGES - On and after the Income Date we deduct the
asset-based charges above from the assets in each Variable Sub-Account on a
daily basis. The maximum charges are:
<TABLE>
<CAPTION>
Variable Sub-Account Charges Annual Charge Daily Charge
---------------------------- ------------- ------------
<S> <C> <C>
Contract Years 1-7 1.40% .0038626%
Contract Years 8+ 1.25% .0034462%
</TABLE>
CHARGE DEDUCTION RULES - Unless otherwise specified above, charges are deducted
from the Account Value proportionately from all Sub-Accounts in which you are
invested.
ANNUITY INCOME BENEFITS
If you have not chosen an income plan, Life Annuity with 10 Years Certain will
automatically apply.
The Maximum Income Date is the first day of the first calendar month following
the Annuitant's 95th birthday.
We reserve the right to require that the Income Date be at least 2 years after
the Contract Date.
The minimum amount that can be applied under any Variable or Fixed Income
Annuity is $5,000.
The minimum income payment is $100.
We currently allow assumed investment rates of 3% and 6%. If you do not
specify one of these rates when you choose an income plan, the assumed
investment rate will be 3%.
Values for other ages, and for other payment periods, joint life combinations,
or assumed investment rates that we offer (Tables below assume 3%) are
available on request. Monthly income payments are shown for each $1,000
applied.
Page 5
DVAZ-9712
<PAGE> 6
INCOME TABLE FOR A FIXED PERIOD
<TABLE>
<CAPTION>
Fixed Monthly Fixed Monthly Fixed Monthly
Period Income Period Income Period Income
of Years Payment of Years Payment of Years Payment
--------- ------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
11 $8.88 21 $5.33
12 8.26 22 5.16
13 7.73 23 5.00
14 7.28 24 4.85
5 17.95 15 6.89 25 4.72
6 15.18 16 6.54 26 4.60
7 13.20 17 6.24 27 4.49
8 11.71 18 5.98 28 4.38
9 10.56 19 5.74 29 4.28
10 9.64 20 5.53 30 4.19
</TABLE>
INCOME TABLE FOR LIFE
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Certain 20 Years Certain
- --- --------- ---------------- ----------------
<S> <C> <C> <C>
50 4.28 / 3.92 $4.24 / 3.90 $4.10 / 3.84
55 4.72 / 4.27 4.64 / 4.24 4.40 / 4.12
60 5.31 / 4.74 5.17 / 4.68 4.73 / 4.45
65 6.13 / 5.38 5.84 / 5.25 5.04 / 4.81
70 7.28 / 6.29 6.65 / 6.00 5.29 / 5.14
75 8.90 / 7.62 7.53 / 6.92 5.43 / 5.37
80 11.19 / 9.62 8.37 / 7.93 5.50 / 5.48
85 14.36 / 12.63 9.00 / 8.77 5.52 / 5.52
</TABLE>
RIDERS
Page 6
DVAZ-9712
<PAGE> 7
DEFINITIONS
- -------------------------------------------------------------------------------
"ACCOUNT VALUE" is the entire amount we hold under this Contract for you before
the Income Date. It is equal to the sum of the Variable Account Value and the
Fixed Account Value.
"ACCUMULATION UNIT" is the unit of measure we use before the Income Date to
keep track of the value of each Variable Sub-Account.
"ANNUITANT" is the natural person whose age determines the Maximum Income Date
and the amount and duration of income payments involving life contingencies.
The Annuitant may also be the person to whom any payment will be made starting
on the Income Date. The Annuitant's name appears in the Schedule.
"BENEFICIARY" is the person or persons to whom we pay a death benefit if any
Owner dies prior to the Income Date.
"CONTRACT DATE" is the date this contract is issued at our Customer Service
Center. The Contract Date is shown in the Schedule. While this Contract is in
force, every anniversary of the Contract Date is the CONTRACT ANNIVERSARY and
each and every consecutive twelve-month period beginning on the Contract Date
and each Contract Anniversary is a CONTRACT YEAR.
"CONTINGENT ANNUITANT" is the natural person who becomes the Annuitant if the
Annuitant dies prior to the Income Date.
"CONTINGENT BENEFICIARY" is the person that becomes the Beneficiary if the
named Beneficiary dies prior to the Income Date.
"CUSTOMER SERVICE CENTER" is where we provide service to you. The mailing
address and telephone number of the Customer Service Center are shown on the
first page of this Contract.
"EXCESS WITHDRAWAL" is a withdrawal of Account Value that exceeds the Free
Withdrawal Amount.
"EXPIRY DATE" is the last day in a Guarantee Period.
"FIXED ACCOUNT" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred.
"FIXED ACCOUNT VALUE" is the sum of the value of each Fixed Sub-Account on any
particular day.
A "FIXED SUB-ACCOUNT" is established when purchase payments are invested or
amounts are transferred to the Fixed Account. The value of each Fixed
Sub-Account is equal to the amount invested, increased by interest and reduced
by any withdrawals or transfers from, or charges assessed against the Fixed
Sub-Account.
"FREE WITHDRAWAL AMOUNT" is the maximum amount that can be withdrawn in a
Contract Year without being subject to a surrender charge. This amount is
described in the Schedule.
"GENERAL ACCOUNT" consists of all our assets other than those held in any
separate investment accounts.
"GUARANTEED INTEREST RATE" is the effective annual interest rate we will credit
for a specified Guarantee Period. The Guaranteed Interest Rate will never be
less than the minimum shown in the Schedule.
"GUARANTEE PERIOD" is a period of years for which a specified effective annual
interest rate is guaranteed by us. Interest is credited daily at a rate to
yield the declared annual Guaranteed Interest Rate.
"HOME OFFICE" is our main office. The mailing address is shown on the first
page of this Contract.
Page 7
DVAZ-9712
<PAGE> 8
"INCOME DATE" is the date when income payments under this Contract commence.
This date is shown in the Schedule.
"INCOME UNIT" is the unit of measure we use to calculate the amount of income
payments under the Variable Income Annuity.
"MARKET VALUE ADJUSTMENT" is a positive or negative adjustment that may apply
to surrender, withdrawals, transfers and amounts applied to an income plan,
from a Fixed Sub-Account before the end of a Guarantee Period.
"NET ASSET VALUE" is the price of one share of an investment portfolio.
"SATISFACTORY NOTICE" is a notice or request authorized by you, in a form
satisfactory to us, received at our Customer Service Center.
"SUB-ACCOUNT" includes both Variable Sub-Accounts and Fixed Sub-Accounts,
unless the context indicates otherwise.
"SURRENDER VALUE" is the amount you receive upon surrender of this Contract
before the Income Date. It is your Account Value, plus or minus any applicable
Market Value Adjustment, and less any applicable surrender charges or other
charges shown in the Schedule.
"VALUATION DATE" is the date at the end of a Valuation Period when each
Variable Sub-Account is valued.
"VALUATION PERIOD" is the period between one calculation of an Accumulation
Unit value and the next calculation. Normally, we calculate Accumulation Units
daily when the New York Stock Exchange is open for trading and we are open for
business. We can delay this calculation if an emergency exists, making
disposal or fair valuation of assets in the Variable Account not reasonably
practicable, or the Securities and Exchange Commission (SEC) permits the delay.
We may change when we calculate the Accumulation Unit value by giving you 30
days notice, or such notice as may be required by law.
"VARIABLE ACCOUNT" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred. The Variable
Account is shown in the Schedule.
"VARIABLE ACCOUNT VALUE" is the sum of the value of each Variable Sub-Account
on a Valuation Date.
"VARIABLE SUB-ACCOUNT" is a division of the Variable Account that invests in
shares of a particular investment portfolio. The value of a Variable
Sub-Account is determined by multiplying (a) times (b) where:
(a) equals the number of Accumulation Units held in the Variable
Sub-Account; and
(b) equals the value of the Accumulation Unit for the Variable
Sub-Account.
"WE", "US" OR "OUR" is Sage Life Assurance of America, Inc.
"YOU" OR "YOUR" is the Owner of this Contract. Your name appears in the
Schedule. You are entitled to exercise all rights under this Contract.
However, if you designate an irrevocable beneficiary, you may need that
beneficiary's consent before you exercise your rights under this Contract. The
death of any Owner before the Income Date initiates payment of the death
benefit.
Page 8
DVAZ-9712
<PAGE> 9
MAKING PURCHASE PAYMENTS
- -------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT - You must make the initial purchase payment in order
to put this Contract in force. The amount of your initial purchase payment is
shown in the Schedule.
ADDITIONAL PURCHASE PAYMENTS - After the initial purchase payment, additional
purchase payments may be made at any time while this Contract is in force and
before the Income Date. The amount of any additional purchase payments may
vary but are subject to limits described in the Schedule.
ALLOCATION OF PURCHASE PAYMENTS AMONG THE VARIABLE AND FIXED ACCOUNTS - Subject
to limits described in the Schedule, you tell us how to allocate your purchase
payment, less any applicable taxes, by notifying us of your choices. You
specified how to allocate your initial purchase payment in your application for
this Contract. Initial purchase payments allocated to the Fixed Account will
be invested in Fixed Sub-Accounts with the Guarantee Periods that you specified
in your application. We may, however, require that an initial purchase payment
allocated to a Variable Sub-Account be invested in the Designated Sub-Account
shown in the Schedule during the Free Look Period. At the end of the Free Look
Period, if your initial purchase payment was allocated to the Designated
Sub-Account by us, we will transfer the value of the Designated Sub-Account to
the Sub-Account(s) you specified in your application. For the purpose of
processing transfers from the Designated Sub-Account, the Free Look Period will
end 15 days after the Contract Date.
Subject to our rules, you may tell us how to allocate any additional purchase
payments. If you do not tell us, they will be allocated in the same manner as
your most recent purchase payment.
CANCELLATION OF CONTRACT - If you have not made a purchase payment for more
than 2 years and your Account Value is less than $2,000 on a Contract
Anniversary, we may cancel this Contract and pay you the Surrender Value as
though you had made a full withdrawal. We will send you written notice at your
address of record. You will be allowed 61 days from the date we mail you the
notice to submit an additional purchase payment to us in an amount not less
than the difference between $2,000 and the Account Value on the last Contract
Anniversary. The additional purchase payment is subject to the limits and
minimums shown in the Schedule.
VARIABLE ACCOUNT
- -------------------------------------------------------------------------------
VARIABLE ACCOUNT - A variable account is an investment account we maintain
separate from our General Account and any other separate investment accounts we
may have. We own the assets in a variable account. A variable account will
not be charged with liabilities that arise from any other business that we
conduct. We may transfer to our General Account assets that exceed the reserves
and other liabilities of a variable account.
A variable account may invest in mutual funds, unit investment trusts and other
investment portfolios. Such a variable account is treated as a unit investment
trust under Federal securities laws and is registered with the SEC under the
Investment Company Act of 1940.
We may offer certain series or variable accounts that may not be registered
with the SEC under the Securities Act of 1933. Any such series or variable
account, if offered, will be described in the applicable offering document.
The Variable Account for this Contract is shown in the Schedule. The laws of
our state of domicile govern this Variable Account.
VARIABLE SUB-ACCOUNTS - A unit investment trust variable account includes
variable sub-accounts, each investing in a designated investment portfolio. The
sub-accounts and the investment portfolios in which they invest are specified
in the prospectus or offering document. Income, gains or losses, realized and
unrealized from assets in each variable sub-account are credited to or charged
against that variable sub-account without regard to other income, gains or
losses in the other sub-accounts or our other income, gains or losses.
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CHANGES WITHIN THE VARIABLE ACCOUNT - We may, from time to time, make
additional Variable Sub-Accounts available to you. These Sub-Accounts will
invest in investment portfolios we find suitable for this Contract. We also
have the right to eliminate Sub-Accounts, to combine two or more Sub-Accounts
or to substitute a new investment portfolio for the portfolio in which a
Sub-Account invests. Such an action may become necessary if, in our judgment, a
portfolio or Sub-Account no longer suits the purposes of this Contract. This
may happen due to a change in laws or regulations, or a change in a portfolio's
or Sub-Account's investment objectives or restrictions, or because the
portfolio or Sub-Account is no longer available for investment, or for some
other reason. We will get prior approval from the insurance department of our
state of domicile before taking such action. If required, this approval
process will be on file with the insurance department of the jurisdiction in
which this Contract is delivered. We will also get any required approval from
the SEC and any other required approvals before taking such an action.
Subject to any required regulatory approvals, we reserve the right to transfer
assets of the Variable Sub-Accounts that we determine to be associated with the
class of contracts to which this Contract belongs, to another variable account
or variable sub-account.
When permitted by law, we reserve the right to:
1. Deregister the Variable Account under the Investment Company Act
of 1940;
2. Operate the Variable Account as a management company under the
Investment Company Act of 1940, if it is operating as a unit
investment trust;
3. Operate the Variable Account as a unit investment trust under the
Investment Company Act of 1940, if it is operating as a Managed
Separate Account;
4. Restrict or eliminate any voting rights of Owners, or other
persons who have voting rights as to the Variable Account;
5. Combine the Variable Account with other separate investment
accounts; and
6. Combine a Variable Sub-Account with another Variable Sub-Account.
If any actions we take result in a material change in the underlying
investments of a Variable Sub-Account in which you are invested, we will notify
you of the change. You may then choose a new Sub-Account.
ACCUMULATION UNITS - We keep track of the value of each of your Variable
Sub-Accounts by crediting you with Accumulation Units for each Sub-Account.
The number of Accumulation Units credited to you for each Sub-Account is
determined by dividing (a) by (b) where:
(a) is the dollar amount allocated to that Sub-Account; and
(b) is the value of the Accumulation Unit for that Sub-Account for
the Valuation Date on which the purchase payment or
transferred amount is invested in that Sub-Account.
Accumulation Units will be adjusted for any transfers and will be canceled on
payment of a death benefit, a withdrawal, a surrender, the application of
Account Value to an income plan on the Income Date, or assessment of charges
shown in the Schedule (other than the variable sub-account charges) based on
their value for the Valuation Period in which the transaction occurs.
VALUE OF ACCUMULATION UNITS - The Accumulation Unit value for any Valuation
Period is determined by multiplying (a) by (b) where:
(a) is the Accumulation Unit value for the immediately preceding
Valuation Period; and
(b) is the "net investment factor" for the Variable Sub-Account
for the Valuation Period for which the value is being
determined.
The value of an Accumulation Unit may increase, decrease or remain the same
from one Valuation Period to the next.
NET INVESTMENT FACTOR - The net investment factor for a Variable Sub-Account is
an index that measures
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the investment performance of that Sub-Account from one Valuation Period to the
next. The net investment factor for any Valuation Period is determined by
dividing (a) by (b), and then subtracting (c) where:
(a) is the net result of:
(i) the Net Asset Value per share of the investment portfolio
share in which the Sub-Account invests determined at the
end of the current Valuation Period; plus
(ii) the per share amount of any dividend or capital gains
distribution made by that investment portfolio on shares
held in the Sub-Account if the "ex-dividend" date occurs
during the current Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for,
which is determined by us to have resulted from the
operations of that Sub-Account;
(b) is the Net Asset Value per share of the investment portfolio share
in which the Sub-Account invests determined at the end of the
immediately preceding Valuation Period; and
(c) is the daily variable sub-account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
FIXED ACCOUNT
- -------------------------------------------------------------------------------
FIXED ACCOUNT - The Fixed Account is a separate investment account under state
insurance law. It is maintained separate from our General Account and separate
from any other separate investment account that we may have. We own the assets
in the Fixed Account. Notwithstanding the foregoing, our obligations under
(and the values and benefits under) the Fixed Account option of this Contract
do not vary as a function of the investment performance of the Fixed Account.
Owners and Beneficiaries with rights under this Contract do not participate in
the investment gains or losses of the assets of the Fixed Account. Such gains
or losses accrue solely to us. We retain the risk that the value of the assets
in the Fixed Account may fall below the reserves and other liabilities that we
must maintain in connection with our obligations under the Fixed Account option
of this Contract. In such event, we will transfer assets from our General
Account to the Fixed Account to make up the difference. The Fixed Account will
not be charged with liabilities that arise from any other business that we
conduct. We may transfer to our General Account assets that exceed the
reserves and other liabilities of the Fixed Account. The Fixed Account is not
required to be registered with the SEC as an investment company under the
Investment Company Act of 1940.
FIXED SUB-ACCOUNT - We will establish a separate Fixed Sub-Account for you each
time you allocate amounts to the Fixed Account. Amounts invested in these
Fixed Sub-Accounts earn interest at the Guaranteed Interest Rate in effect on
the date the amounts are allocated.
GUARANTEE PERIODS - Each Fixed Sub-Account is guaranteed an interest rate for a
period we refer to as a Guarantee Period. The Guaranteed Interest Rate for a
Fixed Sub-Account is effective for the entire Guarantee Period. The length of
a Guarantee Period is measured from the end of the calendar month in which the
amount is allocated to the Fixed Sub-Account. The last day of the Guarantee
Period is its Expiry Date. Surrender, or withdrawals or transfers from all or
part of a Fixed Sub-Account, and amounts applied to an income plan, made prior
to the Expiry Date of a Guarantee Period may be subject to a Market Value
Adjustment.
We will notify you at least thirty days prior to an Expiry Date of your options
for renewal, which include:
1. electing a new Guarantee Period from among those then offered by
us, but excluding any that extend beyond your Income Date; or
2. transferring the value of the Fixed Sub-Account to one or more
Variable Sub-Accounts.
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If we do not receive Satisfactory Notice prior to the Expiry Date, we will
transfer the value of the expiring Fixed Sub-Account to a Fixed Sub-Account
with the same Guarantee Period, but not longer than 5 years, nor extending
beyond your Income Date. The transfer will be effective as of the Expiry Date
of the previous Guarantee Period.
GUARANTEED INTEREST RATES - Periodically, we will declare Guaranteed Interest
Rates for then available Guarantee Periods. These rates will be guaranteed for
the duration of the respective Guarantee Periods. Guaranteed Interest Rates
will never be less than the Minimum Guaranteed Interest Rate shown in the
Schedule.
MARKET VALUE ADJUSTMENT - A Market Value Adjustment may be applied to
surrender, withdrawals, transfers or amounts applied to an income plan when
taken from a Fixed Sub-Account other than the thirty-day period prior to its
Expiry Date. A Market Value Adjustment is applied separately to each Fixed
Sub-Account.
A Market Value Adjustment is determined by multiplying the amount surrendered,
withdrawn, transferred or applied to an income plan by the following factor:
N/365
[(1+I)/(1+J+.0025)] -- 1
Where:
- I is the Index Rate for a maturity equal to the Fixed
Sub-Account's Guarantee Period;
- J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period; and
- N is the remaining number of days in the Guarantee Period at the
time of calculation.
If there is no Index Rate for the maturity needed to calculate I or J, straight
line interpolation between the Index Rate of the next highest and next lowest
maturities will be used to determine that Index Rate. If the maturity is one
year or less, we will use the Index Rate for a one-year maturity.
Market Value Adjustments will be applied as follows:
1. For a surrender, withdrawal, transfer or amount applied to an
income plan, the Market Value Adjustment will be calculated on the
total amount that must be surrendered, withdrawn, transferred or
applied to an income plan in order to provide the amount
requested.
2. If the Market Value Adjustment is negative, it is deducted from
any remaining value in the Fixed Sub-Account or amount
surrendered. Any remaining Market Value Adjustment is deducted
from the amount withdrawn, transferred or applied to an income
plan.
3. If the Market Value Adjustment is positive, it is added to any
remaining value in the Fixed Sub-Account or amount surrendered.
If the full amount of the Fixed Sub-Account is withdrawn,
transferred or applied to an income plan, the Market Value
Adjustment is added to the amount withdrawn, transferred or
applied to an income plan.
TRANSFERS AMONG ACCOUNTS
- -------------------------------------------------------------------------------
Prior to the Income Date and while the Annuitant is living, you may transfer
Account Value among Sub-Accounts. Certain restrictions may apply during the
Free Look Period. To make a transfer, you must give us Satisfactory Notice.
Transfers generally take effect when we receive the notice. The number of free
transfers that we allow each Contract Year is shown in the Charges section of
the Schedule. Restrictions for transfers are shown in the Schedule. A
transfer from a Fixed Sub-Account may be subject to a Market Value Adjustment.
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SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
- -------------------------------------------------------------------------------
Prior to the Income Date and while the Annuitant is living, you may withdraw
all or part of your Account Value by giving us Satisfactory Notice. The
minimum withdrawal is shown in the Schedule.
If you request a surrender, we will terminate this Contract and pay you the
Surrender Value. This amount may also be applied to the income plans subject
to any restrictions described in this Contract. Unless specified otherwise, we
will make partial withdrawals as described in the Schedule. Surrender and
withdrawals generally take effect on the date we receive Satisfactory Notice.
If you make a withdrawal from this Contract in excess of the Free Withdrawal
Amount described in the Schedule, a surrender charge may be assessed.
Surrender charges are described in the Schedule. A withdrawal from the Fixed
Account may also be subject to a Market Value Adjustment.
EXCESS WITHDRAWALS - If a partial withdrawal is made for an amount greater than
the Free Withdrawal Amount, a surrender charge may be applicable. For purposes
of calculating the surrender charge only, purchase payments will be liquidated
in whole or in part on a "first-in-first-out-basis." This means we liquidate
purchase payments in the order they were made: the oldest unliquidated purchase
payment first, the next oldest unliquidated purchase payment second, etc.,
until all purchase payments have been liquidated.
The surrender charge as to any liquidated purchase payment is determined by
multiplying the amount of the purchase payment being liquidated by the
applicable percentage shown in the Schedule. The total surrender charge will
be the sum of the surrender charges for each purchase payment being liquidated.
In a partial withdrawal, the surrender charge is deducted from the Account
Value remaining after you are paid the amount requested. The amount requested
from a Sub-Account may not exceed the value of that Sub-Account less any
applicable surrender charge. In a complete withdrawal (or surrender of this
Contract), it is deducted from the amount otherwise payable.
CHARGES
- -------------------------------------------------------------------------------
The types and amounts of charges and when and how they are deducted are
described in the Schedule.
OWNER, ANNUITANT AND BENEFICIARY
- -------------------------------------------------------------------------------
THE OWNER - You are the Owner of this Contract. You have the rights and options
described in this Contract, including but not limited to the right to receive
the income payments beginning on the Income Date. One or more people may own
this Contract.
THE ANNUITANT - Unless another Annuitant is shown in the Schedule, you are also
the Annuitant. You may name a Contingent Annuitant. You will be the
Contingent Annuitant unless you name someone else. If there are joint Owners,
we will treat the youngest Owner as the Contingent Annuitant, unless you elect
otherwise.
If you are not the Annuitant and the Annuitant dies before the Income Date, the
Contingent Annuitant becomes the Annuitant. If the Annuitant dies and no
Contingent Annuitant has been named, we will allow you sixty days to designate
someone other than yourself as Annuitant.
THE BENEFICIARY - We pay the death benefit to the primary Beneficiary (unless
there are joint Owners in which case proceeds are payable to the surviving
Owner). If the primary Beneficiary dies before the Owner, the death benefit is
paid to the Contingent Beneficiary, if any. If there is no surviving
Beneficiary,
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we pay the death benefit to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any death benefit is to be paid in equal shares to
the multiple surviving Beneficiaries unless you specify otherwise.
You have the right to change Beneficiaries. However, if you designate the
primary Beneficiary as irrevocable, you may need the consent of that
irrevocable Beneficiary to exercise the rights and options under this Contract.
CHANGE OF OWNER, BENEFICIARY OR ANNUITANT - During your lifetime and while this
Contract is in force you can transfer ownership of this Contract or change the
Beneficiary, or change the Annuitant. (However, the Annuitant cannot be
changed after the Income Date.) To make any of these changes, you must send us
Satisfactory Notice. If accepted, any change in Owner, Beneficiary or
Annuitant will take effect on the date you signed the notice. Any of these
changes will not affect any payment made or action taken by us before our
acceptance. A CHANGE OF OWNER MAY BE A TAXABLE EVENT and may also affect the
amount of death benefit payable under this Contract.
DEATH BENEFITS
- -------------------------------------------------------------------------------
DEATH BENEFIT BEFORE THE INCOME DATE - If any Owner dies before the Income
Date, we will pay the Beneficiary the greatest of the following:
(a) the Account Value determined as of the day we receive proof of
death; or
(b) 100% of the sum of all purchase payments made to this Contract,
reduced by any prior withdrawals (including any associated
surrender charge and Market Value Adjustment incurred); or
(c) the Highest Anniversary Value.
HIGHEST ANNIVERSARY VALUE - The Highest Anniversary Value is equal to the
greatest anniversary value attained from the following:
Upon our receipt of proof of death, we will calculate an anniversary
value for each Contract Anniversary before the Owner's death
excluding, however, Contract Anniversaries that come after the Owner
attains age 80. An anniversary value is equal to the Account Value on
a Contract Anniversary, increased by the dollar amount of any purchase
payments made since that Contract Anniversary and reduced for any
withdrawals (including any associated surrender charge and Market
Value Adjustment incurred) taken since that anniversary. This
reduction will be made in proportion to the reduction in the Account
Value that results from a withdrawal.
MULTIPLE OWNERS - If there are multiple Owners, the age of the oldest Owner
will be used to determine the death benefit.
DEATH BENEFIT WHEN NO NATURAL OWNERS - If there is no Owner who is a natural
person, we will treat the Annuitant as Owner for the purpose of paying the
death benefit, and the Annuitant's age will determine the death benefit payable
to the Beneficiary.
REQUIRED DISTRIBUTION OF PROCEEDS ON THE DEATH OF THE OWNER - The three
sub-sections indented below are required to qualify this Contract as an annuity
contract under Section 72(s) of the Internal Revenue Code of 1986, as amended.
Where the terms of these three sub-sections are in conflict with any other
sections or sub-sections of this Contract, these three sub-sections will
control. We reserve the right to amend or administer this Contract as
necessary to comply with the applicable tax requirements. These three
sub-sections and this Contract should be construed so that they comply with the
applicable tax requirements.
DEATH BENEFIT OPTIONS BEFORE INCOME DATE - In the event any Owner dies
before the Income
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Date, the death benefit may be taken in one sum, in which case this
Contract will terminate. Such sum shall be paid within five years of
the Owner's death unless one of the options for continuation of this
Contract below is elected by the person entitled to make that
election.
CONTRACT CONTINUATION OPTION - If the death benefit is not
taken in one sum immediately, this Contract will continue subject to
the following provisions:
1. If there are joint Owners, the surviving Owner becomes the new
Owner. Otherwise, the Beneficiary becomes the new Owner.
2. Unless specified otherwise, any excess of the death benefit
over the Account Value will be allocated to and among the
Variable and Fixed Accounts in proportion to their values as
of the date on which the death benefit is determined. We will
establish a new Fixed Sub-Account for any allocation to the
Fixed Account based on the Guarantee Period you then elect.
3. No additional purchase payments may be applied to this
Contract.
4. If the new Owner is not the deceased Owner's spouse, the
entire interest in this Contract must be distributed under one
of the following options:
a. The entire interest in this Contract must be distributed
over the life of the new Owner, or over a period not
extending beyond the life expectancy of the new Owner,
with distributions beginning within one year of the
Owner's death; or
b. The entire interest in this Contract must be distributed
within 5 years of the Owner's death.
5. If the new Owner is the deceased Owner's spouse, this Contract
will continue with the surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary. If no
Beneficiary is so named, the surviving spouse's estate will be
the Beneficiary. Upon the death of the surviving spouse, the
death benefit will equal the Account Value as of the date we
receive proof of the spouse's death, and the entire interest
in this Contract must be distributed to the new Beneficiary in
accordance with the provisions of 4 (a) or 4 (b) above.
If there is more than one Beneficiary, the foregoing provisions
will independently apply to each Beneficiary.
DEATH BENEFIT ON OR AFTER THE INCOME DATE - If any Owner dies on or
after the Income Date but before the time the entire interest in this
Contract has been distributed, the remaining portion will be
distributed at least as rapidly as under the method of distribution
being used as of the date of the Owner's death.
If income payments have been selected based on an income plan
providing for payments for a guaranteed period, and the Annuitant dies
on or after the Income Date, we will make the remaining guaranteed
payments to the Beneficiary. Any remaining payments will be made as
rapidly as under the method of distribution being used as of the date
of the Annuitant's death. If no Beneficiary is living, we will
commute any unpaid guaranteed payments to a single sum (on the basis
of the interest rate used in determining the payments) and pay that
single sum to the estate of the last to die of the Annuitant or the
Beneficiary.
PROOF OF DEATH - Proof of death must be received at our Customer Service Center
before we will pay any death benefit. We will accept one of the following
items:
1. An original certified copy of an official death certificate; or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or
3. Any other proof satisfactory to us.
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GENERAL PROVISIONS
- -------------------------------------------------------------------------------
ENTIRE CONTRACT - This Contract including any attached riders, endorsements,
amendments and the application, if one is attached to this contract when
issued, constitutes the entire contract between you and us. All statements
made by you, or any Owner, or any Annuitant will be deemed representations and
not warranties.
ASSIGNMENT - You may assign this Contract at any time prior to the Income Date.
No assignment will be binding on us unless we receive Satisfactory Notice. We
will not be liable for any payments made or actions we take before the
assignment is accepted by us. An absolute assignment will revoke the interest
of any revocable Beneficiary. We will not be responsible for the validity of
any assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
CLAIMS OF CREDITORS - To the extent permitted by law, no benefits payable under
this Contract will be subject to the claims of your, the Beneficiary's, or the
Annuitant's creditors.
MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL - We may require proof of age,
sex or survival of any person upon whose age, sex or survival any payments
depend. If the age or sex of the Annuitant has been misstated, or if the age
of the Owner has been misstated, the benefits will be those that the Account
Value applied would have provided for the correct age and sex. If we have made
incorrect income payments, the amount of any underpayment will be paid
immediately. The amount of any overpayment will be deducted from future income
payments.
NO DIVIDENDS PAYABLE - This Contract is non-participating and does not share in
any distribution of our surplus. We will not pay any dividends.
INCONTESTABILITY - This Contract is incontestable from its Contract Date.
REQUIRED REPORTS - We will furnish a report to you as often as required by law,
but at least once each Contract Year before the Income Date. The report will
show the number of Accumulation Units credited to each Variable Sub-Account in
which you are invested and the corresponding Accumulation Unit value as of the
date of the report. It will also show your Fixed Account Value.
MORTALITY AND EXPENSES - Our actual mortality and expense experience will not
affect the amount of any income payments or any other values under this
Contract.
TAXES BASED UPON PURCHASE PAYMENT OR VALUE - If there is a law or change in law
assessing taxes against us based upon purchase payments or value of this
Contract, we reserve the right to charge you and all similarly situated Owners
proportionately for that tax. This would include a tax based upon our realized
net capital gains in the Variable Sub-Accounts and on earnings in the Fixed
Account, on which we are not currently taxed.
PAYMENTS WE MAY DEFER - We may not be able to determine the value of the assets
of the Variable Sub-Accounts because:
1. The New York Stock Exchange is closed for trading;
2. The SEC determines that a state of emergency exists;
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners; or
4. The check used to pay the purchase payment has not cleared
through the banking system. This may take up to 15 days.
If this happens, we may delay:
1. Determination and payment of the Surrender Value or any
withdrawal;
2. Determination and payment of any death benefit if death occurs
before the Income Date;
3. Transfers of the Account Value; or
4. Application of the Account Value under an income plan.
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We reserve the right to delay payment of amounts from the Fixed Account for up
to six months. If deferred 30 days or more, the amount deferred will earn
interest at a rate not less than the Minimum Deferral Interest Rate shown in
the Fixed Account section of the Schedule.
AUTHORITY TO MAKE AGREEMENTS - All agreements made by us must be signed by one
of our officers. No other person, including an insurance agent or broker, can
change the terms of this Contract or make any agreement binding on us.
REQUIRED NOTE ON OUR COMPUTATIONS - We have filed a detailed statement of our
computations with the insurance supervisory officials in the appropriate
jurisdictions. The values are not less than those required by the laws of
those states or jurisdictions. Any benefit provided by an attached rider will
not increase these values unless otherwise stated in that rider.
ANNUITY INCOME BENEFITS
- -------------------------------------------------------------------------------
CHOOSING AN INCOME DATE AND INCOME PLAN - On the Income Date, if the Annuitant
is alive and this Contract is in force, income payments will begin under the
income plan you have chosen. If you have not chosen an income plan, the option
shown in the Schedule will automatically apply. If you have not selected an
Income Date, the Maximum Income Date shown in the Schedule will automatically
apply.
You may choose or change an income plan or the Income Date by giving us
Satisfactory Notice at least 30 days before the Income Date. However, any
Income Date must meet the restrictions described in the Schedule.
Once income payments have begun, we reserve the right to disallow further
changes without our prior approval.
MINIMUM AMOUNTS - If the amount available to apply under any variable or fixed
option is less than the minimum amount shown in the Schedule, we reserve the
right to pay such amount in a lump sum in lieu of the payment otherwise
provided for.
Income payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by giving us Satisfactory Notice at least 30 days before
the Income Date. However, if at any time the payment becomes less than the
minimum income payment shown in the Schedule, we reserve the right to reduce
the frequency of payment to an interval that results in each payment being at
least equal to the minimum income payment. In no event will the interval be
less frequent than annual.
ALLOCATION OF ANNUITY - At the time you elect the income plan, you may also
elect to have the Account Value applied to provide a Variable Income Annuity, a
Fixed Income Annuity, or a combination of both. Unless you specify otherwise,
we will provide either variable or fixed, or a combination of variable and
fixed income payments in proportion to the Sub-Accounts in which you are
invested as of a date not more than 5 Valuation Days before the due date of the
first income payment. If any applicable purchase payment taxes are then due
us, we will also deduct them proportionately.
VARIABLE INCOME ANNUITY
AMOUNT OF FIRST VARIABLE PAYMENT - The Income Tables shown in the Schedule are
used to determine the first monthly variable income payment for an assumed
investment rate of 3%. The Income Tables show the dollar amount of the first
monthly variable income payment that can be purchased with each $1,000 applied.
The assumed investment rates we currently allow are shown on the Schedule.
VALUE OF INCOME UNITS - The Income Unit value for any Valuation Period is
determined by multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the
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value is being determined; and
(c) is the daily equivalent of the assumed investment rate for the
number of days in the Valuation Period.
The value of an Income Unit may increase, decrease or remain the same from one
Valuation Period to the next.
NUMBER OF INCOME UNITS - We determine the number of Income Units in each
Variable Sub-Account by dividing the first monthly variable income payment
attributable to that Sub-Account by its Income Unit value as of a date not more
than 5 Valuation Days before the due date of the first variable income payment.
AMOUNT OF SECOND AND SUBSEQUENT VARIABLE PAYMENTS - The dollar amount of the
second and subsequent variable income payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
income payment will be equal to the sum of the variable income payments in each
Variable Sub-Account. The dollar amount of each payment for a Variable
Sub-Account is determined by multiplying the number of Income Units by the
Income Unit value for the Variable Sub-Account for the Valuation Period which
ends on a consistently applied date not more than 5 Valuation Days before the
payment is due.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in our expenses or mortality experience.
EXCHANGE OF INCOME UNITS - After the Income Date, if there is an exchange of
value of a designated number of Income Units of particular Variable
Sub-Accounts into other Income Units, the value will be such that the dollar
amount of income payment made on the date of exchange would be unaffected by
the exchange.
FIXED INCOME ANNUITY
A Fixed Income Annuity is an annuity with income payments that remain fixed as
to dollar amount throughout the payment period. The Income Tables shown in the
Schedule are used to determine the monthly fixed income payment. The Income
Tables show the dollar amount of the monthly fixed income payment that can be
purchased with each $1,000 applied.
INCOME PLANS
The following is a list of income plans we guarantee to make available.
INCOME PLAN 1. LIFE ANNUITY - An annuity payable during the lifetime of the
Annuitant and terminating with the last payment preceding the death of the
Annuitant.
INCOME PLAN 2. LIFE ANNUITY WITH 10 OR 20 YEARS CERTAIN - An annuity payable
during the lifetime of the Annuitant with the provision that payments will be
made for a minimum of 10 or 20 years, as elected.
INCOME PLAN 3. JOINT AND LAST SURVIVOR ANNUITY - An annuity payable during the
joint lifetime of the Annuitant and a designated second person, and thereafter
during the remaining lifetime of the survivor, ceasing with the last payment
prior to the death of the survivor.
INCOME PLAN 4. PAYMENTS FOR A SPECIFIED PERIOD CERTAIN - An amount payable for
the number of years selected which may be from 5 to 30 years.
INCOME PLAN 5. ANNUITY PLAN - An amount can be used to purchase any single
premium annuity we offer on the Income Date for which you and the Annuitant are
eligible.
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EXHIBIT 4(a)(ii)(B)
[SAGE LOGO]
A Stock Company
Home Office Customer Service Center
300 Atlantic Street 290 Silas Deane Highway
Stamford, CT 06901 Wethersfield, CT 06109
1-877-TEL-SAGE
PLEASE READ THIS CONTRACT CAREFULLY. This Contract is a legal contract
between the Contractholder (you) and Sage Life Assurance of America, Inc. You
have the rights described in the Contract. We will make Income Payments
beginning on the Income Date shown in the Schedule if the Annuitant is living
on that date.
RIGHT TO EXAMINE THIS CONTRACT:
IF FOR ANY REASON YOU ARE NOT SATISFIED WITH THIS CONTRACT, YOU MAY RETURN IT
TO US OR THE AGENT WHO SOLD IT TO YOU WITHIN 10 DAYS AFTER YOU RECEIVE IT (THE
FREE LOOK PERIOD). WHEN WE RECEIVE IT, WE WILL PROMPTLY REFUND YOU THE ACCOUNT
VALUE PLUS ANY CHARGES SHOWN IN THE SCHEDULE THAT WE HAVE DEDUCTED FROM THE
ACCOUNT VALUE ON OR BEFORE THE DATE THE RETURNED CONTRACT WAS RECEIVED BY US,
OR IF REQUIRED BY THE LAW OF YOUR STATE, THE INITIAL PURCHASE PAYMENT (MINUS
ANY WITHDRAWALS).
ALL PAYMENTS AND VALUES, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT, MAY INCREASE OR DECREASE, DEPENDING ON THIS CONTRACT'S
INVESTMENT RESULTS AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. ALL PAYMENTS
AND VALUES BASED ON THE INTEREST ACCOUNT MAY BE SUBJECT TO A MARKET VALUE
ADJUSTMENT, THE OPERATION OF WHICH MAY CAUSE SUCH PAYMENTS AND VALUES TO
INCREASE OR DECREASE.
[SIG]
Chairman
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
Surrender Values while you are living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
DVAZ-9712 NV
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MAKING PURCHASE PAYMENTS . . . . . . . . . . . . . . . . . . . . 9
VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . 9
INTEREST ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . 11
TRANSFERS AMONG ACCOUNTS . . . . . . . . . . . . . . . . . . . 13
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE . . . . 13
CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
OWNER, ANNUITANT AND BENEFICIARY . . . . . . . . . . . . . . . 13
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . 14
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 16
ANNUITY INCOME BENEFITS . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
Page 2
DVAZ-9712 NV
<PAGE> 3
SCHEDULE
Contract No.:
Owner: Contract Date: XX/XX/XXXX
Issue Age/Sex:
Annuitant: Income Date: XX/XX/XXXX
Issue Age/Sex:
Initial Purchase
Payment: $
This Schedule sets forth additional information that relates to the provisions
in this Contract with the corresponding headings.
MAKING PURCHASE PAYMENTS
The Designated Sub-Account is the Money Market Sub-Account.
No purchase payment, whether initial or additional, may be allocated such that
any Sub-Account would have a value less than $250.
Additional purchase payments are subject to the following limits:
1. [Non-qualified plan: Additional purchase payments may be made until
the earlier of the year in which you attain age 85 or the year in
which the Annuitant attains age 85.]
OR
[Qualified plan: Additional purchase payments may be made until the
year in which you attain age 70 1/2, except rollover contributions may
be made until the year in which you attain age 85.]
2. The minimum additional purchase payment we will accept is $1,000.
3. Our prior approval is required before you make a purchase payment that
causes the Account Value of all annuities that you maintain with us to
exceed $1,000,000.
VARIABLE ACCOUNT
The Variable Account for this Contract is The Sage Variable Annuity Account A.
It is a unit investment trust variable account.
INTEREST ACCOUNT
The Interest Account for this Contract is The Sage Fixed Interest Account A.
The Minimum Guaranteed Interest Rate is 3%.
The Minimum Deferral Interest Rate is 3%.
Index Rate: The Index Rate is the U.S. Treasury Constant Maturity Series as
reported in Federal Reserve Bulletin Release H.15. We currently base the
Index Rate for a calendar week on the reported rate for the preceding calendar
week. We reserve the right to set it less frequently but in no event less
often than monthly.
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DVAZ-9712 NV
<PAGE> 4
TRANSFERS AMONG ACCOUNTS
The minimum amount that can be transferred is $250. However, if less remains
in a Sub-Account, that amount may be transferred. If a transfer request would
reduce the Account Value remaining in a Sub-Account below $250, we will treat
the transfer request as a request to transfer the entire amount.
Your transfer request must clearly state the Sub-Accounts from which and to
which transfers are to be made.
We reserve the right to limit, upon notice, the maximum number of transfers you
may make to one per calendar month or 12 per Contract Year.
After the Income Date, we reserve the right to:
1. disallow transfers from the Interest Account to the Variable Account,
or from the Variable Account to the Interest Account; and
2. limit the maximum number of transfers between Variable Sub-Accounts to
1 per Contract Year.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
The Free Withdrawal Amount is the greater of (a) and (b) where:
(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals including any associated surrender charges and
Market Value Adjustment incurred in that Contract Year; and
(b) is the excess of the Account Value on the date of withdrawal over
the unliquidated purchase payments.
The minimum amount that can be withdrawn is $250. If a withdrawal request
would reduce the Account Value remaining in a Sub-Account below $250, we will
treat the withdrawal request as a request to withdraw the entire amount.
If a requested withdrawal would reduce the Account Value below $2,000, we
reserve the right to treat the request as a withdrawal of only the excess over
$2,000.
Unless you specify otherwise, we will make withdrawals proportionately from all
Sub-Accounts in which you are invested.
CHARGES
SURRENDER CHARGE - A surrender charge may be imposed upon surrender of this
Contract or when an Excess Withdrawal is made. The surrender charge is applied
to each purchase payment and is a percentage of each purchase payment as
follows:
The maximum surrender charge percentage is 0% for all Contract Years.
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DVAZ-9712 NV
<PAGE> 5
TRANSFER CHARGE - We reserve the right to charge a maximum of $25 for each
transfer after the 12th in a Contract Year. Each request is considered to be
one transfer regardless of the number of Sub-Accounts affected by the transfer.
The transfer charge will be deducted proportionately from all Sub-Accounts from
which the transfer is made.
ADMINISTRATION CHARGE - $40 a year. This charge is incurred at the beginning
of each Contract Year and deducted on each Contract Anniversary or upon
surrender. The charge will be waived:
1. if the Account Value is at least $50,000 at the time of deduction; or
2. beginning on and after the 8th Contract Anniversary.
PURCHASE PAYMENT TAX CHARGE - The amount of any state and local taxes levied by
any governmental entity on purchase payments may be deducted from the Account
Value when such taxes are incurred. We reserve the right to defer the
collection of this charge and deduct it against your Account Value on the
surrender of this Contract, or Excess Withdrawal, or application of the Account
Value to provide income payments.
ASSET-BASED CHARGES - We deduct asset-based charges to compensate us for
assuming mortality and expense risks, and certain administrative expenses.
Prior to the Income Date asset-based charges are calculated as a percentage of
the Variable Account Value on the date of deduction. On the Contract Date, and
monthly thereafter, the asset-based charges are deducted in proportion to the
Variable Sub-Accounts in which you are invested. The maximum charges are:
Asset-Based Charges Annual Charge Monthly Charge
- ------------------- ------------- --------------
Contract Years 1-7 1.40% .116667%
Contract Years 8+ 1.25% .104167%
We also reserve the right to deduct asset-based charges on the effective date
of any transfer from the Interest Account, or allocation of purchase payment to
the Variable Account, based on the amount transferred or allocated, and based
on the number of days remaining until the next date of deduction.
VARIABLE SUB-ACCOUNT CHARGES - On and after the Income Date we deduct the
asset-based charges above from the assets in each Variable Sub-Account on a
daily basis. The maximum charges are:
Variable Sub-Account Charges Annual Charge Daily Charge
- ---------------------------- ------------- ------------
Contract Years 1-7 1.40% .0038626%
Contract Years 8+ 1.25% .0034462%
CHARGE DEDUCTION RULES - Unless otherwise specified above, charges are deducted
from the Account Value proportionately from all Sub-Accounts in which you are
invested.
ANNUITY INCOME BENEFITS
If you have not chosen an income plan, Life Annuity with 10 Years Certain will
automatically apply.
The Maximum Income Date is the first day of the first calendar month following
the Annuitant's 95th birthday.
We reserve the right to require that the Income Date be at least 2 years after
the Contract Date.
The minimum amount that can be applied under any Variable or Fixed Income
Annuity is $5,000.
The minimum income payment is $100.
We currently allow assumed investment rates of 3% and 6%. If you do not
specify one of these rates when you choose an income plan, the assumed
investment rate will be 3%.
Values for other ages, and for other payment periods, joint life combinations,
or assumed investment rates that we offer (Tables below assume 3%) are
available on request. Monthly income payments are shown for each $1,000
applied.
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DVAZ-9712 NV
<PAGE> 6
INCOME TABLE FOR A FIXED PERIOD
<TABLE>
<CAPTION>
Fixed Monthly Fixed Monthly Fixed Monthly
Period Income Period Income Period Income
of Years Payment of Years Payment of Years Payment
- --------- ------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
11 $8.88 21 $5.33
12 8.26 22 5.16
13 7.73 23 5.00
14 7.28 24 4.85
5 17.95 15 6.89 25 4.72
6 15.18 16 6.54 26 4.60
7 13.20 17 6.24 27 4.49
8 11.71 18 5.98 28 4.38
9 10.56 19 5.74 29 4.28
10 9.64 20 5.53 30 4.19
</TABLE>
INCOME TABLE FOR LIFE
<TABLE>
<CAPTION>
Male/Female Male/Female Male/Female
Age Life Only 10 Years Certain 20 Years Certain
- --- --------- ---------------- ----------------
<S> <C> <C> <C>
50 4.28 / 3.92 $4.24 / 3.90 $4.10 / 3.84
55 4.72 / 4.27 4.64 / 4.24 4.40 / 4.12
60 5.31 / 4.74 5.17 / 4.68 4.73 / 4.45
65 6.13 / 5.38 5.84 / 5.25 5.04 / 4.81
70 7.28 / 6.29 6.65 / 6.00 5.29 / 5.14
75 8.90 / 7.62 7.53 / 6.92 5.43 / 5.37
80 11.19 / 9.62 8.37 / 7.93 5.50 / 5.48
85 14.36 / 12.63 9.00 / 8.77 5.52 / 5.52
</TABLE>
RIDERS
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DVAZ-9712 NV
<PAGE> 7
DEFINITIONS
- -------------------------------------------------------------------------------
"ACCOUNT VALUE" is the entire amount we hold under this Contract for you before
the Income Date. It is equal to the sum of the Variable Account Value and the
Interest Account Value.
"ACCUMULATION UNIT" is the unit of measure we use before the Income Date to
keep track of the value of each Variable Sub-Account.
"ANNUITANT" is the natural person whose age determines the Maximum Income Date
and the amount and duration of income payments involving life contingencies.
The Annuitant may also be the person to whom any payment will be made starting
on the Income Date. The Annuitant's name appears in the Schedule.
"BENEFICIARY" is the person or persons to whom we pay a death benefit if any
Owner dies prior to the Income Date.
"CONTRACT DATE" is the date this contract is issued at our Customer Service
Center. The Contract Date is shown in the Schedule. While this Contract is in
force, every anniversary of the Contract Date is the CONTRACT ANNIVERSARY and
each and every consecutive twelve-month period beginning on the Contract Date
and each Contract Anniversary is a CONTRACT YEAR.
"CONTINGENT ANNUITANT" is the natural person who becomes the Annuitant if the
Annuitant dies prior to the Income Date.
"CONTINGENT BENEFICIARY" is the person that becomes the Beneficiary if the
named Beneficiary dies prior to the Income Date.
"CUSTOMER SERVICE CENTER" is where we provide service to you. The mailing
address and telephone number of the Customer Service Center are shown on the
first page of this Contract.
"EXCESS WITHDRAWAL" is a withdrawal of Account Value that exceeds the Free
Withdrawal Amount.
"EXPIRY DATE" is the last day in a Guarantee Period.
"FREE WITHDRAWAL AMOUNT" is the maximum amount that can be withdrawn in a
Contract Year without being subject to a surrender charge. This amount is
described in the Schedule.
"GENERAL ACCOUNT" consists of all our assets other than those held in any
separate investment accounts.
"GUARANTEED INTEREST RATE" is the effective annual interest rate we will credit
for a specified Guarantee Period. The Guaranteed Interest Rate will never be
less than the minimum shown in the Schedule.
"GUARANTEE PERIOD" is a period of years for which a specified effective annual
interest rate is guaranteed by us. Interest is credited daily at a rate to
yield the declared annual Guaranteed Interest Rate.
"HOME OFFICE" is our main office. The mailing address is shown on the first
page of this Contract.
"INCOME DATE" is the date when income payments under this Contract commence.
This date is shown in the Schedule.
"INCOME UNIT" is the unit of measure we use to calculate the amount of income
payments under the Variable Income Annuity.
"INTEREST ACCOUNT" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred.
"INTEREST ACCOUNT VALUE" is the sum of the value of each Interest Sub-Account
on any particular day.
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DVAZ-9712 NV
<PAGE> 8
An "INTEREST SUB-ACCOUNT" is established when purchase payments are invested or
amounts are transferred to the Interest Account. The value of each Interest
Sub-Account is equal to the amount invested, increased by interest and reduced
by any withdrawals or transfers from, or charges assessed against the Interest
Sub-Account.
"MARKET VALUE ADJUSTMENT" is a positive or negative adjustment that may apply
to surrender, withdrawals, transfers and amounts applied to an income plan,
from an Interest Sub-Account before the end of a Guarantee Period.
"NET ASSET VALUE" is the price of one share of an investment portfolio.
"SATISFACTORY NOTICE" is a notice or request authorized by you, in a form
satisfactory to us, received at our Customer Service Center.
"SUB-ACCOUNT" includes both Variable Sub-Accounts and Interest Sub-Accounts,
unless the context indicates otherwise.
"SURRENDER VALUE" is the amount you receive upon surrender of this Contract
before the Income Date. It is your Account Value, plus or minus any applicable
Market Value Adjustment, and less any applicable surrender charges or other
charges shown in the Schedule.
"VALUATION DATE" is the date at the end of a Valuation Period when each
Variable Sub-Account is valued.
"VALUATION PERIOD" is the period between one calculation of an Accumulation
Unit value and the next calculation. Normally, we calculate Accumulation Units
daily when the New York Stock Exchange is open for trading and we are open for
business. We can delay this calculation if an emergency exists, making
disposal or fair valuation of assets in the Variable Account not reasonably
practicable, or the Securities and Exchange Commission (SEC) permits the delay.
We may change when we calculate the Accumulation Unit value by giving you 30
days notice, or such notice as may be required by law.
"VARIABLE ACCOUNT" is a separate investment account of ours into which purchase
payments may be invested or Account Value may be transferred. The Variable
Account is shown in the Schedule.
"VARIABLE ACCOUNT VALUE" is the sum of the value of each Variable Sub-Account
on a Valuation Date.
"VARIABLE SUB-ACCOUNT" is a division of the Variable Account that invests in
shares of a particular investment portfolio. The value of a Variable
Sub-Account is determined by multiplying (a) times (b) where:
(a) equals the number of Accumulation Units held in the Variable
Sub-Account; and
(b) equals the value of the Accumulation Unit for the Variable
Sub-Account.
"WE", "US" OR "OUR" is Sage Life Assurance of America, Inc.
"YOU" OR "YOUR" is the Owner of this Contract. Your name appears in the
Schedule. You are entitled to exercise all rights under this Contract.
However, if you designate an irrevocable beneficiary, you may need that
beneficiary's consent before you exercise your rights under this Contract. The
death of any Owner before the Income Date initiates payment of the death
benefit.
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DVAZ-9712 NV
<PAGE> 9
MAKING PURCHASE PAYMENTS
- -------------------------------------------------------------------------------
INITIAL PURCHASE PAYMENT - You must make the initial purchase payment in order
to put this Contract in force. The amount of your initial purchase payment is
shown in the Schedule.
ADDITIONAL PURCHASE PAYMENTS - After the initial purchase payment, additional
purchase payments may be made at any time while this Contract is in force and
before the Income Date. The amount of any additional purchase payments may
vary but are subject to limits described in the Schedule.
ALLOCATION OF PURCHASE PAYMENTS AMONG THE VARIABLE AND INTEREST ACCOUNTS -
Subject to limits described in the Schedule, you tell us how to allocate your
purchase payment, less any applicable taxes, by notifying us of your choices.
You specified how to allocate your initial purchase payment in your application
for this Contract. Initial purchase payments allocated to the Interest Account
will be invested in Interest Sub-Accounts with the Guarantee Periods that you
specified in your application. We may, however, require that an initial
purchase payment allocated to a Variable Sub-Account be invested in the
Designated Sub-Account shown in the Schedule during the Free Look Period. At
the end of the Free Look Period, if your initial purchase payment was allocated
to the Designated Sub-Account by us, we will transfer the value of the
Designated Sub-Account to the Sub-Account(s) you specified in your application.
For the purpose of processing transfers from the Designated Sub-Account, the
Free Look Period will end 15 days after the Contract Date.
Subject to our rules, you may tell us how to allocate any additional purchase
payments. If you do not tell us, they will be allocated in the same manner as
your most recent purchase payment.
CANCELLATION OF CONTRACT - If you have not made a purchase payment for more
than 2 years and your Account Value is less than $2,000 on a Contract
Anniversary, we may cancel this Contract and pay you the Surrender Value as
though you had made a full withdrawal. We will send you written notice at your
address of record. You will be allowed 61 days from the date we mail you the
notice to submit an additional purchase payment to us in an amount not less
than the difference between $2,000 and the Account Value on the last Contract
Anniversary. The additional purchase payment is subject to the limits and
minimums shown in the Schedule.
VARIABLE ACCOUNT
- -------------------------------------------------------------------------------
VARIABLE ACCOUNT - A variable account is an investment account we maintain
separate from our General Account and any other separate investment accounts we
may have. We own the assets in a variable account. A variable account will
not be charged with liabilities that arise from any other business that we
conduct. We may transfer to our General Account assets that exceed the reserves
and other liabilities of a variable account.
A variable account may invest in mutual funds, unit investment trusts and other
investment portfolios. Such a variable account is treated as a unit investment
trust under Federal securities laws and is registered with the SEC under the
Investment Company Act of 1940.
We may offer certain series or variable accounts that may not be registered
with the SEC under the Securities Act of 1933. Any such series or variable
account, if offered, will be described in the applicable offering document.
The Variable Account for this Contract is shown in the Schedule. The laws of
our state of domicile govern this Variable Account.
VARIABLE SUB-ACCOUNTS - A unit investment trust variable account includes
variable sub-accounts, each investing in a designated investment portfolio.
The sub-accounts and the investment portfolios in which they invest are
specified in the prospectus or offering document. Income, gains or losses,
realized and unrealized from assets in each variable sub-account are credited
to or charged against that variable sub-account without regard to other income,
gains or losses in the other sub-accounts or our other income, gains or losses.
CHANGES WITHIN THE VARIABLE ACCOUNT - We may, from time to time, make
additional Variable Sub-Accounts available to you. These Sub-Accounts will
invest in investment portfolios we find suitable for this Contract. We also
have the right to eliminate Sub-Accounts, to combine two or more Sub-Accounts
or to
Page 9
DVAZ-9712 NV
<PAGE> 10
substitute a new investment portfolio for the portfolio in which a Sub-Account
invests. Such an action may become necessary if, in our judgment, a portfolio
or Sub-Account no longer suits the purposes of this Contract. This may happen
due to a change in laws or regulations, or a change in a portfolio's or
Sub-Account's investment objectives or restrictions, or because the portfolio
or Sub-Account is no longer available for investment, or for some other reason.
We will get prior approval from the insurance department of our state of
domicile before taking such action. If required, this approval process will be
on file with the insurance department of the jurisdiction in which this
Contract is delivered. We will also get any required approval from the SEC and
any other required approvals before taking such an action.
Subject to any required regulatory approvals, we reserve the right to transfer
assets of the Variable Sub-Accounts that we determine to be associated with the
class of contracts to which this Contract belongs, to another variable account
or variable sub-account.
When permitted by law, we reserve the right to:
1. Deregister the Variable Account under the Investment Company Act of
1940;
2. Operate the Variable Account as a management company under the
Investment Company Act of 1940, if it is operating as a unit
investment trust;
3. Operate the Variable Account as a unit investment trust under the
Investment Company Act of 1940, if it is operating as a Managed
Separate Account;
4. Restrict or eliminate any voting rights of Owners, or other persons
who have voting rights as to the Variable Account;
5. Combine the Variable Account with other separate investment
accounts; and
6. Combine a Variable Sub-Account with another Variable Sub-Account.
If any actions we take result in a material change in the underlying
investments of a Variable Sub-Account in which you are invested, we will notify
you of the change. You may then choose a new Sub-Account.
ACCUMULATION UNITS - We keep track of the value of each of your Variable
Sub-Accounts by crediting you with Accumulation Units for each Sub-Account.
The number of Accumulation Units credited to you for each Sub-Account is
determined by dividing (a) by (b) where:
(a) is the dollar amount allocated to that Sub-Account; and
(b) is the value of the Accumulation Unit for that Sub-Account for the
Valuation Date on which the purchase payment or transferred amount
is invested in that Sub-Account.
Accumulation Units will be adjusted for any transfers and will be canceled on
payment of a death benefit, a withdrawal, a surrender, the application of
Account Value to an income plan on the Income Date, or assessment of charges
shown in the Schedule (other than the variable sub-account charges) based on
their value for the Valuation Period in which the transaction occurs.
VALUE OF ACCUMULATION UNITS - The Accumulation Unit value for any Valuation
Period is determined by multiplying (a) by (b) where:
(a) is the Accumulation Unit value for the immediately preceding
Valuation Period; and
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined.
The value of an Accumulation Unit may increase, decrease or remain the same
from one Valuation Period to the next.
NET INVESTMENT FACTOR - The net investment factor for a Variable Sub-Account is
an index that measures the investment performance of that Sub-Account from one
Valuation Period to the next. The net investment factor for any Valuation
Period is determined by dividing (a) by (b), and then subtracting (c) where:
(a) is the net result of:
(i) the Net Asset Value per share of the investment portfolio
share in which the Sub-Account invests determined at the
end of the current Valuation Period; plus
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DVAZ-9712 NV
<PAGE> 11
(ii) the per share amount of any dividend or capital gains
distribution made by that investment portfolio on shares
held in the Sub-Account if the "ex-dividend" date occurs
during the current Valuation Period; and plus or minus
(iii) a per share charge or credit for any taxes reserved for,
which is determined by us to have resulted from the
operations of that Sub-Account;
(b) is the Net Asset Value per share of the investment portfolio share
in which the Sub-Account invests determined at the end of the
immediately preceding Valuation Period; and
(c) is the daily variable sub-account charges shown in the Schedule
(adjusted for the number of days in the Valuation Period).
The net investment factor may be more or less than, or equal to, one.
INTEREST ACCOUNT
- -------------------------------------------------------------------------------
INTEREST ACCOUNT - The Interest Account is a separate investment account under
state insurance law. It is maintained separate from our General Account and
separate from any other separate investment account that we may have. We own
the assets in the Interest Account. Notwithstanding the foregoing, our
obligations under (and the values and benefits under) the Interest Account
option of this Contract do not vary as a function of the investment performance
of the Interest Account. Owners and Beneficiaries with rights under this
Contract do not participate in the investment gains or losses of the assets of
the Interest Account. Such gains or losses accrue solely to us. We retain the
risk that the value of the assets in the Interest Account may fall below the
reserves and other liabilities that we must maintain in connection with our
obligations under the Interest Account option of this Contract. In such event,
we will transfer assets from our General Account to the Interest Account to
make up the difference. The Interest Account will not be charged with
liabilities that arise from any other business that we conduct. We may
transfer to our General Account assets that exceed the reserves and other
liabilities of the Interest Account. The Interest Account is not required to
be registered with the SEC as an investment company under the Investment
Company Act of 1940.
INTEREST SUB-ACCOUNT - We will establish a separate Interest Sub-Account for
you each time you allocate amounts to the Interest Account. Amounts invested
in these Interest Sub-Accounts earn interest at the Guaranteed Interest Rate in
effect on the date the amounts are allocated.
GUARANTEE PERIODS - Each Interest Sub-Account is guaranteed an interest rate
for a period we refer to as a Guarantee Period. The Guaranteed Interest Rate
for an Interest Sub-Account is effective for the entire Guarantee Period. The
length of a Guarantee Period is measured from the end of the calendar month in
which the amount is allocated to the Interest Sub-Account. The last day of the
Guarantee Period is its Expiry Date. Surrender, or withdrawals or transfers
from all or part of an Interest Sub-Account, and amounts applied to an income
plan, made prior to the Expiry Date of a Guarantee Period may be subject to a
Market Value Adjustment.
We will notify you at least thirty days prior to an Expiry Date of your options
for renewal, which include:
1. electing a new Guarantee Period from among those then offered by
us, but excluding any that extend beyond your Income Date; or
2. transferring the value of the Interest Sub-Account to one or more
Variable Sub-Accounts.
If we do not receive Satisfactory Notice prior to the Expiry Date, we will
transfer the value of the expiring Interest Sub-Account to an Interest
Sub-Account with the same Guarantee Period, but not longer than 5 years, nor
extending beyond your Income Date. The transfer will be effective as of the
Expiry Date of the previous Guarantee Period.
GUARANTEED INTEREST RATES - Periodically, we will declare Guaranteed Interest
Rates for then available Guarantee Periods. These rates will be guaranteed for
the duration of the respective Guarantee Periods.
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DVAZ-9712 NV
<PAGE> 12
Guaranteed Interest Rates will never be less than the Minimum Guaranteed
Interest Rate shown in the Schedule.
MARKET VALUE ADJUSTMENT - A Market Value Adjustment may be applied to
surrender, withdrawals, transfers or amounts applied to an income plan when
taken from an Interest Sub-Account other than the thirty-day period prior to
its Expiry Date. A Market Value Adjustment is applied separately to each
Interest Sub-Account.
A Market Value Adjustment is determined by multiplying the amount surrendered,
withdrawn, transferred or applied to an income plan by the following factor:
N/365
[(1+I)/(1+J+.0025)] -- 1
Where:
- I is the Index Rate for a maturity equal to the Interest Sub-Account's
Guarantee Period;
- J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Interest Sub-Account's
Guarantee Period; and
- N is the remaining number of days in the Guarantee Period at the time
of calculation.
If there is no Index Rate for the maturity needed to calculate I or J, straight
line interpolation between the Index Rate of the next highest and next lowest
maturities will be used to determine that Index Rate. If the maturity is one
year or less, we will use the Index Rate for a one-year maturity.
Market Value Adjustments will be applied as follows:
1. For a surrender, withdrawal, transfer or amount applied to an income
plan, the Market Value Adjustment will be calculated on the total
amount that must be surrendered, withdrawn, transferred or applied to
an income plan in order to provide the amount requested.
2. If the Market Value Adjustment is negative, it is deducted from any
remaining value in the Interest Sub-Account or amount surrendered.
Any remaining Market Value Adjustment is deducted from the amount
withdrawn, transferred or applied to an income plan.
3. If the Market Value Adjustment is positive, it is added to any
remaining value in the Interest Sub-Account or amount surrendered. If
the full amount of the Interest Sub-Account is withdrawn, transferred
or applied to an income plan, the Market Value Adjustment is added to
the amount withdrawn, transferred or applied to an income plan.
TRANSFERS AMONG ACCOUNTS
- -------------------------------------------------------------------------------
Prior to the Income Date and while the Annuitant is living, you may transfer
Account Value among Sub-Accounts. Certain restrictions may apply during the
Free Look Period. To make a transfer, you must give us Satisfactory Notice.
Transfers generally take effect when we receive the notice. The number of free
transfers that we allow each Contract Year is shown in the Charges section of
the Schedule. Restrictions for transfers are shown in the Schedule. A
transfer from an Interest Sub-Account may be subject to a Market Value
Adjustment.
SURRENDERING, OR WITHDRAWING PART OF YOUR ACCOUNT VALUE
- -------------------------------------------------------------------------------
Prior to the Income Date and while the Annuitant is living, you may withdraw
all or part of your Account Value by giving us Satisfactory Notice. The
minimum withdrawal is shown in the Schedule.
If you request a surrender, we will terminate this Contract and pay you the
Surrender Value. This amount may also be applied to the income plans subject
to any restrictions described in this Contract. Unless specified otherwise, we
will make partial withdrawals as described in the Schedule. Surrender and
withdrawals generally take effect on the date we receive Satisfactory Notice.
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DVAZ-9712 NV
<PAGE> 13
If you make a withdrawal from this Contract in excess of the Free Withdrawal
Amount described in the Schedule, a surrender charge may be assessed.
Surrender charges are described in the Schedule. A withdrawal from the
Interest Account may also be subject to a Market Value Adjustment.
EXCESS WITHDRAWALS - If a partial withdrawal is made for an amount greater than
the Free Withdrawal Amount, a surrender charge may be applicable. For purposes
of calculating the surrender charge only, purchase payments will be liquidated
in whole or in part on a "first-in-first-out-basis." This means we liquidate
purchase payments in the order they were made: the oldest unliquidated purchase
payment first, the next oldest unliquidated purchase payment second, etc.,
until all purchase payments have been liquidated.
The surrender charge as to any liquidated purchase payment is determined by
multiplying the amount of the purchase payment being liquidated by the
applicable percentage shown in the Schedule. The total surrender charge will
be the sum of the surrender charges for each purchase payment being liquidated.
In a partial withdrawal, the surrender charge is deducted from the Account
Value remaining after you are paid the amount requested. The amount requested
from a Sub-Account may not exceed the value of that Sub-Account less any
applicable surrender charge. In a complete withdrawal (or surrender of this
Contract), it is deducted from the amount otherwise payable.
CHARGES
- -------------------------------------------------------------------------------
The types and amounts of charges and when and how they are deducted are
described in the Schedule.
OWNER, ANNUITANT AND BENEFICIARY
- -------------------------------------------------------------------------------
THE OWNER - You are the Owner of this Contract. You have the rights and options
described in this Contract, including but not limited to the right to receive
the income payments beginning on the Income Date. One or more people may own
this Contract.
THE ANNUITANT - Unless another Annuitant is shown in the Schedule, you are also
the Annuitant. You may name a Contingent Annuitant. You will be the
Contingent Annuitant unless you name someone else. If there are joint Owners,
we will treat the youngest Owner as the Contingent Annuitant, unless you elect
otherwise.
If you are not the Annuitant and the Annuitant dies before the Income Date, the
Contingent Annuitant becomes the Annuitant. If the Annuitant dies and no
Contingent Annuitant has been named, we will allow you sixty days to designate
someone other than yourself as Annuitant.
THE BENEFICIARY - We pay the death benefit to the primary Beneficiary (unless
there are joint Owners in which case proceeds are payable to the surviving
Owner). If the primary Beneficiary dies before the Owner, the death benefit is
paid to the Contingent Beneficiary, if any. If there is no surviving
Beneficiary, we pay the death benefit to the Owner's estate.
One or more persons may be named as primary Beneficiary or Contingent
Beneficiary. We will assume any death benefit is to be paid in equal shares to
the multiple surviving Beneficiaries unless you specify otherwise.
You have the right to change Beneficiaries. However, if you designate the
primary Beneficiary as irrevocable, you may need the consent of that
irrevocable Beneficiary to exercise the rights and options under this Contract.
CHANGE OF OWNER, BENEFICIARY OR ANNUITANT - During your lifetime and while this
Contract is in force you can transfer ownership of this Contract or change the
Beneficiary, or change the Annuitant. (However, the Annuitant cannot be
changed after the Income Date.) To make any of these changes, you must send us
Satisfactory Notice. If accepted, any change in Owner, Beneficiary or
Annuitant will take effect on the date you signed the notice. Any of these
changes will not affect any payment made or action taken by us before our
acceptance. A CHANGE OF OWNER MAY BE A TAXABLE EVENT and may also affect the
amount of
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DVAZ-9712 NV
<PAGE> 14
death benefit payable under this Contract.
DEATH BENEFITS
- -------------------------------------------------------------------------------
DEATH BENEFIT BEFORE THE INCOME DATE - If any Owner dies before the Income
Date, we will pay the Beneficiary the greatest of the following:
(a) the Account Value determined as of the day we receive proof of death;
or
(b) 100% of the sum of all purchase payments made to this Contract,
reduced by any prior withdrawals (including any associated surrender
charge and Market Value Adjustment incurred); or
(c) the Highest Anniversary Value.
HIGHEST ANNIVERSARY VALUE - The Highest Anniversary Value is equal to the
greatest anniversary value attained from the following:
Upon our receipt of proof of death, we will calculate an anniversary
value for each Contract Anniversary before the Owner's death
excluding, however, Contract Anniversaries that come after the Owner
attains age 80. An anniversary value is equal to the Account Value on
a Contract Anniversary, increased by the dollar amount of any purchase
payments made since that Contract Anniversary and reduced for any
withdrawals (including any associated surrender charge and Market
Value Adjustment incurred) taken since that anniversary. This
reduction will be made in proportion to the reduction in the Account
Value that results from a withdrawal.
MULTIPLE OWNERS - If there are multiple Owners, the age of the oldest Owner
will be used to determine the death benefit.
DEATH BENEFIT WHEN NO NATURAL OWNERS - If there is no Owner who is a natural
person, we will treat the Annuitant as Owner for the purpose of paying the
death benefit, and the Annuitant's age will determine the death benefit payable
to the Beneficiary.
REQUIRED DISTRIBUTION OF PROCEEDS ON THE DEATH OF THE OWNER - The three
sub-sections indented below are required to qualify this Contract as an annuity
contract under Section 72(s) of the Internal Revenue Code of 1986, as amended.
Where the terms of these three sub-sections are in conflict with any other
sections or sub-sections of this Contract, these three sub-sections will
control. We reserve the right to amend or administer this Contract as
necessary to comply with the applicable tax requirements. These three
sub-sections and this Contract should be construed so that they comply with the
applicable tax requirements.
DEATH BENEFIT OPTIONS BEFORE INCOME DATE - In the event any Owner dies
before the Income Date, the death benefit may be taken in one sum, in
which case this Contract will terminate. Such sum shall be paid
within five years of the Owner's death unless one of the options for
continuation of this Contract below is elected by the person entitled
to make that election.
CONTRACT CONTINUATION OPTION - If the death benefit is not taken in
one sum immediately, this Contract will continue subject to the
following provisions:
1. If there are joint Owners, the surviving Owner becomes the new
Owner. Otherwise, the Beneficiary becomes the new Owner.
2. Unless specified otherwise, any excess of the death benefit
over the Account Value will be allocated to and among the
Variable and Interest Accounts in proportion to their values
as of the date on which the death benefit is determined. We
will establish a new Interest Sub-Account for any allocation
to the Interest Account based on the Guarantee Period you then
elect.
3. No additional purchase payments may be applied to this
Contract.
4. If the new Owner is not the deceased Owner's spouse, the
entire interest in this Contract must be distributed under one
of the following options:
a. The entire interest in this Contract must be distributed
over the life of the new Owner, or over a period not
extending beyond the life expectancy of the new Owner,
with
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DVAZ-9712 NV
<PAGE> 15
distributions beginning within one year of the Owner's
death; or
b. The entire interest in this Contract must be distributed
within 5 years of the Owner's death.
5. If the new Owner is the deceased Owner's spouse, this Contract
will continue with the surviving spouse as the new Owner. The
surviving spouse may name a new Beneficiary. If no
Beneficiary is so named, the surviving spouse's estate will be
the Beneficiary. Upon the death of the surviving spouse, the
death benefit will equal the Account Value as of the date we
receive proof of the spouse's death, and the entire interest
in this Contract must be distributed to the new Beneficiary in
accordance with the provisions of 4 (a) or 4 (b) above.
If there is more than one Beneficiary, the foregoing provisions
will independently apply to each Beneficiary.
DEATH BENEFIT ON OR AFTER THE INCOME DATE - If any Owner dies on or
after the Income Date but before the time the entire interest in this
Contract has been distributed, the remaining portion will be
distributed at least as rapidly as under the method of distribution
being used as of the date of the Owner's death.
If income payments have been selected based on an income plan
providing for payments for a guaranteed period, and the Annuitant dies
on or after the Income Date, we will make the remaining guaranteed
payments to the Beneficiary. Any remaining payments will be made as
rapidly as under the method of distribution being used as of the date
of the Annuitant's death. If no Beneficiary is living, we will
commute any unpaid guaranteed payments to a single sum (on the basis
of the interest rate used in determining the payments) and pay that
single sum to the estate of the last to die of the Annuitant or the
Beneficiary.
PROOF OF DEATH - Proof of death must be received at our Customer Service Center
before we will pay any death benefit. We will accept one of the following
items:
1. An original certified copy of an official death certificate; or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or
3. Any other proof satisfactory to us.
GENERAL PROVISIONS
- -------------------------------------------------------------------------------
ENTIRE CONTRACT - This Contract including any attached riders, endorsements,
amendments and the application, if one is attached to this contract when
issued, constitutes the entire contract between you and us. All statements
made by you, or any Owner, or any Annuitant will be deemed representations and
not warranties.
ASSIGNMENT - You may assign this Contract at any time prior to the Income Date.
No assignment will be binding on us unless we receive Satisfactory Notice. We
will not be liable for any payments made or actions we take before the
assignment is accepted by us. An absolute assignment will revoke the interest
of any revocable Beneficiary. We will not be responsible for the validity of
any assignment. AN ASSIGNMENT MAY BE A TAXABLE EVENT.
CLAIMS OF CREDITORS - To the extent permitted by law, no benefits payable under
this Contract will be subject to the claims of your, the Beneficiary's, or the
Annuitant's creditors.
MISSTATEMENT AND PROOF OF AGE, SEX OR SURVIVAL - We may require proof of age,
sex or survival of any person upon whose age, sex or survival any payments
depend. If the age or sex of the Annuitant has been misstated, or if the age
of the Owner has been misstated, the benefits will be those that the Account
Value applied would have provided for the correct age and sex. If we have made
incorrect income payments, the amount of any underpayment will be paid
immediately. The amount of any overpayment will be deducted from future income
payments.
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DVAZ-9712 NV
<PAGE> 16
NO DIVIDENDS PAYABLE - This Contract is non-participating and does not share in
any distribution of our surplus. We will not pay any dividends.
INCONTESTABILITY - This Contract is incontestable from its Contract Date.
REQUIRED REPORTS - We will furnish a report to you as often as required by law,
but at least once each Contract Year before the Income Date. The report will
show the number of Accumulation Units credited to each Variable Sub-Account in
which you are invested and the corresponding Accumulation Unit value as of the
date of the report. It will also show your Interest Account Value.
MORTALITY AND EXPENSES - Our actual mortality and expense experience will not
affect the amount of any income payments or any other values under this
Contract.
TAXES BASED UPON PURCHASE PAYMENT OR VALUE - If there is a law or change in law
assessing taxes against us based upon purchase payments or value of this
Contract, we reserve the right to charge you and all similarly situated Owners
proportionately for that tax. This would include a tax based upon our realized
net capital gains in the Variable Sub-Accounts and on earnings in the Interest
Account, on which we are not currently taxed.
PAYMENTS WE MAY DEFER - We may not be able to determine the value of the assets
of the Variable Sub-Accounts because:
1. The New York Stock Exchange is closed for trading;
2. The SEC determines that a state of emergency exists;
3. An order or pronouncement of the SEC permits a delay for the
protection of Owners; or
4. The check used to pay the purchase payment has not cleared through
the banking system. This may take up to 15 days.
If this happens, we may delay:
1. Determination and payment of the Surrender Value or any
withdrawal;
2. Determination and payment of any death benefit if death occurs
before the Income Date;
3. Transfers of the Account Value; or
4. Application of the Account Value under an income plan.
We reserve the right to delay payment of amounts from the Interest Account for
up to six months. If deferred 30 days or more, the amount deferred will earn
interest at a rate not less than the Minimum Deferral Interest Rate shown in
the Interest Account section of the Schedule.
AUTHORITY TO MAKE AGREEMENTS - All agreements made by us must be signed by one
of our officers. No other person, including an insurance agent or broker, can
change the terms of this Contract or make any agreement binding on us.
REQUIRED NOTE ON OUR COMPUTATIONS - We have filed a detailed statement of our
computations with the insurance supervisory officials in the appropriate
jurisdictions. The values are not less than those required by the laws of
those states or jurisdictions. Any benefit provided by an attached rider will
not increase these values unless otherwise stated in that rider.
INTEREST ON PROCEEDS - Proceeds are payable within 30 days of receipt of proof
of death. We will pay interest on proceeds. This interest will accrue from
the date of death to the date of payment, but not for more than one year, at an
annual rate of 3%, or the rate and time required by law, if greater.
ANNUITY INCOME BENEFITS
- -------------------------------------------------------------------------------
CHOOSING AN INCOME DATE AND INCOME PLAN - On the Income Date, if the Annuitant
is alive and this Contract is in force, income payments will begin under the
income plan you have chosen. If you have not chosen an income plan, the option
shown in the Schedule will automatically apply. If you have not selected an
Income Date, the Maximum Income Date shown in the Schedule will automatically
apply.
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DVAZ-9712 NV
<PAGE> 17
You may choose or change an income plan or the Income Date by giving us
Satisfactory Notice at least 30 days before the Income Date. However, any
Income Date must meet the restrictions described in the Schedule.
Once income payments have begun, we reserve the right to disallow further
changes without our prior approval.
MINIMUM AMOUNTS - If the amount available to apply under any variable or fixed
option is less than the minimum amount shown in the Schedule, we reserve the
right to pay such amount in a lump sum in lieu of the payment otherwise
provided for.
Income payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by giving us Satisfactory Notice at least 30 days before
the Income Date. However, if at any time the payment becomes less than the
minimum income payment shown in the Schedule, we reserve the right to reduce
the frequency of payment to an interval that results in each payment being at
least equal to the minimum income payment. In no event will the interval be
less frequent than annual.
ALLOCATION OF ANNUITY - At the time you elect the income plan, you may also
elect to have the Account Value applied to provide a Variable Income Annuity, a
Fixed Income Annuity, or a combination of both. Unless you specify otherwise,
we will provide either variable or fixed, or a combination of variable and
fixed income payments in proportion to the Sub-Accounts in which you are
invested as of a date not more than 5 Valuation Days before the due date of the
first income payment. If any applicable purchase payment taxes are then due
us, we will also deduct them proportionately.
VARIABLE INCOME ANNUITY
AMOUNT OF FIRST VARIABLE PAYMENT - The Income Tables shown in the Schedule are
used to determine the first monthly variable income payment for an assumed
investment rate of 3%. The Income Tables show the dollar amount of the first
monthly variable income payment that can be purchased with each $1,000 applied.
The assumed investment rates we currently allow are shown on the Schedule.
VALUE OF INCOME UNITS - The Income Unit value for any Valuation Period is
determined by multiplying (a) by (b), and then dividing by (c) where:
(a) is the Income Unit value for the immediately preceding Valuation
Period;
(b) is the "net investment factor" for the Variable Sub-Account for the
Valuation Period for which the value is being determined; and
(c) is the daily equivalent of the assumed investment rate for the
number of days in the Valuation Period.
The value of an Income Unit may increase, decrease or remain the same from one
Valuation Period to the next.
NUMBER OF INCOME UNITS - We determine the number of Income Units in each
Variable Sub-Account by dividing the first monthly variable income payment
attributable to that Sub-Account by its Income Unit value as of a date not more
than 5 Valuation Days before the due date of the first variable income payment.
AMOUNT OF SECOND AND SUBSEQUENT VARIABLE PAYMENTS - The dollar amount of the
second and subsequent variable income payments may change with the investment
performance of the Variable Sub-Accounts. The total amount of each variable
income payment will be equal to the sum of the variable income payments in each
Variable Sub-Account. The dollar amount of each payment for a Variable
Sub-Account is determined by multiplying the number of Income Units by the
Income Unit value for the Variable Sub-Account for the Valuation Period which
ends on a consistently applied date not more than 5 Valuation Days before the
payment is due.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in our expenses or mortality experience.
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DVAZ-9712 NV
<PAGE> 18
EXCHANGE OF INCOME UNITS - After the Income Date, if there is an exchange of
value of a designated number of Income Units of particular Variable
Sub-Accounts into other Income Units, the value will be such that the dollar
amount of income payment made on the date of exchange would be unaffected by
the exchange.
FIXED INCOME ANNUITY
A Fixed Income Annuity is an annuity with income payments that remain fixed as
to dollar amount throughout the payment period. The Income Tables shown in the
Schedule are used to determine the monthly fixed income payment. The Income
Tables show the dollar amount of the monthly fixed income payment that can be
purchased with each $1,000 applied.
INCOME PLANS
The following is a list of income plans we guarantee to make available.
INCOME PLAN 1. LIFE ANNUITY - An annuity payable during the lifetime of the
Annuitant and terminating with the last payment preceding the death of the
Annuitant.
INCOME PLAN 2. LIFE ANNUITY WITH 10 OR 20 YEARS CERTAIN - An annuity payable
during the lifetime of the Annuitant with the provision that payments will be
made for a minimum of 10 or 20 years, as elected.
INCOME PLAN 3. JOINT AND LAST SURVIVOR ANNUITY - An annuity payable during the
joint lifetime of the Annuitant and a designated second person, and thereafter
during the remaining lifetime of the survivor, ceasing with the last payment
prior to the death of the survivor.
INCOME PLAN 4. PAYMENTS FOR A SPECIFIED PERIOD CERTAIN - An amount payable for
the number of years selected which may be from 5 to 30 years.
INCOME PLAN 5. ANNUITY PLAN - An amount can be used to purchase any single
premium annuity we offer on the Income Date for which you and the Annuitant are
eligible.
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DVAZ-9712 NV
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DVAZ-9712 NV
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DVAZ-9712 NV
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[SAGE LOGO]
FLEXIBLE PAYMENT DEFERRED VARIABLE ANNUITY CONTRACT
Surrender Values while you are living and prior to the Income Date
Income Payments begin on the Income Date
Nonparticipating
DVAZ-9712 NV
<PAGE> 1
EXHIBIT 5(i)
APPLICATION FOR
[SAGE LOGO] DEFERRED VARIABLE ANNUITY
SAGE LIFE ASSURANCE OF AMERICA, INC. Mail to: Sage Life, P.O. Box 3000,
Dept. 5162, Hartford, CT 06150-5162
- --------------------------------------------------------------------------------
1. OWNER
- --------------------------------------------------------------------------------
First Middle Last
- --------------------------------------------------------------------------------
Residence Street Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ] TIN#
[ ] Trustee
- --------------------------------------------------------------------------------
Phone E-Mail Address
- --------------------------------------------------------------------------------
1A. JOINT OWNER (optional)
- --------------------------------------------------------------------------------
Name Relationship to Owner
- --------------------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ] TIN#
- --------------------------------------------------------------------------------
2. ANNUITANT (skip if same as Owner)
- --------------------------------------------------------------------------------
First Middle Last
- --------------------------------------------------------------------------------
Residence Street Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ] TIN#
- --------------------------------------------------------------------------------
Phone E-Mail Address Relationship to Owner
- --------------------------------------------------------------------------------
3. PRIMARY BENEFICIARY
- --------------------------------------------------------------------------------
Name(s) SS# Relationship to Owner %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3A. CONTINGENT BENEFICIARY (optional)
- --------------------------------------------------------------------------------
Name(s) SS# Relationship to Owner %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. TYPE OF PLAN
- --------------------------------------------------------------------------------
4a. [ ] Non-Qualified [ ] Traditional IRA [ ] Simple IRA
[ ] Roth IRA [ ] Other_________________
4b. If IRA: [ ] Regular Tax Year ______ Amount $ __________
[ ] Rollover Amount $ __________
[ ] Trustee to Trustee Transfer Amount $ __________
4c. Optional Riders ____________________________________________________________
- --------------------------------------------------------------------------------
5. PURCHASE PAYMENT
- --------------------------------------------------------------------------------
[ ] Check or wire to Sage Life $ ___________________________________________ or
[ ] Estimated Amount of 1035 Exchange $ ____________________________________ or
[ ] Other __________________________________________________________________
- --------------------------------------------------------------------------------
6. REPLACEMENT
- --------------------------------------------------------------------------------
Will the proposed Contract replace any existing annuity or life
insurance policy? [ ] No [ ] Yes (If yes, list all companies and
policy numbers and attach transfer or exchange form) ___________________________
- --------------------------------------------------------------------------------
7. ALLOCATION OF PURCHASE PAYMENT
- --------------------------------------------------------------------------------
- OPTIONAL -
7a. To Dollar-Cost Averaging:
________% of my payment to be Dollar Cost Averaged to the Asset
Allocation Model Portfolio selected in 7b, OR to the
Variable Sub-Accounts in 7c, unless specified otherwise
in 8 below.
- COMPLETE 7B OR 7C -
7b. To Asset Allocation Model Portfolios:
_______ % to the Asset Allocation Model Portfolio checked below:
[[ ] I [ ] II [ ] III [ ] IV [ ] V [ ] VI ]
- OR -
7c. To Variable Sub-Accounts:
[AIM MFS
_____% (203) Capital Development _____% (503) Total Return
_____% (204) Government Securities _____% (504) Growth with Income
_____% (205) Growth and Income _____% (505) High Income
_____% (206) Value _____% (506) Research
_____% (207) International Equity _____% (507) Value
ALGER MORGAN STANLEY
_____% (303) Income and Growth _____% (603) Value
_____% (304) MidCap Growth _____% (604) Mid Cap Value
_____% (305) Small Cap _____% (605) Global Equity
COLONIAL/LIBERTY STATE STREET
_____% (403) U.S. Stock _____% (703) S&P 500 Index
_____% (404) Growth and Income _____% (704) Russell 2000 Index
_____% (405) Small Cap Value _____% (705) EAFE Index
_____% (406) Strategic Income T.ROWE PRICE
_____% (407) Newport Tiger _____% (903) Equity Income
_____% (408) All-Star Equity _____% (904) Mid-Cap Growth
_____% (409) Global Utilities _____% (905) Pers Strgy Balanced
STEINROE SAGE ADVISORS
_____% (803) Growth Stock _____% (002) Money Market]
_____% (804) Special Venture
To Fixed Sub-Accounts:
_____[% (101) 1 year _____% (104) 4 year _____% (110) 10 year]
_____ % (102) 2 year _____% (105) 5 year
_____ % (103) 3 year _____% (107) 7 year
- OPTIONAL -
[ ] Rebalance my Variable Sub-Account values each calendar quarter.
- --------------------------------------------------------------------------------
8. DOLLAR COST AVERAGING
- --------------------------------------------------------------------------------
DCA Account: Check the box below (only one) that you want us to Dollar
Cost Average from.
No. of Months: We will make level monthly transfers from the DCA
Account for the number of months shown below. Transfers from the [Sage
Money Market] will be made over a 12-month period, unless you specify
otherwise below.
Variable Sub-Accounts: Transfers will be made monthly from the DCA
Account to the Asset Allocation Model Portfolio selected in 7b, or to the
same Variable Sub-Accounts and in the same %'s as shown in 7c, unless
you specify otherwise below.
<TABLE>
<CAPTION>
DCA Account No. of Months Variable Sub-Accounts
----------- ------------- ---------------------
<S> <C> <C>
[ ] [(002) Sage Money Market] _________ ________%________
[ ] [(111) Fixed - 1 Year] [12] ________%________
[ ] [(112) Fixed - 2 Year] [24] ________%________
[ ] [(113) Fixed - 3 Year] [36] ________%________
[ ] [(114) Fixed - 4 Year] [48] ________%________
[ ] [(115) Fixed - 5 Year] [60] ________%________
</TABLE>
AP-DVAZ-9805
<PAGE> 2
- --------------------------------------------------------------------------------
9. AUTHORITY FOR TELEPHONE TRANSFERS
- --------------------------------------------------------------------------------
I acknowledge that neither Sage Life Assurance of America, Inc. ("Sage Life")
nor any representative of Sage Life will be responsible for any claim, loss,
liability or expense resulting from a telephone transfer request if we or such
representative acted on the telephone request in good faith.
- --------------------------------------------------------------------------------
I wish to have a Personal Identification Number (PIN) issued to me in order to
make telephone transfers. [ ] Yes [ ] No
I _______ (Owner's initials) authorize you to issue a Personal Identification
Number (PIN) to my registered representative/agent in order for him/her to make
telephone transfers between Sub-Accounts on my behalf. [ ] Yes [ ] No
- --------------------------------------------------------------------------------
10. SPECIAL REQUESTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11. AMENDMENTS (H.O. use only)
- --------------------------------------------------------------------------------
COMPANY CORRECTIONS OR ADDITIONS, IF ANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. SUITABILITY, AGREEMENT AND SIGNATURES
- --------------------------------------------------------------------------------
SUITABILITY: BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE CURRENT VARIABLE
ANNUITY PROSPECTUS AND UNDERSTAND THAT INCOME PAYMENTS AND SURRENDER VALUES,
WHEN BASED UPON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT, MAY INCREASE
OR DECREASE, DEPENDING UPON INVESTMENT EXPERIENCE FOR THE CONTRACT AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT.
AGREEMENT: I agree that my acceptance of the annuity applied for will constitute
approval by me of any corrections or additions made in item 11 above. However, I
must agree in writing to any changes in: amounts; ages; plan of annuity; and
benefits. (Use of "I", "me", and "my" in this application includes multiple
Owners, if applicable, and the Annuitant, where Annuitant's consent or other
action is required.)
Signed at ________________________________________ On ____________________
CITY STATE DATE
X ________________________ X _____________________ X __________________
APPLICANT/OWNER JOINT OWNER ANNUITANT (IF
OTHER THAN OWNER)
FLORIDA Notice to Applicants: Any person who knowingly, and with intent to
injure, defraud, or deceive any insurer files a statement of claim or an
application containing any false, incomplete, or misleading information is
guilty of a felony of the third degree.
- --------------------------------------------------------------------------------
13. AGENT'S REPORT
- --------------------------------------------------------------------------------
Do you have reason to believe that the Contract applied for may replace an
existing annuity or insurance policy? [ ] Yes [ ] No
(If yes, list carrier, policy number, whether Section 1035 exchange, and attach
State Replacement Form if applicable.)
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- -----------------------------------------------
Agent's Legal Name (PRINTED) SS# License Number (Florida only) Agency Name/Broker-Dealer/Branch
- -------------------------------------------------------------------------------- -----------------------------------------------
Agent's Business Address Business Phone Signature of Agent Agent's E-Mail Address
Designation: [ ] Program A [ ] Program B [ ] Program C Once selected, Program cannot be changed.
</TABLE>
AP-DVAZ-9805
<PAGE> 1
EXHIBIT 5(ii)(B)
APPLICATION FOR
[SAGE LOGO] DEFERRED VARIABLE ANNUITY CERTIFICATE
SAGE LIFE ASSURANCE OF AMERICA, INC. Mail to: Sage Life, P.O. Box 3000,
Dept. 5162, Hartford, CT 06150-65162
- --------------------------------------------------------------------------------
1. OWNER
- --------------------------------------------------------------------------------
First Middle Last
- --------------------------------------------------------------------------------
Residence Street Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ] TIN#
[ ] Trustee
- --------------------------------------------------------------------------------
Phone E-Mail Address
- --------------------------------------------------------------------------------
1A. JOINT OWNER (optional)
- --------------------------------------------------------------------------------
Name Relationship to Owner
- --------------------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ]TIN#
- --------------------------------------------------------------------------------
2. ANNUITANT (skip if same as Owner)
- --------------------------------------------------------------------------------
First Middle Last
- --------------------------------------------------------------------------------
Residence Street Address
- --------------------------------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
Birthdate (Mo/Day/Yr) [ ] M [ ] F [ ] SS# [ ] TIN#
- --------------------------------------------------------------------------------
Phone E-Mail Address Relationship to Owner
- --------------------------------------------------------------------------------
3. PRIMARY BENEFICIARY
- --------------------------------------------------------------------------------
Name(s) SS# Relationship to Owner %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3A. CONTINGENT BENEFICIARY (optional)
- --------------------------------------------------------------------------------
Name(s) SS# Relationship to Owner %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. TYPE OF PLAN
- --------------------------------------------------------------------------------
4a. [ ] Non-Qualified [ ] Traditional IRA [ ] Simple IRA
[ ] Roth IRA [ ] Other_________________
4b. If IRA: [ ] Regular Tax Year ______ Amount $ __________
[ ] Rollover Amount $ __________
[ ] Trustee to Trustee Transfer Amount $ __________
4c. Optional Riders ____________________________________________________
- --------------------------------------------------------------------------------
5. PURCHASE PAYMENT
- --------------------------------------------------------------------------------
[ ] Check or wire to Sage Life $ ___________________________________________ or
[ ] Estimated Amount of 1035 Exchange $ ____________________________________ or
[ ] Other __________________________________________________________________
- --------------------------------------------------------------------------------
6. REPLACEMENT
- --------------------------------------------------------------------------------
Will the proposed Certificate replace any existing annuity or life insurance
policy? [ ] No [ ] Yes (If yes, list all companies and policy numbers and attach
transfer or exchange form) _____________
- --------------------------------------------------------------------------------
7. ALLOCATION OF PURCHASE PAYMENT
- --------------------------------------------------------------------------------
- OPTIONAL -
7a. To Dollar-Cost Averaging:
_______% of my payment to be Dollar Cost Averaged to the Asset
Allocation Model Portfolio selected in 7b, OR to the Variable
Sub-Accounts in 7c, unless specified otherwise in 8 below.
- COMPLETE 7B OR 7C -
7b. To Asset Allocation Model Portfolios:
_______% to the Asset Allocation Model Portfolio checked below:
[ [ ] I [ ] II [ ] III [ ] IV [ ] V [ ] VI ]
- OR -
7c. To Variable Sub-Accounts:
[AIM MFS
_____% (203) Capital Development _____% (503) Total Return
_____% (204) Government Securities _____% (504) Growth with Income
_____% (205) Growth and Income _____% (505) High Income
_____% (206) Value _____% (506) Research
_____% (207) International Equity _____% (507) Value
ALGER MORGAN STANLEY
_____% (303) Income and Growth _____% (603) Value
_____% (304) MidCap Growth _____% (604) Mid Cap Value
_____% (305) Small Cap _____% (605) Global Equity
COLONIAL/LIBERTY STATE STREET
_____% (403) U.S. Stock _____% (703) S&P 500 Index
_____% (404) Growth and Income _____% (704) Russell 2000 Index
_____% (405) Small Cap Value _____% (705) EAFE Index
_____% (406) Strategic Income T.Rowe Price
_____% (407) Newport Tiger _____% (903) Equity Income
_____% (408) All-Star Equity _____% (904) Mid-Cap Growth
_____% (409) Global Utilities _____% (905) Pers Strgy Balanced
STEINROE SAGE ADVISORS
_____% (803) Growth Stock _____% (002) Money Market]
_____% (804) Special Venture
To Fixed Sub-Accounts:
_____[% (101) 1 year _____% (104) 4 year _____% (110) 10 year]
_____ % (102) 2 year _____% (105) 5 year
_____ % (103) 3 year _____% (107) 7 year
- OPTIONAL -
[ ] Rebalance my Variable Sub-Account values each calendar quarter.
- --------------------------------------------------------------------------------
8. DOLLAR COST AVERAGING
- --------------------------------------------------------------------------------
DCA Account: Check the box below (only one) that you want us to Dollar
Cost Average from.
No. of Months: We will make level monthly transfers from the DCA
Account for the number of months shown below. Transfers from the [Sage
Money Market] will be made over a 12-month period, unless you specify
otherwise below.
Variable Sub-Accounts: Transfers will be made monthly from the DCA
Account to the Asset Allocation Model Portfolio selected in 7b, or to the
same Variable Sub-Accounts and in the same %'s as shown in 7c, unless
you specify otherwise below.
<TABLE>
DCA Account No. of Months Variable Sub-Accounts
- ----------- ------------- ---------------------
<S> <C> <C>
[ ] [(002) Sage Money Market] ________ ________%________
[ ] [(111) Fixed - 1 Year] [12] ________%________
[ ] [(112) Fixed - 2 Year] [24] ________%________
[ ] [(113) Fixed - 3 Year] [36] ________%________
[ ] [(114) Fixed - 4 Year] [48] ________%________
[ ] [(115) Fixed - 5 Year] [60] ________%________
</TABLE>
AP-DVAZ-C-9805
<PAGE> 2
- --------------------------------------------------------------------------------
9. AUTHORITY FOR TELEPHONE TRANSFERS
- --------------------------------------------------------------------------------
I acknowledge that neither Sage Life Assurance of America, Inc. ("Sage Life")
nor any representative of Sage Life will be responsible for any claim, loss,
liability or expense resulting from a telephone transfer request if we or such
representative acted on the telephone request in good faith.
- --------------------------------------------------------------------------------
I wish to have a Personal Identification Number (PIN) issued to me in order to
make telephone transfers. [ ] Yes [ ] No
I _______ (Owner's initials) authorize you to issue a Personal Identification
Number (PIN) to my registered representative/agent in order for him/her to make
telephone transfers between Sub-Accounts on my behalf. [ ] Yes [ ] No
- --------------------------------------------------------------------------------
10. SPECIAL REQUESTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11. AMENDMENTS (H.O. use only)
- --------------------------------------------------------------------------------
COMPANY CORRECTIONS OR ADDITIONS, IF ANY (Except in Kentucky and West Virginia)
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. SUITABILITY, AGREEMENT AND SIGNATURES
- --------------------------------------------------------------------------------
SUITABILITY: BY SIGNING BELOW, I ACKNOWLEDGE RECEIPT OF THE CURRENT VARIABLE
ANNUITY PROSPECTUS AND UNDERSTAND THAT INCOME PAYMENTS AND SURRENDER VALUES,
WHEN BASED UPON THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT, MAY INCREASE
OR DECREASE, DEPENDING UPON INVESTMENT EXPERIENCE FOR THE CERTIFICATE AND ARE
NOT GUARANTEED AS TO DOLLAR AMOUNT.
AGREEMENT: I agree that, except in Kentucky and West Virginia, my acceptance of
the annuity applied for will constitute approval by me of any corrections or
additions made in item 11 above. However, I must agree in writing to any
changes in: amounts; ages; plan of annuity; and benefits. (Use of "I", "me",
and "my" in this application includes multiple Owners, if applicable, and the
Annuitant, where Annuitant's consent or other action is required.)
Signed at __________________________________________ On __________________
CITY STATE DATE
X _________________________ X ____________________ X ___________________
APPLICANT/OWNER JOINT OWNER ANNUITANT (IF
OTHER THAN OWNER)
ARIZONA Notice to Applicants: Upon written request, Sage Life will provide
within a reasonable time frame, reasonable factual information about the
annuity's benefits and provisions. If for any reason the owner is not satisfied
with the annuity, it may be returned to Sage Life within 10 days after delivery
and the Certificate value will be refunded.
COLORADO NOTICE TO APPLICANTS: IT IS UNLAWFUL TO KNOWINGLY PROVIDE FALSE,
INCOMPLETE, OR MISLEADING FACTS OR INFORMATION TO AN INSURANCE COMPANY FOR THE
PURPOSE OF DEFRAUDING OR ATTEMPTING TO DEFRAUD THE COMPANY. PENALTIES MAY
INCLUDE IMPRISONMENT, FINES, DENIAL OF INSURANCE, AND CIVIL DAMAGES. ANY
INSURANCE COMPANY OR AGENT OF AN INSURANCE COMPANY WHO KNOWINGLY PROVIDES FALSE,
INCOMPLETE, OR MISLEADING FACTS OR INFORMATION TO A POLICYHOLDER OR CLAIMANT FOR
THE PURPOSE OF DEFRAUDING OR ATTEMPTING TO DEFRAUD THE POLICYHOLDER OR CLAIMANT
WITH REGARD TO A SETTLEMENT OR AWARD PAYABLE FROM INSURANCE PROCEEDS SHALL BE
REPORTED TO THE COLORADO DIVISION OF INSURANCE WITHIN THE DEPARTMENT OF
REGULATORY AGENCIES.
ARKANSAS, KENTUCKY, NEW JERSEY, OHIO, PENNSYLVANIA Notice to Applicants: Any
person who knowingly and with intent to defraud any insurance company or other
person files an application for insurance or statement of claim containing any
materially false information or conceals for the purpose of misleading,
information concerning any fact material thereto commits a fraudulent insurance
act, which is a crime and subjects such person to criminal and civil penalties.
- --------------------------------------------------------------------------------
13. AGENT'S REPORT
- --------------------------------------------------------------------------------
Do you have reason to believe that the Certificate applied for may replace an
existing annuity or insurance policy? [ ] Yes [ ] No
(If yes, list carrier, policy number, whether Section 1035 exchange, and attach
State Replacement Form if applicable.)
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
- ----------------------------------------- ------------------------------------
Agent's Legal Name(PRINTED) SS# Agency Name/Broker-Dealer/Branch
- ----------------------------------------- ------------------------------------
Agent's Business Address Business Phone Signature of Agent Agent's
E-Mail Address
Designation: [ ] Program A [ ] Program B [ ] Program C
Once selected, Program cannot be changed.
</TABLE>
AP-DVAZ-C-9805
<PAGE> 1
Exhibit 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus and to the use of our report dated April 22, 1998, with respect to
the financial statements of Sage Life Assurance of America, Inc. included in
the Pre-Effective Amendment No. 1 to the Registration Statement (Form N-4, File
No. 333-44751) and related Prospectus for the registration of its variable
annuity contracts.
Ernst & Young LLP
Stamford, Connecticut
January 12, 1999
<PAGE> 1
EXHIBIT 14(a)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that PAUL C. MEYER, whose signature appears
below, hereby constitutes and appoints MITCHELL R. KATCHER and JAMES F.
BRONSDON, and each of them, with full power of substitution and resubstitution,
for him and in his name, place, and stead, in any and all capacities, to sign
any registration statement and amendments thereto, under the Securities Act of
1933 and the Investment Company Act of 1940, where applicable, executed on
behalf of Sage Life Assurance of America, Inc. (the "Company") in connection
with flexible payment deferred combination fixed and variable annuity contracts
issued by the Company through The Sage Variable Annuity Account A, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission. PAUL C. MEYER hereby ratifies and
confirms all that said attorney-in-fact, or his substitute, may do or cause to
be done by virtue thereof.
/s/ PAUL C. MEYER
------------------------
Paul C. Meyer
Director
Sage Life Assurance Company
of America, Inc.
December 23, 1998
State of New York )
County of )
On this 23rd day of December, 1998, before me came PAUL C. MEYER,
Director of Sage Life Assurance of America, Inc., to me known, and signed the
above Power of Attorney on behalf of Sage Life Assurance of America, Inc.
/s/ Sheila V. Lightfoot [SEAL]
-----------------------
Notary Public