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As filed with the Securities and Exchange Commission on May 17, 1999
File No. 333-_________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
Registration Statement Under
the Securities Act of 1933
SAGE LIFE ASSURANCE OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0258372
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
63
-------------------------------------------------------
(Primary Standard Industrial Classification Code Number)
300 Atlantic Street
Suite 302
Stamford, CT 06901
(203) 602-6500
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
James F. Bronsdon
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
(Name, address, including zip code, and telephone number, including area code,
of agent for
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service)
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of the registration statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: [ X ]
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed
Each Class Maximum Maximum
Of Securities Amount Offering Aggregate Amount Of
To Be To Be Price Per Offering Registration
Registered Registered Unit Price Fee
==================================================================
Modified Single
Payment
Combination * * $338,983 $100
Fixed and
Variable Life
Insurance
Contracts
===================================================================
* The proposed maximum aggregate offering price is estimated solely for
determining the registration fee. The amount to be registered and the proposed
maximum offering price per unit are not applicable since the securities are not
issued in predetermined amounts or units.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file 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 this registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), shall
determine.
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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 modified single
payment combination fixed and variable life insurance 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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PROSPECTUS DATED ___________, 1999
LIFE ASSET I, MODIFIED SINGLE PAYMENT COMBINATION FIXED AND
VARIABLE LIFE INSURANCE CONTRACTS
Issued By
The Sage Variable Life 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)
This Prospectus describes modified single payment combination fixed and
variable life insurance contracts for individuals and groups offered by Sage
Life Assurance of America, Inc. ("we," "us," "our," or the "Company"). We
designed the Contracts for your estate planning or other insurance needs, or to
supplement your long-term retirement savings. The Contracts provide a means for
investing your Account Value 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
additional purchase payments, subject to certain restrictions.
You may allocate purchase payments and transfer Account Value to our
Variable Account and/or our Fixed Account within certain limits. The Variable
Account has 33 Sub-Accounts. Through our Fixed Account, you can choose to invest
your money in one or more of 5 different guarantee periods.
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(SM),
Morgan Stanley Dean Witter Universal Funds, Inc., Oppenheimer Variable Account
Funds, Sage Life Investment Trust, or T. Rowe Price Equity Series, Inc.
(collectively, the "Trusts").
Your Account Value will vary daily with 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 do guarantee principal and a minimum fixed rate of interest for
specified periods of time on amounts you allocate to the Fixed Account. However,
amounts you withdraw, surrender, transfer, or borrow from the Fixed Account
before the end of an applicable Guarantee Period ordinarily will be subject to a
Market Value Adjustment, which may increase or decrease these amounts.
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The Contracts provide a death benefit, as well as additional benefits,
including five alternative Settlement Options for receiving death or surrender
proceeds as income payments under the Contract, and optional programs including
dollar-cost averaging, asset allocation, automatic portfolio rebalancing, and
systematic partial withdrawals.
If you currently own a life insurance policy on the life of the Insured,
you should consider carefully whether the Contract should be used to replace or
supplement your existing policy.
In almost all cases, the Contracts will be modified endowment contracts
for Federal income tax purposes. This means that a loan or other distribution
from the Contract during the life of the Insured will in almost all cases be
taxed to the extent of any earnings in the Contract, and may be subject to an
additional 10% Federal penalty tax, if taken before the Owner attains age
59 1/2. Special tax and legal considerations apply if this Contract is used in
connection with a qualified plan or certain other employment plans.
This Prospectus includes basic information about the Contracts that you
should know before investing. 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 Contracts
or determined that this Prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
Variable life 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.
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TABLE OF CONTENTS
Index of Terms................................................................
Summary Of The Contracts......................................................
PART I - Description Of The Contracts
1. What Are The Contracts?...............................................
2. How Do I Purchase A Contract?.........................................
3. What Are My Investment Options?.......................................
4. What Are The Expenses Under A Contract?...............................
5. How Will My Contract Be Taxed?........................................
6. How Do I Access My Money?.............................................
7. How Is Contract Performance Presented?................................
8. What Is The Death Benefit Under My Contract?..........................
9. What Supplemental Benefits Are Available Under My Contract?...........
10. What Are My Settlement Options?.......................................
11. What Other Information Should I Know?.................................
12. How Can I Make Inquiries?.............................................
Hypothetical Illustrations Of Contract Values.................................
PART II - Additional Information
Additional Information About Sage Life Assurance of America, Inc..............
Selected Financial Data ..............................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................
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Directors and Executive Officers......................................
Independent Auditors Report...........................................
Appendix A - Market Value Adjustment..........................................
Appendix B - Dollar-Cost Averaging Program....................................
This Prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made.
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INDEX OF TERMS
We have tried to make this Prospectus as readable and understandable as
possible. To help you to understand how the Contract works, we have used 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. It equals the sum of the values in the Variable Account, the Fixed
Account, and the Loan Account.
Accumulation Unit - An Accumulation Unit is the unit of measure we use to keep
track of the Account Value in each Variable Sub-Account.
Attained Age - The Attained Age is the Issue Age plus the number of full years
since the Contract Date.
Asset-Based Charges - The Asset-Based Charges are charges for mortality and
expense risks, certain administrative expenses, certain distribution costs, and
certain state and federal tax expenses assessed monthly against your Account
Value. After the proceeds from the Contract are applied to a Settlement Option,
we call these charges Variable Sub-Account Charges and deduct them daily from
the assets of the Variable Account only.
Beneficiary - The Beneficiary is the person or persons to whom we pay the Death
Proceeds when the Insured dies.
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.
Contracts - The Contracts are modified single payment combination fixed and
variable life insurance contracts. 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 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.
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Contract Date - The Contract Date is the day we invest your initial purchase
payment in the Sub-Accounts. It is the date from which we measure Contract
Anniversaries and Contract Years. The Contract Date may or may not be the same
as the Issue Date.
Contract Year - A Contract Year is each and every consecutive twelve-month
period beginning on the Contract Date and the anniversaries thereof.
Death Proceeds - The Death Proceeds is the amount of money that we will pay your
Beneficiary if the Insured dies while your Contract is in force.
Debt - Debt is the sum of all outstanding loans plus accrued interest under a
Contract.
Excess Withdrawal - An Excess Withdrawal is a withdrawal of Account Value that
exceeds the Free Withdrawal Amount.
Expiration Date - The Expiration Date is the last day in a Guarantee Period. In
the Contract, we refer to this as the "Expiry Date."
Fixed Account - The Fixed Account is The Sage Fixed Interest Account A. The
Fixed Account is a separate investment account of ours into which you may invest
purchase payments or transfer Account Value. In certain states, we refer to the
Fixed Account as the Interest Account or the Interest Separate Account. We
divided the Fixed Account into Fixed Sub-Accounts, and establish a Fixed
Sub-Account each time you allocate an amount to the Fixed Account.
Free Withdrawal Amount - A Free Withdrawal Amount is the maximum amount that you
can withdraw within a Contract Year without being subject to a surrender charge.
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.
Insured - The Insured is the person you named in your application for the
Contract whose life your Contract covers.
Issue Age - The Issue Age is the Insured's age on the last birthday on or before
the Contract Date.
Issue Date - The Issue Date is the date we issue an individual Contract or a
certificate for a group Contract at our Customer Service Center.
Loan Account - The Loan Account is an account in our General Account,
established for any amounts transferred from the Sub-Accounts as a result of a
loan. The Loan Account credits a
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fixed rate of interest, the Loan Credited Rate, that is not based on the
investment experience of the Variable Account or the Guaranteed Interest Rates
applicable to the Fixed Sub-Accounts of the Fixed Account.
Market Value Adjustment - A Market Value Adjustment is a positive or negative
adjustment that may apply to a surrender, withdrawal, transfer or loan from a
Fixed Sub-Account before the end of its Guarantee Period.
Monthly Processing Date - The Monthly Processing Date is the day of each month
that we deduct the Monthly Deduction Amount from the Account Value of your
Contract. See "What Are the Expenses Under A Contract?" Monthly Processing Dates
are the Contract Date and the same day of each month thereafter. If there is no
such date in a particular month, the Monthly Processing Date will be the last
day of that month. If a Monthly Processing Date is not a Valuation Date, the
Monthly Processing Date will be the next Valuation Date. This means that if your
Monthly Processing Date is the 31st, and the current month is April, your
Monthly Processing Date for April will be April 30th. If April 30th is a Sunday
(which is not a Valuation Date), your Monthly Processing Date for that April
will be May 1 (assuming May 1 is a Valuation Date).
Net Asset Value - Net Asset Value is the price of one share of a Fund.
Owner - 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 you make or
authorize, in a form satisfactory to us, received at our Customer Service
Center.
Surrender Value - The Surrender Value is the amount we pay you upon surrender of
your Contract. It reflects the deduction of any applicable surrender charge, any
Market Value Adjustment, and any Debt.
Valuation Date - Valuation Date is the date at the end of a Valuation Period
when we value each Variable Sub-Account.
Valuation Period - A Valuation Period is the period between one calculation of
an Accumulation Unit value and the next calculation.
Variable Account - The Variable Account is The Sage Variable Life Account A. It
is a separate investment account of ours into which you may invest purchase
payments or transfer Account Value. We divide the Variable Account into Variable
Sub-Accounts, each of which invests in shares of a particular Fund.
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"We", "us", "our", "Sage Life" or the "Company" is Sage Life Assurance of
America, Inc.
"You" or "Your" is the owner of a Contract.
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This Prospectus has three sections:
o Summary of the Contracts;
o Part I - which gives more detailed information on the Summary topics; and
o Part II - which provides additional information.
Please read the entire Prospectus carefully.
SUMMARY OF THE CONTRACTS
1. WHAT ARE THE CONTRACTS?
The Contracts are modified single payment combination fixed and variable
life insurance contracts offered by Sage Life Assurance of America, Inc. Your
Contract is a contract between you, the Owner, and us, Sage Life.
We designed the Contract to meet your estate planning or other insurance
needs, or to supplement your long-term retirement needs. Because life insurance
is not a short-term investment, you should evaluate your need for life insurance
coverage and the suitability of the Contract to meet your long-term financial
objectives before you purchase a Contract.
Under the Contract, you allocate amounts on a tax-deferred basis to our
Variable Account and our Fixed Account.
Investment Flexibility. You can invest among 33 subdivisions of our
Variable Account, known as "Variable Sub-Accounts," each corresponding to a
different Fund. These Funds, listed in Section 3, 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, and 5 years ("Guarantee Periods"). 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 prevailing
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.
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As your needs or financial 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.
Safety of Separate Accounts. Significantly, both our Fixed and Variable
Accounts are separate investment accounts of Sage Life. This provides you with
an important feature: we cannot charge the assets supporting your allocations to
these Accounts with liabilities arising out of any other business we may
conduct.
The Contract also provides you with other important features, including
a death benefit and access to your money if your circumstances change.
Income Tax-Free Life Insurance Protection For Your Beneficiaries. The
Contract provides a life insurance benefit that can pass free of federal and
state income taxes to your beneficiaries. You can create and preserve a legacy
for loved ones, a favorite charity, or even your Alma Mater.
Access to Amounts Invested. The Contract provides access to your
investment should you need it. During the Insured's lifetime your investment
grows tax-free until withdrawn or borrowed. You decide how much to take and when
to take it.
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. However, if you acquire a Contract by making
a tax-free exchange from an existing contract that provides tax-free access
through loans, the Contract also may provide tax-free access through loans.
Amounts you surrender or withdraw may be subject to a surrender charge,
and a Market Value Adjustment (positive or negative) may apply if you take the
amount from the Fixed Account before the end of the applicable Guarantee Period.
2. HOW DO I PURCHASE A CONTRACT?
In most cases, you may purchase a Contract with $10,000 or more through
an authorized registered representative. You must complete an application, and
the proposed Insured must meet our underwriting requirements. We have designed a
simplified underwriting program that could make qualifying easier and let us
issue a Contract faster than would otherwise be possible. Your eligibility for
this program will depend on the amount you want to invest and the proposed
Insured's age, sex, and health.
After the first Contract Anniversary, you may make additional payments
of at least $250, subject to certain conditions. We reserve the right to require
satisfactory evidence of insurability before we accept any additional payment
that increases the life insurance benefit by more than it increases your Account
Value.
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Also, if the Surrender Value of your Contract is not sufficient to pay
the charges as they come due, you will have a grace period of 61 days to make a
sufficient additional payment to keep your Contract in force. We will send you a
notice at the start of the Grace Period.
We have included hypothetical illustrations in this Prospectus to show
you how the Contract works. We have based these illustrations on hypothetical
rates of return and we do not guarantee these rates. The rates are illustrative
only, and do not represent past or future investment performance. Your actual
Contract values and benefits will be different from those in the illustrations.
3. WHAT ARE MY INVESTMENT OPTIONS?
There are 38 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 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 Variable Sub-Accounts investing in the following 33 Funds:
AIM Variable Insurance Funds, Inc.
o AIM V.I. Government Securities Fund
o AIM V.I. Growth and Income Fund
o AIM V.I. International Equity Fund
o AIM V.I. Value Fund
The Alger American Fund
o Alger American MidCap Growth Portfolio
o Alger American Income and Growth Portfolio
o Alger American Small Capitalization Portfolio
Liberty Variable Investment Trust
o Colonial High Yield Securities Fund, Variable Series
o Colonial Small Cap Value Fund, Variable Series
o Colonial Strategic Income Fund, Variable Series
o Colonial U.S. Stock Fund, Variable Series
o Liberty All-Star Equity Fund, Variable Series
o Newport Tiger Fund, Variable Series
o Stein Roe Global Utilities Fund, Variable Series
SteinRoe Variable Investment Trust
o Stein Roe Growth Stock Fund, Variable Series
o Stein Roe Balanced Fund, Variable Series
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MFS(R) Variable Insurance Trust SM
o MFS Growth With Income Series
o MFS High Income Series
o MFS Research Series
o MFS Total Return Series
o MFS Capital Opportunities Series (formerly known as MFS Value Series)
Morgan Stanley Dean Witter Universal Funds, Inc.
o Global Equity Portfolio
o Mid Cap Value Portfolio
o Value Portfolio
Oppenheimer Variable Account Funds
o Oppenheimer Bond Fund/VA
o Oppenheimer Capital Appreciation Fund/VA (formerly known as
Oppenheimer Growth Fund)
o Oppenheimer Small Cap Growth Fund/VA
Sage Life Investment Trust
o EAFE(R) Equity Index Fund
o S&P 500 Equity Index Fund
o Money Market Fund
T. Rowe Price Equity Series, Inc.
o T. Rowe Price Equity Income Portfolio
o T. Rowe Price Mid-Cap Growth Portfolio
o T. Rowe Price Personal Strategy Balanced Portfolio
The prospectuses for the Trusts describe the Funds in detail. These
Funds do not provide any performance guarantees, and their values will increase
or decrease depending upon investment performance.
Through our Fixed Account, you can choose to invest your money in one or
more of 5 different Guarantee Periods. We guarantee your principal and interest
rate when your investment is left in the Guarantee Period until it ends. You
currently can choose periods of 1, 2, 3, 4, and 5 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. This
Adjustment may be positive or negative depending upon current interest rates.
4. WHAT ARE THE EXPENSES UNDER A CONTRACT?
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The Contract has insurance and investment features. Each has related
costs. Below is a brief summary of the Contract's charges:
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 - Each month, we deduct Asset-Based Charges for
mortality and expense risks, certain administrative and distribution costs, and
certain state and Federal tax expenses from the amounts you allocate to the
Variable and Fixed Accounts. The maximum charges equal, on an annual basis,
1.80% of your Account Value, decreasing to 1.30% after the tenth Contract Year.
Cost of Insurance Charges - Each month, we deduct from the amounts you
allocate to the Variable and Fixed Accounts a charge for providing the life
insurance protection. This charge will never reflect rates greater than those
shown in your Contract.
Surrender Charge - During the first seven Contract Years only, we
ordinarily will deduct a surrender charge when you surrender your Contract or
withdraw amounts in excess of the Free Withdrawal Amount (see Part I). The
maximum applicable percentage is 9% in the first Contract Year. It declines to
0% after the seventh Contract Year. We calculate the surrender charge as a
percentage(s) of the purchase payment(s) you surrender or withdraw.
Fund Fees and Expenses - There are also Fund fees and expenses that are
based on the average daily value of the Funds. Currently, Fund fees and expenses
together range on an annual basis from 0.55% to 1.30%, depending upon the Fund.
Sage Life's business philosophy is to reward our long-term customers. So,
o After the seventh Contract Year we eliminate Surrender Charges.
o After the seventh Contract Year we eliminate the Annual Administration
Charge.
o And after the tenth Contract Year, we reduce the Asset-Based Charges.
This means more of your investment is working for you over the long-term.
5. HOW WILL MY CONTRACT BE TAXED?
Under current federal tax law, life insurance contracts receive
tax-favored treatment. The death benefit is fully excludable from the
Beneficiary's gross income for federal income tax purposes. You are not taxed on
any increase in the Account Value while a life insurance contract remains in
force. In most cases, your Contract will be a Modified Endowment
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Contract ("MEC"). If your Contract is a MEC, certain distributions made during
the Insured's lifetime, such as loans and withdrawals from, and collateral
assignments of, the Contract are includable in gross income on an income-first
basis. A 10% Federal tax penalty ordinarily will be imposed on income
distributed before you attain age 59 1/2. Contracts that are not Modified
Endowment Contracts ("non-MECs") receive preferential tax treatment with respect
to certain distributions. See Part I "How Will My Contract Be Taxed?"
We do not give tax advice, nor is any registered representative
authorized to give tax advice on our behalf. We recommend that you consult your
tax adviser about your particular tax situation.
6. HOW DO I ACCESS MY MONEY?
If you need to take money out of your Contract, you can choose among
several different options. You can tailor your withdrawals to meet your
liquidity needs.
o You can withdraw some of your money.
o You can surrender the Contract and take the entire proceeds as a
single lump sum payment or apply the proceeds to one of the
Settlement Options we offer.
o You can withdraw money using our systematic partial withdrawal
program.
o If your Contract is a non-MEC, you have tax-free access though loans.
o If your Contract is a MEC, you may take taxable loans that may be
subject to a 10% Federal tax penalty.
Keep in mind that amounts you surrender or withdraw may be subject to a
surrender charge if taken during the first seven Contract Years. However, during
that period the Contract does provide a Free Withdrawal Amount (not subject to a
surrender charge) each year equal to your cumulative earnings, or if greater,
10% of total purchase payments you have invested.
In addition, if you access amounts from the Fixed Account, we ordinarily
will apply a Market Value Adjustment.
If you are younger than 59 1/2 when you take money out, you may owe a
10% federal tax penalty, as well as the income tax that ordinarily would apply.
Please remember that withdrawals will reduce your death benefit.
7. HOW IS CONTRACT PERFORMANCE PRESENTED?
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Articles about the Variable Account's investment performance, rankings,
or other characteristics may appear in publications. Publications may use
articles and releases developed by us, the Funds and other parties about the
Variable Account or the Funds.
Please remember that performance data represents past performance.
Amounts you invest in the Variable Sub-Accounts will fluctuate daily based on
underlying Fund investment performance, so the value of your investment may
increase or decrease.
8. WHAT IS THE DEATH BENEFIT UNDER MY CONTRACT?
The Contract provides for a payment to your designated Beneficiary if
the Insured dies while the Contract is in force. This payment is called the
"Death Proceeds" and is equal to the following:
o the death benefit described below; plus
o any additional insurance on the Insured's life that may be provided
by riders to the Contract; minus
o any Debt from Contract loans; minus
o any due and unpaid charges; and minus
o any amounts previously paid under the Accelerated Death Benefit Rider
plus accrued interest.
Your death benefit at issue equals your initial Insurance Amount. On any
Business Day after that it equals the greater of:
o the Insurance Amount; and
o the Minimum Death Benefit
The initial Insurance Amount depends on the amount of your initial
purchase payment, and the age and sex of the proposed Insured. We show your
initial Insurance Amount in your Contract. Your Insurance Amount remains level
unless you make additional purchase payments or withdrawals.
The Minimum Death Benefit equals the Account Value plus any positive
Market Value Adjustment as of that Business Day, multiplied by a percentage that
varies with the attained age of the Insured. We show these percentages in your
Contract.
Your Beneficiaries decide how they wish to receive the Death Proceeds.
They can elect payment in a single sum, or apply proceeds under one of the
Settlement Options we offer.
9. WHAT SUPPLEMENTAL BENEFITS ARE AVAILABLE UNDER MY CONTRACT?
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Accelerated Death Benefit Rider: If permitted in your state, this rider
is automatically included in your Contract at no additional cost. It allows you
to take an advance payment against the Death Proceeds under your Contract if the
Insured is diagnosed as having a terminal illness. You can request up to 50% of
the Insurance Amount, to a maximum of $500,000.
Accidental Death Benefit Rider: If permitted in your state, the Contract
also provides an accidental death benefit at no additional cost. If the Insured
dies as a direct result of an accident before reaching age 81, we will pay an
additional death benefit to the Beneficiary of your choice. This additional
benefit equals 100% of the sum of all purchase payments you have invested in
your Contract, less any withdrawals you have made (including any associated
surrender charge and Market Value Adjustment incurred), up to a maximum of
$250,000.
Waiver of Surrender Charge Rider: If permitted in your state, we will
include this rider automatically in your Contract at no additional cost. It
permits you to withdraw money from your Contract without a surrender charge if
you need it while you are confined to a nursing care facility or hospital.
Certain restrictions apply.
10. WHAT ARE MY SETTLEMENT OPTIONS?
You can apply proceeds under your Contract to purchase a stream of
regular income payments under one of the Settlement Options shown below (or
under any other option acceptable to us). Our descriptions assume that you apply
the Surrender Value and receive the income payments from one of the options
below. Of course, you always can designate someone other than yourself to
receive the income payments, and we pay income payments from any Death Proceeds
to your Beneficiary.
Option 1 - Payments for Life: You will receive payments for your life.
Option 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.
Option 3 - Joint and Last Survivor Life Annuity: We will make payments
as long as either you or a second person you select (such as your
spouse) is alive.
Option 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.
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You or your Beneficiary, as the case may be, tell us how much to apply
to fixed income payments and to variable income payments. With variable income
payments, you currently have all of the investment choices you had before income
payments began. However, we currently limit transfers among your investment
choices. Once income payments begin, you may surrender your Contract only if you
choose Option 4.
We will allocate the amount you apply to provide fixed income payments
to the Fixed Account and invest it in the Guarantee Periods you select. We
guarantee the amount of each fixed income payment. The amount of each fixed
income payment will remain level throughout the period you select.
We will allocate the amount 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.
11. 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. We will send you a refund equal to your Account
Value plus any Asset-Based Charges and cost of insurance charges we have
deducted on or before the date we received the returned Contract. If required by
the law of your state, we will refund your initial purchase payment (less any
withdrawals 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
Sub-Account until we deem the Free Look Period to end.
Dollar-Cost Averaging Program: Under our optional Dollar-Cost Averaging
Program, you may transfer a set dollar amount systematically from the Money
Market Sub-Account 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 strategy 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 way to
help meet your long-term goals. Due to the effect of interest that continues to
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be paid on the amount remaining in the Money Market Sub-Account 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.
No Probate: If the Insured dies, we will pay the Death Proceeds to your
heirs or designated beneficiary. Generally, the Death Proceeds will be received
without going through probate.
12. 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.
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Part I
Description of the Contracts
1. WHAT ARE THE CONTRACTS?
The Contracts are modified single payment combination fixed and variable
life insurance Contracts offered by us, Sage Life Assurance of America, Inc. We
designed the Contracts to meet your estate planning or other insurance needs.
They provide many benefits including:
o investing amounts on a tax-deferred basis in our Variable Account and
our Fixed Account;
o access to your investment should you need it (however, a
surrender charge and Market Value Adjustment may apply); and
o life insurance that can pass free of federal and state income taxes to
your heirs.
However, life insurance is not a short-term investment. You should
evaluate your need for life insurance coverage and the Contract's long-term
investment potential and risks before you purchase a Contract.
Under the terms of the Contract, we promise to pay the Death Proceeds to
your designated Beneficiary upon receipt of proof that the Insured died while
your Contract is in force. You purchase the Contract with an initial purchase
payment. While your Contract is in force and the Insured is alive, you may make
additional payments under the Contract (subject to certain conditions) and will
ordinarily not be taxed on increases in the value of your Contract as long as
you do not take distributions. See "How Will My Contract Be Taxed?" The
Contracts may not be available in all states or in all markets.
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." We will invest purchase payments you allocate to a
Variable Sub-Account solely in its corresponding Fund. Your Account Value in a
Variable Sub-Account will vary according to the investment performance of that
Fund. Depending on market conditions, your value in each Variable Sub-Account
could increase or decrease. We do not guarantee a minimum value. You bear the
risk of investing in the Variable Account. We call the total of the values in
the Variable Sub-Accounts the "Variable Account Value."
You can also allocate purchase payments to our Fixed Account. See "Fixed
Account Investment Option." The Fixed Account includes "Fixed Sub-Accounts" to
which we credit fixed rates of interest for the Guarantee Periods you select. We
call the total of the values in the Fixed Sub-Accounts, the "Fixed Account
Value." We currently offer Guarantee Periods with durations of 1, 2, 3, 4, and 5
years. If any amount allocated or transferred remains in a
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Guarantee Period until the Expiration Date, its value will equal the amount
originally allocated or transferred, multiplied on an annually compounded basis,
by its guaranteed interest rate. We will ordinarily apply a Market Value
Adjustment to any surrender, withdrawal, transfer, or amount borrowed from a
Fixed Sub-Account before its Expiration Date. The Market Value Adjustment may
increase or decrease the value of the Fixed Sub-Account (or portion thereof)
being surrendered, withdrawn, transferred, or borrowed. See "What Are My
Investment Options?"
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 "What Are
My Investment Options?"
We may offer other variable life insurance 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. HOW DO I PURCHASE A CONTRACT?
Initial Purchase Payment. You must make the initial purchase payment to
put a Contract in force. The minimum initial purchase payment is $10,000. We
will not issue a Contract if the proposed Insured is over age 90.
Issuance of a Contract. Once we receive your initial purchase payment
and your application at our Customer Service Center, we will process your
application to see if the proposed Insured meets our underwriting and other
criteria. Under our current underwriting rules, which are subject to change, a
proposed Insured age 80 and under may be eligible for our simplified
underwriting program. This program does not involve a medical examination, and
may enable us to issue a Contract much faster than we otherwise could. To
qualify, an Insured's application responses must meet our simplified
underwriting standards. The maximum initial purchase payment we currently accept
on a simplified underwriting basis varies with the issue age and gender of the
Insured, but, the difference between the initial insurance amount and the
initial purchase payment may never exceed $100,000.
We will apply customary underwriting standards to all other Insureds.
Our current underwriting rules are subject to change.
We reserve the right to reject an application for any reason. If we do
not issue a Contract, we will return to you any purchase payment you submitted
with the application. If we issue a Contract, your Issue 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 ends 10 days after you
receive your Contract. Some states may require a longer period. If you decide to
cancel your Contract,
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you must return it to our Customer Service Center or to one of our authorized
registered representatives. We will send you a refund of your Account Value plus
any Asset-Based Charges and cost of insurance charges we have deducted on or
before the date we receive your returned Contract at our Customer Service
Center. If required by the law of your state, we will refund your initial
purchase payment (less any withdraws previously taken). In those latter states
where this requirement exists, we will temporarily invest amounts you allocate
to the Variable Account to the Money Market Sub-Account until the time we deem
the Free Look Period to end. See "What Are My Investment Options?"
Making Additional Purchase Payments. You may make additional payments at
any time after the first Contract Anniversary, while your Contract is in force
and the Insured is alive, subject to the following conditions:
o Each additional purchase payment must be at least $250.
o You may make only one purchase payment in any Contract Year.
o The Attained Age of the Insured must be less than 81.
o We must approve in advance any payment that would cause the
Account Value of all contracts that you maintain with us to
exceed $1,000,000.
While the Insured is alive, you also may make any additional payment necessary
to keep your Contract in force.
When we accept an additional payment, that payment increases your
Account Value and may increase your death benefit. We reserve the right to
require satisfactory evidence of insurability before accepting any additional
payment that increases your Death Benefit by more than it increases your Account
Value. This is because our risk increases under these circumstances.
All additional payments are payable at our Customer Service Center. We
will credit any payment we receive after the Contract Date to the Contract as of
the Business Day on which our Customer Service Center receives it unless the
payment represents an increase in the Insurance Amount. See "What Is the Death
Benefit Under My Contract?" We will deem purchase payments we receive on other
than a Business Day as received on the next following Business Day.
Unless you tell us otherwise, we will first consider all payments we
receive while a loan is outstanding as a payment of any loan interest, next as a
loan repayment, and last as an additional purchase payment.
Grace Period. If your Surrender Value on a Monthly Processing Date is
not sufficient to cover the Monthly Deduction Amount, we will allow you a Grace
Period of 61
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days for you to pay an amount sufficient to cover the Monthly Deduction Amount
due. See "What Are The Expenses Under A Contract?" We will send you a notice at
the start of the Grace Period at your last known address. The Grace Period will
end 61 days after we mail you the notice.
If you do not make the necessary payment by the end of the Grace Period,
your Contract will terminate without value. Subject to the terms and conditions
of your Contract, if the Insured dies during the Grace Period, we will pay the
Death Proceeds.
Reinstatement. If the Grace Period has ended and you have not paid the
necessary payment and have not surrendered your Contract for its Surrender
Value, you may be able to reinstate your Contract. To do so:
o submit a written request to us for reinstatement within 3 years
after the end of the Grace Period;
o provide us with satisfactory evidence of insurability;
o pay an additional purchase payment equal to the minimum initial
purchase payment for which we would then issue a Contract based
upon the Insured's Attained Age, sex, and health; and
o repay or reinstate any Debt against the Contract that existed at
the end of the Grace Period.
The effective date of a reinstated Contract will be the Monthly
Processing Date on or next following the date we approve your application for
reinstatement and receive the necessary purchase payment.
If we reinstate your Contract, the Account Value on the date of
reinstatement will be the amount provided by the purchase payment that you paid
to reinstate the Contract. Certain charges under the Contract vary depending on
how long the Contract has been in force. We will calculate these charges based
on the length of time from the Contract Date until the date of reinstatement.
Unless you have told us otherwise, we will calculate your Account Value based on
your allocation instructions in effect at the start of the Grace Period.
Specialized Uses of the Contract. The Contract offers potential
benefits such as providing:
o a means for investing on a tax-deferred basis;
o access to your investment if you need it; and
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o life insurance that can pass free of federal and state income taxes to
your Beneficiaries under the Contract.
However, purchasing the Contract partly or wholly for such purposes entails
certain risks. For example, poor investment performance in Variable Sub-Accounts
in which you may invest may cause the need for an additional payment in order to
keep the Contract in force (this may be particularly true if there is
outstanding Debt). Such poor investment performance may cause the Account Value
or Surrender Value to be insufficient to fund the purpose for which you
purchased the Contract. Withdrawals and loans may significantly affect current
and future Account Value, Surrender Value, or Death Proceeds. Before purchasing
a Contract, you should consider whether the long-term nature of the Contract is
consistent with the purpose for which it is being considered. Using a Contract
for a specialized purpose may also have tax consequences. See "How Will My
Contract Be Taxed?"
Illustrations. We have included hypothetical illustrations in this
Prospectus to show you how the Contract works. We have based these illustrations
on hypothetical rates of return and we do not guarantee these rates. The rates
are an illustration only, and do not represent past or future investment
performance. Your actual Contract values will be different from those in the
illustrations.
3. 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 Sub-Account
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 we temporarily allocated your initial
purchase payment to the Money Market Sub-Account, we will transfer the value of
what is in the Money Market Sub-Account to the Variable Sub-Account(s) you
specified in your application. Solely for the purpose of processing this
transfer from the Money Market Sub-Account, we will deem the Free Look Period to
end 15 days after the Contract Date. This transfer from the Money Market
Sub-Account to the Variable Sub-Accounts upon the expiration of the Free Look
Period does not count as a transfer for any other purposes under your Contract.
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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. Not
every Fund may be available in every state or in every market.
AIM Variable Insurance Funds, Inc.
AIM V.I. Government Securities Fund. This Fund seeks to achieve high
current income consistent with reasonable concern for safety of principal by
investing in debt securities issued, guaranteed or otherwise backed by the
United States Government.
AIM V.I. Growth and Income Fund. This Fund's primary objective is growth
of capital with a secondary objective of current income.
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, whose issuers are considered 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 adviser to be undervalued relative to the investment adviser's
appraisal of 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.(R)
Alger American Income and Growth Portfolio. This Fund seeks primarily to
provide a high level of dividend income through investments in dividend-paying
equity securities. Capital appreciation is a secondary goal 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,
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have total market capitalization within the range of companies included in the
Russell 2000 Growth Index(R) or the S&P SmallCap 600 Index.(R)
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
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 &
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Farnham Incorporated subadvises the Global Utility Fund. Newport Fund
Management, Inc. subadvises the Tiger Fund. Liberty Asset Management Company
subadvises the All-Star Fund.
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SteinRoe Variable Investment Trust
Stein Roe Growth Stock Fund. This Fund seeks long-term growth of capital
through investment 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.
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 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 employment of capital, and secondarily
to provide a reasonable opportunity for growth of capital and income.
MFS Capital Opportunities Series (formerly, 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/
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Morgan Stanley Dean Witter 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 stock 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 the market as a whole
as measured by the S&P 500 Index.(R)
Morgan Stanley Dean Witter Investment Management Inc. 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/VA. 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 Capital Appreciation Fund/VA (formerly, Oppenheimer Growth
Fund). This Fund seeks to achieve capital appreciation by investing in
securities of well-known, established companies.
Oppenheimer Small Cap Growth Fund/VA. 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.
Oppenheimer Funds, Inc. manages Oppenheimer Variable Account Funds.
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Sage Life Investment Trust
EAFE(R) 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(R) 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 as well as long-term growth of capital through
investments in the common stocks of established companies.
T. Rowe Price Mid-Cap Growth Portfolio. This Fund seeks to provide
long-term capital appreciation by investing in mid-cap stocks with potential for
above-average earnings.
T. Rowe Price Personal Strategy Balanced Portfolio. The Fund seeks to
provide the highest total return over time, with an emphasis on both capital
growth 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 those 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 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.
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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
who allocate Account Values to the Variable Account, and owners of other
contracts who allocate contract values 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 in 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. You should read the Trusts' prospectuses carefully before you decide
to allocate 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. We guarantee an interest rate (the "Guaranteed Interest Rate") for
each Fixed Sub-Account for a period of time (a "Guarantee Period"). When you
make an allocation to the Fixed Sub-Account, we apply the Guaranteed Interest
Rate then in effect. We may establish specially designated Fixed Sub-Accounts
("DCA Fixed Sub-Accounts"), for our Dollar-Cost Averaging Program.
We have no specific formula for establishing the Guaranteed Interest
Rates for the different Guarantee Periods. The determination we make will be
influenced by, but not necessarily 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. We will
invest these amounts 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
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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, and 5 years. We may offer different Guarantee Periods in the future.
Not all Guarantee Periods may be available in all states.
We will notify you of your options for renewal at least thirty days
before an Expiration Date of a Fixed Sub-Account in which you are invested. Your
options are:
o 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, as of the day
the previous Fixed Sub-Account expires. If such Guarantee Period
is not currently available, we will transfer your value to the
next shortest Guarantee Period. If there is no shorter Guarantee
Period, we will transfer your value to the Money Market
Sub-Account.
o Elect a new Guarantee Period(s) from among those we offer as of
the day the previous Fixed Sub-Account expires.
o Elect to transfer the value of the Fixed Sub-Account to one or
more Variable Sub-Accounts.
Any amounts surrendered, withdrawn, transferred or borrowed 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:
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o Transfers from DCA Fixed Sub-Accounts made automatically under
our Dollar-Cost Averaging Program; and
o Withdrawals of earned interest made automatically under our
Systematic Partial Withdrawal Program.
Market Value Adjustment. A Market Value Adjustment reflects the change
in interest rates since we established a Fixed Sub-Account. 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 we established the Fixed Sub-Account, 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 we established the Fixed Sub-Account, the Market Value Adjustment will be
positive.
We will apply a Market Value Adjustment as follows:
o For a surrender, withdrawal, transfer, or amount borrowed, we
will calculate the Market Value Adjustment on the total amount
(including any applicable surrender charge) that must be
surrendered, withdrawn, transferred or borrowed to provide the
amount requested.
o If the Market Value Adjustment is negative, it reduces any
remaining value in the Fixed Sub-Account, or amount of Surrender
Value. Any remaining Market Value Adjustment then reduces the
amount withdrawn, transferred, or borrowed.
o If the Market Value Adjustment is positive, it increases any
remaining value in the Fixed Sub-Account. In the case of
surrender, or if you withdraw, transfer or borrow the full amount
of the Fixed Sub-Account, the Market Value Adjustment increases
the amount surrendered, withdrawn, transferred, or borrowed.
We will compute the Market Value Adjustment by multiplying the factor
below by the total amount (including any applicable surrender charge) that must
be surrendered, withdrawn, transferred, or borrowed from the Fixed Sub-Account
to provide the amount you requested.
[(1+I)/(1+J+.0025)]/N/365/ - 1
Where
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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, we will use
straight-line interpolation between the Index Rate for the next highest and next
lowest maturities 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 borrowed, 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 Guaranteed 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. You may transfer Account Value from and among the Variable
and Fixed Sub-Accounts at any time, subject to certain conditions. In certain
states, your right to transfer Account Value is restricted until after the end
of the Free Look Period. See "What Are My Investment Options?" The minimum
amount of Account Value that you may transfer from a 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 Sub-Accounts from which and to which we are to
make the transfers. 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 Sub-Accounts.
A transfer ordinarily takes effect on the Business Day we receive
Satisfactory Notice at our Customer Service Center. We will deem requests
received on other than a Business Day as 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.
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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, we will consider each
transfer request one transfer, regardless of the number of Sub-Accounts affected
by the transfer.
If you have applied proceeds under your Contract to a Settlement Option,
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.
Telephone Transactions. You may request transfers, withdrawals or loans
by telephone. We will not be liable for following instructions communicated by
telephone that we reasonably believe to be genuine. To request transfers,
withdrawals or loans 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. We may only be liable for
any losses due to unauthorized or fraudulent instructions where we fail to
follow our procedures properly. These procedures include: (a) asking you or your
authorized representative to provide certain identifying information; (b) tape
recording all such conversations; and (c) sending you a confirmation statement
after all such telephone transactions.
Our telephone transaction authorization form also allows you to create a
power of attorney by authorizing another person to give telephone instructions.
Unless prohibited by state law, we will treat such power as a durable power of
attorney. The Owner's subsequent incapacity, disability, or incompetency will
not affect the power of attorney. 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 done in good
faith reliance upon your power of attorney.
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. The
managements of the Funds share this position.
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
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requests that we receive have, in fact, been made by the Owners in whose names
they are submitted. However, you will not be prevented by these procedures from
making your own transfer requests.
Dollar-Cost Averaging Program. Our optional dollar-cost averaging
program permits you to systematically transfer (monthly 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 the DCA Fixed
Sub-Accounts. These DCA Fixed Sub-Accounts may have different Guarantee Periods
and different Guaranteed Interest Rates than the 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 Sub-Account or a DCA Fixed
Sub-Account, the amounts we transfer 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 proceeds are applied to a Settlement Option by sending us
Satisfactory Notice. The minimum transfer amount is $250 from the Money Market
Sub-Account or from a DCA Fixed Sub-Account. We will make all dollar-cost
averaging transfers on the day of each month that corresponds to your Contract
Date unless that date is not a Business Day. Otherwise, we will make the
transfer 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.
Once elected, dollar-cost averaging remains in effect from the date we
receive your request until you surrender the Contract, 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 we ordinarily will
assess a Market Value Adjustment 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. We do not consider a transfer under this program 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 partial
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:
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Model Investment and Risk Profile
----- ---------------------------
I Stable Capital
II Stable Income
III Moderate Income
IV Moderate Growth
V Capital Growth
VI Aggressive Growth
If you participate in the asset allocation program, we will
automatically allocate all initial and additional purchase payments 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 and the allocation percentages
among the Variable Sub-Accounts or even some of the Variable Sub-Accounts within
a particular model may need to be changed. We will send you a notice at least 30
days before any such change is made, and give you an opportunity not to make the
change.
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 you allocate your money
among the Variable Sub-Accounts, the investment performance of each Variable
Sub-Account may cause your allocation to shift. Before proceeds are applied to a
Settlement Option, you may instruct us to automatically rebalance (on a calendar
quarter, semi-annual, or annual basis) your Variable Account Value to return it
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. We
will deem requests received on other than a Business Day as 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. We do not consider a transfer under
this program a transfer for purposes of assessing any transfer charge. We
reserve the right to discontinue offering this program at
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any time and for any reason. We do not include any money allocated to the Fixed
Account 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 to the sum of the Variable Account
Value, the Fixed Account Value, and the Loan Account Value (each term as defined
below) credited to your Contract. We first determine your Account Value on the
Contract Date and after that on each Business Day. The Account Value will vary
to reflect:
o the performance of the Variable Sub-Accounts you have selected;
o interest credited on amounts you allocated to the Fixed Account;
o interest credited on amounts allocated to the Loan Account;
o any additional purchase payments; and
o charges, transfers, withdrawals, loans, and surrenders.
Your Account Value may be more or less than purchase payments you made.
Variable Account Value. Variable Account Value equals the sum of the
values in each Variable Sub-Account on any particular day. On the Contract Date,
the Variable Account Value for a Variable Sub-Account equals the portion of the
initial purchase payment allocated to the Sub-Account. On each subsequent
Business Day it equals:
o the Variable Account Value in the Sub-Account on the preceding Business
Day multiplied by its net investment factor for the current Valuation
Period; plus
o the amount of any allocation or transfer to the Sub-Account during the
current Valuation Period; minus
o the amount of any transfer from the Sub-Account during the current
Valuation Period; minus
o the amount of any charges allocated to the Sub-Account during the
current Valuation Period; and minus
o the amount of any withdrawal or loan allocated to the Sub-Account
during the current Valuation Period.
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We keep track of the Variable Account Value in each of your Variable
Sub-Accounts by the number of Accumulation Units in that 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, borrow, or
surrender an amount from a Variable Sub-Account, we cancel Accumulation Units in
that Variable Sub-Account. We determine the number of Accumulation Units
canceled by dividing the dollar amount you transferred, withdrew, borrowed, 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, we determine the
Accumulation Unit value 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 we use to
measure the investment performance of a Variable Sub-Account from one Valuation
Period to the next. We determine the net investment factor for any Valuation
Period 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 we determine 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.
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Fixed Account Value. Fixed Account Value is the sum of the values in
each Fixed Sub-Account (including a DCA Fixed Sub-Account) on any particular
date. On the Contract Date the Fixed Account Value for a Sub-Account equals the
portion of the initial purchase payment allocated to the Sub-Account. On each
subsequent Business Day it equals:
o the Fixed Account Value in the Sub-Account on the preceding
Business Day multiplied by the daily equivalent of its Guaranteed
Interest Rate earned for the number of days in the current
Valuation Period; plus
o the amount of any allocation or transfer to the Sub-Account
during the current Valuation Period; minus
o the amount of any transfer from the Sub-Account during the
current Valuation Period; minus
o the amount of any charges allocated to the Sub-Account during
the current Valuation Period; and minus
o the amount of any withdrawal or loan allocated to the
Sub-Account during the current Valuation Period.
We also adjust the Fixed Account Value for any Market Value Adjustment,
the value of which could be positive or negative.
Loan Account Value. Unless you take a loan, the Loan Account Value is
zero. If you take a loan, then on the effective date of the loan the Loan
Account Value equals the amount of the loan. On each subsequent Business Day it
equals:
o the Loan Account Value on the preceding Business Day; plus
o the amount of interest earned (at the Loan Credited Rate) on
Loan Account Value during the current Valuation Period; plus
o any amounts transferred to the Loan Account because of any
additional loans and any due and unpaid loan interest during the
current Valuation Period; minus
o the amount of any loan repayment you make during the current
Valuation Period; and minus
o any amount of interest earned on Loan Account Value and
transferred to the Sub-Accounts during the current Valuation
Period.
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Surrender Value. The Surrender Value on a Business Day is the Account
Value, plus or minus any applicable Market Value Adjustment, reduced by any
applicable surrender charge or other charges that are due us but not yet
deducted, less any Debt.
4. 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:
o the ability of Owners to make withdrawals, surrenders, and take
loans under the Contracts;
o the death benefit paid on the death of the Insured;
o the available investment options, including dollar-cost
averaging, asset allocation, automatic portfolio rebalancing, and
systematic partial withdrawal programs;
o administration of the Settlement Options available under the
Contracts; and
o the distribution of various reports to Owners.
Costs and expenses we incur include:
o those related to various overhead and other expenses associated
with providing the services and benefits provided by the
Contracts;
o sales and marketing expenses; and
o Other costs of doing business.
Risks we assume include:
o the risks that Insureds may live for a shorter period than we
estimated when we established the mortality factors under the
Contracts; and
o that the costs of providing the services and benefits under the
Contracts will exceed the charges deducted.
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.
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To assist you in understanding how the expenses under a Contract will
affect values, we have included hypothetical illustrations beginning on page __
. You can also request a personalized illustration from your registered
representative.
Unless we otherwise specify, we will deduct charges proportionately from
all Variable Sub-Accounts and Fixed Sub-Accounts in which you are invested.
We may reduce or eliminate charges under the Contracts 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:
o the size of the group;
o the total amount of purchase payments to be received from the
group;
o the purposes for which the Contracts are purchased;
o the nature of the group for which the Contracts are purchased; and
o 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. Please contact our Customer Service Center for more information
about those cost reductions.
Monthly Deduction Amount
We deduct the Monthly Deduction Amount on each Monthly Processing Date.
It equals:
o the Asset-Based Charges, plus
o the Cost of Insurance Charge, plus
o the cost of any riders for which a separate charge is assessed,
and plus
o any other applicable charge that we assess.
On a Monthly Processing Date that is also a Contract Anniversary, the
Monthly Deduction Amount equals the Monthly Deduction Amount described above,
plus the Annual Administration Charge.
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Asset-Based Charges. We assess Asset-Based Charges against your Contract for
assuming mortality and expense risks, certain administrative and distribution
costs, and certain state and Federal tax expenses. We calculate the charges as a
percentage of your Account Value as of the date we deduct them. On the Contract
Date, and monthly thereafter, we deduct the charges proportionately from the
Sub-Accounts in which you are invested.
o The maximum asset-based charges are:
Annual Charge Asset-Based Charges Monthly Charge
------------- --------------------- --------------
1.80% Contract Years 1-10 .150000%
1.30% Contract Years 11+ .108333%
o Asset-Based Charges will also apply to any Loan Account Value you
have. (If you have not taken a loan, then no charges will be
assessed.) The charges applicable to the Loan Amount Value are,
on an annual basis, .90% (.075000% monthly), decreasing to .40%
(.033333% monthly) after the tenth Contract Year.
If proceeds are applied to a Settlement Option, we will deduct the
Asset-Based Charges daily from the assets in each Variable Sub-Account
supporting variable income payments. We refer to these charges as Variable
Sub-Account Charges when applied to the proceeds under a Settlement Option.
Cost of Insurance Charge. We deduct the cost of insurance charge from your
Account Value to compensate us for providing life insurance for the Insured.
Current Cost of Insurance Charge. The current cost of insurance charge is
the actual monthly charge that we deduct from your Account Value. We calculate
this charge as a percentage of your Account Value on the date of deduction. On
the Contract Date, and monthly thereafter, we deduct the current cost of
insurance charge in proportion to the Sub-Accounts in which you are invested.
The maximum charge will never be more than the guaranteed maximum monthly cost
of insurance charge described below.
We determine the actual cost of insurance charge based on our expectation of
future mortality experience. Your cost of insurance charge will depend on the
Insured's risk class. The two standard risk classes are smoker and nonsmoker. We
generally charge higher rates for smokers.
We also place Insureds in various sub-standard risk classes, if the
underwriting warrants doing so. These sub-standard risk classes involve a higher
mortality risk and, therefore, higher charges.
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We will apply any charge we make on a uniform basis for Insureds of the same
risk class and Attained Age.
Guaranteed Maximum Monthly Cost of Insurance Charge. The maximum monthly
cost of insurance charge equals (a) times (b) and then divided by (c), where:
(a) is the maximum Cost of Insurance Rate per $1,000 shown in your
Contract based on the Insured's Attained Age, gender and risk
class;
(b) is an amount equal to the death benefit minus the Account Value;
and
(c) is $1,000.
For standard risks, we base the guaranteed cost of insurance charge on the
1980 Commissioners Standard Ordinary Mortality Table, Male/Female, Age Last
Birthday ("1980 CSO"). Because the mortality table differentiate between men and
women, the Contract may pay different benefits to men and women of the same age,
even if all other factors are the same. Certain states, however, may require
unisex rates. We include a table of guaranteed maximum cost of insurance rates
per $1,000 in your Contract. For substandard risks, we base the guaranteed cost
of insurance charge on a multiple of the 1980 CSO. We will base the multiple on
the Insured's substandard rating.
Annual Administration Charge
We will deduct an annual administration charge of $40 for 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 charge on and after the eighth Contract Anniversary, or if the Account
Value is at least $50,000 when we would have otherwise deducted the annual
administration charge.
Surrender Charge
If you make an Excess Withdrawal or surrender your Contract during the first
seven Contract Years, we may deduct a surrender charge calculated as a
percentage of the amount of purchase payment(s) withdrawn or surrendered.
(Approximately 75% of the surrender charge is for the recovery of sales expenses
and 25% is for the recovery of premium taxes.) We apply the surrender charge to
each purchase payment as a percentage of the payment as follows:
Complete Years Elapsed Maximum Surrender
Since Contract Date Charge Percentage
---------------------- -----------------
0 9%
1 9%
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2 8%
3 7%
4 6%
5 5%
6 3%
7+ 0%
If you surrender your Contract, we deduct the surrender charge from your
Account Value in determining the Surrender Value. If you take an Excess
Withdrawal, we deduct the surrender charge from your Account Value remaining
after we pay you the amount requested. We include any surrender charge we assess
in the calculation of any applicable Market Value Adjustment for withdrawals
from the Fixed Account. Each year you may withdraw the "Free Withdrawal Amount"
without incurring a surrender charge. The Free Withdrawal Amount equals the
greater of:
(i) 10% of your total purchase payments less all prior withdrawals
(including any associated surrender charge and Market Value
Adjustment incurred) in that Contract Year, or
(ii) cumulative earnings (i.e., the excess of the Account Value on the
date of withdrawal over unliquidated purchase payments).
With an Excess Withdrawal, we will liquidate purchase payments in whole
or in part on a "first-in, first-out" basis. This means we liquidate purchase
payments in the order you made them: the oldest unliquidated purchase payment
first, the next oldest unliquidated purchase payment second, until all purchase
payments have been liquidated.
The total surrender charge will be the sum of the surrender charges for
each purchase payment being liquidated. The amount you request from a
Sub-Account may not exceed the value of that Sub-Account less any applicable
surrender charge.
Example of Calculation of Surrender Charge. Assume the applicable
surrender charge is 7%, you have requested a withdrawal of $2,000 and no Market
Value Adjustment is applicable. Your total purchase payments are $10,000, your
current Account Value is $10,500, and you made no prior withdrawals during that
Contract Year. Your Free Withdrawal Amount is the greater of (a) or (b), where:
(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals (including any associated surrender charge and Market
Value Adjustment incurred) in that Contract Year (10% x $10,000 =
$1,000); and
(b) is the excess of the Account Value on the date of withdrawal over
the unliquidated purchase payments ($10,500- $10,000 = $500).
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Therefore, the Free Withdrawal Amount is $1,000. A surrender charge will apply
to the excess of $2,000 over $1,000. The surrender charge equals $70 (7% x
$1,000).
Waiver of Surrender Charge. We will not deduct a surrender charge if, at
the time we receive your request for a withdrawal or a surrender, we have also
received due proof that you have been confined continuously to a "Qualifying
Hospital or Nursing Care Facility" for at least 45 days in a 60 day period. We
define "Qualifying Hospital or Nursing Care Facility" in your Contract.
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, we
consider each written or telephone request to be one transfer, regardless of the
number of Sub-Accounts affected by the transfer. In the event that the transfer
charge becomes applicable, we will deduct it proportionately from the
Sub-Accounts from which you made the transfer. 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.
Fund Expenses
Because the Variable Account purchases shares of the various Funds you
choose, the net assets of the Variable Account will reflect the investment
management fees and other operating expenses incurred by those Funds. Below is a
table of each Fund's management fees and other expenses. For a description of
each Fund's expenses, management fees, and other expenses, see the Trusts'
prospectuses.
Fund Annual Expenses (as a percentage of average daily net assets of a Fund)
Total Expenses
Management Fees Other Expenses (after fee
(after fee (after waivers and
waiver reimbursement- reimbursements,
Fund as applicable) as applicable) as applicable)
---- --------------- -------------- ---------------
AIM VARIABLE INSURANCE FUNDS,
INC.:
AIM V.I. Government Securities
Fund.......................... 0.50% 0.26% 0.76%
AIM V.I. Growth and Income
Fund.......................... 0.61 0.04 0.65
AIM V.I. International Equity
Fund.......................... 0.75 0.16 0.91
AIM V.I. Value Fund............ 0.61 0.05 0.66
THE ALGER AMERICAN FUND:
Alger American MidCap Growth
Portfolio..................... 0.80 0.04 0.84
Alger American Income and
Growth Portfolio.............. 0.625 0.075 0.70
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(/4/)
Colonial Small Cap Value Fund,
Variable Series............... 0.80 0.20 1.00(/4/)
Colonial Strategic Income Fund,
Variable Series............... 0.65 0.13 0.78
Colonial U.S. Stock Fund,
Variable Series............... 0.80 0.10 0.90
Liberty All-Star Equity Fund,
Variable Series............... 0.76 0.24 1.00(/4/)
Newport Tiger Fund, Variable
Series........................ 0.90 0.40 1.30
Stein Roe Global Utilities
Fund, Variable Series......... 0.65 0.17 0.82
STEINROE VARIABLE INVESTMENT
TRUST:
Stein Roe Growth Stock Fund,
Variable Series............... 0.65 0.05 0.70
Stein Roe Balanced Fund,
Variable Series............... 0.60 0.05 0.65
MFS(R) VARIABLE INSURANCE
TRUST SM:
MFS Growth With Income Series.. 0.75 0.13 0.88
MFS High Income Series......... 0.75 0.28 1.03
MFS Research Series............ 0.75 0.11 0.86
MFS Total Return Series........ 0.75 0.16 0.91
MFS Capital Opportunities
Series (formerly MFS Value
Series)....................... 0.75 0.27(/5/) 1.02(/5/)
MORGAN STANLEY DEAN WITTER
UNIVERSAL FUNDS, INC.:
Global Equity Portfolio........ 0.32(/6/) 0.83 1.15(/6/)
Mid Cap Value Portfolio........ 0.23(/6/) 0.82 1.05(/6/)
Value Portfolio................ 0.08(/6/) 0.77 0.85(/6/)
OPPENHEIMER VARIABLE FUNDS:
Oppenheimer Bond Fund/VA....... 0.72 0.02 0.74
Oppenheimer Capital
Appreciation Fund/VA
(formerly Oppenheimer Growth
Fund)......................... 0.72 0.03 0.75
Oppenheimer Small Cap Growth
Fund/VA....................... 0.75 0.12 0.87
SAGE LIFE INVESTMENT TRUST:
EAFE(R) Equity Index Fund*..... 0.73(/7/) 0.17 0.40(/7/)
S&P 500 Equity Index Fund**.... 0.38(/7/) 0.17 0.55(/7/)
Money Market Fund.............. 0.48(/7/) 0.17 0.65(/7/)
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
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(1) Currently, we do not assess a 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?"
(4) Without fee waivers and expense reimbursements, the management fees, the
other expenses and total expenses for each of the following Liberty
Variable Investment Trust Funds' during 1998 would have been: Colonial
High Yield Securities Fund, Variable Series 60%, 1.24%, and 1.84%;
Colonial Small Cap Value Fund, Variable Series .80%, 3.54%, and 4.34%;
and Liberty All-Star Equity Fund, Variable Series .80%, .24%, and 1.04%.
(5) Without reimbursements, the management fees, the other expenses, and
total expenses for MFS' Capital Opportunities Series would have been
0.75%, 0.45%, and 1.20%.
(6) Without fee waivers, the management fees, the other expenses, and total
expenses for each of the following Morgan Stanley Dean Witter Universal
Funds, Inc. portfolios would have been: Global Equity Portfolio, 0.80%,
0.83%, and 1.63%; Mid Cap Value Portfolio, 0.75%, 0.82%, and 1.57%; Value
Portfolio, 0.55%, 0.77%, and 1.32%.
(7) These Funds commenced operations in February 1999. The figures shown are
based on estimates. Without fee waivers, the management fees, the other
expenses, and total expenses for each of the Funds would have been:
EAFE(R) Equity Index Fund, 0.90%, 0.17%, and 1.07%; S&P 500 Equity Index
Fund, 0.55%, 0.17%, and 0.72%; and Money Market Fund, 0.65%, 0.17%, and
0.82%.
* The EAFE(R) Index is the exclusive property of Morgan Stanley Capital
International ("MSCI"). This Fund is not sponsored, endorsed, sold or
promoted by MSCI or any affiliate of MSCI.
** S&P 500(R) is a trademark of the McGraw-Hill Companies, Inc. and has been
licensed for use by Sage Advisors, Inc. The S&P 500 Equity Index Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's, and
Standard & Poor's makes no representation regarding the advisability of
investing in the Fund.
5. HOW WILL MY CONTRACT BE TAXED?
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 situations. This discussion is not intended as tax
advice. Please consult counsel or other competent tax advisers for more complete
information. This discussion is based upon our understanding of the present
Federal income tax laws as they are currently interpreted by the Internal
Revenue Service (the "Service"). No representation is made as to the likelihood
of continuation of the present Federal income tax laws or of the current
interpretations by the Internal Revenue Service.
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If you are considering a Contract in connection with a qualified retirement
plan, you should consult a qualified tax adviser.
Tax Status of the Contract
Definition of Life Insurance. Section 7702 of the Code defines a life
insurance contract for Federal income tax purposes.
The Section 7702 definition can be met if a life insurance contract
satisfies either one of two tests in that section. The manner in which these
tests should be applied to certain features of the Contract is not directly
addressed by Section 7702 or proposed regulations issued under that section. The
presence of these Contract features, the absence of final regulations, and the
lack of other pertinent interpretations of Section 7702, thus create some
uncertainty about the application of Section 7702 to the Contract.
Nevertheless, we believe that it is reasonable to conclude that the Contract
qualifies as a life insurance contract for federal tax purposes, so that:
o the death benefit should be fully excludible from the gross income of
the beneficiary under Section 101(a)(1) of the Code; and
o the Owner should not be considered in constructive receipt of the
Surrender Value, including any increases, unless and until they are
distributed from the Contract.
If a Contract were determined not to be a life insurance contract for purposes
of Section 7702, it would not provide most of the tax advantages normally
provided by a life insurance contract. Therefore, we reserve the right to make
changes in the Contract if we deem them necessary to attempt to assure its
qualification as a life insurance contract for tax purposes.
Diversification and Investor Control. Section 817(h) of the Code
requires that the investments of each of the Sub-Accounts must be "adequately
diversified" in accordance with Treasury regulations in order for the Contract
to qualify as a life insurance contract under the Code. The Sub-Accounts,
through the Funds, intend to comply with the diversification requirements
prescribed in Treas. Reg. Section 1.817-5, which affect how a Fund's assets are
to be invested. We believe that the Sub-Accounts will, therefore, meet the
diversification requirements, and we will monitor continued compliance with this
requirement.
In certain circumstances, owners of variable life insurance contracts
may be considered the owners, for federal income tax purposes, of the assets of
the sub-accounts used to support their contracts. In those circumstances, income
and gains from the sub-account assets would be included in the variable contract
owner's gross income. The IRS has stated in published rulings that a variable
contract owner will be considered the owner of sub-account assets if the
contract owner possesses incidents of ownership in those assets, such as
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the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Owner), rather than
the insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets."
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of sub-account assets. For
example, an Owner has additional flexibility in allocating purchase payments and
Contract values and the investment objective of certain Funds may be narrower.
These differences could result in an Owner being treated as the owner of a pro
rata portion of the assets of the Sub-Accounts. In addition, Sage Life does not
know what standards will be set forth, if any, in the regulations or rulings
that the Treasury Department has stated it expects to issue. Therefore, we
reserve the right to modify the Contract as necessary to attempt to prevent an
Owner from being considered the owner of a pro rata share of the assets of the
Sub-Accounts.
The following discussion assumes that the Contract will qualify as a
life insurance contract for federal income tax purposes.
Tax Treatment of Contract Benefits
In General. We believe that the proceeds and Account Value increases of
a Contract should be treated in a manner consistent with a fixed-benefit life
insurance contract for federal income tax purposes. Thus, the death benefit
under the Contract should be excludable from the gross income of the Beneficiary
under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Contract, a Contract
loan, a withdrawal, a surrender, a change in ownership, or an assignment of the
Contract may have federal income tax consequences. In addition, federal, state
and local transfer, and other tax consequences of ownership or receipt of
Contract proceeds depend on the circumstances of each Owner or Beneficiary.
The Contract may continue after the Insured attains age 100. The tax
consequences associated with continuing a Contract beyond age 100 are unclear. A
qualified tax adviser should be consulted on this issue.
The Contract may also be used in various arrangements, including
non-qualified deferred compensation or salary continuation plans, split dollar
insurance plans, executive bonus plans, retiree medical benefit plans and
others. The tax consequences of these plans may vary depending on the particular
facts and circumstances of each individual
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arrangement. Therefore, if you are considering using a Contract in any
arrangement the value of which depends in part on its tax consequences, you
should consult a qualified tax adviser regarding the tax attributes of the
particular arrangement. Moreover, in recent years, Congress has adopted new
rules relating to corporate owned life insurance. Any business considering the
purchase of a new life insurance contract or a change in an existing contract
should consult a qualified tax adviser.
Generally, the Owner will not be deemed to be in constructive receipt of
the Contract Account Value, including increments thereof, until there is a
distribution. The tax consequences of distributions from, and loans taken from
or secured by, a Contract depend on whether the Contract is classified as a
"Modified Endowment Contract." You should be aware that in almost all cases, the
Contracts will be Modified Endowment Contracts. Whether a Contract is or is not
a Modified Endowment Contract, upon a surrender or lapse of a Contract, if the
amount received plus the amount of indebtedness exceeds the total investment in
the Contract, the excess will generally be treated as ordinary income subject to
tax.
Modified Endowment Contracts. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts." In general, a
Contract will be a Modified Endowment Contract if the accumulated premiums paid
at any time during the first seven Contract Years exceed the sum of the net
level premiums that would have been paid on or before such time if the Contract
provided for paid-up future benefits after the payment of seven level annual
premiums. The determination of whether a Contract will be a Modified Endowment
Contract after a material change generally depends upon the relationship of the
death benefit and Contract Account Value at the time of the change and the
additional premiums paid in the seven years following the material change. While
classification as a Modified Endowment Contract therefore will depend on the
individual circumstances of each Contract, in almost all cases the Contracts are
expected to be Modified Endowment Contracts.
Distributions from Contracts Classified as Modified Endowment Contracts.
Contracts classified as Modified Endowment Contract will be subject to the
following tax rules: First, all distributions, including distributions upon
surrender and withdrawals, are treated as ordinary income subject to tax up to
the amount equal to the excess (if any) of the Contract Account Value
immediately before the distribution over the investment in the Contract
(described below) at such time. Second, loans taken from or secured by such a
Contract are treated as distributions and taxed accordingly. Past due loan
interest that is added to the loan amount will be treated as a loan. Third, a 10
percent additional Federal income tax is imposed on the portion of any
distribution from, or loan taken from or secured by, such a Contract that is
included in income except where the distribution or loan is made on or after the
Owner attains age 59 1/2, is attributable to the Owner's becoming disabled, or
is part of a series of substantially equal periodic payments for the life (or
life expectancy) of the Owner or the joint lives (or joint life expectancies) of
the Owner and the Owner's beneficiary.
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If a Contract becomes a Modified Endowment Contract after we issue it,
distributions made during the Contract Year in which it becomes a Modified
Endowment Contract, distributions in any subsequent Contract Year and
distributions within two years before the Contract becomes a Modified Endowment
Contract will be subject to the tax treatment described above. This means that a
distribution from a Contract that is not a Modified Endowment Contract could
later become taxable as a distribution from a Modified Endowment Contract.
DISTRIBUTIONS FROM CONTRACTS NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS.
Any Contract we issue in exchange for a Modified Endowment Contract will be
subject to the tax treatment accorded to Modified Endowment Contracts. However,
we believe that any Contract we issue in exchange for a life insurance contract
that is not a Modified Endowment Contract generally will not be treated as a
Modified Endowment Contract if the death benefit of the Contract is greater than
or equal to the death benefit of the contract being exchanged. The payment of
any premiums at the time of or after the exchange may, however, cause the
Contract to become a Modified Endowment Contract. A Contract Owner may, of
course, choose not to exercise the right to make additional payments in order to
prevent a Contract from being treated as a Modified Endowment Contract. Since
the rules as to whether that Contract could become a Modified Endowment
Contract as the result of a proposed Contract transaction are complex and cannot
be fully described in this summary, Owners should consult with a qualified tax
advisor to determine whether such a Contract transaction would cause a Contract
that is not a Modified Endowment Contract to be treated as a Modified Endowment
Contract.
If your Contract is not a Modified Endowment Contract because of an exchange
described above, distributions from the Contract are generally treated as first
recovering the investment in the Contract (described below) and then, only after
the return of all such investment in the Contract, as distributing taxable
income. An exception to this general rule occurs in the case of a decrease in
the Contract's death benefit or any other change that reduces benefits under the
Contract in the first 15 years after the Contract is issued and that results in
a cash distribution to the Owner in order for the Contract to continue complying
with the Section 7702 definitional limits. Such a cash distribution will be
taxed in whole or in part as ordinary income (to the extent of any gain in the
Contract) under rules prescribed in Section 7702.
Loans from, or secured by, a Contract that is not a Modified Endowment
Contract are not treated as distributions. Instead, such loans are generally
treated as indebtedness of the Owner. However, the tax consequences associated
with a preferred loan from, or secured by, a contract that is not a Modified
Endowment Contract are unclear and a tax advisor should be consulted before
effecting such a loan. See "How Do I Access My Money?"
Finally, the 10 percent additional penalty tax does not apply to
distributions (including distributions upon surrender) and loans from, or
secured by, a Contract that is not a Modified Endowment Contract.
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Market Value Adjustments. There is no definitive guidance on the proper tax
treatment of Market Value Adjustments, an Owner should consult with a qualified
tax adviser with respect to the potential tax consequences of such an
adjustment.
Contract Loan Interest. Interest paid on any loan under a Contract generally
is not deductible. An Owner should consult a tax adviser before deducting any
Contract loan interest.
Investment in the Contract. Investment in the Contract means: (i) the
aggregate amount of any premiums or other consideration paid for a Contract,
minus (ii) the aggregate amount received under the Contract that is excluded
from gross income of the Owner (except that the amount of any loan from, or
secured by, a Contract that is a Modified Endowment Contract, to the extent the
amount is excluded from gross income, will be disregarded), plus (iii) the
amount of any loan from, or secured by, a Contract that is a Modified Endowment
Contract to the extent that the amount is included in the gross income of the
Owner.
Multiple Policies. All Modified Endowment Contracts that we (or our
affiliates) issue to the same Owner during any calendar year are treated as one
Modified Endowment Contract for purposes of determining the amount includible in
the gross income under Section 72(e) of the Code.
Pension or Profit-Sharing Plan or Similar Deferred Compensation Arrangement.
If the Contract is used in connection with a pension or profit-sharing plan, or
similar deferred compensation arrangement, the Federal, state and estate tax
consequences could differ. The amounts of life insurance that may be purchased
on behalf of a participant in a pension or profit-sharing plan are limited. The
current cost of insurance for the net amount at risk is treated as a "current
fringe benefit" and must be included annually in the plan participant's gross
income. We report this cost (generally referred to as the "P.S. 58" cost) to the
participant annually. If the plan participant dies while covered by the plan and
the Contract proceeds are paid to the participant's beneficiary, then the excess
of the death benefit over the cash value is not taxable. However, the cash value
will generally be taxable to the extent it exceeds the participant's cost basis
in the Contract. Contracts owned under these types of plans may be subject to
restrictions under the Employee Retirement Income Security Act of 1974
("ERISA"). You should consult a qualified adviser regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy tax
requirements to be treated as non-taxable. Plan loan requirements and provisions
may differ from Contract loan provisions. Failure of plan loans to comply with
the requirements and provisions of the DOL regulations and of tax law may result
in adverse tax consequences and/or adverse consequences under ERISA. Plan
fiduciaries and participants should consult a qualified adviser before
requesting a loan under a Contract held in connection with a retirement plan.
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Other Arrangements. If the Contract is used in connection with various other
arrangements, including non-qualified deferred compensation or salary
continuance plans, split dollar insurance plans, executive bonus plans, tax
exempt and non-exempt welfare benefit plans, retiree medical benefit plans and
others, the tax consequences of such plans may vary depending on the particular
facts and circumstances. If you are purchasing the Contract for any arrangement
the value of which depends in part on its tax consequences, you should consult a
qualified tax adviser. In recent years, moreover, Congress has adopted new rules
relating to life insurance owned by businesses. Any business contemplating the
purchase of a new Contract or a change in an existing Contract should consult a
tax adviser.
Possible Legislative Changes
Although the likelihood of legislative changes is uncertain, there is always
the possibility that tax treatment of the Contract could change by legislation
or other means. Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change). You should
consult a qualified tax adviser with respect to legislative developments and
their effect on the Contract.
Possible Charge for Sage Life's Taxes
At the present time, we make no charge for any Federal, state or local taxes
that we incur that may be attributable to the Sub-Accounts or to the Contracts.
However, we reserve the right to make additional charges in the future for any
such tax or other economic burden resulting from the application of the tax laws
that we determine to be properly attributable to the Sub-Accounts or to the
Contracts. If any tax charges are made in the future, they will be accumulated
daily and transferred from the applicable Sub-Account to our General Account. We
will retain any investment earnings on tax charges accumulated in a Sub-Account.
6. HOW DO I ACCESS MY MONEY?
You may access the money in your Contract: (1) by making a withdrawal or a
surrender, or (2) by taking a loan from your Contract. If you surrender your
Contract, you can take the proceeds in a single sum, or you can request that we
pay the proceeds over a period of time under one of our Settlement Options. See
"What Are My Settlement Options?"
Withdrawals
You may withdraw all or part of your Surrender Value at any time while your
Contract is in force during the Insured's lifetime. You may make your withdrawal
request in writing or by telephone. See "Requesting Payments." Any withdrawal
must be at least $250. If a withdrawal request would reduce your 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
your Account Value below $5,000, we reserve the right to treat the request as a
withdrawal of only the excess over $5,000. We will pay you the
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withdrawal amount in one sum. Under certain circumstances, we may delay this
payment. See "Requesting Payments."
When you request a withdrawal, you can direct how we deduct the withdrawal
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.
When you make a withdrawal, we reduce the Account Value by the amount of the
withdrawal (including any associated surrender charges and Market Value
Adjustment incurred). We also reduce the Insurance Amount by the same percentage
that the withdrawal (including any associated surrender charge and Market Value
Adjustment incurred) reduced Account Value.
A withdrawal may have adverse tax consequences. See "How Will My Contract
Be Taxed?"
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 Sub-Accounts. You select the day we take the withdrawals, but
this day can be no later than the 28th day of the month. If you do not select a
day, we will use the day of each month that corresponds to your Contract Date.
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.
o If you elect earnings, we will deduct the withdrawals from the
Sub-Accounts in which you are invested on a pro-rata basis.
o 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 tell us otherwise. Any amount in excess of
the Free Withdrawal Amount may be subject to a surrender charge. See
"What Are The Expenses Under A Contract?" Also, any amount in excess
of interest earned on a Fixed Sub-Account in the prior Guarantee
Period ordinarily will be subject to a Market Value Adjustment. See
"What Are My Investment Options?"
You may participate in the systematic partial withdrawal program at any
time during the Insured's lifetime by providing Satisfactory Notice. Once we
receive 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 the systematic
partial withdrawal program at any time and for any reason.
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Systematic partial withdrawals are not available while you are participating in
the dollar-cost averaging program.
A systematic withdrawal may have adverse tax consequences. See "How Is
My Contract Taxed?"
Surrenders
You may cancel and surrender your Contract at any time during the Insured's
lifetime. Your Contract will terminate on the date we receive your request or a
later date as you might request. We will pay you the Surrender Value in one sum
unless you choose a Settlement Option. Under certain circumstances, we may delay
payments of proceeds from a surrender. See "Requesting Payments"
A surrender may have adverse tax consequences. See "How Will My Contract Be
Taxed?"
Loans
While your Contract is in force and after the Free Look Period, you may
request a loan by giving us Satisfactory Notice. Unless you tell us otherwise,
we will transfer an amount equal to the loan from the Sub-Accounts to the Loan
Account in proportion to the Account Value in each Sub-Account in which you are
invested as of the date we process the loan. We use the Loan Account Value as
collateral for your loan. Your Contract will be the only security we require for
the loan. Any loan must be at least $250.
A loan may have adverse tax consequences. See "How Is My Contract Taxed?"
Maximum Loanable Value. The maximum amount that you may borrow ("maximum
loanable value") is 90% of the Account Value less any surrender charge and less
any due and unpaid Monthly Deduction Amount. The amount of the loan and all
existing loans may not be more than the maximum loanable value as of the loan
date, which is the date we process the loan.
If on any Business Day where there is Debt outstanding and the Surrender
Value is negative, we will send you an overloan notice at your last known
address. You will then have 61 days from the date we send the notice to avoid
termination of your Contract by paying us at least the minimum repayment amount
listed in the notice.
Loan Repayment. You may repay all or part of your loan at any time while
your Contract is in force during the Insured's lifetime. Any loan repayment must
be at least $250. If the Grace Period has expired and the Contract has
terminated, any Debt that exists at the end of the Grace Period may not be
repaid unless you reinstate your Contract.
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Unless you tell us otherwise, we will transfer an amount equal to the
loan repayment from the Loan Account to the Sub-Accounts in the same proportion
as your most recent purchase payment.
Loan Interest. Interest on the loan accrues daily at a Loan Interest Rate
of 6% per annum, and is due on each Contract Anniversary. If you do not pay loan
interest when due, we will transfer the difference between the Loan Account and
Debt from the Sub-Accounts to the Loan Account in proportion to the Account
Value in each Sub-Account in which you are invested.
Interest Credited. The portion of your Account Value represented by the
Loan Account will earn interest daily from the date of transfer at a minimum
Loan Credited Rate of 4% per annum.
However, the Preferred Loan Amount will earn interest daily at a Loan
Credited Rate that is currently 6% per annum. The Preferred Loan Amount equals:
o The part of a Loan equal to cumulative earnings (i.e., the excess
of the Account Value on the date of the Loan over unliquidated
purchase payments), and
o Any loan carried over from an existing contract to a Contract as
part of a valid 1035 Exchange, as defined by the Internal Revenue
Code.
Effects of a Loan. When you take out a loan, we transfer funds
proportionately from the Sub-Accounts in which you are invested to the Loan
Account. We also will transfer any loan interest that becomes due that you do
not pay from your Sub-Accounts to the Loan Account. A Market Value Adjustment
may apply to amounts taken from the Fixed Sub-Accounts.
Since we transfer the amount you borrow from the Sub-Accounts, a loan
whether or not repaid, will have a permanent effect on your Surrender Value and
may have a permanent effect on your death benefit. This is because the Loan
Account does not share in the investment results of the Sub-Accounts. Rather,
the Loan Account earns interest daily at the Loan Credited Rate. Depending upon
how the investment results compare to the Loan Credited Rate, this effect may be
favorable or unfavorable. This is true whether you repay the loan or not. If not
repaid, the loan will reduce the amount of Death Proceeds.
Requesting Payments
You must provide us with Satisfactory Notice of your request for
payment. We will ordinarily pay any Death Proceeds, loan, withdrawal, or
surrender proceeds within seven days after receipt at our Customer Service
Center of all requirements. We will determine the amount as of the date our
Customer Service Center receives all requirements.
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We may delay making a payment, applying proceeds to a Settlement Option,
or processing a transfer request if:
o 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
o the SEC, by order, permits postponement of payment to protect
our 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, loan, or transfer request
for up to six months from the date we receive the request, if permitted by state
law.
If we defer payment 30 days or more, the amount deferred will earn
interest at a rate not less than the minimum required in the jurisdiction in
which we delivered the Contract.
7. HOW IS CONTRACT PERFORMANCE PRESENTED?
Articles discussing the Variable Account's investment performance,
rankings, and other characteristics may appear in publications. Some or all of
these publishers or ranking services (including, but not limited to, Lipper
Analytical Services and Morningstar, Inc.) may publish their own rankings or
performance review of variable contract separate accounts, including the
Variable Account. We may use references to or reprints of such articles or
rankings as sales material, and may include rankings that indicate the names of
other variable contract separate accounts and their investment experience.
Publications may use articles and releases, developed by us, the Funds
and other parties, about the Variable Account or the Funds. We may use
references to or reprints of such articles in sales material for the Contracts
or the Variable Account. Such literature may refer to personnel of the advisers,
who have portfolio management responsibility, and their investment style and
include excerpts from media articles.
If we quote performance data, the data will represent past performance
and you should not view it as any indication of future performance. Amounts you
invest in the Variable Sub-Accounts will fluctuate daily based on Fund
investment performance, so the value of your investment may increase or
decrease. The hypothetical illustrations beginning on page ___ of this
Prospectus show how the performance of the Funds may affect Contract values.
8. WHAT IS THE DEATH BENEFIT UNDER MY CONTRACT?
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The Contract provides for a payment to your designated Beneficiary if
the Insured dies while the Contract is in force. This payment is called the
"Death Proceeds," and equals:
o the death benefit described below; plus
o any additional insurance on the Insured's life that may be provided
by riders to the Contract; minus
o any Debt from Contract loans, minus
o any due and unpaid charges; and minus
o any amounts previously paid under the Accelerated Death Benefit
Rider plus accrued interest.
The Death Proceeds will be adjusted in certain circumstances. See
"Incontestability," "Suicide," and "Misstatement of Age or Sex" in "What Other
Information Should I Know?"
You or your Beneficiary decides how he or she wishes to receive the Death
Proceeds. You or your Beneficiary can elect payment in a single sum, in which
case your Contract will terminate; or you or your Beneficiary may apply proceeds
under one of the Settlement Options in your Contract. See "What Are My
Settlement Options?"
Death Benefit. At issue, your death benefit equals your Insurance Amount
shown in your Contract. On any Business Day after that, it equals the greater
of:
o the Insurance Amount; or
o the Minimum Death Benefit.
However, if the state in which we issue a Contract does not allow us to
deduct a cost of insurance charge on or after the Contract Anniversary when the
Insured reaches age 100, we will limit the death benefit on and after that
anniversary to the Minimum Death Benefit. The tax consequences associated with
continuing a Contract after the Insured reaches age 100 are unclear.
Insurance Amount. The initial Insurance Amount depends on the amount of
your initial purchase payment and the age and sex of the proposed Insured. It
remains level unless you make additional purchase payments or withdrawals.
Additional payments may increase the Insurance Amount. See "Insurance Amount
Increases" below. Withdrawals reduce the Insurance Amount in the same proportion
as the Account Value is reduced.
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Minimum Death Benefit. To ensure that the Contract continues to qualify as
life insurance under the Code, each Business Day we will calculate a Minimum
Death Benefit. The Minimum Death Benefit equals (a) times (b), where:
(a) is the Account Value plus any positive Market Value Adjustment on
the date of calculation; and
(b) is the Minimum Death Benefit Percentage from the table below.
Table of Minimum Death Benefit Percentages
------------------------------------------
Attained Attained Attained
Age Percentage Age Percentage Age Percentage
- -------- ---------- -------- ---------- --------- ----------
0 - 40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75-90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94-99 101%
52 171% 66 119% 100+ 100%
53 164% 67 118%
Since positive investment performance increases your Account Value, it may
increase your death benefit to the extent that the Minimum Death Benefit is
greater than the Insurance Amount. Conversely, since negative investment
performance decreases your Account Value, it may decrease your death benefit,
but never below the Insurance Amount.
Proof of Death. We will pay the Death Proceeds to your Beneficiary after
we receive satisfactory proof of death at our Customer Service Center. We will
accept one of the following items:
1. An original certified copy of an official death certificate, or
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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.
Insurance Amount Increases. If you make additional purchase payments, we
may have to increase your Insurance Amount so that your Contract continues to
qualify as life insurance under the Code. We reserve the right to require
satisfactory evidence of insurability of any increase in the Insurance Amount.
In addition, we reserve the right to require that the Insured's risk class be
identical to that on the Contract Date. Other than in connection with making
additional purchase payments, we do not currently permit you to request an
increase in your Insurance Amount.
9. WHAT SUPPLEMENTAL BENEFITS ARE AVAILABLE UNDER MY CONTRACT?
The following supplemental benefits are available under the Contracts by
rider. We include these riders automatically in your Contract at no additional
cost. The riders have certain conditions and use special terms and may not be
available in all states.
Accelerated Death Benefit Rider. The Accelerated Death Benefit Rider
provides you with access to a portion of the death benefit during the Insured's
lifetime, if the Insured is diagnosed as having a terminal illness. You can
request to receive up to 50% of the Insurance Amount up to a maximum of
$500,000.
You must provide us with proof that the Insured has a terminal illness.
You may receive an accelerated benefit amount only once. The accelerated benefit
amount will first be used to repay any outstanding Debt. We will pay any amount
in excess of the outstanding Debt to you in a lump sum. Other conditions apply.
Accidental Death Benefit Rider. The Accidental Death Benefit Rider
provides an additional death benefit called the accidental death benefit. This
additional benefit will equal the purchase payments made minus any withdrawals
(including any associated surrender charge or Market Value Adjustment incurred),
determined as of the date of the Insured's death (or the next Business Day if
the Insured dies on other than a Business Day), up to a maximum of $250,000.
To qualify for this benefit, the Insured's death must: (i) occur before
the first Contract Anniversary after the Insured attains age 80; and (ii) be a
direct result of accidental bodily injury, independent of all other causes.
Further, all the terms and conditions described in the Contract must be
satisfied, including the requirement that we receive satisfactory proof of
accidental death at our Customer Service Center within 30 days after an
accidental death or as soon thereafter as reasonably possible. We will pay the
accidental death benefit to the Beneficiary or the
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person entitled to receive the death benefit under the Contract, after receipt
of satisfactory proof of accidental death.
We terminate the accidental death benefit provision:
o when we pay the benefit;
o when you surrender the Contract or apply the entire Surrender Value to a
Settlement Option;
o when we distribute the interest in the Contract due to the death of an
Insured; or
o when you request termination of the benefit.
Waiver of Surrender Charge Rider. The Waiver of Surrender Charge Rider
provides that we will not deduct a surrender charge if, when you submit your
request for a withdrawal or a surrender, you also submit due proof that you have
been confined continuously to a "Qualifying Hospital or Nursing Care Facility"
for at least 45 days in a 60 day period. We define "Qualifying Hospital or
Nursing Care Facility" in your Contract.
10 . WHAT ARE MY SETTLEMENT OPTIONS?
You may elect to have the Surrender Value or Death Proceeds paid in a
single sum or under one of our Settlement Options if your Account Value is at
least $5,000. You select a Settlement Option from the list below, and indicate
whether you want your income payments to be fixed or variable or a combination
of fixed and variable.
On the date the Settlement Option becomes effective, the Surrender Value
under the Contract will be used to provide income payments. Unless you request
otherwise, we will use any Variable Account Value to provide variable income
payments, and we will use any Fixed Account Value to provide fixed income
payments.
You may elect one of the Settlement Options shown below (or any other
option acceptable to us). For ease of describing these Settlement Options, we
assume that you apply the Surrender Value and receive the income payments from
one of the options below. Of course, you may always designate someone other than
yourself to receive the income payments, and your designated Beneficiary will
receive the income payments from any Death Proceeds.
Option 1 - Payments for Life: You will receive payments for your
life.
Option 2 - Life Annuity with 10 or 20 Years Certain: You will
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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.
Option 3 - Joint and Last Survivor Life Annuity: We will make
payments as long as either you or a second person you select
(such as your spouse) is alive.
Option 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.
Your income payments will made monthly, unless you or the Beneficiary,
as the case may be, choose quarterly, semi-annual or annual payments by giving
us Satisfactory Notice. Each payment must be at least $100. 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.
If you told us that you want a life annuity, it is possible that you
could only receive one payment.
We will base your first income payment, whether fixed or variable, on
the amount of proceeds applied under the Settlement Option you or the
Beneficiary, as the case may be, have selected and on the applicable "purchase
rates." These rates vary based on the age and sex of the person that will
receive the income payments (the "Payee") and if applicable upon the age and sex
of a second designated person. The purchase rate we apply will never be lower
than the rate shown in your Contract.
If you told us you want fixed income payments, we guarantee the amount
of each income payment and it 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.
Variable Income Payments. 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 will allow you to tailor your variable income payments to meet your needs by
giving you a choice of rates. Currently, you 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 net
positive investment performance
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greater than the assumed investment rate). Conversely, the higher the rate, the
higher your initial variable income payment, but the less likely your payments
will keep pace with inflation (assuming net positive investment performance
greater than the assumed investment rate).
For example, if you select 6%, this means that if the investment
performance, after expenses, of your Funds is less than 6%, then the dollar
amount of your variable income payment will decrease. Conversely, if the
investment performance, after expenses, of your Funds is greater than 6%, then
the dollar amount of your income payments will increase.
Your variable payments will fluctuate based on Variable Sub-Account
performance. 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. We
will determine the Income Unit values for each payment 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 Unit Value. We calculate the value of an Income Unit at the same
time that we calculate the value of an Accumulation Unit and base it 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. After that, we
determine the Income Unit value for every Business Day 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 for the number of days in the Valuation Period.
Under a Settlement Option, we calculate the net investment factor
slightly different than is otherwise the case. Before a Settlement Option is
elected, we calculate Asset-Based Charges as a percentage of the Account Value
on the date of deduction. These charges on an annual basis equal 1.80%,
decreasing to 1.30% after the tenth Contract Year. However, once a Settlement
Option is elected, we call these charges Variable Sub-Account Charges and deduct
them from the assets in each Variable Sub-Account on a daily basis. Therefore,
we determine the "net investment factor" in (b), above, by dividing (i) by (ii),
and then subtracting (iii) where:
(i) is the Accumulation Unit value for the current Valuation Period;
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(ii) is the Accumulation Unit value for the immediately preceding
Valuation Period; and
(iii) is the daily equivalent Variable Sub-Account Charges (adjusted
for the number of days in the Valuation Period).
Exchange of Income Units. Under a Settlement Option, 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.
11. WHAT OTHER INFORMATION SHOULD I KNOW?
Sage Life Assurance of America, Inc.
We are a Delaware stock life insurance company that is wholly owned by
Sage Life Holdings of America, Inc. (Sage Life Holdings), also a Delaware
Corporation. Sage Life Holdings is, in turn, wholly owned by Sage Insurance
Group Inc., also a Delaware Corporation. Our Executive Office is located at 300
Atlantic Street, Stamford, CT 06901. We were incorporated in 1981 and have been
engaged in the life insurance business since that year. We are subject to
regulation by the Insurance Department of the State of Delaware as well as by
the insurance departments of all other states and jurisdictions in which we do
business. We sell insurance in 49 states and the District of Columbia. We submit
annual statements on our operations and finance to insurance officials in such
states and jurisdictions. The Contracts described in this Prospectus have been
filed with and, where required, approved by, insurance officials in those
jurisdictions where they are sold.
Separate Accounts
The Sage Variable Life 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. We use the Variable Account
to support the Contracts as well as for other purposes permitted by law. We
registered the Variable Account with the SEC as a unit investment trust under
the 1940 Act and it 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.
We divided the Variable Account 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/SM/, Morgan
Stanley Dean Witter Universal Funds, Inc., Oppenheimer Variable Account Funds,
Sage Life Investment Trust, and T. Rowe Price
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Equity Series, Inc. Variable Sub-Accounts buy and redeem Fund shares at net
asset value without any sales charge. We reinvest any dividends from net
investment income and distributions from realized gains from security
transactions of a Fund 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 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. We maintain it separate from our
General Account and separate from any other separate account that we may have.
We own the assets in the Fixed Account, and also offer the Fixed Account with
our variable annuity contracts. 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. These 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.
We are not required to register the Fixed Account 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 according to instructions received from Owners with
Account Value in the Variable Sub-Accounts. To obtain your voting instructions
before a Fund shareholder meeting, we will send you voting instruction
materials, a voting instruction form, and any other related material. We will
vote shares held by a Variable Sub-Account for which we received no timely
instructions in the same proportion as those shares for which we received voting
instructions. 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:
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o deregister the Variable Account under the 1940 Act;
o operate the Variable Account as a management company under the
1940 Act if it is operating as a unit investment trust;
o operate the Variable Account as a unit investment trust under the
1940 Act if it is operating as a managed separate account;
o restrict or eliminate any voting rights of Owners, or other
persons who have voting rights as to the Variable Account;
o combine the Variable Account with other separate accounts; and
o combine a Variable Sub-Account with another Variable Sub-Account.
We also 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 Delaware
corporation 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. We offer the Contracts on a continuous basis,
and do not anticipate discontinuing their sale. The Contracts may not be
available in all states.
The Contracts are sold by broker-dealers through their registered
representatives 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 7.5%). Broker-dealers
who meet certain productivity and profitability standards may be eligible for
additional compensation.
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Experts
Ernst & Young LLP, independent auditors, have audited our financial
statements for the years ended December 31, 1998 and 1997, as set forth in their
report, which is included in this Prospectus. We included our financial
statements 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
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, we will send you a report
showing information about your Contract for the period covered by the report. We
will also send you 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, we will send you a confirmation of these transactions.
Assignment
You may assign your Contract at any time during the Insured's lifetime.
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 we accept the
assignment. 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.
The Owner
You are the Owner of the Contract. You are also the Insured unless you
named another Insured in the application. You have the rights and options
described in the Contract while the Insured is living and the Contract is in
force. One or more people may own the Contract.
The Beneficiary
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We pay the Death Proceeds to the primary Beneficiary. If the primary
Beneficiary dies before the Insured, we pay the Death Proceeds to the Contingent
Beneficiary, if any. If there is no surviving Beneficiary, we pay the Death
Proceeds to the Owner's estate.
You may name one or more persons as primary Beneficiary or Contingent
Beneficiary. We will assume any Death Proceeds are to be paid in equal shares to
the multiple surviving Beneficiaries, unless you tell us otherwise.
You have the right to change Beneficiaries. However, if you designate
the primary Beneficiary as irrevocable, you may need the consent of that
Beneficiary to exercise the rights and options under your Contract.
Change of Owner or Beneficiary
During your lifetime and while your Contract is in force you can
transfer ownership of your Contract or change the Beneficiary. To make any of
these changes, you must send us Satisfactory Notice. If accepted, any change in
Owner or Beneficiary will take effect on the date you signed the notice. Any of
these changes will not affect any payment made or action we took before our
acceptance. A change of Owner may be a taxable event.
Misstatement And Proof of Age, Sex, or Survival
We may require proof of age, sex, or survival of any person on whose
age, sex, or survival any payments depend. If the age or sex of the Insured has
been misstated, the benefits will be those that the initial purchase payment and
any additional purchase payments would have provided for the correct age and
sex.
Incontestability
We will not contest the payment of the Death Proceeds based upon the
initial purchase payment after the Contract has been in force during the
Insured's lifetime for two years from the Issue Date.
For any increase in Insurance Amount requiring evidence of insurability,
we will not contest payment of the Death Proceeds based on such an increase
after it has been in force during the Insured's lifetime for two year from its
effective date.
Suicide
If the Insured dies by suicide, while sane or insane, within two years
from the Issue Date, we will not pay the Death Proceeds normally payable on the
Insured's death. Instead, we will limit the death benefit to the Account Value
as of the date we receive proof of death. We will otherwise calculate Death
Proceeds in the usual manner.
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If the Insured dies by suicide, while sane or insane, within two years
of any date we receive and accept an additional purchase payment, any amount of
death benefit that would not be payable except for the fact the additional
purchase payment was made will be limited to the amount of such payment.
Authority to Make Agreements
One of our officers must sign all agreements we make. 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.
Participation
The Contract does not participate in the surplus or profits of the
Company, and the Company does not pay dividends on the Contracts.
Safekeeping of Account Assets
We hold the title to the assets of the Variable Account. We keep the
assets physically segregated and hold them separate and apart from our General
Account assets and from the assets in any other separate account.
We maintain records of all purchases and redemptions of Fund shares held
by each of the Variable Sub-Accounts.
Lloyd's of London has issued a fidelity bond in the amount of
approximately $10 million per occurrence covering our directors, officers, and
employees.
Legal Matters
All matters relating to Delaware law pertaining to the Contracts,
including the validity of the Contracts and our authority to issue the
Contracts, have been passed upon by James F. Bronsdon, our Vice President, Legal
and Compliance. Sutherland Asbill & Brennan LLP has provided advice on certain
matters relating to the federal securities laws.
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.
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Computer applications that are affected by the Year 2000 issue could
impact our 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. We used these issues as critical
components in the evaluation and selection of in-house systems and of third
party administrators.
Since we outsource most of our operating functions, there are only a
limited number of in-house systems utilized. At present, the only in-house
system we utilize is the accounting system. This system was certified as Year
2000 compliant before we selected and installed it for operation. We also intend
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.
We have 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 we have received assurances from all of our third party
administrators, we are currently working with them to assess all Year 2000
issues associated with the processing of our applications. This assessment
involves the testing of the data being processed by third party administrators
and electronically interfaced into our accounting system. As to outside
organizations from which we will not be relying on electronic interface, we will
be relying on responses to questionnaires supplied to these service providers as
to their status on Year 2000 compliance. Based upon the responses received from
these third party administrators, we will develop a plan to assure Year 2000
compliance by all third party administrators. We anticipate 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, we have not budgeted any
costs associated with the Year 2000 issue. In addition, Year 2000 costs have
been deemed immaterial.
If any of our third party administrators fail to achieve complete
compliance, it could have a material adverse effect on our ability to conduct
our business, including delays in calculating unit values, redeeming shares,
delivering account statements and providing other information, communication and
servicing to Owners. We believe that we have taken the necessary provisions,
both through selection and testing, to assure that we will not experience any
material adverse effects on our ability to conduct our business. We do, however,
realize the importance of this issue, and we are currently developing a detailed
contingency plan for operations in the unlikely event one or more of our third
party administrators is unable to fulfill its obligations.
Financial Statements
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No financial statements are presented for the Variable Account because
it has yet to commence operations.
We have included the audited financial statements for Sage Life for the
years ended December 31, 1998 and 1997 in this Prospectus. You should consider
these financial statements only as bearing on the ability of Sage Life to meet
its obligations under the Contracts. You should not consider them as bearing on
the investment performance of the assets held in the Variable Account.
12. HOW CAN I MAKE INQUIRIES?
You may make inquiries about your Contract 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.
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HYPOTHETICAL ILLUSTRATIONS OF CONTRACT VALUES
To show you how the Contract works, we have included some hypothetical
illustrations for the following Insureds: a male issue age 45, a female issue
age 55, and a male issue age 65. These illustrations show how Account Values,
Surrender Values and death benefits under a Contract vary over time assuming the
following circumstances:
o An initial purchase payment of $10,000;
o The Insured is in good health, does not smoke and qualifies under
our simplified underwriting program;
o There are no additional purchase payments, no withdrawals, no
charges for supplemental benefits; and
o The Funds earn gross (that is, before deductions for investment
management fees and other operating expenses of the Funds) annual
rates of return of 0%, 6% and 12%.
It is important to understand that the illustrations assume a level rate
of return for all years. The values under a Contract would be different from
those shown if the hypothetical returns averaged 0%, 6% or 12% but fluctuated
over and under those averages throughout the years shown.
The illustrations also reflect an average daily charge equal to an
annual charge of 0.__% of the average daily net assets of the Funds for
investment management fees and other operating expenses. We calculated these
fees based on an average of the expense ratios of each of the Funds (in some
cases, we estimated those fees) for the last year of operations. Taking into
account this average charge, the net annual rates of return for the Variable
Sub-Accounts are %, % and %, respectively. The average daily charge for the Fund
expenses, reflects voluntary expense agreements between certain of the Funds and
their investment managers. These expense agreements could terminate at any time.
See "What Are The Expenses Under A Contract?" If these agreements terminate, the
values shown on the following pages would be less. Accordingly, the illustrated
gross investment rates of 0%, 6%, and 12% would correspond to approximate net
annual rates of __%, ___%, and ___.
The illustrations also reflect the Monthly Deduction and other
applicable charges for the hypothetical Insured. Our current charges and the
higher guaranteed charges we have the contractual right to charge are reflected
in separate illustrations on each of the following pages. All the illustrations
reflect the fact that no charges for Federal or state income taxes are currently
made against the Variable Account.
66
<PAGE>
Each illustration also has a column labeled "Payments Accumulated at 5%
Interest Per Year." This column shows the amount that would accumulate if the
initial purchase payment was invested to earn interest, after taxes, of 5% per
year, compounded annually.
Upon request, we will furnish you a personalized illustration based upon
the proposed Insured's individual circumstances. Such illustrations will reflect
the current cost of insurance charges and the guaranteed maximum cost of
insurance charges and may assume different hypothetical rates of return than
those shown in the following illustrations.
The investment rates of return we have chosen to use in the
illustrations are hypothetical only, and you should understand that they do not
represent actual past or future rates of return. The actual rates of return
under a Contract may be more or less than the hypothetical rates of return in
the illustrations.
67
<PAGE>
[Hypothetical Illustrations to be included in pre-effective amendment]
68
<PAGE>
Part II - Additional Information
Additional Information about Sage Life Assurance of America, Inc.
History and Business
Ownership
Sage Life 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 life insurance business in a majority of states.
Fidelity Mutual Life Insurance Company, a Pennsylvania insurer,
sponsored the Company's formation in 1981 under the name of Fidelity Standard
Life Insurance Company ("Fidelity Life"). Security First Life Insurance Company
"Security First" of Los Angeles, California acquired Fidelity Life in December
1984. In January 1997, 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 and
the Company's ultimate parent, acquired Fidelity Life. The Company changed to
its present name in September 1997. In December 1998, Sage Insurance Group
formed a new company, Sage Life Holdings of America, Inc. ("Sage Life
Holdings"), 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 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, Security First assumption reinsured all of the remaining
annuity business of Fidelity Life. Security First is now a subsidiary of The
Metropolitan Life Insurance Company.
Holding Company Structure and Background
We are an indirect, wholly owned subsidiary of Sage Insurance Group,
which is a holding company for us and affiliated entities conducting life and
annuity insurance business in the United States. We also are 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
69
<PAGE>
marketing company. Sage Group sold its interest in Independent Financial
Marketing Group in March 1996 to the Liberty Financial Companies of Boston.
Sage Group entered into an agreement with Swiss Re Life and Health
America, Inc. ("Swiss Re") on December 1, 1998, whereby Swiss Re will enter into
reinsurance arrangements with us. In addition, Swiss Re invested $12.5 million
in non-voting non-redeemable cumulative preferred stock in a newly formed
company, Sage Life Holdings, that became our immediate parent and a wholly-owned
subsidiary of Sage Insurance Group. It is anticipated that during the second
quarter of 1999, Swiss Re will exchange part of its preferred stock for a voting
interest of not more than 9.9% in Sage Life Holdings. Swiss Re's ultimate parent
is Swiss Reinsurance Company, Switzerland, one of the world's largest life and
health reinsurance groups. The arrangements contemplated by the agreement may be
subject to regulatory approval.
Selected Financial Data
We cannot compare our historical financial results for the calendar year
1996 and all prior years, to the results for the years 1997 and 1998 due to the
substantial change in our business operations. We 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 of our policies other than the
small number of policies that were not 100% assumption reinsured to our former
parent company. We subsequently novated these insurance liabilities during 1998.
Effectively, therefore, since January 1997, we became comparable to a new
company that had not yet begun its business activities.
We present the following selected financial data as of December 31, 1998
and 1997 and for the years then ended, taken from our audited financial
statements. Please read the information below along with the financial
statements, including related notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" we included elsewhere
in this Prospectus.
70
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
(in thousands)
Year ended Year ended
December 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Income Statement Data:
Revenues:
Net investment income $ 1,244 $ 989
Expenses:
Amortization expense 549 325
General and administrative expenses 1,264 1,016
Total expenses 1,813 1,341
Loss before taxes (569) (352)
Income tax expense -- --
Net loss $ (569) $ (352)
======== ========
Balance Sheet Data:
Total Assets $ 36,542 $ 36,689
Stockholder's Equity $ 36,472 $ 33,202
</TABLE>
[To be updated in a pre-effective amendment].
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Introduction
The following discussion highlights the significant factors that influence
our operations. Please read this discussion along with our financial statements
and the related notes included in this Prospectus.
History and Business Overview
71
<PAGE>
During February 1999, we began to market our new variable insurance
products. Sage Insurance Group acquired the Company on December 31, 1996, and
since that date, we have prepared for the recommencement of our insurance
underwriting and marketing activities. (Before the acquisition of the Company,
all new business production and marketing ended in October 1996.) We totally
reengineered our products, systems and administration since the change of
ownership. All of our current senior management are experienced in the insurance
industry (either in the United States or in South Africa). We recruited most of
them since January 1997. Our ongoing business strategy is to focus on the
development, underwriting, and marketing of variable insurance products. Our
obligations under these contracts are supported by (1) variable accounts --
determined by the value of investments held in separate accounts, and (2) fixed
accounts -- backed by investments held in separate accounts. We may not use the
assets of these separate accounts that equal the reserves and other liabilities
supporting the contracts to which they relate, to pay any of our other
obligations or creditors. Currently, we distribute the contracts through banks.
We anticipate that, over the long-term, our distribution channels will expand to
include wirehouses, regional broker-dealers, and financial planners.
Results of Operations
Net losses for the year ended December 31, 1998 were $568,974 and were
$351,786 for the year ended December 31, 1997. As the Company was not
underwriting or marketing insurance products, all revenue for 1998 and 1997 is
derived from investing activities. Effective investment yields for our General
Account were 5.1% for the year ended December 31, 1998, and 5.4% for the year
ended December 31, 1997. General expenses incurred in financing our daily
activities more than offset investment revenue. As we recommence business in
1999, we anticipate that our revenues will increase primarily by charges and
fees associated with products we offer, while our expenses will increase by
acquisition expenses, the cost of administering this new business and the
payment of benefits.
We have capitalized certain costs that have been incurred in the development
and registration of our insurance products and have been paid for by Sage
Insurance Group. We have amortized these development costs on a straight line
basis over fifteen years. Accumulated amortization at December 31, 1998 and
December 31, 1997 was $405,287 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, we wrote-off any unamortized capitalized development costs
on January 1, 1999.
Liquidity and Capital Resources
72
<PAGE>
Since the beginning of 1997, we have needed money primarily to develop our
insurance products and related infrastructure, and to fund our daily operations.
We have met our cash needs through interest income and capital contributions
from Sage Insurance Group.
During 1999, we expect our cash needs will continue to increase as our
underwriting and marketing activities begin. As discussed below, we intend to
enter into a reinsurance arrangement with Swiss Re that will provide an
additional source of cash. We still anticipate that we will be unable to meet
all of our 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 that will provide an additional
source of funds to us for new business expenses. In addition, although not
required to do so, we believe that Sage Insurance Group will continue to provide
capital to us for our non-recurring costs associated with new products and
business development during 1999. Our 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.
Segment Information
We currently plan to conduct our business as a single segment, and
anticipate that this segment will eventually include all of the following
products:
o Combination fixed and variable deferred annuities.
o Combination fixed and variable immediate annuities.
o Combination fixed and variable life insurance products.
Reinsurance
We intend to enter into a coinsurance reinsurance arrangement with Swiss Re,
pursuant to which Swiss Re will reinsure a significant portion of our
liabilities under our variable insurance contracts. This arrangement will
provide additional capacity for growth of our variable insurance business.
In addition, we intend to reinsure certain mortality risks associated with
the guaranteed minimum death benefit and accidental death benefit features of
the Contracts. We intend to use only highly rated reinsurance companies to
reinsure these risks.
Reinsurance does not relieve us from our obligations to Owners. We remain
primarily liable to our Owners to the extent that any reinsurer does not meet
its obligations under the reinsurance agreements.
Reserves
The insurance laws and regulations under which we operate obligate us to
carry on our books, as liabilities, actuarially determined reserves to meet our
obligations on outstanding
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<PAGE>
Contracts. We base our reserves involving life contingencies on mortality tables
in general use in the United States. Where applicable, we compute our reserves
to equal amounts which, together with interest on such reserves computed
annually at certain assumed rates, will be sufficient to meet our Contract
obligations at their maturities or in the event of the 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 December 31, 1998.
Investments
We invested our General Account cash and invested assets of $25.5 million
and $25.3 million at December 31, 1998 and December 31, 1997, respectively,
entirely in investment grade securities and money market funds. It is our stated
policy to refrain from investing in securities having speculative
characteristics. Our 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
We are subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions described below, we must obtain approval of the Insurance
Commissioner of the State of Delaware to pay, in any 12-month period,
Aextraordinary" dividends which are defined as those in excess of the greater of
10% of surplus as regard to shareholders as of the prior year-end and statutory
net income less realized capital gains for such prior year. We may pay dividends
only out of unassigned surplus. In addition, we 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, 1998 the maximum amount of
dividends we could have paid out to our parent without prior approval from state
regulatory authorities was $2,310,910.
New Accounting Standards
As of January 1, 1998, we 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. SFAS
130 requires us to report separately in stockholder's equity the accumulated
balance of other comprehensive income. Our only component of other comprehensive
income is net unrealized gains or losses on available-for-sale securities, which
we report separately in stockholder's equity. The adoption of SFAS 130 had no
impact on our net income or stockholder's equity.
74
<PAGE>
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 us.
Competition
We are 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 products comparable to our products. 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 we are. We are unique in that we are one of the few life insurers confining
its activities to the marketing of separate account variable insurance products.
Transactions with Sage Insurance Group
In 1997, we 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. Under this agreement, we have received $151,348 from Sage
Insurance Group for the year ended December 31, 1998, and we have paid expenses
of $76,048 for the year ended December 31, 1997. In addition, Sage Insurance
Group provides funds to us to meet various operating expenses. We pay these
amounts 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 us. The amount
of these developmental costs paid for by companies affiliated with Sage Life on
December 31, 1998 and December 31, 1997 were $3,270,219 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 us.
Accordingly, these expenditures have been capitalized as development costs and
reflected as contributed capital in our financial statements.
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<PAGE>
Employees
Due to our business strategy of outsourcing our primary administrative and
investment functions to organizations that specialize in these areas, the number
of full time personnel we employ is limited. As of December 31, 1998, we had 14
employees. As of December 31, 1997, we had 8 employees.
Properties
Our executive office is located at 300 Atlantic Street, in Stamford,
Connecticut, where we maintain our primary corporate records. We maintain
customer records at our Customer Service Center.
Sage Insurance Group leases our office space. We reimburse Sage Insurance
Group for the office space under the Cost Sharing Agreement described above.
State Regulation
We are 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"). We file a detailed financial statement in the
prescribed form (the "Statement") with the Insurance Department each year
covering our operations for the preceding year and our financial condition as of
the end of that year. Regulation by the Insurance Department means that the
Insurance Department may examine us and our books and records to determine,
among other things, whether contract liabilities and reserves as we state them
are correct. The Insurance Department, under the auspices of the National
Association of Insurance Commissioners ("NAIC"), will periodically conduct a
full examination of our operations.
In addition, we are subject to regulation under the insurance laws of all
jurisdictions in which we operate. 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. We must file the Statement with supervisory agencies in
each of the jurisdictions in which we do business, and our 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
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<PAGE>
calculate their risk-based capital in accordance with this formula and to
include the results in their Statements. We anticipate that these standards will
have no significant effect upon us.
Further, many states regulate affiliated groups of insurers like us and our
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. Our insurance products are subject to various federal
securities laws and regulations. In addition, current and proposed federal
measures that may significantly affect the insurance business include:
o regulation of insurance company solvency,
o employee benefit regulation,
o removal of barriers preventing banks from engaging in the insurance
business,
o tax law changes affecting the taxation of insurance companies, and
o tax treatment of insurance products and its impact on the relative
desirability of various personal investment vehicles.
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<PAGE>
Directors and Executive Officers
<TABLE>
<S> <C> <C>
Position held with the Other Principal Positions
Name (Age) Company/Year Commenced During Past Five Years
Ronald S. Scowby/1/ Director, 1/97 to present, Chairman and Trustee,
Age 60 Chairman, 2/98 to present Sage Life Investment
Trust, 7/98 to
present; Director,
Sage Life Assurance
Company of New York,
5/98 to present;
Deputy 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 President and Trustee, Sage
Age 33 present, President and Chief Life Investment Trust, 7/98 to
Executive Officer, 2/98 to present; Director, Sage Life
present Assurance Company of New York,
5/98 to present;
Director, President,
Sage Advisors, Inc.,
1/98 to present;
Director, Sage
Distributors, Inc.,
1/98 to present;
Director, 1/97 to
present, President and
Chief Executive
Officer, 2/98 to
present, Sage
Insurance Group, Inc.;
Chief Investment
Officer, 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
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
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 46 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 Vice President, Sage Life
Age 45 present, Senior Investment Trust, 7/98 to
Executive Vice present; Director, Sage Life
President, Chief Assurance Company of New York,
Financial Officer, 5/98 to present; Director,
Chief Actuary Treasurer, Sage Advisors,
5/97 to present Inc., 1/98 to present;
Director, Sage Distributors,
Inc., 1/98 to present;
Treasurer, 7/97 to present,
Senior Executive Vice President,
12/97 to present, Sage
Insurance Group, Inc.; Executive
Vice President, Golden American
Life Insurance Company,
7/93-2/97.
</TABLE>
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<PAGE>
/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
Our executive officers also serve as officers of our parent and of certain
affiliated companies. Cost allocations have been made to us as to the time these
individuals devoted to their duties with us. No allocation was made during 1997
nor was any 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 us 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, 1998.
Annual Compensation
<TABLE>
<CAPTION>
All Other
Name and Principal Position Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
Ronald S. Scowby, 1997 $337,500 $100,000
Chairman(1) 1998 $350,000 $100,000 $22,097
Robin I. Marsden, 1998 $275,000 $150,000 $20,956
President and Chief
Executive Officer(1)
Mitchell R. Katcher, 1997 $114,583 $265,000
Senior Executive 1998 $250,000 $125,000 $19,037
Vice President, Chief
Financial Officer and Chief
Actuary(1)
</TABLE>
(1) All salaries and bonuses are paid by Sage Insurance Group.
We pay outside directors $12,000 and $2,000 per meeting attended. For the
year ended December 31, 1997, we paid each outside director $20,000. We do not
compensate directors who are officers or employees of ours or our affiliates for
serving on the Board. Directors do not receive retirement benefits.
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<PAGE>
[Audited Financial Statements to be filed by pre-effective amendment].
81
<PAGE>
Appendix A
Market Value Adjustment
We will apply a Market Value Adjustment to amounts surrendered, withdrawn,
transferred, or borrowed 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. Surrender charges also may apply.
For a surrender, withdrawal, transfer or borrowed amount, we will
calculate the Market Value Adjustment by applying the factor below to the total
amount (including any applicable surrender charge) that must be surrendered,
withdrawn, transferred or borrowed in order to provide the amount requested.
[(1+I)/(1+J+.0025)]/(N/365)/ - 1
Where
o 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;
o 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 loan; and
o N is the remaining number of days in the Guarantee Period at the
time of calculation.
We will apply Market Value Adjustments as follows:
o 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 borrow.
o 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 borrow the full amount of
the Fixed Sub-Account, we add the Market Value Adjustment to the
amount you withdraw, transfer, or borrow.
A-1
<PAGE>
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 Maturity Series for a
seven-year Guarantee Period ("J") is 8.0% at the time of the surrender, no prior
transfers, withdrawals, or loans affecting this Fixed Sub-Account have been
made, and no surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of
surrender is $124,230 ($100,000 x 1.075/3/)
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0825)]/2555/365/-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, no prior
transfers, withdrawals, or loans affecting this Fixed Sub-Account have been
made, and no surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of surrender is
$124,230 ($100,000 x 1.075/3/)
A-2
<PAGE>
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0625)]/2555/365/-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, no prior transfers, withdrawals, or loans affecting this Fixed
Sub-Account have been made, and no surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of withdrawal is
$248,459 ($200,000 x 1.075/3/).
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0825)]/2555/365/ -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, no prior transfers, withdrawals, or loans affecting this Fixed
Sub-Account have been made, and no surrender charge is applicable.
A-3
<PAGE>
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of withdrawal is
$248,459 ($200,000 x 1.075/3/)
2. N = 2,555 (365 x 7)
3. Market Value Adjustment =
$100,000 x {[(1.07)/(1.0625)]/(2555/365)/ - 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 from your Sub-Accounts to the Loan Account.
A-4
<PAGE>
Appendix B
Dollar-Cost Averaging Program
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 of Dollar Cost
Beginning Month Averaging Amount Dollar Interest End of Month
of Month Account Value Monthly Factor Cost Averaged Credited Account Value
For Month
<S> <C> <C> <C> <C> <C>
24,117
1 24,000 - - 117 23,224
2 24,117 1 / 24 1,005 112 22,323
3 23,224 1 / 23 1,010 108 21,412
4 22,323 1 / 22 1,015 104 20,492
5 21,412 1 / 21 1,020 99 19,562
6 20,492 1 / 20 1,025 95 18,622
7 19,562 1 / 19 1,030 90 17,673
8 18,622 1 / 18 1,035 86 16,715
9 17,673 1 / 17 1,040 81 15,746
10 16,715 1 / 16 1,045 76 14,768
11 15,746 1 / 15 1,050 72 13,780
12 14,768 1 / 14 1,055 67 12,782
13 13,780 1 / 13 1,060 62 11,774
14 12,782 1 / 12 1,065 57 10,756
15 11,774 1 / 11 1,070 52 9,727
16 10,756 1 / 10 1,076 47 8,688
17 9,727 1 / 9 1,081 42 7,639
18 8,688 1 / 8 1,086 37 6,580
19 7,639 1 / 7 1,091 32 5,510
20 6,580 1 / 6 1,097 27 4,429
21 5,510 1 / 5 1,102 21 3,338
22 4,429 1 / 4 1,107 16 2,236
23 3,338 1 / 3 1,113 11 1,124
24 2,236 1 / 2 1,118 5 -
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>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission
Registration Fees (Approximate) $ 100.00
Printing and engraving $27,500.00
Accounting fees and expenses $10,000.00
Legal fees and expenses $25,000.00
Miscellaneous $ 5,000.00
----------
Total Expenses (Approximate) $67,600.00
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
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
PII-1
<PAGE>
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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) Exhibits
1. Distribution Agreement with Sage Distributors, Inc. and Form of Selling
Agreement./1/
3. (i) Articles of Incorporation of the Company./2/
(ii) By-Laws of the Company./2/
4. (a) Form of Individual Contract.*
(b) Form of Individual Contract with Interest Account.*
(c) Form of Group Contract.*
(d) Form of Group Certificate.*
(e) Form of Accelerated Death Benefit Rider.*
PII-2
<PAGE>
(f) Form of Group Accelerated Death Benefit Rider.*
(g) Form of Individual Accidental Death Benefit Rider.*
(h) Form of Group Accidental Death Benefit Rider.*
(i) Form of Individual Waiver of Surrender Charge Rider.*
(j) Form of Group Waiver of Surrender Charge Rider.*
(k) Form of Individual Contract Application.*
(l) Form of Group Certificate Application.*
5. Opinion and Consent of James F. Bronsdon.*
10. (a) Form of Participation Agreement with AIM Variable Insurance Funds,
Inc./1/
(b) Form of Participation Agreement with The Alger American Fund./1/
(c) Form of Participation Agreement with Liberty Variable Investment
Trust./3/
(d) Form of Participation Agreement with MFS(R) Variable Insurance
Trust./1/
(e) Form of Participation Agreement with Morgan Stanley Universal Funds,
Inc./3/
(f) Form of Participation Agreement with Oppenheimer Variable Account
Funds./3/
(g) Form of Participation Agreement with Sage Life Investment Trust./1/
(h) Form of Participation Agreement with SteinRoe Variable Investment
Trust./3/
(i) Form of Participation Agreement with T. Rowe Price Equity Series,
Inc./3/
(j) Form of Services Agreement with Financial Administration Services,
Inc./3/
23. (a) Consent of Sutherland Asbill & Brennan LLP.*
(b) Consent of Ernst & Young LLP.*
24. (a) Power of Attorney for Ronald S. Scowby./3/
(b) Power of Attorney for H. Louis Shill./4/
(c) Power of Attorney for Paul C. Meyer./5/
PII-3
<PAGE>
(d) Power of Attorney for Richard D. Starr./6/
(e) Power of Attorney for Robin I. Marsden./7/
(f) Power of Attorney for Mitchell R. Katcher./4/
27. Not Applicable
(B) Financial Statement Schedules - Not Applicable.
________________
/1/ This exhibit was previously filed in Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4 (File No. 333-43329)
dated December 31, 1998, and is incorporated herein by reference.
/2/ This exhibit was previously filed in the Registration Statement on From N-4
dated December 24, 1997 (File No. 333-43329), and is incorporated herein by
reference.
/3/ This exhibit was previously filed in Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (File No. 333-43329) dated January 28, 1999,
and is incorporated herein by reference.
/4/ This exhibit was previously filed in Pre-Effective Amendment No. 2 to the
Registration Statement filed on Form N-4 (file No. 333-44751) dated February 10,
1999, and is incorporated herein by reference.
/5/ This exhibit was previously filed in the Registration Statement filed on
Form S-6 (File No. 333-________) dated May 17, 1999, and is incorporated herein
by reference.
/6/ This exhibit was previously filed in the Registration Statement filed on
Form S-6 (File No. 333-________) dated May 17, 1999, and is incorporated herein
by reference.
/7/ This exhibit was previously filed in Post-Effective Amendment No. 1 to the
Registration Statement filed on Form N-4 (File No. 333-43329) dated February 26,
1999, and is incorporated herein by reference.
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
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<PAGE>
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
PII-5
<PAGE>
As required by the Securities Act of 1933, the registrant has caused this
Registration Statement to be signed on its behalf, in the City of Stamford, and
the State of Connecticut, on this 13th day of May, 1999.
By: Sage Life Assurance of America, Inc.
(Registrant)
Attest: By: /s/Robin I. Marsden*
-----------------------------------------
Robin I. Marsden
/s/James F. Renz Director, President, Chief Executive Officer
- ------------------
<PAGE>
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/Ronald S. Scowby* Chairman May 13, 1999
- -------------------------
Ronald S. Scowby
/s/H. Louis Shill* Director May 13, 1999
- -------------------------
H. Louis Shill
/s/Paul C. Meyer* Director May 13, 1999
- -------------------------
Paul C. Meyer
/s/Richard D. Starr * Director May 13, 1999
- -------------------------
Richard D. Starr
/s/Mitchell R. Katcher* Director, Senior Executive May 13, 1999
- ------------------------- President, Chief Financial
Mitchell R. Katcher Officer, Chief Actuary
* By: James F. Bronsdon, Esq.
As Attorney-In-Fact pursuant to a
Power of Attorney as dated below.
Director Date
-------- ----
Ronald S. Scowby January 26, 1999
H. Louis Shill February 8, 1999
Paul C. Meyer May 12, 1999
Richard D. Starr May 13, 1999
Mitchell R. Katcher January 26, 1999
Robin I. Marsden January 26, 1999
