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As filed with the Securities and Exchange Commission on September 1, 2000
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)
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<S> <C>
Delaware 51-0258372
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
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63
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(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 service)
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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 ]
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
contained herein relates to Registration Statement Nos. 333-44753, 333-77441,
and 333-36010.
CALCULATION OF REGISTRATION FEE
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================================================================================================================================
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
================================================================================================================================
<S> <C> <C> <C> <C>
Flexible Payment
Deferred
Combination and * * $40,000,000 $11,640
Fixed and
Variable Annuity
Contracts
================================================================================================================================
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* 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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CROSS REFERENCE SHEET
Pursuant to Regulation S-K, Item 501(b)
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ITEM OF FORM S-1 PROSPECTUS CAPTION
<S> <C>
1. Forepart of the Registration Statement.................. Outside Front Cover
and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover..................... Summary; Table of Contents
Pages of Prospectus
3. Summary Information, Risk Factors and................... Outside Front Cover;
Ratio of Earnings to Fixed Charges Profile; What are my Investment Options?
4. Use of Proceeds......................................... Additional Information About Sage Life Assurance
of America, Inc.
5. Determination of Offering Price......................... Not Applicable
6. Dilution................................................ Not Applicable
7. Selling Security Holders................................ Not Applicable
8. Plan of Distribution.................................... What Other Information Should I Know?
9. Description of Securities to be......................... Description, Profile, What are the Contracts?
Registered What are my Income Payment Options? What are my
Investment Options? What are the Expenses Under a
Contract? What Other Information Should I Know?
10. Interests of Named Experts and.......................... N/A
Counsel
11. Information with Respect to the......................... What Other Information Should I Know? What are my
Registrant Investment Options? Additional information about
Sage Life Assurance of America, Inc.
12. Disclosure of Commission Position on.................... Item 14 of Part II
Indemnification for Securities Act Liabilities
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This Prospectus contained herein does not contain all of the information
permitted by the Securities and Exchange Commission. Therefore, this
Registration Statement on Form S-1 for Sage Life Assurance of America, Inc.
incorporates by reference the Statement of Additional Information and Part C
contained in the Registration Statement on Form N-4 (Post-Effective Amendment
No. 6, File No. 333-44751, filed on August 25, 2000) for The Sage Variable
Annuity Account A. This information may be obtained free of charge by writing or
calling our Customer Service Center.
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PROFILE DATED SEPTEMBER 15, 2000
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED AND
VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE SAGE VARIABLE ANNUITY ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.
THIS PROFILE IS A SUMMARY OF SOME IMPORTANT POINTS
THAT YOU SHOULD KNOW AND CONSIDER BEFORE PURCHASING A CONTRACT.
THE CONTRACT IS MORE FULLY DESCRIBED IN THE FULL PROSPECTUS THAT
ACCOMPANIES THIS PROFILE. PLEASE READ THAT PROSPECTUS CAREFULLY.
"We," "us," "our," "Sage Life" or the "Company" refer to Sage Life
Assurance of America, Inc. "You" and "your" refer to the Owner of a Contract.
1. WHAT ARE THE CONTRACTS?
The Contracts are flexible payment fixed and variable annuity
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 for use in your long-term financial and
retirement planning. It provides a means for allocating amounts on a
tax-deferred basis to our Variable Account and our Fixed Account.
INVESTMENT FLEXIBILITY. You can invest among the subdivisions of our
Variable Account, known as "Variable Sub-Accounts," each corresponding to a
different Fund. These Funds, listed in Section 4, are professionally managed
and use a broad range of investment strategies (growth and income, aggressive
growth, etc.), styles (growth, value, etc.) and asset classes (stocks, bonds,
international, etc.). You can select a mix of Funds to meet your financial and
retirement needs and objectives, tolerance for risk, and view of the market.
Amounts you invest in these Funds will fluctuate daily based on underlying
investment performance. So, the value of your investment may increase or
decrease.
Through our Fixed Account, you can invest to receive guaranteed rates
of interest for periods we offer up to 10 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.
As your needs or financial or retirement goals change, your investment
mix can change with them. You may transfer amounts 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 safety feature: we cannot charge
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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, access to your money, and income plan options.
ACCESS TO AMOUNTS INVESTED. The Contract provides access to your
investment should you need it. During the savings, or Accumulation Phase, your
investment grows tax-free until withdrawn. You decide how much to take and when
to take it (certain restrictions apply after the Accumulation Phase).
Ordinarily, once you access earnings, they are taxed as income. If you
access earnings before you are 59 1/2 years old, you may have to pay an
additional 10% federal tax penalty. Amounts you surrender or withdraw may be
subject to a Market Value Adjustment (positive or negative) if you take the
amount from the Fixed Account before the end of the applicable Guarantee
Period.
PROTECTION FOR YOUR BENEFICIARIES. The Contract also provides a death
benefit feature to protect your family should you die during the Accumulation
Phase. In the event of your untimely death, the Beneficiary of your choice will
never receive less than you have invested in the Contract, and may even receive
more. Your Beneficiary decides, within certain federal tax required
limitations, how to receive the death benefit. Or, if your Beneficiary is your
spouse, he or she may take over the Contract and continue deferring taxes on
any gain. Your spouse's starting Account Value would equal any death benefits
payable.
INCOME PAYMENTS. The payout, or Income Phase, of your Contract begins
when you inform us you want to start receiving regular income payments under
one of the various income plans we offer. The amount you accumulated during the
Accumulation Phase determines the amount of income payments you receive during
the Income Phase. You can use your Account Value to provide income payments
that are guaranteed, or income payments that vary with underlying investment
performance, or a combination of both. The income payments can be for life,
which means you can't outlive them!
A portion of each income payment is ordinarily considered a return of
your investment in the Contract. So, until you recover all of your investment
in the Contract, only the portion in excess of this amount is taxed as income.
Other tax consequences may apply to Qualified Contracts.
OPTIONAL RIDERS. Subject to state availability and for an additional
charge, you may purchase either or both optional riders offering a guaranteed
minimum income benefit and an enhanced death benefit. These riders can provide
additional benefits that we discuss under "What Are My Income Payment Options"
and "Does the Contract Have A Death Benefit."
2. WHAT ARE MY INCOME PAYMENT OPTIONS?
Once the Income Phase of your Contract begins, we apply your Account
Value to provide you with regular income payments.
You can tailor your income to meet your needs by choosing from five
different income plans described below. In explaining the income plans, we are
assuming that you designate yourself as the Annuitant. Of course, you always
can designate someone other than yourself as Annuitant.
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[ ] INCOME PLAN 1 -- LIFE ANNUITY: You will receive payments for your life.
[ ] INCOME PLAN 2 -- LIFE ANNUITY WITH 10 OR 20 YEARS CERTAIN: You will
receive payments for your life. However, if you die before the end of the
guaranteed certain period you select (10 or 20 years), your Beneficiary
will receive the payments for the remainder of that period.
[ ] INCOME PLAN 3 -- JOINT AND LAST SURVIVOR LIFE ANNUITY: We will make
payments as long as either you or a second person you select (such as your
spouse) is alive.
[ ] INCOME PLAN 4 -- PAYMENTS FOR A SPECIFIED PERIOD CERTAIN: You will
receive payments for the number of years you select. However, if you die
before the end of that period, your Beneficiary will receive the payments
for the remainder of the guaranteed certain period.
[ ] INCOME PLAN 5 -- ANNUITY PLAN: You can use your Account Value to purchase
any other income plan we offer at the time you want to begin receiving
regular income payments for which you and the Annuitant are eligible.
You tell us how much of your Account Value to apply to fixed income
payments and to variable income payments. During the Income Phase, you still
have all of the investment choices you had during the Accumulation Phase.
However, we currently limit transfers among your investment choices.
We will allocate the amount of Account Value you apply to provide
fixed income payments to the Fixed Account and invest it in the Guarantee
Periods you select. We guarantee the amount of each income payment, and the
amount of each payment will remain level throughout the period you select.
We will allocate the amount of Account Value you apply to provide
variable income payments to the Variable Account and invest it in the Funds you
select. The amount of each income payment will vary according to the investment
performance of those Funds.
OPTIONAL GUARANTEED MINIMUM INCOME BENEFIT. Subject to availability in
your state, at issue, if you are 80 or younger, you may ensure that guaranteed
minimum lifetime income payments are available on your Income Date by electing
the Guaranteed Minimum Income Benefit. You must satisfy the conditions set
forth in the rider to receive the benefit, and there are charges associated
with the benefit. Once you purchase the Guaranteed Minimum Income Benefit, you
cannot cancel it.
3. HOW DO I PURCHASE A CONTRACT?
In most cases, you may purchase a Contract with $25,000 or more
through an authorized registered representative.
In addition, subject to special rules for Contracts used in connection
with tax-qualified retirement plans, you can make additional purchase payments
of $1,000 or more to your Contract at any time during the Accumulation Phase.
4. WHAT ARE MY INVESTMENT OPTIONS?
There are over 40 investment options under the Contracts available
through our Variable and Fixed Accounts. These choices are professionally
managed and allow for a broad range of investment strategies, styles and asset
classes. Additional investment options may be available in the future.
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Through our Variable Account you can choose to invest your money in
one or more of the Variable Sub-Accounts investing in the following Funds:
=> AIM VARIABLE INSURANCE FUNDS
- AIM V.I. Government Securities Fund
- AIM V.I. Growth and Income Fund
- AIM V.I. International Equity Fund
- AIM V.I. Value Fund
=> THE ALGER AMERICAN FUND
- Alger American MidCap Growth Portfolio
- Alger American Income and Growth Portfolio
- Alger American Small Capitalization Portfolio
=> LIBERTY VARIABLE INVESTMENT TRUST
- Colonial High Yield Securities Fund, Variable Series
- Colonial Small Cap Value Fund, Variable Series
- Colonial Strategic Income Fund, Variable Series
- Colonial U.S. Growth and Income Fund, Variable Series
- Liberty All-Star Equity Fund, Variable Series
- Newport Tiger Fund, Variable Series
- Stein Roe Global Utilities Fund, Variable Series
=> STEINROE VARIABLE INVESTMENT TRUST
- Stein Roe Growth Stock Fund, Variable Series
- Stein Roe Balanced Fund, Variable Series
=> MFS(R) VARIABLE INSURANCE TRUST(SM)
- MFS Growth With Income Series
- MFS High Income Series
- MFS Research Series
- MFS Total Return Series
- MFS Capital Opportunities Series
=> THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- The Global Equity Portfolio
- The Mid Cap Value Portfolio
- The Value Portfolio
=> OPPENHEIMER VARIABLE ACCOUNT FUNDS
- Oppenheimer Bond Fund/VA
- Oppenheimer Capital Appreciation Fund/VA
- Oppenheimer Small Cap Growth Fund/VA
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=> SAGE LIFE INVESTMENT TRUST
- EAFE(R) Equity Index Fund
- S&P 500 Equity Index Fund
- Money Market Fund
- Nasdaq-100 Index(R) Fund
- All-Cap Growth Fund
=> T. ROWE PRICE EQUITY SERIES, INC.
- T. Rowe Price Equity Income Portfolio
- T. Rowe Price Mid-Cap Growth Portfolio
- T. Rowe Price Personal Strategy Balanced Portfolio
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 the different Guarantee Periods we offer. 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, 5, 7, and
10 years. We may offer different Guarantee Periods for our DCA Fixed
Sub-Accounts. 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.
5. WHAT ARE THE EXPENSES UNDER A CONTRACT?
The Contract has insurance and investment features. Each has related
costs. Below is a brief summary of the Contract's charges:
SURRENDER CHARGE - None! There are no surrender charges under the
Contract.
ANNUAL ADMINISTRATION CHARGE - During the first seven Contract Years
only, we will deduct an annual $40 administration charge. However, there is no
charge if, at the time of deduction, your Account Value is at least $50,000.
ASSET-BASED CHARGES - Each month, we deduct Asset-Based Charges for
mortality and expense risks and for certain administrative costs from the
amounts you allocate to the Variable Account. The maximum charges equal, on an
annual basis, 1.40% of your Variable Account Value, decreasing to 1.25% after
the seventh Contract Year.
PURCHASE PAYMENT TAX CHARGE - We will deduct any state and local taxes
on purchase payments from Account Value when we incur such taxes. We reserve the
right to defer the collection of this charge and deduct it against your Account
Value on the surrender of this Contract or application of the Account Value to
provide income payments. This tax charge currently ranges from 0% to 3.0%
depending upon the state or locality. We currently do not intend to deduct this
charge on or after the eighth Contract Year.
OPTIONAL BENEFIT CHARGES - If you choose to purchase one or both of the
optional benefit riders we offer, we will deduct a separate charge on the
Contract Date and monthly thereafter. We deduct the rider
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charges proportionately from the Variable and Fixed Sub-Accounts in which you
are invested. On an annual basis, the charge for the Guaranteed Minimum Income
Benefit is 0.20% of Account Value. On an annual basis, the charge for the
Enhanced Death Benefit is 0.20% of Account Value.
FUND FEES AND EXPENSES - There are also Fund fees and expenses that
are based on the average daily value of the Funds. Currently, these Fund fees
and expenses range on an annual basis from .55% to 1.34% depending upon the
Fund.
Sage Life's business philosophy rewards our long-term customers. So,
after the seventh Contract Year we
- eliminate the Annual Administration Charge,
- eliminate the Purchase Payment Tax Charge, if any, and
- reduce Asset-Based Charges.
This means more of your investment is working for you over the long term!
The following chart is designed to help you understand expenses under the
Contract. It does not include rider charges. If we included the charges for the
optional riders, your expenses would be higher.
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Examples of Examples of
Total Total Total Total
Annual Annual Total Expenses Expenses as
Insurance Fund Annual Paid at the End Paid at the End
Fund Charges Charges Charges of 1 Year of 10 Years
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AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Government Securities Fund 1.40% 0.90% 2.30% $24 $298
AIM V.I. Growth and Income Fund 1.40 0.77 2.17 22 280
AIM V.I. International Equity Fund 1.40 0.97 2.37 24 307
AIM V.I. Value Fund 1.40 0.76 2.16 22 278
THE ALGER AMERICAN FUND:
Alger American MidCap Growth Portfolio 1.40 0.85 2.25 23 289
Alger American Income and Growth Portfolio 1.40 0.70 2.10 22 271
Alger American Small Capitalization Portfolio 1.40 0.90 2.30 24 298
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities Fund, Variable Series 1.40 0.80 2.20 23 284
Colonial Small Cap Value Fund, Variable Series 1.40 1.00 2.40 25 309
Colonial Strategic Income Fund, Variable Series 1.40 0.75 2.15 22 278
Colonial U.S. Growth and Income Fund, Variable Series 1.40 0.88 2.28 23 294
Liberty All-Star Equity Fund, Variable Series 1.40 0.95 2.35 24 303
Newport Tiger Fund, Variable Series 1.40 1.21 2.61 27 338
Stein Roe Global Utilities Fund, Variable Series 1.40 0.77 2.17 22 280
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock Fund, Variable Series 1.40 0.67 2.07 21 266
Stein Roe Balanced Fund, Variable Series 1.40 0.62 2.02 21 261
MFS(R) VARIABLE INSURANCE TRUST(SM):
MFS Growth With Income Series 1.40 0.88 2.28 23 294
MFS High Income Series 1.40 0.91 2.31 24 298
MFS Research Series 1.40 0.86 2.26 23 292
MFS Total Return Series 1.40 0.90 2.30 24 298
MFS Capital Opportunities Series 1.40 0.91 2.31 24 298
</TABLE>
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<TABLE>
<CAPTION>
Examples of Examples of
Total Total Total Total
Annual Annual Total Expenses Expenses as
Insurance Fund Annual Paid at the End Paid at the End
Fund Charges Charges Charges of 1 Year of 10 Years
---- ------- ------- ------- --------- -----------
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THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
The Global Equity Portfolio 1.40% 1.15% 2.55% $26 $329
The Mid Cap Value Portfolio 1.40 1.05 2.45 25 316
The Value Portfolio 1.40 0.85 2.25 23 289
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund/VA 1.40 0.73 2.13 22 275
Oppenheimer Capital Appreciation Fund/VA 1.40 0.70 2.10 22 271
Oppenheimer Small Cap Growth Fund/VA 1.40 1.34 2.74 28 354
SAGE LIFE INVESTMENT TRUST:
EAFE(R)Equity Index Fund 1.40 0.90 2.30 24 298
S&P 500 Equity Index Fund 1.40 0.55 1.95 20 252
Money Market Fund 1.40 0.65 2.05 21 265
Nasdaq-100 Index(R) Fund 1.40 0.85 2.38 23 289
All-Cap Growth Fund 1.40 1.10 2.63 26 323
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity Income Portfolio 1.40 0.85 2.25 23 289
T. Rowe Price Mid-Cap Growth Portfolio 1.40 0.85 2.25 23 289
T. Rowe Price Personal Strategy Balanced Portfolio 1.40 0.90 2.30 24 298
</TABLE>
Below is an explanation of what we included in each column of the
chart.
The column "Total Annual Insurance Charges" shows the sum of the
Asset-Based Charges and the Annual Administration Charge (for purposes of the
chart, we assume the average Account Value is $50,000 and therefore we do not
include the Annual Administration Charge.
The column "Total Annual Fund Charges" shows the fees and expenses for
each Fund.
The charges shown for the following funds reflect any expense
reimbursement or waiver:
- Liberty Variable Investment Trust: Colonial High Yield
Securities Fund, Variable Series and Colonial Small Cap
Value Fund, Variable Series.
- MFS(R) Variable Insurance Trust(SM): MFS Capital
Opportunity Series and MFS High Income Series.
- The Universal Institutional Funds, Inc.: The Global Equity
Portfolio; The Mid Cap Value Portfolio; and The Value
Portfolio.
- Sage Life Investment Trust: EAFE(R) Equity Index Fund; S&P
500 Equity Index Fund; Money Market Fund; Nasdaq-100
Index(R) Fund; and All-Cap Growth Fund.
The charges for Sage Life Trust's Nasdaq-100 Index(R) Fund and All-Cap
Growth Fund are based on the estimated expenses that those Funds expect to
incur in their initial fiscal year.
The column "Total Annual Charges" shows the sum of "Total Annual
Insurance Charges" and "Total Annual Fund Charges."
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The last two columns show you examples of the charges, in dollars, you
could pay under a Contract for each $1,000 you invested in that Fund. The
examples assume that your Contract earns 5% annually before charges.
For more information about expenses under a Contract, please refer to
the "Fee Table" in the full Prospectus that accompanies this Profile.
6. HOW WILL MY CONTRACT BE TAXED?
During the Accumulation Phase, your earnings are not taxed unless you
take them out. If you take money out, earnings come out first and are taxed as
income. If you are younger than 59 1/2 when you take money out, you also may be
charged a 10% federal tax penalty on the withdrawn earnings.
Income payments during the Income Phase are considered partly a return
of your original investment. That part of each payment is not taxable as
income. However, once you have recovered all of your original investment,
income payments then will be fully taxable.
Special tax rules apply to withdrawals from Qualified Contracts,
including the Roth IRA.
7. HOW DO I ACCESS MY MONEY?
There are a number of ways to withdraw money from your Contract. You
can tailor your income to meet your near-term or lifelong liquidity needs.
During the Accumulation Phase, if you want to take money out of your
Contract, you can choose among several different options.
- You can withdraw some of your money.
- You can surrender your Contract and take all of your money.
- You can withdraw money using our systematic partial
withdrawal program.
- You can apply your Account Value to an income plan.
Keep in mind that if you take the amount from the Fixed Account before
the end of a Guarantee Period, 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 in addition to the income tax that will apply to any
gain in your Contract. Please remember that withdrawals will reduce your death
benefit by the proportion that the withdrawal reduces your Account Value.
Once you start receiving regular income payments and if you selected
the "payments for a specified period certain" income plan, you may request a
full or partial withdrawal.
8. HOW IS CONTRACT PERFORMANCE PRESENTED?
Because as of December 31, 1999 our Variable Sub-Accounts had been in
operation for less than a year, we cannot show you how the Funds performed in
the Variable Account in this Profile. We do, however, include information about
Variable Sub-Account performance in the Prospectus. When the
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Variable Sub-Accounts have been in operation for a year or more, we will show
you the Funds' performance in this Profile using standard methods prescribed by
the SEC.
Please remember that the performance data represents past performance.
Amounts you invest in the Variable Account will fluctuate daily based on
underlying Fund investment performance, so the value of your investment may
increase or decrease.
9. DOES THE CONTRACT HAVE A DEATH BENEFIT?
Your Contract provides a death benefit for your Beneficiary.
We will pay a death benefit to the Beneficiary of your choice in the
event of your untimely death prior to the Income Phase. This provides comfort
knowing your Beneficiary will receive the greatest of the following:
- the current Account Value on the date we receive proof of
death;
- the sum of all purchase payments you have invested in your
Contract, reduced proportionately by the amount that any
withdrawals you have made (including any associated Market
Value Adjustment incurred) reduced Account Value; or
- the highest anniversary value on or before you reach age 80.
We determine the highest anniversary value in the following manner.
When we receive proof of death, we will calculate an anniversary value for each
Contract Anniversary before the date of the Owner's death, but not beyond the
Owner's attained age 80. An anniversary value for a Contract Anniversary equals
(1) the Account Value on that Contract Anniversary, (2) increased by the dollar
amount of any purchase payments made since the Contract Anniversary, and (3)
reduced proportionately by any withdrawals (including any associated Market
Value Adjustment incurred) taken since that Contract Anniversary. (By
proportionately, we take the percentage by which the withdrawal decreases the
Account Value and we reduce the sum of (1) and (2) by that percentage.) The
greatest of these anniversary values is your highest anniversary value.
OPTIONAL ENHANCED DEATH BENEFIT. Subject to availability in your
state, at issue, if you are 79 or younger, you may supplement the basic death
benefit by purchasing the Enhanced Death Benefit. You must satisfy the
conditions set forth in the rider to receive the benefit, and there are charges
associated with the benefit. Once you purchase the Enhanced Death Benefit, you
may not cancel it.
10. WHAT OTHER INFORMATION SHOULD I KNOW?
The Contract has several additional features available to you at no
additional charge:
FREE LOOK RIGHT: You have the right to return your Contract to us at
our Customer Service Center or to the registered representative who sold it to
you, and have us cancel the Contract. You must return the Contract within a
certain number of days specified by your state (usually 10) from the date you
received the Contract.
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 Purchase Payment
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Tax 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 you the greater
of your Account Value plus charges we have deducted or your initial purchase
payment, less any withdrawals previously taken. In the states where we are
required to return the purchase payment less withdrawals, if you allocated
amounts to the Variable Account, we will temporarily allocate those amounts to
the Money Market Sub-Account (that is, the Variable Sub-Account investing in
the Money Market Fund of Sage Life Investment Trust) until the Free Look Period
ends.
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
(the "DCA 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 or
retirement goals. Due to the effect of interest that continues to be paid on
the amount remaining in the Money Market Sub-Account or the DCA 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 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 Variable
Sub-Account allocations to your original percentages on a quarterly,
semi-annual, or annual basis. Money invested in the Fixed Account is not part
of this program.
11. HOW CAN I MAKE INQUIRIES?
If you need further information about the Contracts, please contact an
authorized registered representative or write or call us at our Customer
Service Center. The address and telephone number of our Customer Service Center
office is P.O. Box 290680, Wethersfield, CT 06129-0680 and (877) 835-7243 (Toll
Free).
P-10
<PAGE> 15
PROSPECTUS DATED SEPTEMBER 15, 2000
FLEXIBLE PAYMENT DEFERRED COMBINATION FIXED
AND VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE SAGE VARIABLE ANNUITY ACCOUNT A AND
SAGE LIFE ASSURANCE OF AMERICA, INC.
<TABLE>
<S> <C>
Executive Office: Customer Service Center:
300 Atlantic Street P.O. Box 290680
Stamford, CT 06901 Wethersfield, CT 06129-0680
Telephone: (877) 835-7243 (Toll Free)
</TABLE>
This Prospectus describes flexible payment deferred combination fixed
and variable annuity contracts for individuals and groups offered by Sage Life
Assurance of America, Inc. We designed the Contracts for use in your long-term
financial and retirement planning. The Contracts provide a means for investing
on a tax-deferred basis in our Variable Account and our Fixed Account. You can
purchase a Contract by making a minimum initial purchase payment. After
purchase, you determine the amount and timing of any additional purchase
payments.
You may allocate purchase payments and transfer Account Value to our
Variable Account and/or our Fixed Account within certain limits. The Variable
Account has over 30 Sub-Accounts. Through our Fixed Account, you can choose to
invest your money in one or more of 7 different Guarantee Periods.
Each Variable Sub-Account invests in a corresponding Fund of the
following Trusts (collectively, the "Trusts"):
- AIM Variable Insurance Funds
- The Alger American Fund
- Liberty Variable Investment Trust
- SteinRoe Variable Investment Trust
- MFS(R)Variable Insurance Trust(SM)
- The Universal Institutional Funds, Inc.
- Oppenheimer Variable Account Funds
- Sage Life Investment Trust
- T. Rowe Price Equity Series, Inc.
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 apply to an
income plan 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.
The Statement of Additional Information contains more information about
the Contracts and the Variable Account, is dated the same as this Prospectus,
and is incorporated herein by reference. The Table of Contents for the Statement
of Additional Information is on page 67 of this Prospectus. We filed it with the
Securities and Exchange Commission. You may obtain a copy of
<PAGE> 16
the Statement of Additional Information free of charge by contacting our
Customer Service Center, or by accessing the Securities and Exchange
Commission's website at http://www.sec.gov.
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. THE TRUST PROSPECTUSES CONTAIN IMPORTANT
INFORMATION ABOUT THE FUNDS. YOUR REGISTERED REPRESENTATIVE CAN PROVIDE THESE
PROSPECTUSES TO YOU BEFORE YOU INVEST.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE
CONTRACTS OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
VARIABLE ANNUITY CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
ENDORSED OR GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR
OTHERWISE PROTECTED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY; THEY ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
<PAGE> 17
<TABLE>
<CAPTION>
===================================================================================================
TABLE OF CONTENTS
===================================================================================================
<S> <C>
INDEX OF TERMS..................................................................................1
FEE TABLE.......................................................................................3
1. WHAT ARE THE CONTRACTS?..................................................................7
Your Options.............................................................................8
Transfers................................................................................8
2. WHAT ARE MY INCOME PAYMENT OPTIONS?......................................................9
Your Choices.............................................................................9
Income Payment Amounts...................................................................9
3. HOW DO I PURCHASE A CONTRACT?...........................................................12
Initial Purchase Payment................................................................12
Issuance of a Contract..................................................................12
Free Look Right to Cancel Your Contract.................................................12
Making Additional Purchase Payments.....................................................13
When We May Cancel Your Contract........................................................13
4. WHAT ARE MY INVESTMENT OPTIONS?.........................................................13
Purchase Payment Allocations............................................................13
Variable Sub-Account Investment Options.................................................14
Fixed Account Investment Options........................................................19
Transfers...............................................................................21
Transfer Programs.......................................................................23
Values Under Your Contract..............................................................25
5. WHAT ARE THE EXPENSES UNDER A CONTRACT?.................................................26
Surrender Charge........................................................................28
Annual Administration Charge............................................................28
Transfer Charge.........................................................................28
Asset-Based Charges.....................................................................28
Purchase Payment Tax Charge.............................................................29
Optional Benefit Charges................................................................29
Fund Annual Expenses....................................................................29
Additional Information..................................................................29
6. HOW WILL MY CONTRACT BE TAXED?..........................................................30
Introduction............................................................................30
Taxation of Non-Qualified Contracts.....................................................30
Taxation of a Qualified Contract........................................................32
Transfers, Assignments, or Exchanges of a Contract......................................32
Possible Tax Law Changes................................................................33
7. HOW DO I ACCESS MY MONEY?...............................................................33
Withdrawals.............................................................................33
Requesting Payments.....................................................................34
</TABLE>
i
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C>
8. HOW IS CONTRACT PERFORMANCE PRESENTED?..................................................35
Yield...................................................................................35
Total Return............................................................................35
Performance/Comparisons.................................................................35
9. DOES THE CONTRACT HAVE A DEATH BENEFIT?.................................................36
Owner's Death Before the Income Date....................................................37
Owner's Death After the Income Date.....................................................38
Owner's or Annuitant's Death After the Income Date......................................38
Optional Enhanced Death Benefit Rider...................................................38
Proof of Death..........................................................................39
10. WHAT OTHER INFORMATION SHOULD I KNOW?...................................................39
Separate Accounts.......................................................................39
Modification............................................................................40
Distribution of the Contracts...........................................................41
Experts.................................................................................41
Legal Proceedings.......................................................................42
Reports to Contract Owners..............................................................42
Authority to Make Agreements............................................................42
Financial Statements....................................................................42
11. HOW CAN I MAKE INQUIRIES................................................................43
12. ADDITIONAL INFORMATION ABOUT SAGE LIFE ASSURANCE OF AMERICA, INC........................43
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION...................................67
APPENDIX A - MARKET VALUE ADJUSTMENT..........................................................A-1
APPENDIX B - DOLLAR COST AVERAGING PROGRAM....................................................B-1
APPENDIX C - CONTRACTS ISSUED BEFORE MAY 1, 2000..............................................C-1
APPENDIX D - GUARANTEED MINIMUM INCOME BENEFIT................................................D-1
APPENDIX E - ENHANCED DEATH BENEFIT...........................................................E-1
</TABLE>
This Prospectus does not constitute an offering in any jurisdiction in
which such offering may not lawfully be made.
ii
<PAGE> 19
==============================================================================
INDEX OF TERMS
==============================================================================
We 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 with special meanings. We define the terms below.
ACCOUNT VALUE -- The Account Value is the entire amount we hold under
your Contract during the Accumulation Phase. It equals the sum of your Variable
Account Value and Fixed Account Value.
ACCUMULATION PHASE -- The Accumulation Phase is the period during
which you accumulate savings under your Contract.
ACCUMULATION UNIT -- An Accumulation Unit is the unit of measure we
use before the Income Date to keep track of the value of each Variable
Sub-Account.
ANNUITANT -- The Annuitant is the natural person whose age determines
the maximum Income Date and the amount and duration of income payments
involving life contingencies. The Annuitant may also be the person to whom we
will make any payment starting on the Income Date.
ASSET-BASED CHARGES -- The Asset-Based Charges are charges for
mortality and expense risks and for administrative costs assessed monthly
against the assets of the Variable Account. After the Income Date, we call
these charges Variable Sub-Account Charges and deduct them daily from the
assets of the Variable Account.
BENEFICIARY -- The Beneficiary is the person or persons to whom we pay
a death benefit if any Owner dies before the Income Date.
BUSINESS DAY -- A Business Day is any day the New York Stock Exchange
("NYSE") is open for regular trading, 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 flexible payment deferred combination
fixed and variable annuity 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.
CONTRACT DATE -- The Contract Date is the date an individual Contract
or a certificate for a group Contract is issued at our Customer Service Center.
CONTRACT YEAR -- A Contract Year is each consecutive twelve-month
period beginning on the Contract Date and the anniversaries thereof.
1
<PAGE> 20
EXPIRATION DATE -- The Expiration Date is the last day in a Guarantee
Period.
FIXED ACCOUNT -- The Fixed Account is The Sage Fixed Interest Account
A. It 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 Interest Separate Account.
FUND -- A Fund is an investment portfolio in which a Variable
Sub-Account invests.
GENERAL ACCOUNT -- An account that consists of all our assets other
than those held in any separate investment accounts.
INCOME DATE -- The Income Date is the date you select for your regular
income payments to begin.
INCOME PHASE -- The Income Phase starts on the Income Date and is the
period during which you receive regular income payments.
INCOME UNIT -- An Income Unit is the unit of measure we use to
calculate the amount of income payments under a variable income plan option.
MARKET VALUE ADJUSTMENT -- A Market Value Adjustment is a positive or
negative adjustment that ordinarily applies to a surrender, withdrawal, or
transfer, and to amounts applied to an income plan from a Fixed Sub-Account
before the end of its Guarantee Period.
NET ASSET VALUE -- Net Asset Value is the price of one share of a
Fund.
OWNER -- The Owner is the person or persons who owns (or own) a
Contract. Provisions relating to action by the Owner mean, in the case of joint
Owners, both Owners acting jointly. In the context of a Contract issued on a
group basis, Owners refer to holders of certificates under the group Contract.
SATISFACTORY NOTICE -- Satisfactory Notice is 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 before the Income Date. It reflects the calculation
of any applicable charge, including the Market Value Adjustment.
VALUATION PERIOD -- The 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 Annuity
Account A. It is a separate investment account of ours into which you may
invest purchase payments or transfer Account Value.
"WE", "US", "OUR", "SAGE LIFE" or the "COMPANY" is Sage Life Assurance
of America, Inc.
"YOU" or "YOUR" is the Owner of a Contract.
2
<PAGE> 21
===============================================================================
FEE TABLE
===============================================================================
The purpose of this Fee Table is to assist you in understanding the
expenses that you will pay directly or indirectly when you invest in the
Contract.
TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load Imposed on Purchases (as a percentage of purchase payments)...........................None
Surrender Charge.................................................................................None
Maximum Transfer Charge(1)
First 12 transfers in a Contract Year........................................................$ 0
After 12th transfer in a Contract Year.......................................................$25
Annual Administration Charge
Contract Years 1-7(2)........................................................................$40
After Contract Year 7........................................................................$ 0
</TABLE>
In addition, we may deduct the amount of any state and local taxes on
purchase payments from your Account Value when we incur such taxes. We reserve
the right to defer collection of this charge and deduct it against your Account
Value when you surrender your Contract or apply your Account Value to provide
income payments. We refer to this as the Purchase Payment Tax Charge.
VARIABLE ACCOUNT ANNUAL EXPENSES(3) (deducted monthly as a percentage of the
Variable Account Value)
<TABLE>
<CAPTION>
CONTRACT YEARS
--------------
1-7 8+
--- -----
<S> <C> <C>
Mortality and Expense Risk Charge 1.25% 1.10%
Asset-Based Administrative Charge 0.15% 0.15%
----- -----
Total Asset-Based Charges 1.40% 1.25%
</TABLE>
OPTIONAL BENEFIT ANNUAL EXPENSES
<TABLE>
<S> <C>
Guaranteed Minimum Income Benefit Charge.....................................................................0.20%
(deducted monthly as a percentage of Account Value)
Enhanced Death Benefit Charge................................................................................0.20%
(deducted monthly as a percentage of Account Value)
</TABLE>
FUND CHARGES
The fees and expenses for each of the Funds (as a percentage of net
assets) for the year ended December 31, 1999 are shown in the following table.
For more information on these fees and expenses, see the prospectuses for the
Trusts. Certain figures shown are net of fee waivers or expense reimbursements.
We cannot guarantee that these fee waivers or reimbursements will continue.
3
<PAGE> 22
FUND ANNUAL EXPENSES (as a percentage of average daily net assets of a Fund)
<TABLE>
<CAPTION>
MANAGEMENT
FEES TOTAL EXPENSES TOTAL EXPENSES
(AFTER FEE OTHER EXPENSES (AFTER FEE (BEFORE FEE
WAIVER, (AFTER WAIVERS AND WAIVERS AND
AS REIMBURSEMENT, REIMBURSEMENTS, REIMBURSEMENTS,
FUND APPLICABLE) AS APPLICABLE) AS APPLICABLE) AS APPLICABLE)
---- ------------ --------------- --------------- ----------------
<S> <C> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Government Securities Fund................. 0.50% 0.40% 0.90% N/A
AIM V.I. Growth and Income Fund..................... 0.61 0.16 0.77 N/A
AIM V.I. International Equity Fund.................. 0.75 0.22 0.97 N/A
AIM V.I. Value Fund................................. 0.61 0.15 0.76 N/A
THE ALGER AMERICAN FUND:
Alger American MidCap Growth Portfolio.............. 0.80 0.05 0.85 N/A
Alger American Income and Growth Portfolio.......... 0.625 0.075 0.70 N/A
Alger American Small Capitalization Portfolio....... 0.85 0.05 0.90 N/A
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities Fund, Variable Series 0.60(4) 0.20(4) 0.80(4) 1.88%
Colonial Small Cap Value Fund, Variable Series...... 0.80(4) 0.20(4) 1.00(4) 4.46
Colonial Strategic Income Fund, Variable Series..... 0.65 0.10 0.75 N/A
Colonial U.S. Growth and Income Fund, Variable Series 0.80 0.08 0.88 0.88
Liberty All-Star Equity Fund, Variable Series....... 0.80 0.15 0.95(4) 0.95
Newport Tiger Fund, Variable Series................. 0.90 0.31 1.21 1.21
Stein Roe Global Utilities Fund, Variable Series.... 0.65 0.12 0.77 0.77
STEINROE VARIABLE INVESTMENT TRUST: N/A
Stein Roe Growth Stock Fund, Variable Series........ 0.50 0.17 0.67 N/A
Stein Roe Balanced Fund, Variable Series............ 0.45 0.17 0.62 N/A
MFS(R) VARIABLE INSURANCE TRUST(SM): N/A
MFS Growth with Income Series....................... 0.75 0.13(5) 0.88(5) N/A
MFS High Income Series.............................. 0.75(5) 0.16(5) 0.91(5) 0.97
MFS Research Series................................. 0.75 0.11(5) 0.86(5) N/A
MFS Total Return Series............................. 0.75 0.15(5) 0.90(5) N/A
MFS Capital Opportunities Series.................... 0.75(5) 0.16(5) 0.91(5) 1.02
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
The Global Equity Portfolio......................... 0.47(6) 0.68(6) 1.15(6) N/A
The Mid Cap Value Portfolio......................... 0.43(6) 0.62(6) 1.05(6) N/A
The Value Portfolio................................. 0.18(6) 0.67(6) 0.85(6) N/A
OPPENHEIMER VARIABLE FUNDS:
Oppenheimer Bond Fund/VA............................ 0.72 0.01 0.73 N/A
Oppenheimer Capital Appreciation Fund/VA............ 0.68 0.02 0.70 N/A
Oppenheimer Small Cap Growth Fund/VA................ 0.65 0.59 1.34 N/A
SAGE LIFE INVESTMENT TRUST:
EAFE(R) Equity Index Fund*.......................... 0.73(7) 0.17(7) 0.90(7) 1.07
S&P 500 Equity Index Fund**......................... 0.38(7) 0.17(7) 0.55(7) 0.72
Money Market Fund................................... 0.48(7) 0.17(7) 0.65(7) 0.82
Nasdaq-100 Index(R) Fund***......................... 0.80(8) 0.05(8) 0.85(8) 0.90
All-Cap Growth Fund................................. 0.99(8) 0.11(8) 1.10(8) 1.21
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity Income Portfolio............... 0.85(9) 0.00 0.85 N/A
T. Rowe Price Mid-Cap Growth Portfolio.............. 0.85(9) 0.00 0.85 N/A
T. Rowe Price Personal Strategy Balanced Portfolio.. 0.90(9) 0.00 0.90 N/A
</TABLE>
-------------
(1) Currently, we do not assess a transfer charge.
(2) In some states, the charge is $30. We waive the Annual Administration
Charge if the Account Value is at least $50,000 on the date of
deduction.
4
<PAGE> 23
(3) On and after the Income Date we call the Asset-Based Charges Variable
Sub-Account Charges and deduct them on a daily basis. See "What Are
The Expenses Under A 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 1999 would have been:
Colonial High Yield Securities Fund, Variable Series 0.60%, 1.28%,
1.88%; and Colonial Small Cap Value Fund, Variable Series 0.80%, 3.66%
and 4.46%.
(5) Without fee waivers and expense reimbursements, the management fees,
the other expenses, and total expenses for each of the following MFS
Variable Insurance Trust Funds during 1999 would have been: MFS Capital
Opportunity Series 0.75%, 0.27% and 1.02%; and MFS High Income Series
0.75%, 0.22%, and 0.97%. In addition, each Fund has an expense offset
arrangement which reduces the Fund's custodian fee based upon the
amount of cash maintained by the Fund with its custodian and dividend
disbursing agent. Each Fund may enter into such arrangements and
directed brokerage arrangements, which would also have the effect of
reducing Fund expenses. "Other Expenses" do not take into account these
expense reductions, and are therefore higher than the actual expenses
of the Fund. Had these fee reductions been taken into account, "Total
Expenses (after fee waivers and reimbursements, as applicable)" would
be lower and would equal: MFS Growth with Income Series -- 0.87%; MFS
High Income Series -- 0.90%; MFS Research Series -- 0.85%; MFS Total
Return Series -- 0.89%; and MFS Capital Opportunities Series -- 0.90%.
(6) Without fee waivers and expense reimbursements, the management fees,
the other expenses, and total expenses for each of the following The
Universal Institutional Funds, Inc. Funds during 1999 would have been:
Global Equity Portfolio 0.80%, 0.68%, and 1.48%; Mid Cap Value
Portfolio 0.75%, 0.62%, and 1.37%; and Value Portfolio 0.55%, 0.67%,
and 1.22%.
(7) Without fee waivers and expense reimbursements, total expenses for
each of the Sage Life Investment Trust funds during 1999 would have
been: EAFE(R) Equity Index Fund 1.07%; S&P 500 Equity Index Fund
0.72%; and Money Market Fund 0.82%. In addition, a Rule 12b-1 Plan
(the "Plan") has been adopted by each Fund, pursuant to which up to
0.25% may be deducted from Fund assets. No Plan payments were made
during 1999, and no payments will be made under the plan prior to May
1, 2001.
(8) The expenses of Sage Life Investment Trust's Nasdaq-100 Index(R) Fund
and All-Cap Growth Fund are based on the estimated expenses that those
Funds expect to incur in their initial fiscal year. Without fee
waivers and expense reimbursements, total expenses for the Nasdaq-100
Index(R) Fund during 2000 would be estimated to be 0.90% and total
expenses for the All-Cap Growth Fund during 2000 would be estimated to
be 1.21%. In addition, a Rule 12b-1 Plan has been adopted by each
Fund, pursuant to which up to 0.25% may be deducted from Fund assets.
No payments will be made under the Plan prior to May 1, 2001.
(9) For each of the portfolios in the T. Rowe Price Equity Series,
management fees include operating expenses.
* 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
5
<PAGE> 24
by Standard & Poor's, and Standard & Poor's makes no representation
regarding the advisability of investing in the Fund.
*** The Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq(R) are trade or
service marks of The Nasdaq Stock Market, Inc. (which with its
affiliates are the Corporations), and are licensed for use by Sage
Advisors, Inc. The product has not been passed on by the Corporations
as to its legality or suitability. The product is not issued,
endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE
NO WARRANTIES AND BEAR NO LIABILITIES WITH RESPECT TO THE PRODUCT.
EXAMPLES
The purpose of the following examples is to demonstrate the expenses
that you would pay on a $1,000 investment in the Variable Account. We calculate
the examples based on the fees and charges shown in the tables above, and we
assume that the fee waivers and reimbursements shown above will continue. For a
more complete description of these expenses, see "What Are The Expenses Under A
Contract?" and see the prospectuses for the Trusts. The examples assume that
the initial purchase payment is $50,000, and that you have invested all your
money in the Variable Account.
You should not consider the examples a representation of past or
future expenses. Actual expenses may be greater or less than those shown. In
addition, we do not reflect Purchase Payment Tax Charges. These charges may
apply depending on the state where the Contract is sold. You might also incur
transfer fees if you make more than twelve transfers in a Contract Year,
however, we currently do not deduct the transfer charge. See "Transfer Charge."
The assumed 5% annual rate of return is hypothetical. You should not
consider it to be a representation of past or future annual returns; both may
be greater or less than this assumed rate.
You would pay the following expenses on a $1,000 initial purchase
payment, assuming a 5% annual return on assets and the charges listed in the
Fee Table above.
The examples do not reflect the charges for the optional Guaranteed
Minimum Income Benefit ("GMIB") and the optional Enhanced Death Benefit
("EDB"). If these charges were reflected, your expenses would be higher.
<TABLE>
<CAPTION>
IF YOU REMAIN IN YOUR CONTRACT
FUND OR YOU ANNUITIZE AT THE
---- END OF EACH TIME PERIOD
----------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Government Securities Fund............................... $24 $75 $131 $298
AIM V.I. Growth and Income Fund................................... 22 70 123 280
AIM V.I. International Equity Fund................................ 24 77 135 307
AIM V.I. Value Fund............................................... 22 69 122 278
THE ALGER AMERICAN FUND:
Alger American MidCap Growth Portfolio............................ 23 72 127 289
Alger American Income and Growth Portfolio........................ 22 69 120 271
Alger American Small Capitalization Portfolio..................... 24 75 131 298
</TABLE>
6
<PAGE> 25
<TABLE>
<CAPTION>
IF YOU REMAIN IN YOUR CONTRACT
FUND OR YOU ANNUITIZE AT THE
---- END OF EACH TIME PERIOD
----------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
LIBERTY VARIABLE INVESTMENT TRUST:
Colonial High Yield Securities Fund, Variable Series.............. $23 $72 $125 $284
Colonial Small Cap Value Fund, Variable Series.................... 25 78 136 309
Colonial Strategic Income Fund, Variable Series................... 22 69 122 278
Colonial U.S. Growth and Income Fund, Variable Series............. 23 74 129 294
Liberty All-Star Equity Fund, Variable Series..................... 24 76 133 303
Newport Tiger Fund, Variable Series............................... 27 84 148 338
Stein Roe Global Utilities Fund, Variable Series.................. 22 70 123 280
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Growth Stock Fund, Variable Series...................... 21 66 117 266
Stein Roe Balanced Fund, Variable Series.......................... 21 66 115 261
MFS(R) VARIABLE INSURANCE TRUST(SM):
MFS Growth With Income Series..................................... 23 74 129 294
MFS High Income Series............................................ 24 75 131 298
MFS Research Series............................................... 23 73 128 292
MFS Total Return Series........................................... 24 75 131 298
MFS Capital Opportunities Series.................................. 24 75 131 298
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.:
The Global Equity Portfolio....................................... 26 82 144 329
The Mid Cap Value Portfolio....................................... 25 79 139 316
The Value Portfolio............................................... 23 72 127 289
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund/VA.......................................... 22 69 121 275
Oppenheimer Capital Appreciation Fund/VA.......................... 22 69 120 271
Oppenheimer Small Cap Growth Fund/VA.............................. 28 88 155 354
SAGE LIFE INVESTMENT TRUST:
EAFE(R)Equity Index Fund.......................................... 24 75 131 298
S&P 500 Equity Index Fund......................................... 20 63 110 252
Money Market Fund................................................. 21 66 116 265
Nasdaq-100 Index(R) Fund.......................................... 23 72 127 289
All-Cap Growth Fund............................................... 26 81 142 323
T. ROWE PRICE EQUITY SERIES, INC.:
T. Rowe Price Equity Income Portfolio............................. 23 72 127 289
T. Rowe Price Mid-Cap Growth Portfolio............................ 23 72 127 289
T. Rowe Price Personal Strategy Balanced Portfolio................ 24 75 131 298
</TABLE>
No information about Accumulation Unit Values is provided because, as
of December 31, 1999, we have not begun to market the Contracts.
==============================================================================
1. WHAT ARE THE CONTRACTS?
==============================================================================
The Contracts are flexible payment deferred combination fixed and
variable annuity Contracts. They are designed for use in your long-term
financial and retirement planning; and provide a means for investing amounts on
a tax-deferred basis in our Variable Account and our Fixed Account.
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Under the terms of the Contract, we promise to pay you (or the
Annuitant, if the Owner is other than an individual) regular income payments
after the Income Date. Until the Income Date, you may make additional purchase
payments under the Contract, and will ordinarily not be taxed on increases in
the value of your Contract as long as you do not take distributions. When you
use the Contract in connection with tax-qualified retirement plans, federal
income taxes may be deferred on your purchase payments, as well as on increases
in the value of your Contract. However, if you would like to purchase a
Contract in connection with a tax-qualified retirement plan, please carefully
consider the costs and benefits of the Contract (including income payments)
before your purchase since the tax-qualified retirement plan itself provides
for tax-sheltered growth. See "How Will My Contract Be Taxed?" The Contracts
may not be available in all states or in all markets. Your Contract may differ
from the descriptions below because of the requirements of the state where we
issued your Contract. Generally Contracts purchased after May 1, 2000 will have
the provisions described in this Prospectus. However, in certain states, the
provisions described in Appendix C will apply. Please contact our Customer
Service Center to see if these provisions apply to your Contract.
YOUR OPTIONS
When you make purchase payments, you can allocate those purchase
payments to one or more of the 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, 5, 7, and 10 years. If any amount allocated or transferred
remains in a 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
applied to an income plan 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
applied to an income plan. See "Market Value Adjustment."
We also offer you two optional benefits for an additional charge --
the GMIB and EDB. These riders can provide additional benefits that we discuss
in "What Are My Income Payment Options" and "Does the Contract Have A Death
Benefit."
TRANSFERS
Subject to certain conditions, you can transfer Account Value three
ways:
- From one Variable Sub-Account to another;
- From a Fixed Sub-Account to a Variable Sub-Account; or
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- From a Variable Sub-Account to a Fixed Sub-Account.
We may offer other variable annuity contracts that also invest in the
same Funds offered under the Contracts. These contracts may have different
charges and they may offer different benefits.
===============================================================================
2. WHAT ARE MY INCOME PAYMENT OPTIONS?
===============================================================================
YOUR CHOICES
You have several choices to make concerning your Income Payments.
First, you choose the Income Date when you want regular income payments to
begin. The Income Date you choose must be on or before the first calendar month
following the Annuitant's 95th birthday. We reserve the right to require that
your Income Date be at least two years after the Contract Date. Then, you
select an income plan from the list below, and indicate whether you want your
income payments to be fixed or variable or a combination of fixed and variable.
You must give Satisfactory Notice of your choices at least 30 days before the
Income Date, and you must have at least $5,000 of Account Value to apply to a
variable or fixed income plan.
On the Income Date, we will use the Account Value under the Contract
(adjusted for any Market Value Adjustment, if applicable) 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. If you have not chosen an income plan by the
Income Date, a "life annuity with 10 years certain" (described below) will be
used.
The available income plans are:
- INCOME PLAN 1 -- Life Annuity - You will receive payments for
your life.
- INCOME PLAN 2 -- Life Annuity with 10 or 20 Years Certain - You
will receive payments for your life. However, if you die before
the end of the guaranteed certain period you select (10 or 20
years), your Beneficiary will receive the payments for the
remainder of that period.
- INCOME PLAN 3 -- Joint and Last Survivor Life Annuity - We will
make payments as long as either you or a second person you select
(such as your spouse) is alive.
- INCOME PLAN 4 -- Payments for a Specified Period Certain - You
will receive payments for the number of years you select. However,
if you die before the end of that period, your Beneficiary will
receive the payments for the remainder of the guaranteed certain
period.
- INCOME PLAN 5 -- Annuity Plan - You can use your Account Value to
purchase any other income plan we offer at the time you want to
begin receiving regular income payments for which you and the
Annuitant are eligible.
INCOME PAYMENT AMOUNTS
We will base your first income payment, whether fixed or variable, on
the amount of proceeds applied under the income plan you have selected and on
the "annuity purchase rates." These rates vary
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based on the Annuitant's age and sex, and if applicable, upon the age and sex
of a second person you designate. The annuity 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 2.5% or 6%; if you do not select a rate, we will apply the 2.5% rate.
(We may offer other rates in the future). The lower the rate, the lower your
initial variable income payment, but the better your payments will keep pace
with inflation (assuming positive investment performance). Conversely, the
higher the rate, the higher your initial variable income payment, but the less
likely your payments will keep pace with inflation (assuming positive
investment performance).
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.
If you told us that you want a life annuity, it is possible that you
could only receive one payment.
Your income payments will be made monthly, unless you choose
quarterly, semi-annual or annual payments by giving us Satisfactory Notice at
least 30 days before the Income Date. Payments start on the Income Date. 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. Also, if on the Income Date, the Account Value is less
than $5,000, we may pay the Surrender Value on that date in one sum.
OPTIONAL GUARANTEED MINIMUM INCOME BENEFIT RIDER. The GMIB is an
optional rider that ensures, if you satisfy the rider's conditions, the
availability of guaranteed minimum lifetime income payments on the Income Date.
Regardless of investment experience, this rider guarantees that you will never
receive income payments that are less than the GMIB. For a particular Income
Plan and frequency of payment, we determine the GMIB by multiplying (a) by (b)
where:
a) is the Highest Anniversary Value determined on the Income Date;
and
b) is the applicable Monthly Income Payment rate per $1,000 shown in
the Income Tables in your Contract Schedule.
We then compare the GMIB to what we would pay you if you had not
elected the GMIB rider. We determine this amount by applying your current
Account Value to our then current monthly income rate per $1,000 (the current
monthly income rates may be more favorable than the guaranteed rates shown in
the Contract to calculate the GMIB). We will pay you the amount that results in
higher income payments.
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The Highest Anniversary Value is the greatest anniversary value
attained in the following manner. We will calculate an anniversary value for
each Contract Anniversary before your Income Date, excluding, however, Contract
Anniversaries that come after you attain age 80 or before the effective date of
the GMIB rider. An anniversary value for a Contract Anniversary equals:
- the Account Value on that Contract Anniversary;
- increased by the dollar amount of any purchase payments made since
that Contract Anniversary; and
- reduced by the proportion that any withdrawal taken since that
anniversary (including applicable surrender charges and Market Value
Adjustment) reduced Account Value.
We show an example of how the GMIB works in Appendix D.
CONTRACT CONTINUATION OPTION. An Owner's surviving spouse who is
eligible to continue the Contract under the Contract Continuation Option, may
also be eligible to continue this rider. To do so, the surviving spouse must
give our Customer Service Center notice within 30 days of the Business Day we
receive proof of the Owner's death. If the spouse is eligible under our then
existing rules, we will continue the rider and assess charges based on the
spouse's attained age and our then current charges. The rider's effective date
for purposes of reviewing Contract Anniversaries to determine the Highest
Anniversary Value will be the Business Day the new Owner elects to continue the
rider. All of the other terms and conditions of the rider will continue as
before.
WHEN MAY YOU ELECT THE GMIB? You may take income payments using the
GMIB on any Contract Anniversary, or the thirty-day period that follows, after
(a) the Contract has been in effect for seven years, and (b) the Annuitant has
attained age 60.
INCOME PLANS AVAILABLE WITH THE GMIB. You may elect to use the GMIB
with the following Income Plans in your Contract:
- Income Plan 1. Fixed Life Annuity;
- Income Plan 2. Fixed Life Annuity with 10 or 20 Years Certain; and
- Income Plan 3. Fixed Joint and Last Survivor Annuity.
You may also elect any other Income Plan we offer on the Income Date
for which you and the Annuitant are then eligible and we then make available
for use with the GMIB.
OTHER GMIB TERMS AND CONDITIONS.
- The GMIB must be purchased at time of application;
- The Annuitant must be age 80 or younger at the time your Contract is
issued;
- The purchase of the GMIB as an optional benefit is irrevocable and
charges for the GMIB will remain in force for as long as your
Contract remains in force, or until your Income Date if sooner.
IMPORTANT CONSIDERATIONS REGARDING THE GMIB. While a GMIB does provide
a guaranteed income, a GMIB MAY NOT BE APPROPRIATE FOR ALL INVESTORS. You
should understand the GMIB completely and analyze it thoroughly before you
purchase the GMIB.
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- A GMIB does not in any way guarantee the performance of any Fund,
or any other investment option under your Contract.
- Once purchased, the GMIB is irrevocable. This means that before the
Income Date if current monthly income payment rates per $1,000 and
the investment performance of the Funds are such as would result in
higher income payments than would be the case under the GMIB using
guaranteed monthly income payment rates, the GMIB charges will
still be assessed.
- The GMIB in no way restricts or limits your rights to take income
payments at other times permitted under your Contract -- therefore,
you should consider the GMIB as an income payment "floor."
- Please take advantage of the guidance of a qualified financial
adviser in evaluating the GMIB options, as well as all other
aspects of your Contract.
- The GMIB may not be approved in all states.
==============================================================================
3. HOW DO I PURCHASE A CONTRACT?
==============================================================================
INITIAL PURCHASE PAYMENT
You may purchase a Contract for use in connection with tax-qualified
retirement plans ("Qualified Contracts") or on a non-tax qualified basis
("Non-Qualified Contracts"). To purchase a Contract, you and the Annuitant you
select may not be more than 85 years old on the Contract Date. We require a
minimum initial purchase payment of $25,000.
ISSUANCE OF A CONTRACT
Once we receive your initial purchase payment and your application at
our Customer Service Center, we will usually issue your Contract within two
Business Days. However, if you did not give us all the information we need, we
will try to contact you to get the needed information. If we cannot complete
the application within five Business Days, we will either send your money back
or obtain your permission to keep your money until we receive the necessary
information. Your Contract Date will be the date we issue your Contract at our
Customer Service Center.
FREE LOOK RIGHT TO CANCEL YOUR 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, you must
return it to our Customer Service Center or to one of our authorized registered
representatives. We will send you a refund equal to your Account Value plus any
Asset-Based Charges and Purchase Payment Tax 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 you the greater of
your Account Value plus the Asset-Based Charges and Purchase Payment Tax
Charges we have deducted or your initial purchase payment less any withdrawals
previously taken. In those latter states where this requirement exists, we will
temporarily invest amounts you allocated to the Variable Account to the Money
Market Sub-Account until we deem the Free Look Period to end. See "What Are My
Investment Options."
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MAKING ADDITIONAL PURCHASE PAYMENTS
You may make additional purchase payments of $1,000 or more (a lesser
minimum amount may apply to Qualified Contracts; contact our Customer Service
Center) at any time before the Income Date, subject to the following
conditions. We will accept additional purchase payments as shown in the chart
below:
<TABLE>
<CAPTION>
======================================================================================
RESTRICTIONS ON ACCEPTANCE OF ADDITIONAL
CONTRACT TYPE PURCHASE PAYMENTS
--------------------------------------------------------------------------------------
<S> <C>
Non-Qualified Accepted until the earlier of the year in which you
Contract attain age 85 or the year in which the Annuitant
attains age 85.
--------------------------------------------------------------------------------------
Qualified Contract Accepted until the year in which you attain
70 1/2, except contributions to a Roth IRA or rollover
contributions may be made until the year in which you
attain age 85.
======================================================================================
</TABLE>
You must obtain our prior approval before you make a purchase payment
that causes the Account Value of all annuities that you maintain with us to
exceed $1,000,000.
We will credit any purchase payment received after the Contract Date
to your Contract as of the Business Day on which we receive it at our Customer
Service Center. We will deem purchase payments received on other than a
Business Day as received on the next following Business Day.
WHEN WE MAY CANCEL YOUR CONTRACT
If you have not made a purchase payment for more than two years and
your Account Value is less than $2,000 on a Contract Anniversary, we may cancel
your Contract and pay you the Surrender Value as though you had surrendered. We
will give you written notice at your address of record. However, we will allow
you 61 days from the date of that notice to submit an additional purchase
payment in an amount sufficient to maintain your Account Value at $2,000 or
more. If we have not received the required additional purchase payment by the
end of this period, we may cancel your Contract.
=============================================================================
4. WHAT ARE MY INVESTMENT OPTIONS?
=============================================================================
PURCHASE PAYMENT ALLOCATIONS
When you apply for a Contract, you specify the percentage of your
initial and additional purchase payments 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
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<PAGE> 32
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 at the end of the Free Look Period does not count as a transfer
for any other purposes under the Contract.
VARIABLE SUB-ACCOUNT INVESTMENT OPTIONS
The Variable Account has over 30 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
AIM V.I. GOVERNMENT SECURITIES FUND. This Fund seeks to achieve a
high level of current income consistent with reasonable concern for safety of
principal by investing in debt securities issued, guaranteed or otherwise
backed by the 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 advisor 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 Advisers, Inc. advises the AIM Variable Insurance Funds.
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO. This Fund seeks long-term
capital appreciation. It focuses on midsize companies with promising growth
potential. Under normal circumstances, the portfolio invests primarily in the
equity securities of companies having a market capitalization within the range
of companies in the S&P MidCap 400 Index.
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO. This Fund primarily seeks
to provide a high level of dividend income; its secondary goal is to provide
capital appreciation. The Portfolio invests in dividend paying equity
securities, such as common or preferred stocks, preferably those which the
Manager believes also offer opportunities for capital appreciation.
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<PAGE> 33
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO. This Fund seeks
long-term appreciation. It focuses on small, fast-growing companies that offer
innovative products, services or technologies to a rapidly expanding
marketplace. Under normal circumstances, the portfolio invests primarily in the
equity securities of small capitalization companies. A small capitalization
company is one that has a market capitalization within the range of the Russell
2000 Growth Index or the S&P SmallCap 600 Index.
Fred Alger Management, Inc. advises The Alger American Fund.
LIBERTY VARIABLE INVESTMENT TRUST
COLONIAL HIGH YIELD SECURITIES FUND, VARIABLE SERIES. This Fund seeks
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. This Fund seeks
long-term growth by investing primarily in smaller capitalization equity
securities.
COLONIAL STRATEGIC INCOME FUND, VARIABLE SERIES. 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. GROWTH AND INCOME FUND, VARIABLE SERIES. This Fund seeks
long-term growth and income by investing primarily in large capitalization
equity securities. Up to 10% of its assets may be invested in debt securities.
LIBERTY ALL-STAR EQUITY FUND, VARIABLE SERIES. 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. 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, The People's Republic of China and the Philippines).
STEIN ROE GLOBAL UTILITIES FUND, VARIABLE SERIES. This Fund seeks
current income and long-term growth of capital by investing primarily in U.S.
and foreign securities of utility companies.
Liberty Advisory Services Corp. provides investment management and
advisory services to the Liberty Variable Investment Trust. Colonial
Management Associates, Inc. sub-advises the High Yield Securities Fund, the
U.S. Growth and Income Fund, the Small Cap Value Fund, and the Strategic Income
Fund. Stein Roe & Farnham Incorporated sub-advises the Global Utility Fund.
Newport Fund Management, Inc. sub-advises the Tiger Fund. Liberty Asset
Management Company sub-advises the All-Star Fund.
STEINROE VARIABLE INVESTMENT TRUST
STEIN ROE GROWTH STOCK FUND. This Fund seeks long-term growth of
capital through investment primarily in common stocks.
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<PAGE> 34
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 long-term growth of
capital and income. The Fund invests, under normal market conditions, at least
65% of its total assets in common stock and related securities, such as
preferred stocks, convertible securities and depositary receipts for those
securities. These securities may be listed on a securities exchange or traded
in the over-the-counter markets. While the Fund may invest in companies of any
size, the Fund generally focuses on companies with larger market
capitalizations that the Fund's adviser believes have sustainable growth
prospects and attractive valuations based on current and expected earnings or
cash flow.
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. The Fund invests,
under normal market conditions, at least 80% of its total assets in high yield
fixed income securities. Fixed income securities offering the high current
income sought by the series generally are lower rated bonds (junk bonds).
MFS RESEARCH SERIES. This Fund seeks to provide long-term growth of
capital and future income. The Fund invests, under normal market conditions, at
least 80% of its total assets in common stocks and related securities, such as
preferred stocks, convertible securities and depositary receipts. The Fund
focuses on companies that the Fund's adviser believes have favorable prospects
for long-term growth, attractive valuations based on current and expected
earnings or cash flow, dominant or growing market share and superior
management.
MFS TOTAL RETURN SERIES. This Fund primarily seeks to obtain
above-average income (compared to a portfolio entirely invested in equity
securities) consistent with prudent employment of capital; its secondary
objective is to take advantage of opportunities for growth of capital and
income since many securities offering a better than average yield may also
possess growth potential. The Fund is a "balanced fund," and invests in a
combination of equity and fixed income securities. Under normal market
conditions, the Fund invests (i) at least 40%, but not more than 75%, of its
net assets in common stocks and related securities (referred to as equity
securities), such as preferred stocks, bonds, warrants or rights convertible
into stock, and depositary receipts for those securities; and (ii) at least 25%
of its net assets in non-convertible fixed income securities.
MFS CAPITAL OPPORTUNITIES SERIES. This Fund seeks capital
appreciation. The Fund invests, under normal market conditions, at least 65% of
its total assets in common stocks and related securities, such as preferred
stocks, convertible securities and depositary receipts for those securities.
The Fund focuses on companies which the Fund's adviser believes have favorable
growth prospects and attractive valuations based on current and expected
earnings or cash flow.
MFS Investment Management(R) advises the MFS(R) Variable Insurance
Trust.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
THE 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
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<PAGE> 35
that is oriented to the selection of individual stocks that the Fund's
investment adviser believes are undervalued.
THE MID CAP VALUE PORTFOLIO. This Fund seeks above-average total
return over a market cycle of three to five years by investing primarily in
common stocks of companies with equity capitalizations in the range of
companies included in the S&P MidCap 400 Index (currently $500 million to $6
billion).
THE VALUE PORTFOLIO. This Fund seeks above-average return over a
market cycle of three to five years by investing primarily in a portfolio of
common stocks and other equity securities of companies with equity
capitalization greater than $2.5 billion 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.
Morgan Stanley Dean Witter Investment Management, Inc. advises The
Global Equity Portfolio. Miller Anderson & Sherrerd, LLP advises The Mid Cap
Value Portfolio and The 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. 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 invests mainly in securities of "growth type" companies
with market capitalizations of less than $1 billion.
Oppenheimer Funds, Inc. manages Oppenheimer Variable Account Funds.
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.
NASDAQ-100 INDEX(R) FUND. This Fund seeks to provide investment returns
that correspond to the performance of the Nasdaq-100 Index(R) before the
deduction of Fund expenses. The Nasdaq-100 Index(R) is a modified
capitalization-weighted index composed of 100 of the largest non-financial
domestic and international companies listed on the National Market tier of the
Nasdaq Stock Market.
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<PAGE> 36
ALL-CAP GROWTH FUND. This Fund seeks long-term capital appreciation by
investing primarily in a diversified portfolio of common stocks.
Sage Advisors, Inc. is the investment manager to the Sage Life
Investment Trust. State Street Global Advisors subadvises the EAFE(R) Equity
Index Fund, S&P 500 Equity Index Fund, and Nasdaq-100 Index(R) Fund. Conning
Asset Management Company subadvises the Money Market Fund. Eagle Asset
Management, Inc. subadvises the All-Cap Growth 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 names, 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.
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 Internal Revenue Code of 1986, as amended (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 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 for administrative services we provide. The fee is ordinarily based upon an
annual percentage of up to 0.25% of the average aggregate net amount we have
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<PAGE> 37
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.
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 is
found in the current prospectus for each Trust. 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 DCA Fixed Sub-Accounts for our Dollar-Cost Averaging Program.
HOW WE DETERMINE THE GUARANTEED INTEREST RATE. We have no specific
formula for establishing the Guaranteed Interest Rates for the different
Guarantee Periods. Our determination 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 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.
GUARANTEE PERIODS. We measure the length of a Guarantee Period from
the end of the calendar month in which you allocated or transferred the amount
to the Fixed Sub-Account. This means that the Expiration Date of any Guarantee
Period will always be the last day of a calendar month. The currently available
Guarantee Periods are 1, 2, 3, 4, 5, 7, and 10 years. We may offer different
Guarantee Periods in the future. Not all Guarantee Periods may be available in
all states. Any Guarantee Period you select cannot be longer than the number of
full years remaining until your Income Date.
We may offer different Guarantee Periods with special Guaranteed
Interest Rates for the DCA Fixed Sub-Accounts. In addition, we may offer
special Guaranteed Interest Rates for new purchase payments allocated to the
Fixed Sub-Accounts.
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<PAGE> 38
We will notify you of your renewal options at least thirty days before
each Expiration Date of your Fixed Sub-Accounts. Currently, your options are:
- Take no action and we will transfer the value of the expiring
Fixed Sub-Account to the Fixed Sub-Account with the same
Guarantee Period, but not longer than five years or extending
beyond the Income Date, as of 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.
- Elect a new Guarantee Period(s) from among those we offer as of
the day the previous Fixed Sub-Account expires.
- Elect to transfer the value of the Fixed Sub-Account to one or
more Variable Sub-Accounts.
Any amounts surrendered, withdrawn, transferred or applied to an income
plan other than during the thirty days before the Expiration Date of the
Guarantee Period are subject to a Market Value Adjustment with the exception of
the following transactions:
- Transfers from DCA Fixed Sub-Accounts made automatically under our
Dollar Cost Averaging Program, and
- Withdrawals of earned interest made automatically under our
Systematic Partial Withdrawal Program.
We currently waive any Market Value Adjustment on withdrawals you take
to satisfy IRS minimum distribution requirements.
MARKET VALUE ADJUSTMENT. A Market Value Adjustment reflects the change
in interest rates since we established a Fixed Sub-Account. It compares: (l)
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.
- 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:
- For a surrender, withdrawal, transfer, or amount applied to an
income plan, we will calculate the Market Value Adjustment on the
total amount that must be surrendered, withdrawn, transferred or
applied to an income plan to provide the amount requested.
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<PAGE> 39
- 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 applied to an income plan.
- If the Market Value Adjustment is positive, it increases any
remaining value in the Fixed Sub-Account. In the case of
surrender, or if you withdraw, transfer or apply to an income
plan, the full amount of the Fixed Sub-Account, the Market Value
Adjustment increases the amount surrendered, withdrawn,
transferred, or applied to an income plan.
A Market Value Adjustment will not be applied to any amounts
payable upon death or cancellation during the free-look period.
We will compute the Market Value Adjustment by multiplying the factor
below by the total amount that must be surrendered, withdrawn, transferred, or
applied to an income plan from the Fixed Sub-Account to provide the amount you
requested.
[(1+I)/(1+J+.0025)](N/365) - 1
Where
I is the Index Rate for a maturity equal to the Fixed Sub-Account's
Guarantee Period at the time we established the Sub-Account;
J is the Index Rate for a maturity equal to the time remaining (rounded
up to the next full year) in the Fixed Sub-Account's Guarantee Period
at the time of calculation; and
N is the remaining number of days in the Guarantee Period at the time
of calculation.
We currently base the Index Rate for a calendar week on the reported
rate for the preceding calendar week. We reserve the right to set it less
frequently than weekly but in no event less often than monthly. If there is no
Index Rate for the maturity needed to calculate I or J, 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 Maryland, state insurance law requires that the Market Value
Adjustment be computed by multiplying the amount being surrendered, withdrawn,
transferred, or applied to an income plan, by the greater of the factor above
and the following factor: [(1.03)/(l+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. In Washington, we
will not assess the Market Value Adjustment because of state insurance law
requirements. Because of these requirements, not all Guarantee Periods are
available. Contact our Customer Service Center for available Guarantee Periods.
Examples of how the Market Value Adjustment works are shown in Appendix
A.
TRANSFERS
Before the Income Date and while the Annuitant is living, you may
transfer Account Value from and among the Variable and Fixed Sub-Accounts at
any time, subject to certain conditions. However, in certain states, your right
to transfer Account Value is restricted until the Free Look Period ends. See
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<PAGE> 40
"What Are My Investment Options?" The minimum amount of Account Value that you
may transfer from a Sub-Account is $100, or, if less, the entire remaining
Account Value held in that Sub-Account. If a transfer would reduce the Account
Value remaining in a Sub-Account below $100, we will treat your transfer
request as a request to transfer the entire amount.
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.
In addition, we reserve the right to restrict transfers:
- if any of the Variable Sub-Accounts that would be affected by the
transfer is unable to purchase or redeem shares of the Fund in which
the Sub-Account invests; or
- if the transfer results in more than one trade involving the same
Sub-Account within a 30-day period; or
- if the transfer would adversely affect Accumulation Unit Values
(which may occur if the transfer would affect one percent or more of
the relevant Fund's total assets).
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 to be one transfer, regardless of the number of Sub-Accounts
affected by the transfer.
After the Income Date, you must have our prior consent to transfer
value from the Fixed Account to the Variable Account or from the Variable
Account to the Fixed Account. A Market Value Adjustment ordinarily will apply
to transfers from the Fixed Account. We reserve the right to limit the number
of transfers among the Variable Sub-Accounts to one transfer per Contract Year
after the Income Date.
TELEPHONE TRANSACTIONS. You may request transfers or withdrawals by
telephone. (We reserve the right to discontinue permitting withdrawals by
telephone.) We will not be liable for following instructions communicated by
telephone that we reasonably believe to be genuine. To request transfers or
withdrawals by telephone, you must elect the option on our authorization form.
We will use 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.
We also have a form to allow 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
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<PAGE> 41
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.
INTERNET TRANSACTIONS. We permit transfers via the Internet. We will
send Owners information about our website and transactions that may be made
through it.
THIRD PARTY TRANSFERS. As a general rule and as a convenience to you,
we allow a third party the right to make transfers on your behalf. However,
when the same third party possesses the right to make transfers on behalf of
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 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 Owners or third parties holding the right to
make transfers on behalf of multiple parties, we may refuse to honor third
party transfers and have instituted or will institute procedures to ensure that
the transfer requests that we receive have, in fact, been made by the Owners in
whose names they are submitted. However, our procedures will not prevent you
from making your own transfer requests.
TRANSFER PROGRAMS
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
DCA Fixed Sub-Accounts.
The dollar-cost averaging method of investment is designed to reduce
the risk of making purchases only when the price of Accumulation Units is high.
However, you should carefully consider your financial ability to continue the
program over a long enough period of time to purchase units when their value is
low as well as when high. Dollar-cost averaging does not assure a profit or
protect against a loss. Because interest 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 Income Date by sending us Satisfactory Notice. The minimum
transfer amount is $100 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. If that date is not a
Business Day, 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, restrictions may apply.
Once elected, dollar-cost averaging remains in effect until:
- the Income Date;
- you surrender the Contract;
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<PAGE> 42
- the value of the Sub-Account from which transfers are being made is
depleted; or
- you cancel the program by written request.
If you cancel dollar-cost averaging from a DCA Fixed Sub-Account before
the end of the selected Guarantee 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. A transfer under this program is not 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, and we reserve the right to restrict
transfers into the Money Market Subaccount. Dollar-cost averaging is not
available while you are participating in the systematic partial withdrawal
program.
We may also permit you to periodically transfer earnings (sweep) from
the Fixed Sub-Accounts to the Variable Sub-Accounts.
ASSET ALLOCATION PROGRAM. An optional Asset Allocation Program is
available if you do not wish to make your own 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.
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. It may be found that
allocation percentages within a particular model need to be changed. You will
be sent notice at least 30 days before any such change is made, and you will be
given an opportunity NOT to make the change.
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, and you may discontinue
your participation in this program by contacting our Customer Service Center.
We reserve the right to cancel the asset allocation 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 the Income Date, you may
instruct us to automatically rebalance (on a calendar quarter, semi-annual or
annual basis) Variable Account Value to return to your original allocation
percentages. Your request will be effective on the Business Day on which we
receive your request at our Customer Service Center. 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
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<PAGE> 43
stop automatic portfolio rebalancing at any time and make changes to your
allocation percentages by written request. There is no additional charge for
using this program. A transfer under this program is not a transfer for
purposes of assessing any transfer charge. We reserve the right to discontinue
offering this program at any time and for any reason. We do not include any
money allocated to the Fixed Account in the rebalancing.
VALUES UNDER YOUR CONTRACT
ACCOUNT VALUE. The Account Value is the entire amount we hold under
your Contract for you. The Account Value serves as a starting point for
calculating certain values under your Contract. It equals the sum of your
Variable Account Value and your Fixed Account Value. We first determine your
Account Value on the Contract Date, and after that, on each Business Day. The
Account Value will vary to reflect:
- the performance of the Variable Sub-Accounts you have selected;
- interest credited on amounts you allocated to the Fixed Account;
- any additional purchase payments; and
- charges, transfers, withdrawals, and surrenders.
Your Account Value may be more or less than purchase payments you made.
SURRENDER VALUE. The Surrender Value on a Business Day before the
Income Date is the Account Value, plus or minus any applicable Market Value
Adjustment, less any applicable annual administration charge and any applicable
Purchase Payment Tax Charge.
VARIABLE ACCOUNT VALUE. On any Business Day, the Variable Account Value
equals the sum of the values in each Variable Sub-Account. The value in each
Variable Sub-Account equals the number of Accumulation Units attributable to
that Variable Sub-Account multiplied by the Accumulation Unit value for that
Variable Sub-Account on that Business Day. When you allocate a purchase payment
or transfer Account Value to a Variable Sub-Account, we credit your Contract
with Accumulation Units in that Variable Sub-Account. We determine the number
of Accumulation Units by dividing the dollar amount allocated or transferred to
the Variable Sub-Account by the Sub-Account's Accumulation Unit value for that
Business Day. Similarly, when you transfer, withdraw, or surrender an amount
from a Variable Sub-Account, we cancel Accumulation Units in that Variable
Sub-Account. We determine the number of Accumulation Units canceled by dividing
the dollar amount you transferred, withdrew, or surrendered by the Variable
Sub-Account's Accumulation Unit value for that Business Day.
ACCUMULATION UNIT VALUE. An Accumulation Unit value varies to reflect
the investment experience of the underlying Fund, and may increase or decrease
from one Business Day to the next. We arbitrarily set the Accumulation Unit
value for each Variable Sub-Account at $10 when we established the Sub-Account.
For each Valuation Period after the date of establishment, 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.
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<PAGE> 44
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 during the Accumulation Phase. We determine the net
investment factor for any Valuation Period by dividing (a) by (b) where:
(a) is the net result of:
(1) the Net Asset Value of the Fund in which the Variable
Sub-Account invests determined at the end of the current
Valuation Period; PLUS
(2) 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; PLUS OR MINUS
(3) 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.
FIXED ACCOUNT VALUE. The Fixed Account Value is the sum of the Fixed
Account Value in each Fixed Sub-Account (including a DCA Fixed Sub-Account) on
any particular day. The value in each Fixed Sub-Account equals:
- the portion of the purchase payment(s) allocated or amount
transferred to the Sub-Account; PLUS
- interest at the Guaranteed Interest Rate; MINUS
- any transfers from the Sub-Account; MINUS
- any withdrawals (including any associated surrender charges) from
the Sub-Account; and MINUS
- any charges allocated to the Sub-Account.
We also adjust the Fixed Sub-Account Value for any Market Value Adjustment, the
value of which could be positive or negative.
==============================================================================
5. WHAT ARE THE EXPENSES UNDER A CONTRACT?
==============================================================================
We deduct the charges described below. The charges are for the
services and benefits we provide, costs and expenses we incur, and risks we
assume under the Contracts.
SERVICES AND BENEFITS WE PROVIDE INCLUDE:
- the ability of Owners to make withdrawals and surrenders under
the Contracts;
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<PAGE> 45
- the death benefit paid on the death of the Owner;
- the available investment options, including dollar-cost averaging,
asset allocation, automatic portfolio rebalancing, IRA partial
withdrawal programs, and systematic partial withdrawal programs;
- administration of the income plans available under the Contracts;
and
- the distribution of various reports to Owners.
COSTS AND EXPENSES WE INCUR INCLUDE:
- those related to various overhead and other expenses associated
with providing the services and benefits guaranteed by the
Contracts;
- sales and marketing expenses; and
- other costs of doing business.
RISKS WE ASSUME INCLUDE:
- the risks that Annuitants may live longer than we estimated when
we established the annuity purchase rates under the Contracts;
- that the amount of the death benefit will be greater than Account
Value; and
- that the costs of providing the services and benefits under the
Contracts will exceed the charges deducted.
We may also deduct a charge for taxes. See "Fee Table."
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,
the payment of sales expenses.
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 or eliminations based on the following
factors:
- the size of the group;
- the total amount of purchase payments to be received from the
group;
- the purposes for which the Contracts are purchased;
- the nature of the group for which the Contracts are purchased;
and
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<PAGE> 46
- 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,
distributors, or service providers of ours. Reductions or eliminations in
Contract charges will not be unfairly discriminatory against any person. Please
contact our Customer Service Center for more information about these cost
reductions and eliminations.
SURRENDER CHARGE
None! There are no surrender charges under the Contracts.
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. In some states the charge is $30, and in some
states it is deducted only from your Account Value in the Variable
Sub-Accounts. We may, from time to time, eliminate this charge for the first
Contract Year.
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. This charge is at cost with no profit to us.
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.
ASSET-BASED CHARGES
We assess Asset-Based Charges against your Contract for assuming
mortality and expense risks and administrative costs we assume. Before the
Income Date, we deduct Asset-Based Charges monthly and calculate the charges as
a percentage of the Variable Account Value on the date of deduction. On the
Contract Date and monthly thereafter, we deduct the Asset-Based Charges
proportionately from the Variable Sub-Accounts in which you are invested. On
and after the Income Date, however, these charges are called Variable
Sub-Account Charges and we deduct them daily from the assets in each Variable
Sub-Account supporting variable income payments. The maximum charges are:
<TABLE>
<CAPTION>
COMBINED
ASSET-BASED CHARGES
-------------------
ANNUAL MONTHLY DAILY
CHARGE CHARGE CHARGE
------ ------ ------
<S> <C> <C> <C>
Contract Years 1-7 1.40% .116667% .0038626%
Contract Years 8+ 1.25% .104167% .0034462%
</TABLE>
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<PAGE> 47
We reserve the right to deduct Asset-Based Charges on the effective
date of any transfer from the Fixed Account, or allocation of purchase payment
to the Variable Account, based on the amount transferred or allocated and based
on the number of days remaining until the next date of deduction. These charges
do not apply to any Fixed Account Value.
PURCHASE PAYMENT TAX CHARGE
We will deduct any state or local premium tax that we incur from your
Account Value. We reserve the right to defer the collection of this charge and
deduct it against your Account Value when you surrender your Contract or begin
receiving regular income payments. This tax charge currently ranges from 0% to
3.0% depending upon the state or locality.
OPTIONAL BENEFIT CHARGES.
Guaranteed Minimum Income Benefit. If you elect the optional
Guaranteed Minimum Income Benefit, we will deduct an additional charge equal on
an annual basis to 0.20% of your Account Value on the date of deduction during
the Accumulation Phase. We deduct it proportionately from the Fixed and
Variable Sub-Accounts in which you are invested. Charges are deducted on your
Contract Date and monthly thereafter. These charges will continue while your
Contract is in force unless (a) you apply all of your Account Value to an
Income Plan or income payments cease for any reason, (b) the death benefit is
paid or has begun to be paid, or (c) the Covered Person dies and an eligible
surviving spouse chooses not to continue this rider even though he or she
continues the Contract.
Enhanced Death Benefit. If you purchase the optional Enhanced Death
Benefit, we will deduct an additional charge equal on an annual basis to 0.20%
of your Account Value on the date of deduction during the Accumulation Phase.
We calculate this charge as a percentage of your Account Value on the date of
deduction, and deduct it proportionately from the Fixed and Variable
Sub-Accounts in which you are invested. Charges are deducted on your Contract
Date and monthly thereafter. These charges will continue while your Contract is
in force unless (a) you apply the Account Value to an Income Plan, (b) the
death benefit is paid or has begun to be paid, or (c) the Covered Person dies
and an eligible surviving spouse chooses not to continue this rider even though
he or she continues the Contract.
FUND ANNUAL 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. A table
of each Fund's management fees and other expenses can be found in the front of
this Prospectus in the Fee Table. For a description of each Fund's expenses,
management fees, and other expenses, see the Trusts' prospectuses.
ADDITIONAL INFORMATION
The Contracts are sold by broker-dealers through registered
representatives of such broker-dealers who are also appointed and licensed as
insurance agents of Sage Life. See "Distribution of the Contracts." These
broker-dealers receive commissions for selling Contracts calculated as a
percentage of purchase payments (up to a maximum of 6.25%). You do not pay
these commissions. We do. Broker-dealers who meet certain productivity and
profitability standards may be eligible for additional compensation.
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6. HOW WILL MY CONTRACT BE TAXED?
==============================================================================
THIS DISCUSSION IS NOT INTENDED AS TAX ADVICE. PLEASE CONSULT COUNSEL OR OTHER
COMPETENT TAX ADVISERS FOR MORE COMPLETE INFORMATION.
INTRODUCTION
The following discussion is general in nature and is not intended as
tax advice. Each person concerned should consult a competent tax adviser. No
attempt is made to consider any applicable state tax or other tax laws, or to
address any federal estate, or state and local estate, inheritance, and other
tax consequences of ownership or receipt of distributions under a Contract.
When you invest in an annuity contract, you usually do not pay taxes
on your investment gains until you withdraw the money - generally for
retirement purposes. If you invest in a variable annuity as part of a pension
plan or employer-sponsored retirement program, your contract is called a
Qualified Contract. If your annuity is independent of any formal retirement or
pension plan, it is termed a Non-Qualified Contract.
TAXATION OF NON-QUALIFIED CONTRACTS
NON-NATURAL PERSON. A Non-Qualified Contract that is owned by a
non-natural person (such as a corporation or a trust) is generally not treated
as an annuity contract for tax purposes. There are some exceptions to this rule
and a prospective owner that is not a natural person should discuss these with
a tax adviser. The discussion in this section assumes that the Contract is
owned by a natural person.
WITHDRAWALS AND SURRENDERS. When a withdrawal from a Non-Qualified
Contract occurs, the amount received will be treated as ordinary income subject
to tax up to an amount equal to the excess (if any) of the account value
immediately before the distribution over the Owner's investment in the Contract
(generally, the premiums or other consideration paid for the Contract, reduced
by any amount previously distributed from the Contract that was not subject to
tax) at that time. In the case of a surrender under a Non-Qualified Contract,
the amount received generally will be taxable as ordinary income only to the
extent it exceeds the Owner's investment in the Contract.
SPECIAL NOTE ON WITHDRAWALS. Please read the following carefully and
consult with your tax adviser on these and other possible tax consequences
before making a withdrawal.
- It is possible that a positive Market Value Adjustment at the
time of a withdrawal may be treated as part of the Account
Value immediately before the distribution.
- We understand that it is the position of the Internal Revenue
Service that when withdrawals (other than income payments) are
taken from the cash value of an income payout option, such as
that offered by this Prospectus under the term certain option
(Income Plan 4. See "What Are My Income Payment Options?"),
then all amounts received by the taxpayer are taxable at
ordinary income rates as amounts "not received as an annuity."
In addition, such amounts are taxable to the recipient without
regard to the owner's investment in the contract or any
investment gain which might be present in the current annuity
value. For example, under this view, an Owner with a cash
value of
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$100,000 seeking to obtain $20,000 of the cash value
immediately after annuitization under a term certain payout,
would pay income taxes on the entire $20,000 amount in that
tax year. For some taxpayers, such as those under age 59 1/2,
additional tax penalties may also apply. This adverse tax
result means that Owners of Non-Qualified Contracts should
consider carefully the tax implications of any withdrawal
requests and their need for Contract funds prior to the
exercise of this right.
PENALTY TAX ON CERTAIN WITHDRAWALS. If you make a withdrawal from or
surrender a Non-Qualified Contract, you may be subject to a federal tax penalty
equal to ten percent of the amount treated as income. However, there usually is
no penalty on distributions that are:
- made on or after the taxpayer reaches age 59 1/2;
- made on or after the death of an Owner;
- attributable to the taxpayer's becoming disabled; or
- made as part of a series of substantially equal periodic
payments for the life (or life expectancy) of the taxpayer.
Other exceptions may be applicable under certain circumstances and
special rules may be applicable in connection with the exceptions listed above.
You should consult a tax adviser with regard to exceptions from the penalty
tax.
INCOME PAYMENTS. Although tax consequences may vary depending on the
payout option elected under an annuity contract, a portion of each income
payment is generally not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an income payment is generally determined in a
manner that is designed to allow you to recover your investment in the contract
ratably on a tax-free basis over the expected stream of income payments, as
determined when income payments start. Once your investment in the contract has
been fully recovered, however, the full amount of each income payment is
subject to tax as ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Contract because of your death or the death of the Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a surrender of
the Contract, or (ii) if distributed under a payout option, they are taxed in
the same way as annuity payments.
WITHHOLDING. Annuity distributions are generally subject to
withholding for the recipient's federal income tax liability. Recipients can
generally elect, however, not to have tax withheld from distributions.
MULTIPLE CONTRACTS. All non-qualified deferred annuity contracts that
are issued by us (or our affiliates) to the same owner during any calendar year
are treated as one annuity contract for purposes of determining the amount
includible in such owner's income when a taxable distribution occurs.
FURTHER INFORMATION. We believe that the contracts will qualify as
annuity contracts for federal income tax purposes and the above discussion is
based on that assumption. Further details can be found in the Statement of
Additional Information under the heading "Tax Status of the Contracts."
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TAXATION OF A QUALIFIED CONTRACT
Qualified Contracts are subject to some of the same tax rules as
Non-Qualified Contracts, but there are a number of significant differences.
Some of these differences and other important rules are highlighted here and in
the Statement of Additional Information, but please keep in mind that this
discussion provides only general information about the tax consequences of
Qualified Contracts, and Owners, Annuitants, and Beneficiaries should consult
their tax advisers for more specific information.
TYPES OF QUALIFIED CONTRACTS. A Qualified Contract can be used in
connection with the following types of retirement plans:
- Individual Retirement Annuity (IRA) - permits eligible
individuals to make non-deductible or deductible annual
contributions of up to $2,000.
- SIMPLE IRA -- permits certain small employers to establish a
plan allowing employees to make annual pre-tax contributions
of up to $6,000, with an employer contribution or match.
- Roth IRA - allows eligible individuals to make after-tax
contributions of up to $2,000, with no tax on qualifying
distributions.
The form of the Qualified Contract and its IRA rider have been
approved by the IRS for use as an IRA. IRS approval does not relate to the
merits of the IRA as an investment.
CONTRIBUTIONS AND DISTRIBUTIONS. Annual contributions to Qualified
Contracts are limited by tax rules and the terms of the retirement plans. For
IRAs and SIMPLE IRAs, minimum distributions generally must begin no later than
April 1 of the calendar year following the calendar year in which the Owner
reaches age 70 1/2. Roth IRAs do not require distributions while the Owner is
alive. Upon the Owner's death, minimum distributions are required from IRAs,
SIMPLE IRAs, and Roth IRAs. Penalty taxes may apply to distributions made
before age 59 1/2 and to certain early distributions from Roth IRAs. See
"Qualified Contracts" in the Statement of Additional Information for more
information on contributions and distributions.
Distributions from Qualified Contracts generally are subject to
withholding for the Owner's federal income tax liability. The Owner will be
provided the opportunity to elect not to have tax withheld from distributions.
TERMS OF THE PLAN. Your rights under a Qualified Contract are also
subject to the terms of the retirement plan itself, although we will not be
bound by the terms of the plan if they contradict the Qualified Contract.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT
A transfer or assignment of ownership of a Contract, the designation
of an annuitant, the selection of certain maturity dates, or the exchange of a
Contract may result in certain tax consequences to you that are not discussed
in this prospectus. An owner contemplating any such transfer, assignment or
exchange, should consult a tax adviser as to the tax consequences.
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POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Contract could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Contract. We have the right to modify the
Contract in response to legislative changes that could otherwise diminish the
favorable tax treatment that annuity contract owners currently receive.
==============================================================================
7. HOW DO I ACCESS MY MONEY?
==============================================================================
You can partially withdraw from or surrender your Contract. When you
surrender your Contract, you can take the proceeds in a single sum, or you can
request that we pay the proceeds over a period of time under one of our income
plans. See "What Are My Income Payment Options?"
WITHDRAWALS
You may withdraw all or part of your Surrender Value at any time
before the Income Date while the Annuitant is still living. (If you have
elected the "payments for a specified period certain" income plan option, you
may request a full or partial withdrawal after the Income Date; otherwise, no
withdrawals are permitted after the Income Date.) There may be adverse tax
consequences if you make a withdrawal from or surrender your Contract. Also,
there may be adverse tax consequences if you make a partial withdrawal during
the Income Phase. See "How Will My Contract Be Taxed?" 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. We will pay you
the 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.
A partial withdrawal will reduce your death benefit proportionately by
the amount your withdrawal (including any applicable Market Value Adjustment)
reduces Account Value and may be subject to federal income tax. See "How Will
My Contract Be Taxed?" and "Does The Contract Have A Death Benefit?"
Please note that if your requested withdrawal would reduce your
Account Value below $2,000, we reserve the right to treat the request as a
withdrawal of only the excess over $2,000.
SYSTEMATIC PARTIAL WITHDRAWAL PROGRAM. The systematic partial
withdrawal program provides automatic monthly, quarterly, semi-annual, or
annual payments to you from the amounts you have accumulated in the
Sub-Accounts. You select the day we take 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.
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- If you elect earnings, we will deduct the withdrawals from the
Sub-Accounts in which you are invested on a pro-rata basis.
- If you elect a specified dollar amount, we will deduct the
withdrawals from the Sub-Accounts in which you are invested on a
pro-rata basis unless you tell us otherwise. Also, any amount in
excess of interest earned on a Fixed Sub-Account in the prior
period ordinarily will be subject to a Market Value Adjustment.
See "Market Value Adjustment."
You may participate in the systematic partial withdrawal program at
any time before the Income Date 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.
Systematic partial withdrawals are not available while you are participating in
the dollar-cost averaging program.
IRA PARTIAL WITHDRAWAL PROGRAM. If your Contract is an IRA Contract
(other than a Roth IRA Contract) and you will attain age 70 1/2 in the current
calendar year, distributions may be made to satisfy requirements imposed by
federal tax law. An IRA partial withdrawal provides payout of amounts required
to be distributed by the IRS rules governing mandatory distributions under
qualified plans. We will send a notice before distributions must commence, and
you may elect this program at that time, or at a later date. You are, however,
ultimately responsible for determining that IRA distributions comply with
applicable tax code rules.
You may not elect the IRA Partial Withdrawal program while you are
participating in the systematic partial withdrawal program. You may take IRA
partial withdrawals on a monthly, quarterly, semi-annual, or annual basis. We
require a minimum withdrawal of $100. You select the day we make the
withdrawals, but this day can be no later than the 28th day of the month. If
you do not elect a day, we will use the day of each month that corresponds to
your Contract Date.
REQUESTING PAYMENTS
You must provide us with Satisfactory Notice of your request for
payment. We will ordinarily pay any death benefit, withdrawal, or surrender
proceeds within seven days after receipt at our Customer Service Center of all
the requirements for payment. We will determine the amount as of the date our
Customer Service Center receives all requirements.
We may delay making a payment, applying Account Value to an income
plan, or processing a transfer request if:
- 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
- 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, or transfer request for up
to six months from the date we receive the request.
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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.
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8. HOW IS CONTRACT PERFORMANCE PRESENTED?
==============================================================================
We may advertise or include in sales literature yields, effective
yields, and total returns for the Variable Sub-Accounts. Effective yields and
total returns for the Variable Sub-Accounts are based on the investment
performance of the corresponding Funds. We show standard performance that
reflects no charges for the optional benefits and that reflects the charges for
the optional benefits. WE BASE THESE FIGURES ON HISTORICAL PERFORMANCE, AND
THEY DO NOT INDICATE OR PROJECT FUTURE RESULTS. We may also advertise or
include in sales literature a Variable Sub-Account's performance compared to
certain performance rankings and indexes compiled by independent organizations,
and we may present performance rankings and indexes without such a comparison.
YIELD
The yield of the Money Market Sub-Account refers to the annualized
income generated by an investment in the Sub-Account over a specified seven-day
period. We calculate the yield by assuming that the income generated for that
seven-day period is generated each seven-day period over a 52-week period. We
calculate the effective yield similarly but, when annualized, the income earned
by an investment in the Money Market Sub-Account is assumed to be reinvested.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The yield of a Variable Sub-Account (except the Money Market
Sub-Account) refers to the annualized income generated by an investment in the
Variable Sub-Account over a specified 30-day or one-month period. We calculate
the yield by assuming that the income generated by the investment during that
30-day or one-month period is generated over a 12-month period.
TOTAL RETURN
The total return of a Variable Sub-Account refers to return quotations
assuming an investment under a Contract has been held in the Variable
Sub-Account for the stated times. Average annual total return of a Variable
Sub-Account tells you the return you would have experienced if you allocated a
$1,000 purchase payment to a Variable Sub-Account for the specified period.
Standard average annual total return reflects all historical investment results
for the Variable Sub-Account, less all charges and deductions applied against
the Variable Sub-Account, but excluding any deductions for purchase payment tax
charges and optional benefit charges. Standard total return may be quoted for
various periods including 1 year, 5 years, and 10 years, or from inception of
the Variable Sub-Account if any of those periods are not available.
"Non-Standard" average annual total return information may be presented,
computed on the same basis as described above, except that we will not deduct
contract charges. In addition, we may from time to time disclose average annual
total return for non-standard periods and cumulative total return for a
Variable Sub-Account.
PERFORMANCE/COMPARISONS
We may, from time to time, also disclose yield, standard total
returns, and non-standard total returns for the Funds. We may also disclose
yield, standard total returns, and non-standard total returns of
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funds or other accounts managed by the Adviser or Subadviser with investment
objectives similar to those of the Funds, and Variable Sub-Account performance
based on that performance data. We will accompany non-standard performance by
standard performance.
In advertising and sales literature, we may compare the performance of
each Variable Sub-Account to the performance of other variable annuity issuers
in general or to the performance of particular types of variable annuities
investing in mutual funds, or investment series of mutual funds with investment
objectives similar to each of the Variable Sub-Accounts. Advertising and sales
literature may also compare the performance of a Variable Sub-Account to the
S&P 500 Composite Stock Price Index, a widely used measure of stock
performance. This unmanaged index assumes the reinvestment of dividends but
does not reflect any deduction for the expense of operating or managing an
investment portfolio. Other independent ranking services and indexes may also
be used as a source of performance comparison. We may also report other
information, including the effect of tax-deferred compounding on a Variable
Sub-Account's investment returns, or returns in general, which may be
illustrated by tables, graphs, or charts.
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9. DOES THE CONTRACT HAVE A DEATH BENEFIT?
==============================================================================
Your Contract provides a death benefit for your Beneficiary if you die
before the Income Date.
If any Owner dies before the Income Date, we will pay the Beneficiary
the greatest of:
- the Account Value determined as of the Business Day we receive
proof of death (if proof of death is received on other than a
Business Day, we will deem the proof as received on the next
following Business Day);
- 100% of the sum of all purchase payments made under the Contract,
reduced proportionately by the amount that any prior withdrawal
(including any associated Market Value Adjustment incurred)
reduced Amount Value; or
- the highest anniversary value (the "Highest Anniversary Value").
The Highest Anniversary Value is the greatest anniversary value
attained in the following manner. When we receive proof of death, we will
calculate an anniversary value for each Contract Anniversary prior to the date
of the Owner's death, but not beyond the Owner's attained age 80. An
anniversary value for a Contract Anniversary equals:
(1) the Account Value on that Contract Anniversary;
(2) increased by the dollar amount of any purchase payments made
since the Contract Anniversary; and
(3) reduced proportionately by any withdrawals (including any
associated Market Value Adjustment incurred) taken since that
Contract Anniversary. (By proportionately, we take the
percentage by which the withdrawal decreases the Account Value
and we reduce the sum of (1) and (2) by that percentage.)
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If there are multiple Owners, we will use the age of the oldest Owner
to determine the applicable death benefit. If there is an Owner who is not a
natural person (that is, an individual), we will treat the Annuitant as an
Owner for the purpose of determining when an Owner dies and the Annuitant's age
will determine the death benefit payable to the Beneficiary in the event of
such Annuitant's death. We will consider any rider benefits payable upon death
of the Owner (or Annuitant, if no natural Owner) part of the death benefit.
OWNER'S DEATH BEFORE THE INCOME DATE
If an Owner dies before the Income Date, the Beneficiary has up to
five years from the Owner's date of death to request that the death benefit be
paid in one lump sum. If the Beneficiary elects the lump sum and we pay it, the
Contract will terminate, and we will have no further obligations under the
Contract. Alternatively, the Beneficiary may provide us with Satisfactory
Notice and request that the Contract continue, in which case we will continue
the Contract subject to the following conditions:
(1) If there are joint Owners, the surviving Owner becomes the new
Owner. Otherwise, the Beneficiary becomes the new Owner.
(2) Unless the new Owner otherwise tells us, we will allocate any
excess of the Death Benefit over the Account Value to and among
the Variable and Fixed Accounts in proportion to their values
as of the date on which we determine the death benefit. We will
establish a new Fixed Sub-Account for any allocation to the
Fixed Account based on the Guarantee Period the new Owner then
elects.
However, certain distribution rules will apply to the continued
Contract. If the sole new Owner is not the deceased Owner's spouse, we must
distribute the entire interest in the Contract either: (i) over the life of the
new Owner, but not extending beyond the life expectancy of the new Owner, with
distributions beginning within one year of the prior Owner's death; or (ii)
within five years of the deceased Owner's death. These distributions, if from
the Fixed Account, are subject to our Market Value Adjustment rules. In
addition, no additional purchase payments may be applied to the Contract.
Alternatively, if the sole new Owner is the deceased Owner's spouse,
the Contract will continue with the surviving spouse as the new Owner. The
Account Value will be the Death Benefit that otherwise would be paid in a lump
sum as of the Business Day we receive proof of death, and the surviving spouse
may make additional purchase payments under the Contract. The surviving spouse
may name a new Beneficiary. If no Beneficiary is named, the surviving spouse's
estate will be the Beneficiary. Upon the death of the surviving spouse, the
death benefit will equal the Account Value as of the Business Day we receive
proof of the spouse's death. We will distribute the entire interest in the
Contract to the new Beneficiary in accordance with the provisions that apply in
the case when the new Owner is not the surviving spouse.
If there is more than one Beneficiary, the distribution provisions
will apply independently to each Beneficiary.
If no Owner of the Contract is an individual, we will treat the death
of any Annuitant under the Contract as the death of an Owner.
In all events, for Non-Qualified Contracts we will make death benefit
distributions in accordance with section 72(s) of the Code, or any applicable
successor provision. Other rules may apply to a Qualified Contract.
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OWNER'S DEATH AFTER THE INCOME DATE
If any Owner dies on or after the Income Date, but before the time we
have distributed the entire interest in the Contract, we will distribute the
remaining portion at least as rapidly as under the method of distribution being
used as of the date of the Owner's death.
OWNER'S OR ANNUITANT'S DEATH AFTER THE INCOME DATE
If income payments have been selected based on an income plan
providing for payments for a guaranteed period and the Annuitant dies on or
after the Income Date, we will make the remaining guaranteed payments to the
Beneficiary. We will make any remaining payments as rapidly as under the method
of distribution being used as of the date of the Annuitant's death. If no
Beneficiary is living, we will commute any unpaid guaranteed payments to a
single sum (on the basis of the interest rate used in determining the payments)
and pay that single sum to the estate of the last to die of the Annuitant or
the Beneficiary.
OPTIONAL ENHANCED DEATH BENEFIT RIDER
You may enhance the Contract's basic death benefit by purchasing the
optional Enhanced Death Benefit rider. The Enhanced Death Benefit rider may
provide an additional death benefit if the Owner dies before the Income Date
(or the Annuitant, if the Owner is not a natural person). We determine the
Enhanced Death Benefit on the Business Day we receive proof of death by
subtracting (b) from (a), and then multiplying by (c), where:
a) is your Account Value on the date of calculation;
b) is the Net Purchase Amount; and
c) is the Benefit Rate.
The Enhanced Death Benefit will not exceed the Maximum Benefit Amount
as shown in your Contract Schedule. The Maximum Benefit Amount is guaranteed
not to be less than 100% of your Net Purchase Amount times the benefit rate.
On the Contract Date, the Net Purchase Amount is equal to your Initial
Purchase Payment. Thereafter, the Net Purchase Amount is increased by any
additional purchase payments you make; and is reduced in proportion to the
reduction in Account Value that results from withdrawals you make.
The Benefit Rate is 40.0% for issue ages 69 and under, and 25.0% for
issue ages 70 through 79.
We will pay the Enhanced Death Benefit to your Beneficiary or
surviving joint Owner upon receipt of written proof of death. PLEASE NOTE THAT
IF YOUR ACCOUNT VALUE HAS DECLINED SUCH THAT IT IS LESS THAN THE NET PURCHASE
AMOUNT, NO ENHANCED DEATH BENEFIT WILL BE PAYABLE.
We show examples of the Enhanced Death Benefit in Appendix E.
CONTRACT CONTINUATION OPTION. An Owner's surviving spouse who is
eligible to continue the Contract under the Contract Continuation Option, may
also be eligible to continue this rider. To do so, the surviving spouse must
give our Customer Service Center notice within 30 days of the Business Day
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we receive proof of the Owner's death. If the spouse is eligible under our then
existing rules, we will continue the rider based on our then current charges
for the new Owner's attained age. The rider's effective date for purposes of
calculating the Net Purchase Amount will be the Business Day the new Owner
elects to continue the rider. On this date the Net Purchase Amount will be
equal to the Account Value. After that, the Net Purchase Amount will be
increased by any additional purchase payments the new Owner makes, and will be
reduced in proportion to the reduction in Account Value that results from
withdrawals the new Owner makes. All of the other terms and conditions of the
rider will continue as before.
OTHER ENHANCED DEATH BENEFIT TERMS AND CONDITIONS.
- You can only purchase the Enhanced Death Benefit at time of
application;
- You must be age 79 or younger at the time the Contract is issued;
- If you purchase the Enhanced Death Benefit as an optional benefit
it is irrevocable and charges for it will remain in force during
the Accumulation Phase (unless not renewed by a surviving spouse
who continues the Contract under the Contract Continuation Option).
IMPORTANT CONSIDERATIONS REGARDING THE ENHANCED DEATH BENEFIT OPTION.
- The Enhanced Death Benefit rider does not guarantee that any
amounts under the rider will become payable upon death. Market
declines resulting in your Account Value at death being less than
the Net Purchase Amount will result in no Enhanced Death Benefit
being payable.
- Once purchased, the Enhanced Death Benefit is irrevocable. This
means that even if the investment performance of the Funds are such
as would result in a basic death benefit that is sufficient for
your needs, the Enhanced Death Benefit charges will still be
assessed.
- Please take advantage of the guidance of a qualified financial
adviser in evaluating the Enhanced Death Benefit option, as well as
all other aspects of the Contract.
- The Enhanced Death Benefit may not be available in all states.
PROOF OF DEATH
We must receive satisfactory proof of death at our Customer Service
Center before we will pay any death benefit. We will accept one of the
following items:
1. An original certified copy of an official death certificate; or
2. An original certified copy of a decree of a court of competent
jurisdiction as to the finding of death; or
3. Any other proof satisfactory to us.
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10. WHAT OTHER INFORMATION SHOULD I KNOW?
=============================================================================
SEPARATE ACCOUNTS
THE SAGE VARIABLE ANNUITY ACCOUNT A. We established the Variable
Account as a separate investment account under Delaware law on December 3,
1997. The Variable Account may invest in mutual funds, unit investment trusts,
and other investment portfolios. We own the assets in the Variable
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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, The Alger American Fund, Liberty Variable Investment Trust, SteinRoe
Variable Investment Trust, MFS(R) Variable Investment Trust(SM), The Universal
Institutional Funds, Inc., Oppenheimer Variable Account Funds, Sage Life
Investment Trust, and T. Rowe Price Equity Series, Inc. Variable Sub-Accounts
buy and redeem Fund shares at net asset value without any sales charge. 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.
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.
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 may offer the Fixed Account in our
variable life insurance products. 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. However, 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.
MODIFICATION
When permitted by applicable law, we may modify the Contracts as
follows:
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- deregister the Variable Account under the 1940 Act;
- operate the Variable Account as a management company under the
1940 Act if it is operating as a unit investment trust;
- operate the Variable Account as a unit investment trust under the
1940 Act if it is operating as a managed separate account;
- restrict or eliminate any voting rights of Owners, or other
persons who have voting rights as to the Variable Account;
- combine the Variable Account with other separate accounts; and
- 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 (the shares of the new Fund may have higher fees
and charges than the Fund it replaced, and not all Funds may be available to
all classes of Contracts); and to establish additional Variable Sub-Accounts or
eliminate Variable Sub-Accounts, if marketing, tax, or investment conditions so
warrant. Subject to any required regulatory approvals, we reserve the right to
transfer assets of a Variable Sub-Account that we determine to be associated
with the class of Contracts to which the Contract belongs, to another separate
account or to another separate account sub-account.
If the actions we take result in a material change in the underlying
investments of a Variable Sub-Account in which you are invested, we will notify
you of the change. You may then make a new choice of Variable Sub-Accounts.
DISTRIBUTION OF THE CONTRACTS
Sage Distributors, Inc. ("Sage Distributors") acts as the distributor
(principal underwriter) of the Contracts. Sage Distributors is a corporation
organized under Delaware law in 1997, is registered as a broker-dealer under
the Securities Exchange Act of 1934, and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"). Sage Distributors is a
wholly owned subsidiary of Sage Insurance Group Inc. We compensate Sage
Distributors for acting as principal underwriter under a distribution
agreement. We offer the Contracts on a continuous basis, and do not anticipate
discontinuing their sale. The Contracts may not be available in all states.
EXPERTS
The financial statements of Sage Life Assurance of America, Inc. at
December 31, 1999 and 1998, and for each of the three years in the period ended
December 31, 1999, and the financial statements of The Sage Variable Annuity
Account A at December 31, 1999 and for the period from February 19, 1999
(commencement of operations) through December 31, 1999, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing. The financial statements of
Sage Life Assurance of America, Inc. for the six months ended June 30, 2000 and
1999 have not been audited.
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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.
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.
FINANCIAL STATEMENTS
Financial statements are presented in the Statement of Additional
Information for the Variable Account as of December 31, 1999 from its
commencement of operations on February 19, 1999.
We included the audited financial statements for Sage Life for the
years ended December 31, 1999 and 1998 and each of the three years in the period
ended December 31, 1999 and unaudited financial information as of June 30, 2000
and for the six month periods ended June 30, 2000 and 1999 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.
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================================================================================
11. HOW CAN I MAKE INQUIRIES?
================================================================================
You may make inquiries about your Contract by contacting one of our
authorized registered representatives or by writing or calling us at our
Customer Service Center.
================================================================================
12. 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 all but five 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 a wholly owned
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 Limited
("Sage Group"), a corporation quoted on the Johannesburg Stock Exchange. Sage
Group is a holding company with a thirty-year history of extensive operating
experience in mutual funds, life assurance and investment management. Sage Group
has directly and indirectly engaged in insurance marketing activities in the
United States since 1977 through its financial interests in Independent
Financial Marketing Group Inc., a financial planning and bank insurance
marketing company. Sage Group sold its interest in Independent Financial
Marketing Group in March 1996 to the Liberty Financial Companies of Boston.
On December 1, 1998, Sage Group entered into a letter of intent with
Swiss Re Life & Health America Inc. ("Swiss Re"). Swiss Re is an indirect
subsidiary of Swiss Reinsurance Company, Switzerland, one of the world's largest
reinsurance groups. This agreement encompassed two transactions: (1) that Sage
Life would enter into a reinsurance agreement with Swiss Re or its affiliate,
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Life Reassurance Corporation of America ("LRCA"); and (2) that Swiss Re or LRCA
would make an investment in Sage Life Holdings, our immediate parent. The
reinsurance agreement with LRCA was entered into on June 8, 2000. As to the
investment in Sage Life Holdings, on December 31, 1998, LRCA did invest $12.5
million in non-voting, non-redeemable, cumulative preferred stock of Sage Life
Holdings, which at that point became our immediate parent and a wholly-owned
subsidiary of Sage Insurance Group. We anticipate that, during the third quarter
of 2000, LRCA will exchange part of its preferred stock for a voting interest of
not more that 9.9% in Sage Life Holdings with a retroactive effective date of
April 1999. The arrangements contemplated by the agreement may be subject to
regulatory approval.
The Company is licensed to write business in all states, except New
York. However, the Company has formed a subsidiary company, Sage Life Assurance
Company of New York ("Sage Life New York"), that will be licensed to write
business in New York. It is anticipated that Sage Life New York will begin
operations at the beginning of 2001.
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, 1998, 1999 and 2000 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 June 30, 2000,
June 30, 1999, December 31, 1999, 1998 and 1997 and for the periods then ended,
taken from our financial statements. The interim data for June 30, 2000 and 1999
is unaudited, while the prior calendar year numbers have been audited. 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.
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<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(IN THOUSANDS)
SIX MONTHS SIX MONTHS YEAR ENDED YEAR ENDED YEAR ENDED
ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
JUNE 30, JUNE 30, 1999 1998 1997
2000 1999
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Net investment income $ 588 $ 646 $ 1,290 $ 1,244 $ 989
Administrative service fees 25 16 38 - -
Annuity charges and fees 1 - 1 - -
Total revenues 614 662 1,329 1,244 989
Benefits and Expenses:
Salaries and benefits expenses 1,066 617 972 742 497
Development expenses 998 1,502 3,828 - -
Insurance expenses and taxes 706 274 721 522 518
Amortization expenses 117 117 235 549 326
Total benefits and expenses 2,887 2,511 5,756 1,813 1,341
Loss before cumulative effect
adjustment (2,273) (1,849) (4,427) (569) (352)
Cumulative effect adjustment - (4,269) - -
Net loss $(2,273) $(1,849) $(8,696) $ (569) $ (352)
BALANCE SHEET DATA:
Total Assets $33,788 $31,452 $31,737 $36,542 $36,689
Total Liabilities $ 2,751 $ 110 $ 234 $ 70 $ 3,486
Stockholder's Equity $31,031 $31,031 $31,503 $36,472 $33,203
</TABLE>
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. Sage Insurance Group acquired the Company
on December 31, 1996, and since that date, we have totally reengineered our
products, systems and administration. (Before the acquisition of the Company,
all new business production and marketing ended in October 1996.) 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. During February 1999, we began to market, on a limited basis, our new
variable insurance products. During the first half of 2000, our initial
marketing focus has been to distribute the contracts through banks and
third-party
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marketing organizations working closely with banks. We anticipate
that, over the long-term, our distribution channels will expand to include
financial planners, regional broker-dealers, and wirehouses.
RESULTS OF OPERATIONS. The Company has had a substantial increase in its
premium volume during the first six months of 2000. Premiums received for the
six months ended June 30, 2000 and 1999 were $2.2 million and $.1 million,
respectively. A large percentage of the premiums were received during the last
week of June as the Company continues to expand its distribution network. For
the six months ended June 30, 2000 and 1999, the Company reported net losses of
$2.3 million and $6.1 million, respectively. Net losses for the three years
ending December 31, 1999, 1998, and 1997 were $8.7 million in 1999, $0.6 million
in 1998 and $0.4 million, respectively. The large increase in losses for 2000
and 1999 is due to the adoption of Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities" (SOP 98-5). SOP 98-5 required the Company to
charge to expense all start-up costs incurred, as well as write-off any
unamortized capitalized development costs on January 1, 1999. The development
costs incurred during the first six months of 2000 and 1999 were $1.0 million
and $1.5 million, respectively, and, during the year ended December 31, 1999,
were $3.8 million. In addition, the January 1, 1999 write-off of unamortized
capitalized development costs increased losses by $4.3 million.
As the Company continued in the development phase, revenues continued to
be derived primarily from investment income earned on Company investments. Net
investment income earned during each of the six months ended June 2000 and 1999
was consistently $0.6 million. For the years ended 1999, 1998 and 1997, net
investment income was $1.3 million, $1.2 million and $1.0 million, respectively.
The Company's investments consist entirely of U.S. Government securities and
highly rated corporate bonds. Investment yields of 5.0%, 5.4%, 5.1% and 4.9%
were earned in 2000, 1999, 1998 and 1997, respectively. Six months ending June
2000 earned a yield of 5.0% compared to 5.4% for six months ending June 1999.
The Company's other sources of income are administrative service fees and
Contract charges and fees. Administrative service fees are asset-based charges
that the Company receives on Contract Owner funds invested with various
investment fund managers. Contract charges and fees are both asset-based fees
and flat annual per-Contract fees charged to each Owner. As the Company broadens
its distribution of products during 2000, these Contract charges and fees are
anticipated to become a major source of revenue. The Contract charges and fees
earned to date have been minimal as there have been a limited number of
Contracts issued by the Company. Administrative service fees earned on funds
invested in the Sage Life Investment Trust were $25,000 and $15,517 during the
six months ended June 30, 2000 and 1999, respectively, and $37,671 for the year
ended December 31, 1999. The Company did not earn any administrative service
fees in 1998 or 1997. Due to the relatively small number and value of contracts
outstanding through June 30, 2000, the Company has not recognized any
significant policy charges and fees.
With the adoption of SOP 98-5, the Company's primary expenses during
2000 and 1999 are those non-recurring expenses incurred in the development of
products and systems. Expenses incurred for development costs for the six months
ended June 2000 and 1999 were $1.0 million and $1.5 million, respectively. Prior
to 1999, these expenses were capitalized and amortized over fifteen years. As
these expenses are no longer amortized, amortization expenses decreased to $0.1
million during the six months ended June 2000, to $0.5 during the six months
ended June 1999 and to $0.2 million for the year ended December 1999 from $0.5
million in 1998. The amortization expenses for 2000 and 1999 relate entirely to
the goodwill associated with the purchase of the Company. Salaries and benefits
expenses for the six months ended June 2000 and 1999 were $1.1 million and $0.6
million, respectively. For the years ended December 1999, 1998 and 1997,
salaries and benefits expenses were $1.0 million, $0.7 million and $0.5,
respectively. The increase in salaries and benefits is attributable to an
increase in full time employees from 8 to 33 over the period from December 31,
1997 to June 30, 2000. General and administrative expenses were $0.7 million,
$0.7 million, $0.5 million and $0.5 million for the six months ended June 2000
and years ended December 1999, 1998 and 1997, respectively. General and
administrative
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expenses were $0.7 million, $0.7 million, $0.5 million and $0.5 million
for the six months ended June 2000 and years ended December 1999, 1998
and 1997, respectively. General and administrative expenses increased
to $0.7 million at June 30, 2000 from $0.3 million at June 30, 1999.
These overhead expenses include rent, professional fees, office expenses and
statutory filing fees.
The Company has no federal income tax expenses for the six months ended
June 2000 nor for each of the three years ended December 31, 1999. The Company
has a net operating loss carryforward of approximately $13.0 million at June 30,
2000.
LIQUIDITY AND CAPITAL RESOURCES. 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 the remainder of 2000, we expect our cash needs to substantially
increase due to our expanded underwriting and marketing activities. We still
anticipate that we will be unable to meet all of our liquidity requirements
during the year without capital contributions from Sage Insurance Group. In
addition, although not required to do so, the Company believes that Sage
Insurance Group will continue to provide capital to the Company for our
non-recurring costs associated with new products and business development during
the year. In addition, as discussed previously, LRCA, an indirect subsidiary of
Swiss Reinsurance Company, has made an equity investment in our parent company
that has provided an additional source of funds to us for new business expenses.
We also have entered into a coinsurance reinsurance agreement with LCRA
that will provide an additional source of cash for operations. Our future
marketing efforts could be hampered in the unlikely event that Sage Insurance
Group, Swiss Re, LRCA and/or their affiliates are unwilling to commit additional
funding.
It is anticipated that during the latter part of 2000, the Company will
be capitalizing its subsidiary company, Sage Life New York. Prior to
capitalizing Sage Life New York, the Company will receive a capital contribution
from Sage Insurance Group of $4 million. The Company will then transfer $14
million of securities to this newly formed company. This transaction will
decrease the available working capital of the Company and increase our potential
need for additional working capital.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
At December 31, 1999, the Company held in its general account
$16,179,750 of fixed maturity investments that are sensitive to changes in
interest rates. These securities are held in support of the Company's target
solvency surplus. The Company has a conservative investment philosophy, with all
investments being investment grade securities, government agency or U.S.
government securities.
The primary equity market risk to the Company comes from the nature of
the variable annuity and variable life products to be sold. Various fees and
charges earned by the Company are substantially derived as a percentage of the
market value of the assets under management. In a market decline, this
income would be reduced. This could be further compounded by customer
withdrawals, net of any applicable surrender charges, partially offset by
transfers to the fixed investment option. It also is not clear what the impact
of a prolonged downturn in the equity markets would have on ongoing sales.
Customer's perceptions of a downturn in equity markets coupled with rising
interest rates could move them into financial products other than variable
insurance products. The Company's products could potentially remain attractive
to consumers in relation to other long-term savings vehicles even after such a
decline.
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:
- Combination fixed and variable deferred annuities;
- Combination fixed and variable immediate annuities; and
- Combination fixed and variable life insurance products.
REINSURANCE.
As discussed above in Holding Company Structure and Background, we have
entered into a coinsurance reinsurance arrangement with LRCA, pursuant to which
LRCA will reinsure a significant
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portion of our liabilities under our variable insurance contracts with a
retroactive effective date of February 1, 1999.
In addition, we have entered into a reinsurance arrangement that
reinsures 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 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. At June 30, 2000 and December 31, 1999 we held $2.0
million and $0.1 million, respectively, of reserves in our Separate Account. 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.
Our General Account cash and invested assets of $24.6 million, $24.1
million, $25.5 million and $25.3 million at June 30, 2000 and December 31, 1999,
1998 and 1997, respectively, was invested 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,
"extraordinary" dividends which are defined as those in excess of the greater of
10% of surplus in 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, 1999 we could not pay a
dividend to Sage Life Holdings without prior approval from state regulatory
authorities as we currently do not have earned surplus, and we did not pay a
dividend to Sage Life Holdings.
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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, INC.
In 1997, the Company entered into a Cost Sharing Agreement with Sage
Insurance Group, the parent of Sage Life Holdings, to share the personnel costs,
office rent and equipment costs. These costs are allocated between the companies
based upon the estimated time worked, square footage of space utilized and upon
monitored usage of the equipment, respectively. Pursuant to this agreement, the
Company had income of $0.7 million, $0.9 million and $0.2 million from Sage
Insurance Group for the six months ended June 2000 and years ended December 31,
1999 and 1998, respectively. The Company incurred an expense to Sage Insurance
Group of $0.1 million for the period ended December 31, 1997, but since then
(and through June 30, 2000) has not incurred any expenses to Sage Insurance
Group under the agreement. At December 31, 1999 the amount due from Sage
Insurance Group relating to this agreement was $0.6 million. There was no amount
due at December 31, 1998. In addition, Sage Insurance Group provides funds to
the Company to meet various operating expenses. As these amounts are paid back
to Sage Insurance Group at the end of each quarter, no amounts remained payable
at June 30, 2000, December 31, 1999 and 1998.
All non-recurring development costs of the Company are paid by Sage
Insurance Group or its parent, Sage Group Limited, and treated as capital
contributions. The cumulative amount of development costs paid for by affiliated
companies at June 30, 2000, December 31, 1999, 1998 and 1997 were $8.1 million,
$7.1 million, $3.3 million and $1.5 million, respectively.
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. The Company had 33, 27, 14
and 8 full time employees at June 30, 2000, December 31, 1999, 1998, and 1997,
respectively.
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
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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 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:
- regulation of insurance company solvency,
- employee benefit regulation,
- tax law changes affecting the taxation of insurance companies, and
- tax treatment of insurance products and its impact on the relative
desirability of various personal investment vehicles.
50
<PAGE> 69
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
POSITION HELD WITH THE OTHER PRINCIPAL POSITIONS
NAME (AGE) COMPANY/YEAR COMMENCED DURING PAST FIVE YEARS
---------- ---------------------- ----------------------
<S> <C> <C>
Ronald S. Scowby(1) Director, 1/97 to present; Chairman, President and Chief
Age 61 Chairman, 2/98 to present Executive Officer, 1/2000 to present,
Sheldon Scowby Associates, Inc.;
Chairman and Trustee, 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 12/99; President, Chief Executive
Officer, Sage Life Assurance of
America Inc., 1/97-2/98; Director,
Sage Distributors, Inc., 1/98 to
12/99; Director, President, Chief
Executive Officer, Sage Management
Services (USA), Inc., 6/96 to 12/99;
Owner, Sheldon Scowby Resources
7/95-6/96.
Robin I. Marsden(2) Director, 1/97 to present; President and Chief Executive
Age 34 President and Chief Executive Officer, Sage Life Assurance Company
Officer, 2/98 to present of New York, 4/2000 to present;
Director and President, Sage Life
(Bermuda) Ltd., 1/2000 to present;
President and Trustee, Sage Life
Investment Trust, 7/98 to present;
Director, Sage Life 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; and
</TABLE>
51
<PAGE> 70
<TABLE>
<CAPTION>
POSITION HELD WITH THE OTHER PRINCIPAL POSITIONS
NAME (AGE) COMPANY/YEAR COMMENCED DURING PAST FIVE YEARS
---------- ---------------------- ----------------------
<S> <C> <C>
Executive-Strategic Developments,
Sage Group Ltd., 11/94 to 1/98.
H. Louis Shill(3) Director, 1/97 to Director, Sage Life Assurance Company
Age 69 present 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(4) Director, 1/97 to Director, Sage Life Assurance Company
Age 47 present of New York, 5/98 to present; Partner,
Clifford, Chance, Rogers & Wells LLP,
1986 to present.
Richard D. Starr(5) Director, 1/97 to Chairman and Director, ABN Amro
Age 56 present Financial Services, Inc., 7/00 to
present; Director, Sage Life Assurance
Company of New York, 5/98 to present;
President, First Interstate
Securities, 1/95 to 12/95; Chairman &
Chief Executive Officer, Financial
Institutions Group, Inc., 10/78 to
present.
Mitchell R. Katcher(2) Director, 12/97 to present; Senior Senior Executive Vice President, Chief
Age 47 Executive Vice President, Chief Financial Officer and Chief Actuary,
Financial Officer, Chief Actuary Sage Life Assurance Company of New
5/97 to present York, 4/2000 to present; Director,
Chief Financial Officer and Chief
Actuary, Sage Life (Bermuda), Ltd.,
1/2000 to present; Vice President, Sage
Life Investment Trust, 7/98 to present;
Director, Sage Life Assurance Company
of New York, 5/98 to present; Director,
Treasurer, Sage Advisors, 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>
52
<PAGE> 71
<TABLE>
<CAPTION>
POSITION HELD WITH THE OTHER PRINCIPAL POSITIONS
NAME (AGE) COMPANY/YEAR COMMENCED DURING PAST FIVE YEARS
---------- ---------------------- ----------------------
<S> <C> <C>
Meyer Feldberg(6) Director, 1/2000 to present Dean/Professor, Columbia University
Age 58 Graduate School of Business, 7/89 to
present; Director, 1/2000 to present,
Sage Life Assurance Company of New
York and Sage Insurance Group, Inc.
John A. Benning(7) Director, 4/2000 to present Director, 4/2000 to present, Sage Life
Age 66 Assurance Company of New York;
Treasurer and General Counsel, Liberty
Hospitality Company, 1/2000 to
present; Senior Vice President and
General Counsel, Liberty Financial
Companies, 1986 to 1999.
</TABLE>
---------------
(1) Mr. Scowby's principal business address is 200 Broad Street, Suite 2337,
Stamford, CT 06901
(2) The principal business address of these persons is 300 Atlantic Street,
Stamford, CT 06901.
(3) Mr. Shill's principal business address is Sage Centre, 10 Fraser Street,
Johannesburg, South Africa 2000.
(4) Mr. Meyer's principal business address is 200 Park Avenue, New York, NY
10166.
(5) Mr. Starr's principal business address is 22507 SE 47th Place, Issaquah, WA
98029.
(6) Dr. Feldberg's principal business address is Columbia University Graduate
School of Business, Uris Hall, Room 101, 3022 Broadway, New York, NY 10027.
(7) Mr. Benning's principal business address is 23rd Floor, 600 Atlantic
Street, Boston, MA 02210
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, 1999.
53
<PAGE> 72
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
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
1999 $350,000 $100,000 $100,000
Robin I. Marsden......................... 1998 $275,000 $100,000
President and Chief Executive Officer(1) 1999 $322,500 $150,000 $ 20,956
Mitchell R. Katcher...................... 1997 $114,583 $265,000
Senior Executive Vice President, 1998 $250,000 $125,000
Chief Financial Officer 1999 $268,750 $150,000 $ 19,037
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. Dr. Feldberg
is paid $30,000 and $8,000 per meeting attended. For meetings attended in the
year ended December 31, 1999, we paid each outside director $20,000. Dr.
Feldberg attended no meetings in 1999; we paid his 2000 retainer in 1999. All
directors' compensation includes compensation for services on any board of
directors for any company affiliated with the Company. 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.
54
<PAGE> 73
Sage Life Assurance of America, Inc.
Financial Statements
For the periods ended June 30, 2000 and 1999 and
years ended December 31, 1999 and 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...................................................................56
Financial Statements
Balance Sheets...................................................................................57
Statements of Operations ........................................................................58
Statements of Stockholder's Equity...............................................................59
Statements of Cash Flows.........................................................................60
Notes to Financial Statements....................................................................61
</TABLE>
55
<PAGE> 74
Report of Independent Auditors
Board of Directors
Sage Life Assurance of America, Inc.
We have audited the accompanying balance sheets of Sage Life Assurance of
America, Inc. as of December 31, 1999 and 1998, and the related statements of
operations, stockholder's equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sage Life Assurance of America,
Inc. as at December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
February 24, 2000
Stamford, Connecticut
56
<PAGE> 75
Sage Life Assurance of America, Inc.
Balance Sheets
<TABLE>
<CAPTION>
June 30
2000 DECEMBER 31
(Unaudited) 1999 1998
-------------------------------- ----------------
<S> <C> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale, at fair
value (amortized cost: 2000-$15,144,562,
1999-$17,296,410 and 1998-$12,967,022) $ 14,116,103 $ 16,179,750 $ 12,992,917
Short-term investments 9,940,685 5,972,494 10,975,402
------------ ------------ ------------
Total investments 24,056,788 22,152,244 23,968,319
Cash and cash equivalents 579,703 1,979,985 1,531,165
Accrued investment income 206,739 226,234 203,425
Receivable from affiliates 473,489 671,270 -
Deferred income taxes 349,688 376,461 -
Goodwill 6,110,912 6,228,146 6,565,134
Development costs - - 4,269,488
Other assets 8,539 9,231 5,000
Separate account assets 2,002,048 93,009 -
------------ ------------ ------------
Total assets $ 33,787,895 $ 31,736,580 $ 36,542,531
============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued expenses $ 174,661 $ 140,426 $ 61,670
Deferred income taxes 580,395 - 8,804
Separate account liabilities 2,002,048 93,009 -
------------ ------------ ------------
Total liabilities 2,757,104 233,435 70,474
Stockholder's equity:
Common stock, $2,500 par value, 1,000 shares
authorized, issued and outstanding 2,500,000 2,500,000 2,500,000
Additional paid-in capital 41,099,519 39,351,096 34,875,727
Retained deficit (11,889,944) (9,617,174) (920,760)
Accumulated other comprehensive (loss) income (678,784) (730,777) 17,090
------------ ------------ ------------
Total stockholder's equity 31,030,791 31,503,145 36,472,057
------------ ------------ ------------
Total liabilities and stockholder's equity $ 33,787,895 $ 31,736,580 $ 36,542,531
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
57
<PAGE> 76
Sage Life Assurance of America, Inc.
Statements of Operations
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30 JUNE 30 YEAR ENDED DECEMBER 31
2000 1999 1999 1998 1997
------------- ------------- ------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Investment income $ 588,179 $ 646,840 $ 1,290,196 $1,243,522 $989,494
Administrative service
fees 25,000 15,517 37,671 - -
Policy charges and fees 1,346 134 861 - -
------------- ------------- ------------- ------------ ------------
Total revenues 614,525 662,491 1,328,728 1,243,522 989,494
EXPENSES
Salaries and benefits
expenses 1,065,668 617,514 972,048 741,979 497,426
Development expenses 998,423 1,502,953 3,827,887 - -
Amortization expense 117,234 117,234 234,468 548,818 325,406
General and
administrative expenses 705,970 273,845 721,247 521,699 518,448
------------- ------------- ------------- ------------ ------------
Total expenses 2,887,295 2,511,546 5,755,654 1,812,496 1,341,280
Loss before cumulative
effect adjustment (2,272,770) (1,849,055) (4,426,926) (568,774) (351,786)
Cumulative effect
adjustment for change in
accounting for
development costs - (4,269,488) (4,269,488) - -
------------- ------------- ------------- ------------ ------------
Net loss $(2,272,770) $(6,118,543) $(8,696,414) $ (568,974) $(351,786)
============= ============= ============= ============ ============
</TABLE>
See accompanying notes to financial statements.
58
<PAGE> 77
Sage Life Assurance of America, Inc.
Statements of Stockholder's Equity
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADDITIONAL RETAINED COMPREHENSIVE
COMMON STOCK PAID-IN CAPITAL DEFICIT (LOSS) INCOME TOTAL
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $2,500,000 $15,505,508 - - $18,005,508
Net loss $ (351,786) (351,786)
Change in unrealized gain on
investments, net of taxes $48,706 48,706
-----------------
Comprehensive income (303,080)
Additional capital contributions 15,500,000 15,500,000
--------------------------------------------------------------------------------------
Balance at January 1, 1998 2,500,000 31,005,508 (351,786) 48,706 33,202,428
Net loss (568,974) (568,974)
Change in unrealized gain on
investments, net of taxes (31,616) (31,616)
-----------------
Comprehensive income (600,590)
Additional capital contributions 3,870,219 3,870,219
--------------------------------------------------------------------------------------
Balance at December 31, 1998 2,500,000 34,875,727 (920,760) 17,090 36,472,057
Net loss (8,696,414) (8,696,414)
Change in unrealized loss on
investments, net of taxes (747,867) (747,867)
-----------------
Comprehensive income (9,444,281)
Purchase price adjustment (102,518) (102,518)
Additional capital contributions 4,577,887 4,577,887
Balance at December 31, 1999 $2,500,000 $39,351,096 $(9,617,174) $(730,777) $31,503,145
======================================================================================
Net loss $(2,272,770) $(2,272,770)
Change in unrealized loss on
investments, net of taxes 51,993 51,993
Comprehensive income (2,220,777)
Additional capital contributions 1,748,423 1,748,423
Balance at June 30, 2000 (unaudited) $2,500,000 $41,099,519 $(11,889,944) $(678,784) $31,030,791
======================================================================================
</TABLE>
See accompanying notes to financial statements.
59
<PAGE> 78
Sage Life Assurance of America, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31
JUNE 30 JUNE 30 --------------------------
2000 1999 1999 1998
----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(2,272,770) $(6,118,543) $(8,696,414) $ (568,974)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Amortization expense 117,234 117,234 234,468 548,818
Development costs paid by parent 998,423 - - -
Deferred income taxes 26,784 - - -
Cumulative effect adjustment for change in accounting for
development costs - 4,269,488 4,269,488 -
Changes in:
Accrued investment income 19,495 (2,744) (22,809) (145,386)
Receivable from affiliates 197,781 (15,517) (671,270) (128,425)
Other assets 692 (256,314) (4,231) 6,443
Other liabilities 580,395 - - - -
----------- ------------ ------------ ------------
Accrued expenses 34,235 (23,886) 78,756 (118,772)
----------- ------------ ------------ ------------
Net cash used in operating activities (297,731) (527,329) (984,125) (406,296)
INVESTING ACTIVITIES
Purchase of fixed maturity securities - (3,947,436) (4,319,964) (10,295,783)
Proceeds from sales, maturities and repayments of fixed
maturity securities 51,993 75,212 - 849,153
Net sales of short-term investments (1,904,544) 3,240,532 5,002,909 10,555,486
----------- ------------ ------------ ------------
Net cash provided by investing activities (1,852,551) (631,692) 682,945 1,108,856
FINANCING ACTIVITIES
Development costs paid by parent - 1,502,953 3,827,887 -
Capital contribution from the parent 750,000 - 750,000 600,000
----------- ------------ ------------ ------------
Net cash provided by financing activities 750,000 - 750,000 600,000
------------ ------------
Increase in cash and cash equivalents (1,400,282) (1,159,021) 448,820 1,302,560
Cash and cash equivalents at beginning of year 1,979,985 1,531,165 1,531,165 228,605
------------ ------------
Cash and cash equivalents at end of year $ 579,703 $ 372,144 $ 1,979,985 $ 1,531,165
=========== ============ ============ ============
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1997
-----------
<S> <C>
OPERATING ACTIVITIES
Net loss $(351,786)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Amortization expense 325,406
Development costs paid by parent -
Deferred income taxes -
Cumulative effect adjustment for change in accounting for
development costs -
Changes in:
Accrued investment income (29,638)
Receivable from affiliates 128,425
Other assets (11,443)
Other liabilities -
-----------
Accrued expenses 116,216
-----------
Net cash used in operating activities 177,180
INVESTING ACTIVITIES
Purchase of fixed maturity securities -
Proceeds from sales, maturities and repayments of fixed
maturity securities 42,941
Net sales of short-term investments (15,507,897)
Net cash provided by investing activities (15,465,046)
FINANCING ACTIVITIES
Development costs paid by parent -
Capital contribution from the parent 15,500,000
-----------
Net cash provided by financing activities 15,500,000
-----------
Increase in cash and cash equivalents 212,134
Cash and cash equivalents at beginning of year 16,471
-----------
Cash and cash equivalents at end of year $ 228,605
===========
</TABLE>
See accompanying notes to financial statements.
60
<PAGE> 79
Sage Life Assurance of America, Inc.
Notes to Financial Statements
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATION
Sage Life Assurance of America, Inc. (the "Company") is a wholly-owned
subsidiary of Sage Life Holdings of America, Inc. ("SLHA"), which is a
wholly-owned indirect subsidiary of Sage Group Limited, a South African company.
DESCRIPTION OF BUSINESS
Sage Life Assurance of America, Inc. (the "Company"), which is domiciled in
Delaware, is a wholly-owned subsidiary of Sage Life Holdings of America, Inc.,
which is a wholly-owned indirect subsidiary of Sage Group Limited (Sage Group),
a South African company.
The Company is in the process of developing and preparing to market variable
annuity and variable life insurance products. The sale of these products began
on a limited basis in the first quarter of 1999. The Company has mutually agreed
to enter into a coinsurance reinsurance arrangement with Swiss Re Life & Health
America (Swiss Re), pursuant to which Swiss Re will reinsure a significant
portion of the liabilities under the variable insurance contracts.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less from the date of purchase to be cash equivalents. Cash and
cash equivalents are carried at cost, which approximates fair value.
INVESTMENTS
The Company has classified all of its fixed maturity investments as
available-for-sale. Those investments are carried at fair value and changes in
unrealized gains and losses are reported as a component of stockholder's equity,
net of applicable deferred income taxes. Fair values are determined by quoted
market prices.
Short-term investments are carried at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined by the
specific identification method and are included in revenues.
61
<PAGE> 80
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying balance
sheet represent funds that are separately administered, principally for the
benefit of certain policyholders who bear the investment risk. The separate
account assets and liabilities, as reported as of December 31, 1999, are carried
at fair value, based on quoted market prices. Revenues and expenses related to
the separate account assets and liabilities, to the extent of benefits paid or
provided to the separate account policyholders, are excluded from the amounts
reported in the accompanying statements of operations.
POLICY LIABILITIES
The Company has no policy liabilities in its General Account at December 31,
1999 and 1998. All policy liabilities are in the Separate Account and are
comprised of all payments received plus credited interest, less accumulated
policyholder charges, assessments and withdrawals related to annuities of a
nonguaranteed return nature.
GOODWILL
Goodwill represents the excess of the fair value of assets exchanged over the
net assets acquired. Goodwill is being amortized on a straight-line basis over
thirty years. The carrying value of goodwill is regularly reviewed for
indications of impairment in value, which, in the view of management, is other
than temporary. Accumulated amortization at December 31, 1999 and December 31,
1998 was $703,403 and $468,935, respectively.
DEVELOPMENT COSTS
Pursuant to the adoption of Statement of Position 98-5, "Reporting on the Costs
of Start-Up Activities", (SOP 98-5), the Company is required to charge to
expense all start-up costs incurred. In addition, the Company was required to
write-off any unamortized capitalized development costs on January 1, 1999.
Development costs incurred for the year ended December 31, 1999 charged to
expense were $3,827,887. The one time write-off of the unamortized capitalized
development costs was $4,269,488.
ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires that management makes estimates and assumptions
that affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
62
<PAGE> 81
INCOME TAXES
Income taxes are accounted for using the liability method. Using this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
63
<PAGE> 82
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made to prior year's financial
statement amounts to conform to the 1999 presentation.
2. INVESTMENTS
Investments in fixed maturity securities as of December 31 consist of the
following:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED FAIR
AMORTIZED COST GAINS LOSSES VALUE
---------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
----
U.S. Government Obligations $ 9,260,132 $12,577 $ 641,663 $ 8,631,046
Corporate Obligations 8,036,278 - 487,574 7,548,704
---------------------------------------------------------------
$17,296,410 $12,577 $ 1,129,237 $16,179,750
===============================================================
1998
----
U.S. Government Obligations $ 9,356,479 $89,549 $ 54,974 $ 9,391,054
Corporate Obligations 3,610,543 4,282 12,962 3,601,863
===============================================================
$ 12,967,022 $93,831 $ 67,936 $12,992,917
===============================================================
</TABLE>
The amortized cost and fair value of fixed maturity securities by contractual
maturity at December 31, 1999 are summarized below. Actual maturities will
differ from contractual maturities because certain borrowers have the right to
call or prepay obligations.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
-----------------------------
<S> <C> <C>
Due in one year or less $ 2,550,942 $ 2,563,519
Due after one year through five years 5,129,073 4,896,658
Due after five years through ten years 9,616,395 8,719,573
-----------------------------
Total $ 17,296,410 $ 16,179,750
=============================
</TABLE>
64
<PAGE> 83
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
Investment income by major category of investment for the years ended December
31, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
Bonds $ 907,068 $ 261,781 $ 255,778
Short-term investments 438,951 787,873 720,556
Cash and cash equivalents 22,416 239,700 49,035
-----------------------------------------------
Total investment income 1,368,435 1,289,354 1,025,369
Investment expenses 78,239 45,832 35,875
-----------------------------------------------
Net investment income $ 1,290,196 $ 1,243,522 $ 989,494
===============================================
</TABLE>
At December 31, 1999 and 1998, investment securities with an amortized cost of
$6,602,056 and $6,678,745, respectively, and a fair value of $5,960,476 and
$6,623,770, respectively, are held by trustees in various amounts in accordance
with the statutory requirements of certain states in which the Company is
licensed to conduct business.
3. INCOME TAXES
The Company files a separate life insurance company Federal income tax return
and will continue to do so through the year 2001. Beginning in the year 2002,
the Company will be included in the consolidated Federal income tax return of
Sage Holdings (U.S.A.), Inc. and its subsidiaries.
The provision for income taxes varies from the amount which would be computed
using the federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------------------------
<S> <C> <C> <C>
Pre-tax loss $ (8,696,414) $(568,974) $(351,786)
Application of the federal statutory tax rate - 34% (2,956,781) (193,451) (119,607)
Change in valuation allowance 2,907,523 193,451 119,532
Other 49,258 - (75)
------------------------------------------------
Total income tax provision $ - $ - $ -
================================================
</TABLE>
65
<PAGE> 84
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
3. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and
liabilities as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 3,501,308 $ 1,967,528
Unrealized loss on depreciation of investments 376,461 -
--------------------------------------
Total deferred tax assets 3,877,769 1,967,528
Deferred tax liabilities:
Unrealized gain on appreciation of investments - (8,804)
Amortization of goodwill and development costs (261,185) (1,634,928)
Other (19,617) (19,617)
--------------------------------------
Total deferred tax liabilities (280,802) (1,663,349)
Valuation allowance for deferred tax assets (3,220,506) (312,983)
--------------------------------------
Net deferred tax asset (liability) $ 376,461 $ (8,804)
======================================
</TABLE>
Based upon the lack of historical operating results and the uncertainty of
operating earnings in the future, management has determined that it is not more
likely than not that the deferred tax assets will be fully recognized.
Accordingly, a valuation allowance has been recorded.
The Company has a separate company net operating loss carryforward of
approximately $10.3 million as of December 31, 1999, of which $4.7 million
expires in the year 2019, $3.7 million which expires in 2018 and $1.9 million
which expires in the year 2012.
4. RETAINED DEFICIT AND DIVIDEND RESTRICTIONS
Statutory-basis net (loss) income and surplus of the Company are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------
<S> <C> <C> <C>
Net (loss) income $ (389,023) $ 27,002 $ 51,133
Surplus 23,473,747 23,109,097 25,017,752
</TABLE>
The Company is subject to state regulatory restrictions that limit the maximum
amount of dividends payable. Subject to certain net income carryforward
provisions as described below, the Company must obtain approval of the Insurance
Commissioner of the State of Delaware in order to pay, in any 12-month period,
"extraordinary" dividends which are defined as those in excess of the greater of
10% of surplus as regards policyholders as of the prior year-end and statutory
net income less realized capital gains for such prior year. Dividends may be
paid by the Company only out of earned surplus. In addition, the Company must
provide notice to the Insurance Commissioner of the State of Delaware of all
dividends and other distributions to stockholders within five business days
after declaration and at least ten days prior to payment. At December 31, 1999,
the Company could not pay a dividend to SLHA without prior approval from state
regulatory authorities as the Company currently does not have earned surplus.
66
<PAGE> 85
Sage Life Assurance of America, Inc.
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS
In 1997, the Company entered into a Cost Sharing Agreement with Sage Insurance
Group, Inc. (SIGI), the parent of SLHA, to share the personnel costs, office
rent and equipment costs. These costs are allocated between the companies based
upon the estimated time worked, square footage of space utilized and upon
monitored usage of the equipment, respectively. Pursuant to this agreement, the
Company has received $903,757 and $151,348 from SIGI for the years ended
December 31, 1999 and 1998, respectively. The Company paid SIGI $76,048 for the
year ended December 31, 1997. At December 31, 1999 the amount due from SIGI
relating to this agreement was $594,432. There was no amount due at December 31,
1998. In addition, SIGI provides funds to the Company to meet various operating
expenses. As these amounts are paid back to SIGI at the end of each quarter, no
amounts remained payable at December 31, 1999 and 1998.
All non-recurring development costs of the Company are paid by SIGI or its
parent, Sage Group Limited, and treated as capital contributions. The amount of
development costs paid for by affiliated companies at December 31, 1999, 1998
and 1997 were $7,098,106, $3,270,219 and $1,504,558, respectively.
6. INTERIM FINANCIAL STATEMENTS
The financial information presented as of June 30, 2000 and for the six month
periods ending June 30, 2000 and 1999 have not been audited.
67
<PAGE> 86
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
Additional information about the Contracts and The Sage Variable
Annuity Account A is contained in the Statement of Additional Information. You
can obtain a free copy of the Statement of Additional Information by writing to
us at the address shown on the front cover or by calling (877) 835-7243 (Toll
Free). The following is the Table of Contents for the Statement of Additional
Information.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Assignment
Change of Owner, Beneficiary or Annuitant
Misstatement and Proof of Age, Sex or Survival
Incontestability
Participation
Beneficiary Designation
Tax Status of the Contracts
Diversification Requirements
Owner Control
Required Distribution from Non-Qualified Contracts
Qualified Contracts
Taxation of Withdrawals
Individual Retirement Accounts (IRAs)
SIMPLE IRAs
Roth IRAs
Calculation of Historical Performance Data
Money Market Sub-Account Yields
Other Variable Sub-Account Yields
Average Annual Total Returns
Other Total Returns
Effect of the Annual Administration Charge on Performance Data
Use of Indexes
Other Information
Income Payment Provisions
Amount of Fixed Income Payments
Amount of Variable Income Payments
Income Units
Income Unit Value
Exchange of Income Units
68
<PAGE> 87
Safekeeping of Account Assets
Legal Matters
Other Information
Financial Statements
69
<PAGE> 88
===============================================================================
APPENDIX A
===============================================================================
MARKET VALUE ADJUSTMENT
We will apply a Market Value Adjustment to amounts surrendered,
withdrawn, transferred or applied to an income plan when taken from a Fixed
Sub-Account more than 30 days before its Expiration Date. We apply a Market
Value Adjustment separately to each Fixed Sub-Account.
For a surrender, withdrawal, transfer or amount applied to an income
plan, we will calculate the Market Value Adjustment by applying the factor below
to the total amount that must be surrendered, withdrawn, transferred or applied
to an income plan in order to provide the amount requested.
(N/365)
[(1+I)/(1+J+.0025)] - 1
Where
- I is the Index Rate for a maturity equal to the Fixed
Sub-Account's Guarantee Period at the time that we established
the Sub-Account;
- J is the Index Rate for a maturity equal to the time remaining
(rounded up to the next full year) in the Fixed Sub-Account's
Guarantee Period, at the time of surrender, withdrawal,
transfer, or application to an income plan; and
- N is the remaining number of days in the Guarantee Period at the
time of calculation.
We will apply Market Value Adjustments as follows:
If the Market Value Adjustment is negative, we first deduct it from any
remaining value in the Fixed Sub-Account. We then deduct any remaining negative
Market Value Adjustment from the amount you surrender, withdraw, transfer, or
apply to an income plan.
If the Market Value Adjustment is positive, we add it to any remaining value in
the Fixed Sub-Account or the amount you surrender. If you withdraw, transfer or
apply to an income plan the full amount of the Fixed Sub-Account, we add the
Market Value Adjustment to the amount you withdraw, transfer, or apply to an
income plan.
MVA EXAMPLES
Example #1: Surrender -- Example of a Negative Market Value Adjustment
Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of 7.0%
based on the U.S. Treasury Constant Maturity Series at the time we established
the Sub-Account. You request a surrender three years into the Guarantee Period,
the Index Rate based on the U.S. Treasury Constant Maturity Series for a
seven-year Guarantee Period ("J") is 8.0% at the time of the surrender and no
prior transfers or withdrawals affecting this Fixed Sub-Account have been made.
A-1
<PAGE> 89
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 and no
prior transfers or withdrawals affecting this Fixed Sub-Account have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Account Value of the Fixed Sub-Account on the date of surrender is
$124,230 ($100,000 x 1.075(3))
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0625)](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
and no prior transfers or withdrawals affecting this Fixed Sub-Account have been
made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Account Value of the Fixed Sub-Account on the date of 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
A-2
<PAGE> 90
Therefore, the amount of the withdrawal paid is $100,000, as requested. The
Fixed Sub-Account will be reduced by the amount of the withdrawal paid
($100,000) and by the Market Value Adjustment ($7,808), for a total reduction in
the Fixed Sub-Account of $107,808.
Example #4: Withdrawal - Example of a Positive Market Value Adjustment
Assume you invest $200,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an initial Index Rate ("I")
of 7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a withdrawal of $100,000 three years
into the Guarantee Period, the Index Rate based on the U.S. Treasury Constant
Maturity Series for a seven-year Guarantee Period ("J") is 6.0% at the time of
the withdrawal and no prior transfers or withdrawals affecting this Fixed
Sub-Account have been made.
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.
A-3
<PAGE> 91
===============================================================================
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 Beginning of Month Dollar Cost Averaging Amount Dollar Interest Credited End of Month
of Month Account Value Monthly Factor Cost Averaged For Month Account Value
-------- ------------- -------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
1 24,000 -- -- 117 24,117
2 24,117 1 / 24 1,005 112 23,224
3 23,224 1 / 23 1,010 108 22,323
4 22,323 1 / 22 1,015 104 21,412
5 21,412 1 / 21 1,020 99 20,492
6 20,492 1 / 20 1,025 95 19,562
7 19,562 1 / 19 1,030 90 18,622
8 18,622 1 / 18 1,035 86 17,673
9 17,673 1 / 17 1,040 81 16,715
10 16,175 1 / 16 1,045 76 15,746
11 15,746 1 / 15 1,050 72 14,768
12 14,768 1 / 14 1,055 67 13,780
13 13,780 1 / 13 1,060 62 12,782
14 12,782 1 / 12 1,065 57 11,774
15 11,774 1 / 11 1,070 52 10,756
16 10,756 1 / 10 1,076 47 9,727
17 9,727 1 / 9 1,081 42 8,688
18 8,688 1 / 8 1,086 37 7,639
19 7,639 1 / 7 1,091 32 6,580
20 6,580 1 / 6 1,097 27 5,510
21 5,510 1 / 5 1,102 21 4,429
22 4,429 1 / 4 1,107 16 3,338
23 3,338 1 / 3 1,113 11 2,236
24 2,236 1 / 2 1,118 5 1,124
25 1,124 1 / 1 1,124 -- --
</TABLE>
NOTE:
Column (3) = Column (1) x Column (2)
Column (5) = Column (1) - Column (3) + Column (4)
B-1
<PAGE> 92
===============================================================================
APPENDIX C
===============================================================================
CONTRACTS ISSUED BEFORE MAY 1, 2000
Generally, Contracts purchased after May 1, 2000, will have the
provisions described in the Prospectus. However, in certain states the
provisions described in this Appendix will apply. Please contact our Customer
Service Center to see if these provisions apply to your Contract.
VARIABLE INCOME BENEFITS
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. We currently allow assumed
investment rates of 3% and 6%. If you do not specify an assumed investment rate,
we will apply the 3.0% rate.
TRANSFER RESTRICTIONS
We may defer transfers to, from and among the Variable Sub-Accounts
under the same conditions that we delay paying proceeds. The additional transfer
restrictions relating to the affected Variable Sub-Accounts' ability to purchase
and redeem shares of a Fund, transfers involving the same Sub-Account, and
transfers that adversely affect Accumulation Unit Values do not apply to your
Contract.
WITHDRAWALS
A partial withdrawal will reduce your death benefit and may be subject
to federal income tax and a Market Value Adjustment. See "What Are The Expenses
Under A Contract?" "How Will My Contact Be Taxed?" and "Does The Contract Have A
Death Benefit?"
DEATH BENEFIT
If any Owner dies before the Income Date, we will pay the Beneficiary the
greatest of the following:
- the Account Value determined as of the day we receive proof of death;
or
- 100% of the sum of all purchase payments made under the Contract,
reduced by any prior withdrawals (including any associated Market Value
Adjustment incurred); or
- the Highest Anniversary Value.
The Highest Anniversary Value is the greatest anniversary value attained in the
following manner. When we receive proof of death, we will calculate an
anniversary value for each Contract Anniversary prior to the date of the Owner's
death, but not beyond the Owner's attained age 80. An anniversary value for a
Contract Anniversary equals:
(1) the Account Value on that Contract Anniversary;
(2) increased by the dollar amount of any purchase payments made since
the Contract Anniversary; and
C-1
<PAGE> 93
(3) Reduced proportionately by any withdrawals (including any
associated Market Value Adjustment incurred) taken since that
Contract Anniversary. (By proportionately, we take the percentage
by which the withdrawal decrease the Account Value and we reduce
the sum of (1) and (2) by that percentage.)
C-2
<PAGE> 94
===============================================================================
APPENDIX D
===============================================================================
GUARANTEED MINIMUM INCOME BENEFIT
Below is an example of how the GMIB will work. The example assumes the
following:
- you are a male whose age last birthday is 55;
- you purchase a Contract with the GMIB rider;
- you do not make any additional purchase payments nor any
withdrawals;
- you elect to receive income from the Contract 10 years later, at
attained age 65; and
- you elect a Life Annuity with 10 Year Certain, which is an
eligible Income Plan under the GMIB rider.
Assume your Account Value is $200,000 and that your Highest Anniversary
Value ("HAV") is $250,000.
Calculate the GMIB:
1. Your guaranteed Monthly Income Payment rate per $1,000 (as shown in
your Contract Schedule) is $5.42.
2. Your HAV is $250,000.
3. The GMIB = $1,355 [$5.42 x $250,000 / $1,000].
Therefore, under this Income Plan, we guarantee that your monthly income
payment will not be less than $1,355.00.
Different guaranteed minimum Monthly Income Payment rates per $1,000 will apply
for females, for males who begin income payments at ages other than the age
shown above, or for income payments under different Income Plans. In these
cases, the GMIB will be different.
D-1
<PAGE> 95
===============================================================================
APPENDIX E
===============================================================================
ENHANCED DEATH BENEFIT
Below are examples of how the Enhanced Death Benefit will work. All
examples assume the following:
- The Owner is a male whose age last birthday is 55;
- The Owner purchases a Contract with the Enhanced Death Benefit
rider;
- The Owner makes an initial purchase payment of $150,000; and
- The Owner does not make any additional purchase payments nor any
withdrawals.
Example 1.
Assume the Account Value is $200,000, the Highest Anniversary Value
("HAV") is $175,000 and the Owner dies of natural causes.
Calculate the basic Death Benefit:
1. The Account Value determined as of the Business Day we receive
proof of the Owner's death is $200,000.
2. The sum of all purchase payments made is $150,000.
3. The HAV is $175,000.
4. The basic Death Benefit is $200,000 [the greatest of (1), (2)
and (3)].
Calculate the Enhanced Death Benefit:
5. The Benefit Rate for an issue age of 55 is 40.0%.
6. The Net Purchase Amount is $150,000.
7. The Maximum Benefit Amount is $60,000 ($150,000 x .40).
8. The Enhanced Death Benefit is $20,000 ([.40 x [$200,000 -
$150,000] = $20,000, but not in excess of $60,000).
We will pay the Owner's Beneficiary the basic Death Benefit of $200,000
and the Enhanced Death Benefit of $20,000, for a total payment of $220,000.
E-1
<PAGE> 96
Example 2.
Assume the Account Value is $500,000, the HAV is $300,000 and the Owner
dies of natural causes.
Calculate the basic Death Benefit:
1. The Account Value determined as of the Business Day we receive
proof of the Owner's death is $500,000.
2. The sum of all purchase payments made is $150,000.
3. The HAV is $300,000.
4. The basic Death Benefit is $500,000 [the greatest of (1), (2)
and (3)].
Calculate the Enhanced Death Benefit:
5. The Benefit Rate for an issue age of 55 is 40.0%.
6. The Net Purchase Amount is $150,000.
7. The Maximum Benefit Amount is $60,000 ($150,000 x .40).
8. The Enhanced Death Benefit is $60,000 ([.40 x [$500,000 -
$150,000] = $140,000, but not in excess of $60,000).
We will pay the Owner's Beneficiary the basic Death Benefit of $500,000
and the Enhanced Death Benefit of $60,000, for a total payment of $560,000.
Example 3.
Assume the Account Value is $100,000, the HAV is $175,000 and the Owner
dies of natural causes.
Calculate the basic Death Benefit:
1. The Account Value determined as of the Business Day we receive
proof of the Owner's death is $100,000.
2. The sum of all purchase payments made is $150,000.
3. The HAV is $175,000.
4. The basic Death Benefit is $175,000 [the greatest of (1), (2)
and (3)].
Calculate the Enhanced Death Benefit:
5. The Benefit Rate for an issue age of 55 is 40.0%.
E-2
<PAGE> 97
6. The Net Purchase Amount is $150,000.
7. The Maximum Benefit Amount is $60,000 ($150,000 x .40).
8. The Enhanced Death Benefit is $0 ([.40 x [$100,000 - $150,000] =
$0, but not in excess of $60,000).
We will pay the Owner's Beneficiary the basic Death Benefit of $175,000 and the
Enhanced Death Benefit of $0, for a total payment of $175,000.
E-3
<PAGE> 98
To obtain a Statement of Additional Information for this Prospectus, please
complete the form below and mail to:
Sage Life Assurance of America, Inc.
Customer Service Center
P.O. Box 290680
Wethersfield, CT 06129-0680
Please send a Statement of Additional Information to me at the following
address:
-------------------------------------------------------
Name
-------------------------------------------------------
Address
-------------------------------------------------------
City/State Zip Code
<PAGE> 99
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Securities and Exchange Commission
Registration Fees (Approximate) $ 11,640
Printing and engraving $ 6,825
Accounting fees and expenses $ 5,000
Legal fees and expenses $ 10,000
Miscellaneous $ 5,000
--------
Total Expenses (Approximate) $ 38,465
</TABLE>
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
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
II-1
<PAGE> 100
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)(ii) Amended Form of Individual Contract./3/
(a)(iii) Second Amended Form of Individual Contract./9/
(b)(i) Form of Individual Contract with Interest Account./3/
(b)(ii) Amended Form of Individual Contract with Interest
Account./3/
(b)(iii) Second Amended Form of Individual Contract with Interest
Account./9/
(c)(ii) Amended Form of Group Contract./4/
(c)(iii) Second Amended Form of Group Contract./9/
II-2
<PAGE> 101
(d)(ii) Amended Form of Group Certificate./4/
(d)(iii) Second Amended Form of Group Certificate./9/
(e)(ii) Amended Form of Individual IRA Rider./4/
(f)(ii) Amended Form of Group IRA Rider./4/
(g)(ii) Amended Form of Individual SIMPLE IRA Rider./4/
(h)(ii) Amended Form of Group SIMPLE IRA Rider./4/
(i)(i) Form of Individual Roth IRA Rider./5/
(j)(i) Form of Group Roth IRA Rider./5/
(k)(i) Form of Individual Enhanced Death Benefit Rider./15/
(l)(i) Form of Group Individual Enhanced Death Benefit
Rider./15/
(m)(i) Form of Individual Guaranteed Minimum Income Benefit
Rider./15/
(n)(i) Form of Group Guaranteed Minimum Income Benefit
Rider./15/
(o) Form of Individual Contract Application./6/
(p) Form of Group Certificate Application./6/
5. Opinion and Consent of James F. Bronsdon.*
10. (a) Form of Participation Agreement with AIM Variable
Insurance Funds, Inc./7/
(b) Form of Participation Agreement with The Alger American
Fund./7/
(c) Form of Participation Agreement with Liberty Variable
Investment Trust./8/
(d) Form of Participation Agreement with MFS (R) Variable
Insurance Trust./7/
(e) Form of Participation Agreement with Morgan Stanley
Universal Funds, Inc./8/
(f) Form of Participation Agreement with Oppenheimer Variable
Account Funds./8/
(g) Form of Participation Agreement with Sage Life Investment
Trust./7/
II-3
<PAGE> 102
(h) Form of Participation Agreement with SteinRoe Variable
Investment Trust./8/
(i) Form of Participation Agreement with T. Rowe Price Equity
Series, Inc./8/
(j) Form of Services Agreement with Financial Administration
Services, Inc./8/
23. (a) Included in Exhibit No 5.
(b) Consent of Ernst & Young LLP.*
(c) Consent of Sutherland Asbill & Brennan LLP.*
24. (a) Power of Attorney for Paul C. Meyer./10/
(b) Power of Attorney for Ronald S. Scowby./11/
(c) Power of Attorney for Richard D. Starr./11/
(d) Power of Attorney for H. Louis Shill./12/
(e) Power of Attorney for Mitchell R. Katcher./12/
(f) Power of Attorney for Robin I. Marsden./13/
(g) Power of Attorney for Paul C. Meyer, Ronald S. Scowby,
Richard D. Starr, H. Louis Shill and Meyer Feldberg./14/
(h) Power of Attorney for John A. Benning.*
27. Not Applicable.
(B) Financial Statement Schedules - Not applicable.
(1) Incorporated herein by reference to Exhibit No. 3 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4 (File No. 333-43329)
filed on December 31, 1998.
(2) Incorporated herein by reference to Exhibit No. 6 to the Registration
Statement filed on Form N-4 (File No. 33-43329) filed on December 24, 1997.
(3) Incorporated herein by reference to Exhibit No. 4 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4 (File No. 333-44751)
filed on January 12, 1999.
II-4
<PAGE> 103
(4) Incorporated herein by reference to Exhibit No. 4 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4 (File No. 333-43329)
filed on December 31, 1998.
(5) Incorporated herein by reference to Exhibit No. 4 to the Registration
Statement on Form N-4 (File No. 333-43329) filed on December 24, 1997.
(6) Incorporated herein by reference to Exhibit No. 5 to Pre-Effective
Amendment No. 1 to the Registration Statement filed on Form N-4 (File No.
333-44751) on January 12, 1999.
(7) Incorporated herein by reference to Exhibit No. 8 to Pre-Effective
Amendment No. 1 to the Registration Statement filed on Form N-4 (File No.
333-43329) on December 31, 1998.
(8) Incorporated herein by reference to Exhibit No. 8 to Pre-Effective
Amendment No. 2 to the Registration Statement on Form N-4 (File No. 333-43329)
filed on January 28, 1999.
(9) Incorporated herein by reference to Exhibit No. 4 to the Post
Effective Amendment No. 3 to the Registration Statement on Form N-4 (File No.
333-43329) filed on February 29, 2000.
(10) Incorporated herein by reference to Exhibit No. 14 to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-4 (File No. 333-44751)
filed on January 12, 1999.
(11) Incorporated herein by reference to Exhibit No. 14 to Pre-Effective
Amendment No. 2 to the Registration Statement filed on Form N-4 (File No.
333-43329) filed on January 28, 1999.
(12) Incorporated herein by reference to Exhibit No. 14 to Pre-Effective
Amendment No. 2 to the Registration Statement on Form N-4 (File No. 333-44751)
filed on February 10, 1999.
(13) Incorporated herein by reference to Exhibit No. 14 to Post-Effective
Amendment No. 1 to the Registration Statement on Form N-4 (File No. 333-43329)
filed on February 26, 1999.
(14) Incorporated herein by reference to Exhibit No. 14 to Post-Effective
Amendment No. 3 to the Registration Statement on Form N-4 (File No. 333-43329)
filed on February 29, 2000.
(15) This exhibit was previously filed in Exhibit No. 4 to Post-Effective
Amendment No. 5 to the Registration Statement on Form N-4 (File No. 333-43329),
dated June 27, 2000, and is incorporated herein by reference.
II-5
<PAGE> 104
(*) Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
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 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.
II-6
<PAGE> 105
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the registrant has caused this Registration Statement to be signed on
its behalf, in the City of Stamford, in the State of Connecticut, on this 4th
day of August, 2000.
Sage Life Assurance of America, Inc.
Attest:
/s/ James F. Bronsdon By: /s/ Robin I. Marsden
------------------------------- --------------------
James F. Bronsdon Robin I. Marsden
Director, President, Chief Executive
Officer
<PAGE> 106
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ---------------- ------------------
<S> <C> <C>
/s/ Ronald S. Scowby* Chairman August 4, 2000
---------------------
Ronald S. Scowby
/s/ H. Louis Shill* Director August 4, 2000
-----------------------
H. Louis Shill
/s/ Paul C. Meyer* Director August 4, 2000
----------------------
Paul C. Meyer
/s/ Richard D. Starr* Director August 4, 2000
-----------------------
Richard D. Starr
/s/ Mitchell R. Katcher Director, August 4, 2000
------------------------ Senior Executive Vice
Mitchell R. Katcher President, Chief Financial
Officer, Chief Actuary
/s/ Meyer Feldberg* Director August 4, 2000
--------------------
Meyer Feldberg
/s/ John A. Benning* Director August 4, 2000
--------------------
John A. Benning
(*)By: /s/ Mitchell R. Katcher
------------------------
Mitchell R. Katcher
</TABLE>
As Attorney-In-Fact pursuant to a Power of Attorney dated below.
<TABLE>
<CAPTION>
Director Date
-------- ----
<S> <C>
Meyer Feldberg February 28, 2000
Ronald S. Scowby February 24, 2000
H. Louis Shill February 25, 2000
Paul C. Meyer February 23, 2000
Richard D. Starr February 25, 2000
John A. Benning July 31, 2000
</TABLE>
<PAGE> 107
EXHIBIT LIST
(5) Opinion and Consent of James F. Bronsdon
(23)(b) Consent of Ernst & Young LLP
(23)(c) Consent of Sutherland Asbill & Brennan LLP
(24)(h) Power of Attorney for John A. Benning
