<PAGE>
As filed with the Securities and Exchange Commission on April 28, 2000
File No. 333-77437
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 1
FORM S-1
Registration Statement Under
the Securities Act of 1933
SAGE LIFE ASSURANCE OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0258372
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
63
--------------------------------------------------------
(Primary Standard Industrial Classification Code Number)
300 Atlantic Street
Suite 302
Stamford, CT 06901
(203) 602-6500
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
James F. Bronsdon
300 Atlantic Street
Stamford, CT 06901
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
Pursuant to Rule 429 under the Securities Act of 1933, the prospectus
contained herein relates to Registration Statement No. 333-46059.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Amount Proposed Maximum Proposed Maximum Amount
To Be Offering Price Aggregate Offering Of Registration
Title of Each Class of Securities To Be Registered Registered Per Unit Price Fee
<S> <C> <C> <C> <C>
Flexible Payment Deferred Combination
and Fixed and Variable Annuity Contracts * * $80,000 $23,600**
</TABLE>
* 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.
** Paid with initial filing.
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.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Regulation S-K, Item 501(b)
ITEM OF FORM S-1
PROSPECTUS CAPTION
<TABLE>
<CAPTION>
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus........ Outside Front Cover
2. Inside Front and Outside Back Cover
Pages of Prospectus........................... Summary; Table of Contents
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges............ Outside Front Cover;
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 Registered.... Description, Profile, What
are the Contracts? 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 Counsel........ N/A
11. Information with Respect to the Registrant.... What Other Information
Should I Know? What are my
Investment Options?
Additional information
about Sage Life Assurance
of America, Inc.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................... Item 14 of Part II
</TABLE>
<PAGE>
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. 4, File No. 333-43329, filed contemporaneously with this Registration
Statement on or about April 28, 2000) for The Sage Variable Life Account A. This
information may be obtained free of charge by writing or calling our Customer
Service Center.
<PAGE>
PROFILE DATED MAY 1, 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 33 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 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.
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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 surrender charge, and a Market Value Adjustment (positive or
negative) may apply if you take the amount from the Fixed Account before the end
of the applicable Guarantee Period.
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.
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.
[_] 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.
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[_] 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.
3. How Do I Purchase A Contract?
In most cases, you may purchase a Contract with $5,000 or more ($2,000
or more in the case of a Contract used in connection with a tax-qualified
retirement plan) 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 $250 or more to your Contract at any time during the Accumulation Phase.
4. What Are My Investment Options?
There are 40 investment options under the Contracts available through
our Variable and Fixed Accounts. These choices are professionally managed and
allow for a broad range of investment strategies, styles and asset classes.
Additional investment options may be available in the future.
Through our Variable Account you can choose to invest your money in
one or more of the Variable Sub-Accounts investing in the following 33 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
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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
Sage Life Investment Trust
. EAFE/(R)/ Equity Index Fund
. S&P 500 Equity Index Fund
. Money Market Fund
T. Rowe Price Equity Series, Inc.
. T. Rowe Price Equity Income Portfolio
. T. Rowe Price Mid-Cap Growth Portfolio
. T. Rowe Price Personal Strategy Balanced Portfolio
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<PAGE>
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:
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.
Surrender Charge -- During the first seven Contract Years only, we
ordinarily will deduct a surrender charge when you surrender your Contract or
withdraw amounts in excess of the Free Withdrawal Amount. The maximum
applicable percentage is 7% in the first Contract Year. It declines to 0% after
the seventh Contract Year. We calculate the surrender charge as a percentage of
the purchase payment(s) you surrender or withdraw.
Purchase Payment Tax Charge -- We will deduct any state premium or local
tax that we incur from your Account Value. We reserve the right to defer
collection of this charge and deduct it against your Account Value when you
surrender your Contract, make an Excess Withdrawal, or begin receiving regular
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.
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 Surrender Charges,
. eliminate the Annual Administration Charge,
. eliminate the Purchase Payment Tax Charge, if any, and
. reduce Asset-Based Charges.
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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.
<TABLE>
<CAPTION>
Examples of
Total Total Examples of Total
Annual Annual Total 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
---- ---------- -------- -------- --------------- ---------------
AIM Variable Insurance Funds:
<S> <C> <C> <C> <C> <C>
AIM V.I. Government Securities Fund 1.53% 0.90% 2.43% $95 $310
AIM V.I. Growth and Income Fund 1.53 0.77 2.30 94 294
AIM V.I. International Equity Fund 1.53 0.97 2.50 96 319
AIM V.I. Value Fund 1.53 0.76 2.29 93 292
The Alger American Fund:
Alger American MidCap Growth Portfolio 1.53 0.85 2.38 94 303
Alger American Income and Growth Portfolio 1.53 0.70 2.23 93 284
Alger American Small Capitalization Portfolio 1.53 0.90 2.43 95 310
Liberty Variable Investment Trust:
Colonial High Yield Securities Fund, Variable Series 1.53 0.80 2.33 94 297
Colonial Small Cap Value Fund, Variable Series 1.53 1.00 2.53 96 322
Colonial Strategic Income Fund, Variable Series 1.53 0.75 2.28 93 290
Colonial U.S. Growth and Income Fund, Variable
Series 1.53 0.88 2.41 95 308
Liberty All-Star Equity Fund, Variable Series 1.53 0.95 2.48 95 317
Newport Tiger Fund, Variable Series 1.53 1.21 2.74 98 349
Stein Roe Global Utilities Fund, Variable Series 1.53 0.77 2.30 94 294
SteinRoe Variable Investment Trust:
Stein Roe Growth Stock Fund, Variable Series 1.53 0.67 2.20 93 281
Stein Roe Balanced Fund, Variable Series 1.53 0.62 2.15 92 273
MFS(R) Variable Insurance Trust(SM)[:]
MFS Growth With Income Series 1.53 0.88 2.41 95 308
MFS High Income Series 1.53 0.91 2.44 95 311
MFS Research Series 1.53 0.86 2.39 94 304
MFS Total Return Series 1.53 0.90 2.43 95 310
MFS Capital Opportunities Series 1.53 0.91 2.44 95 311
The Universal Institutional Funds,
The Global Equity Portfolio 1.53 1.15 2.68 97 342
The Mid Cap Value Portfolio 1.53 1.05 2.58 96 328
The Value Portfolio 1.53 0.85 2.38 94 303
Oppenheimer Variable Account
Oppenheimer Bond Fund/VA 1.53 0.73 2.26 93 288
Oppenheimer Capital Appreciation Fund/VA 1.53 0.70 2.23 93 284
Oppenheimer Small Cap Growth Fund/VA 1.53 1.34 2.87 99 366
Sage Life Investment Trust:
EAFE(R) Equity Index Fund 1.53 0.90 2.43 95 310
S&P 500 Equity Index Fund 1.53 0.55 2.08 91 263
Money Market Fund 1.53 0.65 2.18 92 276
T. Rowe Price Equity Series, Inc.:
T. Rowe Price Equity Income Portfolio 1.53 0.85 2.38 94 303
T. Rowe Price Mid-Cap Growth Portfolio 1.53 0.85 2.38 94 303
T. Rowe Price Personal Strategy Balanced Portfolio 1.53 0.90 2.43 95 310
</TABLE>
Below is an explanation of what we included in each column of the chart:
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The column "Total Annual Insurance Charges" shows the sum of the Asset-
Based Charges and the Annual Administration Charge (for purposes of the chart,
we assume the average Account Value is $30,000 and the Annual Administration
Charge to be 0.13% of the value of an average Contract).
The column "Total Annual Fund Charges" shows the fees and expenses for each
Fund.
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; and Money Market Fund.
The column "Total Annual Charges" shows the sum of "Total Annual Insurance
Charges" and "Total Annual Fund Charges."
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
example assumes that your Contract earns 5% annually before charges.
For more information about expenses under a Contract, please refer to the
"Fee Table" in the full Prospectus that accompanies this Profile.
6. How Will My Contract Be Taxed?
During the Accumulation Phase, your earnings are not taxed unless you take
them out. If 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.
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<PAGE>
. 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 amounts you surrender or withdraw may be subject to a
surrender charge if taken during the first seven Contract Years. However,
during that period, the Contract does provide a Free Withdrawal Amount (an
amount not subject to a surrender charge), each year equal to your cumulative
earnings, or if greater, 10% of total purchase payments you have invested. In
addition, if you take the amounts 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 have been in
operation for less than a year, we cannot show you how the Funds performed in
the Variable Account. When they have been in operation for a year or more, we
will show you the Funds' performance using standard methods prescribed by the
SEC.
Please remember that the performance data represents past performance.
Amounts you invest in the Variable Account will fluctuate daily based on
underlying Fund investment performance, so the value of your investment may
increase or decrease.
9. Does The Contract Have A Death Benefit?
Your Contract provides two different types of death benefits for your
Beneficiary. There is the basic death benefit and the accidental death benefit.
Basic Death Benefit. We will pay the basic 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 surrender charge and Market Value
Adjustment incurred) reduced Account Value; or
. the highest anniversary value on or before you reach age 80.
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<PAGE>
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 surrender
charge and 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.
Accidental Death Benefit. The Contract also provides an accidental death
benefit during the Accumulation Phase at no additional cost. If you die as a
direct result of an accident before reaching age 81, we will pay an additional
death benefit to the Beneficiary of your choice. This additional benefit is
equal to 100% of the sum of all purchase payments you have invested in your
Contract, less any withdrawals you have made (including any associated surrender
charge and Market Value Adjustment incurred) up to a maximum of $250,000.
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 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.
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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.
Waiver of Surrender Charge Rider: This rider, which is automatically
included in your Contract at no additional cost, permits you to withdraw money
from your Contract without a surrender charge if you need it while you are
confined to a nursing care facility or hospital, or if you have a terminal
illness. Certain restrictions apply.
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).
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<PAGE>
PROSPECTUS DATED MAY 1, 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.
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)
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 33 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 50 of this Prospectus. We filed it with the
Securities and Exchange Commission. You may obtain a copy of the Statement of
Additional Information free of charge by contacting our Customer Service Center,
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>
<TABLE>
<CAPTION>
===========================================================================================
TABLE OF CONTENTS
===========================================================================================
<S> <C>
Index of Terms............................................................................. 1
Fee Table.................................................................................. 4
1. What Are The Contracts?................................................................ 8
Your Options........................................................................... 9
Transfers.............................................................................. 9
2. What Are My Income Payment Options?.................................................... 9
Your Choices........................................................................... 9
Income Payment Amounts................................................................. 10
3. How Do I Purchase a Contract?.......................................................... 11
Initial Purchase Payment............................................................... 11
Issuance of a Contract................................................................. 11
Free Look Right to Cancel Your Contract................................................ 12
Making Additional Purchase Payments.................................................... 12
When We May Cancel Your Contract....................................................... 12
4. What Are My Investment Options?........................................................ 13
Purchase Payment Allocations........................................................... 13
Variable Sub-Account Investment Options................................................ 13
Fixed Account Investment Options....................................................... 18
Transfers.............................................................................. 20
Transfer Programs...................................................................... 22
Values Under Your Contract............................................................. 24
5. What Are The Expenses Under a Contract?................................................ 25
Surrender Charge....................................................................... 27
Annual Administration Charge........................................................... 28
Transfer Charge........................................................................ 28
Asset-Based Charges.................................................................... 28
Purchase Payment Tax Charge............................................................ 29
Fund Annual Expenses................................................................... 29
Additional Information................................................................. 29
6. How Will My Contract Be Taxed?......................................................... 29
Introduction........................................................................... 29
Taxation of Non-Qualified Contracts.................................................... 30
Taxation of a Qualified Contract....................................................... 31
Transfers, Assignments, or Exchanges of a Contract..................................... 32
Possible Tax Law Changes............................................................... 32
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
7. How Do I Access My Money?.............................................................. 32
Withdrawals............................................................................ 33
Requesting Payments.................................................................... 34
8. How Is Contract Performance Presented?................................................. 34
Yield.................................................................................. 35
Total Return........................................................................... 35
Performance/Comparisons................................................................ 35
9. Does The Contract Have A Death Benefit?................................................ 36
Owner's Death Before the Income Date................................................... 36
Owner's Death After the Income Date.................................................... 37
Proof of Death......................................................................... 38
10. What Other Information Should I Know?.................................................. 39
Separate Accounts...................................................................... 39
Modification........................................................................... 40
Distribution of the Contracts.......................................................... 40
Experts................................................................................ 41
Legal Proceedings...................................................................... 41
Reports to Contract Owners............................................................. 41
Authority to Make Agreements........................................................... 41
Financial Statements................................................................... 41
11. How Can I Make Inquiries?.............................................................. 42
12. Additional Information About Sage Life Assurance Of America, Inc....................... 42
History and Business................................................................... 42
Management's Discussion and Analysis of Financial Condition............................ 44
Condensed Financial Information............................................................... 48
Table Of Contents Of The Statement Of Additional Information.................................. 49
Appendix A................................................................................... A-1
Appendix B................................................................................... B-1
Appendix C................................................................................... C-1
</TABLE>
This Prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made.
ii
<PAGE>
================================================================================
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 these 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 -- Contract Year is each consecutive twelve-month period
beginning on the Contract Date and the anniversaries thereof.
1
<PAGE>
Excess Withdrawal -- An Excess Withdrawal is a withdrawal of Account
Value that exceeds the Free Withdrawal Amount.
Expiration Date -- The Expiration Date is the last day in a Guarantee
Period.
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.
Free Withdrawal Amount -- A Free Withdrawal Amount is the maximum amount
that you can withdraw within a Contract Year during the Accumulation Phase
without being subject to a surrender charge.
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 a notice or request you
make or authorize, in a form satisfactory to us, received at our Customer
Service Center.
Surrender Value -- The Surrender Value is the amount we pay you upon
surrender of your Contract before the Income Date. It reflects the calculation
of any applicable charge, including the surrender charge and Market Value
Adjustment.
Valuation Period -- The Valuation Period is the period between one
calculation of an Accumulation Unit value and the next calculation.
2
<PAGE>
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.
3
<PAGE>
===============================================================================
FEE TABLE
===============================================================================
The purpose of this Fee Table is to assist you in understanding the
expenses that you will pay directly or indirectly when you invest in the
Contract.
Transaction Expenses
Sales Load Imposed on Purchases (as a percentage of purchase payments)..... None
Surrender Charge/(1)/ (as a percentage of purchase payments withdrawn or
surrendered)
Applicable Applicable Surrender
Contract Year Charge Percentage
------------- -----------------
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 1%
8 and thereafter 0%
Maximum Transfer Charge/(2) /
First 12 transfers in a Contract Year ............................. $ 0
After 12th transfer in a Contract Year ............................ $ 25
Administration Charge
Contract Years 1-7/(3)/............................................ $ 40
After Contract Year 7 ............................................. $ 0
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, make an Excess Withdrawal, or apply your
Account Value to provide income payments. We refer to this as the Purchase
Payment Tax Charge.
Variable Account Annual Expenses/(4)/ (deducted monthly as 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>
4
<PAGE>
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.
Fund Annual Expenses (as a percentage of average daily net assets of a Fund)
<TABLE>
<CAPTION> Total Expenses Total Expenses
Management Other Expenses (after fee (before fee
Fees(after fee (after waivers and waivers and
waiver, reimbursement, reimbursements reimbursements
Fund as 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:............................ N/A
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....... 0.80 0.05 0.90 N/A
Liberty Variable Investment Trust:
Colonial High Yield Securities Fund, Variable Series 0.65/(5)/ 0.20/(5)/ 0.80/(5)/ 1.88%
Colonial Small Cap Value Fund, Variable Series...... 0.80/(5)/ 0.20/(5)/ 1.00/(5)/ 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 N/A
Liberty All-Star Equity Fund, Variable Series....... 0.80 0.15 0.95 N/A
Newport Tiger Fund, Variable Series................. 0.90 0.31 1.21 N/A
Stein Roe Global Utilities Fund, Variable Series.... 0.65 0.12 0.77 N/A
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/(6)/ 0.88/(6)/ N/A
MFS High Income Series.............................. 0.75/(6)/ 0.16/(6)/ 0.91/(6)/ 0.97
MFS Research Series................................. 0.75 0.11/(6)/ 0.86/(6)/ N/A
MFS Total Return Series............................. 0.75 0.15/(6)/ 0.90/(6)/ N/A
MFS Capital Opportunities Series.................... 0.75/(6)/ 0.16/(6)/ 0.91/(6)/ 1.02
The Universal Institutional Funds, Inc.:
The Global Equity Portfolio......................... 0.47/(7)/ 0.68/(7)/ 1.15/(7)/ 1.48
The Mid Cap Value Portfolio......................... 0.43/(7)/ 0.62/(7)/ 1.05/(7)/ 1.37
The Value Portfolio................................. 0.18/(7)/ 0.67/(7)/ 0.85/(7)/ 1.22
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................ 0.75 0.59 1.34 N/A
Sage Life Investment Trust:
EAFE(R) Equity Index Fund*.......................... 0.73/(8)/ 0.17/(8)/ 0.90/(8)/ 1.07
S&P 500 Equity Index Fund**......................... 0.38/(8)/ 0.17/(8)/ 0.55/(8)/ .72
Money Market Fund................................... 0.48/(8)/ 0.17/(8)/ 0.65/(8)/ .82
T. Rowe Price Equity Series, Inc.:
T. Rowe Price Equity Income Portfolio............... 0.85/(9)/ 0.00 0.85/(9)/ N/A
T. Rowe Price Mid-Cap Growth Portfolio.............. 0.85/(9)/ 0.00 0.85/(9)/ N/A
T. Rowe Price Personal Strategy Balanced Portfolio.. 0.90/(9)/ 0.00 0.90/(9)/ N/A
</TABLE>
_____________
5
<PAGE>
(1) You may withdraw a portion of your Account Value without incurring a
surrender charge. This amount is called the Free Withdrawal Amount and is
equal to the greater of (i) 10% of your total purchase payments less all
prior withdrawals (including any associated surrender charge and Market
Value Adjustment incurred) in that Contract Year, or (ii) cumulative
earnings (i.e., the excess of the Account Value on the date of withdrawal
over unliquidated purchase payments).
(2) Currently, we do not assess a transfer charge.
(3) 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) 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?"
(5) 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%.
(6) 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 arrangement 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%.
(7) 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%
(8) 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].
(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 by Standard & Poor's, and Standard &
Poor's makes no representation regarding the advisability of investing in the
Fund.
6
<PAGE>
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 $30,000, and that you have invested all your
money in the Variable Account.
You should not consider the examples a representation of past or future
expenses. Actual expenses may be greater or less than those shown. In
addition, we do not reflect Purchase Payment Tax Charges. These charges may
apply depending on the state where the Contract is sold. You might also incur
transfer fees if you make more than twelve transfers in a Contract Year,
however, we currently do not assess 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.
<TABLE>
<CAPTION>
1. If you surrender your Contract 2. If you do not surrender your
or you annuitize at the end Contract at the end
of each time period of each time period
-------------------- -------------------
Fund 1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
---- ------- -------- ------- ---------- ------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM Variable Insurance Funds:
AIM V.I. Government Securities Fund.............. $95 $138 $177 $310 $25 $78 $137 $310
AIM V.I. Growth and Income Fund.................. 94 135 170 294 24 75 130 294
AIM V.I. International Equity Fund............... 96 141 181 319 26 81 141 319
AIM V.I. Value Fund.............................. 93 134 169 292 23 74 129 292
The Alger American Fund:
Alger American MidCap Growth Portfolio........... 94 137 174 303 24 77 134 303
Alger American Income and Growth Portfolio....... 93 132 165 284 23 72 125 284
Alger American Small Capitalization Portfolio.... 95 138 177 310 25 78 137 310
Liberty Variable Investment Trust:
Colonial High Yield Securities Fund, Variable
Series..................................... 94 135 171 297 24 75 131 297
Colonial Small Cap Value Fund, Variable
Series..................................... 96 141 182 322 26 81 142 322
Colonial Strategic Income Fund, Variable
Series..................................... 93 133 168 290 23 73 128 290
Colonial U.S. Growth and Income Fund, Variable
Series..................................... 95 138 176 308 25 78 136 308
Liberty All-Star Equity Fund, Variable
Series..................................... 95 140 180 317 25 80 140 317
Newport Tiger Fund, Variable Series.............. 98 148 194 349 28 88 154 349
Stein Roe Global Utilities
Fund, Variable Series...................... 94 135 170 294 24 75 130 294
SteinRoe Variable Investment Trust:
Stein Roe Growth Stock Fund, Variable
Series..................................... 93 132 165 281 23 72 125 281
Stein Roe Balanced Fund, Variable Series......... 92 129 161 273 22 69 121 273
MFS(R) Variable Insurance Trust(SM)
MFS Growth With Income Series.................... 95 138 176 308 25 78 136 308
MFS High Income Series........................... 95 138 177 311 25 78 137 311
MFS Research Series.............................. 94 137 174 304 24 77 134 304
MFS Total Return Series.......................... 95 138 177 310 25 78 137 310
MFS Capital Opportunities Series................. 95 138 177 311 25 78 137 311
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
1. If you surrender your Contract 2. If you do not surrender you
or you annuitize at the end Contract at the end
of each time period of each time period
------------------- -------------------
Fund 1Year 3Year 5Years 10Years 1Year 3Year 5Year 10Year
---- ---- ------ ------ ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Universal Institutional Funds, Inc.:
The Global Equity Portfolio........................... $ 97 $ 146 $ 191 $ 342 $ 27 $ 86 $ 151 $ 342
The Mid Cap Value Portfolio........................... 96 143 185 328 26 83 145 328
The Value Portfolio................................... 94 137 174 303 24 77 134 303
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund/VA.............................. 93 132 167 288 23 72 127 288
Oppenheimer Capital Appreciation Fund/VA.............. 93 132 165 284 23 72 125 284
Oppenheimer Small Cap Growth Fund/VA.................. 99 152 201 366 29 93 161 366
Sage Life Investment Trust:
EAFEa Equity Index Fund............................... 95 138 177 310 25 78 137 310
S&P 500 Equity Index Fund............................. 91 126 156 263 21 66 116 263
Money Market Fund..................................... 92 129 162 276 22 69 122 276
T. Rowe Price Equity Series, Inc.:
T. Rowe Price Equity Income Portfolio................. 94 137 174 303 24 77 134 303
T. Rowe Price Mid-Cap Growth Portfolio................ 94 137 174 303 24 77 134 303
T. Rowe Price Personal Strategy Balanced Portfolio.... 95 138 177 310 25 78 310 310
</TABLE>
More information about Accumulation Unit Values may be found in the
Condensed Financial Information section at the end of this Prospectus.
================================================================================
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.
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 all markets. Your Contract may differ from the
descriptions below because of the requirements of the state where we issued your
Contract. If you purchased your Contract before May 1, 2000, please see
Appendix C for certain provisions applicable to 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 continue to apply. Please contact our Customer Service Center to see if
these provisions apply to your Contract.
8
<PAGE>
Your Options
When you make purchase payments, you can allocate those purchase payments
to one or more of the 33 subdivisions of the Variable Account, known as
"Variable Sub-Accounts." We will invest purchase payments you allocate to a
Variable Sub-Account solely in its corresponding Fund. Your Account Value in a
Variable Sub-Account will vary according to the investment performance of that
Fund. Depending on market conditions, your value in each Variable Sub-Account
could increase or decrease. We do not guarantee a minimum value. You bear the
risk of investing in the Variable Account. We call the total of the values in
the Variable Sub-Accounts the "Variable Account Value."
You can also allocate purchase payments to our Fixed Account. See "Fixed
Account Investment Option." The Fixed Account includes "Fixed Sub-Accounts" to
which we credit fixed rates of interest for the Guarantee Periods you select.
We call the total of the values in the Fixed Sub-Accounts, the "Fixed Account
Value." We currently offer Guarantee Periods with durations of 1, 2, 3, 4, 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."
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
. 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.
9
<PAGE>
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 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
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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.
================================================================================
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 different
minimum initial purchase payment depending on whether you are purchasing a Non-
Qualified or Qualified Contract, as shown in the following table:
===================================================
Minimum Initial
Purchase Payment
Required
Non-Qualified Contract $5,000
Qualified Contract $2,000
===================================================
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.
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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."
Making Additional Purchase Payments
You may make additional purchase payments of $250 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:
====================================================================
Contract Type Restrictions on Acceptance of Additional
Purchase Payments
--------------------------------------------------------------------
Non-Qualified Accepted until the earlier of the year in which
Contract you attain age 85 or the year in which the
Annuitant attains age 85.
--------------------------------------------------------------------
Qualified Accepted until the year in which you attain
Contract 701/2, except contributions to a Roth IRA
or rollover contributions may be made until the
year in which you attain age 85.
=====================================================================
You must obtain our prior approval before you make a purchase payment that
causes the Account Value of all annuities that you maintain with us to exceed
$1,000,000.
We will credit any purchase payment received after the Contract Date to
your Contract as of the Business Day on which we receive it at our Customer
Service Center. 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.
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================================================================================
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 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 33 Sub-Accounts, each investing in a specific
Fund. Each of the Funds is either an open-end diversified management investment
company or a separate investment portfolio of such a company, and is managed by
a registered investment adviser. The Funds, as well as brief descriptions of
their investment objectives, are provided below. There is no assurance that
these objectives will be met. Not every Fund may be available in every state or
in every market.
AIM Variable Insurance Funds
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.
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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.
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.
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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.
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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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 Value Portfolio
and The Mid Cap Value Portfolio.
Oppenheimer Variable Account Funds
Oppenheimer Bond Fund/VA. This Fund seeks a high level of current income.
Secondarily, this Fund seeks capital growth when consistent with its primary
objective. The Fund will, under normal market conditions, invest at least 65%
of its total assets in investment grade debt securities.
Oppenheimer Capital Appreciation Fund/VA. 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.
Sage Advisors, Inc. is the investment manager to the Sage Life Investment
Trust. State Street Global Advisors subadvises the EAFE(R) Equity Index Fund
and S&P 500 Equity Index Fund. Conning Asset Management Company subadvises the
Money Market Fund.
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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 .25% of the average aggregate net amount we have
invested on behalf of the Variable Account and other separate accounts. These
percentages differ; 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.
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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.
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.
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. 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: (1) the
current Index Rate for a period equal to the time remaining in the Guarantee
Period, and (2) the Index Rate at the time we established the Fixed Sub-Account
for a period equal to the Guarantee Period.
Ordinarily:
. If the current Index Rate for a period equal to the time remaining in
the Guarantee Period is higher than the applicable Index Rate at the
time we established the Fixed Sub-Account, the Market Value Adjustment
will be negative.
. 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 (including any applicable [surrender charge)] that must be
surrendered, withdrawn, transferred or applied to an income plan to
provide the amount requested.
. If the Market Value Adjustment is negative, it reduces any remaining
value in the Fixed Sub-Account, or amount of Surrender Value. Any
remaining 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
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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 (including any applicable surrender charge) 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)/(1+K)] ((G-N)/365) - 1, where N is as defined above,
K equals the Guaranteed Interest Rate for the Guarantee Period, and G equals the
initial number of days in the Guarantee Period. 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 "What
Are My Investment Options?" The minimum amount of Account Value that you may
transfer from a Sub-Account is $250, or, if less, the entire remaining Account
Value held in that Sub-Account. If a transfer would reduce the Account Value
remaining in a Sub-Account below $250, 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-
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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 with 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
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.
In addition to telephone transactions, we expect to be able to offer all of
these transactions via the Internet in the second quarter of 2000. We will send
Owners information about our website and transactions that may be made through
it.
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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;
. 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
22
<PAGE>
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. Dollar-cost averaging is
not available while you are participating in the systematic partial withdrawal
program.
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 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 a
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 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.
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<PAGE>
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,
reduced by any applicable surrender charge that would be deducted if your
Contract were surrendered that day, 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. Accumulation Unit Value varies to reflect the
investment experience of the underlying Fund, and may increase or decrease from
one Business Day to the next. We arbitrarily set the Accumulation Unit value for
each Variable Sub-Account at $10 when we established the Sub-Account. For each
Valuation Period after the date of establishment, we determine the Accumulation
Unit value by multiplying the Accumulation Unit value for a Sub-Account for the
prior Valuation Period by the net investment factor for the Variable Sub-Account
for the Valuation Period.
Net Investment Factor. The net investment factor is an index we use to
measure the investment performance of a Variable Sub-Account from one Valuation
Period to the next during the Accumulation Phase. We determine the net
investment factor for any Valuation Period by dividing (a) by (b) where:
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<PAGE>
(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;
. the death benefit paid on the death of the Owner;
25
<PAGE>
. the available investment options, including dollar-cost averaging,
asset allocation, automatic portfolio rebalancing, 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
. any other circumstances that could reduce Contract costs and expenses.
26
<PAGE>
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
If you make an Excess Withdrawal or surrender your Contract during the
first seven Contract Years, we may deduct a surrender charge calculated as a
percentage of the amount of purchase payment(s) withdrawn or surrendered. The
applicable percentage is 7% in the first Contract Year, and declines until it
reaches 0% in the eighth Contract Year.
If you surrender your Contract, we deduct the surrender charge from the
Account Value in determining the Surrender Value. If you take an Excess
Withdrawal, we deduct the surrender charge from your Account Value remaining
after we pay you the amount requested. We include any surrender charge we
assess in the calculation of any applicable Market Value Adjustment for
withdrawals from the Fixed Account. Each year you may withdraw a "Free
Withdrawal Amount" without incurring a surrender charge. For a table of
surrender charges and a description of the Free Withdrawal Amount, see the "Fee
Table."
The amount you request from a Sub-Account may not exceed the value of that
Sub-Account less any applicable surrender charge.
Example of Calculation of Surrender Charge. Assume the applicable
surrender charge is 7%, you have requested a withdrawal of $1,000, and no Market
Value Adjustment is applicable. Your initial purchase payment was $5,000, your
current Account Value is $5,250, and you made no prior withdrawals during that
Contract Year. Your Free Withdrawal Amount is the greater of (a) or (b), where:
(a) is the excess of 10% of the total purchase payments over 100% of all
prior withdrawals (including any associated surrender charge and Market
Value Adjustment incurred) in that Contract Year (10% x $5,000 = $500);
and
(b) is the excess of the Account Value on the date of withdrawal over the
unliquidated purchase payments ($5,250 - $5,000 = $250).
Therefore, the Free Withdrawal Amount is $500. A surrender charge will apply to
the excess of $1,000 over $500. The surrender charge equals $35 (7% x $500).
Waiver of Surrender Charge. We will not deduct a surrender charge if, at
the time we receive your request for a withdrawal or a surrender, we have also
received due proof that you (or the Annuitant, if the Owner is not an
individual) have a "Qualifying Terminal Illness" or have been confined
continuously to a "Qualifying Hospital or Nursing Care Facility" for at least 45
days in a 60 day period. We define "Qualifying Terminal Illness" and
"Qualifying Hospital or Nursing Care Facility" in your Contract.
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<PAGE>
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 Subaccounts.
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. The 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:
==================================================
Combined
Asset-Based Charges
-------------------
Annual Monthly Daily
Charge Charge Charge
------ ------- --------
Contract Years 1-7 1.40% .116667% .0038626%
Contract Years 8+ 1.25% .104167% .0034462%
==================================================
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.
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<PAGE>
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.
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.
================================================================================
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.
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<PAGE>
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 $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.
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<PAGE>
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."
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 advisors 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.
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. 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.
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
32
<PAGE>
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 surrender charge and
[Market Value Adjustment)] reduces Account Value and may be subject to
federal income tax. See "What Are The Expenses Under A Contract?" "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.
. 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. Any amount in excess of the Free
Withdrawal Amount may be subject to a surrender charge. See "Surrender
Charge." 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.
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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.
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.
================================================================================
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 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.
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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, including any [surrender charge] that would apply if
you surrendered your Contract at the end of each period indicated, but excluding
any deductions for purchase payment tax 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 deductions will not
include the Surrender Charge. 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 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.
35
<PAGE>
================================================================================
9. Does The Contract Have A Death Benefit?
================================================================================
Your Contract provides two different types of death benefits for your
Beneficiary if you die before the Income Date. There is the basic death benefit
and the accidental death benefit.
Basic Death Benefit. 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 surrender charge and 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
surrender charge and Market Value Adjustment incurred) taken since
that Contract Anniversary. (By proportionately, we take the percentage
by which the withdrawal decreases the Account Value and we reduce the
sum of (1) and (2) by that percentage.)
If there are multiple Owners, 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:
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<PAGE>
(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.
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.
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.
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<PAGE>
Accidental Death Benefit. Under certain circumstances, if the Owner dies
before the Income Date, we will provide an additional death benefit called the
accidental death benefit. This additional benefit will equal:
. the purchase payments made; minus
. any withdrawals (including any associated surrender charge and Market
Value Adjustment incurred),
each determined as of the date of the Owner's death (or the next
Business Day if the Owner dies on other than a Business Day), up to a
maximum of $250,000.
To qualify for this benefit, the Owner's death must occur:
(1) before the first Contract Anniversary after the Owner attains age 80;
and
(2) as a direct result of accidental bodily injury, independent of all
other causes.
If there is no Owner who is a natural person (that is, an individual), we
will treat the Annuitant as Owner and use the Annuitant's age for purposes of
determining whether the accidental death benefit is payable.
Further, all the terms and conditions described in the Contract must be
satisfied, including the requirement that we receive satisfactory proof of
accidental death at our Customer Service Center within 30 days after an
accidental death or as soon thereafter as reasonably possible. We will pay the
accidental death benefit to the Beneficiary or the person entitled to receive
the death benefit under the Contract, after receipt of satisfactory proof of
accidental death. The deceased Owner's spouse may continue the Contact (and
this benefit) according to the terms set forth in the Contract and accidental
death benefit rider.
We terminate the accidental death benefit provision:
. when we pay the benefit after the death of the surviving spouse;
. when you surrender the Contract or apply the entire Account Value to
an income plan;
. when we distribute the interest in the Contract due to the death of an
Owner; or
. when you request termination of the benefit.
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
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3. Any other proof satisfactory to us.
================================================================================
10. What Other Information Should I Know?
================================================================================
Separate Accounts
The Sage Variable Annuity Account A. We established the Variable Account
as a separate investment account under Delaware law on December 3, 1997. The
Variable Account may invest in mutual funds, unit investment trusts, and other
investment portfolios. We own the assets in the Variable Account and are
obligated to pay all benefits under the Contracts. 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
39
<PAGE>
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:
. 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.
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<PAGE>
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.
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 in February 19, 1999 to December 31, 1999.
We included the audited financial statements for Sage Life as of December
31, 1999 and 1998 for each of the three years in the period ended December 31,
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.
================================================================================
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.
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================================================================================
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 and 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 contemplates two transactions: (1) that Sage
Life will enter into a reinsurance agreement with Swiss Re or its affiliate,
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 has not been finalized. However, we anticipate that we
will enter into the reinsurance agreement with LRCA by the end of the second
quarter of 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 second 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
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with a retroactive effective date of April 1999. The arrangements
contemplated by the agreement may be subject to regulatory approval.
Selected Financial Data. We cannot compare our historical financial
results for the calendar year 1996 and all prior years, to the results for the
years 1997, 1998 and 1999 due to the substantial change in our business
operations. We effectively disposed of all in-force business existing as of
December 31, 1996 and, therefore, on January 1, 1997, had no insurance
liabilities under any of our policies other than the small number of policies
that were not 100% assumption reinsured to our former parent company. We
subsequently novated these insurance liabilities during 1998. Effectively,
therefore, since January 1997, we became comparable to a new company that had
not yet begun its business activities.
We present the following selected financial data as of December 31, 1999,
1998 and 1997 and for the years then ended, taken from our audited financial
statements. Please read the information below along with the financial
statements, including related notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" we included elsewhere
in this Prospectus.
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<TABLE>
<CAPTION>
=======================================================================================
Selected Financial Data
(in thousands)
Year ended Year ended Year ended
December 31, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
Income Statement Data:
Revenues:
Net investment income $ 1,290 $ 1,244 $ 989
Administrative service fees 38 - -
Annuity charges and fees 1 - -
Total revenues 1,329 1,244 989
Benefits and Expenses:
Salaries and benefits expenses 972 742 497
Development expenses 3,828 - -
Insurance expenses and taxes 721 522 518
Amortization expenses 235 549 326
Total benefits and expenses 5,756 1,813 1,341
Loss before cumulative effect adjustment (4,427) (569) (352)
Cumulative effect adjustment (4,269) - -
Net loss $(8,696) $ (569) $ (352)
Balance Sheet Data:
Total Assets $31,737 $36,542 $36,689
Total Liabilities $ 234 $ 70 $ 3,486
Stockholder's Equity $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 prepared for the
recommencement of our insurance underwriting and marketing activities, and, on a
limited basis, began those activities in 1999. (Before the acquisition of the
Company, all new business production and marketing ended in October 1996.) We
totally reengineered our products, systems and administration since the change
of ownership. All of our current senior management are experienced in the
insurance industry (either in the United States or in South Africa). We
recruited most of them since January 1997. Our ongoing business strategy is to
focus on the development, underwriting, and marketing of variable insurance
products. Our obligations under these contracts are supported by (1) variable
accounts -- determined by the value of investments held in separate accounts,
and (2) fixed accounts -- backed by investments held in separate accounts. We
may not use the assets of these separate accounts that equal the reserves and
other liabilities supporting the contracts to which they relate, to pay any of
our other obligations or creditors. During February 1999, we began to market,
on a limited basis, our new variable insurance products. Our initial marketing
focus has been to distribute the contracts through banks and third-party
marketing organizations working closely with banks. We anticipate that, over
the long-term, our distribution channels will expand to include wirehouses,
regional broker-dealers, and financial planners.
Results of Operations. Net loss for 1999 was $8.7 million, compared to
losses of $.6 million in 1998 and $.4 million in 1997. The large increase in
losses for 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 1999 of $3.8 million and the write-off of unamortized
capitalized development costs of $4.3 million produced an additional $8.1
million of losses over the prior year results.
As the Company continued in the development phase during most of 1999,
revenues continued to be derived primarily from investment income earned on
Company investments. Net investment income earned during 1999 was $1.3 million,
compared to $1.2 million and $1.0 million in 1998 and 1997, respectively. The
Company's investments consist entirely of U.S. Government securities and highly
rated corporate bonds. Investment yields of 5.4%, 5.1% and 4.9% were earned in
1999, 1998 and 1997, respectively. 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
Contract 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 during 1999 were minimal as
there were a very limited number of Contracts issued during the year.
With the adoption of SOP 98-5, the Company's primary expenses during 1999
were those non-recurring expenses incurred in the development of products and
systems. Expenses incurred for development costs in 1999 were $3.8 million.
Prior to 1999, these expenses were capitalized and amortized over fifteen years.
As these expenses are no longer amortized, amortization expenses decreased to
$.2 million in 1999 from $.5 million in 1998. The amortization expenses for
1999 relate entirely to the goodwill associated with the purchase of the
Company. Salaries and benefits expenses for 1999 were $1.0 million, compared to
$.7 million and $.5 million in 1998 and 1997, respectively. Insurance expenses
and taxes were $.2 million, $.5 million and $.3 million in 1999, 1998 1997,
respectively. These overhead expenses include rent, professional fees, office
expenses and statutory filing fees.
The Company has no federal income tax expenses for each of the three years
ended December 31, 1999. The Company has a net operating loss carryforward of
approximately $10.3 million at the end of 1999.
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 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 in the coming year
without additional capital. However, Sage Insurance Group will continue to
provide capital to us 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 Corporation, has made an
equity investment in our parent company that will provide an additional source
of funds to us for new business expenses.
We also expect to enter into a coinsurance reinsurance arrangement with
LRCA that will provide an additional source of cash for operations. Our future
marketing efforts could be hampered in the unlikely event that Swiss Re, LRCA,
Sage Insurance Group and/or their affiliates are unwilling to commit additional
funding.
Segment Information. We currently plan to conduct our business as a single
segment, and anticipate that this segment will eventually include all of the
following products:
. 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 expect to enter into a coinsurance reinsurance arrangement with
LRCA, pursuant to which LRCA will reinsure a significant portion of our
liabilities under our variable insurance contracts with a retroactive effective
date of February 1, 1999. This arrangement will provide additional capacity for
growth of our variable insurance business.
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 December 31, 1999 we held $93 thousand 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 $24.1
million, $25.5 million and $25.3 million at 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. We did not pay a
dividend to Sage Life Holdings.
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 has received $.9 million
and $.2 million from Sage Insurance Group for the years ended December 31, 1999
and 1998, respectively. The Company paid Sage Insurance Group $.1 million for
the period ended December 31, 1997. At December 31, 1999 the amount due from
Sage Insurance Group relating to this agreement was $.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 December 31, 1999 and 1998.
All non-recurring development costs of the Company are paid by Sage
Insurance Group or its parent, Sage Group, and treated as capital contributions.
The amount of development costs paid for by affiliated companies at December 31,
1999 , 1998 and 1997 were $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 27, 14 and 8 full time employees at 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 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.
44
<PAGE>
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 and Trustee, Sage Life
Age 61 Chairman, 2/98 to present 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/(1)/ Director, 1/97 to present; President Director and President, Sage Life
Age 34 and Chief Executive Officer, 2/98 (Bermuda) Ltd., 1/2000 to present;
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
Executive-Strategic Developments,
Sage Group Ltd., 11/94 to 1/98.
H. Louis Shill/(2)/ Director, 1/97 to Director, Sage Life Assurance
Age 69 present Company of New York, 5/98 to present;
Chairman, Sage Life Assurance of
America, Inc., 1/97 to 2/98; Chairman,
Sage Insurance Group, Inc., 1/97 to
present; Founder, Chairman, Sage
Group Limited, 1965 to present.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Position held with the Other Principal Positions
Name (Age) Company/Year Commenced During Past Five Years
- ---------- ---------------------- ----------------------
<S> <C> <C>
Paul C. Meyer/(3)/ Director, 1/97 to Director, Sage Life Assurance
Age 47 present Company of New York, 5/98 to present;
Partner, Rogers & Wells, 1986 to
present.
Richard D. Starr/(4)/ Director, 1/97 to Director, Sage Life Assurance
Age 55 present 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/(1)/ Director, 12/97 to present; Senior Director, Chief Financial Officer and
Age 46 Executive Vice President, Chief Chief Actuary, Sage Life (Bermuda),
Financial Officer, Chief Actuary Ltd., 1/2000 to present; Vice President,
5/97 to present 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.
Meyer Feldberg/(5)/ 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.]
</TABLE>
________________
/(1)/ The principal business address of these persons is 300 Atlantic Street,
Stamford, CT 06901.
/(2)/ Mr. Shill's principal business address is Sage Centre, 10 Fraser Street,
Johannesburg, South Africa 2000.
/(3)/ Mr. Meyer's principal business address is 200 Park Avenue, New York, N.Y.
10166.
/(4)/ Mr. Starr's principal business address is 22507 SE 47th Place, Issaquah,
WA 98029.
/(5)/ Dr. Feldberg's principal business address is Columbia University Graduate
School of Business, Uris Hall, Room 101, 3022 Broadway, New York, NY
10027.
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.
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------
Name and Principal Position Year Salary Bonus All Other
- --------------------------------------------------------- ---------- ---------------- ------------- 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 $ 20,956
President and Chief Executive Officer(1) 1999 $322,500 $150,000
Mitchell R. Katcher...................................... 1997 $114,583 $265,000
Senior Executive Vice President, 1998 $250,000 $125,000 $ 19,037
Chief Financial Officer 1999 $268,750 $150,000
and Chief Actuary(1)
</TABLE>
46
<PAGE>
___________________
/(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 Dr. Feldberg's Year 2000 retainer
of $30,000 in 1999.) 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.
47
<PAGE>
Audited Financial Statements
Sage Life Assurance of America, Inc.
Years ended December 31, 1999, 1998 and 1997
with Report of Independent Auditors
<PAGE>
Sage Life Assurance of America, Inc.
Audited Financial Statements
Years ended December 31, 1999, 1998 and 1997
Contents
Report of Independent Auditors...............................................1
Audited Financial Statements
Balance Sheets...............................................................2
Statements of Operations.....................................................3
Statements of Stockholder's Equity...........................................4
Statements of Cash Flows.....................................................5
Notes to Financial Statements................................................6
<PAGE>
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. 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.
February 24, 2000
F-1
<PAGE>
Sage Life Assurance of America, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31
1999 1998
------------------ ------------------
<S> <C> <C>
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized
cost: 1999-$17,296,410 and 1998-$12,967,022) $ 16,179,750 $ 12,992,917
Short-term investments 5,972,494 10,975,402
------------------ ------------------
Total investments 22,152,244 23,968,319
Cash and cash equivalents 1,979,985 1,531,165
Accrued investment income 226,234 203,425
Receivable from affiliates 671,270 -
Deferred income taxes 376,461 -
Goodwill 6,228,146 6,565,134
Development costs - 4,269,488
Other assets 9,231 5,000
Separate account assets 93,009 -
------------------ ------------------
Total assets $ 31,736,580 $ 36,542,531
================== ==================
Liabilities and stockholder's equity
Liabilities:
Accrued expenses $ 140,426 $ 61,670
Deferred income taxes - 8,804
Separate account liabilities 93,009 -
------------------ ------------------
Total liabilities 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
Additional paid-in capital 39,351,096 34,875,727
Retained deficit (9,617,174) (920,760)
Accumulated other comprehensive (loss) income (730,777) 17,090
------------------ ------------------
Total stockholder's equity 31,503,145 36,472,057
------------------ ------------------
Total liabilities and stockholder's equity $ 31,736,580 $ 36,542,531
================== ==================
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
Sage Life Assurance of America, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues
Investment income $ 1,290,196 $ 1,243,522 $ 989,494
Administrative service fees 37,671 - -
Policy charges and fees 861 - -
--------------- --------------- ---------------
Total revenues 1,328,728 1,243,522 989,494
Expenses
Salaries and benefits expenses 972,052 741,979 497,426
Development expenses 3,827,887 - -
Amortization expense 234,468 548,818 325,406
General and administrative expenses 721,247 521,699 518,448
--------------- --------------- ---------------
Total expenses 5,755,654 1,812,496 1,341,280
Loss before cumulative effect adjustment (4,426,926) (568,774) (351,786)
Cumulative effect adjustment for change in
accounting for development costs (4,269,488) - -
--------------- --------------- ---------------
Net loss $(8,696,414) $ (568,974) $ (351,786)
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
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
==================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
Sage Life Assurance of America, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Operating activities
Net loss $ (8,696,414) $ (568,974) $ (351,786)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Amortization expense 234,468 548,818 325,406
Cumulative effect adjustment for change in
accounting for development costs 4,269,488 - -
Changes in:
Accrued investment income (22,809) (145,386) (29,638)
Receivable from affiliates (671,270) (128,425) 128,425
Other assets (4,231) 6,443 (11,443)
Accrued expenses 78,756 (118,772) 116,216
---------------- ---------------- ----------------
Net cash (used in) provided by operating activities (4,812,012) (406,296) 177,180
Investing activities
Purchase of fixed maturity securities (4,319,964) (10,295,783) -
Proceeds from sales, maturities and repayments of
fixed maturity securities - 849,153 42,941
Net sales of short-term investments 5,002,909 10,555,486 (15,507,987)
---------------- ---------------- ----------------
Net cash provided by (used in) investing activities 682,945 1,108,856 (15,465,046)
Financing activities
Development costs paid by parent 3,827,887 - -
Capital contribution from the parent 750,000 600,000 15,500,000
---------------- ---------------- ----------------
Net cash provided by financing activities 4,577,887 600,000 15,500,000
---------------- ---------------- ----------------
Increase in cash and cash equivalents 448,820 1,302,560 212,134
Cash and cash equivalents at beginning of year 1,531,165 228,605 16,471
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 1,979,985 $ 1,531,165 $ 228,605
================ ================ ================
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
Sage Life Assurance of America, Inc.
Notes to Financial Statements
December 31, 1999 and 1998
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.
F-6
<PAGE>
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.
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.
F-7
<PAGE>
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
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------------------------
1999
- ----
<S> <C> <C> <C> <C>
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.
Amortized Fair
Cost Value
----------------------------------
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
==================================
F-8
<PAGE>
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:
1999 1998 1997
----------------------------------------------------
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
====================================================
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>
F-9
<PAGE>
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:
1999 1998 1997
----------------------------------------------------------
Net (loss) income $ (389,023) $ 27,002 $ 51,133
Surplus 23,473,747 23,109,097 25,017,752
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.
F-10
<PAGE>
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. Impact of Year 2000 (unaudited)
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expenses related to this effort were not material. The Company is not aware of
any material problems resulting from Year 2000 issues, either with its products,
its internal systems, or the products and services of third parties. The Company
will continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout the year 2000 to ensure that any latent
Year 2000 matters that may arise are addressed promptly.
F-11
<PAGE>
Condensed Financial Information
We began operations in February, 1999. The Accumulation Unit Values and the
number of accumulation units outstanding for each Variable Sub-Account for the
periods shown are as follows:
<TABLE>
<CAPTION>
Accumulation
Unit Values
Fund as of 12/31/99
---- --------------
<S> <C>
AIM Variable Insurance Funds:
AIM V.I. Government Securities Fund............................... 9.939464
AIM V.I. Growth and Income Fund................................... 11.206934
AIM V.I. International Equity Fund................................ 16.010519
AIM V.I. Value Fund............................................... 12.265469
The Alger American Fund:
Alger American MidCap Growth Portfolio............................ 12.646000
Alger American Income and Growth Portfolio........................ 13.895548
Alger American Small Capitalization Portfolio..................... 11.860213
Liberty Variable Investment Trust:
Colonial High Yield Securities Fund, Variable Series.............. 10.132350
Colonial Small Cap Value Fund, Variable Series.................... 12.344051
Colonial Strategic Income Fund, Variable Series................... 10.087292
Colonial U.S. Growth and Income Fund, Variable Series............. 10.892669
Liberty All-Star Equity Fund, Variable Series..................... 10.855902
Newport Tiger Fund, Variable Series............................... 12.310435
Stein Roe Global Utilities Fund, Variable Series.................. 11.302434
SteinRoe Variable Investment Trust:
Stein Roe Growth Stock Fund, Variable Series...................... 11.198531
Stein Roe Balanced Fund, Variable Series.......................... 10.439622
MFS(R) Variable Insurance Trust(SM):
MFS Growth With Income Series..................................... 10.481767
MFS High Income Series............................................ 10.151440
MFS Research Series............................................... 10.932084
MFS Total Return Series........................................... 9.839246
MFS Capital Opportunities......................................... 11.300049
The Universal Institutional Funds, Inc.:
The Global Equity Portfolio....................................... 10.855955
The Mid Cap Value Portfolio....................................... 12.575303
The Value Portfolio............................................... 9.861418
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund/VA.......................................... 9.863016
Oppenheimer Capital Appreciation Fund/VA.......................... 13.794624
Oppenheimer Small Cap Growth Fund/VA.............................. 15.934311
Sage Life Investment Trust:
EAFE(R) Equity Index Fund......................................... 12.658833
S&P 500 Equity Index Fund......................................... 11.777777
Money Market Fund................................................. 10.396108
T. Rowe Price Equity Series, Inc.:
T. Rowe Price Equity Income Portfolio............................. 10.362079
T. Rowe Price Mid-Cap Growth Portfolio............................ 12.593555
T. Rowe Price Personal Strategy Balanced Portfolio................ 10.245335
</TABLE>
48
<PAGE>
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
Safekeeping of Account Assets
Legal Matters
Other Information
Financial Statements
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
49
<PAGE>
- --------------------------------------------------------------------------------
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. Surrender charges also may apply .
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 (including any applicable surrender charge) that must be
surrendered, withdrawn, transferred or applied to an income plan in order to
provide the amount 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 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.
A-1
<PAGE>
MVA EXAMPLES
Example #1: Surrender -- Example of a Negative Market Value Adjustment
- ----------------------------------------------------------------------
Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of 7.0%
based on the U.S. Treasury Constant Maturity Series at the time we established
the Sub-Account. You request a surrender three years into the Guarantee Period,
the Index Rate based on the U.S. Treasury Constant Maturity Series for a seven-
year Guarantee Period ("J") is 8.0% at the time of the surrender, no prior
transfers or withdrawals affecting this Fixed Sub-Account have been made, and no
surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of surrender is
$124,230 ($100,000 x 1.075/3/)
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0825)] /2555/365/ -1) = -
$9,700
Therefore, the amount paid on full surrender is $114,530 ($124,230 - $9,700).
Example #2: Surrender -- Example of a Positive Market Value Adjustment
- -------------------------------------------------------------------------
Assume you invest $100,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an Index Rate ("I") of 7.0%
based on the U.S. Treasury Constant Maturity Series at the time we established
the Sub-Account. You request a surrender three years into the Guarantee Period,
the Index Rate based on the U.S. Treasury Constant Maturity Series for a seven-
year Guarantee Period ("J") is 6.0% at the time of the surrender, no prior
transfers or withdrawals affecting this Fixed Sub-Account have been made, and no
surrender charge is applicable.
Calculate the Market Value Adjustment
1 The Account Value of the Fixed Sub-Account on the date of surrender is
$124,230 ($100,000 x 1.075/3/)
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $124,230 x {[(1.07)/(1.0625)]/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-2
<PAGE>
a seven-year Guarantee Period ("J") is 8.0% at the time of withdrawal, no prior
transfers or withdrawals affecting this Fixed Sub-Account have been made and no
surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of withdrawal is
$248,459 ($200,000 x 1.075/3/).
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0825)]/2555/365/ -1) = -
$7,808
Therefore, the amount of the withdrawal paid is $100,000, as requested. The
Fixed Sub-Account will be reduced by the amount of the withdrawal paid
($100,000) and by the Market Value Adjustment ($7,808), for a total reduction in
the Fixed Sub-Account of $107,808.
Example #4: Withdrawal - Example of a Positive Market Value Adjustment
- ------------------------------------------------------------------------
Assume you invest $200,000 in a Fixed Sub-Account with a Guarantee Period of ten
years, with a Guaranteed Interest Rate of 7.5% and an initial Index Rate ("I")
of 7.0% based on the U.S. Treasury Constant Maturity Series at the time we
established the Sub-Account. You request a withdrawal of $100,000 three years
into the Guarantee Period, the Index Rate based on the U.S. Treasury Constant
Maturity Series for a seven-year Guarantee Period ("J") is 6.0% at the time of
the withdrawal, no prior transfers or withdrawals affecting this Fixed Sub-
Account have been made, and no surrender charge is applicable.
Calculate the Market Value Adjustment
1. The Account Value of the Fixed Sub-Account on the date of withdrawal is
$248,459 ($200,000 x 1.075/3/)
2. N = 2,555 (365 x 7)
3. Market Value Adjustment = $100,000 x {[(1.07)/(1.0625)]/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>
===============================================================================
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 16,715 1/16 1,045 76 15,746
11 15,746 1/15 1,050 72 14,768
12 14,768 1/14 1,055 67 13,780
13 13,780 1/13 1,060 62 12,782
14 12,782 1/12 1,065 57 11,774
15 11,774 1/11 1,070 52 10,756
16 10,756 1/10 1,076 47 9,727
17 9,727 1/9 1,081 42 8,688
18 8,688 1/8 1,086 37 7,639
19 7,639 1/7 1,091 32 6,580
20 6,580 1/6 1,097 27 5,510
21 5,510 1/5 1,102 21 4,429
22 4,429 1/4 1,107 16 3,338
23 3,338 1/3 1,113 11 2,236
24 2,236 1/2 1,118 5 1,124
25 1,124 1/1 1,124 -- --
</TABLE>
Note:
Column (3) = Column (1) x Column (2)
Column (5) = Column (1) - Column (3) + Column (4)
B-1
<PAGE>
===============================================================================
Appendix C
===============================================================================
The purpose of this Appendix is to show certain benefits for 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 continue to 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 Value do not apply to your
Contract.
Withdrawals
A partial withdrawal will reduce your death benefit and may be subject to
federal income tax, a surrender charge, and a Market Value Adjustment. See
"What Are The Expenses Under A Contract?" "How Will My Contract Be Taxed?" and
"Does The Contract Have a Death Benefit?"
Basic 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 surrender
charge and 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>
(3) reduced proportionately by any withdrawals (including any
associated surrender charge and 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>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Securities and Exchange Commission
Registration Fees (Approximate) $23,600
Printing and engraving $37,500
Accounting fees and expenses $15,000
Legal fees and expenses $22,000
Miscellaneous $10,000
--------
Total Expenses (Approximate) $108,100
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,
II-1
<PAGE>
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had a reasonable cause to believe that his conduct was not
unlawful.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) Exhibits.
1. Distribution Agreement with Sage Distributors, Inc. and Form of Selling
Agreement./1/
3. (i) Articles of Incorporation of the Company./2/
(ii) By-Laws of the Company./2/
4. (a)(ii) Amended Form of Individual Contract./3/
(a)(iii) Second Amended Form of Individual Contract./11/
(b)(i) Form of Individual Contract with Interest Account./4/
(b)(ii) Amended Form of Individual Contract with Interest Account./12/
(b)(iii) Second Amended Form of Individual Contract with Interest
Account./11/
(c)(ii) Amended Form of Group Contract./3/
(c)(iii) Second Amended Form of Group Contract./11/
(d)(ii) Amended Form of Group Certificate./3/
(d)(iii) Second Amended Form of Group Certificate./11/
(e)(ii) Amended Form of Individual IRA Rider./3/
(f)(ii) Amended Form of Group IRA Rider./3/
(g)(ii) Amended Form of Individual SIMPLE IRA Rider./3/
<PAGE>
(h)(ii) Amended Form of Group SIMPLE IRA Rider./3/
(i)(i) Form of Individual Roth IRA Rider./6/
(j)(i) Form of Group Roth IRA Rider./6/
(k) Form of Individual Waiver of Surrender Charge Rider./6/
(l) Form of Group Waiver of Surrender Charge Rider./6/
(m) Form of Individual Accidental Death Benefit Rider./6/
(n) Amended Form of Individual Accidental Death Benefit Rider./11/
(o) Form of Group Accidental Death Benefit Rider./6/
(p) Amended Form of Group Accidental Death Benefit Rider. /11/
(q) Form of Individual Contract Application./7/
(r) Form of Group Certificate Application./8/
5. Opinion and Consent of James F. Bronsdon/*/.
10. (a) Form of Participation Agreement with AIM Variable Insurance
Funds, Inc./9/
(b) Form of Participation Agreement with The Alger American
Fund./9/
(c) Form of Participation Agreement with Liberty Variable
Investment Trust./10/
(d) Form of Participation Agreement with MFS (R) Variable Insurance
Trust./9/
(e) Form of Participation Agreement with Morgan Stanley Universal
Funds, Inc./10/
(f) Form of Participation Agreement with Oppenheimer Variable
Account Funds./10/
(g) Form of Participation Agreement with Sage Life Investment
Trust./9/
(h) Form of Participation Agreement with SteinRoe Variable
Investment Trust./10/
(i) Form of Participation Agreement with T. Rowe Price Equity
Series, Inc./10/
(j) Form of Services Agreement with Financial Administration
Services, Inc./10/
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./13/
(b) Power of Attorney for Ronald S. Scowby./14/
(c) Power of Attorney for Richard D. Starr./14/
(d) Power of Attorney for H. Louis Shill./15/
(e) Power of Attorney for Mitchell R. Katcher./14/
(f) Power of Attorney for Robin I. Marsden./16/
(g) Power of Attorney for Paul C. Meyer, Ronald S. Scowby, Richard
D. Starr, H. Louis Shill and Meyer Feldberg./17/
<PAGE>
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.
333-43329) filed on December 31, 1998.
(4) Incorporated herein by reference to Exhibit No. 4 to Pre-Effective
Amendment No. 2 to the Registration Statement on Form N-4 (File No.
333-43329) filed on January 28, 1999.
(5) 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.
(6) 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.
(7) 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. 333-43329) on December 31, 1998.
(8) Incorporated herein by reference to Exhibit No. 5 to the Registration
Statement on Form N-4 (File No. 333-43329) filed on December 24, 1997.
(9) 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.
(10) 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.
(11) 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.
(12) Incorporated herein by reference to Exhibit No. 4 to the Pre-
Effective Amendment No. 2 to the Registration Statement on Form N-4
(File No. 333-43329) filed on January 28, 1999.
(13) 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.
(14) 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.
(15) 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.
(16) 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.
(17) 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 29, 2000.
(*) Filed herewith.
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
II-4
<PAGE>
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-5
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the registrant has caused this Amendment No. 1 to be signed on its
behalf, in the City of Stamford, in the State of Connecticut, on this 26th day
of April, 2000.
The Sage Variable Annuity Account A
(Registrant)
By: 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
By: Sage Life Assurance of America, Inc.
Attest (Depositor)
/s/ James F. Bronsdon By: /s/ Robin I. Marsden
- ---------------------- ------------------------------------
James F. Bronsdon Robin I. Marsden
Director, President, Chief
Executive Officer
<PAGE>
As required by the Securities Act of 1933, this Amendment No. 1 has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Ronald S. Scowby* Chairman April 26, 2000
- ----------------------------
Ronald S. Scowby
/s/ H. Louis Shill* Director April 26, 2000
- ----------------------------
H. Louis Shill
/s/ Paul C. Meyer* Director April 26, 2000
- ----------------------------
Paul C. Meyer
/s/ Richard D. Starr* Director April 26, 2000
- ----------------------------
Richard D. Starr
/s/ Mitchell R. Katcher Director, April 26, 2000
- ---------------------------- Senior Executive Vice
Mitchell R. Katcher President, Chief
Financial Officer,
Chief Actuary
/s/ Meyer Feldberg* Director April 26, 2000
- ----------------------------
Meyer Feldberg
(*)By:/s/ Mitchell R. Katcher
--------------------------
Mitchell R. Katcher
As Attorney-In-Fact pursuant to a
Power of Attorney as dated below.
Director Date
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
<PAGE>
EXHIBIT INDEX
5 Opinion and Consent of James F. Bronsdon
23 (b) Consent of Ernst & Young LLP
23 (c) Consent of Sutherland Asbill & Brennan LLP
<PAGE>
EXHIBIT 5
[SAGE LIFE ASSURANCE OF AMERICA, INC.]
April 26, 2000
Board of Directors
Sage Life Assurance of America, Inc.
300 Atlantic Street
Stamford, CT 06901
To The Board Of Directors:
In my capacity as Vice President, Legal and Compliance of Sage Life
Assurance of America, Inc. (the "Company"), a Delaware corporation, I have
supervised the preparation of Amendment No. 1 to the registration statement for
certain flexible payment deferred combination fixed and variable annuity
contracts ("Contracts") to be filed by the Company with the Securities and
Exchange Commission under the Securities Act of 1933.
I am of the following opinion:
1. The Company was organized in accordance with the laws of the State of
Delaware and is a duly authorized stock life insurance company under the laws of
Delaware and the laws of those states in which the Company is admitted to do
business;
2. The Company is authorized to issue Contracts in those states in which
it is admitted and upon compliance with applicable local law;
3. The Contracts, when issued in accordance with the prospectus contained
in the aforesaid registration statement and upon compliance with the applicable
local law, will be legal and binding obligations of the Company in accordance
with their terms.
In arriving at the foregoing opinion, I have made such examination of law
and examined such records and other documents as in my judgment are necessary or
appropriate.
<PAGE>
Board of Directors
April 26, 2000
Page 2
I hereby consent to the filing of this opinion as an exhibit to the
aforesaid registration statement and to the reference to me under the caption
"Legal Matters" in the Prospectus contained in said registration statement.
Very truly yours,
/s/ James F. Bronsdon
------------------------------------
James F. Bronsdon
Vice President, Legal and Compliance
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Prospectus and to the use of our report dated February 24, 2000, with respect to
the financial statements of Sage Life Assurance of America, Inc. included in the
Amendment No. 1 to the Registration Statement filed on Form S-1 (File No. 333-
77437, and related Prospectus for the registration of its variable annuity
contracts.
/s/ Ernst & Young LLP
---------------------------
Ernst & Young LLP
Stamford, Connecticut
May 1, 2000
<PAGE>
Exhibit 23(c)
[SUTHERLAND ASBILL & BRENNAN LLP]
April 26, 2000
VIA EDGARLINK
- -------------
Board of Directors
Sage Life Assurance of America, Inc.
300 Atlantic Street, Suite 302
Stamford, CT 06901
Gentlemen:
We consent to the reference to our firm under the heading "Legal Matters" in
Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-77437)
for fixed options available under certain deferred variable annuity insurance
contracts issued through Sage Life Assurance of America, Inc. In giving this
consent, we do not admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933.
SUTHERLAND ASBILL & BRENNAN LLP
/s/ STEPHEN E. ROTH
--------------------------
Stephen E. Roth, Esq.
