As filed with the Securities and Exchange Commission on May 29, 1998.
Registration Nos. 333-1043
811-7543
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 13 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 19 [X]
Variable Account A
(Exact name of Registrant)
Keyport Life Insurance Company
(Name of Depositor)
125 High Street, Boston Massachusetts 02110
(Address of Depositor's Principal Executive Offices (Zip Code)
Depositor's Telephone Number, including Area Code: 617-526-1400
Bernard R. Beckerlegge, Esq.
Senior Vice President and General Counsel
Keyport Life Insurance Company
125 High Street, Boston, Massachusetts 02110
(Name and Address of Agent for Service)
copy to:
Joan E. Boros, Esq.
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Washington, DC 20007
It is proposed that this filing will become effective:
( ) immediately upon filing pursuant to paragraph (b) of Rule 485
( ) on [date] pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a) of Rule 485
( ) on [date] pursuant to paragraph (a) of Rule 485
Title of Securities Being Registered: Variable Portion of the Contracts
Funded Through the Separate Account.
No filing fee is due because an indefinite amount of securities is deemed
to have been registered in reliance on Section 24(f) of the Investment
Company Act of 1940.
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Exhibit Index on Page ____
CONTENTS OF REGISTRATION STATEMENT
The Facing Sheet
The Contents Page
Cross-Reference Sheet
PART A
Prospectus
PART B
Statement of Additional Information
PART C
Items 24 - 32
The Signatures
Exhibits
VARIABLE ACCOUNT A
KEYPORT LIFE INSURANCE COMPANY
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-4
N-4 Item Caption in Prospectus
1. . . . . . . . . .Cover Page
2. . . . . . . . . .Glossary of Special Terms
3. . . . . . . . . .Summary of Expenses
4. . . . . . . . . .[Condensed Financial Information]
Performance Information
5. . . . . . . . . .Keyport and the Variable Account
Eligible Funds
6. . . . . . . . . .Deductions
7. . . . . . . . . .Allocations of Purchase Payments
Transfer of Variable Account Value
Substitution of Eligible Funds and Other Variable
Account Changes
Modification of the Certificate
Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Certificate Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Benefits
Suspension of Payments
Inquiries by Certificate Owners
8. . . . . . . . . .Annuity Provisions
9. . . . . . . . . .Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Annuity Options
10. . . . . . . . . .Purchase Payments and Applications
Variable Account Value
Valuation Periods
Net Investment Factor
Sales of the Certificates
11. . . . . . . . . .Partial Withdrawals and Surrender
Option A: Income For a Fixed Number of Years
Right to Revoke
12. . . . . . . . . .Tax Status
13. . . . . . . . . .Legal Proceedings
14. . . . . . . . . .Table of Contents - Statement of Additional
Information
Caption in Statement of Additional Information
15. . . . . . . . . .Cover Page
16. . . . . . . . . .Table of Contents
17. . . . . . . . . .Keyport Life Insurance Company
18. . . . . . . . . .Experts
19. . . . . . . . . .Not applicable
20. . . . . . . . . .Principal Underwriter
21. . . . . . . . . .Investment Performance
22. . . . . . . . . .Variable Annuity Benefits
23. . . . . . . . . .Financial Statements
This Amendment No. 13 to the Registration Statement on Form N-4 which
initially became effective on October 18, 1996 (the "Registration
Statement") is being filed pursuant to Rule 485(a) under the Securities Act
of 1933, as amended, to supplement the Registration Statement with a
separate prospectus and statement of additional information ("SAI"), and
related exhibits, describing a generic form of the Group and Individual
Flexible Premium Deferred Annuity Contracts. This Amendment relates only to
the prospectus, SAI and exhibits included in this Amendment and does not
otherwise delete, amend, or supersede any information contained in Post-
Effective Amendment Nos. 10, 11 and 12 to the Registration Statement.
PART A
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The information contained within double rows of asterisks is
provided at the request of the staff of the Securities and
Exchange Commission. It is not and will not be part of any
documents delivered to purchasers or existing owners, and is
included solely for purposes of clarifying the content of this
registration statement. In addition, throughout the prospectus
and statement of additional information ("SAI") that follow there
are similar inserts that specifically summarize the parameters of
change for the particular design feature.
This registration statement includes a prospectus and SAI that
describes a generic form of the Group and Individual Flexible
Premium Deferred Annuity Contracts (the "Contracts") that are the
subject of the registration statement. The prospectus and SAI
contain numerous bracketed portions to indicate those portions
which may be included or eliminated in any particular form of the
Contracts, including but not limited to those, as follows:
death benefits;
funding media;
withdrawal rights;
transfer privileges;
annuity options;
other features
such as dollar cost averaging,
asset allocation,
systematic withdrawals, and
Account rebalancing.
In all cases variations in other bracketed features, such as issue and
annuity ages and interest rates, will be in conformity with state
insurance law. Bracketed features representing maximum limits for
which a range is not provided will not exceed, but may be less than,
the amount shown. Bracketed features representing minimum limits for
which a range is not provided will not be less than, but may exceed,
the amount shown.
The prospectus and SAI also include bracketed references to the fees
and charges to be imposed under the particular form of the Contract.
Of course, in each case, Keyport only will impose such charges in a
manner and subject to the conditions of applicable rules. In
connection with the various charges under the Contracts, Keyport and
its separate accounts will rely upon and be limited by such rules as 0-
1(e), 6c-8, and 22d-2 under the Investment Company Act of 1940, as
amended, and in compliance with their respective requirements. Any
descriptions of the potential range of fees and charges should be read
in the context of such rules requirements.
Each form of the Contracts will be offered pursuant to a separate
prospectus and a separate or combined SAI, as appropriate. The content
of all prospectuses and SAIs will be identical with respect to
contractual and securities law related features to those contained in
this registration statement, except for provisions that are bracketed
and which will vary within the parameters established herein, and
except for non-material changes consistent with the requirements of
Rule 485(b) under the 1933 Act ("Rule 485(b)").
Except as provided for by Rule 485(b), each prospectus and SAI and
related exhibits will be filed pursuant to Rule 485(a) with a request
for expedited or selective review consistent with precedent and the
fact that all relevant disclosure is included in this Post-Effective
Amendment No. 13.
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GROUP AND INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
Variable Account A
OF
KEYPORT LIFE INSURANCE COMPANY
This Prospectus offers Group and Individual Variable Annuity
Contracts (the "Contracts") and the related Certificates (the
"Certificates") that are designed to fund benefits under certain
group arrangements including those that qualify for special tax
treatment under the Internal Revenue Code of 1986 (the "Code").
As required by certain states, the Certificates may be offered as
individual contracts. Unless otherwise noted or the context so
requires all references to the Certificates include the Contracts
and the individual Contracts. The Certificates are offered on a
flexible payment basis, except in Oregon where they are offered
only on a single Purchase Payment basis.
The variable annuity Contract (form number DVA(1)) and the
Certificates described in this prospectus provide for
accumulation of Certificate Values on a variable basis, [and also
on a fixed basis.], and payments of periodic annuity payments on
[either a variable or] a fixed basis. The Certificates are
designed for use by individuals for retirement planning purposes.
This prospectus generally describes only the variable features of
the Certificate [(for a summary of the fixed features, see
Appendix A on Page xx)]. If the Certificate Owner elects to have
Certificate Values accumulated on a variable basis, Purchase
Payments will be allocated to a segregated investment account of
Keyport Life Insurance Company ("Keyport"), designated Variable
Account A ("Variable Account").
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The terms XXXXX Trust, YYYYY Fund, and XX-1 Sub-Account
are included to indicate that disclosure relevant to an
actual Eligible Fund will be provided. The actual names
of the Eligible Funds and corresponding Sub-Accounts
will be included in the subsequent forms of the
prospectus and SAI.
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The Variable Account invests in shares of the following Eligible
Funds of [The XXXXX Trust ("XXXXX Trust")] at their net asset
value: [X-1, X-2 and X-3]. The Variable Account also invests in
shares of the following Eligible Funds of [The YYYYY Fund ("YYYYY
Fund")] at their net asset value: [Y-1, Y-2, Y-3].
The Variable Account may offer other forms of the Contracts and
Certificates with features, and fees and charges which vary from
the Certificates, and provide for investment in other Sub-
Accounts which may invest in different or additional mutual
funds. Other Contracts and Certificates will be described in
separate prospectuses and statements of additional information.
[The agent selling the Contracts and Certificates has information
concerning the eligibility for and the availability of the other
forms of the Contracts and Certificates.]
A Statement of Additional Information dated the same as this
prospectus has been filed with the Securities and Exchange
Commission and is herein incorporated by reference. It is
available, at no charge, by writing Keyport at 125 High Street,
Boston, MA 02110, by calling (800) 437-4466, or by returning the
postcard on the back cover of this prospectus. A table of
contents for the Statement of Additional Information is on Page
xx.
The Certificates may be sold by or through banks or other
depository institutions. The Contract and Certificates: are not
insured by the FDIC; are not a deposit or other obligation of, or
guaranteed by, the depository institution; and are subject to
investment risks, including the possible loss of principal amount
invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH THE INFORMATION A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING. THE PROSPECTUS SHOULD BE RETAINED
FOR FUTURE REFERENCE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE OR
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO
PERSON IS AUTHORIZED BY KEYPORT TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THIS OFFERING, AND IF GIVEN OR
MADE, SUCH UNAUTHORIZED INFORMATION OR REPRESENTATIONS SHOULD NOT
BE RELIED UPON.
The date of this prospectus is _______________, [1998]
TABLE OF CONTENTS
Page
Glossary of Special Terms
Summary of Expenses
Synopsis
[Condensed Financial Information]
Performance Information
Keyport and the Variable Account
[Year 2000 Matters]
Purchase Payments and Applications
Investments of the Variable Account
Allocations of Purchase Payments
Eligible Funds
Transfer of Variable Account Value
Substitution of Eligible Funds and
Other Variable Account Changes
Deductions
[Deductions for Certificate Maintenance Charge]
Deductions for Mortality and Expense Risk Charge
[Deductions for Daily Distribution Charge]
[Deductions for Daily Administrative Charge]
[Deductions for Contingent Deferred Sales Charge]
[Deductions for Transfers of Variable Account Value]
Deductions for Premium Taxes
Deductions for Income Taxes
Total Variable Account Expenses
Other Services
The Certificates
Variable Account Value
Valuation Periods
Net Investment Factor
Modification of the Certificate
Right to Revoke
Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Certificate Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Provisions
Annuity Benefits
Income Date and Annuity Option
Change in Income Date and Annuity Option
Annuity Options
Variable Annuity Payment Values
Proof of Age, Sex, and Survival of Annuitant
Suspension of Payments
Tax Status
Introduction
[Recent Developments]
Taxation of Annuities in General
Qualified Plans
[Tax-Sheltered Annuities]
Individual Retirement Annuities
[Corporate Pension and Profit-Sharing Plans]
[Deferred Compensation Plans with Respect to
Service for State and Local Governments]
Variable Account Voting Privileges
Sales of the Certificates
Legal Proceedings
Inquiries by Certificate Owners
Table of Contents_Statement of Additional Information
[Appendix A_The Fixed Account (also known as the Modified
Guaranteed Annuity Account)]
Appendix [B]_Telephone Instructions
GLOSSARY OF SPECIAL TERMS
Accumulation Unit: An accounting unit of measure used to calculate Variable
Account Value.
Annuitant: The Annuitant is the natural person to whom any annuity payments
will be made starting on the Income Date. The Annuitant may not be over
age [90] on the Certificate Date (age [75] for Qualified Certificates [and
age [90] for [Roth IRA] Qualified Certificates]).
Certificate Anniversary: The same month and day as the Certificate Date in
each subsequent year of the Certificate.
Certificate Date: The effective date of the Certificate; it is shown on
the Certificate Schedule.
Certificate Owner: The person (or persons in the case of joint ownership)
who possesses all the ownership rights under the Certificate. The primary
Certificate Owner may not be over age [90] on the Certificate Date (age
[75] for Qualified Certificates [, age [90] for [Roth IRA] Qualified
Certificates] and age [90] for a joint Owner).
Certificate Value: The [sum of the] Variable Account Value [and the Fixed
Account Value].
Certificate Withdrawal Value: The Certificate Value [increased or
decreased by a limited Market Value Adjustment] less any premium taxes
[and] [Certificate Maintenance Charge] [and] [applicable Contingent
Deferred Sales Charges].
Certificate Year: Any period of 12 months commencing with the Certificate
Date and each Certificate Anniversary thereafter shall be a Certificate
Year.
[Covered Person: The person(s) identified on the Certificate Schedule
whose death may result in an Adjustment of Certificate Value [and waiver of
any Contingent Deferred Sales Charges] [and a waiver of any Market Value
Adjustment] [or whose medically necessary stay in a hospital or nursing
facility may allow the Certificate Owner to be eligible for either a total
or partial waiver of the Contingent Deferred Sales Charge].]
Designated Beneficiary: The person who may be entitled to receive benefits
following the death of the Annuitant, Certificate Owner, or joint
Certificate Owner. The Designated Beneficiary will be the first person
among the following who is alive on the date of death: primary Certificate
Owner; joint Certificate Owner; primary beneficiary; contingent
beneficiary; and if none of the above is alive, the primary Certificate
Owner's estate. If the primary Certificate Owner and joint Certificate
Owner are both alive, they will be the Designated Beneficiary together.
Eligible Funds: The mutual funds that are eligible investments for the
Variable Account under the Certificates.
[Fixed Account: Part of Keyport's general account to which Purchase
Payments may be allocated or Certificate Values may be transferred.]
[Fixed Account Value: The value of all Fixed Account amounts accumulated
under the Certificate prior to the Income Date.]
[Guarantee Period Anniversary: An anniversary of a Guarantee Period's
Start Date.]
[Guarantee Period Month: The first Guarantee Period Month is the monthly
period which begins on the Start Date. Subsequent Guarantee Period Months
begin on the same day in the ensuing months.]
[Guarantee Period Year: The first Guarantee Period Year is the annual
period which begins on the Start Date. Subsequent Guarantee Period Years
begin on each Guaranteed Period Anniversary.]
In Force: The status of the Certificate before the Income Date so long as
it is not totally surrendered, the Certificate Value under a Certificate
does not go to zero, and there has not been a death of the Annuitant or any
Certificate Owner that will cause the Certificate to end within at most
five years of the date of death.
Income Date: The date on which annuity payments are to begin.
Non-Qualified Certificate: Any Certificate that is not issued under a
Qualified Plan.
Office: Keyport's executive office, which is 125 High Street, Boston,
Massachusetts 02110.
Qualified Certificate: Certificates issued under Qualified Plans.
Qualified Plan: A retirement plan established pursuant to the provisions of
Sections 401, 403(b), 408(b) or 408A of the Internal Revenue Code. Keyport
treats Section 457 plans as Qualified Plans.
[Start Date: The date an amount is first allocated to a Guarantee Period].
Variable Account: A separate investment account of Keyport into which
Purchase Payments under the Certificates may be allocated. The Variable
Account is divided into Sub-Accounts ("Sub-Account") that correspond to the
Eligible Funds in which they invest.
Variable Account Value: The value of all Variable Account amounts
accumulated under the Certificate prior to the Income Date.
Written Request: A request written on a form satisfactory to Keyport,
signed by the Certificate Owner and a disinterested witness, and filed at
Keyport's Office.
SUMMARY OF EXPENSES
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Summary of Expenses will be completed in each Rule 485(a) filing.
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The expense summary format below, including the examples, was adopted by
the Securities and Exchange Commission to assist the owner of a variable
annuity certificate in understanding the transaction and operating expenses
the owner will directly or indirectly bear under a certificate. The values
reflect expenses of the Variable Account as well as the Eligible Funds
under the Certificates. The expenses shown for the Eligible Funds and the
examples should not be considered a representation of future expenses.
Certificate Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Contingent Deferred Sales Charge
(as a percentage of Purchase Payments): [7%1
Years from Date of Payment Sales Charge
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or later 0%]
Maximum Total Certificate Owner Transaction Expenses2
(as a percentage of Purchase Payments): [7%]
Annual Certificate Maintenance Charge3 $[36]
[The Certificate Maintenance Charge will be waived before the Income Date
if:
(i) it is the first Certificate Anniversary;
(ii) the Certificate Value is greater than or equal to [$40,000] on
the Certificate Anniversary date this charge is imposed, or
(iii) Purchase Payments of at least [$2,500] have been made in the
prior Certificate Year and there has been no partial withdrawal in the
prior Certificate Year.]
[The Certificate Maintenance Charge will be waived on or after the Income
Date for the current year if:
(i) variable annuity Option A (Income for a Fixed Number of Years) is
applicable; and
(ii) at the time of the first payment of the year, the present value
of all remaining payments (See "Option A" on Page xx) is greater than or
equal to [$40,000].]
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: [1.25%]
[Distribution Charge:] [ .15%]
[Administrative Charge:] [ .15%]
Total Variable Account Annual Expenses: [1.55%]
[XXXXX Trust and YYYYY Fund] Annual Expenses4
(as a percentage of average net assets)
Total Fund
Operating Expenses
Management Other [After Any Expense
Fund Fees Expenses Reimbursements] [5]
The above expenses for the Eligible Funds were provided by the Funds.
Keyport has not independently verified the accuracy of the information.
[Example #1 _ Assuming surrender of the Certificate at the end of the
periods shown.6
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Example #2 _ Assuming annuitization of the Certificate at the end of the
periods shown.6
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Example #3 _ Assuming the Certificate stays in force through the periods
shown.
A $1,000 investment in each Sub-Account listed would be subject to the same
expenses shown in Example #2, assuming 5% annual return on assets. ]
[Example -- Whether the Certificate stays in force through the periods
shown or is surrendered or annuitized[6] at the end of the periods shown, a
$1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years]
[1Contingent Deferred Sales Charges are deducted only if the Certificate is
totally or partially surrendered. A surrender will not incur the Charge
percentage shown as follows:
1. In any Certificate Year, Certificate Owners may withdraw an
aggregate amount, not to exceed, at the time of withdrawal, the
Certificate's earnings, which equal: (a) the Certificate Value, less
(b) the portion of the Purchase Payments not previously withdrawn.
2. In any Certificate Year after the first, Certificate Owners may
withdraw, in addition to the amount available in 1., the amount by
which 10% of the Certificate Value as of the preceding Certificate
Anniversary exceeds the amount available in 1.]
2Keyport reserves the right to impose a transfer fee after prior notice to
Certificate Owners[, but currently does not impose any charge.] Premium
taxes are not shown. Keyport deducts the amount of premium taxes, if any,
when paid unless Keyport elects to defer such deduction.
3[This charge will be waived on the first Certificate Anniversary and in
certain other instances (see "Deductions for Certificate Maintenance
Charge").]
4[The XXXXX Trust] expenses are for [ ]. [The YYYYY Fund] expenses [are
estimated and] reflect the [YYYYY Fund's] Manager's agreement to reimburse
expenses above certain limits (see footnote 5).
[5[YYYYY Fund's] manager has agreed until [a/bb/cc] to reimburse all
expenses, including management fees, in excess of the following percentage
of the average annual net assets of each Fund, so long as such
reimbursement would not result in the Fund's inability to qualify as a
regulated investment company under the Internal Revenue Code. The total
percentages shown in the table for [YY-1, YY-2 and YY-3] are after expense
reimbursement. Each percentage shown in the parentheses is what the total
for 199[ ] would be in the absence of expense reimbursement: for [YY-1 -
xxx%; for YY-2 - xxx%; and for YYY-3 - xxx%.]]
6The annuity is designed for retirement planning purposes. Surrenders
prior to the Income Date are not consistent with the long-term purposes of
the Certificate and the applicable tax laws.
The example[s] should not be considered a representation of past or future
expenses and charges of the Sub-Accounts. Actual expenses may be greater
or less than those shown. Similarly, the assumed 5% annual rate of return
is not an estimate or a guarantee of future investment performance. See
"Deductions" in this prospectus, ["How the Funds are Managed"] in the
prospectus for [XXXXX Trust], and ["Trust Management Organizations"] and
["Expenses of the Funds"] in the prospectus for [YYYYY Fund].
SYNOPSIS
The following Synopsis should be read in conjunction with the detailed
information in this prospectus and the Statement of Additional Information.
Please refer to the Glossary of Special Terms for the meaning of certain
defined terms. Variations from the information appearing in this prospectus
due to individual state requirements are described in supplements which are
attached to this prospectus, or in endorsements to the Certificates, as
appropriate.
The Certificate allows Certificate Owners to allocate Purchase Payments to
the Variable Account [and also to the Fixed Account.] The Variable Account
is a separate investment account maintained by Keyport. [The Fixed Account
is part of Keyport's "general account", which consists of all Keyport's
assets except the Variable Account and the assets of other separate
accounts maintained by Keyport.] Certificate Owners may allocate payments
to, and receive annuity payments from the Variable Account [and/or the
Fixed Account]. If the Certificate Owner allocates payments to the
Variable Account, the accumulation values and annuity payments will
fluctuate according to the investment experience of the Sub-Accounts
chosen. [If the Certificate Owner allocates payments to the Fixed Account,
the accumulation values will increase at guaranteed interest rates and
annuity payments will be of a fixed amount. [Fixed Account Values are
subject to a limited market value adjustment]. (See "Keyport and the
Variable Account" on Page xx for more information on the Variable Account
[and Appendix A on Page xx for more information on the Fixed Account.)] [If
the Certificate Owner allocates payments to both Accounts, then the
accumulation values and annuity payments will be variable in part and fixed
in part.]
The Certificate permits Purchase Payments to be made on a flexible Purchase
Payment basis. The minimum initial payment is $[5,000] [and [$2,000] for
individual retirement annuities]. The minimum amount for each subsequent
payment is $[1,000] or such lesser amount as Keyport may permit from time
to time (currently [$250]). (See "Purchase Payments and Applications" on
Page x.)
There are no deductions made from Purchase Payments for sales charges at
the time of purchase. [A Contingent Deferred Sales Charge may be deducted
in the event of a total or partial surrender (see "Partial Withdrawals and
Surrender" on Page xx). The Contingent Deferred Sales Charge is based on a
graded table of charges. The charge will not exceed [7]% of that portion
of the amount surrendered that represents Purchase Payments made during the
[seven] years immediately preceding the request for surrender. (See
"Deductions for Contingent Deferred Sales Charge" on Page xx.)]
Keyport deducts a Mortality and Expense Risk Charge, which is equal on an
annual basis to [1.25]% of the average daily net asset values in the
Variable Account attributable to the Certificates. (See "Deductions for
Mortality and Expense Risk Charge" on Page xx.) [Keyport also deducts a
daily Distribution Charge which is equal on an annual basis to [.15%] of
the same values. (See "Deductions for Daily Distribution Charge" on Page
xx.)] [Keyport deducts a daily Administrative Charge which is equal on an
annual basis to [.15]% of the same values. (See "Deductions for Daily
Administrative Charge" on Page xx.)]
[Keyport deducts an annual Certificate Maintenance Charge (currently
$[36.00]) from the Variable Account Value for administrative expenses.
Prior to the Income Date, Keyport reserves the right to change this charge
for future years. [Keyport will in certain instances waive this charge.]
(See "Deductions for Certificate Maintenance Charge" on Page xx.)]
Keyport reserves the right to deduct a charge of $[50] for each transfer in
excess of [12] per Certificate Year [but currently does not do so]. [(See
"Transfer of Variable Account Value" on Page xx.)] [(See "Recent
Developments" on Page xx.)]
Premium taxes will be charged against the Certificate Value. Currently
such premium taxes range from 0% to 5.0%. (See "Deductions for Premium
Taxes" on Page xx.)
There are no federal income taxes on increases in the value of a
Certificate until a distribution occurs, in the form of a lump sum payment,
annuity payments, or the making of a gift or assignment of the Certificate.
A federal penalty tax (currently 10%) may also apply. (See "Tax Status" on
Page xx.)
The Certificate allows the Certificate Owner to revoke the Certificate
generally within 10 days of delivery (see "Right to Revoke" on Page xx).
For most states, Keyport will refund the Certificate Value as of the date
the returned Certificate is received by Keyport, plus any distribution
charges previously deducted. The Certificate Owner thus will bear the
investment risk during the revocation period. In other states, Keyport
will return Purchase Payments. [In such other states Purchase Payments will
be allocated to the [XX-1] Sub-Account during the "freelook" period plus an
additional 10 days.]
[The Certificates described in this prospectus have not previously been
made available for sale[, and include fees and charges that are different
from other forms of the Contracts and Certificates. These differences will
produce differing Accumulation Unit values]. Therefore, no condensed
financial information is provided.] The full financial statements for [the
Variable Account and] Keyport are in the Statement of Additional
Information.
[CONDENSED FINANCIAL INFORMATION]
PERFORMANCE INFORMATION
The Variable Account may from time to time advertise certain performance
information concerning its various Sub-Accounts.
Performance information is not intended to indicate either past performance
under an actual Certificate or future performance.
The Sub-Accounts may advertise total return information for various periods
of time. Total return performance information is based on the overall
percentage change in value of a hypothetical investment in the specific Sub-
Account over a given period of time.
Average annual total return information shows the average percentage change
in the value of an investment in the Sub-Account from the beginning date of
the measuring period to the end of that period. This standardized version
of average annual total return reflects all historical investment results,
less all charges and deductions applied against the Sub-Account and a
Certificate [(including any Contingent Deferred Sales Charge that would
apply if a Certificate Owner surrendered the Certificate at the end of each
period indicated)]. Average total return does not take into account any
premium taxes and would be lower if these taxes were included.
In order to calculate average annual total return, Keyport divides the
change in value of a Sub-Account under a Certificate surrendered on a
particular date by a hypothetical $1,000 investment in the Sub-Account made
by the Certificate Owner at the beginning of the period illustrated. The
resulting total rate for the period is then annualized to obtain the
average annual percentage change during the period. Annualization assumes
that the application of a single rate of return each year during the period
will produce the ending value, taking into account the effect of
compounding.
The Sub-Accounts may present additional nonstandardized total return
information computed on a different basis.
[First, the Sub-Accounts may present total return information computed on
the same basis as described above, except deductions will not include the
Contingent Deferred Sales Charge. This presentation assumes that the
investment in the Certificate continues beyond the period when the
Contingent Deferred Sales Charge applies, consistent with the long-term
investment and retirement objectives of the Certificate. The total return
percentage will thus be higher under this method than the standard method
described above.]
[Second,] the Sub-Accounts may present total return information calculated
by dividing the change in a Sub-Account's Accumulation Unit value over a
specified time period by the Accumulation Unit value of that Sub-Account at
the beginning of the period. This computation results in a 12-month change
rate or, for longer periods, a total rate for the period which Keyport
annualizes in order to obtain the average annual percentage change in the
Accumulation Unit value for that period. The change percentages do not
take into account [the Contingent Deferred Sales Charge,] [the Certificate
Maintenance Charge and] premium tax charges. The percentages would be
lower if these charges were included.
[Third, certain of the Eligible Funds have been available for Keyport
and/or non-Keyport variable annuity contracts for periods prior to the
commencement of the offering of the Certificates described in this
prospectus. Any performance information for such periods will be based on
historical results of the Eligible Funds and applying the fees and charges
of the Certificate for the specified time periods.]
The [XX-1] Sub-Account is a money market Sub-Account that also may
advertise yield and effective yield information. The yield of the Sub-
Account refers to the income generated by an investment in the Sub-Account
over a specifically identified 7-day period. This income is annualized by
assuming that the amount of income generated by the investment during that
week is generated each week over a 52-week period and is shown as a
percentage. The yield reflects the deduction of all charges assessed
against the Sub-Account and a Certificate but does not take into account
[Contingent Deferred Sales Charges and] premium tax charges. The yield
would be lower if these charges were included.
The effective yield of the [XX-1] Sub-Account is calculated in a similar
manner but, when annualizing such yield, income earned by the Sub-Account
is assumed to be reinvested. This compounding effect causes effective
yield to be higher than yield.
KEYPORT AND THE VARIABLE ACCOUNT
Keyport Life Insurance Company was incorporated in Rhode Island in 1957 as
a stock life insurance company. Its executive and administrative offices
are at 125 High Street, Boston, Massachusetts 02110 and its home office is
at 695 George Washington Highway, Lincoln, Rhode Island 02865.
Keyport writes individual life insurance and individual and group annuity
contracts on a non-participating basis. Keyport is licensed to do business
in all states except New York and is also licensed in the District of
Columbia and the Virgin Islands. Keyport has been rated A+ (Superior) by
A.M. Best and Company, independent analysts of the insurance industry.
Keyport has been rated A+ each year since 1976, the first year Keyport was
subject to Best's alphabetic rating system. Standard & Poor's ("S & P")
has rated Keyport AA for excellent financial security, Moody's has rated
Keyport A1 for good financial strength and Duff & Phelps has rated Keyport
AA- for very high claims paying ability. The Best's A+ rating is in the
highest rating category, which also includes A++. S & P and Duff & Phelps
have one rating category above AA and Moody's has two rating categories
above A. Within the S & P AA category, only AA+ is higher. The Moody's "1"
modifier signifies that Keyport is in the higher end of the A category
while the Duff & Phelps "-" modifier signifies that Keyport is at the lower
end of the AA category. These ratings merely reflect the opinion of the
rating company as to the relative financial strength of Keyport and
Keyport's ability to meet its contractual obligations to its policyholders.
Even though assets in the Variable Account are held separately from
Keyport's other assets, ratings of Keyport may still be relevant to
Certificate Owners since not all of Keyport's contractual obligations
relate to payments based on those segregated assets (e.g., see "Death
Provisions" for Keyport's obligation after certain deaths to increase the
Certificate Value if it is less than the guaranteed minimum death benefit
amount).
Keyport is a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and membership in IMSA in
advertisements. Being a member means that Keyport has chosen to participate
in IMSA's Life Insurance Ethical Market Conduct Program.
Keyport is one of the Liberty Financial Companies. Keyport is ultimately
controlled by Liberty Mutual Insurance Company of Boston, Massachusetts, a
multi-line insurance and financial services institution.
The Variable Account was established by Keyport pursuant to the provisions
of Rhode Island Law on January 30, 1996. The Variable Account meets the
definition of "separate account" under the federal securities laws. The
Variable Account is registered with the Securities and Exchange Commission
as a unit investment trust under the Investment Company Act of 1940. Such
registration does not involve supervision of the management of the Variable
Account or Keyport by the Securities and Exchange Commission.
Obligations under the Certificates are the obligations of Keyport. Although
the assets of the Variable Account are the property of Keyport, these
assets are held separately from the other assets of Keyport and are not
chargeable with liabilities arising out of any other business Keyport may
conduct. Income, capital gains and/or capital losses, whether or not
realized, from assets allocated to the Variable Account are credited to or
charged against the Variable Account without regard to the income, capital
gains, and/or capital losses arising out of any other business Keyport may
conduct. Thus, Keyport does not guarantee the investment performance of
the Variable Account. The Variable Account Value and the amount of
variable annuity payments will vary with the investment performance of the
investments in the Variable Account.
[YEAR 2000 MATTERS
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous
results by or at the Year 2000. This potential problem has become known as
the "Year 2000 issue". The Year 2000 issue affects virtually all companies
and organizations.
Computer applications which are affected by the Year 2000 issue could
impact Keyport's business functions in various ways, ranging from a
complete inability to perform critical business functions to a loss of
productivity in varying degrees. Likewise, the failure of some computer
applications could have no impact on critical business functions.
Keyport is assessing and addressing the Year 2000 issue by implementing a
four-step plan. The first two steps involve inventorying all the computer
applications which support Keyport's business functions and prioritizing
computer applications which are affected by the Year 2000 issue based upon
the degree of impact each has on the functioning of Keyport's business
units. The first two steps of the plan are substantially complete.
The final two steps of the four-step plan involve remediation of affected
computer applications (i.e., repairing or replacing programs, including
those which interface with third-party computer applications that have
unremediated Year 2000 issues, and appropriate testing) and reinstallation
of computer applications. For computer applications which are "mission
critical" (i.e., their failure would result in the complete inability to
perform critical business functions), Keyport expects to complete the final
two steps of the plan by December 31, 1998. Remediation and reinstallation
of non-critical computer applications is scheduled to be completed by
December 31, 1999.
Keyport believes that the Year 2000 issue could have a material impact on
Keyport's operations if the four-step plan is not timely implemented.
However, based upon the progress that is being made, Keyport believes that
the timetable for implementing the plan will be met and that the Year 2000
issue will not pose significant operational problems for its computer
systems.
Keyport does not expect that the cost of addressing the Year 2000 issue
will be material to its financial condition or its results of operations.]
PURCHASE PAYMENTS AND APPLICATIONS
***************************************************************************
***************************************************************************
The minimums and maximums described in the following paragraph
may vary within any limits permitted under state insurance law
and Keyport's administrative guidelines in existence at the time
of issuance of the Certificate.
***************************************************************************
***************************************************************************
The initial Purchase Payment is due on the Certificate Date. The minimum
initial Purchase Payment is $[5,000] [and [$2,000] for individual
retirement annuities]. Additional Purchase Payments can be made at the
Certificate Owner's option. Each subsequent Purchase Payment must be at
least $[1,000] or such lesser amount as Keyport may permit from time to
time [(currently $250)]. Keyport may reject any Purchase Payment.
If the application for a Certificate is in good order and it calls for
amounts to be allocated to the Variable Account, Keyport will apply the
initial Purchase Payment to the Variable Account and credit the Certificate
with Accumulation Units within two business days of receipt. If the
application for a Certificate is not in good order, Keyport will attempt to
get it in good order within five business days. If it is not complete at
the end of this period, Keyport will inform the applicant of the reason for
the delay and that the Purchase Payment will be returned immediately unless
the applicant specifically consents to Keyport's keeping the Purchase
Payment until the application is complete. Once the application is
complete, the Purchase Payment will be applied within two business days of
its completion. Keyport has reserved the right to reject any application.
Keyport confirms, in writing, to the Certificate Owner the allocation of
all Purchase Payments and the re-allocation of values after any requested
transfer. Keyport must be notified immediately by the Certificate Owner of
any processing error.
Keyport will permit others to act on behalf of an applicant in certain
instances, including the following two examples. First, Keyport will
accept an application for a Certificate that contains a signature signed
under a power of attorney if a copy of that power of attorney is submitted
with the application. Second, Keyport will issue a Certificate that is
replacing an existing life insurance or annuity policy that was issued by
Keyport or an affiliated company without having previously received a
signed application from the applicant. Certain dealers or other authorized
persons such as employers and Qualified Plan fiduciaries will inform
Keyport of an applicant's answers to the questions in the application by
telephone or by order ticket and cause the initial Purchase Payment to be
paid to Keyport. If the information is in good order, Keyport will issue
the Certificate with a copy of an application completed with that
information. The Certificate will be delivered to the Certificate Owner
with a letter from Keyport that will give the Certificate Owner an
opportunity to respond to Keyport if any of the application information is
incorrect. Alternatively, Keyport's letter may request the Certificate
Owner to confirm the correctness of the information by signing either a
copy of the application or a Certificate delivery receipt that ratifies the
application in all respects (in either case, a copy of the signed document
would be returned to Keyport for its permanent records). All purchases are
confirmed, in writing, to the applicant by Keyport. Keyport's liability
under a Certificate extends only to amounts so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
***************************************************************************
***************************************************************************
**
The percentage of required allocations to each Sub-Account may vary
from 1% to 10%.
***************************************************************************
***************************************************************************
**
Purchase Payments applied to the Variable Account will be invested in one
or more of the Eligible Fund Sub-Accounts designated as permissible
investments in accordance with the selection made by the Certificate Owner
in the application. Any selection must specify the percentage of the
Purchase Payment that is allocated to each Sub-Account [or must specify the
asset allocation model selected. (See "Other Services, the Programs" on
Page xx).] The percentage for each Sub-Account, if not zero, must be at
least [10]% and must be a whole number. A Certificate Owner may change the
allocation percentages without fee, penalty or other charge. Allocation
changes must be made by Written Request unless the Certificate Owner has by
Written Request authorized Keyport to accept telephone allocation
instructions from the Certificate Owner or from a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney. By
authorizing Keyport to accept telephone changes, a Certificate Owner agrees
to accept and be bound by the conditions and procedures established by
Keyport from time to time. The current conditions and procedures are in
Appendix [B] and Certificate Owners authorizing telephone allocation
instructions will be notified, in advance, of any changes.
The Variable Account is segmented into Sub-Accounts. Each Sub-Account
contains the shares of one of the Eligible Funds and such shares are
purchased at net asset value. Eligible Funds and Sub-accounts may be added
or withdrawn as permitted by applicable law. The Sub-Accounts in the
Variable Account and the corresponding Eligible Funds currently are as
follows:
***************************************************************************
***************************************************************************
**
TEXT HERE WILL DESCRIBE ELIGIBLE FUNDS AND CORRESPONDING SUB-
ACCOUNTS
***************************************************************************
***************************************************************************
**
Eligible Funds of [XXXXX Trust] Sub-Accounts
[XX-1] [XX-1 Sub-Account]
[XX-2] [XX-2 Sub-Account]
[XX-3] [XX-3 Sub-Account]
Eligible Funds of [YYYYY Fund] Sub-Accounts
[YY-1] [YY-1 Sub-Account]
[YY-2] [YY-2 Sub-Account]
[YY-3] [YY-3 Sub-Account]
Eligible Funds
The Eligible Funds which are the permissible investments of the Variable
Account are the separate funds of [XXXXX Trust, the separate funds of YYYYY
Fund], and any other mutual funds with which Keyport and the Variable
Account may enter into a participation agreement for the purpose of making
such mutual funds available as Eligible Funds under certain Certificates.
***************************************************************************
***************************************************************************
TEXT HERE WILL DESCRIBE INDIVIDUAL INVESTMENT ADVISERS
***************************************************************************
***************************************************************************
The investment objectives of the Eligible Funds are briefly described
below. More detailed information, including investor considerations
related to the risks of investing in a particular Eligible Fund, may be
found in the current prospectus for that Fund. An investor should read
that prospectus carefully before selecting a fund for investing. The
prospectus is available, at no charge, from a salesperson or by writing
Keyport at the address shown on Page 1 or by calling (800) 437-4466.
Eligible Funds of [XXXXX Trust]
and Variable Account Sub-Accounts Investment Objective
***************************************************************************
***************************************************************************
TEXT HERE WILL DESCRIBE FUNDS AND INVESTMENT OBJECTIVES
***************************************************************************
***************************************************************************
Eligible Funds of [YYYYY Fund]
and Variable Account Sub-Accounts Investment Objective
***************************************************************************
***************************************************************************
TEXT HERE WILL DESCRIBE FUNDS AND INVESTMENT OBJECTIVES
***************************************************************************
***************************************************************************
There is no assurance that the Eligible Funds will achieve their stated
objectives.
[XXXXX and YYYYY] Funds are funding vehicles for variable annuity contracts
and variable life insurance policies offered by separate accounts of
Keyport and of insurance companies affiliated and unaffiliated with
Keyport. The risks involved in this "mixed and shared funding" are
disclosed in the Trust's and Fund's prospectus under the caption ["The
Trust"] and [SALES AND REDEMPTIONS,] respectively.
Transfer of Variable Account Value
***************************************************************************
***************************************************************************
The number of transfers will vary between zero (0) and the
maximum number that Keyport determines is consistent with
interpretations of applicable tax law restrictions on contract
owner control which may permit an unlimited number of transfers.
The transfer charge, if any, imposed on transfers in excess of
the stipulated number will not exceed $50. The maximum number of
free transfers, assuming the imposition of a transfer charge,
will be 12. The minimum amount that may be transferred will
range between $0 and $500, and the minimum required remaining Sub-
Account Value ranges between $0 and $100.
***************************************************************************
***************************************************************************
Certificate Owners may transfer Variable Account Value from one Sub-Account
to another Sub-Account [and/or to the Fixed Account]. [See "Recent
Developments".] [Currently [x] transfers are permitted.] [The minimum
amount of Variable Account Value that may be transferred is [$500] and the
remaining Variable Account Value in the Sub-Account is [$100]].
The Certificate allows Keyport to charge a transfer fee and to limit the
number of transfers that can be made in a specified time period.
Certificate Owners should be aware that transfer limitations may prevent a
Certificate Owner from making a transfer on the date he or she wants to,
with the result that the Certificate Owner's future Certificate Value may
be lower than it would have been had the transfer been made on the desired
date.
Currently, Keyport [has no limit on the number or frequency of transfers
and it] is [not] charging a transfer fee [of [x] for each transfer in
excess of [xx] per Certificate Year] [but reserves the right to charge
[$25] for each transfer in excess of [12] per Certificate Year]. For
transfers under different Certificates that are being requested under
powers of attorney with a common attorney-in-fact or that are, in Keyport's
determination, based on the recommendation of a common investment adviser
or broker/dealer, there is a transfer limitation of one transfer every 30
days or such other period as Keyport may permit.
Keyport is also limiting each transfer to a maximum of $500,000 or such
greater amount as Keyport may permit. All transfers requested for a
Certificate on the same day will be treated as a single transfer and the
total combined transfer amount will be subject to the $500,000 limitation.
If the $500,000 limitation is exceeded, no amount of the transfer will be
executed by Keyport.
In applying the $500,000 limitation, Keyport may treat as one transfer all
transfers requested by a Certificate Owner for multiple Certificates he or
she owns. If the $500,000 limitation is exceeded for multiple transfers
requested on the same day that are treated as a single transfer, no amount
of the transfer will be executed by Keyport.
In applying the $500,000 limitation to transfers requested by a common
attorney-in-fact or investment adviser, Keyport will treat as one transfer
all transfers requested under different Certificates that are being
requested under powers of attorney with a common attorney-in-fact or that
are, in Keyport's determination, based on the recommendation of a common
investment adviser or broker/dealer. If the $500,000 limitation is
exceeded for multiple transfers requested on the same day that are treated
as a single transfer, no amount of the transfer will be executed by
Keyport. If a transfer is executed under one Certificate and, within the
next 30 days, a transfer request for another Certificate is determined by
Keyport to be related to the executed transfer under this paragraph's
rules, the transfer request will not be executed by Keyport. In order for
it to be executed, it would need to be requested again after the 30 day
period has expired and it, along with any other transfer requests that are
collectively treated as a single transfer, would need to total less than
$500,000.
Keyport's interest in applying these limitations is to protect the
interests of both Certificate Owners who are not engaging in significant
transfer activity and Certificate Owners who are engaging in such activity.
Keyport has determined that the actions of Certificate Owners engaging in
significant transfer activity among Sub-Accounts may cause an adverse
affect on the performance of the Eligible Fund for the Sub-Account
involved. The movement of Sub-Account values from one Sub-Account to
another may prevent the appropriate Eligible Fund from taking advantage of
investment opportunities because it must maintain a liquid position in
order to handle redemptions. Such movement may also cause a substantial
increase in Fund transaction costs which must be indirectly borne by
Certificate Owners.
Certificate Owners will be notified, in advance, of the imposition of any
transfer fee or of a change in the limitation on the number of transfers.
The fee will not exceed $[50].
Transfers must be made by Written Request unless the Certificate Owner has
by Written Request authorized Keyport to accept telephone transfer requests
from the Certificate Owner or from a person acting for the Certificate
Owner as an attorney-in-fact under a power of attorney. By authorizing
Keyport to accept telephone transfer instructions, a Certificate Owner
agrees to accept and be bound by the conditions and procedures established
by Keyport from time to time. The current conditions and procedures are in
Appendix [B] and Certificate Owners authorizing telephone transfers will be
notified, in advance, of any changes. Written transfer requests may be made
by a person acting for the Certificate Owner as an attorney-in-fact under a
power of attorney.
Transfer requests received by Keyport before the close of trading on the
New York Stock Exchange (currently 4:00 PM Eastern Time) will be initiated
at the close of business that day. Any requests received later will be
initiated at the close of the next business day. Each request from a
Certificate Owner to transfer value will be executed by both redeeming and
acquiring Accumulation Units on the day Keyport initiates the transfer.
If 100% of any Sub-Account's value is transferred and the allocation
formula for Purchase Payments includes that Sub-Account, then the
allocation formula for future Purchase Payments will automatically change
unless the Certificate Owner instructs otherwise. For example, if the
allocation formula is 50% to Sub-Account A and 50% to Sub-Account B and all
of Sub-Account A's value is transferred to Sub-Account B, the allocation
formula will change to 100% to Sub-Account B unless the Certificate Owner
instructs otherwise.
Substitution of Eligible Funds and Other Variable Account Changes
If the shares of any of the Eligible Funds should no longer be available
for investment by the Variable Account or if in the judgment of Keyport's
management further investment in such fund shares should become
inappropriate in view of the purpose of the Certificate, Keyport may add or
substitute shares of another Eligible Fund or of another mutual fund for
Eligible Fund shares already purchased under the Certificate. No
substitution of Fund shares in any Sub-Account may take place without prior
approval of the Securities and Exchange Commission and notice to
Certificate Owners, to the extent required by the Investment Company Act of
1940.
Keyport has also reserved the right, subject to compliance with the law as
currently applicable or subsequently changed: (a) to operate the Variable
Account in any form permitted under the Investment Company Act of 1940 or
in any other form permitted by law; (b) to take any action necessary to
comply with or obtain and continue any exemptions from the Investment
Company Act of 1940 or to comply with any other applicable law; (c) to
transfer any assets in any Sub-Account to another Sub-Account, or to one or
more separate investment accounts, or to Keyport's general account; or to
add, combine or remove Sub-Accounts in the Variable Account; and (d) to
change the way Keyport assesses charges, so long as the aggregate amount is
not increased beyond that currently charged to the Variable Account and the
Eligible Funds in connection with the Certificates.
DEDUCTIONS
[Deductions for Certificate Maintenance Charge
***************************************************************************
***************************************************************************
The Certificate Maintenance Charge will not exceed a maximum
dollar amount of $100. Under certain forms of the Certificate
Keyport may not impose any Certificate Maintenance Charge. The
amount of purchase payments necessary to support a waiver of the
charge ranges between $1000 and $5000.
***************************************************************************
***************************************************************************
Keyport has responsibility for all administration of the Certificates and
the Variable Account. This administration includes, but is not limited to,
preparation of the Certificates, maintenance of Certificate Owners'
records, and all accounting, valuation, regulatory and reporting
requirements. Keyport assesses a Certificate Maintenance Charge for such
services during the accumulation and annuity payment periods. At the
present time the Certificate Maintenance Charge is $[36] per Certificate
Year. PRIOR TO THE INCOME DATE THE CERTIFICATE MAINTENANCE CHARGE IS NOT
GUARANTEED AND MAY BE CHANGED BY KEYPORT.
[The Certificate Maintenance Charge will be waived before the Income Date
if: [[(i)] it is the first Certificate Anniversary,] [[(ii)] the
Certificate Value is greater than or equal to [$40,000] on the Certificate
Anniversary date this charge is imposed,] or [[(iii)] Purchase Payments of
at least [$2,500] have been made in the prior Certificate Year and there
has been no partial withdrawal in the prior Certificate Year].]
[The Certificate Maintenance Charge will be waived on and after the Income
Date for the current year if: (i) variable annuity Option A (Income for a
Fixed Number of Years) is applicable; and (ii) at the time of the first
payment of the year, the present value of all the remaining payments (see
"Option A" on Page x) is greater than or equal to $40,000.]
Prior to the Income Date, the full amount of the charge will be deducted
from the Variable Account Value on each Certificate Anniversary and on the
date of any total surrender not falling on the Certificate Anniversary. On
the Income Date, a pro-rata portion of the charge due on the next
Certificate Anniversary will be deducted from the Variable Account Value.
This pro-rata charge covers the period from the prior Certificate
Anniversary to the Income Date. For example, if the Income Date occurs 73
days after that prior anniversary, then one-fifth (i.e., 73 days/365 days)
of the annual charge would be deducted on the Income Date. The charge will
be deducted from each Sub-Account in the proportion that the value of each
bears to the Variable Account Value.
Once annuity payments begin on the Income Date or once they begin after
surrender benefits are applied under a settlement option, the yearly cost
of the Certificate Maintenance Charge for a payee's annuity will be the
same as the yearly amount in effect immediately before the annuity payments
begin. Keyport may not later change the amount of the Certificate
Maintenance Charge deducted from the annuity payments. The charge will be
deducted on a pro-rata basis from each annuity payment. For example, if
annuity payments are monthly, then one-twelfth of the annual charge will be
deducted from each payment.
***************************************************************************
***************************************************************************
The Mortality and Expense Risk Charge as stated in the body of
the prospectus will vary between 35 and 125 basis points. The
variations will depend upon the precise combination of features
incorporated into the particular form of the Certificate.
***************************************************************************
***************************************************************************
Deductions for Mortality and Expense Risk Charge
Although variable annuity payments made to Annuitants will vary in
accordance with the investment performance of the investments of the
Variable Account, they will not be affected by the mortality experience
(death rate) of persons receiving such payments or of the general
population. Keyport guarantees the Death Benefits described below (see
"Death Provisions"). [Keyport assumes an expense risk that the asset-based
Administrative Charge will be insufficient to cover the anticipated portion
of Keyport's administrative expenses.] [Keyport assumes an expense risk
since the Certificate Maintenance Charge after the Income Date will stay
the same and not be affected by variations in expenses.]
To compensate it for assuming mortality and expense risks, for each
Valuation Period Keyport deducts from each Sub-Account a Mortality and
Expense Risk Charge equal on an annual basis to [.35 - 1.25]% of the
average daily net asset value of the Sub-Account. The charge is deducted
during both the accumulation and annuity periods (i.e., both before and
after the Income Date). [Less than the full charge will be deducted from
Sub-Account values attributable to Certificates issued to employees of
Keyport and other persons specified in "Sales of the Certificates".]
[Additionally, Keyport may, in certain circumstances described in "Sales of
the Certificates" offer to credit additional interest from Keyport's
general account to a Purchase Payment upon receipt as an allowance for
future deductions of the Mortality and Expense Risk Charge.]
[Deductions for Daily Distribution Charge
***************************************************************************
***************************************************************************
A daily Distribution Charge may not apply to all forms of the
Certificate. It will be imposed at a maximum rate of 15 basis
points of net assets when such imposition combined with any
contingent deferred sales charge does not result in the
imposition of sales charges that exceed 9% of Purchase Payments.
***************************************************************************
***************************************************************************
Keyport also deducts from each Sub-Account each Valuation Period a daily
Distribution Charge equal on an annual basis to 0.[15]% of the average
daily net asset value of the Sub-Account. This charge compensates Keyport
for certain sales distribution expenses relating to the Certificate.
This charge will not be deducted from Sub-Account values attributable to
Certificates that have reached the maximum cumulative distribution charge
limit defined below and to Certificates issued to employees of Keyport and
other persons specified in "Sales of the Certificates". The charge is also
not deducted from Sub-Account values attributable to Annuity Units.
Keyport may decide not to deduct the charge from Sub-Account values
attributable to a Certificate issued in an internal exchange or transfer of
an annuity contract of Keyport's general account.]
[Deductions for Daily Administrative Charge
***************************************************************************
***************************************************************************
A daily Administrative Charge may not apply to all forms of the
Certificate. The maximum daily Administrative Charge will be 15 basis
points. This charge may be adjusted giving consideration to the amount
of the Certificate Maintenance Charge.
***************************************************************************
***************************************************************************
Keyport also deducts from each Sub-Account each Valuation Period an
Administrative Charge equal on an annual basis to 0.[15]% of the average
daily net asset value of the Sub-Account. This charge compensates Keyport
for a portion of the administrative expenses relating to the Certificate.]
[Deductions for Contingent Deferred Sales Charge
***************************************************************************
***************************************************************************
The Contingent Deferred Sales Charge may not apply to all forms
of the Certificate. The Contingent Deferred Sales Charge,
including any amounts deducted through the daily Sales Charge,
will not exceed 9% of Purchase Payments. The Contingent Deferred
Sales Charge, not including any amount deducted through the daily
Sales Charge, will in no event exceed a duration of 7 years and
7%.
***************************************************************************
***************************************************************************
A sales charge is not deducted from the Certificate's Purchase Payments
when initially received. However, a Contingent Deferred Sales Charge may
be deducted upon a surrender.
In order to determine whether a Contingent Deferred Sales Charge will be
due upon a partial or total surrender, Keyport maintains a separate set of
records. These records identify the date and amount of each Purchase
Payment made to the Certificate and the Certificate Value over time.
Certificate Owners will be permitted to make partial surrenders during the
Accumulation Period without incurring a Contingent Deferred Sales Charge,
as follows:
1. In any Certificate Year, Certificate Owners may withdraw an
aggregate amount not to exceed, at the time of the withdrawal, the
Certificate's earnings, which equal: (a) the Certificate Value, less (b)
the portion of the Purchase Payments not previously withdrawn.
2. In any Certificate Year after the first, Certificate Owners
may withdraw, in addition to the amount available in 1., the amount by
which 10% of the Certificate Value as of the preceding Certificate
Anniversary exceeds the amount available in 1.
Contingent Deferred Sales Charges, as discussed below, will be deducted
with respect to withdrawals in excess of these amounts.
In computing the applicable charge amounts, the amount of any surrender in
any Certificate Year after the first as set forth in 2. above, will be
deducted from the Purchase Payments in chronological order from the oldest
to the most recent until the amount is fully deducted. Any amount so
deducted will not be subject to a charge.
The following additional amounts will be deducted from the Purchase
Payments in the same chronological order: the amount of any surrender in
the first Certificate Year in excess of the amount set forth in 1. above
and the amount of any surrender in any later Certificate Year in excess of
the combined amount set forth in 1. and 2. above. The Contingent Deferred
Sales Charge for each Purchase Payment from which a deduction is made will
be equal to (a) multiplied by (b), where:
(a) is the amount so deducted; and
(b) is the applicable percentage for the number of years that have elapsed
from the date of that payment to the date of surrender. Years are
measured from the month and day of payment to the same month and day
in each subsequent calendar year. The percentages applicable to each
Purchase Payment during the [seven] years after the date of its
payment are: [7% during year 1; 6% during year 2; 5% during year 3; 4%
during year 4; 3% during year 5; 2% during year 6; 1% during year 7;]
and 0% thereafter.
The applicable Contingent Deferred Sales Charges for each Purchase Payment
are then totalled. The lesser of this total amount and the Certificate's
maximum cumulative distribution charge will be deducted from the
Certificate Value in the same manner as the surrender amount. The maximum
cumulative distribution charge is equal to (a) less (b), where (a) is 9% of
the total Purchase Payments made to the Certificate and (b) is the sum of
all prior Contingent Deferred Sale Charge deductions from the Certificate
Value [and all prior Variable Account daily distribution charges applicable
to the Certificate from the 0.15% distribution charge factor.] After each
surrender, Keyport's records will be adjusted to reflect any deductions
made from the applicable Purchase Payments.
Example: Two Purchase Payments were made one year apart for $5,000 and
$7,000. The Certificate Value has grown to an assumed $13,200 when the
Certificate Owner decides to withdraw $8,000. The Certificate Value at the
beginning of the Certificate Year of surrender was $13,000. The Contingent
Deferred Sales Charge percentages at the time of surrender are an assumed
5% for the $5,000 payment and 6% for the $7,000 payment. The portion of
the surrender representing the Certificate's earnings ($13,200 less
$12,000, or $1,200) would not be subject to charges. Since $1,200 is less
than the amount guaranteed not to have charges (10% of $13,000, or $1,300),
an additional $100 would not be subject to charges. This $100 would be
deducted from the oldest Purchase Payment, reducing it from $5,000 to
$4,900. The $1,200 increase in value plus the additional $100 leaves
$6,700 ($8,000 - 1,200 - 100) to be deducted. This $6,700 would be
deducted from the $4,900 of the first payment still left and $1,800 of the
second payment. The total Contingent Deferred Sales Charge would be $4,900
multiplied by the applicable 5% and $1,800 times the applicable 6%, or a
total of $353. The distribution charge records would now reflect $0 for
the 1st payment and $5,200 for the 2nd payment. The $8,000 requested plus
the $353 charge would be deducted from Certificate Values under the rules
specified in the "Partial Withdrawals and Surrender" on Page x..
The Contingent Deferred Sales Charge, when it is applicable, will be used
to cover the expenses of selling the Certificate, including compensation
paid to selling dealers and the cost of sales literature. Any expenses not
covered by the charge will be paid from Keyport's general account, which
may include monies deducted from the Variable Account for the Mortality and
Expense Risk Charge.
The Contingent Deferred Sales Charge will be waived in the event a Covered
Person is confined in a medical facility in accordance with the provisions
and conditions of an endorsement relating to such confinements.
The Contingent Deferred Sales Charge will be eliminated under Certificates
issued to employees of Keyport and other persons specified in "Sales of the
Certificates".
[Keyport may reduce or change to 0% any Contingent Deferred Sales Charge
percentage under a Certificate issued in an internal exchange or transfer
of an annuity contract of Keyport's general account.]
[Keyport may allow, under the Systematic Withdrawal Program and under other
permitted circumstances, all or part of the amount in 2. on Page xx to also
be available in the first Certificate Year. If so, the amount in 2. above
will be calculated by substituting the initial Purchase Payment for the
Certificate Value.]
[Deductions for Transfers of Variable Account Value
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The charge for transfers will range from zero to an amount not to
exceed $50.
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The Certificate allows Keyport to charge a transfer fee. [Currently no fee
is being charged.] Certificate Owners will be notified, in advance, of the
imposition of any fee. The fee will not exceed $[50].]
Deductions for Premium Taxes
Keyport deducts the amount of any premium taxes levied by any state or
governmental entity when paid unless Keyport elects to defer such
deduction. It is not possible to describe precisely the amount of premium
tax payable on any transaction involving the Certificate offered hereby.
Such premium taxes depend, among other things, on the type of Certificate
(Qualified or Non-Qualified), on the state of residence of the Certificate
Owner, the state of residence of the Annuitant, the status of Keyport
within such states, and the insurance tax laws of such states. Currently
such premium taxes range from 0% to 5.0% of either total Purchase Payments
or Certificate Value.
Deductions for Income Taxes
Keyport will deduct from any amount payable under the Certificate any
income taxes that a governmental authority requires Keyport to withhold
with respect to that amount. See "Income Tax Withholding" [and "Tax-
Sheltered Annuities"].
Total Variable Account Expenses
Total Variable Account expenses in relation to the Certificate will be [the
Certificate Maintenance Charge,] the Mortality and Expense Risk Charge,
[the daily Distribution Charge,] [and the daily Administrative Charge.]
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and therefore the deductions from and expenses paid
out of the assets of the Eligible Funds. These deductions and expenses are
described in the Eligible Fund prospectus.
[OTHER SERVICES
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Each of the following Programs may or may not be offered under
any form of the Certificate. If only one Program is offered, the
plural nature of the first two paragraphs will be adjusted
accordingly. The minimum amount that may be transferred under the
Dollar Cost Averaging Program ranges between $75 and $750. The
required notice period for the Rebalancing Program will not
exceed thirty days. The minimum Purchase Payment for the
Systematic Investment Program ranges between $50 and $1000. The
minimum amount that may be withdrawn under the Systematic
Withdrawal Program ranges between $100 and $250.
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[The Program[s]]. Keyport offers several investment related programs which
are available only prior to the Income Date: [Asset Allocation]; [Dollar
Cost Averaging]; [Systematic Investment]; and [Systematic Withdrawal]
Programs. [A Rebalancing Program is available prior to and after the Income
Date.] Under each Program that utilizes transfers, the related transfers
between and among Sub-Accounts [and the Fixed Account] are not counted as
one of the [twelve] free transfers. Each of the Programs has its own
requirements, as discussed below. Keyport reserves the right to terminate
any Program.
If the Certificate Owner has submitted the required telephone authorization
form, certain changes may be made by telephone. For those Programs
involving transfers, Owners may change instructions by telephone with
regard to which Sub-Accounts [or the Fixed Account] Certificate Value may
be transferred. The current conditions and procedures are described in
Appendix [B].
[Dollar Cost Averaging Program. Keyport offers a Dollar Cost Averaging
Program that Certificate Owners may participate in by Written Request. The
program periodically transfers Accumulation Units from the [XX-1] Sub-
Account [or the One-Year Guarantee Period of the Fixed Account] to other
Sub-Accounts selected by the Certificate Owner. The program allows a
Certificate Owner to invest in Variable Sub-Accounts over time rather than
having to invest in those Sub-Accounts all at once. The program is
available for initial and subsequent Purchase Payments and for Certificate
Value transferred into the [XX-1] Sub-Account [or the One-Year Guarantee
Period.] Under the program, Keyport makes automatic transfers on a
periodic basis out of the [XX-1] Sub-Account [or the One-Year Guarantee
Period] into one or more of the other available Sub-Accounts (Keyport
reserves the right to limit the number of Sub-Accounts the Certificate
Owner may choose but there are currently no limits).
The Certificate Owner by Written Request must specify the [XX-1] Sub-
Account [or the One Year Guarantee Period] from which the transfers are to
be made, the monthly amount to be transferred [(minimum $750)] and the Sub-
Account(s) to which the transfers are to be made. The first transfer will
occur at the close of the Valuation Period designated by Keyport that is
within 30 days after the receipt of the Certificate Owner's Written
Request. Each succeeding transfer will occur at the close of the same
Valuation Period of the subsequent chosen interval (e.g., if monthly
transfers are selected and the first transfer occurs on April 8, the second
transfer will occur at the close of the Valuation Period that includes May
8). When the remaining value is less than the monthly transfer amount, that
remaining value will be transferred and the program will end. Before this
final transfer, the Certificate Owner may extend the program by allocating
additional Purchase Payments to the [XX-1] Sub-Account [or the One Year
Guarantee Period] or by transferring Certificate Value to the [XX-1] Sub-
Account [or the One Year Guarantee Period.] The Certificate Owner may, by
Written Request or by telephone, change the monthly amount to be
transferred, change the Sub-Account(s) to which the transfers are to be
made, or end the program. The program will automatically end if the Income
Date occurs. Keyport reserves the right to end the program at any time by
sending the Certificate Owner a notice one month in advance.
Written or telephone instructions must be received by Keyport by the end
(currently 4:00 PM Eastern Time) of the business day preceding the next
scheduled transfer in order to be in effect for that transfer. Telephone
instructions are subject to the conditions and procedures established by
Keyport from time to time. The current conditions and procedures appear in
Appendix [B], and Certificate Owners in a dollar cost averaging program
will be notified, in advance, of any changes.]
[Asset Allocation Program
Certificate Owners may select from five asset allocation model portfolios
separately developed by Ibbotson Associates and Standard & Poor's. (Model
A - Capital Preservation, Model B - Income and Growth, Model C - Moderate
Growth, Model D - Growth, and Model E - Aggressive Growth.) If a
Certificate Owner elects one of the models, initial and subsequent Purchase
Payments will automatically be allocated among the Sub-Accounts in the
model. Only one model may be used in a Certificate at a time. Certificate
Owners may use a questionnaire and scoring system to determine the model
which corresponds to their risk tolerance and time horizons.
Periodically Ibbotson Associates and Standard & Poor's will review the
models and may determine that a reconfiguration of the Sub-Accounts and
percentage allocations among those Sub-Accounts is appropriate. Certificate
Owners will receive notification prior of any reconfiguration.
[The Fixed Account is not available in any asset allocation model. A
Certificate Owner may allocate initial or subsequent Purchase Payments, or
Certificate Value, between an asset allocation model and the Fixed
Account.]
[Rebalancing Program. In accordance with the Certificate Owner's election
of the relative Purchase Payments percentage allocations, Keyport will
automatically rebalance the Certificate Value of each Sub-Account [either]
[monthly,] [quarterly,] [semi-annually,] [or] [annually]. On the last day
of the [period selected] [month] [calendar quarter] [year], Keyport will
automatically rebalance the Certificate Value in each of the Sub-Accounts
to match the current Purchase Payments percentage allocations. The Program
may be terminated at any time and the percentages may be altered by Written
Request. The requested change must be received at the Office [thirty (30)]
days prior to the end of the [period selected] [month] [calendar quarter]
[year]. [Certificate Value allocated to the Fixed Account is not subject
to automatic rebalancing.] After the Income Date, automatic rebalancing
applies only to variable annuity payments and Keyport will rebalance the
number of Annuity Units in each Sub-Account. Annuity Units are used to
calculate the amount of each Sub-Account annuity payment; see "Variable
Annuity Benefits" in the Statement of Additional Information.]
[Systematic Investment Program. Purchase Payments under Non-Qualified
Certificates may be made by monthly deductions from the bank account [or
payroll] of any Certificate Owner that has completed and returned to
Keyport a Systematic Investment Program application and authorization form.
The application and authorization form may be obtained from Keyport or from
the sales representative. Each Systematic Investment Program Purchase
Payment is subject to a minimum of [$50.]
[Systematic Withdrawal Program. To the extent permitted by law, Keyport
will make monthly, quarterly, semi-annual or annual distributions of a
predetermined dollar amount to the Certificate Owner that has enrolled in
the Systematic Withdrawal Program. Under the Program, all distributions
will be made directly to the Certificate Owner and will be treated for
federal tax purposes as any other withdrawal or distribution of Certificate
Value. (See "Tax Status".) The Certificate Owner may specify the amount
of each partial withdrawal, subject to a minimum of [$100]. [Systematic
withdrawals may [only] be made from [the] [any] Sub-Account[s] [[or][and]
the [One][, Three][, Five][and Seven] Year Guarantee Period[s] of the Fixed
Account.] [In each Certificate Year, portions of Certificate Value may be
withdrawn without the imposition of any Contingent Deferred Sales Charge
("Free Withdrawal Amount"). If withdrawals pursuant to the Program are
greater than the Free Withdrawal Amount, the amount of the withdrawals
greater than the Free Withdrawal Amount will be subject to the applicable
Contingent Deferred Sales Charge. Any unrelated voluntary partial
withdrawal a Certificate Owner makes during a Certificate Year will be
aggregated with withdrawals pursuant to the Program to determine the
applicability of any Contingent Deferred Sales Charge under the Certificate
provisions regarding partial withdrawals.]
Unless the Certificate Owner specifies the Sub-Account or Sub-Accounts [or
the Fixed Account] from which withdrawals of Certificate Value shall be
made or if the amount in a specified Sub-Account is less than the
predetermined amount, Keyport will make withdrawals under the Program in
the manner specified for partial withdrawals in "Partial Withdrawals and
Surrender". All Sub-Account withdrawals under the Program will be effected
by canceling the number of Accumulation Units equal in value to the amount
to be distributed to the Certificate Owner [and any applicable Contingent
Deferred Sales Charge].
[The Program may be combined with all other Programs [except the Systematic
Investment Program].]
[It may not be advisable to participate in the Systematic Withdrawal
Program [and incur a Contingent Deferred Sales Charge] when making
additional Purchase Payments under the Certificate.]]
THE CERTIFICATES
Variable Account Value
The Variable Account Value for a Certificate is the sum of the value of
each Sub-Account to which values are allocated under a Certificate. The
value of each Sub-Account is determined at any time by multiplying the
number of Accumulation Units attributable to that Sub-Account by the
Accumulation Unit value for that Sub-Account at the time of determination.
The Accumulation Unit value is an accounting unit of measure used to
determine the change in an Accumulation Unit's value from Valuation Period
to Valuation Period.
Each Purchase Payment that is made results in additional Accumulation Units
being credited to the Certificate and the appropriate Sub-Account
thereunder. The number of additional units for any Sub-Account will equal
the amount allocated to that Sub-Account divided by the Accumulation Unit
value for that Sub-Account at the time of investment.
Valuation Periods
The Variable Account is valued each Valuation Period using the net asset
value of the Eligible Fund shares. A Valuation Period is the period
commencing at the close of trading on the New York Stock Exchange on each
Valuation Date and ending at the close of trading for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock
Exchange is open for business. The New York Stock Exchange is currently
closed on weekends, New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Net Investment Factor
Variable Account Value will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect value, Keyport utilizes an Accumulation Unit value.
Each Sub-Account has its own Accumulation Units and value per Unit. The
Unit value applicable during any Valuation Period is determined at the end
of that period.
When Keyport first purchased Eligible Fund shares on behalf of the Variable
Account, Keyport valued each Accumulation Unit at a specified dollar
amount. The Unit value for each Sub-Account in any Valuation Period
thereafter is determined by multiplying the value for the prior period by a
net investment factor. This factor may be greater or less than 1.0;
therefore, the Accumulation Unit may increase or decrease from Valuation
Period to Valuation Period. Keyport calculates a net investment factor for
each Sub-Account by dividing (a) by (b) and then subtracting (c) (i.e., (a
, b) _ c), where:
(a) is equal to:
(i) the net asset value per share of the Eligible Fund at the
end of the Valuation Period; plus
(ii) the per share amount of any distribution made by the
Eligible Fund if the "ex-dividend" date occurs during that same
Valuation Period.
(b) is the net asset value per share of the Eligible Fund at the end of
the prior Valuation Period.
(c) is equal to:
(i) the Valuation Period equivalent of the
Mortality and Expense Risk Charge; plus
[(ii) the Valuation Period equivalent of the
daily Distribution Charge; plus]
[(iii) the Valuation Period equivalent of the
daily Administrative Charge; plus]
[(iv)] a charge factor, if any, for any tax
provision established by Keyport as a result of the
operations of that Sub-Account.
[If a Certificate ever reaches the maximum cumulative sales charge limit
defined in "Deductions for Contingent Deferred Sales Charge", the daily
Distribution Charge in (c)(ii) above will be eliminated thereafter.] For
Certificates issued to employees of Keyport and other persons specified in
"Sales of the Certificates", the Mortality and Expense Risk Charge in
(c)(i) above is [.35]%[, and the daily [Distribution][Administrative]
Charge in (c)[(ii)][(iii)] above is eliminated. The daily Distribution
Charge in (c)(ii) above may be eliminated for certain Certificates issued
in an internal exchange or transfer (see "Deductions for Daily Distribution
Charges".]
Modification of the Certificate
Only Keyport's President or Secretary may agree to alter the Certificate or
waive any of its terms. Any changes must be made in writing and with the
Certificate Owner's consent, except as may be required by applicable law.
Right to Revoke
The Certificate Owner may return the Certificate within 10 days after he or
she receives it by delivering or mailing it to Keyport's Office. The
return of the Certificate by mail will be effective when the postmark is
affixed to a properly addressed and postage-prepaid envelope. The returned
Certificate will be treated as if Keyport never issued it and Keyport will
refund either the Certificate Value or Purchase Payments, as required by
state law. [If the Certificate is delivered in a state that requires the
return of Certificate Value, Certificate Value will immediately be
allocated to the Sub-Accounts selected in the application. If the
Certificate is delivered in a state that requires the return of Purchase
Payments, Certificate Value will be allocated to the [XX-1] Sub-Account (a
Money Market Sub-Account) for a period of 20 or 30 days if the particular
state requires a "free-look" period of 10 or 20 days, respectively.
Thereafter the Certificate Value will be allocated to the Sub-Accounts
selected in the application.]
For Certificates delivered in California to a Certificate Owner age 60 or
older, the Certificate Owner may return the Certificate to Keyport's Office
or to the agent from whom the Certificate was purchased. If the
Certificate is received at Keyport's Office or by the agent within 30 days
after the Certificate Owner receives the Certificate, Keyport will refund
the Certificate Value.
DEATH PROVISIONS FOR NON-QUALIFIED CERTIFICATES
Death of Primary Owner, Joint Owner or Certain Non-Owner Annuitant
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One or more of the three Death Benefit options described below
may be included under any form of the Certificate.
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These provisions apply if, before the Income Date while the Certificate is
In Force, the primary Certificate Owner or any joint Certificate Owner dies
(whether or not the decedent is also the Annuitant) or the Annuitant dies
under a Certificate with a non-natural Certificate Owner such as a trust.
The Designated Beneficiary will control the Certificate after such a death.
If the decedent's surviving spouse (if any) is the sole Designated
Beneficiary, the surviving spouse will automatically become the new sole
primary Certificate Owner as of the decedent's date of death. And, if the
Annuitant is the decedent, the new Annuitant will be any living contingent
annuitant, otherwise the surviving spouse. The Certificate can stay In
Force until another death occurs (i.e., until the death of the Annuitant,
primary Certificate Owner or joint Certificate Owner). Except for this
paragraph, all of "Death Provisions" will apply to that subsequent death.
In all other cases, the Certificate may continue up to five years from the
date of death. During this period, the Designated Beneficiary may exercise
all ownership rights, including the right to make transfers or partial
surrenders or the right to totally surrender the Certificate for its
Surrender Value. If the Certificate is still in effect at the end of the
five-year period, Keyport will automatically end it then by paying the
Certificate Value to the Designated Beneficiary. If the Designated
Beneficiary is not then alive, Keyport will pay any person(s) named by the
Designated Beneficiary in a Written Request; otherwise the Designated
Beneficiary's estate.
The Covered Person under this paragraph shall be [the decedent if he or she
is the first to die of] the primary Certificate Owner, [Joint Certificate
Owner], [Annuitant], or, if there is a non-natural Certificate Owner such
as a trust, the Annuitant shall be the Covered Person. If the Covered
Person dies, the Certificate Value will be increased, as provided below, if
it is less than the Death Benefit Amount ("DBA"). The DBA is:
[[1]. The DBA at issue is the initial Purchase Payment. Thereafter, it is
the prior death benefit plus any additional Purchase Payments, less any
partial withdrawals, including any applicable surrender charge.]
[[2]. The DBA at issue is the initial Purchase Payment. Thereafter, the
DBA is calculated for each Valuation period by adding any additional
Purchase Payments, and deducting any partial withdrawals[, including any
applicable surrender charge]. This resulting amount is the "net Purchase
Payment death benefit". The Certificate Value for each Certificate
Anniversary (the "Anniversary Value") before the [81st] birthday of the
Covered Person is determined. Each Anniversary Value is increased by any
Purchase Payments made after that anniversary. This resultant value is
then decreased by an amount calculated at the time of any partial
withdrawal made after that anniversary. The amount is calculated by taking
the amount of any partial withdrawal, and dividing by the Certificate Value
immediately preceding the partial withdrawal, and then multiplying by the
Anniversary Value immediately preceding the withdrawal. The greatest
Anniversary Value, as so adjusted, (the "greatest Anniversary Value") is
the DBA unless the net Purchase Payment death benefit is higher. The net
Purchase Payment death benefit will be the DBA if such amount is higher
than the greatest Anniversary Value.]
[[3]. The DBA at issue is the initial Purchase Payment. Thereafter, the
DBA is calculated for each Valuation Period by applying a death benefit
interest rate to the previously calculated DBA, adding any Purchase
Payments made during the current Valuation Period and deducting any partial
withdrawals, including any applicable surrender charge, taken during the
current Valuation Period. The death benefit interest rate is applied to
each Purchase Payment until it equals the Maximum Guaranteed Death Benefit.
Initially, the Maximum Guaranteed Death Benefit will be a multiple of the
initial and additional Purchase Payments made, each computed separately,
determined as of the date of death based on such factors as the then
stipulated interest rate or the net rate of return of certain Sub-Accounts
[or the Fixed Account], as described below. Thereafter, the Maximum
Guaranteed Death Benefit as of the effective date of a partial withdrawal
is reduced first by the amount of the withdrawal representing earnings and
second in proportion to the reduction in Certificate Value for any partial
withdrawal representing Purchase Payments.
The death benefit interest rate compounded annually will be a stipulated
interest rate, except that with regard to amounts in the Sub-Accounts
investing in money market, short term bond or income Funds [or the General
Account (the "Fixed Account")] the interest rate applied will be the net
rate of return for such Funds, respectively, if it is less than the
stipulated death benefit interest rate.]
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The period of time during which the Surrender Charge may be waived
following death ranges between 60 and 180 days.
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When Keyport receives due proof of the Covered Person's death, Keyport will
compare, as of the date of death, the Certificate Value to the DBA. If the
Certificate Value was less than the DBA, Keyport will increase the current
Certificate Value by the amount of the difference. Note that while the
amount of the difference is determined as of the date of death, that amount
is not added to the Certificate Value until Keyport receives due proof of
death. The amount to be credited will be allocated to the Variable Account
[and/or the Fixed Account] based on the Purchase Payment allocation
selection that is in effect when Keyport receives due proof of death.
Whether or not the Certificate Value is increased because of this minimum
death provision, the Designated Beneficiary may, by the later of the 90th
day after the Covered Person's death and the 60th day after Keyport is
notified of the death, surrender the Certificate for the Certificate
Withdrawal Value [without any applicable Contingent Deferred Sales Charge
being deducted. For a surrender after the applicable 90 or 60 day period
and for a surrender at any time after the death of a non-Covered Person,
any applicable Contingent Deferred Sales Charge would be deducted]. If the
Certificate is not surrendered, it will continue for the time period
specified above.
Payment of Benefits. Instead of receiving a lump sum, the Certificate
Owner or any Designated Beneficiary may direct by Written Request that
Keyport pay any benefit of $5,000 or more under an annuity payment option
that meets the following: (a) the first payment to the Designated
Beneficiary must be made no later than one year after the date of death;
(b) payments must be made over the life of the Designated Beneficiary or
over a period not extending beyond that person's life expectancy; and (c)
any payment option that provides for payments to continue after the death
of the Designated Beneficiary will not allow the successor payee to extend
the period of time over which the remaining payments are to be made.
Death of Certain Non-Certificate Owner Annuitant. These provisions apply
if, before the Income Date while the Certificate is In Force, (a) the
Annuitant dies, (b) the Annuitant is not a Certificate Owner, and (c) the
Certificate Owner is a natural person. The Certificate will continue after
the Annuitant's death. The new Annuitant will be any living contingent
annuitant, otherwise the primary Certificate Owner. [If the Annuitant is
the first to die of the Certificate's primary Certificate Owner, Joint
Certificate Owner and Annuitant, then the Annuitant is the Covered Person
and the Certificate Value will be increased, as provided below, if it is
less than the Death Benefit Amount ("DBA"), as defined above. When Keyport
receives due proof of the Annuitant's death, Keyport will compare, as of
the date of death, the Certificate Value to the DBA. If the Certificate
Value was less than the DBA, Keyport will increase the current Certificate
Value by the amount of the difference. Note that while the amount of the
difference is determined as of the date of death, that amount is not added
to the Certificate Value until Keyport receives due proof of death. The
amount to be credited will be allocated to the Variable Account [and/or the
Fixed Account] based on the Purchase Payment allocation selection that is
in effect when Keyport receives due proof of death. Whether or not the
Certificate Value is increased because of this minimum death provision, the
Certificate Owner may surrender the Certificate within 90 days of the date
of the Annuitant's death for the Certificate Withdrawal Value [without any
applicable Contingent Deferred Sales Charge being deducted]. [For a
surrender after 90 days, any applicable Contingent Deferred Sales Charge
would be deducted.]]
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
Death of Annuitant. If the Annuitant dies before the Income Date while the
Certificate is In Force, the Designated Beneficiary will control the
Certificate after such a death. The Certificate Value will be increased,
as provided below, if it is less than the Death Benefit Amount ("DBA") as
defined above. When Keyport receives due proof of the Annuitant's death,
Keyport will compare, as of the date of death, the Certificate Value to the
DBA. If the Certificate Value was less than the DBA, Keyport will increase
the current Certificate Value by the amount of the difference. Note that
while the amount of the difference is determined as of the date of death,
that amount is not added to the Certificate Value until Keyport receives
due proof of death. The amount to be credited will be allocated to the
Variable Account [and/or the Fixed Account] based on the Purchase Payment
allocation selection that is in effect when Keyport receives due proof of
death. Whether or not the Certificate Value is increased because of this
minimum death provision, the Designated Beneficiary may, by the later of
the 90th day after the Annuitant's death and the 60th day after Keyport is
notified of the death, surrender the Certificate for the Certificate
Withdrawal Value [without any applicable Contingent Deferred Sales Charge
being deducted. For a surrender after the applicable 90 or 60 day period,
any applicable Contingent Deferred Sales Charge would be deducted].
If the Certificate is not surrendered, it may continue for the time period
permitted by the Internal Revenue Code provisions applicable to the
particular Qualified Plan. During this period, the Designated Beneficiary
may exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to totally surrender the Certificate for
its Certificate Withdrawal Value. If the Certificate is still in effect at
the end of the period, Keyport will automatically end it then by paying the
Certificate Withdrawal Value [(without the deduction of any applicable
Contingent Deferred Sales Charge)] to the Designated Beneficiary. If the
Designated Beneficiary is not alive then, Keyport will pay any person(s)
named by the Designated Beneficiary in a Written Request; otherwise the
Designated Beneficiary's estate.
Payment of Benefits. Instead of receiving a lump sum, the Certificate
Owner or any Designated Beneficiary may direct by Written Request that
Keyport pay any benefit of $5,000 or more under an annuity payment option
that meets the following: (a) the first payment to the Designated
Beneficiary must be made no later than one year after the date of death;
(b) payments must be made over the life of the Designated Beneficiary or
over a period not extending beyond that person's life expectancy; and (c)
any payment option that provides for payments to continue after the death
of the Designated Beneficiary will not allow the successor payee to extend
the period of time over which the remaining payments are to be made.
CERTIFICATE OWNERSHIP
The Certificate Owner shall be the person designated in the application.
The Certificate Owner may exercise all the rights of the Certificate.
Joint Certificate Owners are permitted but not contingent Certificate
Owners.
The Certificate Owner may by Written Request change the Certificate Owner,
primary beneficiary, contingent beneficiary or contingent annuitant. An
irrevocably-named person may be changed only with the written consent of
such person.
Because a change of Certificate Owner by means of a gift (i.e., a transfer
without full and adequate consideration) may be a taxable event, a
Certificate Owner should consult a competent tax adviser as to the tax
consequences resulting from such a transfer.
Any Qualified Certificate may have limitations on transfer of ownership. A
Certificate Owner should consult the Plan Administrator and a competent tax
adviser as to the tax consequences resulting from such a transfer.
ASSIGNMENT
The Certificate Owner may assign the Certificate at any time. A copy of
any assignment must be filed with Keyport. The Certificate Owner's rights
and those of any revocably-named person will be subject to the assignment.
Any Qualified Certificate may have limitations on assignability.
Because an assignment may be a taxable event, a Certificate Owner should
consult a competent tax adviser as to the tax consequences resulting from
any such assignment.
PARTIAL WITHDRAWALS AND SURRENDER
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The minimum amount to be withdrawn will range between $100 and
$500 and required Certificate Value following a withdrawal will
range between $500 to $2500.
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The Certificate Owner may make partial withdrawals from the Certificate.
Keyport must receive a Written Request and the minimum amount to be
withdrawn must be at least [$300] or such lesser amount as Keyport may
permit in conjunction with a Systematic Withdrawal Program. If the
Certificate Value after a partial withdrawal would be below $[2,500],
Keyport will treat the request as a withdrawal of only the excess amount
over $[2,500]. [The amount withdrawn will include any applicable
Contingent Deferred Sales Charge and therefore the amount actually
withdrawn may be greater than the amount of the surrender check requested.]
Unless the request specifies otherwise, the total amount withdrawn will be
deducted from all Sub-Accounts of the Variable Account in the ratio that
the value in each Sub-Account bears to the total Variable Account Value.
[If there is no value, or insufficient value, in the Variable Account, then
the amount surrendered, or the insufficient portion, will be deducted from
the Fixed Account in the ratio that each Guarantee Period's value bears to
the total Fixed Account Value.]
The Certificate Owner may totally surrender the Certificate by making a
Written Request. Surrendering the Certificate will end it. Upon
surrender, the Certificate Owner will receive the Certificate Withdrawal
Value.
Keyport will pay the amount of any surrender within seven days of receipt
of such request. Alternatively, the Certificate Owner may purchase for
himself or herself an annuity payment option with any surrender benefit of
at least $5,000. Keyport's consent is needed to choose an option if the
Certificate Owner is not a natural person.
Annuity options based on life contingencies cannot be surrendered after
annuity payments have begun. Option A, which is not based on life
contingencies, may be surrendered if a variable payout has been selected.
Because of the potential tax consequences of a full or partial surrender, a
Certificate Owner should consult a competent tax adviser regarding a
surrender.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Income Date and the Certificate is In
Force, payments will begin under the annuity option or options the
Certificate Owner has chosen. The amount of the payments will be
determined by applying the Certificate Value [increased or decreased by a
limited Market Value Adjustment of Fixed Account Value described in
Appendix A] (less any premium taxes not previously deducted [and less any
applicable Certificate Maintenance Charge]) on the Income Date in
accordance with the option selected.
Income Date and Annuity Option
The Certificate Owner may select an Income Date and an Annuity Option at
the time of application. If the Certificate Owner does not select an
Annuity Option, Option B will automatically be designated. If the
Certificate Owner does not select an Income Date for the Annuitant, the
Income Date will automatically be the earlier of (i) the later of the
Annuitant's 90th birthday and the 10th Certificate Anniversary and (ii) any
maximum date permitted under state law.
Change in Income Date and Annuity Option
The Certificate Owner may choose or change an Annuity Option or the Income
Date by making a Written Request to Keyport at least 30 days prior to the
Income Date. However, any Income Date must be: (a) for fixed annuity
options, not earlier than the first Certificate Anniversary; and (b) not
later than the earlier of (i) the later of the Annuitant's 90th birthday
and the 10th Certificate Anniversary and (ii) any maximum date permitted
under state law.
Annuity Options
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Keyport does not currently anticipate offering any additional
variable annuity options, but may offer additional fixed annuity
options. Any additional variable annuity options would be limited
to those that could be added by a filing pursuant to Rule 497 or
Rule 485(b).
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The Annuity Options are:
Option A: Income for a Fixed Number of Years;
Option B: Life Income with 10 Years of Payments Guaranteed; and
Option C: Joint and Last Survivor Income.
Other options may be arranged by mutual consent. Each option is available
in two forms_as a variable annuity for use with the Variable Account and as
a fixed annuity for use with [Keyport's general account] [Fixed Account].
Variable annuity payments will fluctuate while fixed annuity payments will
not. The dollar amount of each fixed annuity payment will be determined by
[dividing the amount being applied to a fixed annuity option] [deducting
from the [Variable Account] [Fixed Account] Value [increased or decreased
by a limited Market Value Adjustment described in Appendix A] any premium
taxes not previously deducted and [any applicable Certificate Maintenance
Charge and] then dividing the remainder] by $1,000 and multiplying the
result by the greater of: (a) the applicable factor shown in the
appropriate table in the Certificate; or (b) the factor currently offered
by Keyport at the time annuity payments begin. This current factor may be
based on the sex of the payee unless to do so would be prohibited by law.
If no Annuity Option is selected, Option B will automatically be applied.
Unless the Certificate Owner chooses otherwise, Variable Account Value,
less any premium taxes not previously deducted [and less any applicable
Certificate Maintenance Charge] will be applied in its entirety to a
variable annuity option [and Fixed Account Value [increased or decreased by
a limited Market Value Adjustment described in Appendix A] less any
applicable premium taxes not previously deducted will be applied to a fixed
annuity option.] Any premium taxes will be deducted proportionately from
[both] Variable Account Value [and Fixed Account Value]. Whether variable
or fixed, the same amount applied to each option will produce a different
initial annuity payment as well as different subsequent payments.
The payee is the person who will receive the sum payable under a payment
option. Any payment option that provides for payments to continue after
the death of the payee will not allow the successor payee to extend the
period of time over which the remaining payments are to be made.
If the amount available to apply under any variable or fixed option is less
than $5,000, Keyport has reserved the right to pay such amount in one sum
to the payee in lieu of the payment otherwise provided for.
Annuity payments will be made monthly unless quarterly, semi-annual or
annual payments are chosen by Written Request. However, if any payment
provided for would be or becomes less than $100, Keyport has the right to
reduce the frequency of payments to such an interval as will result in each
payment being at least $100.
Option A: Income For a Fixed Number of Years. Keyport will pay an annuity
for a chosen number of years, not fewer than 5 nor over [50] [(a period of
years over 30 may be chosen only if it does not exceed the difference
between age 100 and the Annuitant's age on the date of the first payment)].
[Option A is referred to as Preferred Income Plan (PIP).] At any time
while variable annuity payments are being made, the payee may elect to
receive the following amount: [(a)] the present value of the remaining
payments, commuted at the interest rate used to create the annuity factor
for this option (this interest rate is [6%] per year [(5% per year for
Oregon and Texas Certificates)], unless [3]% per year is chosen by Written
Request at the time the option is selected); [less (b) any Contingent
Deferred Sales Charge due by treating the value defined in (a) as a total
surrender. (See "Deductions for Contingent Deferred Sales Charge".]
Instead of receiving a lump sum, the payee may elect another payment option
[and the amount applied to the option will not be reduced by the charge
defined in (b) above]. If, at the death of the payee, Option A payments
have been made for fewer than the chosen number of years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity,
this interest rate is [6%] per year [(5% per year for Oregon and Texas
Certificates)], unless [3]% per year had been chosen by the payee at
the time the option was selected.
The Mortality and Expense Risk Charge is deducted during the Option A
payment period if a variable payout has been selected, but Keyport has no
mortality risk during this period.
[Keyport has available a "level monthly" payment option that can be chosen
for variable payments under Option A. Under this option, the monthly
payment amount changes every twelve months instead of every month as would
be the case under the standard monthly payment frequency. The "level
monthly" option converts an annual payment amount into twelve equal monthly
payments as follows. Each annual payment will be determined as described
below in "Variable Annuity Payment Values". Each annual payment will then
be placed in Keyport's general account, from which it will be paid out in
twelve equal monthly payments. The sum of the twelve monthly payments will
exceed the annual payment amount because of an interest rate factor used by
Keyport that will vary from year to year. If the payments are commuted, (1)
the commutation method described above for calculating the present value of
remaining payments applies to any remaining annual payments and (2) any
unpaid monthly payments out of the current twelve will be commuted at the
interest rate that was used to determine those twelve current monthly
payments.]
See "Annuity Payments" on Page x for the manner in which Option A may be
taxed.
Option B: Life Income with 10 Years of Payments Guaranteed. Keyport will
pay an annuity during the lifetime of the payee. If, at the death of the
payee, payments have been made for fewer than 10 years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity,
this interest rate is [6%] per year [(5% per year for Oregon and Texas
Certificates)], unless [3]% per year had been chosen by the payee at
the time the option was selected.
The amount of the annuity payments will depend on the age of the payee on
the Income Date and it may also depend on the payee's sex.
Option C: Joint and Last Survivor Income. Keyport will pay an annuity for
as long as either the payee or a designated second natural person is alive.
The amount of the annuity payments will depend on the age of both persons
on the Income Date and it may also depend on each person's sex. IT IS
POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF BOTH
PAYEES DIE AFTER THE RECEIPT OF THE FIRST PAYMENT OR TO RECEIVE ONLY TWO
ANNUITY PAYMENTS IF BOTH PAYEES DIE AFTER RECEIPT OF THE SECOND PAYMENT AND
SO ON.
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The frequency with which Certificate Owners may transfer the Sub- Accounts
from which variable annuity payments are made with vary between 0 and an
unlimited number of times during periods varying between 1 and 12 months.
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Variable Annuity Payment Values
The amount of the first variable annuity payment is determined by Keyport
using an annuity purchase rate that is based on an assumed annual
investment return of [6%] per year [(5% per year for Oregon and Texas
Certificates)], unless [3]% is chosen by Written Request. Subsequent
variable annuity payments will fluctuate in amount and reflect whether the
actual investment return of the selected Sub-Account(s) (after deducting
the Mortality and Expense Risk Charge) is better or worse than the assumed
investment return. The total dollar amount of each variable annuity
payment will be equal to: [(a)] the sum of all Sub-Account payments; [less
(b) the pro-rata amount of the annual Certificate Maintenance Charge.]
Currently, a payee may instruct Keyport to change the Sub-Account(s) used
to determine the amount of the variable annuity payments [unlimited] [1]
time[s] every [6] months.
Proof of Age, Sex, and Survival of Annuitant
Keyport may require proof of age, sex or survival of any payee upon whose
age, sex or survival payments depend. If the age or sex has been
misstated, Keyport will compute the amount payable based on the correct age
and sex. If income payments have begun, any underpayments Keyport may have
made will be paid in full with the next annuity payment. Any overpayments,
unless repaid in one sum, will be deducted from future annuity payments
until Keyport is repaid in full.
SUSPENSION OF PAYMENTS
[Keyport reserves the right to postpone surrender payments from the Fixed
Account for up to six months.] Keyport reserves the right to suspend or
postpone any type of payment from the Variable Account for any period when:
(a) the New York Stock Exchange is closed other than customary weekend or
holiday closings; (b) trading on the Exchange is restricted; (c) an
emergency exists as a result of which it is not reasonably practicable to
dispose of securities held in the Variable Account or determine their
value; or (d) the Securities and Exchange Commission permits delay for the
protection of security holders. The applicable rules and regulations of
the Securities and Exchange Commission shall govern as to whether the
conditions described in (b) and (c) exist.
TAX STATUS
Introduction
The Certificate is designed for use by individuals in retirement plans
which may or may not be Qualified Plans under the provisions of the
Internal Revenue Code (the "Code"). The ultimate effect of federal income
taxes on the Certificate Value, on annuity payments, and on the economic
benefit to the Certificate Owner, Annuitant or Designated Beneficiary
depends on the type of retirement plan for which the Certificate is
purchased and upon the tax and employment status of the individual
concerned. The discussion contained herein is general in nature and is not
intended as tax advice. Each person concerned should consult a competent
tax adviser. No attempt is made to consider any applicable state or other
tax laws. Moreover, the discussion herein is based upon Keyport's
understanding of current federal income tax laws as they are currently
interpreted. No representation is made regarding the likelihood of
continuation of those current federal income tax laws or of the current
interpretations by the Internal Revenue Service.
[Recent Developments
The President has proposed and Congress will be considering certain changes
to the Code that would have significant adverse tax consequences for
exchanges of variable annuities and transfers between sub-accounts, and the
calculation of the taxable portion of a full surrender or partial
withdrawals. It is impossible to predict whether any of the proposed
changes to the Code will be enacted or in what form.]
Taxation of Annuities in General
Section 72 of the Code governs taxation of annuities in general. There are
no income taxes on increases in the value of a Certificate until a
distribution occurs, in the form of a full surrender, a partial surrender,
an assignment or gift of the Certificate, or annuity payments. A trust or
other entity owning a Non-Qualified Certificate other than as an agent for
an individual is taxed differently; increases in the value of a Certificate
are taxed yearly whether or not a distribution occurs.
Surrenders, Assignments and Gifts. A Certificate Owner who fully
surrenders his or her Certificate is taxed on the portion of the payment
that exceeds his or her cost basis in the Certificate. For Non-Qualified
Certificates, the cost basis is generally the amount of the Purchase
Payments made for the Certificate and the taxable portion of the surrender
payment is taxed as ordinary income. For Qualified Certificates, the cost
basis is generally zero and the taxable portion of the surrender payment is
generally taxed as ordinary income subject to special 5-year income
averaging for lump-sum distributions received before January 1, 2000. A
Designated Beneficiary receiving a lump sum surrender benefit after the
death of the Annuitant or Certificate Owner is taxed on the portion of the
amount that exceeds the Certificate Owner's cost basis in the Certificate.
If the Designated Beneficiary elects to receive annuity payments within 60
days of the decedent's death, different tax rules apply. See "Annuity
Payments" below. For Non-Qualified Certificates, the tax treatment
applicable to Designated Beneficiaries may be contrasted with the income-
tax-free treatment applicable to persons inheriting and then selling mutual
fund shares with a date-of-death value in excess of their basis.
Partial withdrawals received under Non-Qualified Certificates prior to
annuitization are first included in gross income to the extent Certificate
Value exceeds Purchase Payments. Then, to the extent the Certificate Value
does not exceed Purchase Payments, such withdrawals are treated as a non-
taxable return of principal to the Certificate Owner. For partial
withdrawals under a Qualified Certificate, payments are treated first as a
non-taxable return of principal up to the cost basis and then a taxable
return of income. Since the cost basis of Qualified Certificates is
generally zero, partial surrender amounts will generally be fully taxed as
ordinary income.
A Certificate Owner who assigns or pledges a Non-Qualified Certificate is
treated as if he or she had received the amount assigned or pledged and
thus is subject to taxation under the rules applicable to partial
withdrawals or surrenders. A Certificate Owner who gives away the
Certificate (i.e., transfers it without full and adequate consideration) to
anyone other than his or her spouse is treated for income tax purposes as
if he or she had fully surrendered the Certificate.
A special computational rule applies if Keyport issues to the Certificate
Owner, during any calendar year, (a) two or more Certificates or (b) one or
more Certificates and one or more of Keyport's other annuity contracts.
Under this rule, the amount of any distribution includable in the
Certificate Owner's gross income is to be determined under Section 72(e) of
the Code by treating all the Keyport contracts as one contract. Keyport
believes that this means the amount of any distribution under one
Certificate will be includable in gross income to the extent that at the
time of distribution the sum of the values for all the Certificates or
contracts exceeds the sum of the cost bases for all the contracts.
Annuity Payments. The non-taxable portion of each variable annuity payment
is determined by dividing the cost basis of the Certificate [that is
allocated to Variable Account Value] by the total number of expected
payments while the non-taxable portion of each fixed annuity payment is
determined by an "exclusion ratio" formula which establishes the ratio that
the cost basis of the Certificate [that is allocated to Fixed Account
Value] bears to the total expected value of annuity payments for the term
of the annuity. The remaining portion of each payment is taxable. Such
taxable portion is taxed at ordinary income rates. For Qualified
Certificates, the cost basis is generally zero. With annuity payments
based on life contingencies, the payments will become fully taxable once
the payee lives longer than the life expectancy used to calculate the non-
taxable portion of the prior payments. Because variable annuity payments
can increase over time and because certain payment options provide for a
lump sum right of commutation, it is possible that the IRS could determine
that variable annuity payments should not be taxed as described above but
instead should be taxed as if they were received under an agreement to pay
interest. This determination would result in a higher amount (up to 100%)
of certain payments being taxable.
With respect to the "level monthly" payment option available under Annuity
Option A, pursuant to which each annual payment is placed in Keyport's
general account and paid out with interest in twelve equal monthly
payments, it is possible the IRS could determine that receipt of the first
monthly payout of each annual payment is constructive receipt of the entire
annual payment. Thus, the total taxable amount for each annual payment
would be accelerated to the time of the first monthly payout and reported
in the tax year in which the first monthly payout is received.
Penalty Tax. Payments received by Certificate Owners, Annuitants, and
Designated Beneficiaries under Certificates may be subject to both ordinary
income taxes and a penalty tax equal to 10% of the amount received that is
includable in income. The penalty tax is not imposed on amounts received:
(a) after the taxpayer attains age 59-1/2; (b) in a series of substantially
equal payments made for life or life expectancy; (c) after the death of the
Certificate Owner (or, where the Certificate Owner is not a human being,
after the death of the Annuitant); (d) if the taxpayer becomes totally and
permanently disabled; or (e) under a Non-Qualified Certificate's annuity
payment option that provides for a series of substantially equal payments,
provided only one Purchase Payment is made to the Certificate, the
Certificate is not issued as a result of a Section 1035 exchange, and the
first annuity payment begins in the first Certificate Year.
Income Tax Withholding. Keyport is required to withhold federal income
taxes on taxable amounts paid under Certificates unless the recipient
elects not to have withholding apply. Keyport will notify recipients of
their right to elect not to have withholding apply. See "Tax-Sheltered
Annuities" (TSAs) for an alternative type of withholding that may apply to
distributions from TSAs that are eligible for rollover to another TSA or an
individual retirement annuity or account (IRA).
Section 1035 Exchanges. A Non-Qualified Certificate may be purchased with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is Keyport's understanding that in such an event: (a) the new
Certificate will be subject to the distribution-at-death rules described in
"Death Provisions for Non-Qualified Certificates"; (b) Purchase Payments
made between August 14, 1982 and January 18, 1985 and the income allocable
to them will, following an exchange, no longer be covered by a
"grandfathered" exception to the penalty tax for a distribution of income
that is allocable to an investment made over ten years prior to the
distribution; and (c) Purchase Payments made before August 14, 1982 and the
income allocable to them will, following an exchange, continue to receive
the following "grandfathered" tax treatment under prior law: (i) the
penalty tax does not apply to any distribution; (ii) partial withdrawals
are treated first as a non-taxable return of principal and then a taxable
return of income; and (iii) assignments are not treated as surrenders
subject to taxation. Keyport's understanding of the above is principally
based on legislative reports prepared by the Staff of the Congressional
Joint Committee on Taxation. [See "Recent Developments".]
Diversification Standards. The U.S. Secretary of the Treasury has issued
regulations that set standards for diversification of the investments
underlying variable annuity contracts (other than pension plan contracts).
The Eligible Funds are designed to be managed to meet the diversification
requirements for the Certificate as those requirements may change from time
to time. If the diversification requirements are not satisfied, the
Certificate would not be treated as an annuity contract. As a consequence
to the Certificate Owner, income earned on a Certificate would be taxable
to the Certificate Owner in the year in which diversification requirements
were not satisfied, including previously non-taxable income earned in prior
years. As a further consequence, Keyport would be subjected to federal
income taxes on assets in the Variable Account.
The Secretary of the Treasury announced in September 1986 that he expects
to issue regulations which will prescribe the circumstances in which a
Certificate Owner's control of the investments of a segregated asset
account may cause the Certificate Owner, rather than the insurance company,
to be treated as the owner of the assets of the account. The regulations
could impose requirements that are not reflected in the Certificate.
Keyport, however, has reserved certain rights to alter the Certificate and
investment alternatives so as to comply with such regulations. Since the
regulations have not been issued, there can be no assurance as to the
content of such regulations or even whether application of the regulations
will be prospective. For these reasons, Certificate Owners are urged to
consult with their own tax advisers.
Qualified Plans
The Certificate is designed for use with several types of Qualified Plans.
The tax rules applicable to participants in such Qualified Plans vary
according to the type of plan and the terms and conditions of the plan
itself. Therefore, no attempt is made herein to provide more than general
information about the use of the Certificate with the various types of
Qualified Plans. Participants under such Qualified Plans as well as
Certificate Owners, Annuitants, and Designated Beneficiaries are cautioned
that the rights of any person to any benefits under such Qualified Plans
may be subject to the terms and conditions of the plans themselves
regardless of the terms and conditions of the Certificate issued in
connection therewith. Following are brief descriptions of the various
types of Qualified Plans and of the use of the Certificate in connection
therewith. Purchasers of the Certificate should seek competent advice
concerning the terms and conditions of the particular Qualified Plan and
use of the Certificate with that Plan.
[Tax-Sheltered Annuities
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts
and, subject to certain contribution limitations, exclude the amount of
Purchase Payments from gross income for tax purposes. However, such
Purchase Payments may be subject to Social Security (FICA) taxes. This
type of annuity contract is commonly referred to as a "Tax-Sheltered
Annuity" (TSA).
Section 403(b)(11) of the Code contains distribution restrictions.
Specifically, benefits may be paid, through surrender of the Certificate or
otherwise, only (a) when the employee attains age 59-1/2, separates from
service, dies or becomes totally and permanently disabled (within the
meaning of Section 72(m)(7) of the Code) or (b) in the case of hardship. A
hardship distribution must be of employee contributions only and not of any
income attributable to such contributions. Section 403(b)(11) does not
apply to distributions attributable to assets held as of December 31, 1988.
Thus, it appears that the law's restrictions would apply only to
distributions attributable to contributions made after 1988, to earnings on
those contributions, and to earnings on amounts held as of 12/31/88. The
Internal Revenue Service has indicated that the distribution restrictions
of Section 403(b)(11) are not applicable when TSA funds are being
transferred tax-free directly to another TSA issuer, provided the
transferred funds continue to be subject to the Section 403(b)(11)
distribution restrictions.
Keyport will notify a Certificate Owner who has requested a distribution
from a Certificate if all or part of such distribution is eligible for
rollover to another TSA or to an individual retirement annuity or account
(IRA). Any amount eligible for rollover treatment will be subject to
mandatory federal income tax withholding at a 20% rate if the Certificate
Owner receives the amount rather than directing Keyport by Written Request
to transfer the amount as a direct rollover to another TSA or IRA.]
Individual Retirement Annuities
Sections 408(b) and 408A of the Code permit eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" and "Roth IRA", respectively. These individual
retirement annuities are subject to limitations on the amount which may be
contributed, the persons who may be eligible, and on the time when
distributions may commence. In addition, distributions from certain types
of Qualified Plans may be placed on a tax-deferred basis into a Section
408(b) Individual Retirement Annuity.
[Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such retirement
plans may permit the purchase of the Certificate to provide benefits under
the plans.]
[Deferred Compensation Plans With Respect to Service for State and Local
Governments
Section 457 of the Code, while not actually providing for a Qualified Plan
as that term is normally used, provides for certain deferred compensation
plans that enjoy special income tax treatment with respect to service for
tax-exempt organizations, state governments, local governments, and
agencies and instrumentalities of such governments. The Certificate can be
used with such plans. Under such plans, a participant may specify the form
of investment in which his or her participation will be made. However, all
such investments are owned by and subject to the claims of general
creditors of the sponsoring employer.]
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with its view of present applicable law, Keyport will vote
the shares of the Eligible Funds held in the Variable Account at regular
and special meetings of the shareholders of the Eligible Funds in
accordance with instructions received from persons having the voting
interest in the Variable Account. Keyport will vote shares for which it
has not received instructions in the same proportion as it votes shares for
which it has received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation thereof should change,
and as a result Keyport determines that it is permitted to vote the shares
of the Eligible Funds in its own right, it may elect to do so.
The person having the voting interest under a Certificate prior to the
Income Date shall be the Certificate Owner. The number of shares held in
each Sub-Account which are attributable to each Certificate Owner is
determined by dividing the Certificate Owner's Variable Account Value in
each Sub-Account by the net asset value of the applicable share of the
Eligible Fund. The person having the voting interest after the Income Date
under an annuity payment option shall be the payee. The number of shares
held in the Variable Account which are attributable to each payee is
determined by dividing the reserve for the annuity payments by the net
asset value of one share. During the annuity payment period, the votes
attributable to a payee decrease as the reserves underlying the payments
decrease.
The number of shares in which a person has a voting interest will be
determined as of the date coincident with the date established by the
respective Eligible Fund for determining shareholders eligible to vote at
the meeting of the Fund and voting instructions will be solicited by
written communication prior to such meeting in accordance with the
procedures established by the Eligible Fund.
Each person having the voting interest in the Variable Account will receive
periodic reports relating to the Eligible Fund(s) in which he or she has an
interest, proxy material and a form with which to give such voting
instructions with respect to the proportion of the Eligible Fund shares
held in the Variable Account corresponding to his or her interest in the
Variable Account.
SALES OF THE CERTIFICATES
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Another registered broker-dealer that is an affiliate of Keyport
may serve as the principal underwriter of the Certificates.
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*
[Keyport Financial Services Corp. ("KFSC")] serves as the Principal
Underwriter for the Certificate described in this prospectus. The
Certificate will be sold by salespersons who represent Keyport Life
Insurance Company [KFSC's corporate parent] as variable annuity agents and
who are registered representatives of broker/dealers who have entered into
distribution agreements with [KFSC]. [KFSC] is registered under the
Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. It is located at [125 High Street, Boston,
Massachusetts 02110].
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The maximum compensation payable on the sale of Certificates is
7.00%.
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[A dealer selling the Certificate [may] receive[s] [no commission] [up to
[6.25%] of Purchase Payments] [with additional compensation later based on
the Certificate Value of those payments. During certain time periods
selected by Keyport and [KFSC], the percentage may increase to [7.00]%.]
[In addition, under certain circumstances, Keyport or certain of its
affiliates, under a marketing support agreement with [KFSC] may pay certain
sellers for other services not directly related to the sale of the
Certificates such as special marketing support allowances.]]
[Certificates may be sold with lower or no dealer compensation (1) to a
person who is an officer, director, or employee of Keyport, or an affiliate
of Keyport, [a trustee or officer of an Eligible Fund,] [an employee of the
investment adviser or sub-investment adviser of an Eligible Fund,] [or an
employee or associated person of an entity which has entered into a sales
agreement with the Principal Underwriter for the distribution of
Certificates,] or (2) to any Qualified Plan established for such a person.
Such Certificates may be different from the Certificates sold to others in
that [(1) they are not subject to the deduction for the [Certificate
Maintenance Charge,] [the asset-based Distribution Charge] [or the
Contingent Deferred Sales Charge] and (2)] they have a Mortality and
Expense Risk Charge of 0[.35]% per year. ]
[Certificates may be sold with lower or no dealer compensation as part of
an exchange program for other [fixed ("Old FA") and] variable ("Old VA")
annuity contracts previously issued by Keyport. A Certificate issued in
exchange for an Old VA will be issued with an exchange endorsement. One
effect of the endorsement is that no contingent deferred sales charge will
be assessed under the Old VA at the time of the exchange [and that any
Contingent Deferred Sales Charge assessed under the Certificate in relation
to the initial Purchase Payment (i.e., the amount exchanged) will be
calculated based on the actual time of each purchase payment under the Old
VA]. The endorsement also provides that the refund amount described in
"Right to Revoke" will not be made if the Certificate is returned. Instead,
Keyport will return the Old VA to the owner and treat it as if no exchange
had occurred.] [Additionally, under such an exchange program, Keyport may
offer to credit the initial Purchase Payment upon receipt with additional
interest equal to [3]% of the Purchase Payment. Interest credited
represents an allowance for future deductions of the Mortality and Expense
Risk Charge consistent with anticipated cost savings. Such interest will be
allocated on a pro-rata basis to the Sub-Accounts selected by the
Certificate Owner. The interest will be deducted from the Certificate Value
payable in the event the Certificate is returned pursuant to the "Right to
Revoke" provision.] [See "Recent Developments".]
LEGAL PROCEEDINGS
[There are no legal proceedings to which the Variable Account or the
Principal Underwriter are a party. Keyport is engaged in various kinds of
routine litigation which in its judgment is not of material importance in
relation to the total capital and surplus of Keyport.]
INQUIRIES BY CERTIFICATE OWNERS
Certificate Owners with questions about their Certificates may write
Keyport Life Insurance Company, Client Service Department, 125 High Street,
Boston, MA 02110, or call (800) 367-3653.
TABLE OF CONTENTS_STATEMENT OF ADDITIONAL INFORMATION
Page
Keyport Life Insurance Company
Variable Annuity Benefits
Variable Annuity Payment Values
Re-Allocating Sub-Account Payments
Custodian
Principal Underwriter
Experts
Investment Performance
[Average Annual Total Return for a Certificate
that is Surrendered [and for a Certificate that Continues]]
[Change in Accumulation Unit Value]
Yield[s] for [XX-1] Sub-Accounts
Financial Statements
Variable Account [A]
Keyport Life Insurance Company
***************************************************************************
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*
The Certificate may or may not provide for a Fixed Account Option.
***************************************************************************
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*
[APPENDIX A
THE FIXED ACCOUNT [(ALSO KNOWN AS THE MODIFIED GUARANTEED ANNUITY ACCOUNT)]
Introduction
This Appendix describes the Fixed Account option available under the
Certificate.
[FIXED ACCOUNT VALUES PROVIDED BY THE CERTIFICATE ARE SUBJECT TO A MARKET
VALUE ADJUSTMENT, THE OPERATION OF WHICH MAY RESULT IN UPWARD OR DOWNWARD
ADJUSTMENTS IN AMOUNTS TRANSFERRED AND AMOUNTS PAID (INCLUDING WITHDRAWALS,
SURRENDERS, DEATH BENEFITS, AND AMOUNTS APPLIED TO PURCHASE ANNUITY
PAYMENTS) TO A CERTIFICATE OWNER OR OTHER PAYEE. IN NO EVENT WILL THE
DOWNWARD MARKET VALUE ADJUSTMENT ELIMINATE INTEREST AT THE RATE OF 3% PER
YEAR APPLIED TO THE AMOUNT ALLOCATED TO A GUARANTEED PERIOD. PAYMENTS MADE
FROM FIXED ACCOUNT VALUES AT THE END OF THEIR GUARANTEE PERIOD ARE NOT
SUBJECT TO THE MARKET VALUE ADJUSTMENT.]
Purchase Payments allocated to the Fixed Account option become part of
Keyport's general account. Because of applicable exemptive and
exclusionary provisions, interests in the Fixed Account options have not
been registered under the Securities Act of 1933 ("1933 Act"), nor is the
general account an investment company under the Investment Company Act.
Accordingly, neither the general account, the Fixed Account option, nor any
interest therein, are subject to regulation under the 1933 Act or the
Investment Company Act. Keyport understands that the Securities and
Exchange Commission has not reviewed the disclosure in the prospectus
relating to the general account and the Fixed Account option.
Investments in the Fixed Account and Capital Protection Plus
Purchase Payments will be allocated to the Fixed Account in accordance with
the selection made by the Certificate Owner in the application. Any
selection must specify that percentage of the Purchase Payment that is to
be allocated to each Guarantee Period of the Fixed Account. The
percentage, if not zero, must be at least [10%]. The Certificate Owner may
change the allocation percentages without fee, penalty or other charge.
Allocation changes must be made by Written Request unless the Certificate
Owner has by Written Request authorized Keyport to accept telephone
allocation instructions from the Certificate Owner. By authorizing Keyport
to accept telephone changes, a Certificate Owner agrees to accept and be
bound by the conditions and procedures established by Keyport from time to
time. The current conditions and procedures are in Appendix [B] and
Certificate Owners authorizing telephone allocation instructions will be
notified, in advance, of any changes.
Keyport currently offers Guarantee Periods of 1, [3, 5, and 7] years.
Keyport may change at any time the number of Guarantee Periods it offers
under newly-issued and in-force Certificates, as well as the length of
those Guarantee Periods. If Keyport stops offering a particular Guarantee
Period, existing Fixed Account Value in such Guarantee Period would not be
affected until the end of the Period (at that time, a Period of the same
length would not be a transfer option). Each Guarantee Period currently
offered is available for initial and subsequent Purchase Payments and for
transfers of Certificate Value.
[Keyport offers a Capital Protection Plus program that a Certificate Owner
may request. Under this program, Keyport will allocate part of the
Purchase Payment to the Guarantee Period selected by the Certificate Owner
so that such part, based on that Guarantee Period's interest rate in effect
on the date of allocation, will equal at the end of the Guarantee Period
the total Purchase Payment. The rest of the Purchase Payment will be
allocated to the Sub-Account(s) of the Variable Account based on the
Certificate Owner's allocation. If any part of the Fixed Account Value is
surrendered or transferred before the end of the Guarantee Period, the
Value at the end of that Period will not equal the original Purchase
Payment amount.
For an example of Capital Protection Plus, assume Keyport receives a
Purchase Payment of $10,000 when the interest rate for the 7-year Guarantee
Period is 6.75% per year. Keyport will allocate $6,331 to that Guarantee
Period because $6,331 will increase at that interest rate to $10,000 after
7 years. The remaining $3,669 of the payment will be allocated to the Sub-
Account(s) selected by the Certificate Owner.]
Fixed Account Value
The Fixed Account Value at any time is equal to:
(a) all Purchase Payments allocated to the Fixed Account plus the interest
subsequently credited on those payments; plus
(b) any Variable Account Value transferred to the Fixed Account plus the
interest subsequently credited on the transferred value; less
(c) any prior partial withdrawals from the Fixed Account, including any
charges therefor; less
(d) any Fixed Account Value transferred to the Variable Account.
Interest Credits
Keyport will credit interest daily (based on an annual compound interest
rate) to Purchase Payments allocated to the Fixed Account at rates declared
by Keyport for Guarantee Periods of one or more years from the month and
day of allocation. Any rate set by Keyport will be at least [3%] per year.
Keyport's method of crediting interest means that Fixed Account Value might
be subject to different rates for each Guarantee Period the Certificate
Owner has selected in the Fixed Account. For purposes of this section,
Variable Account Value transferred to the Fixed Account and Fixed Account
Value renewed for another Guarantee Period shall be treated as a Purchase
Payment allocation.
[Application of Market Value Adjustment
Any surrender, withdrawal, transfer, or application to an Annuity Option of
Fixed Account Value from a Guarantee Period of three years or more is
subject to a limited Market Value Adjustment, unless: (1) the effective
date of the transaction is at the end of the Guarantee Period; or (2) the
effective date of a surrender is within 90 days of the date of death of the
first Covered Person to die.
If a Market Value Adjustment applies to either a surrender or the
application to an Annuity Option, then any negative Market Value Adjustment
amount will be deducted from the Certificate Value and any positive Market
Value Adjustment amount will be added to the Certificate Value. If a Market
Value Adjustment applies to either a partial withdrawal or a transfer, then
any negative Market Value Adjustment amount will be deducted from the
partial withdrawal or transfer amount after the withdrawal or transfer
amount has been deducted from the Fixed Account Value, and any positive
Market Value Adjustment amount will be added to the applicable amount after
it has been deducted from the Fixed Account Value.
No Market Value Adjustment is ever applicable to Guarantee Periods of fewer
than three years.
Effect of Market Value Adjustment
A Market Value Adjustment reflects the change in prevailing current
interest rates since the beginning of a Guarantee Period. The Market Value
Adjustment may be positive or negative, but any negative Adjustment may be
limited in amount (see Market Value Adjustment Factor below).
Generally, if the Treasury Rate for the Guarantee Period is lower than the
Treasury Rate for a new Guarantee Period with a length equal to the time
remaining in the Guarantee Period, then the application of the limited
Market Value Adjustment will result in a reduction of the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Option.
Similarly, if the Treasury Rate for the Guarantee Period is higher than the
Treasury Rate for a new Guarantee Period with a length equal to the time
remaining in the Guarantee Period, then the application of the Market Value
Adjustment will result in an increase in the amount being surrendered,
withdrawn, transferred, or applied to an Annuity Option.
The Market Value Adjustment will be applied before the deduction of any
applicable surrender charges or applicable taxes.
Market Value Adjustment Factor
The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to a Payment Option, by the
Market Value Adjustment Factor. The Market Value Adjustment Factor is
calculated as the larger of Formula (1) or (2):
(1) [(1+a)/(1+b)](n/12) - 1
where:
"a" is the Treasury Rate for the number of Guarantee Period Years in the
Guarantee Period;
"b" is the Treasury Rate for a period equal to the time remaining (rounded
up to the next whole number of Guarantee Period Years) to the expiration of
the Guarantee Period; and
"n" is the number of complete Guarantee Period Months remaining before the
expiration of the Guarantee Period.
(2) [(1.03)/(1+i)](y+d/#) - 1
where:
"i" is the Guaranteed Interest Rate for the Guarantee Period;
"y" is the number of complete Guarantee Period Years that have elapsed in
the Guarantee Period;
"d" is the number of days since the last Guarantee Period Anniversary or,
if "y" is zero, the number of days since the start of the Guarantee Period;
and
"#" is the number of days in the current Guarantee Period Year (i.e., the
sum of "d" and the number of days until the next Guarantee Period
Anniversary).
In Formulas (1) and (2), all references to Guarantee Period, Guarantee
Period Anniversary, Guarantee Period Month, and Guarantee Period Year
relate to the Guarantee Period from which is being taken the amount being
surrendered, withdrawn, transferred, or applied to an Annuity Option.
As stated above, the Formula (2) amount will apply only if it is greater
than the Formula (1) amount. This will occur only when the Formula (1)
amount is negative and the Formula (2) amount is a smaller negative number.
Formula (2) thus ensures that a full (normal) negative Market Value
Adjustment of Formula (1) will not apply to the extent it would decrease
the Guarantee Period's Fixed Account Value (before the deduction of any
applicable surrender charges or any applicable taxes) below the following
amount:
(a) the amount allocated to the Guarantee Period; less
(b) any prior systematic or partial withdrawal amounts; less
(c) any prior amounts transferred to the Variable Account or to
another Guarantee
Period in the Fixed Account; plus
(d) interest on the above items (a) through (c) credited annually at
a rate of 3% per year.
Treasury Rates
The Treasury Rate for a Guarantee Period is the interest rate in the
Treasury Constant Maturity Series, as published by the Federal Reserve
Board, for a maturity equal to the number of years specified in "a" and "b"
in Formula (1) above. Weekly Series are published at the beginning of the
following week. To determine "a", Keyport uses the weekly Series first
published on or after the most recent Determination Date which occurs on or
before the Start Date for the Guarantee Period, except that if the Start
Date is the same as the Determination Date or the date of publication, or
any date in between, Keyport instead uses the weekly Series first published
after the prior Determination Date. To determine "b", Keyport uses the
Weekly Series first published on or after the most recent Determination
Date which occurs on or before the date on which the Market Value
Adjustment Factor is calculated, except that if the calculation date is the
same as the Determination Date or the date of publication, or any date in
between, Keyport instead uses the weekly Series first published after the
prior Determination Date. The Determination Dates are the last business day
prior to the first and fifteenth of each calendar month.
If the number of years specified in "a" or "b" is not equal to a maturity
in the Treasury Constant Maturity Series, the Treasury Rate will be
determined by straight line interpolation between the interest rates of the
next highest and next lowest maturities.
If the Treasury Constant Maturity Series becomes unavailable, Keyport will
adopt a comparable constant maturity index or, if such a comparable index
also is not available, Keyport will replicate calculation of the Treasury
Constant Maturity Series Index based on U.S. Treasury Security coupon
rates.
End of A Guarantee Period
Keyport will notify a Certificate Owner in writing at least 30 days prior
to the end of a Guarantee Period. At the end of the Guarantee Period,
Keyport will automatically transfer the Guarantee Period's Fixed Account
Value to the Money Market Sub-Account of the Variable Account unless
Keyport previously received a Certificate Owner's Written Request of: (1)
election of a new Guarantee Period from among those being offered by
Keyport at that time; or (2) instructions to transfer the ending Guarantee
Period's Fixed Account Value to one or more Sub-accounts of the Variable
Account. A new Guarantee Period cannot be longer than the number of years
remaining until the Income Date.]
Transfers of Fixed Account Value
***************************************************************************
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*
The limits on the number of transfers will range between unlimited
transfers and 12 per year. The limitations on transfers from the Fixed
Account will range between 10% and 110%.
***************************************************************************
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*
The Certificate Owner may transfer Fixed Account Value from one Guarantee
Period to another or to one or more Sub-Accounts of the Variable Account
subject to any applicable Market Value Adjustment. If the Fixed Account
Value represents multiple Guarantee Periods, the transfer request must
specify from which values the transfer is to be made.
The Certificate allows Keyport to limit the number of transfers that can be
made in a specified time period. Currently, Keyport is limiting Variable
Account and Fixed Account transfers to generally [xx] transfers per
calendar year with a $500,000 per transfer dollar limit. See "Transfer of
Variable Account Value". [Transfers from the Fixed Account to the Variable
Account are limited to [110%] of the Fixed Account Value at the beginning
of the Certificate Year.] [This limitation will be waived if a Systematic
Withdrawal Program is in effect.] These limitations will not apply to any
transfer made at the end of a Guarantee Period. Certificate Owners will be
notified, in advance, of a change in the limitation on the number of
transfers.
Transfer requests must be by Written Request unless the Certificate Owner
has authorized Keyport by Written Request to accept telephone transfer
instructions from the Certificate Owner or from a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney. By
authorizing Keyport to accept telephone transfer instructions, a
Certificate Owner agrees to accept and be bound by the conditions and
procedures established by Keyport from time to time. The current
conditions and procedures are in Appendix [B] and Certificate Owners
authorizing telephone transfers will be notified, in advance, of any
changes. Written transfer requests may be made by a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Keyport before the close of trading on the
New York Stock Exchange (currently 4:00 PM Eastern Time) will be executed
at the close of business that day. Any requests received later will be
executed at the close of the next business day.
The amount of the transfer will be deducted from the specified values in
the manner stated in the next section below.
If 100% of a Guarantee Period's value is transferred and the current
allocation for Purchase Payments includes that Guarantee Period, then the
allocation formula for future Purchase Payments will automatically change
unless the Certificate Owner instructs otherwise. For example, if the
allocation formula is 50% to the one-year Guarantee Period and 50% to Sub-
Account A and all Fixed Account Value is transferred to Sub-Account A, the
allocation formula will change to 100% to Sub-Account A.
[APPENDIX [B]
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are joint Certificate Owners, both must authorize Keyport to
accept telephone instructions but either Certificate Owner may give Keyport
telephone instructions.
2. All callers will be required to identify themselves. Keyport reserves
the right to refuse to act upon any telephone instructions in cases where
the caller has not sufficiently identified himself/herself to Keyport's
satisfaction.
3. Neither Keyport nor any person acting on its behalf shall be subject
to any claim, loss, liability, cost or expense if it or such person acted
in good faith upon a telephone instruction, including one that is
unauthorized or fraudulent; however, Keyport will employ reasonable
procedures to confirm that a telephone instruction is genuine and, if
Keyport does not, Keyport may be liable for losses due to an unauthorized
or fraudulent instruction. The Certificate Owner thus bears the risk that
an unauthorized or fraudulent instruction that is executed may cause the
Certificate Value to be lower than it would be had no instruction been
executed.
4. All conversations will be recorded with disclosure at the time of the
call.
5. The application for the Certificate may allow a Certificate Owner to
create a power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, such power will be treated
as durable in nature and shall not be affected by the subsequent
incapacity, disability or incompetency of the Certificate Owner. Either
Keyport or the authorized person may cease to honor the power by sending
written notice to the Certificate Owner at the Certificate Owner's last
known address. Neither Keyport nor any person acting on its behalf shall
be subject to liability for any act executed in good faith reliance upon a
power of attorney.
6. Telephone authorization shall continue in force until (a) Keyport
receives the Certificate Owner's written revocation, (b) Keyport
discontinues the privilege, or (c) Keyport receives written evidence that
the Certificate Owner has entered into a market timing or asset allocation
agreement with an investment adviser or with a broker/dealer.
7. Telephone transfer instructions received by Keyport at 800-367-3653
before the close of trading on the New York Stock Exchange (currently 4:00
P.M. Eastern Time) will be initiated that day based on the unit value
prices calculated at the close of that day. Instructions received after
the close of trading on the NYSE will be initiated the following business
day.
8. Once instructions are accepted by Keyport, they may not be canceled.
9. All transfers must be made in accordance with the terms of the
Certificate and current prospectus. If the transfer instructions are not
in good order, Keyport will not execute the transfer and will notify the
caller within 48 hours.
10. If 100% of any Sub-Account's value is transferred and the allocation
formula for Purchase Payments includes that Sub-Account, then the
allocation formula for future Purchase Payments will change accordingly
unless Keyport receives telephone instructions to the contrary. For
example, if the allocation formula is 50% to Sub-Account A and 50% to Sub-
Account B and all of Sub-Account A's value is transferred to Sub-Account B,
the allocation formula will change to 100% to Sub-Account B unless Keyport
is instructed otherwise.
Telephone Changes to Purchase Payment Allocation Percentages
Numbers 1-6 above are applicable.]
PROSPECTUS
[DATE]
Distributed by:
[Keyport Financial Services Corp.
125 High Street, Boston, MA 02110-2712]
Issued by:
Keyport Life Insurance Company
125 High Street, Boston, MA 02110-2712
Yes. I would like to receive the Keyport [NAME OF ANNUITY] Statement of
Additional Information.
Yes. I would like to receive the [NAME OF FUND] Statement of Additional
Information.
Yes. I would like to receive the [NAME OF FUND] Statement of Additional
Information.
Name
Address
City, State Zip
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 6719 BOSTON, MA
POSTAGE WILL BE PAID BY ADDRESSEE
KEYPORT LIFE INSURANCE CO
125 HIGH STREET
BOSTON, MA 02110-2712
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
PART B
STATEMENT OF ADDITIONAL INFORMATION
GROUP AND INDIVIDUAL FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT A
OF
KEYPORT LIFE INSURANCE COMPANY ("Keyport")
This Statement of Additional Information (SAI) is not a prospectus but it
relates to, and should be read in conjunction with, the [XX] variable
annuity prospectus dated , [1998]. The SAI is
incorporated by reference into the prospectus. The prospectus is available,
at no charge, by writing Keyport at 125 High Street, Boston, MA 02110 or by
calling (800) 437-4466. [It may also be obtained by writing
.]
TABLE OF CONTENTS
Page
Keyport Life Insurance Company
Variable Annuity Benefits
Variable Annuity Payment Values
Re-Allocating Sub-Account Payments
Custodian
Principal Underwriter
Experts
Investment Performance
[Average Annual Total Return for a Certificate that is
Surrendered [and for a Certificate that Continues]]
[Change in Accumulation Unit Value]
Yield[s] for [XX-1] Sub-Account[s]
Financial Statements
Variable Account [A]............................................
Keyport Life Insurance Company
The date of this statement of additional information is , [1998].
KEYPORT LIFE INSURANCE COMPANY
[Liberty Mutual Insurance Company ("Liberty Mutual"), a multi-line
insurance company, is the ultimate corporate parent of Keyport. Liberty
Mutual ultimately controls Keyport through the following intervening
holding company subsidiaries: Liberty Mutual Equity Corporation, LFC
Holdings Inc., Liberty Financial Companies, Inc. ("LFC") and SteinRoe
Services, Inc. Liberty Mutual, as of December 31, [1997], owned,
indirectly, approximately [83]% of the combined voting power of the
outstanding stock of LFC (with the balance being publicly held).] For
additional information about Keyport, see page 8 of the prospectus.
VARIABLE ANNUITY BENEFITS
Variable Annuity Payment Values
For each variable payment option, the total dollar amount of each
periodic payment will be equal to: [(a)] the sum of all Sub-Account
payments; [less (b) the pro-rata amount of the annual Certificate
Maintenance Charge.]
The first payment for each Sub-Account will be determined by deducting
[any applicable Certificate Maintenance Charge and] any applicable state
premium taxes and then dividing the remaining value of that Sub-Account by
$1,000 and multiplying the result by the greater of: (a) the applicable
factor from the Certificate's annuity table for the particular payment
option; or (b) the factor currently offered by Keyport at the time annuity
payments begin. This current factor may be based on the sex of the payee
unless to do so would be prohibited by law.
The number of Annuity Units for each Sub-Account will be determined by
dividing such first payment by the Sub-Account Annuity Unit value for the
Valuation Period that includes the date of the first payment. The number
of Annuity Units remains fixed for the annuity payment period. Each
Sub-Account payment after the first one will be determined by multiplying
(a) by (b), where: (a) is the number of Sub-Account Annuity Units; and (b)
is the Sub-Account Annuity Unit value for the Valuation Period that
includes the date of the particular payment.
Variable annuity payments will fluctuate in accordance with the
investment results of the underlying Eligible Funds. In order to determine
how these fluctuations affect annuity payments, Keyport uses an Annuity
Unit value. Each Sub-Account has its own Annuity Units and value per Unit.
The Annuity Unit value applicable during any Valuation Period is determined
at the end of such period.
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**
The formula for the net investment factor will vary depending upon
whether certain asset charges are imposed, as explained in the notes
in the Prospectus. With regard to the AIR, the AIR will vary within
the limits permitted under state insurance law, but no less than 3%.
***************************************************************************
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**
When Keyport first purchased the Eligible Fund shares on behalf of the
Variable Account, Keyport valued each Annuity Unit for each Sub-Account at
a specified dollar amount. The Unit value for each Sub-Account in any
Valuation Period thereafter is determined by multiplying the value for the
prior period by a net investment factor. This factor may be greater or
less than 1.0; therefore, the Annuity Unit may increase or decrease from
Valuation Period to Valuation Period. For each assumed annual investment
rate (AIR), Keyport calculates a net investment factor for each Sub-Account
by dividing (a) by (b), where:
(a) is equal to the net investment factor as defined in the
prospectus [without any deduction for the Distribution Charge defined in
(c)(ii) of the net investment factor formula]; and
(b) is the assumed investment factor for the current Valuation
Period. The assumed investment factor adjusts for the interest assumed in
determining the first variable annuity payment. Such factor for any
Valuation Period shall be the accumulated value, at the end of such period,
of $1.00 deposited at the beginning of such period at the assumed annual
investment rate (AIR). The AIR for Annuity Units based on the
Certificate's annuity tables is [6]% per year [(5% per year for Oregon and
Texas Certificates)]. [An AIR of 3% per year is also currently available
upon Written Request.]
With a particular AIR, payments after the first one will increase or
decrease from month to month based on whether the actual annualized
investment return of the selected Sub-Account(s) (after deducting the
Mortality and Expense Risk Charge) is better or worse than the assumed AIR
percentage. If a given amount of Sub-Account value is applied to a
particular payment option, the initial payment will be smaller if a [3]%
AIR is selected instead of a [6]% AIR but, all other things being equal,
the subsequent [3]% AIR payments have the potential for increasing in
amount by a larger percentage and for decreasing in amount by a smaller
percentage. For example, consider what would happen if the actual
annualized investment return (see the first sentence of this paragraph) is
[9]%, [6]%, [3]%, or [0]% between the time of the first and second
payments. With an actual [9]% return, the [3]% AIR and [6]% AIR payments
would both increase in amount but the [3]% AIR payment would increase by a
larger percentage. With an actual [6]% return, the [3]% AIR payment would
increase in amount while the [6]% AIR payment would stay the same. With an
actual return of [3]%, the [3]% AIR payment would stay the same while the
[6]% AIR payment would decrease in amount. Finally, with an actual return
of [0%], the [3]% AIR and [6]% AIR payments would both decrease in amount
but the [3]% AIR payment would decrease by a smaller percentage. Note that
the changes in payment amounts described above are on a percentage basis
and thus do not illustrate when, if ever, the [3]% AIR payment amount might
become larger than the [6]% AIR payment amount. Note though that if Option
A (Income for a Fixed Number of Years) is selected and payments continue
for the entire period, the [3]% AIR payment amount will start out being
smaller than the [6]% AIR payment amount but eventually the [3]% AIR
payment amount will become larger than the [6]% AIR payment amount.
Re-Allocating Sub-Account Payments
***************************************************************************
***************************************************************************
**
The number of times that Sub-Account(s) used to determine the amount
of variable annuity payments will range between unlimited times to once
every twelve months. The minimum percentage per Sub-Account will range
between 1% and 10%.
***************************************************************************
***************************************************************************
**
The number of Annuity Units for each Sub-Account under any variable
annuity option will remain fixed during the entire annuity payment period
unless the payee makes a written request for a change. Currently, a payee
can instruct Keyport to change the Sub-Account(s) used to determine the
amount of the variable annuity payments [once] every [12] months. The
payee's request must specify the percentage of the annuity payment that is
to be based on the investment performance of each Sub-Account. The
percentage for each Sub-Account, if not zero, must be at least [10]% and
must be a whole number. At the end of the Valuation Period during which
Keyport receives the request, Keyport will: (a) value the Annuity Units for
each Sub-Account to create a total annuity value; (b) apply the new
percentages the payee has selected to this total value; and (c) recompute
the number of Annuity Units for each Sub-Account. This new number of units
will remain fixed for the remainder of the payment period unless the payee
requests another change.
CUSTODIAN
The custodian of the assets of the Variable Account is [State Street
Bank and Trust Company, a state chartered trust company]. Its principal
office is at [225 Franklin Street, Boston, Massachusetts].
PRINCIPAL UNDERWRITER
The Contract and Certificates, which are offered continuously, are
distributed by [Keyport Financial Services Corp. ("KFSC"), a wholly-owned
subsidiary of Keyport].
EXPERTS
[The consolidated financial statements of Keyport Life Insurance
Company at December 31, [1996] and for the year then ended, and the
financial statements of Keyport Life Insurance Company-Variable Account A
as of December 31, [1996] and for the period then ended appearing in this
Statement of Additional Information 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.]
INVESTMENT PERFORMANCE
The Variable Account may from time to time quote performance
information concerning its various Sub-Accounts. A Sub-Account's
performance may also be compared to the performance of sub-accounts used
with variable annuities offered by other insurance companies. This
comparative information may be expressed as a ranking prepared by Financial
Planning Resources, Inc. of Miami, FL (The VARDS Report), Lipper Analytical
Services, Inc., or by Morningstar, Inc. of Chicago, IL (Morningstar's
Variable Annuity Performance Report), which are independent services that
compare the performance of variable annuity sub-accounts. The rankings are
done on the basis of changes in accumulation unit values over time and do
not take into account any charges (such as sales charges or administrative
charges) that are deducted directly from Certificate values.
Ibbotson Associates of Chicago, IL provides historical returns from
1926 on capital markets in the United States. The Variable Account may
quote the performance of its Sub-Accounts in conjunction with the long-term
performance of capital markets in order to illustrate general long-term
risk versus reward investment scenarios. Capital markets tracked by
Ibbotson Associates include common stocks, small company stocks, long-term
corporate bonds, long-term government bonds, U.S. Treasury Bills, and the
U.S. inflation rate. Historical total returns are determined by Ibbotson
Associates for: Common Stocks, represented by the Standard and Poor's
Composite Price Index (an unmanaged weighted index of 90 stocks prior to
March 1957 and 500 stocks thereafter of industrial, transportation, utility
and financial companies widely regarded by investors as representative of
the stock market); Small Company Stocks, represented by the fifth
capitalization quintile (i.e., the ninth and tenth deciles) of stocks on
the New York Stock Exchange for 1926-1981 and by the performance of the
Dimensional Fund Advisors Small Company 9/10 (for ninth and tenth deciles)
Fund thereafter; Long Term Corporate Bonds, represented beginning in 1969
by the Salomon Brothers Long-Term High-Grade Corporate Bond Index, which is
an unmanaged index of nearly all Aaa and Aa rated bonds, represented for
1946-1968 by backdating the Salomon Brothers Index using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon
Brothers in computing its Index, and represented for 1925-1945 through the
use of the Standard and Poor's monthly High-Grade Corporate Composite yield
data, assuming a 4% coupon and a 20-year maturity. Long-Term Government
Bonds, measured each year using a portfolio containing one U.S. government
bond with a term of approximately twenty years and a reasonably current
coupon; U.S. Treasury Bills, measured by rolling over each month a one-bill
portfolio containing, at the beginning of each month, the shortest-term
bill having not less than one month to maturity; Inflation, measured by the
Consumer Price Index for all Urban Consumers, not seasonably adjusted,
since January, 1978 and by the Consumer Price Index before then. The stock
capital markets may be contrasted with the corporate bond and U.S.
government securities capital markets. Unlike an investment in stock, an
investment in a bond that is held to maturity provides a fixed rate of
return. Bonds have a senior priority to common stocks in the event the
issuer is liquidated and interest on bonds is generally paid by the issuer
before it makes any distributions to common stock owners. Bonds rated in
the two highest rating categories are considered high quality and present
minimal risk of default. An additional advantage of investing in U.S.
government bonds and Treasury bills is that they are backed by the full
faith and credit of the U.S. government and thus have virtually no risk of
default. Although government securities fluctuate in price, they are
highly liquid.
***************************************************************************
***************************************************************************
**
Information regarding the Performance of the Certificates will be
included in the subsequent filings. Presentations of standardized
average annual total return with respect to the units offered by each
separate prospectus and SAI will be limited to the date of
effectiveness of the separate prospectus and SAI. Performance
information that pre-dates the date the funding option was made
available through the Variable Account, as well as other non-
standardized performance information, may accompany the presentation
of standardized average annual total return.
***************************************************************************
***************************************************************************
**
[Average annual Total Return for A Certificate that is surrendered [and for
a Certificate that Continues]]
[Change in Accumulation Unit Value]
Yield[s] for [XX-1] Sub-Account[s]
Yield [and effective yield] percentages for the [XX-1] Sub-Account are
calculated using the method prescribed by the Securities and Exchange
Commission. [Both] yields reflect the deduction of the annual [1.25]%
asset-based Certificate charges. [[Both] yields also reflect, on an
allocated basis [after xx/xx/xx], the Certificate's annual $[36]
Certificate Maintenance Charge that is collected after the first
Certificate Anniversary.] [Both] yields do not reflect [Contingent
Deferred Sales Charges and] premium tax charges. The yield[s] would be
lower if these charges were included. The following [are] [is] the
standardized formulas:
Yield equals: (A - B - 1) X 365
C 7
[Effective Yield Equals: (A - B)365/7 - 1
C]
Where:
A = the Accumulation Unit value at the end of the 7-day period.
B = [0][hypothetical Certificate Maintenance Charge for the 7-
day period. The assumed annual [XX-1] Sub-Account charge is equal
to the $[36] Certificate charge multiplied by a fraction equal to
the average number of Certificates with [XX-1] Sub-Account value
during the 7-day period divided by the average total number of
Certificates during the 7-day period. This annual amount is
converted to a 7-day charge by multiplying it by 7/365. It is
then equated to an Accumulation Unit size basis by multiplying it
by a fraction equal to the average value of one [XX-1] Sub-
Account Accumulation Unit during the 7-day period divided by the
average Certificate Value in [XX-1] Sub-Account during the 7-day
period.]
C = the Accumulation Unit value at the beginning of the 7-day
period.
The yield formula assumes that the weekly net income generated by an
investment in the [XX-1] Sub-Account will continue over an entire year.
[The effective yield formula also annualizes seven days of net income but
it assumes that the net income is reinvested over the year. This
compounding effect causes effective yield to be higher than the yield.]
[For the 7-day period ended [XX/XX/XX], the yield for the [XX-1] Sub-
Account was [3.90%] [and effective yield was [3.98%].]
FINANCIAL STATEMENT
The financial statements of the Variable Account and Keyport Life
Insurance Company are included in the statement of additional information.
The consolidated financial statements of Keyport Life Insurance Company are
provided as relevant to its ability to meet its financial obligations under
the Certificates and should not be considered as bearing on the investment
performance of the assets held in the Variable Account.
Financial Statements
Variable Account A
Keyport Life Insurance Company
[to be filed by Amendment]
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements: (To be filed by Amendment)
Included in Part B:
Keyport Life Insurance Company:
Consolidated Balance Sheet - December 31, 1997 and 1996
Consolidated Income Statement for the years ended December 31,
1997, 1996 and 1995
Consolidated Statement of Stockholder's Equity for the years
ended December 31, 1997, 1996 and 1995
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Variable Account A:
Statement of Assets and Liabilities - December 31, 1997
Statement of Operations and Changes in Net Assets for the years
ended December 31, 1997 and 1996
Notes to Financial Statements
(b) Exhibits:
* (1) Resolution of the Board of Directors establishing Variable
Account A
(2) Not applicable
* (3a) Principal Underwriter's Agreement
* (3b) Specimen Agreement between Principal Underwriter and Dealer
*** (3c) Manning & Napier Broker/Dealer's Agreement
* (4a) Form of Group Variable Annuity Contract of Keyport Life
Insurance Company
* (4b) Form of Variable Annuity Certificate of Keyport Life
Insurance Company
* (4c) Form of Tax-Sheltered Annuity Endorsement
* (4d) Form of Individual Retirement Annuity Endorsement
* (4e) Form of Corporate/Keogh 401(a) Plan Endorsement
*** (4f) Specimen Group Variable Annuity Contract of Keyport Life
Insurance Company (M&N)
*** (4g) Specimen Variable Annuity Certificate of Keyport Life
Insurance Company (M&N)
**** (4h) Specimen Group Variable Annuity Contract of Keyport Life
Insurance Company (KA)
**** (4i) Specimen Variable Annuity Certificate of Keyport Life
Insurance Company (KA)
++ (4j) Form of Individual Variable Annuity Contract of Keyport
Life Insurance Company
++ (4k) Specimen Individual Variable Annuity Contract of Keyport
Life Insurance Company(KA)
++ (4l) Specimen Group Exchange Program Endorsement (KA)
++ (4m) Specimen Individual Exchange Program Endorsement (KA)
## (4n) Specimen Group Variable Annuity Contract of Keyport Life
Insurance Company (KAV)
## (4o) Specimen Variable Annuity Certificate of Keyport Life
Insurance Company (KAV)
## (4p) Specimen Individual Variable Annuity Contract of Keyport
Life Insurance Company (KAV)
* (5a) Form of Application for a Group Variable Annuity Contract
* (5b) Form of Application for a Group Variable Annuity Certificate
* (6a) Articles of Incorporation of Keyport Life Insurance Company
* (6b) By-Laws of Keyport Life Insurance Company
(7) Not applicable
** (8a) Form of Participation Agreement
*** (8b) Participation Agreement Among Manning & Napier Insurance
Fund, Inc., Manning & Napier Investor Services, Inc.,
Manning
& Napier Advisors, Inc., and Keyport Life Insurance Company
**** (8c) Participation Agreement Among MFS Variable Insurance Trust,
Keyport Life Insurance Company, and Massachusetts Financial
Services Corp.
**** (8d) Participation Agreement Among The Alger American Fund,
Keyport Life Insurance Company, and Fred Alger and Company,
Incorporated
**** (8e) Participation Agreement Among Alliance Variable Products
Series Fund, Inc., Alliance Fund Distributors, Inc.,
Alliance
Capital Management L.P., and Keyport Life Insurance Company
#### (8f) Participation Agreement By and Among AIM Variable Insurance
Funds, Inc., Keyport Life Insurance Company, on Behalf of
Itself and its Separate Accounts, and Keyport Financial
Services Corp.
# (8g) Amended and Restated Participation Agreement By and Among
Keyport Variable Investment Trust, Keyport Financial
Services
Corp., Keyport Life Insurance Company and Liberty Life
Assurance Company of Boston
#### (8h) Amended and Restated Participation Agreement By and Among
SteinRoe Variable Investment Trust, Keyport Financial
Services Corp., Keyport Life Insurance Company and Liberty
Life Assurance Company of Boston
+ (9) Opinion and Consent of Counsel
(10) Consents of Independent Auditors (To be filed by Amendment)
(11) Not applicable
(12) Not applicable
++++ (13) Schedule for Computations of Performance Quotations
+++ (15) Chart of Affiliations
### (16) Powers of Attorney
### (27) Financial Data Schedule
* Incorporated by reference to Registration Statement (File No. 333-
1043)
filed on or about February 16, 1996.
** Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement (File No. 333-1043) filed on or about August
22,
1996.
*** Incorporated by reference to Pre-Effective Amendment No. 3 to
Registration Statement (File No. 333-1043) filed on or about October
15, 1996.
**** Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement (File No. 333-1043) filed on or about October
18, 1996.
+ Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement (File No. 333-1043) filed on or about May 1,
1997.
++ Incorporated by reference to Post-Effective Amendment No. 5 to the
Registration Statement (File No. 333-1043) filed on or about July 30,
1997.
+++ Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement (File No. 333-1043) filed on or about February
6, 1998.
++++ Incorporated by reference to Post-Effective Amendment No. 8 to the
Registration Statement (File No. 333-1043) filed on or about February
27, 1998.
# Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-4 of Variable Account J of Liberty
Life Assurance Company of Boston (Files No. 333-29811; 811-08269)
filed on or about July 17, 1997.
## Incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement (File No. 333-1043) filed on or about March
20, 1998.
### Incorporated by reference to Post-Effective Amendment No. 10 to the
Registration Statement (File No. 333-1043) filed on or about April
24, 1998.
#### Incorporated by reference to Post-Effective Amendment No. 12 to the
Registration Statement (File No. 333-1043) filed on or about May
8, 1998.
Item 25. Directors and Officers of the Depositor.
Name and Principal Positions and Offices
Business Address* with Depositor
Kenneth R. Leibler, President Director and Chairman of the Board
Liberty Financial Companies Inc.
Federal Reserve Plaza, 24th Floor
600 Atlantic Avenue
Boston, MA 02110
Frederick Lippitt Director
The Providence Plan
740 Hospital Trust Building
15 Westminster Street
Providence, RI 02903
Mr. Robert C. Nyman Director
12 Cooke Street
Providence, RI 02906-2006
John W. Rosensteel President, Chief Executive Officer
and Director
Stephen B. Bonner Executive Vice President
Paul H. LeFevre, Jr. Executive Vice President
Bernard R. Beckerlegge Senior Vice President and General
Counsel
Bernhard M. Koch Senior Vice President and Chief
Financial Officer
Stewart R. Morrison Senior Vice President and Chief
Investment Officer
Francis E. Reinhart Senior Vice President and Chief
Information Officer
Mark R. Tully Senior Vice President and Chief
Sales Officer
Garth A. Bernard Vice President
Daniel C. Bryant Vice President and Assistant
Secretary
Clifford O. Calderwood Vice President
James P. Greaton Vice President and Corporate
Actuary
Jacob M. Herschler Vice President
Kenneth M. Hughes Vice President
James J. Klopper Vice President and Secretary
Leslie J. Laputz Vice President
Jeffrey J. Lobo Vice President - Risk Management
Suzanne E. Lyons Vice President - Human Resources
Jeffery J. Whitehead Vice President and Treasurer
Peter E. Berkeley Assistant Vice President
John G. Bonvouloir Assistant Vice President &
Assistant Treasurer
Judith A. Brookins Assistant Vice President
Paul R. Coady Assistant Vice President
Alan R. Downey Assistant Vice President
Kenneth M. LeClair Assistant Vice President
Gregory L. Lapsley Assistant Vice President
Scott E. Morin Assistant Vice President and
Controller
Michael J. Mulkern Assistant Vice President
Sean P. O'Brien Assistant Vice President
Robert J. Scheinerman Assistant Vice President
Edward M. Shea Assistant Vice President
Teresa M. Shumila Assistant Vice President
Daniel T. Smyth Assistant Vice President
Donald A. Truman Assistant Vice President and
Assistant Secretary
Ellen L. Wike Assistant Vice President
Daniel Yin Assistant Vice President
Frederick Lippitt Assistant Secretary
*125 High Street, Boston, Massachusetts 02110, unless noted otherwise.
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant.
The Depositor controls the Registrant, KMA Variable Account, Keyport
401 Variable Account, Keyport Variable Account I, and Keyport Variable
Account II, under the provisions of Rhode Island law governing the
establishment of these separate accounts of the Company.
The Depositor controls Keyport Financial Services Corp. (KFSC), a
Massachusetts corporation functioning as a broker/dealer of securities,
through 100% stock ownership. KFSC files separate financial statements.
The Depositor controls Liberty Advisory Services Corp. (LASC)
(formerly known as Keyport Advisory Services Corp.), a Massachusetts
corporation functioning as an investment adviser, through 100% stock
ownership. LASC files separate financial statements.
The Depositor controls Independence Life and Annuity Company
("Independence Life")(formerly Keyport America Life Insurance Company), a
Rhode Island corporation functioning as a life insurance company, through
100% stock ownership. Independence Life files separate financial
statements.
The Depositor controls American Benefit Life Insurance Company
("American Benefit"), a New York corporation functioning as a life
insurance company, through 100% stock ownership. American Benefit files
separate financial statements.
The chart for the affiliations of the Depositor is incorporated by
reference to Post-Effective Amendment No. 7 to Registration Statement (File
No. 333-1043) filed on or about February 6, 1998.
Item 27. Number of Contract Owners.
At April 1, 1998, there were 1,959 Qualified Contract Owners and 2,972
Non-Qualified Contract Owners.
Item 28. Indemnification.
Directors and officers of the Depositor and the principal underwriter
are covered persons under Directors and Officers/Errors and Omissions
liability insurance policies issued by ICI Mutual Insurance Company,
Federal Insurance Company, Firemen's Fund Insurance Company, CNA and
Lumberman's Mutual Casualty Company. Insofar as indemnification for
liability arising under the Securities Act of 1933 may be permitted to
directors and officers under such insurance policies, or otherwise, the
Depositor 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 Depositor of expenses incurred or paid by a director or officer in
the successful defense of any action, suit or proceeding) is asserted by
such director or officer in connection with the variable annuity contracts,
the Depositor 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 29. Principal Underwriters.
Keyport Financial Services Corp. is also principal underwriter of the
SteinRoe Variable Investment Trust and Liberty Variable Investment Trust,
which offer eligible funds for variable annuity and variable life insurance
contracts.
The directors and officers are:
Name and Principal Position and Offices
Business Address* with Underwriter
John W. Rosensteel President, Director and Chairman of the
Board
James J. Klopper Director and Clerk
Francis E. Reinhart Director and Vice President,
Administration
Rogelio P. Japlit Treasurer
Paul T. Holman Assistant Clerk
Donald A. Truman Assistant Clerk
*125 High Street, Boston, Massachusetts 02110.
Item 30. Location of Accounts and Records.
Keyport Life Insurance Company, 125 High Street, Boston, Massachusetts
02110.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted;
(b) Registrant undertakes to include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that
an applicant can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or included in
the prospectus that the applicant can remove to send for a Statement of
Additional Information; and
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request.
Representation
Depositor represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by
the Depositor. Further, this representation applies to each form of the
contract described in a prospectus and statement of additional information
included in this registration statement.
SIGNATURES
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on
its behalf, in the City of Boston and Commonwealth of Massachusetts, on
this 29th day of May, l998.
Variable Account A
(Registrant)
BY: Keyport Life Insurance Company
(Depositor)
BY: /s/ John W. Rosensteel*
John W. Rosensteel
President
*BY: /s/James J. Klopper May 29, 1998
James J. Klopper Date
Attorney-in-Fact
* James J. Klopper has signed this document on the indicated date on
behalf of Mr. Rosensteel pursuant to power of attorney duly executed by him
and included as part of Exhibit 16 in Post-Effective Amendment No. 10 to
Registration Statement on Form N-4 filed on or about April 24, 1998 (File
No. 333-1043; 811-7543).
As required by the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/ Kenneth R. Leibler* /s/ John W. Rosensteel*
Kenneth R. Leibler John W. Rosensteel
Director and Chairman of the Board President
(Principal Executive Officer)
/s/ Frederick Lippitt * /s/ Bernhard M. Koch*
Frederick Lippitt Bernhard M. Koch
Director Senior Vice President
(Chief Financial Officer)
/s/ Robert C. Nyman*
Robert C. Nyman
Director
/s/ John W. Rosensteel*
John W. Rosensteel
Director
*BY: /s/ James J. Klopper May 29, 1998
James J. Klopper Date
Attorney-in-Fact
* James J. Klopper has signed this document on the indicated date on
behalf of each of the above Directors and Officers of the Depositor
pursuant to powers of attorney duly executed by such persons and included
as Exhibit 16 in Post-Effective Amendment No. 10 to Registration Statement
on Form N-4 filed on or about April 24, 1998 (File No. 333-1043; 811-7543).
