As filed with the Securities and Exchange Commission on February 29, 2000
Registration Nos. 333-1043
811-7543
==========================================================================
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. 24 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 39 [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
(X) on May 1, 2000 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 ____
<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
<PAGE>
This Amendment No. 24 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 specific 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. 21, 22, and 23 to the Registration Statement.
<PAGE>
PART A
<PAGE>
May 1, 2000 Prospectus for
Keyport Advisor Vista
Variable Annuity
<PAGE>
Annuities are:
not insured by the FDIC;
not a deposit or other obligation of, or
guaranteed by, the depository institution;
subject to investment risks, including the
possible loss of principal amount invested.
<PAGE>
- -------------------------------------------------------------------------
Prospectus for
The Keyport Advisor Vista Variable Annuity
Group and Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts
issued by
Variable Account A
of
Keyport Life Insurance Company
- -------------------------------------------------------------------------
This prospectus describes the Keyport Advisor Vista variable annuity group
Contracts and Certificates offered by Keyport Life Insurance Company. The
prospectus also offers the Certificates in the form of Individual
Contracts, where required by certain states. All discussion of
Certificates applies to the Contracts and Individual Contracts unless
specified otherwise.
Under the Certificate, you may elect to have value accumulate on a variable
or fixed basis. You may also elect to receive periodic annuity payments on
either a variable or fixed basis. This prospectus generally describes only
the variable features of the Certificate. For a summary of the Fixed
Account and its features, see Appendix A. The Certificates are designed to
help you in your retirement planning. You may purchase them on a tax
qualified or non-tax qualified basis. Because they are offered on a
flexible payment basis, you are permitted to make multiple payments (except
in Oregon where they are offered only on a single purchase payment basis).
We will allocate your purchase payments to the investment options and the
Fixed Account in the proportions you choose. The Certificate currently
offers twenty-one investment options, each of which is a Sub-account of
Variable Account A. Currently, you may choose among the Sub-accounts
investing in the following Eligible Funds:
AIM VARIABLE INSURANCE FUNDS, INC.: AIM V.I. Capital Appreciation Fund; AIM
V.I. Growth Fund and AIM V.I. International Equity Fund
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.: Global Bond Portfolio;
Alliance Growth and Income Portfolio; Premier Growth Portfolio; and Real
Estate Investment Portfolio
LIBERTY VARIABLE INVESTMENT TRUST: Colonial Value Fund, Variable Series;
Colonial High Yield Securities Fund, Variable Series; Colonial Small Cap
Value Fund, Variable Series; Colonial Strategic Income Fund, Variable
Series; Colonial U.S. Growth & Income Fund, Variable Series; Liberty All-
Star Equity Fund, Variable Series; and Stein Roe Global Utilities Fund,
Variable Series
MFS VARIABLE INSURANCE TRUST: MFS Bond Series; MFS Emerging Growth Series
and MFS Research Series
STEINROE VARIABLE INVESTMENT TRUST: Stein Roe Balanced Fund, Variable
Series; Stein Roe Growth Stock Fund, Variable Series; Stein Roe Money
Market Fund, Variable Series; and Stein Roe Small Company Growth Fund,
Variable Series
You may not purchase a Certificate if either you or the Annuitant are 90
years old or older before we receive your application. You may not
purchase a tax-qualified Certificate if you or the Annuitant are 75 years
old or older before we receive your application (age 90 applies to Roth
IRAs).
The purchase of a Contract or Certificate involves certain risks.
Investment performance of the Sub-accounts to which you may allocate
purchase payments may vary based on the performance of the related Eligible
Funds. We do not guarantee any minimum Certificate Value for amounts
allocated to the Sub-accounts. Benefits provided by this Certificate, when
based on the Fixed Account, may be subject to a market value adjustment,
which may result in an upward or downward adjustment in withdrawal
benefits, death benefits, settlement values, transfers to Eligible Funds,
or periodic income payments.
The Variable Account may offer other certificates with different features,
fees and charges, and other Sub-accounts which may invest in different or
additional mutual funds. Separate prospectuses and statements of
additional information will describe other certificates. The agent selling
the Certificates has information concerning the eligibility for and
availability of the other certificates.
This prospectus contains important information about the Contracts and
Certificates you should know before investing. You should read it before
investing and keep it for future reference. We have filed a Statement of
Additional Information ("SAI") with the Securities and Exchange Commission.
The current SAI has the same date as this prospectus and is incorporated by
reference in this prospectus. You may obtain a free copy by writing us 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 SAI appears on page 34 of this prospectus.
The date of this prospectus is May 1, 2000.
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
Definitions 3
Summary of Certificate Features 4
Fee Table 5
Example 8
Explanation of Fee Table and Example 8
Condensed Financial Information 9
Performance Information 9
Keyport and the Variable Account 10
Purchase Payments and Applications 11
Investments of the Variable Account 12
Allocations of Purchase Payments 12
Eligible Funds 12
Transfer of Variable Account Value 15
Limits on Transfers 15
Substitution of Eligible Funds and Other Variable Account Changes 16
Deductions 16
Deductions for Mortality and Expense Risk Charge 16
Deductions for Daily Administrative Charge 16
Deductions for Transfers of Variable Account Value 16
Deductions for Premium Taxes 16
Deductions for Income Taxes 17
Total Variable Account Expenses 17
Other Services 17
The Certificates 19
Variable Account Value 19
Valuation Periods 19
Net Investment Factor 19
Modification of the Certificate 20
Right to Revoke 20
Death Provisions for Non-Qualified Certificates 20
Death Provisions for Qualified Certificates 22
Certificate Ownership 23
Assignment 23
Partial Withdrawals and Surrender 23
Annuity Provisions 24
Annuity Benefits 24
Annuity Option and Income Date 24
Change in Annuity Option and Income Date 24
Annuity Options 24
Variable Annuity Payment Values 26
Proof of Age, Sex, and Survival of Annuitant 26
Suspension of Payments 27
Tax Status 28
Introduction 28
Taxation of Annuities in General 28
Qualified Plans 30
Tax-Sheltered Annuities 30
Individual Retirement Annuities 31
Corporate Pension and Profit-Sharing Plans 31
Deferred Compensation Plans with Respect to
Service for State and Local Governments 31
Annuity Purchases by Nonresident Aliens 31
Variable Account Voting Privileges 31
Sales of the Certificates 32
Legal Proceedings 33
Inquiries by Certificate Owners 33
Table of Contents--Statement of Additional Information 34
Appendix A--The Fixed Account (also known as the Modified
Guaranteed Annuity Account) 35
Appendix B--Telephone Instructions 39
<PAGE>
DEFINITIONS
Accumulation Unit: A unit of measurement we use to calculate Variable
Account Value.
Annuitant: The natural person on whose life annuity benefits are based and
who will receive annuity payments starting on the Income Date.
Certificate Anniversary: Each anniversary of the Certificate Date.
Certificate Date: The date when the Certificate becomes effective.
Certificate Owner ("You"): The person(s) having the privileges of ownership
defined in the Certificate.
Certificate Value: The sum of the Variable Account Value and the Fixed
Account Value under your Certificate at a given time.
Certificate Withdrawal Value: The Certificate Value increased or decreased
by a limited market value adjustment less any premium taxes.
Certificate Year: Each twelve-month period beginning on the Certificate
Date and each Certificate Anniversary thereafter.
Company ("We", "Us", "Our", "Keyport"): Keyport Life Insurance Company.
Covered Person: The person(s) identified in the Certificate whose death may
result in an adjustment of Certificate Value or a waiver of any market
value adjustment.
Designated Beneficiary: The person designated to receive any death benefits
under the Certificate.
Eligible Funds: The underlying mutual funds in which the Variable Account
invests.
Fixed Account: Part of our general account to which purchase payments or
Certificate Values may be allocated or 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. Later Guarantee Period Months begin
on the same day in the following months.
Guarantee Period Year: The twelve-month period which begins on the Start
Date. Guarantee Period Years thereafter 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.
Qualified Certificate: Certificates issued under Qualified Plans.
Qualified Plan: A retirement plan which receives special tax treatment
under Sections 401, 403(b), 408(b) or 408A of the Internal Revenue Code
("Code") or a deferred compensation plan for a state and local government
or another tax exempt organization under Section 457 of the Code.
Start Date: The date money is first allocated to a Guarantee Period of the
Fixed Account.
Variable Account: Variable Account A which is a separate investment account
of the Company into which purchase payments under the Certificates may be
allocated. The Variable Account is divided into Sub-accounts which invest
in shares of an Eligible Fund.
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 us, signed by
you and a disinterested witness, and filed at our office.
SUMMARY OF CERTIFICATE FEATURES
Because this is a summary, it does not contain all of the information that
may be important to you. You should read the entire prospectus and
Statement of Additional Information before deciding to invest. Further,
individual state requirements, which are different from the information in
this prospectus, are described in supplements to this prospectus or in
endorsements to the Certificates.
The Certificate
The Certificate is a flexible premium deferred variable annuity
certificate. It is designed for retirement planning purposes. It allows
you to allocate purchase payments to and receive annuity payments from the
Variable Account and/or the Fixed Account.
The Variable Account is a separate investment account we maintain. If you
allocate payments to the Variable Account, your accumulation values and
annuity payments will fluctuate according to the investment performance of
the Eligible Funds chosen.
The Fixed Account is part of our "general account", which consists of all
our assets except the Variable Account and the assets of other separate
investment accounts we maintain. If you allocate payments to the Fixed
Account, your accumulation value will increase at guaranteed interest rates
and annuity payments will be of a fixed amount. Any surrender, withdrawal,
transfer or annuitization of your values in the Fixed Account may be
subject to a limited market value adjustment, which could increase or
decrease the applicable amount. (See Appendix A for more information on
the Fixed Account.)
If you allocate payments to both the Variable and the Fixed Accounts, then
the accumulation value and annuity payments will be variable in part and
fixed in part.
Purchase of the Certificate
You may make multiple purchase payments. The minimum initial payment is
$25,000. The minimum amount for each subsequent payment is $1,000 or a
lesser amount as we may permit from time to time which is currently $250.
(See "Purchase Payments and Applications".)
Investment Choices
You can allocate and reallocate your investment among the Sub-accounts of
the Variable Account which in turn invest in the Eligible Funds. Each
Eligible Fund holds its assets separately from the assets of the other
Eligible Funds. Each has its own investment objectives and policies
described in the prospectuses for the Eligible Funds. Under the
Certificate, the Variable Account currently invests in the following:
AIM Variable Insurance Funds, Inc. ("AIM Insurance Funds")
AIM V.I. Capital Appreciation Fund ("AIM Capital Appreciation")
AIM V.I. Growth Fund ("AIM Growth")
AIM V.I. International Equity Fund ("AIM International Equity")
Alliance Variable Products Series Fund, Inc. ("Alliance Series Fund")
Global Bond Portfolio ("Alliance Global Bond")
Growth and Income Portfolio ("Alliance Growth and Income")
Premier Growth Portfolio ("Alliance Premier Growth")
Real Estate Portfolio ("Alliance Real Estate")
Liberty Variable Investment Trust ("Liberty Trust")
Colonial Value Fund, Variable Series ("Colonial Value")
Colonial High Yield Securities Fund, Variable Series ("Colonial High
Yield Securities")
Colonial Small Cap Value Fund, Variable Series ("Colonial Small Cap
Value")
Colonial Strategic Income Fund, Variable Series ("Colonial Strategic
Income")
Colonial U.S. Growth & Income Fund, Variable Series ("Colonial U.S.
Growth & Income")
Liberty All-Star Equity Fund, Variable Series ("Liberty All-Star
Equity")
Stein Roe Global Utilities Fund, Variable Series ("Stein Roe Global
Utilities")
MFS Variable Insurance Trust ("MFS Trust")
MFS Bond Series ("MFS Bond")
MFS Emerging Growth Series ("MFS Emerging Growth")
MFS Research Series ("MFS Research")
SteinRoe Variable Investment Trust ("SteinRoe Trust")
Stein Roe Balanced Fund, Variable Series ("Stein Roe Balanced")
Stein Roe Growth Stock Fund, Variable Series ("Stein Roe Growth Stock")
Stein Roe Money Market Fund, Variable Series ("Stein Roe Money Market")
Stein Roe Small Company Growth Fund, Variable Series ("Stein Roe Small
Company Growth")
Fees and Charges
Mortality and Expense Risk Charge
We deduct a mortality and expense risk charge at an annual rate of 1.25% of
your average daily net asset value in the Variable Account. (See
"Deductions for Mortality and Expense Risk Charge".)
Daily Administrative Charge
We deduct a daily administrative charge at an annual rate of .15% of your
daily net asset value in the Variable Account. (See "Deductions for Daily
Administrative Charge".)
Transfer Charge
Currently, there is no transfer charge. However the Certificate permits us
to charge you up to $25 for each transfer in excess of 12 in each year your
Certificate is In Force.
Premium Taxes
We charge premium taxes against your Certificate Value. Currently such
premium taxes range from 0% to 5.0%. (See "Deductions for Premium Taxes".)
Federal Income Taxes
You will not pay federal income taxes on the increases in the value of your
Certificate. However, if you make a withdrawal, in the form of a lump sum
payment, annuity payment or make a gift or assignment, you will be subject
to federal income taxes on the increases in the value of your Certificate
and may also be subject to a 10% federal penalty tax. (See "Tax Status".)
Free Look
Generally, you may revoke the Certificate by returning it to us within 10
days after you receive it. For most states, we will refund your
Certificate Value plus any administrative charges previously deducted, as
of the date we receive the returned Certificate. You will bear the
investment risk during the revocation period. In other states, we will
return purchase payments. You may ask us for the rules that apply to your
state. (See "Right to Revoke".)
FEE TABLE
Certificate Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Contingent Deferred Sales Charge
(as a percentage of purchase payments): 0%
Maximum Total Certificate Owner Transaction Expenses
(as a percentage of purchase payments): 0%
Annual Certificate Maintenance Charge $0
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: 1.25%
Administrative Charge: .15%
Total Variable Account Annual Expenses: 1.40%
AIM Insurance Funds, Alliance Series Fund, Liberty Trust,
MFS Trust, and SteinRoe Trust Annual Expenses1
(as a percentage of average net assets)
Management Other Total Fund
Fees Expenses Operating Expenses
(After Any (After Any (After Any
Waiver and/or Waiver and/or Waiver and/or
Fund Reimbursement)2 Reimbursement)2
Reimbursements)2
AIM Capital Appreciation .62% .05% .67%
AIM Growth .64% .08% .72%
AIM International Equity .75% .16% .91%
Alliance Global Bond .64%(.65%) .29%(.53%) .93%(1.18%)
Alliance Growth and Income .63% .10% .73%
Alliance Premier Growth .97%(1.00%) .09% 1.06%(1.09%)
Alliance Real Estate .45%(.90%) .50%(.87%) .95%(1.77%)
Colonial Value .65% .08% .73%
Colonial High Yield Securities .12%(.60%) .68% .80%(1.28%)
Colonial Small Cap Value .00%(.80%) 1.00%(2.86%) 1.00%(3.66%)
Colonial Strategic Income .65% .10% .75%
Colonial U.S. Growth & Income .80% .08% .88%
Liberty All-Star Equity .80% .15% .95%
Stein Roe Global Utilities .65% .12% .77%
MFS Bond .60% .16%(.46%) .76%(1.06%)
MFS Emerging Growth .75% .09% .84%
MFS Research .75% .11% .86%
Stein Roe Balanced .45% .18% .63%
Stein Roe Growth Stock .50% .17% .67%
Stein Roe Money Market .35% .17% .52%
Stein Roe Small Company Growth .50% .22% .72%
THE ABOVE EXPENSES FOR THE ELIGIBLE FUNDS WERE PROVIDED BY THE FUNDS. WE
HAVE NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
1All Trust and Fund expenses are for 1999. The AIM Insurance Funds,
Alliance Series Fund, Liberty Trust, MFS Trust (except MFS Emerging Growth
and MFS Research), and SteinRoe Trust expenses reflect the Fund's or
Trust's manager's agreement to reimburse expenses above certain limits (see
footnote 2).
2The manager of AIM Insurance Funds may from time to time waive all or a
portion of its advisory fees and/or assume certain expenses of the Eligible
Funds. Fee waivers or reductions, other than those contained in the AIM
Insurance Funds' advisory agreement, may be modified or terminated at any
time. The AIM Insurance Funds' manager did not waive advisory fees or
assume expenses as of the date of this prospectus.
The manager of Alliance Series Fund has agreed to continue voluntary
expense reimbursements for Alliance Global Bond, Alliance Premier Growth
and Alliance Real Estate for the foreseeable future. Each percentage shown
in the parentheses is what the expenses would be in the absence of expense
reimbursement: for Alliance Global Bond - .65% for management fees, .53%
for other expenses and 1.18% for total expenses; for Alliance Premier
Growth - 1.00% for management fees and 1.09% for total expenses; and for
Alliance Real Estate - .90% for management fees, .87% for other expenses,
and 1.77% for total expenses.
The manager of Liberty Trust has agreed until April 30, 2001 to reimburse
all expenses, including management fees, but excluding interest, taxes,
brokerage, and other expenses which are capitalized in accordance with
accepted accounting procedures, and extraordinary expenses, in excess of
the following percentage of average net asset value per annum: 1.00% for
Colonial Value, Liberty All-Star Equity, Colonial Small Cap Value, Stein
Roe Global Utilities, and Colonial U.S. Growth & Income; and .80% for
Colonial High Yield Securities and Colonial Strategic Income. Each
percentage shown in the parentheses is what the expenses would be in the
absence of expense reimbursement: for Colonial High Yield Securities - .60%
for management fees and 1.28% for total expenses; for Colonial Small Cap
Value - .80% for management fees, 2.86% for other expenses and 3.66% for
total expenses.
The manager of MFS Trust has agreed until May 1, 2001, subject to
reimbursement, to bear expenses, except for management fees, taxes,
extraordinary expenses, and brokerage and transaction costs, such that
other expenses do not exceed .15% of the average daily net assets of MFS
Bond. The MFS Trust manager's agreement to bear expenses is subject to
termination or revision. Each percentage shown in the parentheses is what
the expenses would be in the absence of this arrangement: for MFS Bond -
.46% for other expenses and 1.06% for total expenses.
The manager of SteinRoe Trust has agreed until April 30, 2001 to reimburse
all expenses, including management fees, in excess of the following
percentage of the average net assets of each Eligible Fund: for Stein Roe
Balanced - .75%; for Stein Roe Growth Stock and Stein Roe Small Company
Growth - .80%; and for Stein Roe Money Market -.65%. The SteinRoe Trust's
manager was not required to reimburse expenses as of the date of this
prospectus.
EXAMPLE
Example 1. If your Certificate stays in force through the periods shown or
is surrendered or annuitized at the end of the periods shown, you would pay
the following expenses on a $1,000 investment, assuming 5% annual return on
assets.
Sub-account 1 Year 3 Years 5 Years 10 Years
AIM Capital Appreciation 21 67 121 294
AIM Growth 21 69 124 301
AIM International Equity 23 75 134 325
Alliance Global Bond 23 75 135 327
Alliance Growth and Income 21 69 124 302
Alliance Premier Growth 25 79 143 344
Alliance Real Estate 24 76 137 330
Colonial Value 22 70 126 306
Colonial High Yield Securities 22 71 128 311
Colonial Small Cap Value 24 78 139 336
Colonial Strategic Income 22 71 127 308
Colonial U.S. Growth & Income 23 74 134 324
Liberty All-Star Equity 24 78 139 336
Stein Roe Global Utilities 22 72 129 313
MFS Bond 24 78 139 336
MFS Emerging Growth 23 73 131 317
MFS Research 23 73 132 319
Stein Roe Balanced 21 66 120 291
Stein Roe Growth Stock 21 68 123 298
Stein Roe Money Market 20 66 118 288
Stein Roe Small Company Growth 21 70 125 304
EXPLANATION OF FEE TABLE AND EXAMPLE
The purpose of the fee table is to illustrate the expenses you may directly
or indirectly bear under a Certificate. The table reflects expenses of the
Variable Account as well as the Eligible Funds. You should read
"Deductions" in this prospectus and the sections relating to expenses of
the Eligible Funds in their prospectuses. The examples do not include any
taxes or tax penalties you may be required to pay if you surrender your
Certificate.
The example assumes you did not make any transfers. We reserve the right
to impose a transfer fee after we notify you. Currently, we do not impose
any transfer fee. Premium taxes are not shown. We deduct the amount of
any premium taxes (which range from 0% to 5%) from Certificate Value upon
full surrender, death or annuitization.
The fee table and example should not be considered a representation of past
or future expenses and charges of the Sub-accounts. Your actual expenses
may be greater or less than those shown. Similarly, the 5% annual rate of
return assumed in the example is not an estimate or a guarantee of future
investment performance. See "Deductions" in this prospectus, "Management"
in the prospectus for AIM Insurance Funds, "Management of the Fund" in the
prospectus for the Alliance Series Fund, "Trust Management Organizations"
and "Expenses of the Funds" in the prospectus for Liberty Trust,
"Management of the Series" and "Expenses" in the prospectus for MFS Trust,
and "How the Funds are Managed" in the prospectus for SteinRoe Trust.
CONDENSED FINANCIAL INFORMATION
Accumulation Unit Values*
Accumulation Accumulation Number of
Unit Value Unit Value Accumulation
Beginning End Units End
Sub-Account of Year** of Year of Year Year
AIM Capital Appreciation $11.091 $ 1999
10.000 11.091 861 1998
AIM Growth 11.816 1999
10.000 11.816 17,097 1998
AIM International Equity 9.997 1999
10.000 9.997 32,523 1998
Alliance Global Bond 11.042 1999
10.006 11.042 915,527 1998
Alliance Growth and Income 10.894 1999
10.000 10.894 51,386 1998
Alliance Premier Growth 19.646 1999
16.467 19.646 2,327,577 1998
Alliance Real Estate 9.019 1999
10.000 9.019 13,212 1998
Colonial Value 21.211 1999
21.121 21.211 2,102,020 1998
Colonial High Yield Securities 9.631 1999
10.000 9.631 102,633 1998
Colonial Small Cap Value 8.575 1999
10.000 8.575 5,371 1998
Colonial Strategic Income 14.237 1999
13.945 14.237 3,092,643 1998
Colonial U.S. Growth & Income 24.622 1999
23.285 24.622 2,060,242 1998
Liberty All-Star Equity 11.777 1999
11.332 11.777 1,394,639 1998
Stein Roe Global Utilities 17.923 1999
16.572 17.923 806,562 1998
MFS Bond 10.240 1999
10.000 10.240 84,215 1998
MFS Emerging Growth 15.455 1999
13.592 15.455 1,086,256 1998
MFS Research 14.400 1999
13.709 14.400 1,664,675 1998
Stein Roe Balanced 27.188 1999
25.839 27.188 1,446,830 1998
Stein Roe Growth Stock 44.829 1999
40.074 44.829 546,512 1998
Stein Roe Money Market 14.284 1999
13.974 14.284 1,742,449 1998
Stein Roe Small Company Growth 25.351 1999
32.104 25.351 223,807 1998
* Accumulation Unit Values are rounded to the nearest tenth of a cent and
numbers of accumulation units are rounded to the nearest whole number.
** Each value is as of May 19, 1998, which is the date the Eligible Fund
Sub-account first became available.
The full financial statements for the Variable Account and Keyport are in
the Statement of Additional Information.
PERFORMANCE INFORMATION
The Variable Account may from time to time advertise certain performance
information concerning its various Sub-accounts.
Performance information is not an indicator of either past or future
performance of a Certificate.
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 Sub-account
over a given period of time.
Average annual total return information shows the average annual
compounding percentage applied to the value of an investment in the Sub-
account from the beginning of the measuring period to the end of that
period. This average annual total return reflects all historical investment
results, less all Sub-account and Certificate charges and deductions.
Average total return is not reduced by any premium taxes. Average total
return would be less if these taxes were deducted.
In order to calculate average annual total return, we divide 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. We then annualize
the resulting total rate for the period to obtain the average annual
compounding percentage change during the period.
The Sub-accounts may present additional non-standardized total return
information computed on a different basis:
(a) First, the Sub-accounts may present total return information as
described above, except there are no Certificate deductions for premium tax
charges. Because there are no charges deducted, the calculation is
simplified. We divide 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
twelve-month change rate. For longer periods it is a total rate for the
period. We annualize the total rate in order to obtain the average annual
percentage change in the Accumulation Unit value. The percentages would be
lower if these charges were included.
(b) Second, certain of the Eligible Funds have been available for other
variable annuity contracts prior to the beginning of the offering of the
Certificates described in this prospectus. Any performance information for
such periods will be based on the historical results of the Eligible Funds
and applying the fees and charges to the Certificate for the specified time
periods.
The Stein Roe Money Market 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 seven-day period. We annualize this
income by assuming that the amount of income generated by the investment
during that week is generated each week over a fifty-two week period. It is
shown as a percentage. The yield reflects the deduction of all charges
assessed against the Sub-account and a Certificate but does not include
premium tax charges. The yield would be lower if these charges were
included.
We calculate the effective yield of the Stein Roe Money Market Sub-account
in a similar manner but, when annualizing the yield, we assume income
earned by the Sub-account is reinvested. This compounding effect causes
effective yield to be higher than yield.
KEYPORT AND THE VARIABLE ACCOUNT
We were incorporated in Rhode Island in 1957 as a stock life insurance
company. Our executive and administrative offices are at 125 High Street,
Boston, Massachusetts 02110. Our home office is at 695 George Washington
Highway, Lincoln, Rhode Island 02865.
We write individual life insurance and individual and group annuity
contracts that are "non-participating". That is, we do not pay dividends or
benefits based on our financial performance. We are licensed to do
business in all states except New York and are also licensed in the
District of Columbia and the Virgin Islands. We are rated A (Excellent) by
A.M. Best and Company, independent analysts of the insurance industry.
Standard & Poor's ("S&P") rates us AA- for very strong financial security,
Moody's rates us A2 for good financial strength and Duff & Phelps rates us
AA- for very high claims paying ability. The Best's A rating is in the
second highest rating category, which also includes a lower rating of A-.
S&P and Duff & Phelps have one rating category above AA and Moody's has two
rating categories above A. The Moody's "2" modifier means that we are in
the middle of the A category. The S&P and Duff & Phelps "-" modifier
signifies that we are at the lower end of the AA category. These ratings
reflect the opinion of the rating company as to our relative financial
strength and ability to meet contractual obligations to our policyholders.
Even though we hold the assets in the Variable Account separately from our
other assets, our ratings may still be relevant to you since not all of our
contractual obligations relate to payments based on those segregated
assets.
We are 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 we have chosen to participate in
IMSA's Life Insurance Ethical Market Conduct Program.
We are indirectly owned by Liberty Financial Companies, Inc. and are
ultimately controlled by Liberty Mutual Insurance Company of Boston,
Massachusetts, a multi-line insurance and financial services institution.
We established the Variable Account 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 mean the Securities and Exchange Commission
supervises us or the management of the Variable Account.
Obligations under the Certificates are our obligations. Although the assets
of the Variable Account are our property, these assets are held separately
from our other assets and are not chargeable with liabilities arising out
of any other business we 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 we may conduct.
PURCHASE PAYMENTS AND APPLICATIONS
The initial purchase payment is due on the Certificate Date. The minimum
initial purchase payment is $25,000. You may make additional purchase
payments. Each subsequent purchase payment must be at least $1,000 or any
lesser amount we may permit, which is currently $250. We may reject any
purchase payment or application.
If your application for a Certificate is complete and amounts are to be
allocated to the Variable Account, we will apply your initial purchase
payment to the Variable Account within two business days of receipt. If
the application is incomplete, we will notify you and try to complete it
within five business days. If it is not complete at the end of this
period, we will inform you of the reason for the delay. The purchase
payment will be returned immediately unless you specifically consent to our
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.
We will send you a written notification showing the allocation of all
purchase payments and the re-allocation of values after any transfer you
have requested. You must notify us immediately of any error.
We will permit others to act on your behalf in certain instances,
including:
o We will accept an application for a Certificate
signed by an attorney-in-fact if we receive a copy of the
power of attorney with the application.
o We will issue a Certificate to replace an existing
life insurance or annuity policy that we or an affiliated
company issued even though we did not previously receive a
signed application from you.
Certain dealers or other authorized persons, such as employers and
Qualified Plan fiduciaries may inform us of your responses to application
questions by telephone or by order ticket and cause the initial purchase
payment to be paid to us. If the information is complete, we will issue
the Certificate with a copy of an application containing that information.
We will send you the Certificate and a letter so you may review the
information and notify us of any errors. We may request you to confirm
that the information is correct by signing a copy of the application or a
Certificate delivery receipt. We will send you a written notice confirming
all purchases. Our liability under any Certificate relates only to amounts
so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
We will invest purchase payments you applied to the Variable Account in the
Eligible Fund Sub-accounts chosen by you. Your 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".) The percentage for each Sub-account, if not zero, must be at
least 5% and a whole number. You may change the allocation percentages
without fee, penalty or other charge. You must notify us in writing of your
allocation changes unless you, your attorney-in-fact or another authorized
person have given us written authorization to accept telephone allocation
instructions. By allowing us to accept telephone changes, you agree to
accept and be bound by our current conditions and procedures. The current
conditions and procedures are in Appendix B. We will notify you of any
changes in advance.
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. We may add or withdraw Eligible Funds and Sub-
accounts as permitted by applicable law.
Eligible Funds
The Eligible Funds are the separate funds listed within the AIM Insurance
Funds, Alliance Series Fund, Liberty Trust, MFS Trust and SteinRoe Trust.
Keyport and the Variable Account may enter into agreements with other
mutual funds for the purpose of making such mutual funds available as
Eligible Funds under certain Certificates.
We do not promise that the Eligible Funds will meet their investment
objectives. Amounts you have allocated to Sub-accounts may grow, decline,
or grow less in value than you expect, depending on the investment
performance of the Sub-accounts in which the Eligible Funds invest. You
bear the investment risk that those Sub-accounts possibly will not meet
their investment objectives. You should carefully review their
prospectuses before allocating amounts to the Sub-accounts of the Variable
Account.
All the Eligible Funds are funding vehicles for variable annuity contracts
and variable life insurance policies offered by our separate accounts. The
Eligible Funds are also available for the separate accounts of insurance
companies affiliated and unaffiliated with us. The risks involved in this
"mixed and shared funding" are disclosed in the Eligible Fund prospectuses.
AIM Insurance Funds-"Purchase and Redemption of Shares"; Alliance Series
Fund-"Introduction to the Fund"; Liberty Trust-"The Trust"; MFS
Trust-"Investment Concept of the Trust"; and SteinRoe Trust-"The Trust".
AIM Advisors Inc. ("AIM") serves as the investment adviser to each of the
Eligible Funds of AIM Insurance Funds.
Alliance Capital Management L.P. is the investment adviser for the Eligible
Funds of Alliance Series Fund. AIGAM International Limited is sub-adviser
for Alliance Global.
Liberty Advisory Services Corp. ("LASC"), our subsidiary, is the manager
for Liberty Trust and its Eligible Funds. Colonial Management Associates,
Inc. ("Colonial"), an affiliate, is the sub-adviser for the Eligible Funds
except for Stein Roe Global Utilities and Liberty All-Star Equity. Liberty
Asset Management Company, an affiliate, is sub-adviser for Liberty All-Star
Equity and the current portfolio managers are J.P. Morgan Investment
Management Inc., Oppenheimer Capital, TCW Funds Management, Inc., Westwood
Management Corp. and Boston Partners Asset Management, L.P.
Massachusetts Financial Services Company ("MFS") is the investment adviser
for the Eligible Funds of MFS Trust.
Stein Roe & Farnham Incorporated ("Stein Roe"), an affiliate, is the
investment adviser for each Eligible Fund of SteinRoe Trust and sub-adviser
for Stein Roe Global Utilities.
We have briefly described the Eligible Funds below. You should read the
current prospectuses for the Eligible Funds for more details and complete
information. The prospectuses are available, at no charge, from a
salesperson or by writing to us or by calling (800) 437-4466.
Eligible Funds of AIM Insurance
Funds and Variable Account
Sub-accounts Investment Objective
AIM Capital Appreciation Capital appreciation through
(AIM Capital Appreciation investments in common stocks,
Sub-account) with emphasis on medium-sized
and smaller emerging growth
companies.
AIM Growth Growth of capital through
(AIM Growth Sub-account) investments primarily in
common stocks of leading U.S.
companies considered by AIM
to have strong earnings
momentum.
AIM International Equity Long-term growth of capital
(AIM International Equity by investing in international
Sub-account) equity securities, the issuers
of which are considered by AIM
to have strong earnings
momentum.
Eligible Funds of Alliance Series
Fund and Variable Account
Sub-accounts Investment Objective
Alliance Global Bond A high level of return from a
(Alliance Global Bond combination of current income and
Sub-account) capital appreciation by investing
in a globally diversified
portfolio of high quality debt
securities denominated in the U.S.
Dollar and a range of foreign
currencies.
Alliance Growth and Income Balance the objectives of
(Alliance Growth and Income reasonable current income and
Sub-account) reasonable opportunities for
appreciation through investments
primarily in dividend-paying
common stocks of good quality.
Alliance Premier Growth Growth of capital rather than
(Alliance Premier Growth current income.
Sub-account)
Alliance Real Estate Total return on its assets through
(Alliance Real Estate Sub- long-term growth of capital and
Account) income principally through
investing in a portfolio of equity
securities of issuers that are
primarily engaged in or related to
the real estate industry.
Eligible Funds of Liberty Trust
and Variable Account
Sub-accounts Investment Objective
Colonial Value Primarily income and long-term
(Colonial Value Sub-account) capital growth and, secondarily,
preservation of capital.
Colonial High Yield Securities High current income and total
(Colonial High Yield Securities return by investing primarily
Sub-account) in lower rated corporate debt
securities.
Colonial Small Cap Value Long-term growth by investing
(Colonial Small Cap Value in smaller capitalization
Sub-account) equity securities.
Colonial Strategic Income A high level of current income, as
(Colonial Strategic Income is consistent with prudent risk
Sub-account) and maximizing total return, by
diversifying investments primarily
in U.S. and foreign government and
high yield, high risk corporate
debt securities.
Colonial U.S. Growth & Income Long-term capital growth and
(Colonial U.S. Growth & Income income by investing primarily in
Sub-account) large capitalization equity
securities.
Liberty All-Star Equity Total investment return, comprised
(Liberty All-Star Equity Sub-account) of long-term capital appreciation
and current income, through
investment primarily in a
diversified portfolio of equity
securities.
Stein Roe Global Utilities Current income and long-term
(Stein Roe Global Utilities growth of capital and income.
Sub-account
Eligible Funds of MFS Trust
and Variable Account
Sub-accounts Investment Objective
MFS Bond High level of current income
(MFS Bond Sub-account) as is believed consistent
with prudent investment risk
and secondarily to protect
shareholders' capital.
MFS Emerging Growth Long-term growth of capital.
(MFS Emerging Growth Sub-account)
MFS Research Long-term growth of capital and
(MFS Research Sub-account) future income.
Eligible Funds of SteinRoe Trust
and Variable Account
Sub-accounts Investment Objective
Stein Roe Balanced High total investment return
(Stein Roe Balanced through investment in a changing
Sub-account) mix of securities.
Stein Roe Growth Stock Long-term growth of capital
(Stein Roe Growth Stock through investment primarily
Sub-account) in common stocks.
Stein Roe Money Market High current income from short-
(Stein Roe Money Market term money market instruments
Sub-account) while emphasizing preservation
of capital and maintaining
excellent liquidity.
Stein Roe Small Company Growth Capital growth by investing
(Stein Roe Small Company Growth primarily in common stocks,
Sub-account) convertible securities, and other
securities selected for
prospective capital growth.
Transfer of Variable Account Value
You may transfer Variable Account Value from one Sub-account to another Sub-
account and/or to the Fixed Account.
We may charge a transfer fee and limit the number of transfers that you can
make in a time period. Transfer limitations may prevent you from making a
transfer on the date you select. This may result in your Certificate Value
being lower than it would have been if you had been able to make the
transfer.
Limits on Transfers
Currently, we do not limit the number or frequency of transfers. We do not
charge a transfer fee for each transfer in excess of 12 in each Certificate
Year, except as follows:
o We impose a transfer limit of one transfer every thirty days, or
such other period as we may permit, for transfers on behalf of
multiple Certificates by a common attorney-in-fact, or transfers
that are, in our determination, based on the recommendation of a
common investment adviser or broker/dealer, and
o We limit each transfer to a maximum of $500,000, or such
greater amount as we may permit. We treat all transfer requests
for a Certificate made on the same day as a single transfer. We
may treat as a single transfer all transfers you request on the
same day for every Certificate you own. The total combined
transfer amount is subject to the $500,000 limitation. If the
total amount of the requested transfers exceeds $500,000, we
will not execute any of the transfers, and
o We treat as a single transfer all transfers made on the same
day on behalf of multiple Certificates by a common attorney-
in-fact, or transfers that are, in our determination, based on
the recommendation of a common investment adviser
or broker/dealer. The $500,000 limitation applies to such
transfers. If the total amount of the requested transfers
exceeds $500,000, we will not execute any of the transfers.
If we have executed a transfer with respect to your Certificate as part of
a multiple transfer request, we will not execute another transfer request
for your Certificate for thirty days.
By applying these limitations we intend to protect the interests of
individuals who do and those who do not engage in significant transfer
activity among Sub-accounts. We have determined that the actions of
individuals engaging in significant transfer activity may cause an adverse
affect on the performance of the Eligible Fund for the Sub-account
involved. The movement of values from one Sub-account to another may
prevent the appropriate Eligible Fund from taking advantage of investment
opportunities because the Eligible Fund must maintain a liquid position in
order to handle redemptions. Such movement may also cause a substantial
increase in fund transaction costs which all Certificate Owners must
indirectly bear.
We will notify you prior to charging any transfer fee or a change in the
limitation on the number of transfers. The fee will not exceed $25.
You must notify us in writing of your transfer requests unless you have
given us written authorization to accept telephone transfer requests from
you or your attorney-in-fact. By authorizing us to accept telephone
transfer instructions, you agree to accept and be bound by our current
conditions and procedures. The current conditions and procedures are in
Appendix B. You will be given prior notification of any changes. A person
acting on your behalf as an attorney-in-fact may make written transfer
requests.
If we receive your transfer requests before 4:00 P.M. Eastern Time, we will
initiate them at the close of business that day. We will initiate any
requests received after that time at the close of the next business day. We
will execute your request to transfer value by both redeeming and acquiring
Accumulation Units on the day we initiate the transfer.
If you transfer 100% of any Sub-account's value, and the allocation formula
for purchase payments on your application includes that Sub-account, the
allocation formula for future purchase payments will automatically change
unless you tell us otherwise.
Substitution of Eligible Funds and Other Variable Account Changes
If shares of any of the Eligible Funds are no longer available for
investment by the Variable Account, or further investment in the shares of
an Eligible Fund is no longer appropriate under the Certificate, we may add
or substitute shares of another Eligible Fund or of another mutual fund for
Eligible Fund shares already purchased or to be purchased in the future.
Any substitution of securities will comply with the requirements of the
Investment Company Act of 1940.
We also reserve the right to make the following changes in the operation of
the Variable Account and Eligible Funds:
o to operate the Variable Account in any form permitted by law;
o to take any action necessary to comply with applicable law or
obtain and continue any exemption from applicable law;
o to transfer any assets in any Sub-account to another or to one
or more separate investment accounts, or to our general
account;
o to add, combine or remove Sub-accounts in the Variable Account;
and
o to change how charges are assessed, so long as the total
charges do not exceed the maximum amount that may be charged
the Variable Account and the Eligible Funds in connection with
the Certificates.
DEDUCTIONS
Deductions for Mortality and Expense Risk Charge
Variable annuity payments fluctuate depending on the investment performance
of the Sub-accounts. The payments will not be affected by the mortality
experience (death rate) of persons receiving such payments or of the
general population. We guarantee the Death Benefits described in "Death
Provisions". We also assume an expense risk that the asset-based
administrative charge will be insufficient to cover our anticipated
administrative expenses.
We deduct a mortality and expense risk charge from each Sub-account. The
mortality and expense risk charge is equal, on an annual basis, to 1.25% of
the average daily net asset value of each Sub-account. We deduct the charge
both before and after the Income Date. We may deduct less than the full
charge from Sub-account values attributable to Certificates issued to our
employees and to other persons specified in "Sales of the Certificates".
Deductions for Daily Administrative Charge
We deduct from each Sub-account for each valuation period an administrative
charge equal on an annual basis to 0.15% of the average daily net asset
value of each Sub-account. This charge compensates us for a portion of the
administrative expenses relating to the Certificate. We deduct this charge
both before and after the Income Date.
Deductions for Transfers of Variable Account Value
The Certificate allows us to charge a transfer fee. Currently, we do not
charge such a fee. We will notify you prior to the imposition of any fee
and the fee will not exceed $25.
Deductions for Premium Taxes
We deduct the amount of any premium taxes required by any state or
governmental entity. We deduct premium taxes from Certificate Value when
they are paid. The actual amount of any such premium taxes will depend,
among other things, on the type of Certificate you purchase (Qualified or
Non-Qualified), on your state of residence, the state of residence of the
Annuitant, 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
We will deduct income taxes from any amount payable under the Certificate
that a governmental authority requires us to withhold. See "Income Tax
Withholding" and "Tax-Sheltered Annuities".
Total Variable Account Expenses
Total Variable Account expenses you will incur will be the mortality and
expense risk charge and the daily administrative charge.
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and the deductions and expenses paid out of the assets
of the Eligible Funds. The prospectus for the Eligible Fund describes these
deductions and expenses.
OTHER SERVICES
The Programs. We offer the following investment related programs which are
available only prior to the Income Date:
o asset allocation;
o dollar cost averaging;
o systematic investment; and
o systematic withdrawal programs.
A rebalancing program is available before and after the Income Date. Under
each program that uses transfers, the 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. We reserve the right to terminate any program.
If you have submitted a telephone authorization form, you may make certain
changes by telephone. For those programs involving transfers, you may
change instructions by telephone with regard to which Sub-accounts or Fixed
Account Certificate Value may be transferred. We describe the current
conditions and procedures in Appendix B.
Dollar Cost Averaging Program. Under the program, we make automatic
transfers of Accumulation Units on a periodic basis out of the Stein Roe
Money Market Sub-account or the One-Year Guarantee Period into one or more
of the other available Sub-accounts you select. The program allows you to
invest in the Sub-accounts over time rather than all at once. The program
is available for purchase payments and amounts transferred into the Stein
Roe Money Market Sub-account or the One-Year Guarantee Period. We reserve
the right to limit the number of Sub-accounts you may choose; currently
there are no limits.
If you wish to participate in the program, you must specify in writing the
Stein Roe Money Market Sub-account or the One-Year Guarantee Period from
which you want the transfers made. You must also tell us the monthly
amount you want transferred (minimum $100) and the Sub-account(s) to which
you want the transfers made. The first transfer will occur about 30 days
after we receive your request. Each subsequent periodic transfer will occur
at the close of the same valuation period. If you select monthly transfers
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, we will transfer that
remaining value and the program will end. Before this final transfer, you
may extend the program by allocating additional purchase payments, or by
transferring Certificate Value, to the Stein Roe Money Market Sub-account
or the One-Year Guarantee Period.
You may change the monthly amount you want transferred, the Sub-account(s)
to which you want transfers made or end the program. The program will
automatically end on the Income Date. We reserve the right to end the
program at any time by sending you a notice one month in advance.
We must receive your written or telephone instructions by 4:00 P.M. Eastern
Time of the business day before the next scheduled transfer in order for
the new instructions to be in effect for that transfer. We establish
conditions and procedures for telephone instructions for dollar cost
averaging from time to time. The current conditions and procedures appear
in Appendix B, and you will be notified prior to any changes.
Asset Allocation Program. You may select from five asset allocation model
portfolios separately developed by Ibbotson Associates and Standard &
Poor's:
o Model A -- Capital Preservation,
o Model B -- Income and Growth,
o Model C -- Moderate Growth,
o Model D -- Growth, and
o Model E -- Aggressive Growth.
If you elect one of the models, we will automatically allocate initial and
subsequent purchase payments among the Sub-accounts in the model. You may
use only one model in a Certificate at a time. You may use a questionnaire
and scoring system to determine the model that corresponds to your 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. You will
receive notification prior to any reconfiguration.
The Fixed Account is not available in any asset allocation model. You may
allocate initial or subsequent purchase payments, or Certificate Value,
between an asset allocation model and the Fixed Account.
Rebalancing Program. If you elect purchase payment percentage allocations,
we will automatically rebalance the Certificate Value of each Sub-account
on the last day of the calendar quarter to match your current percentage
allocations. You may terminate the program at any time or change the
percentages by notifying us in writing. We must receive your changes ten
days before the end of the calendar quarter. Certificate Value allocated to
the Fixed Account is not included in the rebalancing program. After the
Income Date, the rebalancing program applies only to variable annuity
payments, and we will rebalance the number of Annuity Units in each Sub-
account. Annuity Units are used to calculate the amount of each annuity
payment.
Systematic Investment Program. You may make purchase payments for Non-
Qualified Certificates through monthly deductions from your bank account or
payroll. You may elect this program by completing and returning a
systematic investment program application and authorization form to us.
You may obtain an application and authorization form from us or your sales
representative. There is a current minimum of $50 per payment for the
program.
Systematic Withdrawal Program. To the extent permitted by law, if you
enroll in the systematic withdrawal program, we will make monthly,
quarterly, semi-annual or annual distributions of a set dollar amount
directly to you. We will treat such distributions for federal tax purposes
as any other withdrawal or distribution of Certificate Value. You may
specify the amount of each partial withdrawal, subject to a minimum of
$100. You may make systematic withdrawals from any Sub-accounts or
guarantee period of the Fixed Account.
Unless you specify the Sub-account(s) or the Fixed Account from which you
want withdrawals of Certificate Value made, or if the amount in a specified
Sub-account is less than the predetermined amount, we will make withdrawals
under the program in the manner specified for partial withdrawals in
"Partial Withdrawals and Surrender." We will process all Sub-account
withdrawals under the program by canceling Accumulation Units equal in
value to the amount to be distributed to you and to the amount of any
applicable contingent deferred sales charge.
You may combine the program with all other programs except the systematic
investment program.
THE CERTIFICATES
Variable Account Value
The Variable Account Value for your Certificate is based on the sum of your
proportionate interest in the value of each Sub-account to which you have
allocated values. We determine the value of each Sub-account at any time by
multiplying the number of Accumulation Units attributable to that Sub-
account by its Accumulation Unit value.
Each purchase payment you make results in the credit of additional
Accumulation Units to your Certificate and the appropriate Sub-account.
Purchase payments are credited to your Certificate using the Accumulation
Unit value that is next calculated after we receive your purchase payment.
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
We determine the value of the Variable Account each valuation period using
the net asset value of the Eligible Fund shares. A valuation period is the
period beginning at 4:00 P.M. (ET) which is the close of trading on the New
York Stock Exchange and ending at the close of trading for the next
business day. 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
Your Variable Account Value will fluctuate with the investment results of
the underlying Eligible Funds you have selected. In order to determine how
these fluctuations affect value, we use an Accumulation Unit value. Each
Sub-account has its own Accumulation Units and value per unit. We determine
the unit value applicable during any valuation period at the end of that
period.
When we first purchased Eligible Fund shares on behalf of the Variable
Account, we 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. We calculate a net investment factor for each Sub-account
according to the following formula (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 the Eligible Fund made
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 administrative
charge; plus
(iii) a charge factor for any tax provision established by us as a
result of the operations of that Sub-account.
For Certificates issued to our employees and other persons specified in
"Sales of the Certificates", the mortality and expense risk charge in
(c)(i) above is .35%, and the daily administrative charge in (c)(ii) above
is eliminated.
Modification of the Certificate
Only our President or Secretary may agree to alter the Certificate or waive
any of its terms. A change may be made to the Certificate if there have
been changes in applicable law or interpretation of law. Any changes will
be made in writing and with your consent, except as may be required by
applicable law.
Right to Revoke
You may return the Certificate within 10 days after you receive it by
delivering or mailing it to us. The postmark on a properly addressed and
postage-prepaid envelope determines if a Certificate is returned within the
period. We will treat the returned Certificate as if we never issued it and
will refund either the Certificate Value or purchase payments, whichever is
required by state law.
If we deliver your Certificate to you in California and you are age 60 or
older, you may return the Certificate to us or to the agent from whom you
purchased it. If you return the Certificate within 30 days after you
receive it, we will refund the Certificate Value.
DEATH PROVISIONS FOR NON-QUALIFIED CERTIFICATES
Death of Primary Owner, Joint Owner or Certain Non-Owner Annuitant. If the
Certificate is In Force, you or any Joint Certificate Owner dies, or if the
Annuitant dies when a non-natural person (such as a trust) owns the
Certificate, we will treat the Designated Beneficiary as the Certificate
Owner after such a death.
If the decedent's surviving spouse is the sole Designated Beneficiary, he
or she will automatically become the new sole primary Certificate Owner as
of the decedent's date of death. If the decedent was the Annuitant, the new
Annuitant will be any living contingent annuitant, otherwise the surviving
spouse. The Certificate can stay In Force until another death occurs.
Except for this paragraph, all of "Death Provisions" will apply to that
subsequent death.
In all other cases, the Certificate may remain In Force for a period not to
exceed 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, we will automatically
end it by paying the Certificate Value to the Designated Beneficiary. If
the Designated Beneficiary is not then alive, we will pay any person(s)
named by the Designated Beneficiary in writing; otherwise we will pay the
Designated Beneficiary's estate.
The Covered Person under this paragraph shall be the decedent if he or she
is the first to die among you, any joint Certificate Owner, or Annuitant.
If there is a non-natural Certificate Owner such as a trust, the Annuitant
shall be the Covered Person.
Upon the death of the Covered Person, we will increase the Certificate
Value so that it equals the death benefit amount if it is less than the
death benefit amount ("DBA"). The DBA is the greater of the "net purchase
payment death benefit," the current Certificate Value or the "greatest
Anniversary Value.
The net purchase payment death benefit is:
o the initial purchase payment, plus
o any additional purchase payments, minus
o any partial withdrawals and any applicable surrender charges.
Each day we determine the value of your Certificate during a Certificate
Year, we will also value your "greatest Anniversary Value". The "greatest
Anniversary Value" on the issue date is the initial purchase payment. Each
day we will add to this amount any additional purchase payments made that
day, and subtract an adjustment for withdrawals made that day. This
adjustment equals the amount of the partial withdrawal:
o divided by the Certificate Value immediately before the
withdrawal; and
o multiplied by the "greatest Anniversary Value" immediately
before the withdrawal.
On each Certificate Anniversary, we compare the current Certificate Value
to "greatest Anniversary Value", adjusted as described above. If the
current Certificate Value exceeds the adjusted "greatest Anniversary
Value", the current Certificate Value will become the new "greatest
Anniversary Value". This new "greatest Anniversary Value" will be adjusted
as described above during the following Certificate Year, if necessary.
This process will continue until the Certificate Anniversary prior to the
81st birthday of the Covered Person. On this Certificate Anniversary, the
greater of the current Certificate Value and the adjusted "greatest
Anniversary Value" will become the new "greatest Anniversary Value". From
that point on, the "greatest Anniversary Value" will not change unless
subsequent purchase payments are made or withdrawals are taken, in which
case the "greatest Anniversary Value" will be adjusted as described above.
When we receive due proof of the Covered Person's death, we will compare,
as of the date of death, the Certificate Value and the DBA. If the
Certificate Value was less than the DBA, we 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 we receive due proof of death.
We allocate the amount credited, if any, to the Variable Account and/or the
Fixed Account based on the purchase payment allocation selection in effect
when we receive due proof of death. The Designated Beneficiary may, by the
later of the 90th day after the Covered Person's death and the
60th day after we receive proof of the death, surrender the Certificate for
the Certificate Value without incurring any applicable contingent deferred
sales charge. If the Designated Beneficiary surrenders the Certificate
after the applicable 90 or 60 day period or surrenders it at any time after
the death of a non-Covered Person, we will deduct any applicable contingent
deferred sales charge. If the Designated Beneficiary does not surrender
the Certificate, it will continue for the time period specified above.
Payment of Benefits. Instead of receiving a lump sum, you or any Designated
Beneficiary may direct us in writing to pay any benefit of $5,000 or more
under an annuity payment option that meets the following:
o the first payment to the Designated Beneficiary must be made
no later than one year after the date of death;
o payments must be made over the life of the Designated Beneficiary
or over a period not extending beyond that person's life
expectancy; and
o 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 during which the
remaining payments are to be made.
Death of Certain Non-Certificate Owner Annuitant. These provisions apply
if, while the Certificate is In Force, the Annuitant dies, the Annuitant is
not the Certificate Owner or a joint Certificate Owner, and 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. If there is no contingent annuitant, you will be the new
Annuitant. If the Annuitant dies before you and any joint Certificate
Owner, then the Annuitant is the Covered Person and we will increase the
Certificate Value, as provided below, if it is less than the DBA, as
defined above.
When we receive due proof of the Annuitant's death, we will compare, as of
the date of death, the Certificate Value and the DBA. If the Certificate
Value is less than the DBA, we will increase the Certificate Value by 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 we receive due proof of death.
We allocate the amount credited, if any, to the Variable Account and/or the
Fixed Account based on the purchase payment allocation selection in effect
when we receive due proof of death. You may surrender the Certificate
within 90 days of the date of the Annuitant's death for the Certificate
Value.
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
Death of Annuitant. If the Annuitant dies while the Certificate is In
Force, the Designated Beneficiary will control the Certificate. We will
increase the Certificate Value, as provided below, if it is less than the
DBA as defined above. When we receive due proof of the Annuitant's death,
we will compare, as of the date of death, the Certificate Value to the DBA.
If the Certificate Value was less than the DBA, we 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 we receive due proof of
death.
We will allocate the amount credited, if any, to the Variable Account
and/or the Fixed Account based on the purchase payment allocation selection
in effect when we receive due proof of death. The Designated Beneficiary
may, by the later of the 90th day after the Annuitant's death and the 60th
day after we are notified of the death, surrender the Certificate for the
Certificate Value.
If the Designated Beneficiary does not surrender the Certificate, 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, we will
automatically end it then by paying the Certificate Withdrawal Value to the
Designated Beneficiary. If the Designated Beneficiary is not alive then, we
will pay any person(s) named by the Designated Beneficiary in writing;
otherwise we will pay the Designated Beneficiary's estate.
Payment of Benefits. You or any Designated Beneficiary may direct us in
writing to pay any benefit of $5,000 or more under an annuity payment
option that meets the following:
o the first payment to the Designated Beneficiary must be made no
later than one year after the date of death;
o payments must be made over the life of the Designated Beneficiary
or over a period not extending beyond that person's life
expectancy; and
o 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 and
you may exercise all the rights of the Certificate. Joint Certificate
Owners are permitted. Contingent Certificate Owners are not permitted.
You may direct us in writing to change the Certificate Owner, primary
beneficiary, contingent beneficiary or contingent annuitant. An irrevocably-
named person may be changed only with the written consent of that person.
Because a change of Certificate Owner by means of a gift may be a taxable
event, you 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.
You should consult the plan administrator and a competent tax adviser as to
the tax consequences resulting from such a transfer.
ASSIGNMENT
You may assign the Certificate at any time. You must file a copy of any
assignment with us. Your rights and those of any revocably-named person
will be subject to the assignment. A Qualified Certificate may have
limitations on your ability to assign the Certificate.
Because an assignment may be a taxable event, you should consult a
competent tax adviser as to the tax consequences resulting from any such
assignment.
PARTIAL WITHDRAWALS AND SURRENDER
You may make partial withdrawals from the Certificate by notifying us in
writing. The minimum withdrawal amount is $300. We may permit a lesser
amount with the systematic withdrawal program. If the Certificate Value
after a partial withdrawal would be below $2,500, we will treat the request
as a withdrawal of only the amount over $2,500. Unless you specify
otherwise, we will deduct the total amount withdrawn 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 or insufficient
value in the Variable Account, 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.
You may totally surrender the Certificate by notifying us in writing.
Surrendering the Certificate will end it. Upon surrender, you will receive
the Certificate Withdrawal Value.
We will pay the amount of any surrender within seven days of receipt of
your request. Alternatively, you may purchase for yourself an annuity
payment option with any surrender benefit of at least $5,000. If the
Certificate Owner is not a natural person, we must consent to the selection
of an annuity payment option.
You may not surrender annuity options based on life contingencies after
annuity payments have begun. You may surrender Option A, described in
"Annuity Options" below, which is not based on life contingencies, if you
have selected a variable payout.
Because of the potential tax consequences of a partial withdrawal or
surrender, you should consult a competent tax adviser.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Income Date and the Certificate is In
Force, we will begin payments under the annuity option or options you have
chosen. We determine the amount of the payments on the Income Date by:
o applying payments to the option you choose for your Certificate
Value,
o increasing or decreasing your Certificate Value by applying by a
limited market value adjustment of Fixed Account Value described
in Appendix A, and
o subtracting any premium taxes not previously deducted.
Annuity Option and Income Date
You may select an Annuity Option and Income Date at the time of
application. If you do not select an Annuity Option, we automatically
choose Option B. If you do not select an Income Date for the Annuitant, the
Income Date will automatically be the earlier of:
o the later of the Annuitant's 90th birthday and the 10th
Certificate Anniversary or
o any maximum date permitted under state law.
You may continue to make purchase payments until you reach your Income
Date.
Change in Annuity Option and Income Date
You may choose or change an Annuity Option or the Income Date by writing to
us at least 30 days before the Income Date. However, any Income Date must
be:
o for fixed annuity options, not earlier than the first
Certificate Anniversary; and
o not later than the earlier of
(i) the later of the Annuitant's 90th birthday and the 10th
Certificate Anniversary or
(ii) any maximum date permitted under state law.
Annuity Options
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.
You may arrange other options if we agree. 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 our general account Fixed Account. Variable
annuity payments will fluctuate. Fixed annuity payments will not
fluctuate. We will determine the dollar amount of each fixed annuity
payment by:
o deducting from the Fixed Account Value, increased or decreased
by a limited market value adjustment described in Appendix A and
any premium taxes not previously deducted;
o dividing the remainder by $1,000 and
o multiplying the result by the greater of:
(i) the applicable factor shown in the appropriate table in the
Certificate; and
(ii) the factor we currently offer at the time annuity payments
begin. We may base this current factor on the sex of the
payee unless we are prohibited by law from doing so.
If you do not select an Annuity Option, we will automatically apply Option
B. Unless you choose otherwise, we will apply:
o Variable Account Value (less any premium taxes not previously
deducted) in its entirety to a variable annuity option and,
o Fixed Account Value, increased or decreased by a limited market
value adjustment described in Appendix A less any premium taxes
not previously deducted, to a fixed annuity option.
The same amount applied to a variable option and a fixed option will
produce a different initial annuity payment and 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 under any variable or fixed option is less than
$5,000, we reserve the right to pay such amount in one sum to the payee in
lieu of the payment otherwise provided for.
We will make annuity payments monthly unless you have requested in writing
quarterly, semi-annual or annual payments. However, if any payment would be
less than $100, we have the right to reduce the frequency of payments to a
period that will result in each payment being at least $100.
Option A: Income For a Fixed Number of Years. We will pay an annuity for a
chosen number of years, not less than 5 nor more than 50. You may choose a
period of years over 30 only if it does not exceed the difference between
age 100 and the Annuitant's age on the date of the first payment. We refer
to Option A as Preferred Income Plan (PIP). At any time while we are making
variable annuity payments, the payee may elect to receive the following
amount: 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 at the time you chose Option A you selected
3% per year in writing. Instead of receiving a lump sum, the payee may
elect another payment option and we will not reduce the amount applied to
the option by the market value adjustment above.
If, at the death of the payee, Option A payments have been made for fewer
than the chosen number of years:
o we will continue payments during the remainder of the period to
the successor payee; or
o the 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 the payee chose 3% per
year 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 we have no
mortality risk during this period.
You may chose a "level monthly" payment option for variable payments under
Option A. Under this option, we convert your annual payment into twelve
equal monthly payments. Thus the monthly payment amount changes annually
instead of monthly. We will determine each annual payment as described
below in "Variable Annuity Payment Values", place each annual payment in
our general account and distribute it in twelve equal monthly payments.
The sum of the twelve monthly payments will exceed the annual payment
amount because of an interest rate factor we use, which will vary from year
to year. If the payments are commuted, (1) we will use the commutation
method described above for calculating the present value of remaining
annual payments and (2) use the interest rate that determined the current
twelve monthly payments to commute any unpaid monthly payments.
See "Annuity Payments" for the manner in which Option A may be taxed.
Option B: Life Income with 10 Years of Payments Guaranteed. We 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:
o we will continue payments during the remainder of the period to
the successor payee; or
o such 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 the payee had chosen 3%
per year 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. We 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.
Variable Annuity Payment Values
We determine the amount of the first variable annuity payment by using an
annuity purchase rate based on an assumed annual investment return of 6%
per year (5% per year for Oregon and Texas Certificates), unless you choose
3% in writing. 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 and
administrative charge) is better or worse than the assumed investment
return. The total dollar amount of each variable annuity payment will be
equal to the sum of all Sub-account payments.
Currently, there is no limit on the number of times or the frequency with
which a payee may instruct us to change the Sub-account(s) used to
determine the amount of the variable annuity payments.
Proof of Age, Sex, and Survival of Annuitant
We 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, we
will compute the amount payable based on the correct age and sex. If income
payments have begun, we will pay in full any underpayments with the next
annuity payment, and deduct any overpayments, unless repaid in one sum,
from future annuity payments until we are repaid in full.
SUSPENSION OF PAYMENTS
We reserve the right to postpone surrender payments from the Fixed Account
for up to six months. We also reserve the right to suspend or postpone any
type of payment from the Variable Account for any period when:
o the New York Stock Exchange is closed other than customary
weekend or holiday closings;
o trading on the Exchange is restricted;
o 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
o 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 prior two conditions described above
exist.
TAX STATUS
Introduction
This discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax adviser. We make no
attempt to consider any applicable state or other tax laws. Moreover, this
discussion is based upon our understanding of current federal income tax
laws as they are currently interpreted. We make no representation regarding
the likelihood of continuation of those current federal income tax laws or
of the current interpretations by the Internal Revenue Service.
The Certificate is 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 you purchase the Certificate and upon the tax
and employment status of the individual concerned.
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 withdrawal,
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, Death Benefit Payments, Assignments and Gifts. If you fully
surrender your Certificate, the portion of the payment that exceeds your
cost basis in the Certificate is subject to tax as ordinary income. For Non-
Qualified Certificates, the cost basis is generally the amount of the
purchase payments made for the Certificate. For Qualified Certificates, the
cost basis is generally zero and the taxable portion of the surrender
payment is generally taxed as ordinary income. A Designated Beneficiary
receiving a lump sum surrender benefit after your death or the death of the
Annuitant is similarly taxed on the portion of the amount that exceeds your
cost basis in the Certificate. If the Designated Beneficiary elects to
receive annuity payments that begin within one year 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 you. 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
withdrawal amounts will generally be fully taxed as ordinary income.
If you assign or pledge a Non-Qualified Certificate, you will be treated as
if you had received the amount assigned or pledged. You will be subject to
taxation under the rules applicable to partial withdrawals or surrenders.
If you give away your Certificate to anyone other than your spouse, you are
treated for income tax purposes as if you had fully surrendered the
Certificate.
A special computational rule applies if we issue to you during any calendar
year, two or more Certificates, or one or more Certificates and one or more
of our other annuity contracts. Under this rule, the amount of any
distribution includable in your gross income is determined under Section
72(e) of the Code. All of the contracts will be treated as one contract.
We believe this means the amount of any distribution under any 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 each contract's cost basis.
Annuity Payments. We determine the non-taxable portion of each variable
annuity payment by dividing the cost basis of your values allocated to
Variable Account Value by the total number of expected payments. We
determine the non-taxable portion of each fixed annuity payment with an
"exclusion ratio" formula which establishes the ratio that the cost basis
of your values 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 our 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 you, 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 the following
amounts received:
o after the taxpayer attains age 59-1/2;
o in a series of substantially equal payments made for life or
life expectancy;
o after the death of the Certificate Owner (or, where the
Certificate Owner is not a human being, after the death of the
Annuitant);
o if the taxpayer becomes totally and permanently disabled; or
o under a Non-Qualified Certificate's annuity payment option that
provides for a series of substantially equal payments; provided
that only one purchase payment is made to the Certificate, that
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. We are required to withhold federal income taxes on
taxable amounts paid under Certificates unless the recipient elects not to
have withholding apply. We 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. You may purchase a Non-Qualified Certificate 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 our understanding that in such an event:
o the new Certificate will be subject to the distribution-at-death
rules described in "Death Provisions for Non-Qualified
Certificates";
o 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
o 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.
We base our understanding of the above principally on legislative reports
prepared by the Staff of the Congressional Joint Committee on Taxation.
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 intend 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 will not be
treated as an annuity contract. As a consequence, income earned on a
Certificate would be taxable to you in the year in which diversification
requirements were not satisfied, including previously non-taxable income
earned in prior years. As a further consequence, we 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 your
control of the investments of a segregated asset account may cause you,
rather than us, to be treated as the owner of the assets of the account.
The regulations could impose requirements that are not reflected in the
Certificate. We, however, have reserved certain rights to alter the
Certificate and investment alternatives so as to comply with such
regulations. Since no regulations have 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, you are urged to
consult with your tax adviser.
Qualified Plans
The Certificate is 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, we do not attempt 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 with them. 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:
o 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
o 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.
If you have requested a distribution from a Certificate, we will notify you
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 unless you direct us in writing 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.
Annuity Purchases by Nonresident Aliens
The discussion above provides general information regarding federal income
tax consequences to annuity purchasers who are U.S. citizens or resident
aliens. Purchasers who are not U.S. citizens or are resident aliens will
generally be subject to U.S. federal income tax and withholding on annuity
distributions at a 30% rate, unless a lower rate applies in a U.S. treaty
with the purchaser's country. In addition, purchasers may be subject to
state premium tax, other state and/or municipal taxes, and taxes that may
be imposed by the purchaser's country of citizenship or residence.
Prospective purchasers are advised to consult with a qualified tax adviser
regarding U.S., state, and foreign taxation with respect to an annuity
purchase.
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with our view of present applicable law, we 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. We will vote shares for which we have not received
instructions in the same proportion as we vote shares for which we have
received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation should change, and as a
result we determine that we are permitted to vote the shares of the
Eligible Funds in our own right, we may elect to do so.
You have the voting interest under a Certificate prior to the Income Date.
The number of shares held in each Sub-account which are attributable to you
is determined by dividing your Variable Account Value in each Sub-account
by the net asset value of the applicable share of the Eligible Fund. The
payee has the voting interest after the Income Date under an annuity
payment option. 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.
We will determine the number of shares in which a person has a voting
interest as of the date established by the respective Eligible Fund for
determining shareholders eligible to vote at the meeting of the Fund. We
will solicit voting instructions in writing prior to such meeting in
accordance with the procedures established by the Eligible Fund.
Each person having a 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.
SALES OF THE CERTIFICATES
Keyport Financial Services Corp. ("KFSC"), our subsidiary, serves as the
principal underwriter for the Certificate described in this prospectus.
Salespersons who represent us as variable annuity agents will sell the
Certificates. Such salespersons are also 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.
A dealer selling the Certificate may receive up to 6.00% of purchase
payments, and additional compensation later based on the Certificate Value
of those payments. The percentage may increase to 7.00% during certain time
periods Keyport and KFSC select. In addition, under certain circumstances,
we or certain of our affiliates, under a marketing support agreement with
KFSC, may pay certain sellers for other services not directly related to
the sale of Certificates, such as special marketing support allowances.
We may sell certificates with lower or no dealer compensation (1) to a
person who is an officer, director, or employee of ours or an affiliate of
ours 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 asset-based
administrative charge and (2) they have a mortality and expense risk charge
of 0.35% per year.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the
Principal Underwriter are a party. We are engaged in various kinds of
routine litigation which, in our judgment, is not of material importance in
relation to our total capital and surplus.
INQUIRIES BY CERTIFICATE OWNERS
You may write us with questions about your Certificates to: 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 2
Variable Annuity Benefits 2
Variable Annuity Payment Values 2
Re-Allocating Sub-account Payments 3
Custodian 4
Principal Underwriter 4
Experts 4
Investment Performance 4
Average Annual Total Return for a Certificate that
is Surrendered 5
Change in Accumulation Unit Value 7
Yields for Stein Roe Money Market Sub-account 9
Financial Statements 9
Variable Account A 10
Keyport Life Insurance Company 40
<PAGE>
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 are subject to a market value adjustment. The
adjustment may result in an increase or decrease in amounts transferred and
amounts paid to you or other payees (including withdrawals, surrenders,
death benefits, and amounts applied to purchase annuity payments). However,
a market value adjustment will not reduce the interest rate applied to
amounts you allocate to a Guarantee Period to less than 3% per year.
Payments made from Fixed Account Values at the end of a guarantee period
are not subject to the market value adjustment.
Any purchase payments you allocate to the Fixed Account option become part
of our general account. Because of provisions in the securities laws, our
general account including the Fixed Account, are not subject to regulation
under the Securities Act of 1933 or the Investment Company Act of 1940. 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
We will allocate purchase payments to the Fixed Account according to your
selection in the application. Your selection must specify the percentage of
the purchase payment you want to allocate to each Guarantee Period. The
percentage, if not zero, must be at least 5%. You may change the allocation
percentages without any charges. You must make allocation changes in
writing unless you have, in writing, authorized us to accept telephone
allocation instructions. By authorizing us to accept telephone changes, you
are agreeing to the conditions and procedures we establish from time to
time. The current conditions and procedures are in Appendix B. We will
notify you in advance of any changes.
Each Guarantee Period currently offered is available for initial and
subsequent purchase payments and for transfers of Certificate Value. We
currently offer Guarantee Periods of 1, 3, 5, and 7 years. We may change at
any time the number and/or length of Guarantee Periods we offer. If we no
longer offer a particular Guarantee Period, the existing Fixed Account
Value in that Guarantee Period will remain until the end of the period. At
that time, you must select a different Guarantee Period.
Capital Protection Plus
We offer a capital protection plus program. Under this program, we allocate
part of your purchase payment to the Guarantee Period you select.
Currently, you may select the 7-year Guarantee Period. Based on the length
of the period and the period's interest rate, we determine how much of your
purchase payment must be allocated to the Guarantee Period so that, at the
end of the Guarantee Period, the allocated amount plus interest will be
equal to your total purchase payment. We will allocate the rest of your
purchase payment to the Sub-account(s) of the Variable Account based on
your allocation instructions. If you surrender or transfer any part of the
Fixed Account Value before the end of the guarantee period, the value at
the end of that period will not equal your original purchase payment
amount.
For example, assume you choose the 7-year Guarantee Period and we receive
your purchase payment of $10,000 when the interest rate for the Guarantee
Period is 6.75% per year. We will allocate $6,331 to that Guarantee Period,
because $6,331 will increase at that interest rate to $10,000 after seven
years. The remaining $3,669 of the payment will be allocated to the Sub-
account(s) you selected.
Fixed Account Value
Fixed Account Value is equal to:
(a) all purchase payments allocated or amounts transferred to the
Fixed Account plus the interest credited on those payments or
amounts transferred; less
(b) any prior partial withdrawals or transfers from the Fixed
Account, including any applicable charges.
Interest Credits
We credit interest daily. The interest we credit is based on an annual
compound interest rate. It is credited to purchase payments allocated to
the Fixed Account at rates we declare for Guarantee Periods of one or more
years from the month and day of allocation. Any rate we set will be at
least 3% per year.
Our interest crediting method may result in each of your Guarantee Periods
being subject to different rates. For purposes of this section, we treat
Variable Account Value transferred to the Fixed Account and Fixed Account
Value renewed for or transferred to another Guarantee Period as a purchase
payment allocation.
Application of Market Value Adjustment
No market value adjustment applies to Guarantee Periods of fewer than three
years.
A market value adjustment applies to any Fixed Account Value surrendered,
withdrawn, transferred, or applied to an Annuity Option from a Guarantee
Period of three years or more, unless:
(a) the transaction occurs at the end of the Guarantee Period, or
(b) the Certificate is surrendered within 90 days for the Death
Benefit after the death of a Covered Person.
We apply the market value adjustment before we deduct any applicable
surrender charges or taxes.
If a market value adjustment applies to a surrender or the application to
an Annuity Option, we will add or deduct any positive or negative market
value adjustment amount, respectively, to your Certificate Value.
If a market value adjustment applies to either a partial withdrawal or a
transfer, we will add or deduct any positive or negative market value
adjustment, respectively, to, the partial withdrawal or transfer amount
after we have deducted the requested withdrawal or transfer amount from the
Fixed Account Value. This means that the net amount may be more or less
than the amount requested.
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. Any negative adjustment may be
limited in amount (see "Market Value Adjustment Factor" below).
Generally, if the treasury rate (see "Treasury Rates" below) for your
Guarantee Period is lower than the treasury rate for a new Guarantee Period
with a length equal to the time remaining in your Guarantee Period, the
market value adjustment will result in a reduction of the amount
surrendered, withdrawn, transferred, or applied to an Annuity Option.
On the other hand, if the treasury rate for your Guarantee Period is higher
than the treasury rate for a new Guarantee Period with a length equal to
the time remaining in your Guarantee Period, then the market value
adjustment will result in an increase in the amount surrendered, withdrawn,
transferred, or applied to an Annuity Option.
Market Value Adjustment Factor
We compute the market value adjustment for each of your Guarantee Periods
by multiplying the applicable amount surrendered, withdrawn, transferred,
or applied to an Annuity Option, by the market value adjustment factor. The
market value adjustment factor is calculated as the larger of formulas (a)
and (b):
(a) (1+a)/(1+b)(n/12)-1
where:
"a" is the treasury rate for the initial number of years in your Guarantee
Period;
"b" is the treasury rate for a period equal to the time remaining (rounded
up to the next whole number of 12-month periods) to the expiration of your
Guarantee Period; and
"n" is the number of complete Guarantee Period Months remaining before the
expiration of your Guarantee Period.
(b) (1.03)/(1+i)(y+d/#)-1
where:
"i" is the guaranteed interest rate for your Guarantee Period;
"y" is the number of complete 12-month periods that have elapsed in your
guarantee period;
"d" is the number of calendar days since the end of the last complete 12-
month period in your Guarantee Period or, if "y" is zero, the number of
calendar days since the start of your Guarantee Period; and
"#" is the number of calendar days in the current 12-month period of your
Guarantee Period, which is generally 365 days.
As stated above, the formula (b) amount will apply only if it is greater
than the formula (a) amount. This will occur only when the formula (a)
amount is negative and the formula (b) amount is a smaller negative number.
Under these conditions, formula a's full (normal) negative market value
adjustment will be limited to the extent that adjustment would decrease
your Guarantee Period's Fixed Account Value below the following amount:
(i) the amount allocated to your Guarantee Period; less
(ii) any prior systematic or partial withdrawal amounts and amounts
transferred; less
(iii) interest on the above items (i) and (ii) 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 (a) above. Weekly series are published at the beginning of the
following week. The Determination Dates are the last business day before
the first and fifteenth of each calendar month.
To determine the "a" treasury rate, we use the weekly series first
published on or after the most recent Determination Date that occurs on or
before the Start Date for the Guarantee Period. If the Start Date is the
same as the Determination Date or the date of publication, or any date in
between, we instead use the weekly series first published after the prior
Determination Date. To determine the "b" treasury rate, we use 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. If the calculation date is the same as the Determination Date
or the date of publication, or any date in between, we will instead use the
weekly series first published after the prior Determination Date.
If the number of years and or 12-month periods specified in "a" or "b" is
not equal to a maturity in the Treasury Constant Maturity Series, we
determine the treasury rate by straight line interpolation between the
interest rates of the next highest and next lowest maturities.
If the Treasury Constant Maturity Series becomes unavailable, we will adopt
a comparable constant maturity index. If such a comparable index is not
available, we will replicate calculation of the Treasury Constant Maturity
Series Index based on U.S. Treasury Security coupon rates.
End of A Guarantee Period
We will notify you in writing at least 30 days prior to the end of each of
your Guarantee Periods. At the end of your Guarantee Period, we will
automatically transfer your Guarantee Period's Fixed Account Value to the
Stein Roe Money Market Sub-account unless we have received:
(a) your election of a new Guarantee Period from among those we offer
at that time; or
(b) your instructions to transfer the ending Fixed Account Value to
one or more Sub-accounts of the Variable Account.
You may not elect a new Guarantee Period longer than the number of years
remaining until the Income Date
Transfers of Fixed Account Value
You may transfer Fixed Account Value from one of your Guarantee Periods 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, your transfer request must specify
from which values you want the transfer made.
The Certificate allows us to limit the number of transfers you may make in
a specified time period. Currently, we generally limit Variable Account and
Fixed Account transfers to unlimited transfers per calendar year with a
$500,000 per transfer dollar limit. See "Transfer of Variable Account
Value" and "Limits on Transfers". These limitations will not apply to any
transfer made at the end of a Guarantee Period. We will notify you prior to
changing the current limitations.
You must request transfers in writing unless you have authorized us in
writing to accept telephone transfer instructions from you or from a person
acting on your behalf as an attorney-in-fact under a power of attorney. By
authorizing us to accept telephone transfer instructions, you agree to the
conditions and procedures we establish from time to time. The current
conditions and procedures are in Appendix B. If you have authorized
telephone transfers, you will be notified in advance of any changes. A
person acting on your behalf as an attorney-in-fact under a power of
attorney may request transfers in writing.
If we receive your transfer requests before 4:00 P.M. Eastern Time, which
is the close of trading on the New York Stock Exchange, we will execute
them at the close of business that day. Any requests we receive later, we
will execute at the close of the next business day.
If you transfer 100% of a Guarantee Period's value and your current
allocation for purchase payments includes that Guarantee Period, we will
automatically change the allocation formula for future purchase payments
unless you instruct otherwise. For example, if the allocation formula is
50% to the one-year Guarantee Period and 50% to Sub-account A and you
transfer all Fixed Account Value to Sub-account A, we will change the
allocation formula to 100% to Sub-account A.
<PAGE>
APPENDIX B
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are Joint Certificate Owners, both must authorize us to accept
telephone instructions but either Certificate Owner may give us telephone
instructions.
2. All callers must identify themselves. We reserve the right to refuse to
act upon any telephone instructions in cases where the caller has not
sufficiently identified himself/herself to our satisfaction.
3. Neither we nor any person acting on our behalf shall be subject to any
claim, loss, liability, cost or expense if we or such person acted in good
faith upon a telephone instruction, including one that is unauthorized or
fraudulent. However, we will employ reasonable procedures to confirm that a
telephone instruction is genuine and, if we do not, we may be liable for
losses due to an unauthorized or fraudulent instruction. You thus bear the
risk that an unauthorized or fraudulent instruction we execute may cause
your Certificate Value to be lower than it would be had we not executed the
instruction.
4. We record all conversations with disclosure at the time of the call.
5. The application for the Certificate may allow you to create a power of
attorney by authorizing another person to give telephone instructions.
Unless prohibited by state law, we will treat such power as durable in
nature and it shall not be affected by your subsequent incapacity,
disability or incompetency. Either we or the authorized person may cease to
honor the power by sending written notice to you at your last known
address. Neither we nor any person acting on our behalf shall be subject to
liability for any act executed in good faith reliance upon a power of
attorney.
6. Telephone authorization shall continue in force until:
o we receive your written revocation,
o we discontinue the privilege, or
o we receive written evidence that you have entered into a market
timing or asset allocation agreement with an investment adviser
or with a broker/dealer.
7. If we receive telephone transfer instructions at 800-367-3653 before the
4:00 P.M. Eastern Time close of trading on the New York Stock Exchange,
they will be initiated that day based on the unit value prices calculated
at the close of that day. We will initiate instructions we receive after
the close of trading on the NYSE on the following business day.
8. Once we accept instructions, they may not be canceled.
9. You must make all transfers in accordance with the terms of the
Certificate and current prospectus. If your transfer instructions are not
in good order, we will not execute the transfer and will notify the caller
within 48 hours.
10. If you transfer 100% of any Sub-account's value and the allocation
formula for purchase payments includes that Sub-account, then we will
change the allocation formula for future purchase payments accordingly
unless we receive telephone instructions to the contrary. For example, if
the allocation formula is 50% to Sub-account A and 50% to Sub-account B and
you transfer all of Sub-account A's value to Sub-account B, we will change
the allocation formula to 100% to Sub-account B unless you instruct us
otherwise.
Telephone Changes to Purchase Payment Allocation Percentages
Numbers 1-6 above are applicable.
<PAGE>
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
KAV 5/2000
Yes. I would like to receive the Keyport Advisor Vista Variable Annuity
Statement of Additional Information.
Yes. I would like to receive the Statement of Additional Information for
the Eligible Funds of:
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund, Inc.
Liberty Variable Investment Trust
MFS Variable Insurance Trust
SteinRoe Variable Investment Trust
Name
Address
City
State
Zip
<PAGE>
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
<PAGE>
PART B
<PAGE>
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 is not a prospectus but it relates
to, and should be read in conjunction with, the Keyport Advisor Vista
variable annuity prospectus dated May 1, 2000. This 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.
TABLE OF CONTENTS
Page
Keyport Life Insurance Company.........................................2
Variable Annuity Benefits..............................................2
Variable Annuity Payment Values......................................2
Re-Allocating Sub-Account Payments...................................3
Custodian..............................................................4
Principal Underwriter..................................................4
Experts................................................................4
Investment Performance.................................................4
Average Annual Total Return for a Certificate that is Surrendered....5
Change in Accumulation Unit Value....................................7
Yields for Stein Roe Money Market Sub-Account........................9
Financial Statements...................................................9
Variable Account A...................................................10
Keyport Life Insurance Company.......................................40
The date of this statement of additional information is May 1, 2000.
KAV.SAI 5/2000
<PAGE>
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, 1999, owned, indirectly, approximately
72% 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 the sum of all Sub-Account payments.
The first payment for each Sub-Account will be determined by deducting 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.
When Keyport first purchased 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. (See "Net Investment Factor" in
the prospectus.) 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; 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 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 unlimited times 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 5% 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, 1999 and 1998, and for each of the three years in the period
ended December 31, 1999, and the financial statements of Keyport Life
Insurance Company-Variable Account A at December 31, 1999 and for each of
the two years in the period ended December 31, 1999, 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 Stock 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.
Average Annual Total Return for a Certificate that is Surrendered
The tables below provide performance results for each Sub-Account through
December 31, 1999. The results shown in this section are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Certificate Owner.
The following tables were calculated using the method prescribed by the
Securities and Exchange Commission. They illustrate each Sub-Account's
average annual total return over the periods shown assuming a single $1,000
initial purchase payment and the surrender of the Certificate at the end of
each period. The Sub-Account's average annual total return is the annual
rate that would be necessary to achieve the ending value of an investment
kept in the Sub-Account for the period specified. The first table uses the
inception date of the Certificate's Sub-Accounts while the second table
assumes the Certificate was available prior to that date on the Funds'
inception date.
Each calculation assumes that the $1,000 initial purchase payment was
allocated to only one Sub-Account and no transfers or additional purchase
payments were made. The rate of return reflects all charges assessed
against a Certificate and the Sub-Account except for any premium taxes that
may be payable. The charges reflected are: the annual 1.25% Mortality and
Expense Risk Charge and the annual 0.15% sales charge.
Average Annual Total Return for a
Certificate Surrendered on 12/31/99
Hypothetical $1,000 Purchase Payment*
Length of Investment Period
One Three Five Ten Since Sub-Account
Sub-Account Year Years Years Years Inception Shown
AIM Capital Appreciation N/A N/A N/A N/A 10.91%(5/19/98)
AIM Growth N/A N/A N/A N/A 18.16%(5/19/98)
AIM International Equity N/A N/A N/A N/A -0.03%(5/19/98)
Alliance Global Bond N/A N/A N/A N/A 10.18%(11/18/96)
Alliance Growth and Income N/A N/A N/A N/A 8.94%(5/19/98)
Alliance Premier Growth N/A N/A N/A N/A 22.04%(11/18/96)
Alliance Real Estate N/A N/A N/A N/A -9.81%(5/19/98)
Colonial Value N/A N/A N/A N/A 2.48%(11/18/96)
Colonial High Yield Securities N/A N/A N/A N/A -3.69%(5/19/98)
Colonial Small Cap Value N/A N/A N/A N/A -14.25%(5/19/98)
Colonial Strategic Income N/A N/A N/A N/A 1.68%(11/18/96)
Colonial U.S. Growth & Income N/A N/A N/A N/A 7.86%(11/18/96)
Liberty All-Star Equity N/A N/A N/A N/A 7.53%(11/15/97)
Stein Roe Global Utilities N/A N/A N/A N/A 10.23%(11/18/96)
MFS Bond N/A N/A N/A N/A 2.40%(5/19/98)
MFS Emerging Growth N/A N/A N/A N/A 16.00%(11/18/96)
MFS Research N/A N/A N/A N/A 8.35%(11/18/96)
Stein Roe Balanced N/A N/A N/A N/A 7.26%(11/18/96)
Stein Roe Growth Stock N/A N/A N/A N/A 13.31%(11/18/96)
Stein Roe Small Company Growth N/A N/A N/A N/A -12.73%(11/18/96)
* Fund expenses in excess of defined amounts were reimbursed during one or
more calendar years for all Funds except Colonial High Yield Securities;
Colonial Small Cap Value and Liberty All-Star-Equity. Without this expense
reimbursement any return percentages shown that include these calendar
years would be lower. See footnote 2 on page 6 of the prospectus for any
expense reimbursement percentages currently applicable to the Funds.
Average Annual Total Return for a
Certificate Surrendered on 12/31/99
Hypothetical $1,000 Purchase Payment*
Length of Investment Period
One Three Five Ten Since Fund
Sub-Account Year Years Years Years Inception Shown
AIM Capital Appreciation 17.68% 15.60% 15.16% N/A 17.13%(5/5/93)
AIM Growth 32.29 24.46 19.76 N/A 19.20 (5/5/93)
AIM International Equity 11.03 13.11 10.80 N/A 11.17 (5/5/93)
Alliance Global Bond 12.54 5.38 6.13 N/A 7.23 (7/15/91)
Alliance Growth and Income 19.22 22.83 19.52 N/A 14.42 (1/14/91)
Alliance Premier Growth 45.93 32.59 26.09 N/A 23.71 (6/26/92)
Alliance Real Estate -20.18 N/A N/A N/A -1.44 (1/9/97)
Colonial Value 9.60 17.43 15.26 N/A 14.66 (7/1/93)
Colonial High Yield Securities N/A N/A N/A N/A -3.69 (5/19/98)
Colonial Small Cap Value N/A N/A N/A N/A -14.25 (5/19/98)
Colonial Strategic Income 4.46 6.81 N/A N/A 8.19 (7/13/94)
Colonial U.S. Growth & Income 18.49 22.90 N/A N/A 22.24 (7/5/94)
Liberty All-Star Equity 17.03 N/A N/A N/A 15.59 (11/15/97)
Stein Roe Global Utilities 16.70 15.89 12.92 N/A 11.20 (7/1/93)
MFS Bond 5.32 4.82 N/A N/A 5.43 (10/24/95)
MFS Emerging Growth 32.31 22.44 N/A N/A 24.82 (7/24/95)
MFS Research 21.68 20.24 N/A N/A 20.79 (7/26/95)
Stein Roe Balanced 10.99 13.39 11.49 N/A 11.37 (1/1/89)
Stein Roe Growth Stock 26.14 25.31 19.81 N/A 17.29 (1/1/89)
Stein Roe Small Company Growth -18.45 2.77 3.61 N/A 10.96 (1/1/89)
* Fund expenses in excess of defined amounts were reimbursed during one or
more calendar years for all Funds except Colonial High Yield Securities;
Colonial Small Cap Value and Liberty All-Star-Equity. Without this expense
reimbursement any return percentages shown that include these calendar
years would be lower. See footnote 2 on page 6 of the prospectus any
expense reimbursement percentages currently applicable to the Funds.
Change in Accumulation Unit Value
The following performance information illustrates the average annual change
and the actual annual change in Accumulation Unit values for each Sub-
Account and is computed differently than the standardized average annual
total return information. Performance information for periods prior to the
inception date of the Contract's Sub-Accounts assumes the Certificates were
available prior to that date on the Funds' inception date.
A Sub-Account's average annual change in Accumulation Unit values is the
annualized rate at which the value of a Unit changes over the time period
illustrated. A Sub-Account's actual annual change in Accumulation Unit
values is the rate at which the value of a Unit changes over each 12-month
period illustrated. These rates of change in Accumulation Unit values
reflect the Certificate's annual 1.25% Mortality and Expense Risk Charge
and the annual 0.15% sales charge. They do not reflect deductions for any
premium taxes. The rates of change would be lower if these charges were
included.
Average Annual Change Average Annual Change
In Accumulation Unit in Accumulation Unit Value
Value From Fund over the period shown
Inception Shown through 12/31/99
Sub-Account through 12/31/99** Three Years Five Years Ten Years
AIM Capital Appreciation 17.13%(5/5/93) 15.60% 15.16% N/A
AIM Growth 19.20(5/5/93) 24.46 19.76 N/A
AIM International Equity 11.17(5/5/93) 13.11 10.80 N/A
Alliance Global Bond 7.23(7/15/91) 5.38 6.13 N/A
Alliance Growth and Income 14.42(1/14/91) 22.83 19.52 N/A
Alliance Premier Growth 23.71(6/26/92) 32.59 26.09 N/A
Alliance Real Estate -1.44(1/9/97) N/A N/A N/A
Colonial Value 14.66(7/1/93) 17.43 15.26 N/A
Colonial High Yield Securities -3.69(5/19/98) N/A N/A N/A
Colonial Small Cap Value -14.25(5/19/98) N/A N/A N/A
Colonial Strategic Income 8.19(7/5/94) 6.81 N/A N/A
Colonial U.S. Growth & Income 22.24(7/5/94) 22.90 N/A N/A
Liberty All-Star Equity 15.59(11/15/97) N/A N/A N/A
Stein Roe Global Utilities 11.20(7/1/93) 15.89 12.92 N/A
MFS Bond 5.43(10/24/95) 4.82 N/A N/A
MFS Emerging Growth 24.82(7/24/95) 22.44 N/A N/A
MFS Research 20.79(7/26/95) 20.24 N/A N/A
Stein Roe Balanced 11.37(1/1/89) 13.39 11.49 N/A
Stein Roe Growth Stock 17.29(1/1/89) 25.31 19.81 N/A
Stein Roe Small Company Growth 10.96(1/1/89) 2.77 3.61 N/A
12-Month Period Change in Accumulation
Unit Value**
Sub-Account 1990 1991 1992 1993 1994
AIM Capital Appreciation N/A N/A N/A 18.41%* 1.09%
AIM Growth N/A N/A N/A 9.66* -3.82
AIM International Equity N/A N/A N/A 9.00* -1.13
Alliance Global Bond N/A 10.29* 3.40 9.61 -6.46
Alliance Growth and Income N/A 2.13* 6.44 10.16 -1.72
Alliance Premier Growth N/A N/A 12.99* 11.07 -4.30
Alliance Real Estate N/A N/A N/A N/A N/A
Colonial Value N/A N/A N/A 4.28* -2.12
Colonial High Yield Securities N/A N/A N/A N/A N/A
Colonial Small Cap Value N/A N/A N/A N/A N/A
Colonial Strategic Income N/A N/A N/A N/A 0.15*
Colonial U.S. Growth & Income N/A N/A N/A N/A 3.69*
Liberty All-Star Equity N/A N/A N/A N/A N/A
Stein Roe Global Utilities N/A N/A N/A -2.38* -11.51
MFS Bond N/A N/A N/A N/A N/A
MFS Emerging Growth N/A N/A N/A N/A N/A
MFS Research N/A N/A N/A N/A N/A
Stein Roe Balanced -2.11 26.17 6.04 7.78 -4.52
Stein Roe Growth Stock -3.04 45.98 5.15 3.52 -7.64
Stein Roe Small Company Growth -10.29 35.36 12.90 33.80 -0.20
12-Month Period Change in Accumulation
Unit Value**
Sub-Account 1995 1996 1997 1998 1999
AIM Capital Appreciation 33.79% 15.98% 11.90% 17.68%
AIM Growth 32.88 16.51 25.07 32.29
AIM International Equity 16.74 21.67 7.12 11.03
Alliance Global Bond 23.02 4.72 -0.72 12.54
Alliance Growth and Income 33.93 22.36 27.02 19.22
Alliance Premier Growth 42.85 21.00 32.01 45.93
Alliance Real Estate N/A N/A 21.74* -20.18
Colonial Value 28.34 16.16 27.19 9.60
Colonial High Yield Securities N/A N/A N/A -3.69*
Colonial Small Cap Value N/A N/A N/A -14.25*
Colonial Strategic Income 16.67 8.20 7.70 4.56
Colonial U.S. Growth & Income 27.91 20.14 30.41 18.49
Liberty All-Star Equity N/A N/A 0.63* 17.03
Stein Roe Global Utilities 33.30 5.04 26.98 16.70
MFS Bond 2.76* 0.67 8.62 5.32
MFS Emerging Growth 16.70* 15.40 20.22 32.31
MFS Research 9.97* 20.46 18.60 21.68
Stein Roe Balanced 23.75 14.01 15.21 10.99
Stein Roe Growth Stock 35.84 19.59 30.45 26.14
Stein Roe Small Company Growth 10.21 25.18 6.32 -18.45
* Percentage of change is for less than 12 months; it is for the period
from the inception date shown to the end of the year.
** Fund expenses in excess of defined amounts were reimbursed during one or
more calendar years for all Funds except Colonial High Yield Securities;
Colonial Small Cap Value and Liberty All-Star-Equity. Without this expense
reimbursement any return percentages shown that include these calendar
years would be lower. See footnote 2 on page 6 of the prospectus for any
expense reimbursement percentages currently applicable to the Funds.
Yield for Stein Roe Money Market Sub-Account
Yield percentages for the Stein Roe Money Market Sub-Account are calculated
using the method prescribed by the Securities and Exchange Commission.
Yields reflect the deduction of the annual 1.40% asset-based Certificate
charges. Yields do not reflect premium tax charges. The yield would be
lower if these charges were included. The following is the standardized
formula:
Yield equals: (A - B - 1) x 365
C 7
Where:
A = the Accumulation Unit value at the end of the 7-day period.
B = $0.00.
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 Stein Roe Money Market Sub-Account will continue over an
entire year.
For the 7-day period ended 12/31/99 the yield for the Stein Roe Money
Market Sub-Account was 4.27%.
FINANCIAL STATEMENTS
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
Keyport Life Insurance Company
Variable Account A
[to be filed by Amendment]
<PAGE>
PART C
<PAGE>
Item 24. Financial Statements and Exhibits
@ (a) Financial Statements:
Included in Part B:
Variable Account A:
Statement of Assets and Liabilities - December 31, 1999
Statement of Operations and Changes in Net Assets for the years
ended December 31, 1999 and 1998
Notes to Financial Statements
Keyport Life Insurance Company:
Consolidated Balance Sheet - December 31, 1999 and 1998
Consolidated Income Statement for the years ended December 31,
1999, 1998 and 1997
Consolidated Statement of Stockholder's Equity for the years
ended December 31, 1999, 1998 and 1997
Consolidated Statement of Cash Flows for the years ended
December 31, 1999, 1998 and 1997
Notes to Consolidated 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
(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. 12 to the
Registration Statement (File No. 333-1043) filed on or about May
8, 1998.
#### Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement (File No. 333-84701) filed on or about December
10, 1999.
@ To be filed by Amendment.
Item 25. Directors and Officers of the Depositor.
Name and Principal Positions and Offices
Business Address* with Depositor
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
Philip K. Polkinghorn Director and President
Paul H. LeFevre, Jr. Chief Operating Officer
Bernard R. Beckerlegge Senior Vice President and General
Counsel
William Hayward Senior Vice President
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
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
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
Thomas P. O'Grady Vice President
Jeffery J. Whitehead Vice President and Treasurer
Ellen L. Wike Vice President
Daniel T. H. Yin Vice President
Nancy C. Atherton Assistant Vice President
John G. Bonvouloir Assistant Vice President &
Assistant Treasurer
Reese R. Boyd III Assistant Vice President
Paul R. Coady Assistant Vice President
Stephen Cross Assistant Vice President and
Assistant Controller
Alan R. Downey Assistant Vice President
Gregory L. Lapsley Assistant Vice President
Kenneth M. LeClair Assistant Vice President
Scott E. Morin Assistant Vice President and
Controller
Sean P. O'Brien Assistant Vice President
Diane Pursley Assistant Vice President
Richard D. Ribeiro Assistant Vice President
Teresa M. Shumila Assistant Vice President
Daniel T. Smyth Assistant Vice President
Donald A. Truman Assistant Vice President and
Assistant Secretary
Jane Withington 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 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 Keyport Financial Services Corp. (KFSC), a
Massachusetts corporation functioning as a broker/dealer of securities,
through LASC's 100% stock ownership of KFSC. KFSC 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 Keyport Benefit Life Insurance Company
("Keyport Benefit")(formerly American Benefit Life Insurance Company), a
New York corporation functioning as a life insurance company, through 100%
stock ownership. Keyport 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.
As of March 31, 2000, there were Qualified Contract Owners and ___
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. (KFSC) is principal underwriter of
the variable annuity and variable life insurance contracts. KFSC is the
principal underwriter for Variable Account A of Keyport Life Insurance
Company. KFSC is also principal underwriter for Variable Account J and
Variable Account K of Liberty Life Assurance Company of Boston; for
Variable Account A of Keyport Benefit Life Insurance Company; for the KMA
Variable Account and Keyport Variable Account-I of Keyport Life Insurance
Company; and for the Independence Variable Annuity Separate Account and
Independence Variable Life Separate Account of Independence Life and
Annuity Acccount. KFSC receives no compensation for its services.
The directors and officers of Keyport Financial Services Corp. are:
Name and Principal Position and Offices
Business Address* with Underwriter
Jacob M. Herschler Director
Paul T. Holman Director and Assistant Clerk
James J. Klopper Director, President and Clerk
Daniel C. Bryant Vice President
Rogelio P. Japlit Treasurer
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.
<PAGE>
SIGNATURES
<PAGE>
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 28th day of February, 2000.
Variable Account A
(Registrant)
BY: Keyport Life Insurance Company
(Depositor)
BY: /s/ Philip K.Polkinghorn*
Philip K. Polkinghorn
President
*BY: /s/ James J. Klopper February 28, 2000
James J. Klopper Date
Attorney-in-Fact
* James J. Klopper has signed this document on the indicated date on
behalf of Mr. Polkinghorn pursuant to power of attorney duly executed by
him and included as part of Exhibit 16 in Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4 filed on or about December 10, 1999
(File No. 333-84701; 811-7543).
<PAGE>
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/ Frederick Lippitt* /s/ Philip K. Polkinghorn*
Frederick Lippitt Philip K. Polkinghorn
Director President
(Principal Executive Officer)
/s/ Robert C. Nyman* /s/ Bernhard M. Koch*
Robert C. Nyman Bernhard M. Koch
Director Senior Vice President
(Chief Financial Officer)
/s/ Philip K. Polkinghorn
Philip K. Polkinghorn
Director
*BY: /s/ James J. Klopper February 28, 2000
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
incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement (File Nos. 333-84701; 811-7543) filed on or about
December 10, 1999.
