As Filed with the Securities and Exchange Commission on July 17, 1997
Registration No. 333-29811
811-08269
============================================================================
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. 1 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 [X]
Variable Account J
(Exact Name of Registrant)
Liberty Life Assurance Company of Boston
(Name of Depositor)
175 Berkeley Street, Boston, Massachusetts 02117
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: 617-357-9500
Lee W. Rabkin, Esq.
Liberty Life Assurance Company of Boston
175 Berkeley Street
Boston, MA 02117
(Name and Address of Agent for Service)
Copies to:
James J. Klopper, Esq. Joan E. Boros, Esq.
Keyport Life Insurance Company and Katten Muchin & Zavis
125 High Street, 13th Floor 1025 Thomas Jefferson Street, N.W.
Boston, MA 02110 Washington, DC 20007
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
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)(1) of Rule 485
( ) on [date] pursuant to paragraph (a)(1) of Rule 485
Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2. The
Rule 24f-2 Notice for the Registrant's most recent fiscal year will be filed
on or about February 28, 1998.
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Exhibit List on Page ____
CONTENTS OF REGISTRATION STATEMENT
The Facing Sheet
The Contents Page
Cross-Reference Sheet
PART A
Prospectus
PART B
Statement of Additional Information
PART C
Items 24 - 32
The Signatures
Exhibits
VARIABLE ACCOUNT J
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-4
N-4 Item Caption in Prospectus
1. Cover Page
2. Glossary of Special Terms
3. Summary of Expenses
4. Performance Information
5. Liberty Life and the Variable Account
Eligible Funds
6. Deductions
7. Allocations of Purchase Payments
Transfer of Variable Account Value
Substitution of Eligible Funds and Other Variable Account
Changes
Modification of the Certificate
Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Certificate Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Benefits
Suspension of Payments
Inquiries by Certificate Owners
8. Annuity Provisions
9. Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Annuity Options
10. Purchase Payments and Applications
Variable Account Value
Valuation Periods
Net Investment Factor
Sales of the Certificates
11. Partial Withdrawals and Surrender
Option A: Income For a Fixed Number of Years
Right to Revoke
12. Tax Status
13. Legal Proceedings
14. Table of Contents - Statement of Additional Information
Caption in Statement of Additional Information
15. Cover Page
16. Table of Contents
17. Liberty Life Assurance Company of Boston
18. Safekeeping of Assets, Experts
19. Not applicable
20. Principal Underwriter
21. Investment Performance
22. Variable Annuity Benefits
23. Financial Statements
This Amendment to the Registration Statement of Form N-4 which became
effective on July 15, 1997 (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 particular form of the Group and Individual Flexible Premium Deferred
Annuity Contract. 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 the Registration Statement.
PART A
July 30, 1997 Prospectus for
LIBERTY
ADVISOR VARIABLE ANNUITY
Including Fund Prospectuses for
THE ALGER AMERICAN FUND
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC.
KEYPORT VARIABLE INVESTMENT TRUST
MFS VARIABLE INSURANCE TRUST
STEINROE VARIABLE INVESTMENT TRUST
NOT May lose value
FDIC No bank guarantee
INSURED
Distributed by:
Keyport Financial Services Corp.
125 High Street, Boston, MA 02110-2712
Issued by:
Liberty Life Assurance Company of Boston
175 Berkeley Street, Boston, MA 02117
Liberty Life Service Office
125 High Street, Boston, MA 02110-2712
Service Hotline 800-367-3653 (Press 3)
LAVAP 7/97
____Yes.I would like to receive the Liberty Advisor Variable Annuity
Statement of Additional Information.
____Yes.I would like to receive the Statement of Additional Information for
the Eligible Funds of:
____ The Alger American Fund
____ Alliance Variable Products Series Fund, Inc.
____ Keyport Variable Investment Trust
____ MFS Variable Insurance Trust
____ SteinRoe Variable Investment Trust
Name
Address
City State Zip
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 6719 BOSTON, MA
POSTAGE WILL BE PAID BY ADDRESSEE
LIBERTY LIFE SERVICE OFFICE
125 HIGH STREET
BOSTON, MA 02110-9773
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
Variable Account J
OF
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
This Prospectus offers Group Variable Annuity Contracts (the "Contracts")
and the related Certificates (the "Certificates") that are designed to fund
benefits under certain group arrangements including those that qualify for
special tax treatment under the Internal Revenue Code of 1986 (the "Code").
As required by certain states, the Certificates may be offered as individual
contracts. Unless otherwise noted or the context so requires all references
to the Certificates include the Contracts and the individual Contracts. The
Certificates are offered on a flexible payment basis.
The variable annuity Contract (form number DVA(1)NY) and the Certificates
described in this prospectus provide for accumulation of Certificate Values
on a variable basis, and also on a fixed basis, and payments of periodic
annuity payments on either a variable or a fixed basis. The Certificates are
designed for use by individuals for retirement planning purposes.
This prospectus generally describes only the variable features of the
Certificate (for a summary of the fixed features, see Appendix A on Page xx).
If the Certificate Owner elects to have Certificate Values accumulated on a
variable basis, Purchase Payments will be allocated to a segregated
investment account of Liberty Life Assurance Company of Boston ("Liberty
Life"), designated Variable Account J ("Variable Account").
The Variable Account invests in shares of the following investment companies
at their net asset value: The Alger American Fund ("Alger American Fund")-
Alger American Growth Portfolio ("Alger Growth") and Alger American Small
Capitalization Portfolio ("Alger Small Cap"); Alliance Variable Products
Series Fund, Inc. ("Alliance Series Fund") - Global Bond Portfolio ("Alliance
Global Bond") and Premier Growth Portfolio ("Alliance Premier Growth");
Keyport Variable Investment Trust ("Colonial Trust") -- Colonial-Keyport
Growth and Income Fund ("Colonial Growth & Income"), Colonial-Keyport
International Fund for Growth ("Colonial Int'l Fund for Growth"), Colonial-
Keyport Strategic Income Fund ("Colonial Strategic Income"), Colonial-Keyport
U.S. Stock Fund ("Colonial U.S. Stock Fund"), Colonial-Keyport Utilities Fund
("Colonial Utilities"), and Newport-Keyport Tiger Fund ("Colonial-Newport
Tiger"); MFS Variable Insurance Trust ("MFS Trust") -- MFS Emerging Growth
Series ("MFS Emerging Growth") and MFS Research Series ("MFS Research"); and
SteinRoe Variable Investment Trust ("SteinRoe Trust") -- SteinRoe Capital
Appreciation Fund ("SteinRoe Capital Appreciation"), SteinRoe Cash Income
Fund ("SteinRoe Cash Income"), SteinRoe Managed Assets Fund ("SteinRoe
Managed Assets"), SteinRoe Managed Growth Stock Fund ("SteinRoe Managed
Growth Stock"), and SteinRoe Mortgage Securities Income Fund ("SteinRoe
Mortgage Securities Income").
The Variable Account may offer other forms of the Contracts and Certificates
with features, and fees and charges which vary from the Certificates, and
provide for investment in other Sub-accounts which may invest in different or
additional mutual funds. Other Contracts and Certificates will be described
in separate prospectuses and statements of additional information.
A Statement of Additional Information dated the same as this prospectus has
been filed with the Securities and Exchange Commission and is herein
incorporated by reference. It is available, at no charge, by writing the
Principal Underwriter, Keyport Financial Services Corp. at 125 High Street,
Boston, MA 02110, by calling (800) 437-4466, or by returning the postcard on
the back cover of this prospectus. A table of contents for the Statement of
Additional Information is on Page xx.
The Certificates may be sold by or through banks or other depository
institutions. The Contract and Certificates: are not insured by the FDIC;
are not a deposit or other obligation of, or guaranteed by, the depository
institution; and are subject to investment risks, including the possible loss
of principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH THE INFORMATION A PROSPECTIVE INVESTOR SHOULD KNOW
BEFORE INVESTING. THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE OR JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED BY
LIBERTY LIFE TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THIS OFFERING,
AND IF GIVEN OR MADE, SUCH UNAUTHORIZED INFORMATION OR REPRESENTATIONS SHOULD
NOT BE RELIED UPON.
The date of this prospectus is July 30, 1997
TABLE OF CONTENTS
Page
Glossary of Special Terms
Summary of Expenses
Synopsis
Performance Information
Liberty Life and the Variable Account
Purchase Payments and Applications
Investments of the Variable Account
Allocations of Purchase Payments
Eligible Funds
Transfer of Variable Account Value
Substitution of Eligible Funds and Other Variable
Account Changes
Deductions
Deductions for Certificate Maintenance Charge
Deductions for Mortality and Expense Risk Charge
Deductions for Daily Distribution Charge
Deductions for Contingent Deferred Sales Charge
Deductions for Transfers of Variable Account Value
Deductions for Premium Taxes
Deductions for Income Taxes
Total Variable Account Expenses
Other Services
The Certificates
Variable Account Value
Valuation Periods
Net Investment Factor
Modification of the Certificate
Right to Revoke
Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Certificate Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Provisions
Annuity Benefits
Income Date and Annuity Option
Change in Income Date and Annuity Option
Annuity Options
Variable Annuity Payment Values
Proof of Age, Sex, and Survival of Annuitant
Suspension of Payments
Tax Status
Introduction
Taxation of Annuities in General
Qualified Plans
Tax-Sheltered Annuities
Individual Retirement Annuities
Corporate Pension and Profit-Sharing Plans
Deferred Compensation Plans with Respect to Service
for State and Local Governments
Variable Account Voting Privileges
Sales of the Certificates
Legal Proceedings
Inquiries by Certificate Owners
Table of Contents-Statement of Additional Information
Appendix A-The Fixed Account (also known as the Modified
Guaranteed Annuity Account)
Appendix B-Telephone Instructions
GLOSSARY OF SPECIAL TERMS
Accumulation Unit: An accounting unit of measure used to calculate Variable
Account Value.
Annuitant: The Annuitant is the natural person to whom any annuity payments
will be made starting on the Income Date. The Annuitant may not be over age
90 on the Certificate Date (age 75 for Qualified Certificates).
Certificate Anniversary: The same month and day as the Certificate Date in
each subsequent year of the Certificate.
Certificate Date: The effective date of the Certificate; it is shown on the
Certificate Schedule.
Certificate Owner: The person (or persons in the case of joint ownership) who
possesses all the ownership rights under the Certificate. The primary
Certificate Owner may not be over age 90 on the Certificate Date (age 75 for
Qualified Certificates and age 90 for a joint Owner).
Certificate Value: The sum of the Variable Account Value and the Fixed
Account Value.
Certificate Withdrawal Value: The Certificate Value increased or decreased
by a limited Market Value Adjustment less any premium taxes and Certificate
Maintenance Charge and applicable Contingent Deferred Sales Charges.
Certificate Year: Any period of 12 months commencing with the Certificate
Date and each Certificate Anniversary thereafter shall be a Certificate Year.
Covered Person: The person(s) identified on the Certificate Schedule whose
death may result in an Adjustment of Certificate Value, a waiver of any
Contingent Deferred Sales Charges and a waiver of any Market Value
Adjustment or whose medically necessary stay in a hospital or nursing
facility may allow the Certificate Owner to be eligible for either a total or
partial waiver of the Contingent Deferred Sales Charge.
Designated Beneficiary: The person who may be entitled to receive benefits
following the death of the Annuitant, Certificate Owner, or joint Certificate
Owner. The Designated Beneficiary will be the first person among the
following who is alive on the date of death: primary Certificate Owner; joint
Certificate Owner; primary beneficiary; contingent beneficiary; and if none
of the above is alive, the primary Certificate Owner's estate. If the
primary Certificate Owner and joint Certificate Owner are both alive, they
will be the Designated Beneficiary together.
Eligible Funds: The mutual funds that are eligible investments for the
Variable Account under the Certificates.
Fixed Account: Part of Liberty Life's general account to which Purchase
Payments may be allocated or Certificate Values may be transferred.
Fixed Account Value: The value of all Fixed Account amounts accumulated under
the Certificate prior to the Income Date.
Guarantee Period Anniversary: An anniversary of a Guarantee Period's Start
Date.
Guarantee Period Month: The first Guarantee Period Month is the monthly
period which begins on the Start Date. Subsequent Guarantee Period Months
begin on the same day in the ensuing months.
Guarantee Period Year: The first Guarantee Period Year is the annual period
which begins on the Start Date. Subsequent Guarantee Period Years begin on
each Guaranteed Period Anniversary.
In Force: The status of the Certificate before the Income Date so long as it
is not totally surrendered, the Certificate Value under a Certificate does
not go to zero, and there has not been a death of the Annuitant or any
Certificate Owner that will cause the Certificate to end within at most five
years of the date of death.
Income Date: The date on which annuity payments are to begin.
Non-Qualified Certificate: Any Certificate that is not issued under a
Qualified Plan.
Office: Liberty Life's Service Office, which is 125 High Street, Boston,
Massachusetts 02110.
Qualified Certificate: Certificates issued under Qualified Plans.
Qualified Plan: A retirement plan established pursuant to the provisions of
Sections 401, 403(b) or 408(b) of the Internal Revenue Code. Liberty Life
treats Section 457 plans as Qualified Plans.
Start Date: The date an amount is first allocated to a Guarantee Period.
Variable Account: A separate investment account of Liberty Life into which
Purchase Payments under the Certificates may be allocated. The Variable
Account is divided into Sub-Accounts ("Sub-Account") that correspond to the
Eligible Funds in which they invest.
Variable Account Value: The value of all Variable Account amounts accumulated
under the Certificate prior to the Income Date.
Written Request: A request written on a form satisfactory to Liberty Life,
signed by the Certificate Owner and a disinterested witness, and filed at
Liberty Life's Office.
SUMMARY OF EXPENSES
The expense summary format below, including the examples, was adopted by the
Securities and Exchange Commission to assist the owner of a variable annuity
certificate in understanding the transaction and operating expenses the owner
will directly or indirectly bear under a certificate. The values reflect
expenses of the Variable Account as well as the Eligible Funds under the
Certificates. The expenses shown for the Eligible Funds and the examples
should not be considered a representation of future expenses.
Certificate Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Contingent Deferred Sales Charge
(as a percentage of Purchase Payments): 7%1
Years from Date of Payment Sales Charge
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or later 0%
Maximum Total Certificate Owner Transaction Expenses
(as a percentage of Purchase Payments): 7%
Annual Certificate Maintenance Charge2 $36
The Certificate Maintenance Charge will be waived before the Income Date if:
(i) the Certificate Value is greater than or equal to $40,000 on the
Certificate Anniversary date this charge is imposed, or
(ii) Purchase Payments of at least $2,000 have been made in the prior
Certificate Year and there has been no partial withdrawal in the prior
Certificate Year.
The Certificate Maintenance Charge will be waived on and after the Income
Date for the current year if:
(i) variable annuity Option A (Income for a Fixed Number of Years) is
applicable; and
(ii) at the time of the first payment of the year, the present value of
all the remaining payments (see "Option A" on Page xx) is greater than or
equal to $40,000.
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: 1.25%
Distribution Charge:. .15%
Total Variable Account Annual Expenses: 1.40%
Alger American Fund, Alliance Series Fund, Colonial Trust, MFS Trust, and
SteinRoe Trust Annual Expenses3
(as a percentage of average net assets)
Total Fund
Operating
Expenses After
Management Other Any Expense
Fund Fees Expenses Reimbursements4
Alger Growth .75% .04% .79%
Alger Small Cap .85% .03% .88%
Alliance Global Bond .44% .50% .94%(1.15%)4
Alliance Premier Growth .72% .23% .95%(1.23%)4
Colonial Growth & Income .65% .14% .79%
Colonial Int'l Fund for Growth .90% .50% 1.40%
Colonial-Newport Tiger .90% .37% 1.27%
Colonial Strategic Income .65% .15% .80%(.86%)4
Colonial U.S. Stock .80% .15% .95%
Colonial Utilities .65% .16% .81%
MFS Emerging Growth .75% .25% 1.00%(1.16%)4
MFS Research .75% .25% 1.00%(1.48%)4
SteinRoe Capital Appreciation .65% .10% .75%
SteinRoe Cash Income .50% .15% .65%
SteinRoe Managed Assets .60% .07% .67%
SteinRoe Managed Growth Stock .65% .08% .73%
SteinRoe Mortgage Securities
Income .55% .15% .70%(.72%)4
THE ABOVE EXPENSES FOR THE ELIGIBLE FUNDS WERE PROVIDED BY THE FUNDS. LIBERTY
LIFE HAS NOT INDEPENDENTLY VERIFIED THE ACCURACY OF THE INFORMATION.
Example #1 _ Assuming surrender of the Certificate at the end of the periods
shown.5
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Alger Growth $ 93 $122 $162 $319
Alger Small Cap 94 125 167 331
Alliance Global Bond 94 127 170 338
Alliance Premier Growth 94 127 171 340
Colonial Growth & Income 93 122 162 319
Colonial Int'l Fund for Growth 99 141 195 395
Colonial-Newport Tiger 97 137 188 379
Colonial Strategic Income 93 123 162 321
Colonial U.S. Stock 94 127 171 340
Colonial Utilities 93 123 163 322
MFS Emerging Growth 95 129 174 346
MFS Research 95 129 174 346
SteinRoe Capital Appreciation 92 121 160 314
SteinRoe Cash Income 91 118 154 301
SteinRoe Managed Assets 91 119 155 304
SteinRoe Managed Growth Stock 92 120 159 312
SteinRoe Mortgage Securities Income 92 120 157 308
Example #2 _ Assuming annuitization of the Certificate at the end of the
periods shown.5
A $1,000 investment in each Sub-Account listed would be subject to the
expenses shown, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Alger Growth 23 73 132 319
Alger Small Cap 24 76 137 331
Alliance Global Bond 24 78 140 338
Alliance Premier Growth 24 78 141 340
Colonial Growth & Income 23 73 132 319
Colonial Int'l Fund for Growth 29 93 165 395
Colonial-Newport Tiger 27 88 158 379
Colonial Strategic Income 23 74 132 321
Colonial U.S. Stock 24 78 141 340
Colonial Utilities 23 74 133 322
MFS Emerging Growth 25 80 144 346
MFS Research 25 80 144 346
SteinRoe Capital Appreciation 23 72 130 314
SteinRoe Cash Income 21 69 124 301
SteinRoe Managed Assets 21 70 125 304
SteinRoe Managed Growth Stock 22 71 129 312
SteinRoe Mortgage Securities Income 22 70 127 308
Example #3 _ Assuming the Certificate stays in force through the periods
shown.
A $1,000 investment in each Sub-Account listed would be subject to the same
expenses shown in Example #2, assuming 5% annual return on assets.
1Contingent Deferred Sales Charges are deducted only if the Certificate is
totally or partially surrendered. A surrender will not incur the Charge
percentage shown as follows:
1. In any Certificate Year, Certificate Owners may withdraw an aggregate
amount, not to exceed, at the time of withdrawal, the Certificate's earnings,
which equal: (a) the Certificate Value, less (b) the portion of the Purchase
Payments not previously withdrawn.
2. In any Certificate Year after the first, Certificate Owners may
withdraw, in addition to the amount available in 1., the amount by which 10%
of the Certificate Value as of the preceding Certificate Anniversary exceeds
the amount available in 1.
2This charge will be waived on the first Certificate Anniversary and in
certain other instances (see "Deductions for Certificate Maintenance
Charge"). Liberty Life reserves the right to impose a transfer fee after
prior notice to Certificate Owners, but currently does not impose any charge.
Premium taxes are not shown. Liberty Life deducts the amount of premium
taxes, if any, when paid unless Liberty Life elects to defer such deduction.
3All Trust and Fund expenses are for 1996. The Alliance Series Fund,
Colonial Trust (Colonial Strategic Income only), MFS Trust, and SteinRoe
Trust (SteinRoe Mortgage Securities Income only) expenses reflect such Fund's
or Trust's adviser's agreement to reimburse expenses above certain limits
(see footnote 4).
4Expense information shown for Alliance Series Fund has been restated to
reflect current fees and is net of voluntary expense reimbursements. The
Alliance Series Fund Adviser has agreed to continue such reimbursements for
the foreseeable future. Each percentage shown in the parentheses is what the
total expenses would have been in the absence of expense reimbursement: for
Alliance Global Bond - 1.15%; and for Alliance Premier Growth - 1.23%.
Colonial Trust's manager has agreed until 4/30/98 to reimburse all expenses,
including management fees, in excess of the following percentage of the
average annual net assets of each Fund, so long as such reimbursement would
not result in the Fund's inability to qualify as a regulated investment
company under the Internal Revenue Code: 1.00% for Colonial Growth & Income,
Colonial Utilities and Colonial U.S. Stock Fund; 1.75% for Colonial Int'l
Fund for Growth and Colonial-Newport Tiger; and .80% for Colonial Strategic
Income. For Colonial Strategic Income the total .80% shown in the table is
after expense reimbursement and the .86% shown in the parentheses is what the
total for 1996 would have been in the absence of expense reimbursement.
MFS Trust's Adviser has agreed to bear, subject to reimbursement, expenses
for each of the two Eligible Funds shown such that each Fund's total
operating expenses shall not exceed, on an annualized basis, 1.25% of the
average daily net assets of the Fund from January 1, 1997 through December
31, 1998, and 1.50% of the average daily net assets of the Fund from January
1, 1999 through December 31, 2004; provided however, that this obligation may
be terminated or revised at any time. Each percentage shown in the
parentheses is what the total expenses would have been in the absence of
expense reimbursement: for MFS Emerging Growth - 1.16%; and for MFS Research
- - 1.48%.
SteinRoe Trust's adviser has voluntarily agreed until 4/30/98 to reimburse
all expenses, including management fees, in excess of the following
percentage of the average annual net assets of each Fund, so long as such
reimbursement would not result in the Fund's inability to qualify as a
regulated investment company under the Internal Revenue Code: .80% for
SteinRoe Capital Appreciation and Managed Growth Stock; .65% for SteinRoe
Cash Income; .75% for SteinRoe Managed Assets; and .70% for SteinRoe Mortgage
Securities Income. For SteinRoe Mortgage Securities Income, the total .70%
shown in the table is after expense reimbursement and the .72% shown in the
parentheses is what the total for 1996 would have been in the absence of
expense reimbursement.
5The annuity is designed for retirement planning purposes. Surrenders prior
to the Income Date are not consistent with the long-term purposes of the
Certificate and the applicable tax laws.
The examples should not be considered a representation of past or future
expenses and charges of the Sub-Accounts. Actual expenses may be greater or
less than those shown. Similarly, the assumed 5% annual rate of return is
not an estimate or a guarantee of future investment performance. See
"Deductions" in this prospectus, "Management of the Fund" in the prospectuses
for Alger American Fund and the Alliance Series Fund, "Trust Management
Organizations" and "Expenses of the Funds" in the prospectus for Colonial
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.
SYNOPSIS
The following Synopsis should be read in conjunction with the detailed
information in this prospectus and the Statement of Additional Information.
Please refer to the Glossary of Special Terms for the meaning of certain
defined terms. Variations from the information appearing in this prospectus
due to individual state requirements are described in supplements which are
attached to this prospectus, or in endorsements to the Certificates, as
appropriate.
The Certificate allows Certificate Owners to allocate Purchase Payments to
the Variable Account and also to the Fixed Account. The Variable Account is
a separate investment account maintained by Liberty Life. The Fixed Account
is part of Liberty Life's "general account", which consists of all Liberty
Life's assets except the Variable Account and the assets of other separate
investment accounts maintained by Liberty Life. Certificate Owners may
allocate payments to, and receive annuity payments from the Variable Account
and/or the Fixed Account. If the Certificate Owner allocates payments to the
Variable Account, the accumulation values and annuity payments will fluctuate
according to the investment experience of the Sub-Accounts chosen. If the
Certificate Owner allocates payments to the Fixed Account, the accumulation
values will increase at guaranteed interest rates and annuity payments will
be of a fixed amount. Fixed Account Values are subject to a limited market
value adjustment. (See "Liberty Life and the Variable Account" on Page __
for more information on the Variable Account and Appendix A on Page xx for
more information on the Fixed Account.) If the Certificate Owner allocates
payments to both Accounts, then the accumulation values and annuity payments
will be variable in part and fixed in part.
The Certificate permits Purchase Payments to be made on a flexible Purchase
Payment basis. The minimum initial payment is $5,000. The minimum amount
for each subsequent payment is $1,000 or such lesser amount as Liberty Life
may permit from time to time (currently $250). (See "Purchase Payments" on
Page x.)
There are no deductions made from Purchase Payments for sales charges at the
time of purchase. A Contingent Deferred Sales Charge may be deducted in the
event of a total or partial surrender (see "Surrenders" on Page xx). The
Contingent Deferred Sales Charge is based on a graded table of charges. The
charge will not exceed 7% of that portion of the amount surrendered that
represents Purchase Payments made during the seven years immediately
preceding the request for surrender. (See "Deductions for Contingent
Deferred Sales Charge" on Page xx.)
Liberty Life deducts a Mortality and Expense Risk Charge, which is equal on
an annual basis to 1.25% of the average daily net asset values in the
Variable Account attributable to the Certificates. (See "Deductions for
Mortality and Expense Risk Charge" on Page xx.) Liberty Life also deducts a
daily distribution charge which is equal on an annual basis to .15% of the
same values. (See "Deductions for Daily Distribution Charge" on Page xx.)
Liberty Life deducts an annual Certificate Maintenance Charge (currently
$36.00) from the Variable Account Value for administrative expenses. Prior
to the Income Date, Liberty Life reserves the right to change this charge for
future years. Liberty Life will in certain instances waive this charge. (See
"Deductions for Certificate Maintenance Charge" on Page xx.)
Liberty Life reserves the right to deduct a charge of $25 for each transfer
in excess of 12 per Certificate Year but currently does not do so. (See
"Transfer of Variable Account Value" on Page xx.)
Premium taxes will be charged against the Certificate Value. Currently such
premium taxes range from 0% to 5.0%. (See "Deductions for Premium Taxes" on
Page xx.)
There are no federal income taxes on increases in the value of a Certificate
until a distribution occurs, in the form of a lump sum payment, annuity
payments, or the making of a gift or assignment of the Certificate. A
federal penalty tax (currently 10%) may also apply. (See "Tax Status" on
Page xx.)
The Certificate allows the Certificate Owner to revoke the Certificate
generally within 10 days of delivery (see "Right to Revoke" on Page xx).
Liberty Life will refund the Certificate Value as of the date the returned
Certificate is received by Liberty Life, plus any distribution charges
previously deducted. The Certificate Owner thus will bear the investment
risk during the revocation period.
The full financial statements for Liberty Life 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.
Certain of the Eligible Funds have been available for Liberty Life and/or non-
Liberty Life variable annuity contracts for periods prior to the commencement
of the offering of the Certificates described in this prospectus. Any
performance information for such periods will be based on the historical
results of the Eligible Funds being applied to the Certificate for the
specified time periods.
Performance information is not intended to indicate either past performance
under an actual Certificate or future performance.
The Sub-Accounts may advertise total return information for various periods
of time. Total return performance information is based on the overall
percentage change in value of a hypothetical investment in the specific Sub-
Account over a given period of time.
Average annual total return information shows the average percentage change
in the value of an investment in the Sub-Account from the beginning date of
the measuring period to the end of that period. This standardized version of
average annual total return reflects all historical investment results, less
all charges and deductions applied against the Sub-Account and a Certificate
(including any Contingent Deferred Sales Charge that would apply if a
Certificate Owner surrendered the Certificate at the end of each period
indicated). Average total return does not take into account any premium
taxes and would be lower if these taxes were included.
In order to calculate average annual total return, Liberty Life divides the
change in value of a Sub-Account under a Certificate surrendered on a
particular date by a hypothetical $1,000 investment in the Sub-Account made
by the Certificate Owner at the beginning of the period illustrated. The
resulting total rate for the period is then annualized to obtain the average
annual percentage change during the period. Annualization assumes that the
application of a single rate of return each year during the period will
produce the ending value, taking into account the effect of compounding.
The Sub-Accounts may present additional total return information computed on
a different basis.
First, the Sub-Accounts may present total return information computed on the
same basis as described above, except deductions will not include the
Contingent Deferred Sales Charge. This presentation assumes that the
investment in the Certificate continues beyond the period when the Contingent
Deferred Sales Charge applies, consistent with the long-term investment and
retirement objectives of the Certificate. The total return percentage will
thus be higher under this method than the standard method described above.
Second, the Sub-Accounts may present total return information calculated by
dividing the change in a Sub-Account's Accumulation Unit value over a
specified time period by the Accumulation Unit value of that Sub-Account at
the beginning of the period. This computation results in a 12-month change
rate or, for longer periods, a total rate for the period which Liberty Life
annualizes in order to obtain the average annual percentage change in the
Accumulation Unit value for that period. The change percentages do not take
into account the Contingent Deferred Sales Charge, the Certificate
Maintenance Charge and premium tax charges. The percentages would be lower
if these charges were included.
The SteinRoe Cash Income Sub-Account is a money market Sub-Account that also
may advertise yield and effective yield information. The yield of the Sub-
Account refers to the income generated by an investment in the Sub-Account
over a specifically identified 7-day period. This income is annualized by
assuming that the amount of income generated by the investment during that
week is generated each week over a 52-week period and is shown as a
percentage. The yield reflects the deduction of all charges assessed against
the Sub-Account and a Certificate but does not take into account Contingent
Deferred Sales Charges and premium tax charges. The yield would be lower if
these charges were included.
The effective yield of the SteinRoe Cash Income Sub-Account is calculated in
a similar manner but, when annualizing such yield, income earned by the Sub-
Account is assumed to be reinvested. This compounding effect causes
effective yield to be higher than yield.
LIBERTY LIFE AND THE VARIABLE ACCOUNT
Liberty Life Assurance Company of Boston was incorporated on September 17,
1963 as a stock life insurance company. Its executive and administrative
offices are at 175 Berkeley Street, Boston, Massachusetts 02117.
Liberty Life writes individual life insurance on both a participating and a
non-participating basis and group life and health insurance and individual
and group annuity contracts on a non-participating basis. The variable
annuity contracts described in this prospectus are issued on a non-
participating basis. Liberty Life is licensed to do business in all states
and in the District of Columbia. However, the contracts described in this
prospectus are currently offered only in New York. Liberty Life has been
rated "A" by A.M. Best and Company, independent analysts of the insurance
industry. The Best's A rating is in the second highest rating category, which
also includes a lower rating of A-. Best's Ratings merely reflect Best's
opinion as to the relative financial strength of Liberty Life and Liberty
Life's ability to meet its contractual obligations to its policyholders. Even
though assets in the Variable Account are held separately from Liberty Life's
other assets, ratings of Liberty Life may still be relevant to Certificate
Owners since not all of Liberty Life's contractual obligations relate to
payments based on those segregated assets (e.g., see "Death Provisions" on
pages 16-17 for Liberty Life's obligation after certain deaths to increase
the Certificate Value if it is less than the guaranteed minimum death value
amount).
Liberty Life is a wholly-owned indirect subsidiary of Liberty Mutual
Insurance Company and Liberty Mutual Fire Insurance Company. Liberty Mutual
Insurance Company is a multi-line insurance and financial services
institution.
The Variable Account was established by Liberty Life pursuant to the
provisions of Massachusetts Law on June 2, 1997. The Variable Account meets
the definition of "separate account" under the federal securities laws. The
Variable Account is registered with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940. Such
registration does not involve supervision of the management of the Variable
Account or Liberty Life by the Securities and Exchange Commission.
Obligations under the Certificates are the obligations of Liberty Life.
Although the assets of the Variable Account are the property of Liberty Life,
these assets are held separately from the other assets of Liberty Life and
are not chargeable with liabilities arising out of any other business Liberty
Life 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 Liberty Life
may conduct. Thus, Liberty Life does not guarantee the investment performance
of the Variable Account. The Variable Account Value and the amount of
variable annuity payments will vary with the investment performance of the
investments in the Variable Account.
PURCHASE PAYMENTS AND APPLICATIONS
The initial Purchase Payment is due on the Certificate Date. The minimum
initial Purchase Payment is $5,000. Additional Purchase Payments can be made
at the Certificate Owner's option. Each subsequent Purchase Payment must be
at least $1,000 or such lesser amount as Liberty Life may permit from time to
time (currently $250). Liberty Life may reject any Purchase Payment.
If the application for a Certificate is in good order and it calls for
amounts to be allocated to the Variable Account, Liberty Life will apply the
initial Purchase Payment to the Variable Account and credit the Certificate
with Accumulation Units within two business days of receipt. If the
application for a Certificate is not in good order, Liberty Life will attempt
to get it in good order within five business days. If it is not complete at
the end of this period, Liberty Life will inform the applicant of the reason
for the delay and that the Purchase Payment will be returned immediately
unless the applicant specifically consents to Liberty Life's keeping the
Purchase Payment until the application is complete. Once the application is
complete, the Purchase Payment will be applied within two business days of
its completion. Liberty Life has reserved the right to reject any
application.
Liberty Life confirms, in writing, to the Certificate Owner the allocation of
all Purchase Payments and the re-allocation of values after any requested
transfer. Liberty Life must be notified immediately by the Certificate Owner
of any processing error.
Liberty Life will permit others to act on behalf of an applicant in certain
instances, including the following two examples. First, Liberty Life will
accept an application for a Certificate that contains a signature signed
under a power of attorney if a copy of that power of attorney is submitted
with the application. Second, Liberty Life will issue a Certificate that is
replacing an existing life insurance or annuity policy that was issued by
either Liberty Life or an affiliated company without having previously
received a signed application from the applicant. Certain dealers or other
authorized persons such as employers and Qualified Plan fiduciaries will
inform Liberty Life of an applicant's answers to the questions in the
application by telephone or by order ticket and cause the initial Purchase
Payment to be paid to Liberty Life. If the information is in good order,
Liberty Life will issue the Certificate with a copy of an application
completed with that information. The Certificate will be delivered to the
Certificate Owner with a letter from Liberty Life that will give the
Certificate Owner an opportunity to respond to Liberty Life if any of the
application information is incorrect. Alternatively, Liberty Life's letter
may request the Certificate Owner to confirm the correctness of the
information by signing either a copy of the application or a Certificate
delivery receipt that ratifies the application in all respects (in either
case, a copy of the signed document would be returned to Liberty Life for its
permanent records). All purchases are confirmed, in writing, to the
applicant by Liberty Life. Liberty Life's liability under a Certificate
extends only to amounts so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
Purchase Payments applied to the Variable Account will be invested in one or
more of the Eligible Fund Sub-Accounts designated as permissible investments
in accordance with the selection made by the Certificate Owner in the
application. Any selection must specify the percentage of the Purchase
Payment that is allocated to each Sub-Account or must specify the asset
allocation model selected. (See "Other Services, The Programs" on Page xx).
The percentage for each Sub-Account, if not zero, must be at least 5% and
must be a whole number. A Certificate Owner may change the allocation
percentages without fee, penalty or other charge. Allocation changes must be
made by Written Request unless the Certificate Owner has by Written Request
authorized Liberty Life to accept telephone allocation instructions from the
Certificate Owner or from a person acting for the Certificate Owner as an
attorney-in-fact under a power of attorney. By authorizing Liberty Life to
accept telephone changes, a Certificate Owner agrees to accept and be bound
by the conditions and procedures established by Liberty Life from time to
time. The current conditions and procedures are in Appendix B and
Certificate Owners authorizing telephone allocation instructions will be
notified, in advance, of any changes.
The Variable Account is segmented into Sub-Accounts. Each Sub-Account
contains the shares of one of the Eligible Funds and such shares are
purchased at net asset value. Eligible Funds and Sub-Accounts may be added
or withdrawn as permitted by applicable law. The Sub-Accounts in the
Variable Account and the corresponding Eligible Funds currently are as
follows:
Eligible Funds of Alger American Fund Sub-Accounts
Alger Growth Alger Growth Sub-Account
Alger Small Cap Alger Small Cap Sub-Account
Eligible Funds of Alliance Series Fund Sub-Accounts
Alliance Global Bond Alliance Global Bond Sub-
Account
Alliance Premier Growth Alliance Premier Growth Sub-
Account
Eligible Funds of Colonial Trust Sub-Accounts
Colonial Growth & Income Colonial Growth & Income Sub-
Account
Colonial Int'l Fund for Growth Colonial Int'l Fund for Growth
Sub-Account
Colonial-Newport Tiger Colonial-Newport Tiger Sub-
Account
Colonial Strategic Income Colonial Strategic Income Sub-
Account
Colonial U.S. Stock Colonial U.S. Stock Sub-
Account
Colonial Utilities Colonial Utilities Sub-Account
Eligible Funds of MFS Trust Sub-Accounts
MFS Emerging Growth MFS Emerging Growth Sub-
Account
MFS Research MFS Research Sub-Account
Eligible Funds of SteinRoe Trust Sub-Accounts
SteinRoe Capital Appreciation SteinRoe Capital Appreciation
Sub-Account
SteinRoe Cash Income SteinRoe Cash Income Sub-
Account
SteinRoe Managed Assets SteinRoe Managed Assets Sub-
Account
SteinRoe Managed Growth Stock SteinRoe Managed Growth Stock
Sub-Account
SteinRoe Mortgage Securities Income SteinRoe Mortgage Securities
Income Sub-Account
Eligible Funds
The Eligible Funds which are the permissible investments of the Variable
Account are the separate funds listed above of Alger American Fund, Alliance
Series Fund, Colonial Trust, MFS Trust and SteinRoe Trust, and any other
mutual funds with which Liberty Life and the Variable Account may enter into
a participation agreement for the purpose of making such mutual funds
available as Eligible Funds under certain Certificates.
Fred Alger Management, Inc. ("Alger Management") is the investment manager
for both Eligible Funds of Alger American Fund. Alger Management has been in
the business of providing investment advisory services since 1964.
Alliance Capital Management L.P. is the investment advisor for both Eligible
Funds of Alliance Series Fund. AIGAM International Limited serves as sub-
adviser for Alliance Global.
Keyport Advisory Services Corp. ("KASC"), an affiliate of Liberty Life, is
the manager for Colonial Trust and its Eligible Funds. Colonial Management
Associates, Inc. ("Colonial"), an affiliate of Liberty Life, serves as sub-
adviser for the Eligible Funds (except for Newport Tiger). Colonial has
provided investment advisory services since 1931. Newport Fund Management,
Inc., an affiliate of Liberty Life, serves as sub-adviser for Colonial-
Newport Tiger.
Massachusetts Financial Services Company ("MFS") is the investment advisor
for both Eligible Funds of MFS Trust. MFS is America's oldest mutual fund
organization. MFS and its predecessor organizations have a history of money
management dating from 1924 and the founding of the first mutual fund in the
United States, Massachusetts Investors Trust.
Stein Roe & Farnham Incorporated ("Stein Roe") is the investment adviser for
each Eligible Fund of SteinRoe Trust. In 1986, Stein Roe was organized and
succeeded to the business of Stein Roe & Farnham, a partnership. Stein Roe is
an affiliate of Liberty Life. Stein Roe and its predecessor have provided
investment advisory and administrative services since 1932.
The investment objectives of the Eligible Funds are briefly described below.
More detailed information, including investor considerations related to the
risks of investing in a particular Eligible Fund, may be found in the current
prospectus for that Fund. An investor should read that prospectus carefully
before selecting a fund for investing. The prospectus is available, at no
charge, from a salesperson or by writing the Principal Underwriter, Keyport
Financial Services Corp. at 125 High Street, Boston, MA 02110 or by calling
(800) 437-4466.
Eligible Funds of Alger
American Fund and Variable Account
Sub-Accounts Investment Objective
Alger Growth Long-term capital appreciation
(Alger Growth Sub-Account)
Alger Small Cap Long-term capital appreciation.
(Alger Small Cap Sub-Account)
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 Premier Growth Growth of capital rather than
(Alliance Premier Growth current income.
Sub-Account)
Eligible Funds of Colonial Trust
and Variable Account
Sub-Accounts Investment Objective
Colonial Growth & Income Primarily income and long-term
(Colonial Growth & Income capital growth and, secondarily,
Sub-Account) preservation of capital.
Colonial Int'l Fund for Growth Long-term capital growth, by
(Colonial Int'l Fund for Growth investing primarily in non-U.S.
Sub-Account) equity securities.
Colonial-Newport Tiger
(Colonial-Newport Tiger Sub-Account) Long term capital growth by
investing primarily in equity
securities of companies located in
the four Tigers of Asia (Hong Kong,
Singapore, South Korea and Taiwan)
and the other mini-Tigers of East
Asia (Malaysia, Thailand, Indonesia,
China and the Philippines).
Colonial Strategic Income A high level of current income, as
(Colonial Strategic Income is consistent with prudent risk and
Sub-Account) maximizing total return, by
diversifying investments primarily in
U.S. and foreign government and high
yield, high risk corporate debt
securities.
Colonial U.S. Stock Growth exceeding over time the S&P
(Colonial U.S. Stock Sub-Account) 500 Index (Standard & Poor's
Corporation 500 Composite Stock Price
Index) performance.
Colonial Utilities
(Colonial Utilities Sub-Account) Primarily current income and,
secondarily, long-term capital
growth.
Eligible Funds of MFS Trust
and Variable Account
Sub-Accounts Investment Objective
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
SteinRoe Capital Appreciation Capital growth by investing
(SteinRoe Capital Appreciation primarily in Sub-common stocks,
Sub-Account) convertible securities, and other
securities selected for prospective
capital growth.
SteinRoe Cash Income High current income from short-term
(SteinRoe Cash Income money market instruments while
Sub-Account) emphasizing preservation of capital
and maintaining excellent liquidity.
SteinRoe Managed Assets High total investment return
(SteinRoe Managed Assets through investment in a changing
Sub-Account) mix of securities.
SteinRoe Managed Growth Stock Long-term growth of capital through
(SteinRoe Managed Growth Stock investment primarily in common
Sub-Account) stocks.
SteinRoe Mortgage Securities Income Highest possible level of current
(SteinRoe Mortgage Securities Income income consistent with safety of
Sub-Account) principal and maintenance of
liquidity through investment
primarily in mortgage-backed
securities.
There is no assurance that the Eligible Funds will achieve their stated
objectives.
All the Eligible Funds are funding vehicles for variable annuity contracts
and variable life insurance policies offered by separate accounts of Liberty
Life and of insurance companies affiliated and unaffiliated with Liberty
Life. The risks involved in this "mixed and shared funding" are disclosed in
the Eligible Fund prospectuses under the following captions: Alger American
Fund - "Participating Insurance Companies and Plans"; Alliance Series Fund -
"Introduction to the Fund"; Colonial Trust - "The Trust"; MFS Trust -
"Investment Concept of the Trust"; and SteinRoe Trust - "The Trust".
Transfer of Variable Account Value
Certificate Owners may transfer Variable Account Value from one Sub-Account
to another Sub-Account and/or to the Fixed Account.
The Certificate allows Liberty Life to charge a transfer fee and to limit the
number of transfers that can be made in a specified time period. Certificate
Owners should be aware that transfer limitations may prevent a Certificate
Owner from making a transfer on the date he or she wants to, with the result
that the Certificate Owner's future Certificate Value may be lower than it
would have been had the transfer been made on the desired date.
Currently, Liberty Life has no limit on the number or frequency of transfers,
and it is not charging a transfer fee of $25 for each transfer in excess of
12 per Certificate Year. For transfers under different Certificates that are
being requested under powers of attorney with a common attorney-in-fact or
that are, in Liberty Life's determination, based on the recommendation of a
common investment adviser or broker/dealer, there is a transfer limitation of
one transfer every 30 days or such shorter time period as Liberty Life may
permit.
Liberty Life is also limiting each transfer to a maximum of $500,000 or such
greater amount as Liberty Life may permit. All transfers requested for a
Certificate on the same day will be treated as a single transfer and the
total combined transfer amount will be subject to the $500,000 limitation.
If the $500,000 limitation is exceeded, no amount of the transfer will be
executed by Liberty Life.
In applying the $500,000 limitation, Liberty Life may treat as one transfer
all transfers requested by a Certificate Owner for multiple Certificates he
or she owns. If the $500,000 limitation is exceeded for multiple transfers
requested on the same day that are treated as a single transfer, no amount of
the transfer will be executed by Liberty Life.
In applying the $500,000 limitation to transfers requested by a common
attorney-in-fact or investment adviser, Liberty Life will treat as one
transfer all transfers requested under different Certificates that are being
requested under powers of attorney with a common attorney-in-fact or that
are, in Liberty Life's determination, based on the recommendation of a common
investment adviser or broker/dealer. If the $500,000 limitation is exceeded
for multiple transfers requested on the same day that are treated as a single
transfer, no amount of the transfer will be executed by Liberty Life. If a
transfer is executed under one Certificate and, within the next 30 days, a
transfer request for another Certificate is determined by Liberty Life to be
related to the executed transfer under this paragraph's rules, the transfer
request will not be executed by Liberty Life. In order for it to be
executed, it would need to be requested again after the 30 day period has
expired and it, along with any other transfer requests that are collectively
treated as a single transfer, would need to total less than $500,000.
Liberty Life's interest in applying these limitations is to protect the
interests of both Certificate Owners who are not engaging in significant
transfer activity and Certificate Owners who are engaging in such activity.
Liberty Life has determined that the actions of Certificate Owners engaging
in significant transfer activity among Sub-Accounts may cause an adverse
effect on the performance of the Eligible Fund for the Sub-Account involved.
The movement of Sub-Account values from one Sub-Account to another may
prevent the appropriate Eligible Fund from taking advantage of investment
opportunities because it must maintain a liquid position in order to handle
redemptions. Such movement may also cause a substantial increase in Fund
transaction costs which must be indirectly borne by Certificate Owners.
Certificate Owners will be notified, in advance, of the imposition of any
transfer fee or of a change in the limitation on the number of transfers.
The fee will not exceed the lesser of $25 and the cost of effecting a
transfer.
Transfers must be made by Written Request unless the Certificate Owner has by
Written Request authorized Liberty Life to accept telephone transfer requests
from the Certificate Owner or from a person acting for the Certificate Owner
as an attorney-in-fact under a power of attorney. By authorizing Liberty
Life to accept telephone transfer instructions, a Certificate Owner agrees to
accept and be bound by the conditions and procedures established by Liberty
Life from time to time. The current conditions and procedures are in
Appendix B and Certificate Owners authorizing telephone transfers will be
notified, in advance, of any changes. Written transfer requests may be made
by a person acting for the Certificate Owner as an attorney-in-fact under a
power of attorney.
Transfer requests received by Liberty Life before the close of trading on the
New York Stock Exchange (currently 4:00 PM Eastern Time) will be initiated at
the close of business that day. Any requests received later will be
initiated at the close of the next business day. Each request from a
Certificate Owner to transfer value will be executed by both redeeming and
acquiring Accumulation Units on the day Liberty Life initiates the transfer.
If 100% of any Sub-Account's value is transferred and the allocation formula
for Purchase Payments includes that Sub-Account, then the allocation formula
for future Purchase Payments will automatically change unless the Certificate
Owner instructs otherwise. For example, if the allocation formula is 50% to
Sub-Account A and 50% to Sub-Account B and all of Sub-Account A's value is
transferred to Sub-Account B, the allocation formula will change to 100% to
Sub-Account B unless the Certificate Owner instructs otherwise.
Substitution of Eligible Funds and Other Variable Account Changes
If the shares of any of the Eligible Funds should no longer be available for
investment by the Variable Account or if in the judgment of Liberty Life's
management further investment in such fund shares should become inappropriate
in view of the purpose of the Certificate, Liberty Life may add or substitute
shares of another Eligible Fund or of another mutual fund for Eligible Fund
shares already purchased under the Certificate. No substitution of Fund
shares in any Sub-Account may take place without prior approval of the
Securities and Exchange Commission and notice to Certificate Owners, to the
extent required by the Investment Company Act of 1940.
Liberty Life has also reserved the right, subject to compliance with the law
as currently applicable or subsequently changed: (a) to operate the Variable
Account in any form permitted under the Investment Company Act of 1940 or in
any other form permitted by law; (b) to take any action necessary to comply
with or obtain and continue any exemptions from the Investment Company Act of
1940 or to comply with any other applicable law; (c) to transfer any assets
in any Sub-Account to another Sub-Account, or to one or more separate
investment accounts, or to Liberty Life's general account; or to add, combine
or remove Sub-Accounts in the Variable Account; and (d) to change the way
Liberty Life assesses charges, so long as the aggregate amount is not
increased beyond that currently charged to the Variable Account and the
Eligible Funds in connection with the Certificates.
DEDUCTIONS
Deductions for Certificate Maintenance Charge
Liberty Life has responsibility for all administration of the Certificates
and the Variable Account. Liberty Life has sub-contracted to an affiliate the
actual day-to-day administration of the Certificates, for which it pays a
fee. This administration includes, but is not limited to, preparation of the
Certificates, maintenance of Certificate Owners' records, and all accounting,
valuation, regulatory and reporting requirements. Liberty Life makes a
Certificate Maintenance Charge for such services during the accumulation and
annuity payment periods. At the present time the Certificate Maintenance
Charge is $36 per Certificate Year. PRIOR TO THE INCOME DATE THE CERTIFICATE
MAINTENANCE CHARGE IS NOT GUARANTEED AND MAY BE CHANGED BY LIBERTY LIFE. The
Certificate Maintenance Charge will be waived before the Income Date if:
(i) it is the first Certificate Anniversary, or
(ii) the Certificate Value is greater than or equal to $40,000 on the
Certificate Anniversary date this charge is imposed, or
(iii) Purchase Payments of at least $2,000 have been made in the prior
Certificate Year and there has been no partial withdrawal in the prior
Certificate Year.
The Certificate Maintenance Charge will be waived on and after the Income
Date for the current year if:
(i) variable annuity Option A (Income for a Fixed Number of Years) is
applicable; and
(ii) at the time of the first payment of the year, the present value of all
of the remaining payments (see "Option A" on Page 21) is greater than or
equal to $40,000.
Prior to the Income Date, the full amount of the charge will be deducted from
the Variable Account Value on each Certificate Anniversary and on the date of
any total surrender not falling on the Certificate Anniversary. On the
Income Date, a pro-rata portion of the charge due on the next Certificate
Anniversary will be deducted from the Variable Account Value. This pro-rata
charge covers the period from the prior Certificate Anniversary to the Income
Date. For example, if the Income Date occurs 73 days after that prior
anniversary, then one-fifth (i.e., 73 days/365 days) of the annual charge
would be deducted on the Income Date. The charge will be deducted from each
Sub-Account in the proportion that the value of each bears to the Variable
Account Value.
Once annuity payments begin on the Income Date or once they begin after
surrender benefits are applied under a settlement option, the yearly cost of
the Certificate Maintenance Charge for a payee's annuity will be the same as
the yearly amount in effect immediately before the annuity payments begin.
Liberty Life may not later change the amount of the Certificate Maintenance
Charge deducted from the annuity payments. The charge will be deducted on a
pro-rata basis from each annuity payment. For example, if annuity payments
are monthly, then one-twelfth of the annual charge will be deducted from each
payment.
Deductions for Mortality and Expense Risk Charge
Although variable annuity payments made to Annuitants will vary in accordance
with the investment performance of the investments of the Variable Account,
they will not be affected by the mortality experience (death rate) of persons
receiving such payments or of the general population. Liberty Life
guarantees the Death Benefits described below (see "Death Provisions").
Liberty Life assumes an expense risk since the Certificate Maintenance Charge
after the Income Date will stay the same and not be affected by variations in
expenses.
To compensate it for assuming mortality and expense risks, for each Valuation
Period Liberty Life deducts from each Sub-Account a Mortality and Expense
Risk Charge equal on an annual basis to 1.25% of the average daily net asset
value of the Sub-Account. The charge is deducted during both the
accumulation and annuity periods (i.e., both before and after the Income
Date). Less than the full charge will be deducted from Sub-Account values
attributable to Certificates issued to employees of Liberty Life and other
persons specified in "Sales of the Certificates".
Deductions for Daily Distribution Charge
Liberty Life also deducts from each Sub-Account each Valuation Period a daily
Distribution Charge equal on an annual basis to 0.15% of the average daily
net asset value of the Sub-Account. This charge compensates Liberty Life for
certain sales distribution expenses relating to the Certificate.
This charge will not be deducted from Sub-Account values attributable to
Certificates that have reached the maximum cumulative distribution charge
limit defined below and to Certificates issued to employees of Liberty Life
and other persons specified in "Sales of the Certificates". The charge is
also not deducted from Sub-Account values attributable to Annuity Units.
Liberty Life may decide not to deduct the charge from Sub-Account values
attributable to a Certificate issued in an internal exchange or transfer of
an annuity contract of Liberty Life's general account.
Deductions for Contingent Deferred Sales Charge
A sales charge is not deducted from the Certificate's Purchase Payments when
initially received. However, a Contingent Deferred Sales Charge may be
deducted upon a surrender.
In order to determine whether a Contingent Deferred Sales Charge will be due
upon a partial or total surrender, Liberty Life maintains a separate set of
records. These records identify the date and amount of each Purchase Payment
made to the Certificate and the Certificate Value over time.
Certificate Owners will be permitted to make partial surrenders during the
Accumulation Period without incurring a Contingent Deferred Sales Charge, as
follows:
1. In any Certificate Year, Certificate Owners may withdraw an aggregate
amount not to exceed, at the time of the withdrawal, the Certificate's
earnings, which equal: (a) the Certificate Value, less (b) the portion of the
Purchase Payments not previously withdrawn.
2. In any Certificate Year after the first, Certificate Owners may withdraw,
in addition to the amount available in 1., the amount by which 10% of the
Certificate Value as of the preceding Certificate Anniversary exceeds the
amount available in 1.
Contingent Deferred Sales Charges, as discussed below, will be deducted with
respect to withdrawals in excess of these amounts.
In computing the applicable charge amounts, the amount of any surrender in
any Certificate Year after the first as set forth in 2. above, will be
deducted from the Purchase Payments in chronological order from the oldest to
the most recent until the amount is fully deducted. Any amount so deducted
will not be subject to a charge.
The following additional amounts will be deducted from the Purchase Payments
in the same chronological order: the amount of any surrender in the first
Certificate Year in excess of the amount set forth in 1. above and the amount
of any surrender in any later Certificate Year in excess of the combined
amount set forth in 1. and 2. above. The Contingent Deferred Sales Charge
for each Purchase Payment from which a deduction is made will be equal to (a)
multiplied by (b), where:
(a) is the amount so deducted; and
(b) is the applicable percentage for the number of years that have elapsed
from the date of that payment to the date of surrender. Years are
measured from the month and day of payment to the same month and day in
each subsequent calendar year. The percentages applicable to each
Purchase Payment during the seven years after the date of its payment
are: 7% during year 1; 6% during year 2; 5% during year 3; 4% during
year 4; 3% during year 5; 2% during year 6; 1% during year 7; and 0%
thereafter.
The applicable Contingent Deferred Sales Charges for each Purchase Payment
are then totaled. The lesser of this total amount and the Certificate's
maximum cumulative distribution charge will be deducted from the Certificate
Value in the same manner as the surrender amount. The maximum cumulative
distribution charge is equal to (a) less (b), where (a) is 9% of the total
Purchase Payments made to the Certificate and (b) is the sum of all prior
Contingent Deferred Sale Charge deductions from the Certificate Value and all
prior Variable Account daily distribution charges applicable to the
Certificate from the 0.15% distribution charge factor. After each surrender,
Liberty Life's records will be adjusted to reflect any deductions made from
the applicable Purchase Payments.
Example: Two Purchase Payments were made one year apart for $5,000 and
$7,000. The Certificate Value has grown to an assumed $13,200 when the
Certificate Owner decides to withdraw $8,000. The Certificate Value at the
beginning of the Certificate Year of surrender was $13,000. The Contingent
Deferred Sales Charge percentages at the time of surrender are an assumed 5%
for the $5,000 payment and 6% for the $7,000 payment. The portion of the
surrender representing the Certificate's earnings ($13,200 less $12,000, or
$1,200) would not be subject to charges. Since $1,200 is less than the
amount guaranteed not to have charges (10% of $13,000, or $1,300), an
additional $100 would not be subject to charges. This $100 would be deducted
from the oldest Purchase Payment, reducing it from $5,000 to $4,900. The
$1,200 increase in value plus the additional $100 leaves $6,700 ($8,000 -
1,200 - 100) to be deducted. This $6,700 would be deducted from the $4,900
of the first payment still left and $1,800 of the second payment. The total
Contingent Deferred Sales Charge would be $4,900 multiplied by the applicable
5% and $1,800 times the applicable 6%, or a total of $353. The distribution
charge records would now reflect $0 for the 1st payment and $5,200 for the
2nd payment. The $8,000 requested plus the $353 charge would be deducted
from Certificate Values under the rules specified in "Partial Withdrawals and
Surrender" on Page xx.
The Contingent Deferred Sales Charge, when it is applicable, will be used to
cover the expenses of selling the Certificate, including compensation paid to
selling dealers and the cost of sales literature. Any expenses not covered
by the charge will be paid from Liberty Life's general account, which may
include monies deducted from the Variable Account for the Mortality and
Expense Risk Charge. A dealer selling the Certificate may receive up to
6.00% of Purchase Payments with additional compensation later based on the
Certificate Value of those payments. During certain time periods selected by
Liberty Life and Keyport Financial Services Corp., the percentage may
increase to 6.25%.
The Contingent Deferred Sales Charge will be waived in the event a Covered
Person is confined in a medical facility in accordance with the provisions
and conditions of an endorsement relating to such confinements.
The Contingent Deferred Sales Charge will be eliminated under Certificates
issued to employees of Liberty Life and other persons specified in "Sales of
the Certificates".
Liberty Life may reduce or change to 0% any Contingent Deferred Sales Charge
percentage under a Certificate issued in an internal exchange or transfer of
an annuity contract of Liberty Life's general account.
Liberty Life may allow, under the Systematic Withdrawal Program and under
other permitted circumstances, all or part of the amount in 2. above to also
be available in the first Certificate Year. If so, the amount in 2. above
will be calculated by substituting the initial Purchase Payment for the
Certificate Value.
Deductions for Transfers of Variable Account Value
The Certificate allows Liberty Life to charge a transfer fee. Currently no
fee is being charged. Certificate Owners will be notified, in advance, of
the imposition of any fee. The fee will not exceed the lesser of $25 and the
cost of effecting a transfer.
Deductions for Premium Taxes
Liberty Life deducts the amount of any premium taxes levied by any state or
governmental entity when paid unless Liberty Life elects to defer such
deduction. It is not possible to describe precisely the amount of premium
tax payable on any transaction involving the Certificate offered hereby.
Such premium taxes depend, among other things, on the type of Certificate
(Qualified or Non-Qualified), on the state of residence of the Certificate
Owner, the state of residence of the Annuitant, the status of Liberty Life
within such states, and the insurance tax laws of such states. For New York
Certificates, the current premium tax rate is 0%.
Deductions for Income Taxes
Liberty Life will deduct from any amount payable under the Certificate any
income taxes that a governmental authority requires Liberty Life to withhold
with respect to that amount. See "Income Tax Withholding" and "Tax-Sheltered
Annuities".
Total Variable Account Expenses
Total Variable Account expenses in relation to the Certificate will be the
Certificate Maintenance Charge, the Mortality and Expense Risk Charge, and
the Daily Sales Charge.
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and therefore the deductions from and expenses paid out
of the assets of the Eligible Funds. These deductions and expenses are
described in the Eligible Fund prospectuses.
OTHER SERVICES
The Programs. Liberty Life offers several investment related programs which
are available only prior to the Income Date: Asset Allocation; Dollar Cost
Averaging; Systematic Investment; and Systematic Withdrawal Programs. A
Rebalancing Program is available prior to and after the Income Date. Under
each Program, the related transfers between and among Sub-Accounts and the
Fixed Account are not counted as one of the twelve free transfers. Each of
the Programs has its own requirements, as discussed below. Liberty Life
reserves the right to terminate any Program.
If the Certificate Owner has submitted the required telephone authorization
form, certain changes may be made by telephone. For those Programs involving
transfers, Owners may change instructions by telephone with regard to which
Sub-Accounts or the Fixed Account Certificate Value may be transferred. The
current conditions and procedures are described in Appendix B.
Dollar Cost Averaging Program. Liberty Life offers a Dollar Cost Averaging
Program that Certificate Owners may participate in by Written Request. The
program periodically transfers Accumulation Units from the SteinRoe Cash
Income Sub-Account or the One-Year Guarantee Period of the Fixed Account to
other Sub-Accounts selected by the Certificate Owner. The program allows a
Certificate Owner to invest in Variable Sub-Accounts over time rather than
having to invest in those Sub-Accounts all at once. The program is available
for initial and subsequent Purchase Payments and for Certificate Value
transferred into the SteinRoe Cash Income Sub-Account or the One-Year
Guarantee Period. Under the program, Liberty Life makes automatic transfers
on a periodic basis out of the SteinRoe Cash Income Sub-Account or the One-
Year Guarantee Period into one or more of the other available Sub-Accounts
(Liberty Life reserves the right to limit the number of Sub-Accounts the
Certificate Owner may choose but there are currently no limits).
The Certificate Owner by Written Request must specify the SteinRoe Cash
Income Sub-Account or the One Year Guarantee Period from which the transfers
are to be made, the monthly amount to be transferred (minimum $100) and the
Sub-Account(s) to which the transfers are to be made. The first transfer
will occur at the close of the Valuation Period that includes the 30th day
after the receipt of the Certificate Owner's Written Request. Each succeeding
transfer will occur one month later (e.g., if the 30th day after the receipt
date is April 8, the second transfer will occur at the close of the Valuation
Period that includes May 8). When the remaining value is less than the
monthly transfer amount, that remaining value will be transferred and the
program will end. Before this final transfer, the Certificate Owner may
extend the program by allocating additional Purchase Payments to the SteinRoe
Cash Income Sub-Account or the One Year Guarantee Period or by transferring
Certificate Value to the SteinRoe Cash Income Sub-Account or the One Year
Guarantee Period. The Certificate Owner may, by Written Request or by
telephone, change the monthly amount to be transferred, change the Sub-
Account(s) to which the transfers are to be made, or end the program. The
program will automatically end if the Income Date occurs. Liberty Life
reserves the right to end the program at any time by sending the Certificate
Owner a notice one month in advance.
Written or telephone instructions must be received by Liberty Life by the end
(currently 4:00 PM Eastern Time) of the business day preceding the next
scheduled transfer in order to be in effect for that transfer. Telephone
instructions are subject to the conditions and procedures established by
Liberty Life from time to time. The current conditions and procedures appear
in Appendix B, and Certificate Owners in a dollar cost averaging program will
be notified, in advance, of any changes.
Asset Allocation Program. Certificate Owners may select from five asset
allocation model portfolios developed by Ibbotoson Associates (Model A -
Capital Preservation, Model B - Income and Growth, Model C - Moderate Growth,
Model D - Growth, and Model E - Aggressive Growth). If a Certificate Owner
elects one of the models, initial and subsequent Purchase Payments will
automatically be allocated among the Sub-Accounts in the model. Only one
model may be used in a Certificate at a time. Certificate Owners may use a
questionnaire and scoring system to determine the model which corresponds to
their risk tolerance and time horizons.
Periodically Ibbotoson Associates will review the models and may determine
that a reconfiguration of the Sub-Accounts and percentage allocations among
those Sub-Accounts is appropriate. Certificate Owners will receive
notification prior to any reconfiguration.
The Fixed Account is not available in any asset allocation model. A
Certificate Owner may allocate initial or subsequent Purchase Payments, or
Certificate Value, between an asset allocation model and the Fixed Account.
Rebalancing Program. In accordance with the Certificate Owner's election of
the relative Purchase Payment percentage allocations, Liberty Life will
automatically rebalance the Certificate Value of each Sub-Account quarterly.
On the last day of the calendar quarter, Liberty Life will automatically
rebalance the Certificate Value in each of the Sub-Accounts to match the
current Purchase Payment percentage allocations. The Program may be
terminated at any time and the percentages may be altered by Written Request.
The requested change must be received at the Office ten (10) days prior to
the end of the calendar quarter. Certificate Value allocated to the Fixed
Account is not subject to automatic rebalancing. After the Income Date,
automatic rebalancing applies only to variable annuity payments and Liberty
Life will rebalance the number of Annuity Units in each Sub-Account (Annuity
Units are used to calculate the amount of each Sub-Account annuity payment;
see "Variable Annuity Benefits" in the Statement of Additional Information.)
Systematic Investment Program. Purchase Payments may be made by monthly
draft against the bank account of any Certificate Owner who has completed and
returned to Liberty Life a Systematic Investment Program application and
authorization form. The application and authorization form may be obtained
from Liberty Life or from the sales representative. Each Systematic
Investment Program Purchase Payment is subject to a minimum of $250 or such
lesser amount as Liberty Life may permit.
Systematic Withdrawal Program. To the extent permitted by law, Liberty Life
will make monthly, quarterly, semi-annually or annual distributions of a
predetermined dollar amount to the Certificate Owner that has enrolled in the
Systematic Withdrawal Program. Under the Program, all distributions will be
made directly to the Certificate Owner and will be treated for federal tax
purposes as any other withdrawal or distribution of Certificate Value. (See
"Tax Status".) The Certificate Owner may specify the amount of each partial
withdrawal, subject to a minimum of $100. Systematic withdrawals may be made
from any Sub-Account or Guarantee Period of the Fixed Account. In each
Certificate Year, portions of Certificate Value may be withdrawn without the
imposition of any Contingent Deferred Sales Charge ("Free Withdrawal
Amount"). If withdrawals pursuant to the Program are greater than the Free
Withdrawal Amount, the amount of the withdrawals greater than the Free
Withdrawal Amount will be subject to the applicable Contingent Deferred Sales
Charge. Any unrelated voluntary partial withdrawal a Certificate Owner makes
during a Certificate Year will be aggregated with withdrawals pursuant to the
Program to determine the applicability of any Contingent Deferred Sales
Charge under the Certificate provisions regarding partial withdrawals.
Unless the Certificate Owner specifies the Sub-Account or Sub-Accounts or the
Fixed Account from which withdrawals of Certificate Value shall be made or if
the amount in a specified Sub-Account is less than the predetermined amount,
Liberty Life will make withdrawals under the Program in the manner specified
for partial withdrawals in "Partial Withdrawals and Surrender". All Sub-
Account withdrawals under the Program will be effected by canceling the
number of Accumulation Units equal in value to the amount to be distributed
to the Certificate Owner and any applicable Contingent Deferred Sales Charge.
The Program may be combined with all other Programs except the Systematic
Investment Program.
It may not be advisable to participate in the Systematic Withdrawal Program
and incur a Contingent Deferred Sales Charge when making additional Purchase
Payments under the Certificate.
THE CERTIFICATES
Variable Account Value
The Variable Account Value for a Certificate is the sum of the value of each
Sub-Account to which values are allocated under a Certificate. The value of
each Sub-Account is determined at any time by multiplying the number of
Accumulation Units attributable to that Sub-Account by the Accumulation Unit
value for that Sub-Account at the time of determination. The Accumulation
Unit value is an accounting unit of measure used to determine the change in
an Accumulation Unit's value from Valuation Period to Valuation Period.
Each Purchase Payment that is made results in additional Accumulation Units
being credited to the Certificate and the appropriate Sub-Account thereunder.
The number of additional units for any Sub-Account will equal the amount
allocated to that Sub-Account divided by the Accumulation Unit value for that
Sub-Account at the time of investment.
Valuation Periods
The Variable Account is valued each Valuation Period using the net asset
value of the Eligible Fund shares. A Valuation Period is the period
commencing at the close of trading on the New York Stock Exchange on each
Valuation Date and ending at the close of trading for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock
Exchange is open for business. The New York Stock Exchange is currently
closed on weekends, New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net Investment Factor
Variable Account Value will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect value, Liberty Life utilizes an Accumulation Unit value.
Each Sub-Account has its own Accumulation Units and value per Unit. The Unit
value applicable during any Valuation Period is determined at the end of that
period.
When Liberty Life first purchased Eligible Fund shares on behalf of the
Variable Account, Liberty Life 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. Liberty Life calculates a net investment factor
for each Sub-Account by dividing (a) by (b) and then subtracting (c) (i.e.,
(a/b) _ c), where:
(a) is equal to:
(i) the net asset value per share of the Eligible Fund at the end of the
Valuation Period; plus
(ii) the per share amount of any distribution made by the Eligible Fund if the
"ex-dividend" date occurs during that same Valuation Period.
(b) is the net asset value per share of the Eligible Fund at the end of the
prior Valuation Period.
(c) is equal to:
(i) the Valuation Period equivalent of the Mortality and Expense Risk
Charge; plus
(ii) the Valuation Period equivalent of the daily Distribution Charge; plus
(iii) a charge factor, if any, for any tax provision established by Liberty
Life as a result of the operations of that Sub-Account.
If a Certificate ever reaches the maximum cumulative sales charge limit
defined in "Deductions for Contingent Deferred Sales Charge" on Page xx, Unit
values without (c)(ii) above will be used thereafter. For Certificates
issued to employees of Liberty Life and other persons specified in "Sales of
the Certificates", Unit values with .35% in (c)(i) above and without (c)(ii)
above will be used. Unit values without (c)(ii) above may be used for
certain Certificates issued in an internal exchange or transfer (see
"Deductions for Daily Distribution Charge").
Modification of the Certificate
Only Liberty Life's President or Secretary may agree to alter the Certificate
or waive any of its terms. Any changes must be made in writing and with the
Certificate Owner's consent, except as may be required by applicable law.
Right to Revoke
The Certificate Owner may return the Certificate within 10 days after he or
she receives it by delivering or mailing it to Liberty Life's Service Office.
The return of the Certificate by mail will be effective when the postmark is
affixed to a properly addressed and postage-prepaid envelope. The returned
Certificate will be treated as if Liberty Life never issued it and Liberty
Life will refund the Certificate Value.
DEATH PROVISIONS FOR NON-QUALIFIED CERTIFICATES
Death of Primary Owner, Joint Owner or Certain Non-Owner Annuitant. These
provisions apply if, before the Income Date while the Certificate is In
Force, the primary Certificate Owner or any Joint Certificate Owner dies
(whether or not the decedent is also the Annuitant) or the Annuitant dies
under a Certificate with a non-natural Certificate Owner such as a trust.
The Designated Beneficiary will control the Certificate after such a death.
If the decedent's surviving spouse (if any) is the sole Designated
Beneficiary, the surviving spouse will automatically become the new sole
primary Certificate Owner as of the decedent's date of death. And, if the
Annuitant is the decedent, the new Annuitant will be any living contingent
annuitant, otherwise the surviving spouse. The Certificate may continue
until another death occurs (i.e., until the death of the Annuitant, primary
Certificate Owner or joint Certificate Owner). Except for this paragraph,
all of "Death Provisions" will apply to that subsequent death.
In all other cases, the Certificate may continue up to five years from the
date of death. During this period, the Designated Beneficiary may exercise
all ownership rights, including the right to make transfers or partial
surrenders or the right to totally surrender the Certificate for its
Surrender Value. If the Certificate is still in effect at the end of the
five-year period, Liberty Life will automatically end it then by paying the
Certificate Value to the Designated Beneficiary. If the Designated
Beneficiary is not then alive, Liberty Life will pay any person(s) named by
the Designated Beneficiary in a Written Request; otherwise the Designated
Beneficiary's estate.
The Covered Person under this paragraph shall be the decedent if he or she is
the first to die of the primary Certificate Owner, Joint Certificate Owner,
Annuitant, or, if there is a non-natural Certificate Owner such as a trust,
the Annuitant shall be the Covered Person. If the Covered Person dies, the
Certificate Value will be increased, as provided below, if it is less than
the Death Benefit Amount ("DBA"). The DBA is:
The DBA at issue is the initial Purchase Payment. Thereafter, the DBA is
calculated for each Valuation Period by adding any additional Purchase
Payments, and deducting any partial withdrawals, including any applicable
surrender charge. This resulting amount is the "net Purchase Payment death
benefit". The Certificate Value for each Certificate Anniversary (the
"Anniversary Value") before the 81st birthday of the Covered Person is
determined. Each Anniversary Value is increased by any Purchase Payments
made after that anniversary. This resultant value is then decreased by an
amount calculated at the time of any partial withdrawal made after that
anniversary. The amount is calculated by taking the amount of any partial
withdrawal, and dividing by the Certificate Value immediately preceding the
partial withdrawal, and then multiplying by the Anniversary Value immediately
preceding the withdrawal. The greatest Anniversary Value, as so adjusted,
(the "greatest Anniversary Value") is the DBA unless the net Purchase Payment
death benefit is higher. The net Purchase Payment death benefit will be the
DBA if such amount is higher than the greatest Anniversary Value.
When Liberty Life receives due proof of the Covered Person's death, Liberty
Life will compare, as of the date of death, the Certificate Value to the DBA.
If the Certificate Value was less than the DBA, Liberty Life 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 Liberty Life receives
due proof of death. The amount to be credited will be allocated to the
Variable Account and/or the Fixed Account based on the Purchase Payment
allocation selection that is in effect when Liberty Life receives due proof
of death. Whether or not the Certificate Value is increased because of this
minimum death provision, the Designated Beneficiary may, by the later of the
90th day after the Covered Person's death and the 60th day after Liberty Life
is notified of the death, surrender the Certificate for the Certificate
Withdrawal Value without any applicable Contingent Deferred Sales Charge
being deducted. For a surrender after the applicable 90 or 60 day period and
for a surrender at any time after the death of a non-Covered Person, any
applicable Contingent Deferred Sales Charge would be deducted. If the
Certificate is not surrendered, it will continue for the time period
specified above.
Payment of Benefits. Instead of receiving a lump sum, the Certificate Owner
or any Designated Beneficiary may direct by Written Request that Liberty Life
pay any benefit of $5,000 or more under an annuity payment option that meets
the following: (a) the first payment to the Designated Beneficiary must be
made no later than one year after the date of death; (b) payments must be
made over the life of the Designated Beneficiary or over a period not
extending beyond that person's life expectancy; and (c) any payment option
that provides for payments to continue after the death of the Designated
Beneficiary will not allow the successor payee to extend the period of time
over which the remaining payments are to be made.
Death of Certain Non-Certificate Owner Annuitant. These provisions apply if,
before the Income Date while the Certificate is In Force, (a) the Annuitant
dies, (b) the Annuitant is not a Certificate Owner, and (c) the Certificate
Owner is a natural person. The Certificate will continue after the
Annuitant's death. The new Annuitant will be any living contingent
annuitant, otherwise the primary Certificate Owner. If the Annuitant is the
first to die of the Certificate's primary Certificate Owner, Joint
Certificate Owner and Annuitant, then the Annuitant is the Covered Person and
the Certificate Value will be increased, as provided below, if it is less
than the Death Benefit Amount ("DBA"), as defined above. When Liberty Life
receives due proof of the Annuitant's death, Liberty Life will compare, as of
the date of death, the Certificate Value to the DBA. If the Certificate
Value was less than the DBA, Liberty Life 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 Liberty Life receives due proof
of death. The amount to be credited will be allocated to the Variable
Account and/or the Fixed Account based on the Purchase Payment allocation
selection that is in effect when Liberty Life receives due proof of death.
Whether or not the Certificate Value is increased because of this minimum
death provision, the Certificate Owner may surrender the Certificate within
90 days of the date of the Annuitant's death for the Certificate Withdrawal
Value without any applicable Contingent Deferred Sales Charge being deducted.
For a surrender after 90 days, any applicable Contingent Deferred Sales
Charge would be deducted.
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
Death of Annuitant. If the Annuitant dies before the Income Date while the
Certificate is In Force, the Designated Beneficiary will control the
Certificate after such a death. The Certificate Value will be increased, as
provided below, if it is less than the Death Benefit Amount ("DBA") as
defined above. When Liberty Life receives due proof of the Annuitant's
death, Liberty Life will compare, as of the date of death, the Certificate
Value to the DBA. If the Certificate Value was less than the DBA, Liberty
Life 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
Liberty Life receives due proof of death. The amount to be credited will be
allocated to the Variable Account and/or the Fixed Account based on the
Purchase Payment allocation selection that is in effect when Liberty Life
receives due proof of death. Whether or not the Certificate Value is
increased because of this minimum death provision, the Designated Beneficiary
may, by the later of the 90th day after the Annuitant's death and the 60th
day after Liberty Life is notified of the death, surrender the Certificate
for the Certificate Withdrawal Value without any applicable Contingent
Deferred Sales Charge being deducted. For a surrender after the applicable
90 or 60 day period, any applicable Contingent Deferred Sales Charge would be
deducted.
If the Certificate is not surrendered, it may continue for the time period
permitted by the Internal Revenue Code provisions applicable to the
particular Qualified Plan. During this period, the Designated Beneficiary
may exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to totally surrender the Certificate for its
Certificate Withdrawal Value. If the Certificate is still in effect at the
end of the period, Liberty Life will automatically end it then by paying the
Certificate Withdrawal Value (without the deduction of any applicable
Contingent Deferred Sales Charge) to the Designated Beneficiary. If the
Designated Beneficiary is not alive then, Liberty Life will pay any person(s)
named by the Designated Beneficiary in a Written Request; otherwise the
Designated Beneficiary's estate.
Payment of Benefits. Instead of receiving a lump sum, the Certificate Owner
or any Designated Beneficiary may direct by Written Request that Liberty Life
pay any benefit of $5,000 or more under an annuity payment option that meets
the following: (a) the first payment to the Designated Beneficiary must be
made no later than one year after the date of death; (b) payments must be
made over the life of the Designated Beneficiary or over a period not
extending beyond that person's life expectancy; and (c) any payment option
that provides for payments to continue after the death of the Designated
Beneficiary will not allow the successor payee to extend the period of time
over which the remaining payments are to be made.
CERTIFICATE OWNERSHIP
The Certificate Owner shall be the person designated in the application. The
Certificate Owner may exercise all the rights of the Certificate. Joint
Certificate Owners are permitted but not contingent Certificate Owners.
The Certificate Owner may by Written Request change the Certificate Owner,
primary beneficiary, contingent beneficiary or contingent annuitant. An
irrevocably-named person may be changed only with the written consent of such
person.
Because a change of Certificate Owner by means of a gift (i.e., a transfer
without full and adequate consideration) may be a taxable event, a
Certificate Owner should consult a competent tax adviser as to the tax
consequences resulting from such a transfer.
Any Qualified Certificate may have limitations on transfer of ownership. A
Certificate Owner should consult the Plan Administrator and a competent tax
adviser as to the tax consequences resulting from such a transfer.
ASSIGNMENT
The Certificate Owner may assign the Certificate at any time. A copy of any
assignment must be filed with Liberty Life. The Certificate Owner's rights
and those of any revocably-named person will be subject to the assignment.
Any Qualified Certificate may have limitations on assignability.
Because an assignment may be a taxable event, a Certificate Owner should
consult a competent tax adviser as to the tax consequences resulting from any
such assignment.
PARTIAL WITHDRAWALS AND SURRENDER
The Certificate Owner may make partial withdrawals from the Certificate.
Liberty Life must receive a Written Request and the minimum amount to be
withdrawn must be at least $300 or such lesser amount as Liberty Life may
permit in conjunction with a Systematic Withdrawal Program. If the
Certificate Value after a partial withdrawal would be below $2,500, Liberty
Life will treat the request as a withdrawal of only the excess amount over
$2,500. The amount withdrawn will include any applicable Contingent Deferred
Sales Charge and therefore the amount actually withdrawn may be greater than
the amount of the surrender check requested. Unless the request specifies
otherwise, the total amount withdrawn will be deducted from all Sub-Accounts
of the Variable Account in the ratio that the value in each Sub-Account bears
to the total Variable Account Value. If there is no value, or insufficient
value, in the Variable Account, then the amount surrendered, or the
insufficient portion, will be deducted from the Fixed Account in the ratio
that each Guarantee Period's value bears to the total Fixed Account Value.
The Certificate Owner may totally surrender the Certificate by making a
Written Request. Surrendering the Certificate will end it. Upon surrender,
the Certificate Owner will receive the Certificate Withdrawal Value.
Liberty Life will pay the amount of any surrender within seven days of
receipt of such request. Alternatively, the Certificate Owner may purchase
for himself or herself an annuity option with any surrender benefit of at
least $5,000. Liberty Life's consent is needed to choose an option if the
Certificate Owner is not a natural person.
Annuity options based on life contingencies cannot be surrendered after
annuity payments have begun. Option A, which is not based on life
contingencies, may be surrendered if a variable payout has been selected.
Because of the potential tax consequences of a full or partial surrender, a
Certificate Owner should consult a competent tax adviser regarding a
surrender.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Income Date and the Certificate is In Force,
payments will begin under the annuity option or options the Certificate Owner
has chosen. The amount of the payments will be determined by applying the
Certificate Value increased or decreased by a limited Market Value Adjustment
of Fixed Account Value described in Appendix A (less any premium taxes not
previously deducted and less any applicable Certificate Maintenance Charge)
on the Income Date in accordance with the option selected.
Income Date and Annuity Option
The Certificate Owner may select an Income Date and an Annuity Option at the
time of application. If the Certificate Owner does not select an Annuity
Option, Option B will automatically be designated. If the Certificate Owner
does not select an Income Date for the Annuitant, the Income Date will
automatically be the earlier of (i) Annuitant's 90th birthday and the 10th
Certificate Anniversary and (ii) any maximum date permitted under state law.
Change in Income Date and Annuity Option
The Certificate Owner may choose or change an Annuity Option or the Income
Date by making a Written Request to Liberty Life at least 30 days prior to
the Income Date. However, any Income Date must be: (a) for fixed annuity
options, not earlier than the first Certificate Anniversary; and (b) not
later than the earlier of (i) the later of the Annuitant's 90th birthday and
the 10th Certificate Anniversary and (ii) any maximum date permitted under
state law.
Annuity Options
The Annuity Options are:
Option A: Income for a Fixed Number of Years;
Option B: Life Income with 10 Years of Payments Guaranteed; and
Option C: Joint and Last Survivor Income.
Other options may be arranged by mutual consent. Each option is available in
two forms -- as a variable annuity for use with the Variable Account and as a
fixed annuity for use with Liberty Life's general account Fixed Account.
Variable annuity payments will fluctuate while fixed annuity payments will
not. The dollar amount of each fixed annuity payment will be determined by
deducting from the Fixed Account Value increased or decreased by a limited
Market Value Adjustment described in Appendix A any applicable premium taxes
not previously deducted and then dividing the remainder by $1,000 and
multiplying the result by the greater of: (a) the applicable factor shown in
the appropriate table in the Certificate; or (b) the factor currently offered
by Liberty Life at the time annuity payments begin. This current factor may
be based on the sex of the payee unless to do so would be prohibited by law.
If no Annuity Option is selected, Option B will automatically be applied.
Unless the Certificate Owner chooses otherwise, Variable Account Value, (less
any applicable premium taxes not previously deducted and less any applicable
Certificate Maintenance Charge) will be applied to a variable annuity option
and Fixed Account Value increased or decreased by a limited Market Value
Adjustment described in Appendix A (less any applicable premium taxes not
previously deducted) will be applied to a fixed annuity option. Any premium
taxes will be deducted proportionately from both the Variable Account Value
and Fixed Account Value. Whether variable or fixed, the same Certificate
Value applied to each option will produce a different initial annuity payment
as well as different subsequent payments.
The payee is the person who will receive the sum payable under an annuity
option. Any annuity option that provides for payments to continue after the
death of the payee will not allow the successor payee to extend the period of
time over which the remaining payments are to be made.
If the amount available to apply under any variable or fixed option is less
than $5,000, Liberty Life has reserved the right to pay such amount in one
sum to the payee in lieu of the payment otherwise provided for.
Annuity payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by Written Request. However, if any payment provided for
would be or becomes less than $100, Liberty Life has the right to reduce the
frequency of payments to such an interval as will result in each payment
being at least $100.
Option A: Income For a Fixed Number of Years. Liberty Life will pay an
annuity for a chosen number of years, not fewer than 5 nor over 50 (a period
of years over 30 may be chosen only if it does not exceed the difference
between age 100 and the Annuitant's age on the date of the first payment).
At any time while variable annuity payments are being made, the payee may
elect to receive the following amount: (a) the present value of the remaining
payments, commuted at the interest rate used to create the annuity factor for
this option (this interest rate is 5% per year unless 3% per year is chosen
by Written Request at the time the option is selected); less (b) any
Contingent Deferred Sales Charge due by treating the value defined in (a) as
a total surrender. (See "Deductions for Contingent Deferred Sales Charge".)
Instead of receiving a lump sum, the payee may elect another payment option
and the amount applied to the option will not be reduced by the charge
defined in (b) above. If, at the death of the payee, Option A payments have
been made for fewer than the chosen number of years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity,
this interest rate is 5% per year unless 3% per year had been chosen by
the payee at the time the option was selected.
The Mortality and Expense Risk Charge is deducted during the Option A payment
period if a variable payout has been selected, but Liberty Life has no
mortality risk during this period.
If annual payments are chosen for Option A and a variable payout has been
selected, Liberty Life has available a "stabilizing" payment option that may
be chosen. Each annual payment will be determined as described in "Variable
Annuity Payment Values". Each annual payment will then be placed in Liberty
Life's general account, from which it will be paid out in twelve equal
monthly payments. The sum of the twelve monthly payments will exceed the
annual payment amount because of an interest rate factor used by Liberty Life
that will vary from year to year. The commutation method described above for
calculating the present value of remaining payments applies to the annual
payments. Any monthly payments remaining before the next annual payment will
be commuted at the interest rate used to determine that year's monthly
payments.
See "Annuity Payments" on Page xx for the manner in which Option A may be
taxed.
Option B: Life Income with 10 Years of Payments Guaranteed. Liberty Life
will pay an annuity during the lifetime of the payee. If, at the death of
the payee, payments have been made for fewer than 10 years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity,
this interest rate is 5% per year unless 3% per year had been chosen by
the payee at the time the option was selected.
The amount of the annuity payments will depend on the age of the payee on the
Income Date and it may also depend on the payee's sex.
Option C: Joint and Last Survivor Income. Liberty Life 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
The amount of the first variable annuity payment is determined by Liberty
Life using an annuity purchase rate that is based on an assumed annual
investment return of 5% per year, unless 3% is chosen by Written Request.
Subsequent variable annuity payments will fluctuate in amount and reflect
whether the actual investment return of the selected Sub-Account(s) (after
deducting the Mortality and Expense Risk Charge) is better or worse than the
assumed investment return. The total dollar amount of each variable annuity
payment will be equal to: (a) the sum of all Sub-Account payments; less (b)
the pro-rata amount of the annual Certificate Maintenance Charge. Currently,
a payee may instruct Liberty Life to change the Sub-Account(s) used to
determine the amount of the variable annuity payments unlimited times every
12 months.
Proof of Age, Sex, and Survival of Annuitant
Liberty Life 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, Liberty Life will compute the amount payable based on the correct
age and sex. If income payments have begun, any underpayments Liberty Life
may have made will be paid in full with the next annuity payment. Any
overpayments, unless repaid in one sum, will be deducted from future annuity
payments until Liberty Life is repaid in full.
SUSPENSION OF PAYMENTS
Liberty Life reserves the right to postpone surrender payments from the Fixed
Account for up to six months. Liberty Life reserves the right to suspend or
postpone any type of payment from the Variable Account for any period when:
(a) the New York Stock Exchange is closed other than customary weekend or
holiday closings; (b) trading on the Exchange is restricted; (c) an emergency
exists as a result of which it is not reasonably practicable to dispose of
securities held in the Variable Account or determine their value; or (d) the
Securities and Exchange Commission permits delay for the protection of
security holders. The applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions described in
(b) and (c) exist.
TAX STATUS
Introduction
The Certificate is designed for use by individuals in retirement plans which
may or may not be Qualified Plans under the provisions of the Internal
Revenue Code (the "Code"). The ultimate effect of federal income taxes on
the Certificate Value, on annuity payments, and on the economic benefit to
the Certificate Owner, Annuitant or Designated Beneficiary depends on the
type of retirement plan for which the Certificate is purchased and upon the
tax and employment status of the individual concerned. The discussion
contained herein is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax adviser. No attempt is
made to consider any applicable state or other tax laws. Moreover, the
discussion herein is based upon Liberty Life's understanding of current
federal income tax laws as they are currently interpreted. No representation
is made regarding the likelihood of continuation of those current federal
income tax laws or of the current interpretations by the Internal Revenue
Service.
Taxation of Annuities in General
Section 72 of the Code governs taxation of annuities in general. There are
no income taxes on increases in the value of a Certificate until a
distribution occurs, in the form of a full surrender, a partial surrender, an
assignment or gift of the Certificate, or annuity payments. A trust or other
entity owning a Non-Qualified Certificate other than as an agent for an
individual is taxed differently; increases in the value of a Certificate are
taxed yearly whether or not a distribution occurs.
Surrenders, Assignments and Gifts. A Certificate Owner who fully surrenders
his or her Certificate is taxed on the portion of the payment that exceeds
his or her cost basis in the Certificate. For Non-Qualified Certificates,
the cost basis is generally the amount of the Purchase Payments made for the
Certificate and the taxable portion of the surrender payment is taxed as
ordinary income. For Qualified Certificates, the cost basis is generally
zero and the taxable portion of the surrender payment is generally taxed as
ordinary income subject to special 5-year income averaging for lump-sum
distributions received before January 1, 2000. A Designated Beneficiary
receiving a lump sum surrender benefit after the death of the Annuitant or
Certificate Owner is taxed on the portion of the amount that exceeds the
Certificate Owner's cost basis in the Certificate. If the Designated
Beneficiary elects to receive annuity payments within 60 days of the
decedent's death, different tax rules apply. See "Annuity Payments" below.
For Non-Qualified Certificates, the tax treatment applicable to Designated
Beneficiaries may be contrasted with the income-tax-free treatment applicable
to persons inheriting and then selling mutual fund shares with a date-of-
death value in excess of their basis.
Partial withdrawals received under Non-Qualified Certificates prior to
annuitization are first included in gross income to the extent Certificate
Value exceeds Purchase Payments. Then, to the extent the Certificate Value
does not exceed Purchase Payments, such withdrawals are treated as a non-
taxable return of principal to the Certificate Owner. For partial
withdrawals under a Qualified Certificate, payments are treated first as a
non-taxable return of principal up to the cost basis and then a taxable
return of income. Since the cost basis of Qualified Certificates is
generally zero, partial surrender amounts will generally be fully taxed as
ordinary income.
A Certificate Owner who assigns or pledges a Non-Qualified Certificate is
treated as if he or she had received the amount assigned or pledged and thus
is subject to taxation under the rules applicable to partial withdrawals or
surrenders. A Certificate Owner who gives away the Certificate (i.e.,
transfers it without full and adequate consideration) to anyone other than
his or her spouse is treated for income tax purposes as if he or she had
fully surrendered the Certificate.
A special computational rule applies if Liberty Life issues to the
Certificate Owner, during any calendar year, (a) two or more Certificates or
(b) one or more Certificates and one or more of Liberty Life's other annuity
contracts. Under this rule, the amount of any distribution includable in the
Certificate Owner's gross income is to be determined under Section 72(e) of
the Code by treating all the Liberty Life contracts as one contract. Liberty
Life believes that this means the amount of any distribution under one
Certificate will be includable in gross income to the extent that at the time
of distribution the sum of the values for all the Certificates or contracts
exceeds the sum of the cost bases for all the contracts.
Annuity Payments. The non-taxable portion of each variable annuity payment
is determined by dividing the cost basis of the Certificate that is allocated
to Variable Account Value by the total number of expected payments while the
non-taxable portion of each fixed annuity payment is determined by an
"exclusion ratio" formula which establishes the ratio that the cost basis of
the Certificate that is allocated to Fixed Account Value bears to the total
expected value of annuity payments for the term of the annuity. The
remaining portion of each payment is taxable. Such taxable portion is taxed
at ordinary income rates. For Qualified Certificates, the cost basis is
generally zero. With annuity payments based on life contingencies, the
payments will become fully taxable once the payee lives longer than the life
expectancy used to calculate the non-taxable portion of the prior payments.
Because variable annuity payments can increase over time and because certain
payment options provide for a lump sum right of commutation, it is possible
that the IRS could determine that variable annuity payments should not be
taxed as described above but instead should be taxed as if they were received
under an agreement to pay interest. This determination would result in a
higher amount (up to 100%) of certain payments being taxable.
With respect to the "stabilizing" payment option available under Annuity
Option 1, pursuant to which each annual payment is placed in Liberty Life's
general account and paid out with interest in twelve equal monthly payments,
it is possible the IRS could determine that receipt of the first monthly
payout of each annual payment is constructive receipt of the entire annual
payment. Thus, the total taxable amount for each annual payment would be
accelerated to the time of the first monthly payout and reported in the tax
year in which the first monthly payout is received.
Penalty Tax. Payments received by Certificate Owners, Annuitants, and
Designated Beneficiaries under Certificates may be subject to both ordinary
income taxes and a penalty tax equal to 10% of the amount received that is
includable in income. The penalty tax is not imposed on amounts received:
(a) after the taxpayer attains age 59-1/2; (b) in a series of substantially
equal payments made for life or life expectancy; (c) after the death of the
Certificate Owner (or, where the Certificate Owner is not a human being,
after the death of the Annuitant); (d) if the taxpayer becomes totally and
permanently disabled; or (e) under a Non-Qualified Certificate's annuity
payment option that provides for a series of substantially equal payments,
provided only one Purchase Payment is made to the Certificate, the
Certificate is not issued as a result of a Section 1035 exchange, and the
first annuity payment begins in the first Certificate Year.
Income Tax Withholding. Liberty Life is required to withhold federal income
taxes on taxable amounts paid under Certificates unless the recipient elects
not to have withholding apply. Liberty Life will notify recipients of their
right to elect not to have withholding apply. See "Tax-Sheltered Annuities"
(TSAs) for an alternative type of withholding that may apply to distributions
from TSAs that are eligible for rollover to another TSA or an individual
retirement annuity or account (IRA).
Section 1035 Exchanges. A Non-Qualified Certificate may be purchased with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is Liberty Life's understanding that in such an event: (a) the
new Certificate will be subject to the distribution-at-death rules described
in "Death Provisions for Non-Qualified Certificates"; (b) Purchase Payments
made between August 14, 1982 and January 18, 1985 and the income allocable to
them will, following an exchange, no longer be covered by a "grandfathered"
exception to the penalty tax for a distribution of income that is allocable
to an investment made over ten years prior to the distribution; and (c)
Purchase Payments made before August 14, 1982 and the income allocable to
them will, following an exchange, continue to receive the following
"grandfathered" tax treatment under prior law: (i) the penalty tax does not
apply to any distribution; (ii) partial withdrawals are treated first as a
non-taxable return of principal and then a taxable return of income; and
(iii) assignments are not treated as surrenders subject to taxation. Liberty
Life's understanding of the above is principally based 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 are designed to be managed to meet the diversification
requirements for the Certificate as those requirements may change from time
to time. If the diversification requirements are not satisfied, the
Certificate would not be treated as an annuity contract. As a consequence to
the Certificate Owner, income earned on a Certificate would be taxable to the
Certificate Owner in the year in which diversification requirements were not
satisfied, including previously non-taxable income earned in prior years. As
a further consequence, Liberty Life would be subjected to federal income
taxes on assets in the Variable Account.
The Secretary of the Treasury announced in September 1986 that he expects to
issue regulations which will prescribe the circumstances in which a
Certificate Owner's control of the investments of a segregated asset account
may cause the Certificate Owner, rather than the insurance company, to be
treated as the owner of the assets of the account. The regulations could
impose requirements that are not reflected in the Certificate. Liberty Life,
however, has reserved certain rights to alter the Certificate and investment
alternatives so as to comply with such regulations. Since the regulations
have not been issued, there can be no assurance as to the content of such
regulations or even whether application of the regulations will be
prospective. For these reasons, Certificate Owners are urged to consult with
their own tax advisers.
Qualified Plans
The Certificate is designed for use with several types of Qualified Plans.
The tax rules applicable to participants in such Qualified Plans vary
according to the type of plan and the terms and conditions of the plan
itself. Therefore, no attempt is made herein to provide more than general
information about the use of the Certificate with the various types of
Qualified Plans. Participants under such Qualified Plans as well as
Certificate Owners, Annuitants, and Designated Beneficiaries are cautioned
that the rights of any person to any benefits under such Qualified Plans may
be subject to the terms and conditions of the plans themselves regardless of
the terms and conditions of the Certificate issued in connection therewith.
Following are brief descriptions of the various types of Qualified Plans and
of the use of the Certificate in connection therewith. Purchasers of the
Certificate should seek competent advice concerning the terms and conditions
of the particular Qualified Plan and use of the Certificate with that Plan.
Tax-Sheltered Annuities
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts and,
subject to certain contribution limitations, exclude the amount of Purchase
Payments from gross income for tax purposes. However, such Purchase Payments
may be subject to Social Security (FICA) taxes. This type of annuity
contract is commonly referred to as a "Tax-Sheltered Annuity" (TSA).
Section 403(b)(11) of the Code contains distribution restrictions.
Specifically, benefits may be paid, through surrender of the Certificate or
otherwise, only (a) when the employee attains age 59-1/2, separates from
service, dies or becomes totally and permanently disabled (within the meaning
of Section 72(m)(7) of the Code) or (b) in the case of hardship. A hardship
distribution must be of employee contributions only and not of any income
attributable to such contributions. Section 403(b)(11) does not apply to
distributions attributable to assets held as of December 31, 1988. Thus, it
appears that the law's restrictions would apply only to distributions
attributable to contributions made after 1988, to earnings on those
contributions, and to earnings on amounts held as of 12/31/88. The Internal
Revenue Service has indicated that the distribution restrictions of Section
403(b)(11) are not applicable when TSA funds are being transferred tax-free
directly to another TSA issuer, provided the transferred funds continue to be
subject to the Section 403(b)(11) distribution restrictions.
Liberty Life will notify a Certificate Owner who has requested a distribution
from a Certificate if all or part of such distribution is eligible for
rollover to another TSA or to an individual retirement annuity or account
(IRA). Any amount eligible for rollover treatment will be subject to
mandatory federal income tax withholding at a 20% rate if the Certificate
Owner receives the amount rather than directing Liberty Life by Written
Request to transfer the amount as a direct rollover to another TSA or IRA.
Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity."
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
an Individual Retirement Annuity.
Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such retirement
plans may permit the purchase of the Certificate to provide benefits under
the plans.
Deferred Compensation Plans With Respect to Service for State and Local
Governments
Section 457 of the Code, while not actually providing for a Qualified Plan as
that term is normally used, provides for certain deferred compensation plans
that enjoy special income tax treatment with respect to service for tax-
exempt organizations, state governments, local governments, and agencies and
instrumentalities of such governments. The Certificate can be used with such
plans. Under such plans, a participant may specify the form of investment in
which his or her participation will be made. However, all such investments
are owned by and subject to the claims of general creditors of the sponsoring
employer.
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with its view of present applicable law, Liberty Life 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. Liberty Life will vote shares for which it has not received
instructions in the same proportion as it votes shares for which it has
received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation thereof should change, and
as a result Liberty Life determines that it is permitted to vote the shares
of the Eligible Funds in its own right, it may elect to do so.
The person having the voting interest under a Certificate prior to the Income
Date shall be the Certificate Owner. The number of shares held in each Sub-
Account which are attributable to each Certificate Owner is determined by
dividing the Certificate Owner's Variable Account Value in each Sub-Account
by the net asset value of the applicable share of the Eligible Fund. The
person having the voting interest after the Income Date under an annuity
payment option shall be the payee. The number of shares held in the Variable
Account which are attributable to each payee is determined by dividing the
reserve for the annuity payments by the net asset value of one share. During
the annuity payment period, the votes attributable to a payee decrease as the
reserves underlying the payments decrease.
The number of shares in which a person has a voting interest will be
determined as of the date coincident with the date established by the
respective Eligible Fund for determining shareholders eligible to vote at the
meeting of the Fund and voting instructions will be solicited by written
communication prior to such meeting in accordance with the procedures
established by the Eligible Fund.
Each person having the voting interest in the Variable Account will receive
periodic reports relating to the Eligible Fund(s) in which he or she has an
interest, proxy material and a form with which to give such voting
instructions with respect to the proportion of the Eligible Fund shares held
in the Variable Account corresponding to his or her interest in the Variable
Account.
SALES OF THE CERTIFICATES
Keyport Financial Services Corp. ("KFSC") serves as the Principal Underwriter
for the Certificate described in this prospectus. The Certificate will be
sold by salespersons who represent Liberty Life Assurance Company of Boston,
an affiliate of KFSC, as variable annuity agents and who are registered
representatives of broker/dealers who have entered into distribution
agreements with KFSC. KFSC is registered under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers,
Inc. It is located at 125 High Street, Boston, Massachusetts 02110.
Different Certificates may be sold (1) to a person who is an officer,
director, or employee of Liberty Life, or an affiliate of Liberty Life, a
trustee or officer of an Eligible Fund, an employee of the investment adviser
or sub-investment adviser of an Eligible Fund, or an employee or associated
person of an entity which has entered into a sales agreement with the
Principal Underwriter for the distribution of Certificates, or (2) to any
Qualified Plan established for such a person. Such Certificates may be
different from the Certificates sold to others in that [(1) they are not
subject to the deduction for the Certificate Maintenance Charge, the asset-
based Sales charge or the Contingent Deferred Sales 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. Liberty Life is engaged in various kinds of routine
litigation which in its judgment is not of material importance in relation to
the total capital and surplus of Liberty Life.
INQUIRIES BY CERTIFICATE OWNERS
Certificate Owners with questions about their Certificates may write Liberty
Life Service Office, 125 High Street, Boston, MA 02110, or call (800) 367-
3653.
TABLE OF CONTENTS-STATEMENT OF ADDITIONAL INFORMATION
Page
Liberty Life Assurance Company of Boston
Variable Annuity Benefits
Variable Annuity Payment Values
Re-Allocating Sub-Account Payments
Safekeeping of Assets
Principal Underwriter
Experts
Investment Performance
Yields for SteinRoe Cash Income Sub-Account
Financial Statements
Liberty Life Assurance Company of Boston
APPENDIX A
THE FIXED ACCOUNT (ALSO KNOWN AS THE MODIFIED GUARANTEED ANNUITY ACCOUNT)
Introduction
This Appendix describes the Fixed Account option available under the
Certificate.
FIXED ACCOUNT VALUES PROVIDED BY THE CERTIFICATE ARE SUBJECT TO A MARKET
VALUE ADJUSTMENT, THE OPERATION OF WHICH MAY RESULT IN UPWARD OR DOWNWARD
ADJUSTMENTS IN AMOUNTS TRANSFERRED AND AMOUNTS PAID (INCLUDING WITHDRAWALS,
SURRENDERS, DEATH BENEFITS, AND AMOUNTS APPLIED TO PURCHASE ANNUITY PAYMENTS)
TO A CERTIFICATE OWNER OR OTHER PAYEE. IN NO EVENT WILL THE DOWNWARD MARKET
VALUE ADJUSTMENT ELIMINATE INTEREST AT THE RATE OF 3% PER YEAR APPLIED TO THE
AMOUNT ALLOCATED TO A GUARANTEED PERIOD. PAYMENTS MADE FROM FIXED ACCOUNT
VALUES AT THE END OF THEIR GUARANTEE PERIOD ARE NOT SUBJECT TO THE MARKET
VALUE ADJUSTMENT.
Purchase Payments allocated to the Fixed Account option become part of
Liberty Life's general account. Because of applicable exemptive and
exclusionary provisions, interests in the Fixed Account options have not been
registered under the Securities Act of 1933 ("1933 Act"), nor is the general
account an investment company under the Investment Company Act. Accordingly,
neither the general account, the Fixed Account option, nor any interest
therein, is subject to regulation under the 1933 Act or the Investment
Company Act. Liberty Life understands that the Securities and Exchange
Commission has not reviewed the disclosure in the prospectus relating to the
general account and the Fixed Account option.
Investments in the Fixed Account and Capital Protection Plus
Purchase Payments will be allocated to the Fixed Account in accordance with
the selection made by the Certificate Owner in the application. Any
selection must specify that percentage of the Purchase Payment that is to be
allocated to each Guarantee Period of the Fixed Account. The percentage, if
not zero, must be at least 5%. The Certificate Owner may change the
allocation percentages without fee, penalty or other charge. Allocation
changes must be made by Written Request unless the Certificate Owner has by
Written Request authorized Liberty Life to accept telephone allocation
instructions from the Certificate Owner. By authorizing Liberty Life to
accept telephone changes, a Certificate Owner agrees to accept and be bound
by the conditions and procedures established by Liberty Life from time to
time. The current conditions and procedures are in Appendix B and
Certificate Owners authorizing telephone allocation instructions will be
notified, in advance, of any changes.
Liberty Life currently offers Guarantee Periods of 1, 3, 5, and 7 years.
Liberty Life may change at any time the number of Guarantee Periods it offers
under newly-issued and in-force Certificates, as well as the length of those
Guarantee Periods. If Liberty Life stops offering a particular Guarantee
Period, existing Fixed Account Value in such Guarantee Period would not be
affected until the end of the Period (at that time, a Period of the same
length would not be a transfer option). Each Guarantee Period currently
offered is available for initial and subsequent Purchase Payments and for
transfers of Certificate Value.
Liberty Life offers a Capital Protection Plus program that a Certificate
Owner may request. Under this program, Liberty Life will allocate part of
the Purchase Payment to the Guarantee Period selected by the Certificate
Owner so that such part, based on that Guarantee Period's interest rate in
effect on the date of allocation, will equal at the end of the Guarantee
Period the total Purchase Payment. The rest of the Purchase Payment will be
allocated to the Sub-Account(s) of the Variable Account based on the
Certificate Owner's allocation. If any part of the Fixed Account Value is
surrendered or transferred before the end of the Guarantee Period, the Value
at the end of that Period will not equal the original Purchase Payment
amount.
For an example of Capital Protection Plus, assume Liberty Life receives a
Purchase Payment of $10,000 when the interest rate for the 7-year Guarantee
Period is 6.75% per year. Liberty Life will allocate $6,331 to that
Guarantee Period because $6,331 will increase at that interest rate to
$10,000 after 7 years. The remaining $3,669 of the payment will be allocated
to the Sub-Account(s) selected by the Certificate Owner.
Fixed Account Value
The Fixed Account Value at any time is equal to:
(a) all Purchase Payments allocated to the Fixed Account plus the interest
subsequently credited on those payments; plus
(b) any Variable Account Value transferred to the Fixed Account plus the
interest subsequently credited on the transferred value; less
(c) any prior partial withdrawals from the Fixed Account, including any
charges therefor; less
(d) any Fixed Account Value transferred to the Variable Account.
Interest Credits
Liberty Life will credit interest daily (based on an annual compound interest
rate) to Purchase Payments allocated to the Fixed Account at rates declared
by Liberty Life for Guarantee Periods of one or more years from the month and
day of allocation. Any rate set by Liberty Life will be at least 3% per
year.
Liberty Life's method of crediting interest means that Fixed Account Value
might be subject to different rates for each Guarantee Period the Certificate
Owner has selected in the Fixed Account. For purposes of this section,
Variable Account Value transferred to the Fixed Account and Fixed Account
Value renewed for another Guarantee Period shall be treated as a Purchase
Payment allocation.
Application of Market Value Adjustment
Any surrender, withdrawal, transfer, or application to an Annuity Option of
Fixed Account Value from a Guarantee Period of three years or more is subject
to a limited Market Value Adjustment, unless: (1) the effective date of the
transaction is at the end of the Guarantee Period; or (2) the effective date
of a surrender is within 90 days of the date of death of the first Covered
Person to die.
If a Market Value Adjustment applies to either a surrender or the application
to an Annuity Option, then any negative Market Value Adjustment amount will
be deducted from the Certificate Value and any positive Market Value
Adjustment amount will be added to the Certificate Value. If a Market Value
Adjustment applies to either a partial withdrawal or a transfer, then any
negative Market Value Adjustment amount will be deducted from the partial
withdrawal or transfer amount after the withdrawal or transfer amount has
been deducted from the Fixed Account Value, and any positive Market Value
Adjustment amount will be added to the applicable amount after it has been
deducted from the Fixed Account Value.
No Market Value Adjustment is ever applicable to Guarantee Periods of fewer
than three years.
Effect of Market Value Adjustment
A Market Value Adjustment reflects the change in prevailing current interest
rates since the beginning of a Guarantee Period. The Market Value Adjustment
may be positive or negative, but any negative Adjustment may be limited in
amount (see Market Value Adjustment Factor below).
Generally, if the Treasury Rate for the Guarantee Period is lower than the
Treasury Rate for a new Guarantee Period with a length equal to the time
remaining in the Guarantee Period, then the application of the limited Market
Value Adjustment will result in a reduction of the amount being surrendered,
withdrawn, transferred, or applied to an Annuity Option.
Similarly, if the Treasury Rate for the Guarantee Period is higher than the
Treasury Rate for a new Guarantee Period with a length equal to the time
remaining in the Guarantee Period, then the application of the Market Value
Adjustment will result in an increase in the amount being surrendered,
withdrawn, transferred, or applied to an Annuity Option.
The Market Value Adjustment will be applied before the deduction of any
applicable surrender charges or applicable taxes.
Market Value Adjustment Factor
The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, transferred, or applied to a Payment Option, by the
Market Value Adjustment Factor. The Market Value Adjustment Factor is
calculated as the larger of Formula (1) or (2):
(1) (1+a)/(1+b)(n/12) - 1
where:
"a" is the Treasury Rate for the number of Guarantee Period Years in the
Guarantee Period;
"b" is the Treasury Rate for a period equal to the time remaining (rounded up
to the next whole number of Guarantee Period Years) to the expiration of the
Guarantee Period; and
"n" is the number of complete Guarantee Period Months remaining before the
expiration of the Guarantee Period.
(2) (1.03)/(1+i)(y+d/#) - 1
where:
"i" is the Guaranteed Interest Rate for the Guarantee Period;
"y" is the number of complete Guarantee Period Years that have elapsed in the
Guarantee Period;
"d" is the number of days since the last Guarantee Period Anniversary or, if
"y" is zero, the number of days since the start of the Guarantee Period; and
"#" is the number of days in the current Guarantee Period Year (i.e., the sum
of "d" and the number of days until the next Guarantee Period Anniversary).
In Formulas (1) and (2), all references to Guarantee Period, Guarantee Period
Anniversary, Guarantee Period Month, and Guarantee Period Year relate to the
Guarantee Period from which is being taken the amount being surrendered,
withdrawn, transferred, or applied to an Annuity Option.
As stated above, the Formula (2) amount will apply only if it is greater than
the Formula (1) amount. This will occur only when the Formula (1) amount is
negative and the Formula (2) amount is a smaller negative number. Formula (2)
thus ensures that a full (normal) negative Market Value Adjustment of Formula
(1) will not apply to the extent it would decrease the Guarantee Period's
Fixed Account Value (before the deduction of any applicable surrender charges
or any applicable taxes) below the following amount:
(a) the amount allocated to the Guarantee Period; less
(b) any prior systematic or partial withdrawal amounts; less
(c) any prior amounts transferred to the Variable Account or to another
Guarantee Period in the Fixed Account; plus
(d) interest on the above items (a) through (c) credited annually at a
rate of 3% per year.
Treasury Rates
The Treasury Rate for a Guarantee Period is the interest rate in the Treasury
Constant Maturity Series, as published by the Federal Reserve Board, for a
maturity equal to the number of years specified in "a" and "b" in Formula (1)
above. Weekly Series are published at the beginning of the following week. To
determine "a", Liberty Life uses the weekly Series first published on or
after the most recent Determination Date which occurs on or before the Start
Date for the Guarantee Period, except that if the Start Date is the same as
the Determination Date or the date of publication, or any date in between,
Liberty Life instead uses the weekly Series first published after the prior
Determination Date. To determine "b", Liberty Life uses the weekly Series
first published on or after the most recent Determination Date which occurs
on or before the date on which the Market Value Adjustment Factor is
calculated, except that if the calculation date is the same as the
Determination Date or the date of publication, or any date in between,
Liberty Life instead uses the weekly Series first published after the prior
Determination Date. The Determination Dates are the last business day prior
to the first and fifteenth of each calendar month.
If the number of years specified in "a" or "b" is not equal to a maturity in
the Treasury Constant Maturity Series, the Treasury Rate will be determined
by straight line interpolation between the interest rates of the next highest
and next lowest maturities.
If the Treasury Constant Maturity Series becomes unavailable, Liberty Life
will adopt a comparable constant maturity index or, if such a comparable
index also is not available, Liberty Life will replicate calculation of the
Treasury Constant Maturity Series Index based on U.S. Treasury Security
coupon rates.
End of A Guarantee Period
Liberty Life will notify a Certificate Owner in writing at least 30 days
prior to the end of a Guarantee Period. At the end of the Guarantee Period,
Liberty Life will automatically transfer the Guarantee Period's Fixed Account
Value to the Money Market Sub-Account of the Variable Account unless Liberty
Life previously received a Certificate Owner's Written Request of: (1)
election of a new Guarantee Period from among those being offered by Liberty
Life at that time; or (2) instructions to transfer the ending Guarantee
Period's Fixed Account Value to one or more Sub-accounts of the Variable
Account. A new Guarantee Period cannot be longer than the number of years
remaining until the Income Date.
Transfers of Fixed Account Value
The Certificate Owner may transfer Fixed Account Value from one Guarantee
Period to another or to one or more Sub-Accounts of the Variable Account
subject to any applicable Market Value Adjustment. If the Fixed Account Value
represents multiple Guarantee Periods, the transfer request must specify from
which values the transfer is to be made.
The Certificate allows Liberty Life to limit the number of transfers that can
be made in a specified time period. Currently, Liberty Life is limiting
Variable Account and Fixed Account transfers to generally unlimited transfers
per calendar year with a $500,000 per transfer dollar limit. See "Transfer
of Variable Account Value". These limitations will not apply to any transfer
made at the end of a Guarantee Period. Certificate Owners will be notified,
in advance, of a change in the limitation on the number of transfers.
Transfer requests must be by Written Request unless the Certificate Owner has
authorized Liberty Life by Written Request to accept telephone transfer
instructions from the Certificate Owner or from a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney. By
authorizing Liberty Life to accept telephone transfer instructions, a
Certificate Owner agrees to accept and be bound by the conditions and
procedures established by Liberty Life from time to time. The current
conditions and procedures are in Appendix B and Certificate Owners
authorizing telephone transfers will be notified, in advance, of any changes.
Written transfer requests may be made by a person acting for the Certificate
Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Liberty Life before the close of trading on the
New York Stock Exchange (currently 4:00 PM Eastern Time) will be executed at
the close of business that day. Any requests received later will be executed
at the close of the next business day.
The amount of the transfer will be deducted from the specified values in the
manner stated in the next section below.
If 100% of a Guarantee Period's value is transferred and the current
allocation for Purchase Payments includes that Guarantee Period, then the
allocation formula for future Purchase Payments will automatically change
unless the Certificate Owner instructs otherwise. For example, if the
allocation formula is 50% to the one-year Guarantee Period and 50% to Sub-
Account A and all Fixed Account Value is transferred to Sub-Account A, the
allocation formula will change to 100% to Sub-Account A.
APPENDIX B
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are Joint Certificate Owners, both must authorize Liberty Life
to accept telephone instructions but either Certificate Owner may give
Liberty Life telephone instructions.
2. All callers will be required to identify themselves. Liberty Life
reserves the right to refuse to act upon any telephone instructions in cases
where the caller has not sufficiently identified himself/herself to Liberty
Life's satisfaction.
3. Neither Liberty Life nor any person acting on its behalf shall be
subject to any claim, loss, liability, cost or expense if it or such person
acted in good faith upon a telephone instruction, including one that is
unauthorized or fraudulent; however, Liberty Life will employ reasonable
procedures to confirm that a telephone instruction is genuine and, if Liberty
Life does not, Liberty Life may be liable for losses due to an unauthorized
or fraudulent instruction. The Certificate Owner thus bears the risk that an
unauthorized or fraudulent instruction that is executed may cause the
Certificate Value to be lower than it would be had no instruction been
executed.
4. All conversations will be recorded with disclosure at the time of the
call.
5. The application for the Certificate may allow a Certificate Owner to
create a power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, such power will be treated as
durable in nature and shall not be affected by the subsequent incapacity,
disability or incompetency of the Certificate Owner. Either Liberty Life or
the authorized person may cease to honor the power by sending written notice
to the Certificate Owner at the Certificate Owner's last known address.
Neither Liberty Life nor any person acting on its behalf shall be subject to
liability for any act executed in good faith reliance upon a power of
attorney.
6. Telephone authorization shall continue in force until (a) Liberty Life
receives the Certificate Owner's written revocation, (b) Liberty Life
discontinues the privilege, or (c) Liberty Life receives written evidence
that the Certificate Owner has entered into a market timing or asset
allocation agreement with an investment adviser or with a broker/dealer.
7. Telephone transfer instructions received by Liberty Life's Service
Office at 800-367-3653 before the close of trading on the New York Stock
Exchange (currently 4:00 P.M. Eastern Time) will be initiated that day based
on the unit value prices calculated at the close of that day. Instructions
received after the close of trading on the NYSE will be initiated the
following business day.
8. Once instructions are accepted by Liberty Life, they may not be
canceled.
9. All transfers must be made in accordance with the terms of the
Certificate and current prospectus. If the transfer instructions are not in
good order, Liberty Life will not execute the transfer and will notify the
caller within 48 hours.
10. If 100% of any Sub-Account's value is transferred and the allocation
formula for Purchase Payments includes that Sub-Account, then the allocation
formula for future Purchase Payments will change accordingly unless Liberty
Life receives telephone instructions to the contrary. For example, if the
allocation formula is 50% to Sub-Account A and 50% to Sub-Account B and all
of Sub-Account A's value is transferred to Sub-Account B, the allocation
formula will change to 100% to Sub-Account B unless Liberty Life is
instructed otherwise.
Telephone Changes to Purchase Payment Allocation Percentages
Numbers 1-6 above are applicable.
PART B
STATEMENT OF ADDITIONAL INFORMATION
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT J
OF
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON ("Liberty Life")
This Statement of Additional Information is not a prospectus but it relates
to, and should be read in conjunction with, the Liberty Advisor variable
annuity prospectus dated July 30, 1997. The prospectus is available, at no
charge, by writing Keyport Financial Sercives Corp. at 125 High Street,
Boston, MA 02110 or by calling (800) 437-4466.
TABLE OF CONTENTS
Page
Liberty Life Assurance Company of Boston...................................1
Variable Annuity Benefits..................................................2
Variable Annuity Payment Values..........................................2
Re-Allocating Sub-Account Payments.......................................3
Safekeeping of Assets......................................................4
Principal Underwriter......................................................4
Experts....................................................................4
Investment Performance.....................................................4
Yields for SteinRoe Cash Income Sub-Account..............................5
Financial Statements.......................................................6
Liberty Life Assurance Company of Boston.................................7
The date of this statement of additional information is July 30, 1997.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Liberty Mutual Insurance Company ("Liberty Mutual") and Liberty Mutual Fire
Insurance Company ("Liberty Mutual Fire") are the ultimate corporate parents
of Liberty Life. Liberty Mutual and Liberty Mutual Fire ultimately control
Liberty Life through the following intervening holding company subsidiary:
Liberty Mutual Property-Casualty Holding Corporation. Liberty Mutual is a
multi-line insurance company. For additional information about Liberty Life,
see page ___ of the prospectus.
VARIABLE ANNUITY BENEFITS
Variable Annuity Payment Values
For each variable payment option, the total dollar amount of each
periodic payment will be equal to: (a) the sum of all Sub-Account payments;
less (b) the pro-rata amount of the annual Certificate Maintenance Charge.
The first payment for each Sub-Account will be determined by deducting
any applicable Certificate Maintenance Charge and any applicable state
premium taxes and then dividing the remaining value of that Sub-Account by
$1,000 and multiplying the result by the greater of: (a) the applicable
factor from the Certificate's annuity table for the particular payment
option; or (b) the factor currently offered by Liberty Life 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, Liberty Life 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 Liberty Life first purchased Eligible Fund shares on behalf of the
Variable Account, Liberty Life valued each Annuity Unit for each Sub-Account
at a specified dollar amount. The Unit value for each Sub-Account in any
Valuation Period thereafter is determined by multiplying the value for the
prior period by a net investment factor. This factor may be greater or less
than 1.0; therefore, the Annuity Unit may increase or decrease from Valuation
Period to Valuation Period. For each assumed annual investment rate (AIR),
Liberty Life calculates a net investment factor for each Sub-Account by
dividing (a) by (b), where:
(a) is equal to the net investment factor as defined in the
prospectus without any deduction for the sales charge defined in
(c)(ii) of the net investment factor formula; and
(b) is the assumed investment factor for the current Valuation
Period. The assumed investment factor adjusts for the interest
assumed in determining the first variable annuity payment. Such
factor for any Valuation Period shall be the accumulated value, at
the end of such period, of $1.00 deposited at the beginning of such
period at the assumed annual investment rate (AIR). The AIR for
Annuity Units based on the Certificate's annuity tables is 5% per
year. 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 5% 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%, 5%, 3%, or 0%
between the time of the first and second payments. With an actual 9% return,
the 3% AIR and 5% AIR payments would both increase in amount but the 3% AIR
payment would increase by a larger percentage. With an actual 5% return, the
3% AIR payment would increase in amount while the 5% AIR payment would stay
the same. With an actual return of 3%, the 3% AIR payment would stay the
same while the 5% AIR payment would decrease in amount. Finally, with an
actual return of 0%, the 3% AIR and 5% 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 5% 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 5% AIR payment amount but eventually the 3% AIR payment amount will
become larger than the 5% 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 Liberty Life to change the Sub-Account(s) used to determine the
amount of the variable annuity payments 1 time 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 Liberty Life
receives the request, Liberty Life 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.
SAFEKEEPING OF ASSETS
Liberty Life is responsible for the safekeeping of the assets of the
Variable Account.
Liberty Life has responsibility for providing all administration of the
Certificates and the Variable Account. This administration includes, but is
not limited to, preparation of the Contracts and Certificates, maintenance of
Certificate Owners' records, and all accounting, valuation, regulatory and
reporting requirements. Liberty Life has contracted with Keyport Life
Insurance Company, an affiliate, to provide all administration for the
Contracts and Certificates, as its agent. Keyport Life Insurance Company's
compensation is based on the number of Certificates and on the Certificate
Value of these Certificates.
PRINCIPAL UNDERWRITER
The Contract and Certificate, which are offered continuously, are
distributed by Keyport Financial Services Corp. ("KFSC"), which is an
affiliate of Liberty Life.
EXPERTS
The financial statements of Liberty Life Assurance Company of Boston at
December 31, 1996, and for the year then ended appearing in this Statement of
Additional Information have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The financial statements of Liberty Life Assurance Company of Boston as
of December 31, 1995 and for each of the years in the two-year period ended
December 31, 1995 have been included herein in reliance on the report of KPMG
Peat Marwick LLP, independent certified public accountants, and upon the
authority of said 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 contract 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: Large
Company Stocks, represented by the Standard and Poor's Composite Price Index
(an unmanaged weighted index of 90 stocks prior to March 1957 and 500 stocks
thereafter of industrial, transportation, utility and financial companies
widely regarded by investors as representative of the stock market); Small
Company Stocks, represented by the fifth capitalization quintile (i.e., the
ninth and tenth deciles) of stocks on the New York Stock Exchange for 1926-
1981 and by the performance of the Dimensional Fund Advisors Small Company
9/10 (for ninth and tenth deciles) Fund thereafter; Long Term Corporate
Bonds, represented beginning in 1969 by the Salomon Brothers Long-Term High-
Grade Corporate Bond Index, which is an unmanaged index of nearly all Aaa and
Aa rated bonds, represented for 1946-1968 by backdating the Salomon Brothers
Index using Salomon Brothers' monthly yield data with a methodology similar
to that used by Salomon Brothers in computing its Index, and represented for
1925-1945 through the use of the Standard and Poor's monthly High-Grade
Corporate Composite yield data, assuming a 4% coupon and a 20-year maturity;
Long-Term Government Bonds, measured each year using a portfolio containing
one U.S. government bond with a term of approximately twenty years and a
reasonably current coupon; U.S. Treasury Bills, measured by rolling over each
month a one-bill portfolio containing, at the beginning of each month, the
shortest-term bill having not less than one month to maturity; Inflation,
measured by the Consumer Price Index for all Urban Consumers, not seasonably
adjusted, since January, 1978 and by the Consumer Price Index before then.
The stock capital markets may be contrasted with the corporate bond and U.S.
government securities capital markets. Unlike an investment in stock, an
investment in a bond that is held to maturity provides a fixed rate of
return. Bonds have a senior priority to common stocks in the event the
issuer is liquidated and interest on bonds is generally paid by the issuer
before it makes any distributions to common stock owners. Bonds rated in the
two highest rating categories are considered high quality and present minimal
risk of default. An additional advantage of investing in U.S. government
bonds and Treasury bills is that they are backed by the full faith and credit
of the U.S. government and thus have virtually no risk of default. Although
government securities fluctuate in price, they are highly liquid.
Yields for SteinRoe Cash Income Sub-Account
Yield and effective yield percentages for the SteinRoe Cash Income Sub-
Account are calculated using the method prescribed by the Securities and
Exchange Commission. Both yields reflect the deduction of the annual 1.40%
asset-based Certificate charge. Both yields also reflect, on an allocated
basis, the Certificate's annual $36 Certificate Maintenance Charge that is
collected after the first Certificate Anniversary. Both yields do not
reflect Contingent Deferred Sales Charges and premium tax charges. The
yields would be lower if these charges were included. The following are the
standardized formulas:
Yield equals: (A - B - 1) X 365
C 7
Effective Yield Equals: (A - B)365/7 - 1
C
Where:
A = the Accumulation Unit value at the end of the 7-day period.
B = hypothetical Certificate Maintenance Charge for the 7-day
period. The assumed annual SteinRoe Cash Income charge is equal to
the $36 Certificate charge multiplied by a fraction equal to the
average number of Certificates with SteinRoe Cash Income Sub-
Account value during the 7-day period divided by the average total
number of Certificates during the 7-day period. This annual amount
is converted to a 7-day charge by multiplying it by 7/365. It is
then equated to an Accumulation Unit size basis by multiplying it
by a fraction equal to the average value of one SteinRoe Cash
Income Accumulation Unit during the 7-day period divided by the
average Certificate Value in SteinRoe Cash Income Sub-Account
during the 7-day period.
C = the Accumulation Unit value at the beginning of the 7-day
period.
The yield formula assumes that the weekly net income generated by an
investment in the SteinRoe Cash Income Sub-Account will continue over an
entire year. The effective yield formula also annualizes seven days of net
income but it assumes that the net income is reinvested over the year. This
compounding effect causes effective yield to be higher than the yield.
FINANCIAL STATEMENTS
The Variable Account has not yet commenced operations and therefore no
financial statements are included. The financial statements of Liberty Life
are provided as relevant to its ability to meet its financial obligations
under the Certificates.
Report of Independent Auditors
The Board of Directors
Liberty Life Assurance Company of Boston
We have audited the accompanying balance sheet of Liberty Life Assurance
Company of Boston (the Company) as of December 31, 1996, and the related
statements of income, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Liberty Life Assurance
Company of Boston at December 31, 1996, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
February 28, 1997 Ernst & Young LLP
Boston, Massachusetts
Independent Auditors' Report
The Board of Directors
Liberty Life Assurance Company of Boston:
We have audited the accompanying balance sheet of Liberty Life Assurance
Company of Boston as of December 31, 1995, and the related statements of
income, stockholders' equity, and cash flows for each of the years in the two-
year period then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Liberty Life Assurance
Company of Boston as of December 31, 1995 and the results of its operations
and its cash flows for each of the years in the two-year period then ended,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 16, 1996
Liberty Life Assurance Company of Boston
Balance Sheets
December 31
1996 1995
(In Thousands)
Assets
Investments:
Fixed maturities, available for sale $1,737,187 $1,522,447
Equity securities, available for sale 4,122 4,191
Policy loans 45,345 40,672
Short-term investments 78,715 121,471
Other invested assets 38,281 32,339
Total investments 1,903,650 1,721,120
Cash and cash equivalents 34,372 64,801
Amounts recoverable from reinsurers 48,800 36,919
Premiums receivable 8,421 4,974
Investment income due and accrued 20,820 17,275
Deferred policy acquisition costs 77,424 62,762
Other assets 7,050 7,545
Assets held in separate accounts 1,097,040 899,519
Total assets $3,197,577 $2,814,915
Liabilities and Stockholders' Equity:
Liabilities:
Future Policy benefits $ 936,842 $ 809,042
Policyholders' and beneficiaries' funds 548,153 441,619
Policy and contract claims 30,394 19,344
Dividends to policyholders 12,919 12,309
Experience rating refund reserves 2,400 1,190
Liability for participating policies 68,504 65,256
Federal income taxes payable 542 -
Deferred federal income taxes 73,973 93,158
Due to Parent 8,907 9,334
Accrued expenses and other liabilities 117,144 191,894
Liabilities related to separate accounts 1,097,040 899,519
Total liabilities 2,896,818 2,542,665
Stockholders' equity:
Common stock, $312.50 par value; 8,000
shares authorized, issued and outstanding 2,500 2,500
Additional paid-in capital 52,500 2,500
Net unrealized gains on investments,
net of federal income taxes of $43,793
and $66,391 81,330 122,875
Cumulative foreign currency translations,
net of federal income taxes of $612 and $515 1,139 957
Retained earnings 163,290 143,418
Total stockholders' equity 300,759 272,250
Total liabilities and stockholders' equity $3,197,577 $2,814,915
See accompanying notes to financial statements.
Liberty Life Assurance Company of Boston
Statements of Income
Year Ended December 31
1996 1995 1994
(In Thousands)
Revenues:
Premiums, net $283,965 $197,017 $130,606
Net investment income 122,527 108,721 97,022
Realized gains on investments 6,722 5,091 3,043
Contractholder charges and assessments 5,759 5,428 4,943
Other revenues 4,469 4,323 3,776
Total revenues 423,442 320,580 239,390
Benefits and expenses:
Death and other policy benefits 173,281 126,029 110,158
Recoveries from reinsurers on ceded claims (11,454) (10,489) (5,858)
Provision for future policy benefits and
other policy liabilities 121,347 88,903 41,609
Interest credited to policyholders 32,252 27,527 18,347
Change in deferred policy acquisition
costs (15,247) (11,101) (9,921)
General expenses 69,926 52,555 38,381
Insurance taxes and licenses 6,956 4,997 3,550
Dividends to policyholders 12,610 12,277 11,671
Total benefits and expenses 389,671 290,698 207,937
Income from continuing operations before
federal income taxes and earnings of
participating policies 33,771 29,882 31,453
Federal income taxes 10,327 10,782 11,003
Income from continuing operations before
earnings of participating policies 23,444 19,100 20,450
Earnings of participating policies net
of federal income tax benefit of $2,514
in 1996, $2,581 in 1995 and $835 in 1994 3,247 3,397 1,545
Income from continuing operations 20,197 15,703 18,905
Discontinued operations:
Loss from operations on discontinued
group health, net of federal income
(benefits) taxes of ($175) in 1996, ($1,236)
in 1995 and $100 in 1994 (325) (2,267) 24
Net income $ 19,872 $ 13,436 $ 18,929
See accompanying notes to financial statements.
Liberty Life Assurance Company of Boston
Statements of Stockholders' Equity
Years Ended December 31, 1996, 1995 and 1994
(In Thousands)
Net
Unrealized Cumulative
Additional Gains Foreign
Common Paid-In (Losses) on Currency Retained
Stock Capital Investments Translations Earnings Total
Balance at
January 1, 1994 $2,500 2,500 105,774 203 111,053 $222,030
Net income 18,929 18,929
Net unrealized
gains (losses) on
investments, net
of deferred
federal income
taxes of ($425) (93,500) (93,500)
Cumulative foreign
currency translations,
net of deferred
federal income taxes
of ($140) 260 260
Balance at
December 31, 1994 2,500 2,500 12,274 463 129,982 147,719
Net income 13,436 13,436
Net unrealized
gains (losses) on
investments, net
of deferred
federal income
taxes of ($59,758) 110,601 110,601
Cumulative foreign
currency translations,
net of deferred
federal income taxes
of ($267) 494 494
Balance at
December 31, 1995 2,500 2,500 122,875 957 143,418 272,250
Additional Paid-In
Capital 50,000 50,000
Net income 19,872 19,872
Net unrealized
gains (losses) on
investments, net
of deferred
federal income
taxes of $22,598 (41,545) (41,545)
Cumulative foreign
currency translations,
net of deferred federal
income taxes
of ($97) 182 182
Balance at
December 31, 1996 $2,500 52,500 81,330 1,139 163,290 $300,759
See accompanying notes to financial statements.
Liberty Life Assurance Company of Boston
Statements of Cash Flows
Years ended December 31
1996 1995 1994
(In Thousands)
Cash flows from operating activities:
Premiums collected $ 280,613 $ 197,607 $ 127,716
Investment income received 98,899 89,412 80,817
Other considerations received 10,331 9,421 22,599
Policyholder claims paid (124,297) (96,494) (123,676)
Surrender benefits paid (33,748) (5,927) (5,317)
Policyholder dividends paid (12,008) (11,685) (11,081)
General expenses paid (67,834) (56,736) (41,915)
Insurance taxes and licenses paid (3,959) (6,000) (6,346)
Federal income taxes paid, including
capital gains taxes (5,858) (12,878) (4,897)
Intercompany net receipts (426) 9,201 (16,620)
Other receipts (payments) 12,218 (2,782) (6,904)
Net cash flows provided by operating
activities 153,931 113,139 14,376
Cash flows from investing activities:
Proceeds from fixed maturities sold 128,493 41,763 66,835
Proceeds from fixed maturities matured 91,292 75,084 124,347
Cost of fixed maturities acquired (480,206) (224,725) (315,121)
Proceeds from equity securities sold 125,997 87,449 45,632
Cost of equity securities acquired (122,197) (86,390) (45,898)
Change in policy loans (4,673) (4,087) (3,827)
Investment cash in transit 126 (182) 34
Proceeds from short-term investments
sold or matured 833,144 485,257 902,371
Cost of short-term investments acquired (790,040) (566,870) (879,643)
Proceeds from other long-term investments
sold 5,997 4,320 2,657
Cost of other long-term investments
acquired (6,904) (13,427) (5,772)
Net cash used in investing activities (218,971) (201,808) (108,385)
Cash flows from financing activities:
Additional paid-in capital 50,000 - -
Policyholders' deposits on investment
contracts 139,579 62,019 124,565
Policyholders' withdrawals from
investment contracts (65,343) (62,314) (30,608)
Change in securities loaned (89,625) 148,710 93,957
Net cash provided by financing activities 34,611 148,415 (52)
Change in cash and cash equivalents (30,429) 59,746 5,107
Cash and cash equivalents,
beginning of year 64,801 5,055
Cash and cash equivalents, end of year $ 34,372 $ 64,801 $ 5,055
Reconciliation of net income to net cash
flows from operating activities:
Net income $ 19,872 $ 13,436 $ 18,929
Adjustments to reconcile net income to
net cash flows from operating
activities:
Realized capital gains on investments (6,722) (5,091) (3,211)
Accretion of bond discount (20,271) (17,822) (16,297)
Interest credited to policyholders 32,252 27,543 18,347
Changes in assets and liabilities:
Proceeds from securities loaned 89,625 (148,710) -
Amounts recoverable from reinsurers (11,881) 4,897 (16,735)
Premiums receivable (3,447) 413 (418)
Investment income due and accrued (3,545) (1,409) (1,336)
Deferred policy acquisition costs (15,247) (10,888) (9,921)
Other assets 495 1,354 (1,846)
Future policy benefits 127,800 88,924 45,660
Policy and contract claims 11,050 (1,523) (494)
Dividends to policyholders 610 567 590
Experience rating refund liabilities 1,210 (510) 550
Liability for participating policies 3,248 3,397 1,544
Federal income taxes payable 542 (5,830) 4,643
Deferred federal income taxes 3,805 3,235 1,563
Due to Parent (427) 9,201 (16,620)
Accrued expenses and other liabilities (75,038) 151,955 (5,454)
Net cash flows provided by
operating activities $ 153,931 $ 113,139 $ 14,376
See accompanying notes to financial statements.
Liberty Life Assurance Company of Boston
Notes to Financial Statements
December 31, 1996, 1995 and 1994
(In Thousands)
1. Nature of Operations and Significant Accounting Policies
Organization
Liberty Life Assurance Company of Boston ("The Company") is domiciled in the
Commonwealth of Massachusetts. The Company is directly owned 100% by Liberty
Mutual Property-Casualty Holding Corporation, a subsidiary directly owned 90%
by Liberty Mutual Insurance Company and 10% by Liberty Mutual Fire Insurance
Company ("Liberty Mutual").
The Company insures life, annuity and accident and health risks for groups
and individuals. The Company also issues structured settlement contracts and
administers separate account contracts. The Company is licensed and sells its
products in all 50 states, the District of Columbia, and Canada.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the financial
statements, and the reported amounts of revenues and expenses during the
year. Actual amounts could subsequently differ from such estimates.
Investments
Fixed maturity and equity securities are classified as available for sale and
are carried at fair value. Unrealized gains and losses on fixed maturity and
equity securities are reported as a separate component of stockholders'
equity, net of applicable deferred income taxes.
For the mortgage-backed bond portion of the fixed maturity investment
portfolio, the Company recognizes income using a constant effective yield
based on anticipated prepayments over the estimated economic life of the
security. When actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect actual payments
to date and anticipated future payments and any resulting adjustments are
included in investment income.
Short-term investments include investments with maturities of less than one
year at the date of acquisition.
Other invested assets, specifically investments in limited partnerships, are
accounted for using the equity method.
Policy loans are reported at unpaid loan balances.
Realized capital gains and losses are determined on the specific
identification basis.
Deferred Policy Acquisition Costs
Policy acquisition costs are the costs of acquiring new business which vary
with, and are primarily related to, the production of new business. Such
costs include commissions, costs of policy underwriting, and variable agency
expenses. Acquisition costs related to traditional life insurance and certain
long-duration group accident and health insurance, to the extent recoverable
from future policy revenues, are deferred and amortized over the premium-
paying period of the related policies using assumptions consistent with those
used in computing policy benefit reserves. For universal life insurance and
investment products, to the extent recoverable from future gross profits,
deferred policy acquisition costs are amortized generally in proportion to
the present value of expected gross profits from surrender charges and
investment, mortality, and expense margins. Deferred policy acquisition costs
are adjusted for amounts relating to unrealized gains and losses on fixed
maturity and equity securities the Company has designated as available for
sale. This adjustment, net of tax, is included with the change in net
unrealized gains or losses that is credited or charged directly to
stockholders' equity. Deferred policy acquisition costs have decreased for
this adjustment by $585 and $2,834 at December 31, 1996 and 1995,
respectively.
The Company began deferring acquisition costs relating to group life and
disability insurance as of January 1, 1995. Costs relating to these policies
are amortized straight line over a five year period. Anticipated premium
revenue was estimated using the same assumptions which were used for
computing liabilities for future policy benefits.
Recognition of Traditional Life Premium Revenue and Related Expenses
Premiums on traditional life insurance policies are recognized as revenue
when due. Benefits and expenses are associated with premiums so as to result
in the recognition of profits over the life of the policies. This association
is accomplished by providing liabilities for future policy benefits and the
deferral and subsequent amortization of acquisition costs.
Recognition of Universal Life Revenue and Policy Account Balances
Revenues from universal life policies represent investment income from the
related invested assets and amounts assessed against policyholders. Included
in such assessments are mortality charges, surrender charges paid and
administrative fees. Policy account balances consist of consideration
received plus credited interest, less accumulated policyholder charges,
assessments and withdrawals. Credited interest rates were between 5.75% and
6.3% in 1996 and between 6.3% and 6.5% in 1995 and 1994.
Investment Contracts
The Company writes certain annuity and structured settlement contracts
without mortality risk which are accounted for as investment contracts.
Revenues for investment contracts consist of investment income from the
related invested assets, with profits recognized to the extent investment
income earned exceeds the amount credited to the contract. This method of
computing the liability for future policy benefits effectively results in
recognition of profits over the benefit period. Policy account balances
consist of consideration received plus credited interest less policyholder
withdrawals. Credited interest rates were between 5.35% and 7.05% in 1996,
between 5.6% and 7.25% in 1995, and between 5.0% and 5.25% in 1994 for
annuity contracts. Credited interest rates were between 6.2% and 11.4% in
1996, 1995 and 1994 for structured settlement contracts.
Future Policy Benefits
Liabilities for future policy benefits for traditional life policies have
been computed using the net level premium method based on estimated future
investment yield, mortality and withdrawal experience. Interest rate
assumptions were between 4.5% and 10.25% for all years of issue. Mortality
assumptions have been calculated principally on an experience multiple
applied to the 1955-60 and 1965-70 Select and Ultimate Basic Tables for
issued prior to 1986, the 1986 Bragg Non-Smoker/Smoker Select and Ultimate
Basic Tables for 1986 to 1992 issues, and the 1991 Bragg Non-Smoker/Smoker
Select and Ultimate Basic Tables for 1993 and subsequent issues. Withdrawal
assumptions are generally based on the Company's experience.
The liability for future policy benefits with respect to structured
settlement contracts with life contingencies and single premium group
annuities (group pension) is determined based on interest crediting rates
between 6.2% and 11.4%, and the mortality assumptions are based on the 1971
GAM and IAM tables.
Future policy benefits for long-term disability cases are computed using the
1987 Commissioners' Group Disability Table adjusted for the Company's
experience.
Policy and Contract Claims
Accident and health business policy and contract claims principally include
claims in course of settlement and claims incurred but not reported, which
are determined based on a formula derived as a result of the Company's past
experience. Claims liabilities may be more or less than the amounts paid when
the claims are ultimately settled. Such differences are considered changes in
estimates and are recorded in the statement of income in the year the claims
are settled.
Reinsurance
All assets and liabilities related to reinsurance ceded contracts are
reported on a gross basis in the accompanying balance sheets. The
accompanying statements of operations reflect premiums, benefits and
settlement expenses net of reinsurance ceded.
Reinsurance premiums, commissions, expense reimbursements, benefits and
reserves related to reinsured business are accounted for on bases consistent
with those used in accounting for original policies issued and the terms of
the reinsurance contracts.
Federal Income Taxes
The Company has adopted the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that includes
the enactment date.
Participating Policies
Participating policies approximate 33% and 35% of life insurance in force at
December 31, 1996 and 1995, respectively, and 18% and 56% of individual life
insurance premium revenue in 1996 and 1995, respectively. Dividends to
participating policyholders are calculated as the sum of the difference
between the assumed mortality, interest and loading, and the actual
experience of the Company relating to participating policyholders. As a
result of statutory regulations, the major portion of earnings from
participating policies inures to the benefit of the participating
policyholders and is not available to stockholders. Undistributed earnings of
the participating block of business is represented by the liability for
participating policies in the accompanying balance sheets. The payment of
dividends to stockholders is further restricted by insurance laws of the
Commonwealth of Massachusetts.
Foreign Currency Translations
The Company enters into certain transactions that are denominated in a
currency other than the U.S. dollar. Functional currencies are assigned to
foreign currencies. The resulting translation adjustments from such
transactions are accumulated and then converted to U.S. dollars. The
unrealized gain or loss from this translation is recorded as a separate
component of stockholders' equity, net of deferred federal income taxes. The
translations are calculated using current exchange rates for the balance
sheet and average exchange rates for the statement of operations.
Separate Accounts
Separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered, principally for
annuity contracts, and for which the contractholder, rather than Liberty Life
Assurance, bears the investment risk. Separate account contractholders have
no claim against the assets of the general account of Liberty Life Assurance.
Separate account assets are reported at market value. The operations of the
separate accounts are not included in the accompanying financial statements.
Fees charged on separate account policyholder deposits are included in other
income.
Reclassification
Certain 1995 balances have been reclassified to permit comparison with the
1996 presentation.
2. Investments
Fixed Maturities
The amortized cost, gross unrealized gains and losses, and fair value of
investments in fixed maturities are summarized as follows:
December 31, 1996
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Treasury securities and
obligations of U.S government
corporations and agencies $ 408,214 $ 86,080 $ (1,195) $ 493,099
Debt securities issued by
foreign governments 24,762 87 (256) 24,593
Corporate securities 614,901 29,667 (3,864) 640,704
U.S. government guaranteed
mortgage-backed securities 567,343 16,402 (4,954) 578,791
Total fixed maturities $1,615,220 $132,236 $(10,269) $1,737,187
At December 31, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Treasury securities and
obligations of U.S government
corporations and agencies $ 380,296 $116,737 $ (37) $ 496,996
Debt securities issued by
foreign governments 19,651 1,839 (7) 21,483
Corporate securities 313,686 18,727 (2,797) 329,616
U.S. government guaranteed
mortgage-backed securities 621,282 53,523 (453) 674,352
Total fixed maturities $1,334,915 $190,826 $ (3,294) $1,522,447
The amortized cost and fair value of the Company's investment in fixed
maturities by contractual maturity is summarized as follows:
At December 31, 1996
Amortized Fair
Cost Value
Maturity in one year or less $ 29,651 $ 30,279
Maturity after one year through five years 169,258 172,798
Maturity after five years through ten years 313,404 335,973
Maturity after ten years 535,564 619,346
U.S. government guaranteed mortgage-
backed securities 567,343 578,791
Total fixed maturities $1,615,220 $1,737,187
The expected maturities in the foregoing table may differ from contractual
maturities because certain borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Gross gains of $1,462 and $811, and gross losses of $1,411, and $445 were
realized on the sales of fixed maturities respectively.
At December 31, 1996, bonds with an admitted asset value of $14,232 were on
deposit with state insurance departments to satisfy regulatory requirements.
Equity Securities and Other Invested Assets
Unrealized gains and losses on investments in equity securities, available
for sale and other invested assets are recorded in a separate component of
stockholders' equity and do not affect operations. The cost, gross unrealized
gains and losses on, and the fair value of, those investments are summarized
as follows:
At December 31, 1996
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
Equity securities $ 3,098 $ 1,241 $ (217) $ 4,122
Other invested assets 32,729 6,462 (910) 38,281
Total $35,827 $ 7,703 $(1,127) $42,403
At December 31, 1995
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
Equity securities $ 3,086 $ 1,105 -- $ 4,191
Other invested assets 28,874 4,045 $ (580) 32,339
Total $31,960 $ 5,150 $ (580) $36,530
Net Investment Income
Major categories of the Company's net investment income are summarized as
follows:
Year ended December 31
1996 1995 1994
Investment income:
Fixed maturities $118,365 $104,779 $ 95,837
Equity securities 83 214 22
Policy loans 2,672 2,397 2,111
Short-term investments and cash equivalents 1,633 2,034 1,711
Other invested assets 1,476 878 342
Gross investment income 124,229 110,302 100,023
Less: Investment expenses 1,702 1,581 1,942
Discontinued operations -- -- 1,059
Net investment income $122,527 $108,721 $ 97,022
Realized Capital Gains on Investments
Realized capital gains on investments were derived from the following
sources:
Year ended December 31
1996 1995 1994
Fixed maturities $ 61 $ 366 $ 1,752
Equity securities 3,812 3,441 434
Short-term investments -- -- (4)
Other invested assets 2,849 1,284 1,029
Less: Discontinued operations -- 168
Realized capital gains on investments $ 6,722 $ 5,091 $ 3,043
Concentration of Investments
There were no investments in a single entity's fixed maturities in excess of
ten percent of stockholders' equity at December 31, 1996 and 1995,
respectively.
3. Reinsurance
Certain premiums and benefits are assumed from and ceded to other insurance
companies under various reinsurance agreements. Reinsurance assumed is not
significant. The ceded reinsurance agreements provide the Company with
increased capacity to write larger risks and maintain its exposure to loss
within capital resources.
The Company generally reinsures risks on life insurance policies over two
hundred fifty thousand dollars as well as selected risks of lesser amounts.
Life insurance in force and premium information is summarized as follows:
Year ended December 31, 1996
Assumed Ceded to
Direct From Other Other Net
Amount Companies Companies Amount
Life insurance in force $25,127,732 $64,767 $1,699,677 $23,492,822
Premiums:
Group life and disability $ 193,209 $ 55 10,070 183,194
Individual life and annuity 103,191 2,939 5,536 100,594
Group pension 177 - - 177
Total premiums $ 296,577 $ 2,994 $ 15,606 $ 283,965
Year ended December 31, 1995
Assumed Ceded to
Direct From Other Other Net
Amount Companies Companies Amount
Life insurance in force $17,374,371 $56,753 $1,110,191 $16,320,933
Premiums:
Group life and disability $ 105,415 $ 68 $ 12,223 $ 93,260
Individual life and annuity 103,732 123 2,477 101,378
Group pension 2,379 - - 2,379
Total premiums $ 211,526 $ 191 $ 14,700 $ 197,017
Amounts payable or recoverable for reinsurance on policy and contract
liabilities are not subject to periodic or maximum limits. At December 31,
1996, the Company's reinsurance recoverables are not material and no
individual reinsurer owed the Company an amount that was equal to or greater
than 3% of the Company's surplus.
Amounts recoverable from reinsurers are presented as an asset in the
accompanying financial statements and are summarized as follows:
At December 31
1996 1995
Group life and health $ 25,952 $ 19,377
Individual life and annuity 22,848 17,542
Total amounts recoverable from reinsurers $ 48,800 $ 36,919
4. Federal Income Taxes
The Company is included in a consolidated federal income tax return with
Liberty Mutual and its other subsidiaries. Under a written tax sharing
agreement, approved by the Board of Directors, Liberty Mutual collects from
and refunds to the subsidiaries the amount of taxes or benefits determined as
if Liberty Mutual and the subsidiaries filed separate returns.
Federal income tax expense (benefit) attributable to income from operations
was composed of the following:
Year ended December 31
1996 1995 1994
Continuing operations:
Current $ 7,011 $ 7,848 $ 9,559
Deferred 3,316 2,934 1,444
Federal income tax (benefit) expense $10,327 10,782 $11,003
Year ended December 31
1996 1995 1994
Discontinued operations:
Current $ (175) $ (1,236) $ (19)
Deferred 0 0 119
Federal income tax (benefit) expense $ (175) $ (1,236) $ 100
A reconciliation of federal income tax expense as recorded in the statements
of income with expected federal income tax expense computed at the applicable
federal tax rate of 35% is summarized as follows:
Year ended December 31
1996 1995 1994
Expected income tax expense $ 11,820 $ 10,458 $11,009
Adjustments to income taxes resulting from:
Reconciliation of prior year tax return (1,226) 401 -
Other, net (267) (77) (6)
Federal income tax expense $ 10,327 $10,782 $11,003
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred liabilities are summarized as
follows:
Year ended December 31
1996 1995 1994
Deferred tax assets:
Dividends to policyholders $ 3,349 $ 3,230 $ 3,242
Experience rating reserves - 14 102
Unearned interest on policy loans 303 283 -
Unearned group premium adjustment 962 585 448
Accrued surrender charges on deposit funds 401 - -
1987 disability reserve tax adjustment - 215 334
Other 60 29 281
Total deferred tax assets 5,075 4,356 4,407
Deferred tax liabilities:
Future policy benefits (11,760) (11,181) (12,002)
Deferred acquisition costs (18,818) (16,201) (13,742)
Bonds purchased at market discount (2,273) (1,769) (1,509)
Bonds market valuation adjustment (41,493) (64,788) (5,916)
Unrealized gain on other long-term
investments (2,300) (1,603) (717)
Reconciliation of taxes on other long-term
investments (951) (829) (134)
Cumulative foreign currency translations (612) (515) (248)
Deferred and uncollected premium adjustment (653) (565) (337)
Experience rating reserves (133) 0 0
Other (55) (63) -
Total deferred tax liabilities $(79,048) $(97,514) $(34,605)
Net deferred tax liability $(73,973) $(93,158) $(30,198)
The Company is required to establish a valuation allowance for any portion of
the deferred tax asset that management believes will not be realized. In the
opinion of management, it is more likely than not that the Company will
realize the benefit of the deferred tax assets, and, therefore, no such
valuation allowance has been established.
Prior to 1984, a portion of the Company's income was not taxed, but was
accumulated in a "policyholders' surplus account". In the event that those
amounts are distributed to stockholders', or the balance of the account
exceeds certain limitations under the Internal Revenue Code, the excess
amounts would become taxable at current rates. The policyholders' surplus
account balance at December 31, 1996 was approximately $4,000. Management
does not intend to take actions nor does management expect any events to
occur that would cause federal income taxes to become payable on that amount.
However, if such taxes were assessed, the amount of taxes payable would be
approximately $1,400.
5. Unpaid Claims Liability for Group Accident and Health Business
The following table provides a reconciliation of the beginning and ending
balances of unpaid claim liabilities, net of reinsurance recoverables:
Year ended December 31
1996 1995
Unpaid claim liabilities, at beginning of year $ 102,089 $ 76,630
Less: reinsurance recoverables 203 444
Net balance at beginning of year 101,886 76,186
Claims incurred related to:
Current year 104,526 52,747
Prior years 18,176 6,813
Total incurred 122,702 59,560
Claims paid related to:
Current year 34,342 15,413
Prior years 27,449 18,447
Total paid 61,791 33,860
Net balance at end of year 162,797 101,886
Plus: reinsurance recoverables 238 203
Balance, Unpaid claim liabilities,at end of year $ 163,035 $ 102,089
During 1996, approximately $17,000 of long-term disability business was
accepted from unaffiliated companies through buyout contracts. In return for
future premiums, as underwritten by the Company, the Company accepted the
risk for covered lines under those contacts, including certain claims which
were already in payment status. These claims, which were incurred in 1995 or
earlier, were not included in the December 31, 1995 claim reserves and
liabilities but are included as prior years incurred claims at December 31,
1996. The claims incurred related to prior years increased by $6,813 in 1995
due to changes in estimates of prior year insured events.
6. Risk-Based Capital and Retained Earnings
Life insurance companies are subject to certain Risk-Based Capital ("RBC")
requirements as specified by the NAIC. Under those requirements, the amount
of capital and surplus maintained by a life insurance company is to be
determined based on the various risk factors related to it. At December 31,
1996, the Company meets the RBC requirements.
The payment of dividends by the Company to stockholders is limited and cannot
be made except from earned profits. The maximum amount of dividends that may
be paid by life insurance companies without prior approval of the
Commonwealth of Massachusetts Insurance Commissioner is subject to
restrictions relating to statutory surplus and net gain from operations.
According to a resolution voted by the Board of Directors of Liberty Life
Assurance, not more than the larger of 10% of statutory profits on
participating business or fifty cents per thousand dollars of participating
business in force in a given year may accrue to the benefit of stockholders.
The amount of statutory unassigned surplus (deficit) held for the benefit of
participating policyholders is $(1,245) and for the stockholders is $83,428
at December 31, 1996. Dividends paid to policyholders were $12,008 and there
were no dividends paid to stockholders in 1996.
7. Commitments and Contingencies
The Company is named as a defendant in various legal actions arising
principally from claims made under insurance policies and contracts. Those
actions are considered by the Company in estimating reserves for policy and
contract liabilities. The Company's management believes that the resolution
of those actions will not have a material effect on the Company's financial
position or results of operations.
The Company is subject to insurance guaranty fund laws in the states in which
it does business. These laws assess insurance companies amounts to be used to
pay benefits to policyholders and claimants of insolvent insurance companies.
Many states allow these assessments to be credited against future premium
taxes. At December 31, 1996 and 1995, the Company has accrued $888 and $842,
respectively, of premium tax deductions. The Company recognizes its
obligations for guaranty fund assessments when it receives notice that an
amount is payable to a guaranty fund. Expenses incurred for guaranty fund
assessments were $150 and $472 in 1996 and 1995, respectively.
8. Separate Accounts
Separate Accounts held by the Company represent primarily funds which are
administered for pension plans. The assets consist of common stock, long-term
bonds, real estate and short-term investments. Except for long-term bonds
which are carried at amortized cost, the assets are carried at estimated fair
value. Investment income and changes in asset values do not affect the
operating results of the Company. Separate Accounts business is maintained
independently from the general account of the Company. The Company provides
administrative services for these contracts. Fees earned by the Company
related to these contracts included in other considerations were $1,503 and
$1,434 for the years ended December 31, 1996 and 1995, respectively.
9. Employee Benefits
The Company shares personnel with Liberty Mutual which has a non-contributory
defined benefit pension plan covering employees who have attained age twenty-
one and have completed one year of service. Benefits are based on years of
service and the employee's "final average compensation" which is the
employee's average annual compensation for the highest five consecutive
calendar years during the ten years immediately preceding retirement. Liberty
Mutual's funding and accounting policies are to contribute annually the
maximum amount that can be deducted for federal income tax purposes and to
charge such contributions to expense in the year deductible for income tax
purposes. Liberty Mutual's pension cost charged to operations for the entire
plan in 1996 and 1995 was $15,541 and $26,432 respectively. The Company's
allocated pension cost in 1996 and 1995 was $395 and $628, respectively.
As of January 1, 1996 and 1995, the actuarial present value of accumulated
vested and nonvested benefits for the entire plan, based on a valuation
interest rate of 8% in 1996 and 1995, approximated $657,550 and $607,595,
respectively, and the net assets, at fair market value, available for plan
benefits approximated $994,643 and $776,859 in 1996 and 1995, respectively.
Assets of the plan consist primarily of investments in life insurance company
separate accounts and a collective investment trust fund. At January 1, 1996
and 1995, separate account investments of the Company, included in plan
assets at fair market value, amounted to approximately $696,384 and $521,220
respectively.
10. Postretirement Benefits
Liberty Mutual provides certain health care and life insurance benefits
("postretirement") for retired employees. Substantially all employees may
become eligible for these benefits if they reach retirement age while working
for the Liberty Companies. Alternatively, retirees may elect certain prepaid
health care benefit plans. Life insurance benefits are based upon a
participant's final compensation subject to the plan maximum.
Liberty Mutual records the costs of its postretirement benefits by the
accrual accounting method and has elected to amortize its transition
obligation for retirees and fully eligible or vested employees over 20 years.
The unamortized transition obligation was $155,840 and $165,580 at December
31, 1996 and 1995, respectively.
Net postretirement benefit costs for Liberty Mutual were approximately
$26,239 in 1996 and $30,979 in 1995 and includes the expected cost of such
benefits for newly eligible or vested employees, interest cost, gains and
losses arising from differences between actuarial assumptions and actual
experience, and amortization of the transition obligation. Liberty Mutual
made payments of $13,000 in 1996 and $14,000 in 1995, as claims were
incurred.
At December 31, 1996 and December 31, 1995, the accrued unfunded
postretirement benefit obligation for Liberty Mutual's retirees and other
fully eligible plan participants was $59,023 and $45,848, respectively. The
accumulated benefit obligation for non-vested employees was $96,742 and
$86,357 at December 31, 1996 and 1995, respectively. The discount rates used
in determining the accumulated postretirement benefit obligation were 7.25%
and 7% in 1996 and 1995, respectively, and the health care cost trend rates
were 10.75% and 11.25%, graded to 5% over 10 years, in 1996 and 1995,
respectively.
The Company's share of postretirement benefit costs were approximately $236
and $282 for 1996 and 1995, respectively.
The health care cost trend rate assumption has a significant effect on the
amount reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the postretirement
benefit obligation of the entire plan as of December 31, 1996 by
approximately $13,899, and the estimated eligibility cost and interest cost
components of net periodic postretirement benefit cost for 1996 by
approximately $1,699.
11. Related Party Transactions
Under a Service Agreement between the Company and Liberty Mutual, the latter
provides personnel, office space, equipment, computer processing and other
services. The Company reimburses Liberty Mutual for these services at cost,
and for any other special services supplied at the Company's request.
Substantially all of the Company's insurance expenses incurred in 1996 and
1995 related to this agreement.
The Company insures the group term life and disability risks for Liberty
Mutual employees. Premiums associated with these policies amounted to $13,903
and $14,755 in 1996 and 1995, respectively.
The Company insures key officers of Liberty Mutual Group under an Optional
Life Insurance Plan. Premiums associated with this plan amounted to $4,967
and $4,278 in 1996 and 1995, respectively.
Liberty Mutual purchased structured settlement annuity contracts, with and
without life contingencies, from the Company. Premiums under these contracts
amounted to $91,754 and $78,567 in 1996 and 1995, respectively. The related
policy and contract reserves with respect to all structured settlement
annuity contracts purchased by Liberty Mutual amounted to $441,220 and
$386,565 at December 31, 1996 and 1995, respectively.
Liberty Mutual deposited $16,107 and $2,761 with the Company in 1996 and
1995, respectively, to fund certain Liberty Mutual environmental claim
transactions. Such amounts have been included in deposit type fund revenues
for the years ended December 31, 1996 and 1995, as well as in the liability
for premium and other deposit funds.
In 1996, Keyport Life Insurance Company began ceding 100% of the premiums and
benefits of certain structured settlement annuity contracts, with and without
life contingencies, to the Company. Premiums under these contracts amounted
to $3,194 in 1996. The related policy and contract reserves with respect to
these structured settlement annuity contracts assumed by the Company amounted
to $2,601 at December 31, 1996.
12. Fair Value of Financial Instruments
Fair values generally represent quoted market value prices for securities
traded in the public marketplace, or analytically determined values using bid
or closing prices for securities not traded in the public marketplace.
The following methods and assumptions were used by the Company in estimating
the "fair value" disclosures for financial instruments in the accompanying
financial statements and notes thereto:
Fixed Maturities
Fair values for publicly traded fixed maturities are determined using values
reported by an independent pricing service. Fair values of private placement
fixed maturities are determined by obtaining market indications from various
broker-dealers.
Cash and Short-term Investments
The carrying amounts reported in the accompanying balance sheets for these
financial instruments approximate their fair values.
Policy Loans
The carrying amounts reported in the accompanying balance sheets for these
financial instruments approximate their fair values.
Investment Contracts
The fair values for the Company's liabilities under investment-type insurance
contracts are estimated using discounted cash flow calculations, based on
interest rates currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued.
Policy Account Balances
The fair values of the Company's liabilities for insurance contracts other
than investment-type contracts are not required to be disclosed. However, the
fair values of liabilities under all insurance contracts are taken into
consideration in the Company's overall management of interest rate risk, such
that the Company's exposure to changing interest rates is minimized through
the matching of investment maturities with amounts due under insurance
contracts.
The carrying amount and fair value of the Company's financial instruments are
summarized a follows:
December 31, 1996 December 31, 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Fixed maturities $1,737,187 $1,737,187 $1,522,447 $1,522,447
Equity securities 4,122 4,122 4,191 4,191
Other invested assets 38,281 38,281 32,339 32,339
Policy loans 45,345 45,345 40,672 40,672
Short-term investments 78,715 78,715 121,471 121,471
Individual and group annuities 153,927 153,742 150,562 149,223
Other policyholder funds
left on deposit 8,009 8,009 7,527 7,527
13. Deferred Policy Acquisition Costs
Details with respect to deferred policy acquisition costs are summarized as
follows:
Year ended December 31
1996 1995
Balance, beginning of year $ 62,762 $ 54,283
Additions 16,114 14,143
Amortization (867) (2,830)
Valuation adjustment for unrealized
gain on fixed maturities (585) (2,834)
Balance, end of year $ 77,424 $ 62,762
14. Segment Information
Revenues and income from continuing operations before federal income taxes
and earnings of participating policies for each of the Company's segments are
summarized as follows:
Year ended December 31
1996 1995 1994
Revenues from continuing operations:
Group life and disability $203,911 $108,132 $ 84,872
Individual life and annuity 186,696 175,960 116,966
Group pension 32,835 36,488 37,552
Total revenues from continuing operations $423,442 $320,580 $239,390
Income from continuing operations before federal
income taxes and earnings from participating
policies:
Group life and disability $ 8,377 $ 5,723 $ 11,559
Individual life and annuity 24,319 22,444 18,284
Group pension 1,075 1,715 1,610
Total income from continuing operations
before federal income taxes and
earnings of participating policies $ 33,771 $ 29,882 $ 31,453
15. Reconciliation to Statutory-Basis Accounting
The Company is required to file statutory financial statements with state
insurance regulatory authorities. Accounting principles used to prepare
statutory financial statements differ from the financial statements reported
herein which are prepared on the basis of generally accepted accounting
principles.
Reconciliations of statutory net income and capital and surplus, as
determined using statutory accounting principles, to the amounts included in
the accompanying financial statements are summarized as follows:
Year ended December 31
Net income: 1996 1995 1994
Statutory basis, net income $ 3,554 $ 6,952 $ 4,289
Increases/(decreases)
Deferred policy acquisition costs 15,247 11,101 9,921
Policy reserves 9,631 2,779 8,971
Participating policies (3,248) (3,397) (1,545)
Deferred federal income taxes (3,316) (2,934) (1,563)
Deferred premiums (1,859) (1,763) (1,644)
Interest maintenance reserve (526) (439) 687
Other 389 1,137 (187)
Net income as reported herein $ 19,872 $ 13,436 $ 18,929
Year ended December 31
Stockholders' equity: 1996 1995 1994
Statutory basis, capital and surplus $137,933 $ 84,441 $ 76,434
Increases/(decreases)
Deferred policy acquisition costs 77,424 65,597 54,283
Policy reserves 102,214 92,583 88,531
Participating policies (68,504) (65,256) (61,859)
Asset valuation reserve 11,773 9,372 6,969
Interest maintenance reserve 4,327 4,853 5,292
Deferred federal income taxes (73,973) (93,158) (30,198)
Deferred premiums (17,346) (15,487) (9,970)
Net unrealized gain on fixed maturities 121,967 184,696 17,077
Other 4,944 4,609 1,160
Stockholders' equity as reported herein $300,759 $272,250 $147,719
16. Discontinued Operations
On December 31, 1993, the Company discontinued its Group Medical insured and
administrative services line of business. Substantially all of the insured
operating assets and future policy liabilities, as of December 31, 1993, were
ceded to Liberty Mutual effective January 1, 1994, until the termination date
of the contracts. After termination there is no additional insurance risk
associated with this particular line of business and all insured operating
assets and future policy liabilities will be extinguished.
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part B:
Liberty Life Assurance Company of Boston:
Balance Sheets for the years ended December 31, 1996
and 1995.
Statements of Income for the years ended December
31, 1996, 1995, and 1994.
Statements of Stockholders' Equity for the years
ended December 31, 1996 and 1995.
Statements of Cash Flows for the years ended
December 31, 1996 and 1995.
Notes to Financial Statements
(b) Exhibits:
* (1) Resolution of the Board of Directors establishing
Variable Account J
(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 Liberty
Assurance Company of Boston
* (4b) Form of Variable Annuity Certificate of Liberty Life
Assurance Company of Boston
* (4c) Form of Tax-Sheltered Annuity Endorsement
* (4d) Form of Individual Retirement Annuity Endorsement
* (4e) Form of Corporate/Keogh 401(a) Plan Endorsement
* (4f) Form of Unisex Endorsement
** (4g) Specimen Group Variable Annuity Contract of Liberty
Life Assurance Company of Boston (M&N)
** (4h) Specimen Variable Annuity Certificate of Liberty
Life Assurance Company of Boston (M&N)
(4i) Specimen Group Variable Annuity Contract of Liberty
Life Assurance Company of Boston (LA)
(4j) Specimen Variable Annuity Certificate of Liberty
Life Assurance Company of Boston (LA)
* (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 Liberty Life Assurance
Company of Boston
* (6b) By-Laws of Liberty Life Assurance Company of Boston
(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 Liberty Life Assurance
Company of Boston
** (8c) Participation Agreement By and Among Liberty Life
Assurance Company of Boston, SteinRoe Variable Investment
Trust and Keyport Financial Services Corp.
(8d) Participation Agreement Among MFS Variable Insurance Trust,
Liberty Life Assurance Company of Boston, and Massachusetts
Financial Services Corp.
(8e) Participation Agreement Among The Alger American Fund,
Liberty Life Assurance Company of Boston, and Fred Alger and
Company, Incorporated
(8f) Participation Agreement Among Alliance Variable Products
Series Fund, Inc., Alliance Fund Distributors, Inc., Alliance
Capital Management L.P., and Liberty Life Assurance Company of
Boston.
(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.
(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
* (17) Specimen Tax-Sheltered Annuity Acknowledgement
* (18) Administrative Services Agreement
** (27) Financial Data Schedule
* Incorporated by reference to Registration Statement (File No. 333-29811;
811-08269) filed on or about June 18, 1997.
** Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement (File No. 333-29811; 811-08269) filed on or about
June 27, 1997.
*** To be Filed by Amendment.
Item 25. Officers and Directors of the Depositor.
Name and
Business Address* Position and Offices with Depositor
Gary L. Countryman Chairman of the Board & Chief Exec. Officer
Edmund F. Kelly President and CAO
Morton E. Spitzer Exec. VP and COO-Individual
Jean M. Scarrow Exec. VP and COO-Group
J. Phillip Bruen Vice President
Edwin J. Campbell Vice President
J. Paul Condrin, III Vice President
A. Alexander Fontanes Vice President
Andrew M. Girdwood, Jr. Vice President
Richard W. Hadley Vice President
Elizabeth P. Jefferson Vice President
Richard B. Lassow Vice President
Merrill J. Mack Vice President
Douglas T. Maines Vice President
John S. O'Donnell Vice President
Gerard A. Paolino Vice President
Steven M. Sentler Vice President
John A. Tymochko Vice President
Barry S. Gilvar Secretary
Elliot J. Williams Treasurer
Gerald H. Dolan Assistant Treasurer
Bernard Gillen Assistant Treasurer
James W. Jakobek Assistant Treasurer
Diane S. Bainton Assistant Secretary
Katherine Desiderio Assistant Secretary
Christine T. Devine Assistant Secretary
James R. Pugh Assistant Secretary
Directors
John B. Conners J. Paul Condrin, III Morton E. Spitzer
Gary L. Countryman Edmund F. Kelly Jean M. Scarrow
A. Alexander Fontanes Christopher C. Mansfield
*175 Berkeley Street, Boston, Massachusetts 02117, unless noted otherwise
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
The Depositor controls the Registrant, and is an affiliate of Keyport
Financial Services Corp. (KFSC), a Massachusetts corporation functioning
as a broker/dealer of securities. KFSC files separate financial
statements. Both are ultimately owned by Liberty Mutual Insurance
Company.
The Depositor is an affiliate of Keyport Advisory Services Corp. (KASC),
a Massachusetts corporation functioning as an investment advisor. KASC
files separate financial statements and is ultimately owned by Liberty
Mutual Insurance Company.
Chart for the affiliations of the Depositor is included herein as
Exhibit 15.
Item 27. Number of Contract Owners.
None
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. 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 SteinRoe Variable Investment Trust and the Keyport Variable Investment
Trust, which offer eligible funds for variable annuity and variable life
insurance contracts. KFSC is also principal underwriter for Variable
Account K of Liberty Life Assurance Company of Boston and for the KMA
Variable Account, Variable Account A and Keyport Variable Account-I of
Keyport Life Insurance Company and for the Independence Variable Annuity
Account and Independence Variable Life Account of Independence Life and
Annuity Company, both are affiliated companies of Liberty Life.
The directors and officers are:
Name and Principal Position and Offices
Business Address* with Underwriter
John W. Rosensteel Chairman of the Board and President
John E. Arant III Director and Vice President and Sales Officer
William L. Dixon Vice President-Compliance Officer
Francis E. Reinhart Director and Vice President-Administration
Rogelio P. Japlit Treasurer
James J. Klopper Clerk
Donald A. Truman Assistant Clerk
*125 High Street, Boston, Massachusetts 02110.
Item 30. Location of Accounts and Records.
Liberty Life Assurance Company of Boston, 175 Berkeley St., Boston, MA
02117
Keyport Life Insurance Company, 125 High St., Boston, MA 02110
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The 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.
The 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.
The 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.
Registrant represents that it is relying on the November 28, 1988 no-
action letter (Ref. No. IP-6-88) relating to variable annuity contracts
offered as funding vehicles for retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code. Registrant further represents
that it has complied with the provisions of paragraphs (1) - (4) of that
letter. Specimen of acknowledgement form used to comply with paragraph (4)
is incorporated by reference to the Registration Statement Form N-4 (Files
No. 333-29811; 811-08269) filed on or about June 18, 1997.
Representation
Depositor represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Depositor. Further, this representation applies to each form of the contract
described in a prospectus and statement of additional information included in
this Registration Statement.
SIGNATURES
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it has duly caused this Registration
Statement to be signed on its behalf, in the City of Boston and Commonwealth
of Massachusetts, on this 17th day of July, l997.
Variable Account J
(Registrant)
BY: Liberty Life Assurance Company of Boston
(Depositor)
BY: /s/Elliot J. Williams
Elliot J. Williams, Treasurer
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/GARY L. COUNTRYMAN* /s/EDMUND F. KELLY*
GARY L. COUNTRYMAN EDMUND F. KELLY
Chairman of the Board President
/s/J. PAUL CONDRIN,III* /s/ELLIOT J. WILLIAMS 7/17/97
J. PAUL CONDRIN, III ELLIOT J. WILLIAMS Date
Director Treasurer
/s/JOHN B. CONNERS*
JOHN B. CONNERS
Director
/s/A. ALEXANDER FONTANES*
A. ALEXANDER FONTANES
Director
/s/EDMUND F. KELLY*
EDMUND F. KELLY
Director
/s/CHRISTOPHER C. MANSFIELD*
CHRISTOPHER C. MANSFIELD
Director
*BY: /s/Elliot J. Williams 7/17/97
/s/JEAN M. SCARROW* Elliot J. Williams Date
JEAN M. SCARROW Attorney-in-Fact
Director
/s/MORTON E. SPITZER*
MORTON E. SPITZER
Director
*Elliot J. Williams has signed this document on the indicated date on behalf
of each of the above Directors and Officers of the Depositor pursuant to
powers of attorney duly executed by such persons and included herein as
Exhibit 16 in the Registration Statement (Files No. 333-29811; 811-08269)
filed on or about June 18, 1997.
EXHIBIT INDEX
Exhibit Page
(4i) Specimen Group Variable Annuity Contract of Liberty Life
Assurance Company of Boston (LA)
(4j) Specimen Variable Annuity Certificate of Liberty Life Assurance
Company of Boston (LA)
(6a) Articles of Incorporation of Liberty Life Assurance Company of
Boston
(8d) Participation Agreement Among MFS Variable Insurance Trust,
Liberty Life Assurance Company of Boston, and Massachusetts
Financial Services Corp.
(8e) Participation Agreement Among The Alger American Fund,
Liberty Life Assurance Company of Boston, and Fred Alger
and Company, Incorporated
(8f) Participation Agreement Among Alliance Variable Products
Series Fund, Inc., Alliance Fund Distributors, Inc.,
Alliance Capital Management L.P., and Liberty Life Assurance
Company of Boston.
(8g) Amended and Restated Participation Agreement By and Among
Keyport Financial Services Corp., Keyport Variable Investment
Trust, Keyport Life Insurance Company and Liberty Life
Assurance Company of Boston.
(9) Opinion and Consent of Counsel
(10) Consents of Independent Auditors
EXHIBIT 4(i)
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Read this Contract carefully. This document is a description of the
legal contract between the Group Contract Owner and Us.
A Certificate Owner may return a Certificate to Us within 10 days after
receipt by delivering or mailing it to Our Office. The return of the
Certificate by mail will be effective when the postmark is affixed to a
properly addressed and postage prepaid envelope. This returned Certificate
will be treated as if We never issued it and We will refund the Certificate
Value plus any amount deducted from the purchase payment before it was
allocated to the Variable Account. The Certificate Value will be determined
as of the date of surrender (i.e., for a mailed contract, the postmark date).
The Group Contract, as issued to the Group Contract Owner by Us with any
riders or endorsements, alone makes up the agreement under which benefits are
paid. The Group Contract may be inspected at the office of the Group
Contract Owner. In consideration of any application for a Certificate and
the payment of purchase payments, We agree, subject to the terms and
conditions of the Group Contract, to provide the benefits described in the
Certificate to the Certificate Owner. If a Certificate is In Force on the
Income Date, We will begin making income payments to the Annuitant. We will
make such payments according to the terms of the Certificate and Group
Contract.
Signed for the Company on the Issue Date at Our Home Office, 175
Berkeley Street, Boston, Massachusetts 02117:
_________________________ _________________________
Secretary President
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase payment
flexibility. This contract is nonparticipating with no dividends.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED
ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNT. VARIABLE ANNUITY PAYMENTS WILL NOT DECREASE
OVER TIME IF THE SEPARATE ACCOUNT (AFTER DEDUCTION OF THE ANNUAL [1.55%]
ASSET CHARGE) HAS AN ANNUALIZED INVESTMENT RETURN OF AT LEAST 5.0%. SEE PAGES
12-13 AND 19 FOR FURTHER EXPLANATION. CONTRACT ASSETS ALLOCATED TO THE
SEPARATE ACCOUNT INCUR CHARGES OF [1.55%] BEFORE ANNUITY PAYMENTS BEGIN AND
[1.40%] ONCE ANNUITY PAYMENTS BEGIN. INCOME, CAPITAL GAINS, AND/OR LOSSES
WHETHER OR NOT REALIZED, FROM ASSETS ALLOCATED TO THE SEPARATE ACCOUNT ARE
CREDITED TO OR CHARGED AGAINST THE SEPARATE ACCOUNT WITHOUT REGARD TO INCOME,
CAPITAL GAINS, AND/OR LOSSES ARISING OUT OF ANY OTHER BUSINESS THE COMPANY
MAY CONDUCT.
Table of Contents
Page
Right to Examine Certificate 1
Definitions 2
Contract Schedule 3
General Provisions 5
Variable Account Provisions 10
Transfers 13
Partial Withdrawals and Total Surrender 14
Death Provisions 15
Annuity Provisions 16
Endorsements (if any) are before page 22
Definitions
Accumulation Period: The period prior to the Income Date during which
Purchase Payments may be made by a Certificate Owner.
Accumulation Unit: An accounting unit used to calculate a Certificate Owner's
interest in a Sub-account of the Variable Account during the Accumulation
Period.
Adjusted Certificate Value: The Certificate Value less any applicable taxes
relating to a Certificate and Certificate Maintenance Charge. This amount is
applied to the applicable Annuity Tables to determine Annuity Payments.
Annuitant: The natural person on whose life Annuity Payments are based, and
to whom any Annuity Payments will be made starting on the Income Date.
Annuity Options: Options available for Annuity Payments.
Annuity Payments: The series of payments made to the Annuitant, starting on
the Income Date, under the Annuity Option selected.
Annuity Period: The period after the Income Date during which Annuity
Payments are made.
Annuity Unit: An accounting unit used to calculate Variable Annuity Payments
during the Annuity Period.
Beneficiary: The person(s) or entity(ies) who controls the Certificate if
any Certificate Owner dies before the Income Date.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
125 High Street, Boston, MA 02110
Service Office
125 High Street, 11th Floor
Boston, MA 02110
Contract Schedule
GROUP CONTRACT OWNER Liberty Insurance Trust
GROUP CONTRACT NUMBER DVA002NY
GROUP CONTRACT ISSUE DATE 00/00/97
MINIMUM INITIAL PAYMENT $5,000
MINIMUM ADDITIONAL PAYMENT $1,000
Charges
Distribution Charge We deduct 0.000411% of the assets in each Variable
Account Sub-Account on a daily basis (equivalent to an annual rate of 0.15%)
to compensate Us for a portion of Our distribution costs.]
Administrative Charge None
Mortality and Expense Risk Charge We deduct 0.003403% of the assets in each
Variable Account Sub-account on a daily basis (equivalent to an annual rate
of 1.25%) for Our mortality and expense risks.
Certificate Maintenance Charge We charge $36 to cover a portion of Our
ongoing Certificate maintenance expenses. The charge is incurred at the
beginning of the Certificate Year and is deducted from the assets of the
Variable Account on each Certificate Anniversary and at the time of total
surrender. We reserve the right to charge up from the assets of the Variable
Account $100 per year.
Transfer Charge Currently none, however, We reserve the right to charge $25
for a transfer if a Certificate Owner makes more than 12 transfers per
Certificate Year.
Surrender Charge At the time of each partial withdrawal or at total surrender
a contingent deferred sales charge is imposed as a percentage of each
Purchase Payment during the [seven] years after the date of its payment, as
follows:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
7% 6% 5% 4% 3% 2% 1%
Thereafter 0%.
Initial Purchase Payment Allocation
Currently, Certificate Owners can select 17 Sub-accounts and the Fixed
Account. We reserve the right to increase or decrease the number of
available Sub-accounts. The minimum a Certificate Owner may allocate to any
Sub-account or the Fixed Account is 5% of any Purchase Payment. An initial
Purchase Payment may be invested as follows:
Alger Growth
Alger Small Cap
Alliance Global Bond
Alliance Premier Growth
Colonial Growth & Income
Colonial Int'l Fund for Growth
Colonial Strategic Income
Colonial U.S. Fund for Growth
Colonial Utilities
MFS Emerging Growth
MFS Research
Newport Tiger
SteinRoe Cap Appreciation
SteinRoe Cash Income
SteinRoe Managed Assets
SteinRoe Managed Growth Stock
SteinRoe Mortgage Sec Income
Fixed Account
Transfer Guidelines
Number of Transfers and Transfer Charge: Currently, Certificate Owners are
permitted unlimited transfers per Certificate Year during the Accumulation
Period and unlimited transfers every 12 months during the Annuity Period. We
reserve the right to change, upon notice, the frequency of transfers a
Certificate Owner can make. We also reserve the right to impose a charge for
any transfer in excess of 12 per Certificate Year. The transfer charge is
shown in the Charges section of the Schedule.
Minimum amount to be transferred: None
Minimum amount which must remain in a Sub-account after transfer: None
Partial Withdrawals
A Certificate Owner may make partial withdrawals during the Accumulation
Period without incurring a Surrender Charge, as follows:
(1) In any Certificate Year a Certificate Owner may withdraw an
aggregate amount not to exceed, at the time of withdrawal:
(a) the Certificate Value, less
(b) the portion of the Purchase Payments not previously
withdrawn by that Certificate Owner; and
(2) In any Certificate Year after the first, a Certificate Owner may
also withdraw the positive difference, if any, between the amount
withdrawn pursuant to (1) above in any such subsequent year and 10%
of the Certificate Value as of the preceding Certificate
Anniversary.
Minimum withdrawal amount: $300, unless the withdrawal is made pursuant to
Our Systematic Withdrawal Program described below, in which case the minimum
withdrawal is $100.
Minimum Certificate Value which must remain after a partial withdrawal:
$2,500.
Death Benefits
Adjustment of Certificate Value
When We receive due proof of death of the Certificate Owner, any Joint
Certificate Owner, or the Annuitant if the Certificate Owner is a non-natural
Person, We will compare, as of the date of death, the Certificate Value to
the Death Benefit amount defined in the Certificate Schedule. If the
Certificate Value is less than the Death Benefit, We will increase the
current Certificate Value by the amount of the difference. Any amount
credited will be allocated to the Variable Account and/or the Fixed Account
based on the Purchase Payment allocation selection that is in effect when We
receive due proof of death.
Waiver of Surrender Charges
If the Certificate is surrendered within 90 days of the date of death of the
Certificate Owner, any Joint Certificate Owner, or the Annuitant if the
Certificate Owner is a non-natural Person, any applicable Surrender Charges
will not be deducted from the Certificate Withdrawal Value.
Death Benefit Amount
A Certificate Schedule will contain the following Death Benefit provision.
Certificate Anniversary Death Benefit
On the Certificate Date, the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) (a) Start with the Death Benefit from the Certificate Date;
(b) Add to (a) any additional Purchase Payments paid since the
Certificate Date and subtract from (a) any partial withdrawals
(including any associated Surrender Charge incurred) made since
the Certificate Date;
(2) (a) Determine the Certificate Value for each Certificate
Anniversary (the "Anniversary Value") before the [81st]
birthday of the Certificate Owner or, if the Certificate Owner
is a non-natural Person, the Annuitant;
(b) Increase each "Anniversary Value" by any Purchase Payments made
after that Value's Anniversary;
(c) Decrease each "Anniversary Value" by the following amount
calculated at the time of each partial withdrawal made after
that Value's Anniversary: (i) the partial withdrawal amount
(including any associated Surrender Charge incurred) divided by
the Certificate Value immediately preceding the withdrawal,
(ii) multiplied by the "Anniversary Value" immediately
preceding the withdrawal;
(d) Select the highest "Anniversary Value" after the adjustments in
(b) and (c) above;
(3) Set the Death Benefit equal to the greater of (1) and (2).
If there is a change of Certificate Owner, the new Certificate Owner's age
will be used to determine the amount in (2) above.
The Variable Separate Account
Sub-accounts investing in shares of mutual funds
Variable Account J is a unit investment trust variable separate account,
organized in and governed by the laws of the State of Massachusetts, Our
state of domicile. Variable Account J is divided into Sub-accounts. Each
Sub-account listed below invests in shares of the corresponding Portfolio of
the Eligible Fund shown.
Sub-account Eligible Fund and Portfolio
The Alger American Fund
Alger Growth Alger American Growth Portfolio - seeks
Sub-account long-term capital appreciation.
Alger Small Cap Alger American Small Capitalization
Sub-account Portfolio - seeks long-term capital
appreciation.
Alliance Variable Products Series Fund, Inc.
Alliance Global Bond Global Bond Portfolio - seeks a high level of
Sub-account return from a combination of current income and
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 Premier Growth Premier Growth Portfolio - seeks growth of
Sub-account capital rather than current income.
Keyport Variable Investment Trust
Colonial Growth & Income Colonial-Keyport Growth and Income
Sub-account Fund - seeks primarily income
and long-term capital growth and, secondarily,
preservation of capital.
Colonial Strategic Income Colonial-Keyport Strategic Income Fund -
Sub-account seeks a high level of current income, as is
consistent with prudent risk and maximizing
total return, by diversifying investments
primarily in U.S. and foreign government and
high yield, high risk corporate debt
securities.
Colonial Int'l Fund for Colonial-Keyport International Fund for Growth-
Growth Sub-account seeks long-term capital growth, by investing
primarily in non-U.S. equity securities.
Colonial U.S. Fund for Colonial-Keyport U.S. Fund for Growth -
Growth Sub-account seeks growth exceeding over time the S&P
500 Index (Standard & Poor's Corporation
Composite Price Index) performance.
Colonial Utilities Colonial-Keyport Utilities Fund - seeks
Sub-account primarily current income and, secondarily,
long-term capital growth.
Newport Tiger Newport-Keyport Tiger Fund - seeks long-
Sub-account term capital growth by investing primarily
in equity securities of companies located in
the four Tigers of Asia (Hong Kong, Singapore,
South Korea and Taiwan) and the other mini-
Tigers of East Asia (Malaysia, Thailand,
Indonesia, China and the Philippines).
MFS Variable Insurance Trust
MFS Emerging Growth MFS Emerging Growth Series - seeks to provide
Sub-account long-term growth of capital.
MFS Research MFS Research Series - seeks to provide long-
Sub-Account term growth of capital and future income.
SteinRoe Variable Investment Trust
SteinRoe Cap Appreciation Capital Appreciation Fund - seeks capital
Sub-account growth by investing primarily in common stocks,
convertible securities, and other securities
selected for prospective capital growth.
SteinRoe Cash Income Cash Income Fund - seeks high current income
Sub-account from short-term money market instruments
("Money Market" Sub-account) while emphasizing preservation of capital and
maintaining excellent liquidity.
SteinRoe Managed Assets Managed Assets Fund - seeks high total inves-
Sub-account tment return through investment in a changing
mix of securities.
SteinRoe Managed Growth Managed Growth Stock Fund - seeks long-term
Stock Sub-account growth of capital through investment primarily
in common stocks.
SteinRoe Mortgage Securities Mortgage Securities Income Fund - seeks highest
Income Sub-account possible level of current income consistent
with safety of principal and maintenance of
liquidity through investment primarily in
mortgage-backed securities.
Sub-Accounts investing directly in securities - None
The Fixed Account
The Fixed Account is part of Our General Account, which consists of all of
Our assets except the assets of the Variable Account and the assets of other
separate accounts that We maintain. Subject to applicable law, We have sole
discretion over investments of the assets of the Fixed Account. If a
Certificate Owner allocates assets to the Fixed Account, the Certificate
Owner's accumulation values and annuity payments will have guaranteed
minimums.
Before the Income Date, a Certificate Owner's interest in the Fixed Account
is measured by the Fixed Account Value. When annuity payments begin, the
payee's interest in the Fixed Account is measured by the amount of each
periodic payment.
Benefits from the Fixed Account will not be less than the minimum values
required by any law of the jurisdiction where the Certificate is delivered.
Purchase Payments will be allocated to the Fixed Account in accordance with a
Certificate Owner's selection at the Certificate Date. A Certificate Owner
may change such selection by Written Request.
The Fixed Account Value at any time is equal to:
(1) all Purchase Payments allocated to the Fixed Account plus the interest
subsequently credited on those payments; plus
(2) any Variable Account value transferred to the Fixed Account plus the
interest subsequently credited on the transferred value; less
(3) any prior partial withdrawals from the Fixed Account; less
(4) any Fixed Account Value transferred to the Variable Account.
We will credit interest to Purchase Payments allocated to the Fixed Account
at rates declared by Us for Guarantee Periods of one or more years from the
month and day of allocation. The minimum Guaranteed Interest Rate is 3% per
year.
Certificate Owner Services
The Programs. Liberty Life offers the following investment related programs
which are available only prior to the Income Date: Dollar Cost Averaging;
Capital Protection Plus; and Systematic Withdrawal Programs. A Rebalancing
Program is available prior to and after the Income Date. Under this Program,
the related transfers between and among Sub-Accounts and the Fixed Account
are not counted as one of the twelve free transfers. Each Program has its
own requirements, as discussed below. Liberty Life reserves the right to
terminate any Program.
Dollar Cost Averaging Program. The program periodically transfers
Accumulation Units from the SteinRoe Cash Income Sub-Account or the One-Year
Guarantee Period of the Fixed Account to other Sub-Accounts selected by the
Certificate Owner. The program allows a Certificate Owner to invest in
Variable Sub-Accounts over time rather than having to invest in those Sub-
Accounts all at once. The program is available for initial and subsequent
Purchase Payments and for Certificate Value transferred into the SteinRoe
Cash Income Sub-Account or the One-Year Guarantee Period. Under the program,
Liberty Life makes automatic transfers on a periodic basis out of the
SteinRoe Cash Income Sub-Account or the One-Year Guarantee Period into one or
more of the other available Sub-Accounts (Liberty Life reserves the right to
limit the number of Sub-Accounts the Certificate Owner may choose but there
are currently no limits). The program will automatically end if the Income
Date occurs. Liberty Life reserves the right to end the program at any time
by sending the Certificate Owner a notice one month in advance.
Rebalancing Program. In accordance with the Certificate Owner's election of
the relative Purchase Payment percentage allocations, Liberty Life will
automatically rebalance the Certificate Value of each Sub-Account either
monthly, quarterly, semi-annually, or annually. On the last day of the
period selected, Liberty Life will automatically rebalance the Certificate
Value in each of the Sub-Accounts to match the current Purchase Payment
percentage allocations. The Program may be terminated at any time and the
percentages may be altered by Written Request. Certificate Value allocated to
the Fixed Account is not subject to automatic rebalancing. After the Income
Date, automatic rebalancing applies only to variable annuity payments and
Liberty Life will rebalance the number of Annuity Units in each Sub-Account.
Systematic Withdrawal Program. Liberty Life will make monthly, quarterly,
semi-annually or annual distributions of a predetermined dollar amount to the
Certificate Owner that has enrolled in the Systematic Withdrawal Program. The
Certificate Owner may specify the amount of each partial withdrawal, subject
to a minimum of $100. Systematic withdrawals may only be made from the Sub-
Accounts and the One Year Guarantee Period of the Fixed Account. In each
Certificate Year, portions of Certificate Value may be withdrawn without the
imposition of any Contingent Deferred Sales Charge ("Free Withdrawal
Amount"). If withdrawals pursuant to the Program are greater than the Free
Withdrawal Amount, the amount of the withdrawals greater than the Free
Withdrawal Amount will be subject to the applicable Contingent Deferred Sales
Charge. Any unrelated voluntary partial withdrawal a Certificate Owner makes
during a Certificate Year will be aggregated with withdrawals pursuant to the
Program to determine the applicability of any Contingent Deferred Sales
Charge under the Certificate provisions regarding partial withdrawals.
Capital Protection Plus Under this program, Liberty Life will allocate part
of the Purchase Payment to the Guarantee Period selected by the Certificate
Owner so that such part, based on that Guarantee Period's interest rate in
effect on the date of allocation, will equal at the end of the Guarantee
Period the total Purchase Payment. The rest of the Purchase Payment will be
allocated to the Sub-Account(s) of the Variable Account based on the
Certificate Owner's allocation. If any part of the Fixed Account Value is
surrendered or transferred before the end of the Guarantee Period, the Value
at the end of that Period will not equal the original Purchase Payment
amount.
Definitions (continued)
Certificate: The document issued to a Certificate Owner to evidence a
Certificate Owner's participation under the Group Contract. The Certificate
summarizes the benefits and provisions of the Group Contract.
Certificate Anniversary: An anniversary of the Certificate Date.
Certificate Date: The date a Certificate is issued to a Certificate Owner.
The Certificate Date is shown on the Certificate Schedule.
Certificate Owner: The person who owns a Certificate under the Group
Contract. Any Joint Certificate Owners and the Certificate Owner own the
Certificate equally with rights of survivorship. All Owners must exercise
ownership rights and privileges together, including the signing of Written
Requests.
Certificate Value: The sum of the Certificate Owner's interest in the Sub-
accounts of the Variable Account and the Fixed Account during the
Accumulation Period.
Certificate Year: The first Certificate Year is the annual period which
begins on the Certificate Date. Subsequent Certificate Years begin on each
Certificate Anniversary.
Eligible Fund: An investment entity shown on the Certificate Schedule.
Fixed Account: The account We establish to support Fixed Allocations. The
Contract Schedule shows whether the Fixed Account is available under the
Certificates.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under a Certificate prior to the Income Date.
Fixed Allocation: An amount allocated to the Fixed Account that is credited
with a Guaranteed Interest Rate for a specified Guarantee Period.
Fixed Annuity: An annuity with a series of payments made during the Annuity
Period which are guaranteed as to dollar amount by Us.
General Account: Our general investment account which contains all of Our
assets except those in the Variable Account and Our other separate accounts.
Group Contract Owner: The person or entity to which the Group Contract is
issued.
Guaranteed Interest Rate: The effective annual interest rate which We will
credit for a specified Guarantee Period.
Guarantee Period: The period of year(s) a rate of interest is guaranteed to
be credited within the Fixed Account.
Income Date: The date on which Annuity Payments begin. The Income Date is
shown on the Certificate Schedule.
In Force: The status of a Certificate before the Income Date so long as it
has not been totally surrendered and there has not been a death of a
Certificate Owner or Joint Certificate Owner that will cause the Certificate
to end within five years of the date of death.
Office: Our service office shown on the Certificate Schedule.
Person: A human being, trust, corporation, or any other legally recognized
entity.
Portfolio: A series of an Eligible Fund which constitutes a separate and
distinct class of shares.
Purchase Payment: A payment made by or on behalf of a Certificate Owner with
respect to a Certificate.
Sub-account: Variable Account assets are divided into Sub-accounts. Assets
of each Sub-account will be invested in shares of a Portfolio of an Eligible
Fund, or directly in portfolio securities.
Valuation Date: Each day on which We and the New York Stock Exchange
("NYSE") are open for business, or any other day that the Securities and
Exchange Commission requires that mutual funds, unit investment trusts or
other investment portfolios be valued.
Valuation Period: The period of time beginning at the close of business of
the NYSE on each Valuation Date and ending at the close of business on the
next succeeding Valuation Date.
Variable Account: Our Variable Account(s) shown on the Certificate Schedule.
Variable Annuity: An annuity with payments which vary as to dollar amount in
relation to the investment performance of specified Sub-accounts of the
Variable Account.
We, Us, Our: Liberty Life Assurance Company of Boston.
Written Request: A request in writing, in a form satisfactory to Us, and
received by Us at Our Office.
General Provisions
Purchase Payments
The initial Purchase Payment is due on the Certificate Date. It must be paid
at Our Office in United States currency. Coverage under a Certificate does
not take effect until We have accepted the initial Purchase Payment during a
Certificate Owner's lifetime. Each Purchase Payment after the Certificate
Date must be at least the amount shown on the Certificate Schedule. Provided
the Certificate Value under a Certificate does not go to zero, a Certificate
will stay in force until the Income Date even if a Certificate Owner make no
payments after the initial one. We reserve the right to reject any
subsequent Purchase Payment.
Allocation of Purchase Payments
An initial Purchase Payment is allocated to the Sub-accounts of the Variable
Account, and to the Fixed Account if available, in accordance with the
selections made by a Certificate Owner at the Certificate Date. Unless
otherwise changed by a Certificate Owner, subsequent Purchase Payments are
allocated in the same manner as the initial Purchase Payment. Allocation of
Purchase Payments is subject to the terms and conditions imposed by Us. We
reserve the right to allocate initial Purchase Payments to the Money Market
Sub-account until the expiration of the Right to Examine Certificate period
set forth on the first page of the Group Contract and the Certificate.
The Contract
The Group Contract, including the application, if any, and any attached rider
or endorsement constitute the entire contract between the Group Contract
Owner and Us. All statements made by the Group Contract Owner, any
Certificate Owner or any Annuitant will be deemed representations and not
warranties. No such statement will be used in any contest unless it is
contained in the application signed by the Group Contract Owner or in a
written instrument signed by the Certificate Owner, a copy of which has been
furnished to the Certificate Owner, the Beneficiary or to the Group Contract
Owner.
Only Our President or Secretary may agree to change any of the terms of the
Group Contract. Any changes must be in writing. Any change to the terms of
a Certificate must be in writing and with Certificate Owner's consent,
unless provided otherwise by the Group Contract and the Certificate.
To assure that the Group Contract and the Certificate will maintain their
status as a variable annuity under the Internal Revenue Code, We reserve the
right to change the Group Contract and any Certificate issued thereunder to
comply with future changes in the Internal Revenue Code, any regulations or
rulings issued thereunder, and any requirements otherwise imposed by the
Internal Revenue Service. The Group Contract Owner and the affected
Certificate Owner will be sent a copy of any such amendment.
We reserve the right, subject to the approval of the New York Superintendent
of Insurance and compliance with U.S. Laws as currently applicable or
subsequently changed, to: (a) operate the Variable Account in any form
permitted under the Investment Company Act of 1940, as amended, (the "1940
Act"), or in any other form permitted by law; (b) take any action necessary
to comply with or obtain and continue any exemptions from the 1940 Act, or to
comply with any other applicable law; (c) transfer any assets in any Sub-
account to another Sub-account, or to one or more separate investment
accounts, or the General Account; or to add, combine or remove Sub-accounts
in the Variable Account; and (d) change the way We assess charges, so long as
We do not increase the aggregate amount beyond that currently charged to the
Variable Account and the Eligible Funds in connection with a Certificate. If
the shares of any of the Eligible Funds should become unavailable for
investment by the Variable Account or if in Our judgment further investment
in such Portfolio shares should become inappropriate in view of the purpose
of the Certificate, We may add or substitute shares of another mutual fund
for the Portfolio shares already purchased under the Certificate. No
substitution of Portfolio shares in any Sub-account may take place without
prior approval of the Securities and Exchange Commission and notice to the
affected Certificate Owners, to the extent required by the 1940 Act.
Certificate Owner
A Certificate Owner has all rights and may receive all benefits under a
Certificate. A Certificate Owner is the person designated as such on the
Certificate Date, unless changed. A Certificate Owner may exercise all
rights of a Certificate while it is In Force, subject to the rights of (a)
any assignee under an assignment filed with Us, and (b) any irrevocably named
Beneficiary.
Joint Certificate Owner
A Certificate can be owned by Joint Certificate Owners. Upon the death of
any Certificate Owner or Joint Certificate Owner, the surviving owner(s) will
be the primary Beneficiary(ies). Any other beneficiary designation will be
treated as a Contingent Beneficiary unless otherwise indicated in a Written
Request filed with Us.
Annuitant
The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by a Certificate Owner at the Certificate
Date, unless changed prior to the Income Date. Any change of Annuitant is
subject to Our underwriting rules then in effect. The Annuitant may not be
changed in a Certificate which is owned by a non-natural person. A
Certificate Owner may name a Contingent Annuitant. The Contingent Annuitant
becomes the Annuitant if the Annuitant dies while a Certificate is In Force.
If the Annuitant dies and no Contingent Annuitant has been named, We will
allow a Certificate Owner sixty days to designate someone other than the
Certificate Owner as Annuitant. The Certificate Owner will be the Contingent
Annuitant unless the Certificate Owner names someone else. If the Certificate
is owned by a non-natural person, the death of the Annuitant will be treated
as the death of the Certificate Owner and a new Annuitant may not be
designated.
Beneficiary
The Beneficiary is the person who controls the Certificate if any Certificate
Owner dies prior to the Income Date. If the Certificate is owned by Joint
Certificate Owners, upon the death of any Certificate Owner or Joint
Certificate Owner, the surviving owner(s) will become the primary
Beneficiary. Any other beneficiary designation will be treated as a
Contingent Beneficiary unless otherwise indicated in a Written Request filed
with Us. If a Certificate Owner names more than one Person as Primary
Beneficiary or as Contingent Beneficiary, and does not state otherwise on an
application or in a Written Request to Us, any non-survivors will not receive
a benefit. The survivors will receive equal shares. Subject to the rights
of any irrevocable Beneficiary(ies), a Certificate Owner may change primary
or contingent Beneficiary(ies). A change must be made by Written Request and
will be effective as of the date the Written Request is signed. We will not
be liable for any payment We make or action We take before We receive the
Written Request.
Group Contract Owner
The Group Contract Owner has title to the Group Contract. The Group Contract
and any amount accumulated under any Certificate are not subject to the
claims of the Group Contract Owner or any of its creditors. The Group
Contract Owner may transfer ownership of this Group Contract. Any transfer
of ownership terminates the interest of any existing Group Contract Owner.
It does not change the rights of any Certificate Owner. Nothing in the Group
Contract shall invalidate or impair any rights granted to the Certificate
Owner by the Certificate or New York law.
Change of Certificate Owner, Beneficiary or Contingent Annuitant
While a Certificate is In Force, a Certificate Owner may by Written Request
change the primary Certificate Owner, Joint Certificate Owner, primary
Beneficiary, Contingent Beneficiary, Contingent Annuitant, or in certain
instances, the Annuitant. An irrevocably named Person may be changed only
with the written consent of such Person. The change will be effective,
following Our receipt of the Written Request, as of the date the Written
Request is signed. The change will not affect any payments We make or
actions We take prior to the time We receive the Written Request.
Assignment of the Certificate
A Certificate Owner may assign a Certificate at any time while it is In
Force. The assignment must be in writing and a copy must be filed at Our
Office. A Certificate Owner's rights and those of any revocably named Person
will be subject to the assignment. An assignment will not affect any
payments We make or actions We take before We receive the assignment. We are
not responsible for the validity of any assignment.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any payee has been misstated, We will
compute the amount payable based on the correct age and sex. If Annuity
Payments have begun, any underpayment(s) that have been made plus interest at
a rate of 5% per year will be paid in full with the next Annuity Payment.
Any overpayment plus interest at a rate of 5% per year, unless repaid to Us
in one sum, will be deducted from future Annuity Payments otherwise due until
We are repaid in full.
Non-Participating
A Certificate does not participate in Our divisible surplus.
Evidence of Death, Age, Sex or Survival
If a Certificate provision relates to the death of a natural Person, We will
require proof of death before We will act under that provision. Proof of
death shall be: (a) a certified death certificate; or (b) a certified decree
of a court of competent jurisdiction as to the finding of death; or (c) a
written statement by a medical doctor who attended the deceased; or (d) any
other document constituting due proof of death under applicable state law.
If Our action under a Certificate provision is based on the age, sex, or
survival of any Person, We may require evidence of the particular fact before
We act under that provision.
Protection of Proceeds
No Beneficiary or payee may commute or assign any payments under a
Certificate before they are due. To the extent permitted by law, no payments
shall be subject to the debts of any Beneficiary or payee or to any judicial
process for payment of those debts.
Reports
We will send Certificate Owners a report that shows the Certificate Value at
least once each Certificate Year. We will send any other reports that may be
required by law.
Taxes
Any taxes paid to any governmental entity relating to a Certificate will be
deducted from the Purchase Payments or Certificate Value. We may, in Our
sole discretion, delay the deduction until a later date. By not deducting
tax payments at the time of Our payment, We do not waive any right We may
have to deduct amounts at a later date. We will, in Our sole discretion,
determine when taxes relate to a Certificate or to the operation of the
Variable Account. We reserve the right to establish a provision for federal
income taxes if We determine, in Our sole discretion, that We will incur a
tax as a result of the operation of the Variable Account. Such a provision
will be reflected in the Accumulation and Annuity Unit Values. We will
deduct for any income taxes incurred by Us as a result of the operation of
the Variable Account whether or not there was a provision for taxes and
whether or not it was sufficient. We will deduct from any payment under a
Certificate any withholding taxes required by applicable law.
Regulatory Requirements
All values payable under a Certificate will not be less than the minimum
benefits required by the laws and regulations of the states in which the
Certificate is delivered.
Suspension or Deferral of Payments
We reserve the right to suspend or postpone payments for a withdrawal,
transfer, surrender or death benefit for any period when:
(1) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); or
(2) trading on the New York Stock Exchange is restricted; or
(3) an emergency exists as a result of which valuation or disposal
of the assets and securities of the Variable Account is not
reasonably practicable; or
(4) the Securities and Exchange Commission, by order or
pronouncement, so permits for the protection of Certificate Owners;
provided that applicable rules and regulations of the Securities and Exchange
Commission govern as to whether the conditions described in (2) and (3) above
exist.
We reserve the right to delay payment of amounts allocated to the Fixed
Account for up to six months.
Variable Account Provisions
The Variable Account
The Variable Account(s) is designated on the Certificate Schedule and
consists of assets set aside by Us, which are kept separate from Our general
assets and all other variable account assets We maintain. We own the assets
of the Variable Account. Variable Account assets equal to reserves and other
contract liabilities will not be chargeable with liabilities arising out of
any other business We may conduct. We may transfer to Our General Account
assets which exceed the reserves and other liabilities of the Variable
Account. Income and realized and unrealized gains or losses from assets in
the Variable Account are credited to or charged against the account without
regard to other income, gains or losses in Our other investment accounts.
The Variable Account assets are divided into Sub-accounts. The Sub-accounts
which are available under the Certificate are shown on the Certificate
Schedule. The assets of the Sub-accounts of the unit investment trust
variable separate account are allocated to the Eligible Fund(s) and the
Portfolio(s), if applicable, within an Eligible Fund shown on the Certificate
Schedule. The assets of the Sub-accounts of the investment company variable
separate account, if applicable, are invested in portfolios of securities
designed to meet the objectives of the Sub-Account shown on the Certificate
Schedule. We may, from time to time, add additional Sub-accounts, Eligible
Funds or Portfolios to those shown on the Certificate Schedule. A
Certificate Owner may be permitted to transfer Certificate Values or allocate
Purchase Payments to the additional Sub-Accounts, Eligible Funds or
Portfolios. However, the right to make such transfers or allocations will be
limited by the terms and conditions imposed by Us.
We also have the right to eliminate Sub-accounts from the Variable Account,
to combine two or more Sub-accounts or to substitute a new Portfolio for the
Portfolio in which a Sub-account invests. A substitution may become
necessary if, in Our discretion, a Portfolio or Sub-account no longer suits
the purposes of the Group Contract. This may happen: due to a change in
laws or regulations or a change in a Portfolio's investment objectives or
restrictions; because the Portfolio or Sub-account is no longer available for
investment; or for some other reason. We will obtain any prior approvals
that may be required from the insurance department of Our state of domicile,
the New York Superintendent of Insurance and from the SEC or any other
governmental entity before making such a substitution.
When permitted by law, We reserve the right to:
(1) Deregister a Variable Account under the 1940 Act;
(2) Operate a Variable Account as a management company under the 1940
Act, if it is operating as a unit investment trust;
(3) Operate a Variable Account as a unit investment trust under the
1940 Act, if it is operating as a management company;
(4) Restrict or eliminate any voting rights as to the account;
(5) Combine the Variable Account with any other variable account.
Valuation of Assets
The assets of the Variable Account are valued at their fair market value in
accordance with Our procedures.
Accumulation Units
A Certificate Owner's Variable Account value will fluctuate in accordance
with the investment results of the Sub-accounts to which the Certificate
Owner has allocated his or her Purchase Payments or Certificate Value. In
order to determine how these fluctuations affect a Certificate Owner's
Certificate Value, We use an Accumulation Unit value. Accumulation Units are
used to account for all amounts allocated to or withdrawn from the Sub-
accounts of the Variable Account as a result of Purchase Payments, partial
withdrawals, transfers, or charges deducted from the Certificate Value. We
determine the number of Accumulation Units of a Sub-account purchased or
canceled by dividing the amount allocated to, or withdrawn from, the Sub-
account by the dollar value of one Accumulation Unit of the Sub-account as of
the end of the Valuation Period during which We receive the request for the
transaction.
Accumulation Unit Value
The Accumulation Unit Value for each Sub-account was initially set at $10.
Subsequent Accumulation Unit Values for each Sub-account are determined by
multiplying the Accumulation Unit Value for the immediately preceding
Valuation Period by a net investment factor for the Sub-account for the
current period. This factor may be greater or less than 1.0; therefore, the
Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period.
We calculate the net investment factor for each Sub-account investing in
shares of mutual funds by dividing (a) by (b) and then subtracting (c) where:
(a) is equal to:
(i) the net asset value per share of the Portfolio in which the
Sub-account invests at the end of the Valuation Period; plus
(ii) any dividend per share declared for the Portfolio that has an ex-dividend
date within the current Valuation Period.
(b) is the net asset value per share of the Portfolio at the end of the
preceding Valuation Period.
(c) is equal to:
(i) the sum of each Valuation Period equivalent of the annual rate
for the Mortality and Expense Risk Charge, for the Administrative
Charge, and for the Distribution Charge, if any, which are shown on the
Certificate Schedule; plus
(ii) a charge factor, if any, for any tax provision established by
Us a result of the operation of the Sub-account.
We calculate the net investment factor for each Sub-account investing
directly in securities with the same formula, except:
(a) is equal to:
(i) the value of the assets in the Sub-account at the
end of the preceding Valuation Period; plus
(ii) any investment income and capital gains, realized or
unrealized, credited to the assets during the current
Valuation Period; less
(iii) any capital losses, realized or unrealized,
charged against the assets during the current Valuation
Period; less
(iv) all operating and investment expenses relating to
the assets that are incurred during the current Valuation
Period.
(b) is the value of the assets in the Sub-account at the end of
the preceding Valuation Period.
Mortality and Expense Risk Charge
Each Valuation Period We deduct a Mortality and Expense Risk Charge from each
Sub-account of the Variable Account which is equal, on an annual basis, to
the amount shown on the Certificate Schedule. The Mortality and Expense Risk
Charge compensates Us for assuming the mortality and expense risks with
respect to the Certificates We issue. We guarantee the dollar amount of each
Annuity Payment after the first Annuity Payment will not be affected by
variations in mortality or expense experience.
Administrative Charge
Each Valuation Period We deduct an Administrative Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Administrative Charge compensates Us for the costs
associated with administration of the Variable Account and the Certificates
We issue.
Distribution Charge
Each Valuation Period We deduct a Distribution Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Distribution Charge compensates Us for the costs
associated with the distribution of the Certificates We issue.
Certificate Maintenance Charge
We deduct a Certificate Maintenance Charge from the Certificate Value by
canceling Accumulation Units from each applicable Sub-account to reimburse
Us for expenses relating to the maintenance of the Certificate. We will
deduct the Certificate Maintenance Charge from the Sub-accounts of the
Variable Account in the same proportion that the amount of Certificate Value
in each Sub-account bears to the Certificate Value. The Certificate
Maintenance Charge is shown on the Certificate Schedule. The Certificate
Maintenance Charge will be deducted from the Certificate Value on each
Certificate Anniversary during the Accumulation Period.
If a total surrender is made on a date other than a Certificate Anniversary,
the Certificate Maintenance Charge will be deducted at the time of surrender.
During the Annuity Period, the Certificate Maintenance Charge will be
deducted on a pro-rata basis from each Annuity Payment.
Transfers
Transfers: Subject to any limitation We impose on the number of transfers
permitted in a Certificate Year, a Certificate Owner may transfer all or part
of Certificate Owner's Certificate Value among the Sub-accounts and the Fixed
Account, if any, by Written Request or by telephone without the imposition of
any fees or charges. Transfers among the Sub-accounts and the Fixed Account
are permitted only during the Accumulation Period. The number of permitted
transfers, and the charge for transfers in excess of that number, are shown
on the Certificate Schedule. All transfers are subject to the following:
(1) If more than the number of free transfers, shown on the Certificate
Schedule, are made in a Certificate Year, We will deduct a transfer charge,
shown on the Certificate Schedule, for each subsequent transfer. The
transfer fee will be deducted from the Sub-account from which the transfer is
made. However, if Certificate Owner transfers his or her entire interest in
a Sub-account, the transfer fee will be deducted from the amount transferred.
If a Certificate Owner makes a transfer from more than one Sub-account, any
transfer fee will be allocated pro-rata among such Sub-accounts in proportion
to the amount transferred from each. The deduction of any fees We impose on
such transfers will not exceed the maximum listed on page 3.
(2) During the Annuity Period, transfers of values between Sub-accounts
will be made by converting the number of Annuity Units being transferred to
the number of Annuity Units in the Sub-account to which a transfer is made,
so that the next Annuity Payment, if it were made at that time, would be the
same amount that it would have been without the transfer. Thereafter,
Annuity Payments will reflect changes in the value of the new Annuity Units.
(3) The minimum amount which can be transferred is shown on the
Certificate Schedule. The minimum amount which must remain in a Sub-account
after a transfer is shown on the Certificate Schedule.
(4) If 100% of the value of any Sub-account is transferred and the
current allocation for Purchase Payments includes that Sub-account, the
allocation for future Purchase Payments will change to reflect a Certificate
Owner's allocation of Certificate Value following the transfer.
(5) We reserve the right, at any time and without prior notice to any
party, to terminate, suspend or modify the transfer privileges described
above.
We will not be liable for transfers made in accordance with a Certificate
Owner's instructions. All amounts and Accumulation Units will be determined
as of the end of the Valuation Period in which We receive the request for
transfer.
Partial Withdrawals and Total Surrender
Partial Withdrawals
During the Accumulation Period while the Certificate is In Force, a
Certificate Owner may, upon Written Request, make a partial withdrawal,
subject to the provisions and limitations shown on the Certificate Schedule.
For purposes of determining whether a Surrender Charge is applicable to a
partial withdrawal:
(1) A partial withdrawal will first be taken from the portion of a
Certificate Owner's Certificate Value which is in excess of
Purchase Payments, and then from Purchase Payments; and
(2) We will allocate partial withdrawals to Purchase Payments in the
order in which the Purchase Payments were made, starting with the
first.
A withdrawal will result in the cancellation of Accumulation Units from each
applicable Sub-account in the ratio that a Certificate Owner's interest in
the Sub-account bears to his or her Certificate Value in all the Sub-
accounts. A Certificate Owner must specify by Written Request in advance if
he or she wants Accumulation Units to be canceled in a manner other than the
method described above. If there is no value or insufficient value in the
Variable Account, then the amount withdrawn, or the insufficient portion,
will be deducted from the Fixed Account. If a Certificate Owner has multiple
Guarantee Periods, We will deduct such amount from each Guarantee Period's
values in the ratio that each Period's values bears to the total Fixed
Account Value. A Certificate Owner must specify by Written Request in
advance if he or she wants multiple Guarantee Periods to be reduced in a
manner other than the method described above. Any amount deducted from the
fixed account value may be subject to a market value adjustment, if
applicable.
Each partial withdrawal must be for an amount not less than the amount shown
on the Certificate Schedule. The Certificate Value which must remain in a
Certificate is shown on the Certificate Schedule. The Certificate Schedule
also shows any charge.
Total Surrender
During the Accumulation Period while the Certificate is In Force, a
Certificate Owner may, upon Written Request, make a total surrender of the
Certificate Withdrawal Value. The Certificate Withdrawal Value is:
(1) the Certificate Value as of the end of the Valuation Period during
which We receive a Written Request for a withdrawal or
surrender; less
(2) any applicable taxes not previously deducted; less
(3) any Surrender Charge; less
(4) any Certificate Maintenance Charge.
The Fixed Account Value, which is a component of the Certificate Value, may
be subject to a market value adjustment, if applicable.
We will pay the amount of any withdrawal or surrender within seven days
unless the Suspension or Deferral of Payments Provision is in effect.
Death Provisions
Death of Certificate Owner
These provisions apply if, during the Accumulation Period while the
Certificate is In Force, the Certificate Owner or any Joint Certificate Owner
dies (whether or not the decedent is also the Annuitant) or the Annuitant
dies under a Certificate owned by a non-natural Person. The "designated
beneficiary" will control the Certificate after such a death. This
"designated beneficiary" will be the first Person among the following who is
alive on the date of death: Certificate Owner; Joint Certificate Owner;
primary Beneficiary; Contingent Beneficiary; and Certificate Owner's estate.
If the Certificate Owner and Joint Certificate Owner are both alive, they
shall be the "designated beneficiary" together.
If the decedent's surviving spouse (if any) is the sole "designated
beneficiary", the surviving spouse will automatically become the new sole
Certificate Owner as of the date of the death. And, if the Annuitant is the
decedent, the new Annuitant will be any living Contingent Annuitant,
otherwise the surviving spouse. The Certificate may stay in force until
another death occurs (i.e., until the death of the Certificate Owner or Joint
Certificate Owner). Except for this paragraph, all of "Death Provisions" will
apply to that subsequent death.
In all other cases, the Certificate may stay in force up to five years from
the date of death. During this period, the "designated beneficiary" may
exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to surrender the Certificate for its
Certificate Withdrawal Value. If this Certificate is still in force at the
end of the five-year period, We will automatically end it then by paying to
the "designated beneficiary" the Certificate Withdrawal Value without the
deduction of any applicable Surrender Charges. If the "designated
beneficiary" is not alive then, We will pay any Person(s) named by the
"designated beneficiary" in a Written Request; otherwise the "designated
beneficiary's" estate.
Death of Annuitant
These provisions apply if during the Accumulation Period while the
Certificate is In Force, (a) the Annuitant dies, (b) the Annuitant is not an
Owner, and (c) the Owner is a natural person. The Certificate will continue
In Force after the Annuitant's death. The new Annuitant will be any living
Contingent Annuitant, otherwise the Certificate Owner.
Payment of Benefits
Instead of receiving a lump sum, a Certificate Owner or any "designated
beneficiary" may by Written Request direct that We pay any benefit of $2,000
or more under an Annuity Option that meets the following: (a) the first
payment to the "designated beneficiary" must be made no later than one year
after the date of death; (b) payments must be made over the life of the
"designated beneficiary" or over a period not extending beyond that person's
life expectancy; and (c) any Annuity 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.
Annuity Provisions
General
If the Certificate is In Force on the Income Date, the Adjusted Certificate
Value will be applied under the Annuity Option selected by a Certificate
Owner. Annuity Payments may be made on a fixed or variable basis or both.
Income Date
The Income Date may be selected by a Certificate Owner. It is shown on the
Certificate Schedule. The Income Date can be any time after the Certificate
Date for variable payments and any time after the first Certificate
Anniversary for fixed payments. The Income Date may not be later than the
earlier of when the Annuitant reaches attained age 90 or that required under
state law. If no Income Date is selected, it will be the earlier of when the
Annuitant reaches attained age 90 or the maximum date permitted under state
law, if any.
Prior to the Income Date, a Certificate Owner may change the Income Date by
Written Request. Any change must be requested at least 30 days prior to the
new Income Date.
Selection of an Annuity Option
An Annuity Option may be selected by a Certificate Owner. If no Annuity
Option is selected, Option B will automatically be applied. Prior to the
Income Date, a Certificate Owner can change the Annuity Option selected by
Written Request. Any change must be requested at least 30 days prior to the
Income Date.
Frequency and Amount of Annuity Payments
Annuity Payments are paid in monthly installments unless quarterly, semi-
annual or annual payments are chosen. The Adjusted Certificate Value is
applied to the Annuity Table for the Annuity Option selected. If the
Adjusted Certificate Value to be applied under an Annuity Option is less than
$2,000, We reserve the right to make a lump sum payment in lieu of Annuity
Payments. If the Annuity Payment would be or becomes less than $100, We will
reduce the frequency of payments to a longer interval which will result in
each payment being at least $100.
Annuity Options
The following Annuity Options or any other Annuity Option acceptable to Us
may be selected:
OPTION A. ANNUITY FOR A FIXED NUMBER OF YEARS: Annuity Payments for a
chosen number of years, not less than 5. If the payee dies during the
payment period and the Beneficiary does not desire payments to continue
for the remainder of the period, he/she may elect to have the present
value of the remaining payments commuted and paid in a lump sum. During
the payment period of a Variable Annuity, the payee may elect by Written
Request to receive the following amount: (a) the present value of the
remaining payments commuted; less (b) any Surrender Charge that may be
due by treating the value defined in (a) as a surrender. Instead of
receiving a lump sum, the payee may elect another Annuity Option. The
amount applied to that Option would not be reduced by the charge defined
in (b).
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 10 YEARS: Annuity Payments
during the lifetime of the payee and in any event for 10 years certain.
If the payee dies during the guaranteed payment period and the
Beneficiary does not desire payments to continue for the remainder of
the guaranteed period, he/she may elect to have the present value of the
guaranteed payments remaining commuted and paid in a lump sum.
OPTION C. JOINT AND SURVIVOR ANNUITY: Annuity Payments payable during
the joint lifetime of the payee and a designated second natural person
and then during the lifetime of the survivor.
Unless the Annuity Option provides for commutation by the payee, a payee may
not withdraw or otherwise end an Annuity Option after it begins. Payments
will end upon the payee's death unless the Annuity Option provides for
payments continuing to a successor payee. No successor payee may extend the
period of time over which the remaining payments are to be made.
Annuity
If a Certificate Owner selects a Fixed Annuity, the Adjusted Certificate
Value is allocated to the General Account and the Annuity is paid as a Fixed
Annuity. If the Certificate Owner selects a Variable Annuity, the Adjusted
Certificate Value will be allocated to the Sub-accounts of the Separate
Account in accordance with the selection he or she makes, and the Annuity
will be paid as a Variable Annuity. A Certificate Owner can also select a
combination of a Fixed and Variable Annuity and the Adjusted Certificate
Value will be allocated accordingly. If a Certificate Owner does not select
between a Fixed Annuity and a Variable Annuity, any Adjusted Certificate
Value in the Variable Account will be applied to a Variable Annuity and any
Adjusted Certificate Value in the Fixed Account will be applied to a Fixed
Annuity.
The Adjusted Certificate Value will be applied to the applicable Annuity
Table contained in the Certificate based upon the Annuity Option a
Certificate Owner selects. If, as of the Income Date, the current Annuity
Option rates applicable to the class of Certificates issued under the Group
Contract provide an initial Annuity Payment greater than the initial Annuity
Payment guaranteed under the applicable Annuity Table in the Certificate, the
greater payment will be made.
Fixed Annuity
The minimum dollar amount of each Fixed Annuity Payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. After the initial
Fixed Annuity payment, the payments will not change regardless of investment,
mortality or expense experience.
Variable Annuity
Variable Annuity Payments reflect the investment performance of the Variable
Account in accordance with the allocation of the Adjusted Certificate Value
to the Sub-accounts during the Annuity Period. Variable Annuity payments are
not guaranteed as to dollar amount.
The dollar amount of the first Variable Annuity payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. The dollar amount
of Variable Annuity payments for each applicable Sub-account after the first
Variable Annuity Payment is determined as follows:
(1) the dollar amount of the first Variable Annuity payment is
divided by the value of an Annuity Unit for each applicable Sub-
account as of the Income Date. This sets the number of Annuity
Units for each monthly payment for the applicable Sub-account. The
number of Annuity Units for each applicable Sub-account remains
fixed during the Annuity Period;
(2) the fixed number of Annuity Units per payment in each Sub-
account is multiplied by the Annuity Unit Value for that Sub-
account for the Valuation Period for which the payment is due.
This result is the dollar amount of the payment for each applicable
Sub-account.
The total dollar amount of each Variable Annuity payment is the sum of all
Sub-account Variable Annuity payments reduced by the applicable portion of
the Certificate Maintenance Charge.
Annuity Unit
The value of any Annuity Unit for each Sub-Account of the Separate Account
was initially set at $10.
The Sub-account Annuity Unit Value at the end of any subsequent Valuation
Period is determined as follows:
(1) the net investment factor calculated as set forth on pages 11-
12 (but without the Distribution Charge, if any) for the current
Valuation Period is multiplied by the value of the Annuity Unit for
the Sub-account for the immediately preceding Valuation Period.
(2) the result in (1) is then divided by the Assumed Investment
Rate Factor which equals 1.00 plus the Valuation Period equivalent
of the Assumed Investment Rate for the number of days in the
current Valuation Period. The Assumed Investment Rate is equal to
6% per year.
The value of an Annuity Unit may increase or decrease from Valuation Period
to Valuation Period.
Using the Tables
Tables 2, 3, 5, and 6 are age-dependent. The amount of the first annuity
payment will be based on an age a specified number of years younger than the
person's then-attained age (i.e., age last birthday). This age setback is as
follows:
Date of First Payment Age Setback
1996-1999 1 year
2000-2009 2 years
2010-2019 4 years
2020-2029 5 years
2030 or later 6 years
We will calculate the amount for a payment frequency other than monthly and
for any ages not shown in Tables 2, 3, 5, and 6 in accordance with the next
section. Upon request, We will tell a Certificate Owner any such amount.
Basis of Calculation
Tables 1 and 4 are based on interest at 5% and 3%, respectively. Tables 2,
3, 5, and 6 are based on the 1983 Individual Annuity Valuation Tables (sex
distinct), with interest at 5% (Tables 2 and 3) and 3% (Tables 5 and 6),
projected dynamically with Projection Scale G.
TABLE 1: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 1 FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $18.74 12 $9.16 19 $6.71 25 $5.76
6 15.99 13 8.64 20 6.51 26 5.65
7 14.02 14 8.20 21 6.33 27 5.54
8 12.56 15 7.82 22 6.17 28 5.45
9 11.42 16 7.49 23 6.02 29 5.36
10 10.51 17 7.20 24 5.88 30 5.28
11 9.77 18 6.94
TABLE 2: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 2 FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $4.45 $4.34 47 $5.05 $4.78 64 $6.54 $5.98 80 $9.14 $8.67
31 4.47 4.35 48 5.11 4.82 65 6.68 6.10 81 9.29 8.86
32 4.50 4.37 49 5.17 4.87 66 6.82 6.22 82 9.44 9.05
33 4.52 4.39 50 5.23 4.92 67 6.97 6.35 83 9.57 9.23
34 4.55 4.41 51 5.29 4.97 68 7.12 6.49 84 9.69 9.40
35 4.57 4.43 52 5.36 5.02 69 7.28 6.63 85 9.81 9.55
36 4.60 4.45 53 5.43 5.08 70 7.44 6.79 86 9.91 9.69
37 4.63 4.47 54 5.50 5.13 71 7.61 6.95 87 10.01 9.82
38 4.67 4.49 55 5.58 5.20 72 7.78 7.12 88 10.10 9.94
39 4.70 4.52 56 5.67 5.27 73 7.95 7.30 89 10.17 10.04
40 4.74 4.55 57 5.76 5.34 74 8.12 7.48 90 10.24 10.13
41 4.78 4.57 58 5.85 5.41 75 8.30 7.67 91 10.30 10.21
42 4.82 4.60 59 5.95 5.49 76 8.47 7.87 92 10.35 10.27
43 4.86 4.64 60 6.06 5.58 77 8.65 8.07 93 10.39 10.33
44 4.91 4.67 61 6.17 5.67 78 8.82 8.27 94 10.43 10.37
45 4.95 4.70 62 6.29 5.77 79 8.98 8.47 96 10.45 10.41
46 5.00 4.74 63 6.41 5.87
TABLE 3: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 3 FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30 $4.24$4.28$4.31$4.34$4.36$4.38$4.40$4.42$4.43$4.44$4.45 $4.45 $4.45 $4.46
35 4.26 4.30 4.35 4.39 4.43 4.47 4.50 4.52 4.54 4.56 4.57 4.57 4.58 4.58
40 4.28 4.33 4.39 4.45 4.51 4.56 4.61 4.65 4.68 4.71 4.73 4.74 4.75 4.75
M 45 4.29 4.35 4.42 4.50 4.58 4.66 4.74 4.80 4.86 4.90 4.93 4.96 4.97 4.98
A 50 4.30 4.37 4.46 4.55 4.66 4.77 4.88 4.98 5.07 5.14 5.20 5.23 5.25 5.27
L 55 4.31 4.39 4.48 4.59 4.73 4.87 5.03 5.18 5.32 5.44 5.53 5.59 5.63 5.65
E 60 4.32 4.40 4.50 4.63 4.78 4.97 5.18 5.40 5.61 5.80 5.96 6.07 6.13 6.17
65 4.33 4.41 4.52 4.65 4.83 5.05 5.31 5.61 5.92 6.23 6.50 6.70 6.83 6.90
A 70 4.33 4.42 4.53 4.68 4.87 5.11 5.42 5.80 6.23 6.70 7.14 7.50 7.75 7.90
G 75 4.34 4.42 4.54 4.69 4.89 5.16 5.50 5.95 6.50 7.15 7.83 8.45 8.92 9.23
E 80 4.34 4.43 4.54 4.70 4.91 5.19 5.56 6.06 6.71 7.55 8.52 9.50 10.34 10.93
85 4.34 4.43 4.55 4.71 4.92 5.21 5.60 6.13 6.86 7.85 9.10 10.52 11.87 12.93
90 4.34 4.43 4.55 4.71 4.93 5.22 5.62 6.18 6.96 8.06 9.55 11.39 13.34 15.05
95 4.34 4.43 4.55 4.71 4.93 5.23 5.64 6.21 7.02 8.20 9.86 12.09 14.69 17.20
TABLE 4: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION A FOR EACH $1,000
APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $17.91 12 $8.24 19 $5.73 25 $4.71
6 15.14 13 7.71 20 5.51 26 4.59
7 13.16 14 7.26 21 5.32 27 4.47
8 11.68 15 6.87 22 5.15 28 4.37
9 10.53 16 6.53 23 4.99 29 4.27
10 9.61 17 6.23 24 4.84 30 4.18
11 8.86 18 5.96
TABLE 5: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION B FOR EACH $1,000
APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $3.12 $2.99 47 $3.82 $3.53 64 $5.40 $4.83 80 $8.15 $7.66
31 3.15 3.01 48 3.88 3.58 65 5.55 4.96 81 8.32 7.86
32 3.18 3.03 49 3.94 3.63 66 5.69 5.08 82 8.47 8.06
33 3.21 3.06 50 4.01 3.68 67 5.85 5.22 83 8.61 8.25
34 3.24 3.08 51 4.08 3.74 68 6.01 5.37 84 8.75 8.43
35 3.27 3.11 52 4.15 3.80 69 6.18 5.52 85 8.87 8.60
36 3.31 3.13 53 4.23 3.86 70 6.35 5.68 86 8.98 8.75
37 3.34 3.16 54 4.31 3.93 71 6.52 5.85 87 9.08 8.88
38 3.38 3.19 55 4.39 4.00 72 6.70 6.03 88 9.18 9.01
39 3.42 3.22 56 4.48 4.07 73 6.89 6.21 89 9.26 9.12
40 3.46 3.25 57 4.58 4.15 74 7.07 6.41 90 9.33 9.21
41 3.51 3.29 58 4.68 4.23 75 7.26 6.61 91 9.40 9.30
42 3.55 3.32 59 4.78 4.32 76 7.44 6.81 92 9.45 9.37
43 3.60 3.36 60 4.89 4.41 77 7.63 7.02 93 9.49 9.43
44 3.65 3.40 61 5.01 4.50 78 7.81 7.23 94 9.53 9.47
45 3.71 3.44 62 5.14 4.61 79 7.98 7.45 95 9.55 9.51
46 3.76 3.49 63 5.27 4.72
TABLE 6: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION C FOR EACH $1,000
APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30 $2.88$2.93$2.97$3.01$3.04$3.07$3.08$3.10$3.11$3.12$3.12 $3.12 $3.13 $3.13
35 2.91 2.97 3.03 3.09 3.14 3.18 3.21 3.23 3.25 3.26 3.27 3.27 3.28 3.28
40 2.93 3.01 3.09 3.17 3.24 3.30 3.35 3.39 3.42 3.44 3.46 3.46 3.47 3.47
45 2.95 3.04 3.14 3.24 3.34 3.43 3.51 3.58 3.63 3.66 3.69 3.71 3.72 3.72
M 50 2.96 3.06 3.17 3.30 3.43 3.56 3.68 3.79 3.87 3.94 3.98 4.01 4.03 4.03
A 55 2.97 3.07 3.20 3.34 3.50 3.68 3.85 4.02 4.16 4.27 4.34 4.39 4.42 4.44
L 60 2.98 3.09 3.22 3.38 3.56 3.78 4.01 4.25 4.47 4.66 4.80 4.89 4.95 4.98
E 65 2.98 3.09 3.23 3.40 3.61 3.86 4.15 4.48 4.81 5.12 5.37 5.55 5.66 5.72
70 2.99 3.10 3.24 3.42 3.64 3.92 4.26 4.67 5.13 5.60 6.04 6.38 6.60 6.73
A 75 2.99 3.10 3.25 3.43 3.66 3.96 4.34 4.81 5.39 6.06 6.75 7.35 7.79 8.07
G 80 2.99 3.11 3.25 3.44 3.68 3.99 4.39 4.92 5.60 6.45 7.44 8.42 9.23 9.79
E 85 2.99 3.11 3.26 3.44 3.69 4.00 4.42 4.98 5.73 6.74 8.01 9.44 10.77 11.81
90 2.99 3.11 3.26 3.45 3.69 4.01 4.44 5.02 5.82 6.93 8.43 10.29 12.25 13.95
95 2.99 3.11 3.26 3.45 3.70 4.02 4.45 5.04 5.87 7.05 8.73 10.97 13.58 16.11
Endorsements
To be inserted only by Us
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase payment
flexibility. This Contract is non participating with no dividends.
EXHIBIT 4(j)
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Read this Certificate carefully. This document is a description of
the legal contract between the Group Contract Owner and Us.
You may return this Certificate within 10 days after You receive it
by delivering or mailing it to Our Office. The return of this Certificate by
mail will be effective when the postmark is affixed to a properly addressed
and postage prepaid envelope. This returned Certificate will be treated as if
We never issued it and We will refund the Certificate Value plus any amount
deducted from Your purchase payment before it was allocated to the Variable
Account. The Certificate Value will be determined as of the date of surrender
(i.e., for a mailed contract, the postmark date).
This Certificate describes the benefits and provisions of the Group
Contract. The Group Contract, as issued to the Group Contract Owner by Us
with any riders or endorsements, alone makes up the agreement under which
benefits are paid. The Group Contract may be inspected at the office of the
Group Contract Owner. In consideration of any application for this
Certificate and the payment of purchase payments, We agree, subject to the
terms and conditions of the Group Contract, to provide the benefits described
in this Certificate to the Certificate Owner.
If this Certificate is In Force on the Income Date, We will begin
making income payments to the Annuitant. We will make such payments
according to the terms of the Certificate and Group Contract.
Signed for the Company on the Issue Date at Our Home Office, 175
Berkeley Street, Boston, Massachusetts 02117:
_________________________ _________________________
Secretary President
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CERTIFICATE with limited purchase
payment flexibility. This contract is nonparticipating with no dividends.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CERTIFICATE, WHEN
BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND
ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. VARIABLE ANNUITY PAYMENTS WILL NOT
DECREASE OVER TIME IF THE SEPARATE ACCOUNT (AFTER DEDUCTION OF THE ANNUAL
[1.55%] ASSET CHARGE) HAS AN ANNUALIZED INVESTMENT RETURN OF AT LEAST 5.0%.
SEE PAGES 12-13 AND 19 FOR FURTHER EXPLANATION. CERTIFICATE ASSETS ALLOCATED
TO THE SEPARATE ACCOUNT INCUR CHARGES OF [1.55%] BEFORE ANNUITY PAYMENTS
BEGIN AND [1.40%] ONCE ANNUITY PAYMENTS BEGIN. INCOME, CAPITAL GAINS, AND/OR
LOSSES WHETHER OR NOT REALIZED, FROM ASSETS ALLOCATED TO THE SEPARATE ACCOUNT
ARE CREDITED TO OR CHARGED AGAINST THE SEPARATE ACCOUNT WITHOUT REGARD TO
INCOME, CAPITAL GAINS, AND/OR LOSSES ARISING OUT OF ANY OTHER BUSINESS THE
COMPANY MAY CONDUCT.
Table of Contents
Page
Right to Examine Certificate 1
Certificate Schedule 2
Definitions 3
General Provisions 5
Variable Account Provisions 10
Transfers 13
Partial Withdrawals and Total Surrender 14
Death Provisions 15
Annuity Provisions 16
Endorsements (if any) are before page 22
Definitions
Accumulation Period: The period prior to the Income Date during which
Purchase Payments may be made by a Certificate Owner.
Accumulation Unit: An accounting unit used to calculate a Certificate Owner's
interest in a Sub-account of the Variable Account during the Accumulation
Period.
Adjusted Certificate Value: The Certificate Value less any applicable taxes
relating to a Certificate and Certificate Maintenance Charge. This amount is
applied to the applicable Annuity Tables to determine Annuity Payments.
Annuitant: The natural person on whose life Annuity Payments are based, and
to whom any Annuity Payments will be made starting on the Income Date.
Annuity Options: Options available for Annuity Payments.
Annuity Payments: The series of payments made to the Annuitant, starting on
the Income Date, under the Annuity Option selected.
Annuity Period: The period after the Income Date during which Annuity
Payments are made.
Annuity Unit: An accounting unit used to calculate Variable Annuity Payments
during the Annuity Period.
Beneficiary: The person(s) or entity(ies) who controls the Certificate if
any Certificate Owner dies before the Income Date.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
175 Berkeley Street, Boston, MA 02117
Service Office
125 High Street, 11th Floor
Boston, MA 02110
Certificate Schedule
GROUP CONTRACT OWNER Liberty Insurance Trust
GROUP CONTRACT NUMBER DVA002
CERTIFICATE NUMBER 123455
CERTIFICATE OWNER John Q. Public, male, 1/1/40
JOINT CERTIFICATE OWNER Jane Q. Public, female, 2/29/40
ANNUITANT Thomas Doe, male, 11/22/40
COVERED PERSONS John Q. Public, Jane Q. Public, Thomas Doe
ISSUE STATE Rhode Island
IRS PLAN TYPE Non-Qualified
CERTIFICATE DATE November 1, 1995
INCOME DATE November 1, 2010
INITIAL PURCHASE PAYMENT $10,000
MINIMUM INITIAL PAYMENT $5,000
MINIMUM ADDITIONAL PAYMENT $1,000
Charges
Distribution Charge: We deduct 0.000411% of the assets in each Variable
Account Sub-Account on a daily basis (equivalent to an annual rate of 0.15%)
to compensate Us for a portion of Our distribution costs.
Administrative Charge: None.
Mortality and Expense Risk Charge: We deduct 0.003403% of the assets in each
Variable Account Sub-account on a daily basis (equivalent to an annual rate
of 1.25%) for Our mortality and expense risks.
Certificate Maintenance Charge: We charge $36 to cover a portion of Our
ongoing Certificate maintenance expenses. The charge is incurred at the
beginning of the Certificate Year and is deducted on each Certificate
Anniversary and at the time of total surrender.
Transfer Charge: Currently none, however, We reserve the right to charge $25
for a transfer if You make more than 12 transfers per Certificate Year.
Surrender Charge: At the time of each partial withdrawal or at total
surrender a contingent deferred sales charge is imposed as a percentage of
each Purchase Payment during the seven years after the date of its payment,
as follows:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
7% 6% 5% 4% 3% 2% 1%
Thereafter 0%.
Initial Purchase Payment Allocation
Currently, Certificate Owners can select 17 Sub-accounts and the Fixed
Account. We reserve the right to increase or decrease the number of
available Sub-accounts. The minimum You may allocate to any Sub-account or
the Fixed Account is 5% of any Purchase Payment. Your initial Purchase
Payment has been invested as follows:
Alger Growth x%
Alger Small Cap x%
Alliance Global Bond x%
Alliance Premier Growth x%
Colonial Growth & Income x%
Colonial Int'l Fund for Growth x%
Colonial Strategic Income x%
Colonial U.S. Fund for Growth x%
Colonial Utilities x%
MFS Emerging Growth x%
MFS Research x%
Newport Tiger x%
SteinRoe Cap Appreciation x%
SteinRoe Cash Income x%
SteinRoe Managed Assets x%
SteinRoe Managed Growth Stock x%
SteinRoe Mortgage Sec Income x%
Fixed Account - 1 Year x%
Fixed Account - 3 Years x%
Fixed Account - 5 Years x%
Fixed Account - 7 Years x%
Transfer Guidelines
Number of Transfers and Transfer Charge: Currently, Certificate Owners are
permitted unlimited transfers per Certificate Year during the Accumulation
Period and unlimited transfers every 12 months during the Annuity Period. We
reserve the right to change, upon notice, the frequency of transfers You can
make. We also reserve the right to impose a charge for any transfer in
excess of 12 per Certificate Year. The transfer charge is shown in the
Charges section of the Schedule.
Minimum amount to be transferred: None.
Minimum amount which must remain in a Sub-account after transfer: None.
Partial Withdrawals
You may make partial withdrawals during the Accumulation Period without
incurring a surrender charge, as follows:
(1) In any Certificate Year You may withdraw an aggregate amount not to
exceed, at the time of withdrawal:
(a) the Certificate Value, less
(b) the portion of Your Purchase Payments not previously
withdrawn; and
(2) In any Certificate Year after the first, You may also withdraw the
positive difference, if any, between the amount withdrawn pursuant to (1)
above in any such subsequent year and 10% of Your Certificate Value as of the
preceding Certificate Anniversary.
We will collect the surrender charge shown on the Schedule with respect to
partial withdrawals in excess of the amounts described in (1) and (2) above.
Minimum withdrawal amount: $300, unless the withdrawal is made pursuant to
Our systematic withdrawal program, in which case the minimum withdrawal is $100.
Minimum Certificate Value which must remain after a partial withdrawal:
$2,500.
Death Benefits
Adjustment of Certificate Value
When We receive due proof of death of the Certificate Owner, any Joint
Certificate Owner, or the Annuitant if the Certificate Owner is a non-natural
Person, We will compare, as of the date of death, the Certificate Value to
the Death Benefit amount defined in this Schedule. If the Certificate Value
is less than the Death Benefit, We will increase the current Certificate
Value by the amount of the difference. Any amount credited will be allocated
to the Variable Account and/or the Fixed Account based on the Purchase
Payment allocation selection that is in effect when We receive due proof of
death.
Waiver of Surrender Charges
If the Certificate is surrendered within 90 days of the date of death of the
Certificate Owner, any Joint Certificate Owner, or the Annuitant if the
Certificate Owner is a non-natural Person, any applicable surrender charges
will not be deducted from the Certificate Withdrawal Value.
Death Benefit Amount
Certificate Anniversary Death Benefit
On the Certificate Date, the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) (a) Start with the Death Benefit from the Certificate
Date;
(b) Add to (a) any additional Purchase Payments paid
since the Certificate Date and subtract from (a) any partial
withdrawals (including any associated surrender charge
incurred) made since the Certificate Date;
(2) (a) Determine the Certificate Value for each Certificate
Anniversary (the "Anniversary Value") before the 81st birthday
of the Certificate Owner or, if the Certificate Owner is a non-
natural Person, the Annuitant;
(b) Increase each "Anniversary Value" by any Purchase
Payments made after that Value's Anniversary;
(c) Decrease each "Anniversary Value" by the following
amount calculated at the time of each partial withdrawal made
after that Value's Anniversary: (i) the partial withdrawal
amount (including any associated surrender charge incurred)
divided by the Certificate Value immediately preceding the
withdrawal, (ii) multiplied by the "Anniversary Value"
immediately preceding the withdrawal;
(d) Select the highest "Anniversary Value" after the
adjustments in (b) and (c) above;
(3) Set the Death Benefit equal to the greater of (1) and (2).
If there is a change of Certificate Owner, the new Certificate Owner's age
will be used to determine the amount in (2) above.
The Variable Separate Account
Sub-accounts investing in shares of mutual funds
Variable Account A is a unit investment trust variable separate account,
organized in and governed by the laws of the State of Rhode Island, Our state
of domicile. Variable Account A is divided into Sub-accounts. Each
Sub-account listed below invests in shares of the corresponding Portfolio of the
Eligible Fund shown.
Sub-account Eligible Fund and Portfolio
The Alger American Fund
Alger Growth Alger American Growth Portfolio - seeks
Sub-account long-term capital appreciation.
Alger Small Cap Alger American Small Capitalization
Sub-account Portfolio - seeks long-term capital
appreciation.
Alliance Variable Products Series Fund, Inc.
Alliance Global Bond Global Bond Portfolio - seeks a high level of
Sub-account return from a combination of current income
and 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 Premier Growth Premier Growth Portfolio - seeks growth of
Sub-account capital rather than current income.
Keyport Variable Investment Trust
Colonial Growth & Income Colonial-Keyport Growth and Income
Sub-account Fund - seeks primarily income
and long-term capital growth and, secondarily,
preservation of capital.
Colonial Strategic Income Colonial-Keyport Strategic Income Fund -
Sub-account seeks a high level of current income, as is
consistent with prudent risk and maximizing
total return, by diversifying investments
primarily in U.S. and foreign government and
high yield, high risk corporate debt
securities.
Colonial Int'l Fund for Colonial-Keyport International Fund for
Growth Sub-account Growth - seeks long-term capital growth, by
investing primarily in non-U.S. equity
securities.
Colonial U.S. Fund for Colonial-Keyport U.S. Fund for Growth -
Growth Sub-account seeks growth exceeding over time the S&P
500 Index (Standard & Poor's Corporation
Composite Price Index) performance.
Colonial Utilities Colonial-Keyport Utilities Fund - seeks
Sub-account primarily current income and, secondarily,
long-term capital growth.
Newport Tiger Newport-Keyport Tiger Fund - seeks long-
Sub-account term capital growth by investing primarily
in equity securities of companies located in
the four Tigers of Asia (Hong Kong, Singapore,
South Korea and Taiwan) and the other mini-
Tigers of East Asia (Malaysia, Thailand,
Indonesia, China and the Philippines).
MFS Variable Insurance Trust
MFS Emerging Growth MFS Emerging Growth Series - seeks to provide
Sub-account long-term growth of capital.
MFS Research MFS Research Series - seeks to provide long-
Sub-Account term growth of capital and future income.
SteinRoe Variable Investment Trust
SteinRoe Cap Appreciation Capital Appreciation Fund - seeks capital
Sub-account growth by investing primarily in common
stocks, convertible securities, and other
securities selected for prospective capital
growth.
SteinRoe Cash Income Cash Income Fund - seeks high current income
Sub-account from short-term money market instruments
("Money Market" Sub-account) while emphasizing preservation of capital and
maintaining excellent liquidity.
SteinRoe Managed Assets Managed Assets Fund - seeks high total inves-
Sub-account tment return through investment in a changing
mix of securities.
SteinRoe Managed Growth Managed Growth Stock Fund - seeks long-term
Stock Sub-account growth of capital through investment primarily
in common stocks.
SteinRoe Mortgage Securities Mortgage Securities Income Fund - seeks
Sub-Account highest Income possible level of current
income consistent with safety of principal and
maintenance of liquidity through investment
primarily in mortgage-backed securities.
Sub-accounts investing directly in securities - None.
The Fixed Account
The Fixed Account is part of Our General Account, which consists of all of
Our assets except the assets of the Variable Account and the assets of other
separate accounts that We maintain. Subject to applicable law, We have sole
discretion over investments of the assets of the Fixed Account. If You
allocate assets to the Fixed Account, Your accumulation values and annuity
payments will have guaranteed minimums.
Before the Income Date, Your interest in the Fixed Account is measured by the
Fixed Account Value. When annuity payments begin, the payee's interest in
the Fixed Account is measured by the amount of each periodic payment.
Benefits from the Fixed Account will not be less than the minimum values
required by any law of the jurisdiction where the Certificate is delivered.
Purchase Payments will be allocated to the Fixed Account in accordance with
Your selection at the Certificate Date. You may change such selection by
Written Request.
The Fixed Account Value at any time is equal to:
(1) all Purchase Payments allocated to the Fixed Account plus the
interest subsequently credited on those payments; plus
(2) any Variable Account value transferred to the Fixed Account plus
the interest subsequently credited on the transferred value; less
(3) any prior partial withdrawals from the Fixed Account; less
(4) any Fixed Account Value transferred to the Variable Account.
We will credit interest to Purchase Payments allocated to the Fixed Account
at rates declared by Us for Guarantee Periods of one or more years from the
month and day of allocation. The minimum Guaranteed Interest Rate is 3% per
year.
Certificate Owner Services
The Programs. Liberty Life offers the following investment related programs
which are available only prior to the Income Date: Dollar Cost Averaging;
Capital Protection Plus; and Systematic Withdrawal Programs. A Rebalancing
Program is available prior to and after the Income Date. Under each Program,
the related transfers between and among Sub-Accounts and the Fixed Account
are not counted as one of the twelve free transfers. Each Programs has its
own requirements, as discussed below. Liberty Life reserves the right to
terminate any Program.
Dollar Cost Averaging Program. The program periodically transfers
Accumulation Units from the SteinRoe Cash Income Sub-Account or the One-Year
Guarantee Period of the Fixed Account to other Sub-Accounts selected by the
Certificate Owner. The program allows a Certificate Owner to invest in
Variable Sub-Accounts over time rather than having to invest in those Sub-
Accounts all at once. The program is available for initial and subsequent
Purchase Payments and for Certificate Value transferred into the SteinRoe
Cash Income Sub-Account or the One-Year Guarantee Period. Under the program,
Liberty Life makes automatic transfers on a periodic basis out of the
SteinRoe Cash Income Sub-Account or the One-Year Guarantee Period into one or
more of the other available Sub-Accounts (Liberty Life reserves the right to
limit the number of Sub-Accounts the Certificate Owner may choose but there
are currently no limits). The program will automatically end if the Income
Date occurs. Liberty Life reserves the right to end the program at any time
by sending the Certificate Owner a notice one month in advance.
Rebalancing Program. In accordance with the Certificate Owner's election of
the relative Purchase Payment percentage allocations, Liberty Life will
automatically rebalance the Certificate Value of each Sub-Account either
monthly, quarterly, semi-annually, or annually. On the last day of the
period selected, Liberty Life will automatically rebalance the Certificate
Value in each of the Sub-Accounts to match the current Purchase Payment
percentage allocations. The Program may be terminated at any time and the
percentages may be altered by Written Request. Certificate Value allocated to
the Fixed Account is not subject to automatic rebalancing. After the Income
Date, automatic rebalancing applies only to variable annuity payments and
Liberty Life will rebalance the number of Annuity Units in each Sub-Account.
Systematic Withdrawal Program. Liberty Life will make monthly, quarterly,
semi-annually or annual distributions of a predetermined dollar amount to the
Certificate Owner that has enrolled in the Systematic Withdrawal Program. The
Certificate Owner may specify the amount of each partial withdrawal, subject
to a minimum of $100. Systematic withdrawals may only be made from the Sub-
Accounts and the One Year Guarantee Period of the Fixed Account. In each
Certificate Year, portions of Certificate Value may be withdrawn without the
imposition of any Contingent Deferred Sales Charge ("Free Withdrawal
Amount"). If withdrawals pursuant to the Program are greater than the Free
Withdrawal Amount, the amount of the withdrawals greater than the Free
Withdrawal Amount will be subject to the applicable Contingent Deferred Sales
Charge. Any unrelated voluntary partial withdrawal a Certificate Owner makes
during a Certificate Year will be aggregated with withdrawals pursuant to the
Program to determine the applicability of any Contingent Deferred Sales
Charge under the Certificate provisions regarding partial withdrawals.
Capital Protection Plus Under this program, Liberty Life will allocate part
of the Purchase Payment to the Guarantee Period selected by the Certificate
Owner so that such part, based on that Guarantee Period's interest rate in
effect on the date of allocation, will equal at the end of the Guarantee
Period the total Purchase Payment. The rest of the Purchase Payment will be
allocated to the Sub-Account(s) of the Variable Account based on the
Certificate Owner's allocation. If any part of the Fixed Account Value is
surrendered or transferred before the end of the Guarantee Period, the Value
at the end of that Period will not equal the original Purchase Payment
amount.
Definitions (continued)
Certificate: The document issued to a Certificate Owner to evidence a
Certificate Owner's participation under the Group Contract. The Certificate
summarizes the benefits and provisions of the Group Contract.
Certificate Anniversary: An anniversary of the Certificate Date.
Certificate Date: The date a Certificate is issued to a Certificate Owner.
The Certificate Date is shown on the Certificate Schedule.
Certificate Owner: The person who owns a Certificate under the Group
Contract. Any Joint Certificate Owners and the Certificate Owner own the
Certificate equally with rights of survivorship.
Certificate Value: The sum of the Certificate Owner's interest in the Sub-
accounts of the Variable Account and the Fixed Account during the
Accumulation Period.
Certificate Year: The first Certificate Year is the annual period which
begins on the Certificate Date. Subsequent Certificate Years begin on each
Certificate Anniversary.
Eligible Fund: An investment entity shown on the Certificate Schedule.
Fixed Account: The account We establish to support Fixed Allocations. The
Certificate Schedule shows whether the Fixed Account is available under the
Certificate.
Fixed Account Value: The value of all Fixed Account amounts accumulated
under this Certificate prior to the Income Date.
Fixed Allocation: An amount allocated to the Fixed Account that is credited
with a Guaranteed Interest Rate for a specified Guarantee Period.
Fixed Annuity: An annuity with a series of payments made during the Annuity
Period which are guaranteed as to dollar amount by Us.
General Account: Our general investment account which contains all of Our
assets except those in the Variable Account and Our other separate accounts.
Group Contract Owner: The person or entity to which the Group Contract is
issued.
Guaranteed Interest Rate: The effective annual interest rate which We will
credit for a specified Guarantee Period.
Guarantee Period: The period of year(s) a rate of interest is guaranteed to
be credited within the Fixed Account.
Income Date: The date on which Annuity Payments begin. The Income Date is
shown on the Certificate Schedule.
In Force: The status of a Certificate before the Income Date so long as it
has not been totally surrendered and there has not been a death of a
Certificate Owner or Joint Certificate Owner that will cause the Certificate
to end within five years of the date of death.
Office: Our service office shown on the Certificate Schedule.
Person: A human being, trust, corporation, or any other legally recognized
entity.
Portfolio: A series of an Eligible Fund which constitutes a separate and
distinct class of shares.
Purchase Payment: A payment made by or on behalf of a Certificate Owner with
respect to a Certificate.
Sub-account: Variable Account assets are divided into Sub-accounts. Assets
of each Sub-account will be invested in shares of a Portfolio of an Eligible
Fund, or directly in portfolio securities.
Valuation Date: Each day on which We and the New York Stock Exchange
("NYSE") are open for business, or any other day that the Securities and
Exchange Commission requires that mutual funds, unit investment trusts or
other investment portfolios be valued.
Valuation Period: The period of time beginning at the close of business of
the NYSE on each Valuation Date and ending at the close of business on the
next succeeding Valuation Date.
Variable Account: Our Variable Account(s) shown on the Certificate Schedule.
Variable Annuity: An annuity with payments which vary as to dollar amount in
relation to the investment performance of specified Sub-accounts of the
Variable Account.
We, Us, Our: Liberty Life Assurance Company of Boston.
Written Request: A request in writing, in a form satisfactory to Us, and
received by Us at Our Office.
You, Your: The Certificate Owner and any Joint Certificate Owners.
General Provisions
Purchase Payments
The initial Purchase Payment is due on the Certificate Date. It must be paid
at Our Office in United States currency. Coverage under a Certificate does
not take effect until We have accepted the initial Purchase Payment during
Your lifetime. Each Purchase Payment after the Certificate Date must be at
least the amount shown on the Certificate Schedule. Provided the Certificate
Value under a Certificate does not go to zero, a Certificate will stay in
force until the Income Date even if You make no payments after the initial
one. We reserve the right to reject any subsequent Purchase Payment.
Allocation of Purchase Payments
Your initial Purchase Payment is allocated to the Sub-accounts of the
Variable Account, and to the Fixed Account if available, in accordance with
the selections made by You at the Certificate Date. Unless otherwise changed
by You, subsequent Purchase Payments are allocated in the same manner as the
initial Purchase Payment. Allocation of Purchase Payments is subject to the
terms and conditions imposed by Us. We reserve the right to allocate initial
Purchase Payments to the Money Market Sub-account until the expiration of the
Right to Examine Certificate period set forth on the first page of the
Certificate.
The Contract
The Group Contract, including the application, if any, and any attached rider
or endorsement constitute the entire contract between the Group Contract
Owner and Us. All statements made by the Group Contract Owner, any
Certificate Owner or any Annuitant will be deemed representations and not
warranties. No such statement will be used in any contest unless it is
contained in the application signed by the Group Contract Owner or in a
written instrument signed by the Certificate Owner, a copy of which has been
furnished to the Certificate Owner, the Beneficiary or to the Group Contract
Owner.
Only Our President or Secretary may agree to change any of the terms of the
Group Contract. Any changes must be in writing. Any change to the terms of
a Certificate must be in writing and with Your consent, unless provided
otherwise by the Group Contract and the Certificate.
To assure that the Group Contract and the Certificate will maintain their
status as a variable annuity under the Internal Revenue Code, We reserve the
right to change the Group Contract and any Certificate issued thereunder to
comply with future changes in the Internal Revenue Code, any regulations or
rulings issued thereunder, and any requirements otherwise imposed by the
Internal Revenue Service. The Group Contract Owner and the affected
Certificate Owner will be sent a copy of any such amendment.
We reserve the right, subject to the approval of the New York Superintendent
of Insurance and compliance with U.S. laws as currently applicable or
subsequently changed, to: (a) operate the Variable Account in any form
permitted under the Investment Company Act of 1940, as amended, (the "1940
Act"), or in any other form permitted by law; (b) take any action necessary
to comply with or obtain and continue any exemptions from the 1940 Act, or to
comply with any other applicable law; (c) transfer any assets in any Sub-
account to another Sub-account, or to one or more separate investment
accounts, or the General Account; or to add, combine or remove Sub-accounts
in the Variable Account; and (d) change the way We assess charges, so long as
We do not increase the aggregate amount beyond that currently charged to the
Variable Account and the Eligible Funds in connection with this Certificate.
If the shares of any of the Eligible Funds should become unavailable for
investment by the Variable Account or if in Our judgment further investment
in such Portfolio shares should become inappropriate in view of the purpose
of the Certificate, We may add or substitute shares of another mutual fund
for the Portfolio shares already purchased under the Certificate. No
substitution of Portfolio shares in any Sub-account may take place without
prior approval of the Securities and Exchange Commission and notice to the
affected Certificate Owners, to the extent required by the 1940 Act.
Certificate Owner
You are the Certificate Owner of this Certificate. You have all rights and
may receive all benefits under a Certificate. A Certificate Owner is the
person designated as such on the Certificate Date, unless changed. You may
exercise all rights of this Certificate while it is In Force, subject to the
rights of (a) any assignee under an assignment filed with Us, and (b) any
irrevocably named Beneficiary.
Joint Certificate Owner
A Certificate can be owned by Joint Certificate Owners. Upon the death of
any Certificate Owner or Joint Certificate Owner, the surviving owner(s) will
be the primary Beneficiary(ies). Any other beneficiary designation will be
treated as a Contingent Beneficiary unless otherwise indicated in a Written
Request filed with Us.
Annuitant
The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by You at the Certificate Date, unless
changed prior to the Income Date. Any change of Annuitant is subject to Our
underwriting rules then in effect. The Annuitant may not be changed in a
Certificate which is owned by a non-natural person. You may name a
Contingent Annuitant. The Contingent Annuitant becomes the Annuitant if the
Annuitant dies while this Certificate is In Force. If the Annuitant dies
and no Contingent Annuitant has been named, We will allow You sixty days to
designate someone other than Yourself as Annuitant. You will be the
Contingent Annuitant unless You name someone else. If the Certificate is
owned by a non-natural person, the death of the Annuitant will be treated as
the death of the Certificate Owner and a new Annuitant may not be designated.
Beneficiary
The Beneficiary is the person who controls the Certificate if any Certificate
Owner dies prior to the Income Date. If the Certificate is owned by Joint
Certificate Owners, upon the death of any Certificate Owner or Joint
Certificate Owner, the surviving owner(s) will become the primary
Beneficiary. Any other beneficiary designation will be treated as a
Contingent Beneficiary unless otherwise indicated in a Written Request filed
with Us. If You name more than one Person as Primary Beneficiary or as
Contingent Beneficiary, and do not state otherwise on an application or in a
Written Request to Us, any non-survivors will not receive a benefit. The
survivors will receive equal shares. Subject to the rights of any
irrevocable Beneficiary(ies), You may change primary or contingent
Beneficiary(ies). A change must be made by Written Request and will be
effective as of the date the Written Request is signed. We will not be
liable for any payment We make or action We take before We receive the
Written Request.
Group Contract Owner
The Group Contract Owner has title to the Group Contract. The Group Contract
and any amount accumulated under any Certificate are not subject to the
claims of the Group Contract Owner or any of its creditors. The Group
Contract Owner may transfer ownership of this Group Contract. Any transfer
of ownership terminates the interest of any existing Group Contract Owner.
It does not change the rights of any Certificate Owner. Nothing in the Group
Contract shall invalidate or impair any right granted to the Certificate
Owner by the Certificate or New York law.
Change of Certificate Owner, Beneficiary or Contingent Annuitant
While this Certificate is In Force, You may by Written Request change the
primary Certificate Owner, Joint Certificate Owner, primary Beneficiary,
Contingent Beneficiary, Contingent Annuitant, or in certain instances, the
Annuitant. An irrevocably named Person may be changed only with the written
consent of such Person. The change will be effective, following Our receipt
of the Written Request, as of the date the Written Request is signed. The
change will not affect any payments We make or actions We take prior to the
time We receive the Written Request.
Assignment of the Certificate
You may assign this Certificate at any time while it is In Force. The
assignment must be in writing and a copy must be filed at Our Office. Your
rights and those of any revocably named Person will be subject to the
assignment. An assignment will not affect any payments We make or actions We
take before We receive the assignment. We are not responsible for the
validity of any assignment.
Misstatement of Age or Sex
If the age or sex of the Annuitant or any payee has been misstated, We will
compute the amount payable based on the correct age and sex. If Annuity
Payments have begun, any underpayment(s) that have been made plus interest
thereon at a rate of 5% per year will be paid in full with the next Annuity
Payment. Any overpayment plus interest thereon at a rate of 5% per year,
unless repaid to Us in one sum, will be deducted from future Annuity Payments
otherwise due until We are repaid in full.
Non-Participating
This Certificate does not participate in Our divisible surplus.
Evidence of Death, Age, Sex or Survival
If a Certificate provision relates to the death of a natural Person, We will
require proof of death before We will act under that provision. Proof of
death shall be: (a) a certified death certificate; or (b) a certified decree
of a court of competent jurisdiction as to the finding of death; or (c) a
written statement by a medical doctor who attended the deceased; or (d) any
other document constituting due proof of death under applicable state law.
If Our action under a Certificate provision is based on the age, sex, or
survival of any Person, We may require evidence of the particular fact before
We act under that provision.
Protection of Proceeds
No Beneficiary or payee may commute or assign any payments under a
Certificate before they are due. To the extent permitted by law, no payments
shall be subject to the debts of any Beneficiary or payee or to any judicial
process for payment of those debts.
Reports
We will send Certificate Owners a report that shows the Certificate Value at
least once each Certificate Year. We will send any other reports that may be
required by law.
Taxes
Any taxes paid to any governmental entity relating to a Certificate will be
deducted from the Purchase Payments or Certificate Value. We may, in Our
sole discretion, delay the deduction until a later date. By not deducting
tax payments at the time of Our payment, We do not waive any right We may
have to deduct amounts at a later date. We will, in Our sole discretion,
determine when taxes relate to a Certificate or to the operation of the
Variable Account. We reserve the right to establish a provision for federal
income taxes if We determine, in Our sole discretion, that We will incur a
tax as a result of the operation of the Variable Account. Such a provision
will be reflected in the Accumulation and Annuity Unit Values. We will
deduct for any income taxes incurred by Us as a result of the operation of
the Variable Account whether or not there was a provision for taxes and
whether or not it was sufficient. We will deduct from any payment under this
Certificate any withholding taxes required by applicable law.
Regulatory Requirements
All values payable under a Certificate will not be less than the minimum
benefits required by the laws and regulations of the states in which the
Certificate is delivered.
Suspension or Deferral of Payments
We reserve the right to suspend or postpone payments for a withdrawal,
transfer, surrender or death benefit for any period when:
(1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings); or
(2) trading on the New York Stock Exchange is restricted; or
(3) an emergency exists as a result of which valuation or disposal of
the assets and securities of the Variable Account is not reasonably
practicable; or
(4) the Securities and Exchange Commission, by order or pronouncement,
so permits for the protection of Certificate Owners;
provided that applicable rules and regulations of the Securities and Exchange
Commission govern as to whether the conditions described in (2) and (3) above
exist.
We reserve the right to delay payment of amounts allocated to the Fixed
Account for up to six months.
Variable Account Provisions
The Variable Account
The Variable Account(s) is designated on the Certificate Schedule and
consists of assets set aside by Us, which are kept separate from Our general
assets and all other variable account assets We maintain. We own the assets
of the Variable Account. Variable Account assets equal to reserves and other
contract liabilities will not be chargeable with liabilities arising out of
any other business We may conduct. We may transfer to Our General Account
assets which exceed the reserves and other liabilities of the Variable
Account. Income and realized and unrealized gains or losses from assets in
the Variable Account are credited to or charged against the account without
regard to other income, gains or losses in Our other investment accounts.
The Variable Account assets are divided into Sub-accounts. The Sub-accounts
which are available under the Certificate are shown on the Certificate
Schedule. The assets of the Sub-accounts of the unit investment trust
variable separate account are allocated to the Eligible Fund(s) and the
Portfolio(s), if applicable, within an Eligible Fund shown on the Certificate
Schedule. The assets of the Sub-accounts of the investment company variable
separate account, if applicable, are invested in portfolios of securities
designed to meet the objectives of the Sub-Account shown on the Certificate
Schedule. We may, from time to time, add additional Sub-accounts, Eligible
Funds or Portfolios to those shown on the Certificate Schedule. You may be
permitted to transfer Certificate Values or allocate Purchase Payments to the
additional Sub-Accounts, Eligible Funds or Portfolios. However, the right to
make such transfers or allocations will be limited by the terms and
conditions imposed by Us.
We also have the right to eliminate Sub-accounts from the Variable Account,
to combine two or more Sub-accounts or to substitute a new Portfolio for the
Portfolio in which a Sub-account invests. A substitution may become
necessary if, in Our discretion, a Portfolio or Sub-account no longer suits
the purposes of the Group Contract. This may happen: due to a change in
laws or regulations or a change in a Portfolio's investment objectives or
restrictions; because the Portfolio or Sub-account is no longer available for
investment; or for some other reason. We will obtain any prior approvals
that may be required from the insurance department of Our state of domicile,
the New York Superintendent of Insurance and from the SEC or any other
governmental entity before making such a substitution.
When permitted by law, We reserve the right to:
(1) Deregister a Variable Account under the 1940 Act;
(2) Operate a Variable Account as a management company under the 1940
Act, if it is operating as a unit investment trust;
(3) Operate a Variable Account as a unit investment trust under the 1940
Act, if it is operating as a management company;
(4) Restrict or eliminate any voting rights as to the account;
(5) Combine the Variable Account with any other variable account.
Valuation of Assets
The assets of the Variable Account are valued at their fair market value in
accordance with Our procedures.
Accumulation Units
Your Variable Account value will fluctuate in accordance with the investment
results of the Sub-accounts to which You have allocated Your Purchase
Payments or Certificate Value. In order to determine how these fluctuations
affect Your Certificate Value, We use an Accumulation Unit value.
Accumulation Units are used to account for all amounts allocated to or
withdrawn from the Sub-accounts of the Variable Account as a result of
Purchase Payments, partial withdrawals, transfers, or charges deducted from
the Certificate Value. We determine the number of Accumulation Units of a
Sub-account purchased or canceled by dividing the amount allocated to, or
withdrawn from, the Sub-account by the dollar value of one Accumulation Unit
of the Sub-account as of the end of the Valuation Period during which We
receive the request for the transaction.
Accumulation Unit Value
The Accumulation Unit Value for each Sub-account was initially set at $10.
Subsequent Accumulation Unit Values for each Sub-account are determined by
multiplying the Accumulation Unit Value for the immediately preceding
Valuation Period by a net investment factor for the Sub-account for the
current period. This factor may be greater or less than 1.0; therefore, the
Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period.
We calculate the net investment factor for each Sub-account investing in
shares of mutual funds by dividing (a) by (b) and then subtracting (c) where:
(a) is equal to:
(i) the net asset value per share of the Portfolio in which the
Sub-account invests at the end of the Valuation Period; plus
(ii) any dividend per share declared for the Portfolio that has an
ex-dividend date within the current Valuation Period.
(b) is the net asset value per share of the Portfolio at the end of the
preceding Valuation Period.
(c) is equal to:
(i) the sum of each Valuation Period equivalent of the annual rate
for the Mortality and Expense Risk Charge, for the
Administrative Charge, and for the Distribution Charge, if any,
which are shown on the Certificate Schedule; plus
(ii) a charge factor, if any, for any tax provision established by
Us a result of the operation of the Sub-account.
We calculate the net investment factor for each Sub-account investing
directly in securities with the same formula, except:
(a) is equal to:
(i) the value of the assets in the Sub-account at the end of the
preceding Valuation Period; plus
(ii) any investment income and capital gains, realized or
unrealized, credited to the assets during the current Valuation
Period; less
(iii) any capital losses, realized or unrealized, charged against the
assets during the current Valuation Period; less
(iv) all operating and investment expenses relating to the assets
that are incurred during the current Valuation Period.
(b) is the value of the assets in the Sub-account at the end of the
preceding Valuation Period.
Mortality and Expense Risk Charge
Each Valuation Period We deduct a Mortality and Expense Risk Charge from each
Sub-account of the Variable Account which is equal, on an annual basis, to
the amount shown on the Certificate Schedule. The Mortality and Expense Risk
Charge compensates Us for assuming the mortality and expense risks with
respect to the Certificates We issue. We guarantee the dollar amount of each
Annuity Payment after the first Annuity Payment will not be affected by
variations in mortality or expense experience.
Administrative Charge
Each Valuation Period We deduct an Administrative Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Administrative Charge compensates Us for the costs
associated with administration of the Variable Account and the Certificates
We issue.
Distribution Charge
Each Valuation Period We deduct a Distribution Charge from the Variable
Account which is equal, on an annual basis, to the amount shown on the
Certificate Schedule. The Distribution Charge compensates Us for the costs
associated with the distribution of the Certificates We issue.
Certificate Maintenance Charge
We deduct a Certificate Maintenance Charge from the Certificate Value by
canceling Accumulation Units from each applicable Sub-account to reimburse
Us for expenses relating to the maintenance of the Certificate. We will
deduct the Certificate Maintenance Charge from the Sub-accounts of the
Variable Account in the same proportion that the amount of Certificate Value
in each Sub-account bears to the Certificate Value. The Certificate
Maintenance Charge is shown on the Certificate Schedule. The Certificate
Maintenance Charge will be deducted from the Certificate Value on each
Certificate Anniversary during the Accumulation Period.
If a total surrender is made on a date other than a Certificate Anniversary,
the Certificate Maintenance Charge will be deducted at the time of surrender.
During the Annuity Period, the Certificate Maintenance Charge will be
deducted on a pro-rata basis from each Annuity Payment.
Transfers
Subject to any limitation We impose on the number of transfers permitted in a
Certificate Year, You may transfer all or part of Your Certificate Value
among the Sub-accounts and the Fixed Account, if any, by Written Request or
by telephone without the imposition of any fees or charges. Transfers among
the Sub-accounts and the Fixed Account are permitted only during the
Accumulation Period. The number of permitted transfers, and the charge for
transfers in excess of that number, are shown on the Certificate Schedule.
All transfers are subject to the following:
(1) If more than the number of free transfers, shown on the Certificate
Schedule, are made in a Certificate Year, We will deduct a transfer charge,
shown on the Certificate Schedule, for each subsequent transfer. The
transfer fee will be deducted from the Sub-account from which the transfer is
made. However, if You transfer Your entire interest in a Sub-account, the
transfer fee will be deducted from the amount transferred. If You make a
transfer from more than one Sub-account, any transfer fee will be allocated
pro-rata among such Sub-accounts in proportion to the amount transferred from
each. The deduction of any fees We impose on such transfers will not exceed
the maximum listed on page 3.
(2) During the Annuity Period, transfers of values between Sub-accounts
will be made by converting the number of Annuity Units being transferred to
the number of Annuity Units in the Sub-account to which a transfer is made,
so that the next Annuity Payment, if it were made at that time, would be the
same amount that it would have been without the transfer. Thereafter,
Annuity Payments will reflect changes in the value of the new Annuity Units.
(3) The minimum amount which can be transferred is shown on the
Certificate Schedule. The minimum amount which must remain in a Sub-account
after a transfer is shown on the Certificate Schedule.
(4) If 100% of the value of any Sub-account is transferred and the
current allocation for Purchase Payments includes that Sub-account, the
allocation for future Purchase Payments will change to reflect Your
allocation of Certificate Value following the transfer.
(5) We reserve the right, at any time and without prior notice to any
party, to terminate, suspend or modify the transfer privileges described
above.
We will not be liable for transfers made in accordance with Your
instructions. All amounts and Accumulation Units will be determined as of
the end of the Valuation Period in which We receive the request for
transfer.
Partial Withdrawals and Total Surrender
Partial Withdrawals
During the Accumulation Period while the Certificate is In Force, You may,
upon Written Request, make a partial withdrawal, subject to the provisions
and limitations shown on the Certificate Schedule. For purposes of
determining whether a surrender charge is applicable to Your partial
withdrawal:
(1) Your partial withdrawal will first be taken from the portion of Your
Certificate Value which is in excess of Your Purchase Payments, and
then from Your Purchase Payments; and
(2) We will allocate partial withdrawals to Purchase Payments in the
order in which the Purchase Payments were made, starting with the
first.
A withdrawal will result in the cancellation of Accumulation Units from each
applicable Sub-account in the ratio that Your interest in the Sub-account
bears to Your Certificate Value in all the Sub-accounts. You must specify by
Written Request in advance if You want Accumulation Units to be canceled in a
manner other than the method described above. If there is no value or
insufficient value in the Variable Account, then the amount withdrawn, or the
insufficient portion, will be deducted from the Fixed Account. If You have
multiple Guarantee Periods, We will deduct such amount from each Guarantee
Period's values in the ratio that each Period's values bears to the total
Fixed Account Value. You must specify by Written Request in advance if You
want multiple Guarantee Periods to be reduced in a manner other than the
method described above. Any amount deducted from the Fixed Account Value may
be subject to a market value adjustment, if applicable.
Each partial withdrawal must be for an amount not less than the amount shown
on the Certificate Schedule. The Certificate Value which must remain in a
Certificate is shown on the Certificate Schedule. The Certificate Schedule
also shows any charge.
Total Surrender
During the Accumulation Period while the Certificate is In Force, You may,
upon Written Request, make a total surrender of the Certificate Withdrawal
Value. The Certificate Withdrawal Value is:
(1) the Certificate Value as of the end of the Valuation Period during
which We receive a Written Request for a withdrawal or surrender;
less
(2) any applicable taxes not previously deducted; less
(3) any Surrender Charge; less
(4) any Certificate Maintenance Charge.
The Fixed Account Value, which is a component of the Certificate Value, may
be subject to a market value adjustment, if applicable.
We will pay the amount of any withdrawal or surrender within seven days
unless the Suspension or Deferral of Payments Provision is in effect.
Death Provisions
Death of Certificate Owner
These provisions apply if, during the Accumulation Period while the
Certificate is In Force, the Certificate Owner or any Joint Certificate Owner
dies (whether or not the decedent is also the Annuitant) or the Annuitant
dies under a Certificate owned by a non-natural Person. The "designated
beneficiary" will control the Certificate after such a death. This
"designated beneficiary" will be the first Person among the following who is
alive on the date of death: Certificate Owner; Joint Certificate Owner;
primary Beneficiary; Contingent Beneficiary; and Certificate Owner's estate.
If the Certificate Owner and Joint Certificate Owner are both alive, they
shall be the "designated beneficiary" together.
If the decedent's surviving spouse (if any) is the sole "designated
beneficiary", the surviving spouse will automatically become the new sole
Certificate Owner as of the date of the death. And, if the Annuitant is the
decedent, the new Annuitant will be any living Contingent Annuitant,
otherwise the surviving spouse. The Certificate may stay in force until
another death occurs (i.e., until the death of the Certificate Owner or Joint
Certificate Owner). Except for this paragraph, all of "Death Provisions" will
apply to that subsequent death.
In all other cases, the Certificate may stay in force up to five years from
the date of death. During this period, the "designated beneficiary" may
exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to surrender the Certificate for its
Certificate Withdrawal Value. If this Certificate is still in force at the
end of the five-year period, We will automatically end it then by paying to
the "designated beneficiary" the Certificate Withdrawal Value without the
deduction of any applicable surrender charges. If the "designated
beneficiary" is not alive then, We will pay any Person(s) named by the
"designated beneficiary" in a Written Request; otherwise the "designated
beneficiary's" estate.
Death of Annuitant
These provisions apply if during the Accumulation Period while the
Certificate is In Force, (a) the Annuitant dies, (b) the Annuitant is not an
Owner, and (c) the Owner is a natural person. The Certificate will continue
In Force after the Annuitant's death. The new Annuitant will be any living
Contingent Annuitant, otherwise the Certificate Owner.
Payment of Benefits
Instead of receiving a lump sum, You or any "designated beneficiary" may by
Written Request direct that We pay any benefit of $2,000 or more under an
Annuity Option that meets the following: (a) the first payment to the
"designated beneficiary" must be made no later than one year after the date
of death; (b) payments must be made over the life of the "designated
beneficiary" or over a period not extending beyond that person's life
expectancy; and (c) any Annuity 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.
Annuity Provisions
General
If the Certificate is In Force on the Income Date, the Adjusted Certificate
Value will be applied under the Annuity Option selected by You. Annuity
Payments may be made on a fixed or variable basis or both.
Income Date
The Income Date may be selected by You. It is shown on the Certificate
Schedule. The Income Date can be any time after the Certificate Date for
variable payments and any time after the first Certificate Anniversary for
fixed payments. The Income Date may not be later than the earlier of when
the Annuitant reaches attained age 90 or that required under state law. If
no Income Date is selected, it will be the earlier of when the Annuitant
reaches attained age 90 or the maximum date permitted under state law, if
any.
Prior to the Income Date, You may change the Income Date by Written Request.
Any change must be requested at least 30 days prior to the new Income Date.
Selection of an Annuity Option
An Annuity Option may be selected by You. If no Annuity Option is selected,
Option B will automatically be applied. Prior to the Income Date, You may
change the Annuity Option selected by Written Request. Any change must be
requested at least 30 days prior to the Income Date.
Frequency and Amount of Annuity Payments
Annuity Payments are paid in monthly installments unless quarterly, semi-
annual or annual payments are chosen. The Adjusted Certificate Value is
applied to the Annuity Table for the Annuity Option selected. If the
Adjusted Certificate Value to be applied under an Annuity Option is less than
$2,000, We reserve the right to make a lump sum payment in lieu of Annuity
Payments. If the Annuity Payment would be or becomes less than $100, We will
reduce the frequency of payments to a longer interval which will result in
each payment being at least $100.
Annuity Options
The following Annuity Options or any other Annuity Option acceptable to Us
may be selected:
OPTION A. ANNUITY FOR A FIXED NUMBER OF YEARS: Annuity Payments for a
chosen number of years, not less than 5. If the payee dies during the
payment period and the Beneficiary does not desire payments to continue for
the remainder of the period, he/she may elect to have the present value of
the remaining payments commuted and paid in a lump sum. During the payment
period of a Variable Annuity, the payee may elect by Written Request to
receive the following amount: (a) the present value of the remaining payments
commuted; less (b) any surrender charge that may be due by treating the value
defined in (a) as a surrender. Instead of receiving a lump sum, the payee
may elect another Annuity Option. The amount applied to that Option would
not be reduced by the charge defined in (b).
OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 10 YEARS: Annuity Payments
during the lifetime of the payee and in any event for 10 years certain. If
the payee dies during the guaranteed payment period and the Beneficiary does
not desire payments to continue for the remainder of the guaranteed period,
he/she may elect to have the present value of the guaranteed payments
remaining commuted and paid in a lump sum.
OPTION C. JOINT AND SURVIVOR ANNUITY: Annuity Payments payable during
the joint lifetime of the payee and a designated second natural person and
then during the lifetime of the survivor.
Unless the Annuity Option provides for commutation by the payee, a payee may
not withdraw or otherwise end an Annuity Option after it begins. Payments
will end upon the payee's death unless the Annuity Option provides for
payments continuing to a successor payee. No successor payee may extend the
period of time over which the remaining payments are to be made.
Annuity
If You select a Fixed Annuity, the Adjusted Certificate Value is allocated to
the General Account and the Annuity is paid as a Fixed Annuity. If You
select a Variable Annuity, the Adjusted Certificate Value will be allocated
to the Sub-accounts of the Separate Account in accordance with the selection
You make, and the Annuity will be paid as a Variable Annuity. You can also
select a combination of a Fixed and Variable Annuity and the Adjusted
Certificate Value will be allocated accordingly. If You don't select between
a Fixed Annuity and a Variable Annuity, any Adjusted Certificate Value in the
Variable Account will be applied to a Variable Annuity and any Adjusted
Certificate Value in the Fixed Account will be applied to a Fixed Annuity.
The Adjusted Certificate Value will be applied to the applicable Annuity
Table contained in the Certificate based upon the Annuity Option You select.
If, as of the Income Date, the current Annuity Option rates applicable to the
class of Certificates issued under the Group Contract provide an initial
Annuity Payment greater than the initial Annuity Payment guaranteed under the
applicable Annuity Table in the Certificate, the greater payment will be
made.
Fixed Annuity
The minimum dollar amount of each Fixed Annuity Payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. After the initial
Fixed Annuity payment, the payments will not change regardless of investment,
mortality or expense experience.
Variable Annuity
Variable Annuity Payments reflect the investment performance of the Variable
Account in accordance with the allocation of the Adjusted Certificate Value
to the Sub-accounts during the Annuity Period. Variable Annuity payments are
not guaranteed as to dollar amount.
The dollar amount of the first Variable Annuity payment for each $1,000 of
Adjusted Certificate Value is shown in the Annuity Tables. The dollar amount
of Variable Annuity payments for each applicable Sub-account after the first
Variable Annuity Payment is determined as follows:
(1) the dollar amount of the first Variable Annuity payment is divided
by the value of an Annuity Unit for each applicable Sub-account as of the
Income Date. This sets the number of Annuity Units for each monthly payment
for the applicable Sub-account. The number of Annuity Units for each
applicable Sub-account remains fixed during the Annuity Period;
(2) the fixed number of Annuity Units per payment in each Sub-account
is multiplied by the Annuity Unit Value for that Sub-account for the
Valuation Period for which the payment is due. This result is the dollar
amount of the payment for each applicable Sub-account.
The total dollar amount of each Variable Annuity payment is the sum of all
Sub-account Variable Annuity payments reduced by the applicable portion of
the Certificate Maintenance Charge.
Annuity Unit
The value of any Annuity Unit for each Sub-Account of the Separate Account
was initially set at $10.
The Sub-account Annuity Unit Value at the end of any subsequent Valuation
Period is determined as follows:
(1) the net investment factor calculated as set forth on pages 11-12
(but without the Distribution Charge, if any) for the current Valuation
Period is multiplied by the value of the Annuity Unit for the Sub-account for
the immediately preceding Valuation Period.
(2) the result in (1) is then divided by the Assumed Investment Rate
Factor which equals 1.00 plus the Valuation Period equivalent of the Assumed
Investment Rate for the number of days in the current Valuation Period. The
Assumed Investment Rate is equal to 5% per year.
The value of an Annuity Unit may increase or decrease from Valuation Period
to Valuation Period.
Using the Tables
Tables 2, 3, 5, and 6 are age-dependent. The amount of the first annuity
payment will be based on an age a specified number of years younger than the
person's then-attained age (i.e., age last birthday). This age setback is as
follows:
Date of First Payment Age Setback
1996-1999 1 year
2000-2009 2 years
2010-2019 4 years
2020-2029 5 years
2030 or later 6 years
We will calculate the amount for a payment frequency other than monthly and
for any ages not shown in Tables 2, 3, 5, and 6 in accordance with the next
section. Upon request, We will tell You any such amount.
Basis of Calculation
Tables 1 and 4 are based on interest at 5% and 3%, respectively. Tables 2,
3, 5, and 6 are based on the 1983 Individual Annuity Valuation Tables (sex
distinct) with interest at 5% (Tables 2 and 3) and 3% (Tables 5 and 6),
projected dynamically with Projection Scale G.
TABLE 1: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 1 FOR EACH
$1,000 APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $18.74 12 $9.16 19 $6.71 25 $5.76
6 15.99 13 8.64 20 6.51 26 5.65
7 14.02 14 8.20 21 6.33 27 5.54
8 12.56 15 7.82 22 6.17 28 5.45
9 11.42 16 7.49 23 6.02 29 5.36
10 10.51 17 7.20 24 5.88 30 5.28
11 9.77 18 6.94
TABLE 2: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 2 FOR EACH
$1,000 APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $4.45 $4.34 47 $5.05 $4.78 64 $6.54 $5.98 80 $9.14 $8.67
31 4.47 4.35 48 5.11 4.82 65 6.68 6.10 81 9.29 8.86
32 4.50 4.37 49 5.17 4.87 66 6.82 6.22 82 9.44 9.05
33 4.52 4.39 50 5.23 4.92 67 6.97 6.35 83 9.57 9.23
34 4.55 4.41 51 5.29 4.97 68 7.12 6.49 84 9.69 9.40
35 4.57 4.43 52 5.36 5.02 69 7.28 6.63 85 9.81 9.55
36 4.60 4.45 53 5.43 5.08 70 7.44 6.79 86 9.91 9.69
37 4.63 4.47 54 5.50 5.13 71 7.61 6.95 87 10.01 9.82
38 4.67 4.49 55 5.58 5.20 72 7.78 7.12 88 10.10 9.94
39 4.70 4.52 56 5.67 5.27 73 7.95 7.30 89 10.17 10.04
40 4.74 4.55 57 5.76 5.34 74 8.12 7.48 90 10.24 10.13
41 4.78 4.57 58 5.85 5.41 75 8.30 7.67 91 10.30 10.21
42 4.82 4.60 59 5.95 5.49 76 8.47 7.87 92 10.35 10.27
43 4.86 4.64 60 6.06 5.58 77 8.65 8.07 93 10.39 10.33
44 4.91 4.67 61 6.17 5.67 78 8.82 8.27 94 10.43 10.37
45 4.95 4.70 62 6.29 5.77 79 8.98 8.47 96 10.45 10.41
46 5.00 4.74 63 6.41 5.87
TABLE 3: FIRST MONTHLY PAYMENT PAYABLE UNDER VARIABLE OPTION 3 FOR EACH
$1,000 APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30 $4.24$4.28$4.31$4.34$4.36$4.38$4.40$4.42$4.43$4.44$4.45 $4.45 $4.45 $4.46
35 4.26 4.30 4.35 4.39 4.43 4.47 4.50 4.52 4.54 4.56 4.57 4.57 4.58 4.58
40 4.28 4.33 4.39 4.45 4.51 4.56 4.61 4.65 4.68 4.71 4.73 4.74 4.75 4.75
M 45 4.29 4.35 4.42 4.50 4.58 4.66 4.74 4.80 4.86 4.90 4.93 4.96 4.97 4.98
A 50 4.30 4.37 4.46 4.55 4.66 4.77 4.88 4.98 5.07 5.14 5.20 5.23 5.25 5.27
L 55 4.31 4.39 4.48 4.59 4.73 4.87 5.03 5.18 5.32 5.44 5.53 5.59 5.63 5.65
E 60 4.32 4.40 4.50 4.63 4.78 4.97 5.18 5.40 5.61 5.80 5.96 6.07 6.13 6.17
65 4.33 4.41 4.52 4.65 4.83 5.05 5.31 5.61 5.92 6.23 6.50 6.70 6.83 6.90
A 70 4.33 4.42 4.53 4.68 4.87 5.11 5.42 5.80 6.23 6.70 7.14 7.50 7.75 7.90
G 75 4.34 4.42 4.54 4.69 4.89 5.16 5.50 5.95 6.50 7.15 7.83 8.45 8.92 9.23
E 80 4.34 4.43 4.54 4.70 4.91 5.19 5.56 6.06 6.71 7.55 8.52 9.50 10.34 10.93
85 4.34 4.43 4.55 4.71 4.92 5.21 5.60 6.13 6.86 7.85 9.10 10.52 11.87 12.93
90 4.34 4.43 4.55 4.71 4.93 5.22 5.62 6.18 6.96 8.06 9.55 11.39 13.34 15.05
95 4.34 4.43 4.55 4.71 4.93 5.23 5.64 6.21 7.02 8.20 9.86 12.09 14.69 17.20
TABLE 4: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION A FOR EACH $1,000
APPLIED
Years Payment Years Payment Years Payment Years Payment
5 $17.91 12 $8.24 19 $5.73 25 $4.71
6 15.14 13 7.71 20 5.51 26 4.59
7 13.16 14 7.26 21 5.32 27 4.47
8 11.68 15 6.87 22 5.15 28 4.37
9 10.53 16 6.53 23 4.99 29 4.27
10 9.61 17 6.23 24 4.84 30 4.18
11 8.86 18 5.96
TABLE 5: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION B FOR EACH $1,000
APPLIED
Age Male Female Age Male Female Age Male Female Age Male Female
30 $3.12 $2.99 47 $3.82 $3.53 64 $5.40 $4.83 80 $8.15 $7.66
31 3.15 3.01 48 3.88 3.58 65 5.55 4.96 81 8.32 7.86
32 3.18 3.03 49 3.94 3.63 66 5.69 5.08 82 8.47 8.06
33 3.21 3.06 50 4.01 3.68 67 5.85 5.22 83 8.61 8.25
34 3.24 3.08 51 4.08 3.74 68 6.01 5.37 84 8.75 8.43
35 3.27 3.11 52 4.15 3.80 69 6.18 5.52 85 8.87 8.60
36 3.31 3.13 53 4.23 3.86 70 6.35 5.68 86 8.98 8.75
37 3.34 3.16 54 4.31 3.93 71 6.52 5.85 87 9.08 8.88
38 3.38 3.19 55 4.39 4.00 72 6.70 6.03 88 9.18 9.01
39 3.42 3.22 56 4.48 4.07 73 6.89 6.21 89 9.26 9.12
40 3.46 3.25 57 4.58 4.15 74 7.07 6.41 90 9.33 9.21
41 3.51 3.29 58 4.68 4.23 75 7.26 6.61 91 9.40 9.30
42 3.55 3.32 59 4.78 4.32 76 7.44 6.81 92 9.45 9.37
43 3.60 3.36 60 4.89 4.41 77 7.63 7.02 93 9.49 9.43
44 3.65 3.40 61 5.01 4.50 78 7.81 7.23 94 9.53 9.47
45 3.71 3.44 62 5.14 4.61 79 7.98 7.45 95 9.55 9.51
46 3.76 3.49 63 5.27 4.72
TABLE 6: MINIMUM MONTHLY PAYMENT PAYABLE UNDER FIXED OPTION C FOR EACH $1,000
APPLIED
COMBINATION OF AGES
FEMALE AGE
30 35 40 45 50 55 60 65 70 75 80 85 90 95
30$2.88$2.93$2.97$3.01$3.04$3.07$3.08$3.10$3.12$3.12$3.12 $3.12 $3.13$ 3.13
35 2.91 2.97 3.03 3.09 3.14 3.18 3.21 3.23 3.25 3.26 3.27 3.27 3.28 3.28
40 2.93 3.01 3.09 3.17 3.24 3.30 3.35 3.39 3.42 3.44 3.46 3.46 3.47 3.47
M 45 2.95 3.04 3.14 3.24 3.34 3.43 3.51 3.58 3.63 3.66 3.69 3.71 3.72 3.72
A 50 2.96 3.06 3.17 3.30 3.43 3.56 3.68 3.79 3.87 3.94 3.98 4.01 4.03 4.03
L 55 2.97 3.07 3.20 3.34 3.50 3.68 3.85 4.02 4.16 4.27 4.34 4.39 4.42 4.44
E 60 2.98 3.09 3.22 3.38 3.56 3.78 4.01 4.25 4.47 4.66 4.80 4.89 4.95 4.98
65 2.98 3.09 3.23 3.40 3.61 3.86 4.15 4.48 4.81 5.12 5.37 5.55 5.66 5.72
A 70 2.99 3.10 3.24 3.42 3.64 3.92 4.26 4.67 5.13 5.60 6.04 6.38 6.60 6.73
G 75 2.99 3.10 3.25 3.43 3.66 3.96 4.34 4.81 5.39 6.06 6.75 7.35 7.79 8.07
E 80 2.99 3.11 3.25 3.44 3.68 3.99 4.39 4.92 5.60 6.45 7.44 8.42 9.23 9.79
85 2.99 3.11 3.26 3.44 3.69 4.00 4.42 4.98 5.73 6.74 8.01 9.44 10.77 11.81
90 2.99 3.11 3.26 3.45 3.69 4.01 4.44 5.02 5.82 6.93 8.43 10.29 12.25 13.95
95 2.99 3.11 3.26 3.45 3.70 4.02 4.45 5.04 5.87 7.05 8.73 10.97 13.58 16.11
Endorsements
To be inserted only by Us
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CERTIFICATE with limited purchase payment
flexibility. This certificate is nonparticipating with no dividends.
EXHIBIT 6(a)
ARTICLES OF ORGANIZATION
OF
LIBERTY LIFE ASSURANCE COMPANY
We, Frank L. Farwell, President, and George A. Potter, Secretary, and
S. Bruce Black, Bryan K. Smith, William S.
Brewster, Boardman Bump, Marshall B. Dalton, Joseph
A. Erickson, Samuel A. Groves, and Joseph J. Snyder,
being a majority of the Liberty Life Assurance Company elected at its first
meeting, in compliance with the requirements of General Laws, Chapter 175,
hereby certify that the following is a true copy of the Agreement of
Association to form said corporation, with the names of subscribers thereto:
We whose names are hereto subscribed do, by this agreement, associate
ourselves with the intention of forming a corporation under the provisions of
General Laws, Chapter 175.
The name by which the corporation shall be known is
LIBERTY LIFE ASSURANCE COMPANY
The location of the principal office of the corporation in Massachusetts is
to be the City of Boston.
The business address of the corporation if to be 175 Berkeley Street, Boston,
Massachusetts.
The corporation is to be formed for the following purposes:
Upon the stock plan, to transact life insurance and make contracts for the
payment of annuities and pure endowments.
Upon the stock plan, to insure persons against bodily injury or death by
accident.
Upon the stock plan, to make insurance upon the health of individuals.
Upon the stock plan, to transact insurance business of any and all other
kinds that the corporation may now or hereafter be authorized by law to
transact.
The total capital stock to be authorized is as follows:
Eight thousand (8,000) shares of common stock having a par value of one
hundred dollars ($100.) per share.
The Board of Directors may permit policyholders of the corporation from time
to time to participate in the profits of its operations and may make
reasonable classification of policies. The corporation may issue both
participating and non-participating policies and the Board of Directors shall
have the power to determine what policies shall be participating and what
policies non-participating.
No share of the corporation's stock may be sold, hypothecated, or transferred
without the consent of the holders of record of three-fourths of the capital
stock of the corporation.
We hereby waive all requirements of the General Laws of the Massachusetts for
notice of the first meeting of the incorporators for the purpose of
organization and appoint the day of September 11, 1963 at 3:00 P.M. at 175
Berkeley Street, Boston, Massachusetts, as the time and place for holding
such first meeting.
The names and residences of the incorporators are as follows:
Frank L. Farwell 60 Redington Road, Needham, Massachusetts
S. Bruce Black 180 Kent Road, Waban, Massachusetts
Bryan E. Smith 39 Byron Road, Weston, Massachusetts
William S. Brewster Wellsbrook, Plymouth, Massachusetts
Boardman Bump 229 Ash Street, Weston, Massachusetts
Marshall B. Dalton 20 Chapel Street, Brookline, Massachusetts
Joseph A. Erickson 50 The Ledgeways, Wellesley Hills, Massachusetts
Samuel A. Groves 135 Edmunds Road Wellesley Hills, Massachusetts
Joseph J. Snyder 276 Marlboro Street, Boston, Massachusetts
Franklin J. Marryott 34 White Oak Road, Wellesley Hills, Massachusetts
Charles P. Thomas 53 Martin Road, Wellesley, Massachusetts
IN WITNESS WHEREOF we hereto sign our name this 11th day of September, 1963.
Frank L. Farwell (s)
S. Bruce Black (s)
Bryan E. Smith (s)
William S. Brewster (s)
Boardman Bump (s)
Marshall B. Dalton (s)
Joseph A. Erickson (s)
Samuel A. Groves (s)
Joseph J. Snyder (s)
Franklin J. Marryott (s)
Charles P. Thomas (s)
And we further certify that:
The first meeting of the subscribers to said Agreement was held on the 11th
day of September, 1963.
The amount of capital stock now to be issued is as follows:
8,000 shares of common stock having a par value of $100 per share, to be paid
in cash in full.
The name, residence, and post office address of each of the officers of the
corporation are as follows:
NAME RESIDENCE AND POST OFFICE ADDRESS
President
Frank L. Farwell 60 Redington Road
Needham, Massachusetts
Vice President
Charles P. Thomas 53 Martin Road
Wellesley, Massachusetts
Secretary
George A. Potter 53 Glendale Avenue
Needham Heights, Massachusetts
Assistant Secretary
Mary M. Collins 46 Porter Street
Lexington, Massachusetts
Assistant Secretary
Barton L. Searle 15 Mercer Road
Needham, Massachusetts
Treasurer
Lloyd S. Glidden, Jr. 21 Dana Road
Reading, Massachusetts
Assistant Treasurer
Allan M. Mercer 102 Mayo Road
Wellesley, Massachusetts
Director
S. Bruce Black 180 Kent Road
Waban, Massachusetts
Director
Bryan E. Smith 39 Byron Road
Weston, Massachusetts
Director
William S. Brewster Wellsbrook
Plymouth, Massachusetts
Director
Boardman Bump 229 Ash Street
Weston, Massachusetts
Director
Marshall B. Dalton 20 Chapel Street
Brookline, Massachusetts
Director
Joseph A. Erickson 50 The Ledgeways
Wellesley Hills, Massachusetts
Director
Samuel A. Groves 135 Edmunds Road
Wellesley Hills, Massachusetts
Director
Joseph J. Snyder 276 Marlboro Street
Boston, Massachusetts
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY WE hereto to sign our
names this 11th day of September, 1963.
/s/ S. Bruce Black /s/ Marshall B. Dalton
/s/ Joseph J. Snyder /s/ Samuel A. Groves
/s/ Joseph A. Erickson /s/ Frank L. Farwell
/s/ William S. Brewster /s/ Bryan E. Smith
/s/ Boardman Bump /s/ George A. Potter
THE COMMONWEALTH OF MASSACHUSETTS
SUFFOLK SS. September 11, 1963
Then personally appeared the above-named Frank L. Farwell, President,
and George A. Potter, Secretary, and S. Bruce Black, Bryan E. Smith, William
S. Brewster, Boardman Bump, Marshall B. Dalton, Joseph A. Erickson, Samuel A.
Groves and Joseph J. Snyder, Directors, and severally made oath that the
foregoing certificate, by them subscribed, is true to the best of their
knowledge and belief.
Before me,
/s/ Frederick H. Walter
NOTARY PUBLIC
/s/ My commission expires Nov 3, 1968
THE COMMONWEALTH OF MASSACHUSETTS
Liberty Life Assurance Company
ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 175
Filed in the office of the Secretary of the Commonwealth, Sept. 17, 1963.
I hereby certify that it appears upon an examination of the within
articles of organization and the records of the corporation duly submitted to
my inspection, that the requirements of section forty-nine of chapter one
hundred and seventy-five of the General Laws have been complied with, and I
hereby approve said articles this 16th day of September A.D. nineteen hundred
and sixty-three.
/s/ Harry M. Duggan
First Deputy Commission of Insurance
Charter to be sent to:
Franklin J. Marryott
175 Berkeley Street
Boston, Massachusetts
THE COMMONWEALTH OF MASSACHUSETTS
JOHN F. X. DAVOREM
Secretary of the Commonwealth
STATE HOUSE BOSTON, MASS.
CHANGE OF NAME
General Laws, Chapter 175, Section 50
We, Frank L. Farwell President, Lloyd S. Glidden, Jr. Treasurer, Bruce E.
Boorman Secretary, and William S. Brewster, Boardman Bump, Joseph A.
Erickson, Samuel A. Groves, Bryan E. Smith
being a majority of the directors of Liberty Life Assurance Company
a corporation duly organized under the provisions of Chapter 175 of the
General Laws to compliance with the provisions of Chapter 175, Section 50 of
the General Laws as amended, do hereby certify that at a meeting of the
shareholders said corporation duly called for the purpose and held on the
11th day of December, by an affirmative vote of ten shareholders of said
corporation; being at least two-thirds of the persons legally entitled to
vote, it was voted to change the name of the corporation to Liberty Life
Assurance Company of Boston.
Signed the 27th day of December 1958 under the penalties of perjury
President: /s/ Frank L. Farwell
Treasurer: /s/ Lloyd S. Glidden, Jr.
Clerks: /s/ Bruce E. Boorman
Majority of Directors:
/s/ William S. Brewster /s/ Boardman Bump
/s/ Samuel A. Groves /s/ Joseph A. Erickson
/s/ Bryan E. Smith
IMPORTANT: Amendments made under Chapter 155 Section 10 must be filed within
30 days of the date of the vote. If more space is needed use continuation
sheets which must be 8 1/2" wide x 11" high paper, and typed on one side
only.
DELETE ANY INAPPLICABLE WORDS
GENERAL LAWS
CHAPTER 180 SECTION 10
I hereby approve the within amendment and the filing fees having been paid,
and certificate is deemed to have been filed with me this 2nd day of Jan.,
1969.
JOHN F. K. DAVOREM
Secretary of the Commonwealth
As of those entered published in Boston newspaper by letter of 12-19-68 HG
MASSACHUSETTS GENERAL LAWS
Section 50, Chapter 175
December 19, 1968
I find that the change of name has been made in conformity to law.
Approved:
/s/_____________________
Commissioner of Insurance
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
We, Frank L. Farwell, President and Director, and Bruce E. Boorman,
Secretary, and Joseph A. Erickson, S. Bruce Black, Samuel A. Groves, William
S. Brewster, Bryan E. Smith, Boardman Bump, Joseph J. Snyder and George D.
Hart, being a majority of the Directors of
LIBERTY LIFE ASSURANCE COMPANY
located at Boston, Massachusetts, in compliance with the provisions of
General Laws, Chapter 175, Section 50, do hereby certify that at a meeting of
the stockholders of the Company, duly called for the purpose, held December
8, 1965, by affirmative vote of the holders of 8,000 shares of the Capital
Stock of the Company, being more than two-thirds of all the Capital Stock
outstanding and entitled to vote, the following amendment to the Articles of
Organization of the Company was duly adopted, namely:
VOTED that
(1) The par value of the shares of common stock of the Company is
hereby changed from one hundred dollars ($100.00) to one hundred
twenty-five dollars ($125.00); and in conformity therewith the
Articles of Organization are hereby amended to read as follows:
"The total capital stock to be authorized is as follows:
Eight thousand (8,000) shares of common stock having a
par value of one hundred twenty-five dollars ($125.00)
per share."
(2) Each issued share of common stock of the par value of one hundred
dollars($100.00) a share of the Company is hereby changed into one
share of common stock of the par value of one hundred twenty-five
dollars ($125.00) of share of the Company.
(3) Upon this Amendment to the articles of organization becoming
effective, each certificate which theretofore represented shares of
common stock of the par value of one hundred dollars ($100.00) a
share of the Company shall represent the same number of shares of
common stock of the par value of one hundred twenty-five dollars
($125.00) a share of the Company;
and it is further
VOTED that the amount of two hundred thousand dollars ($200,000.00) shall be
transferred from the surplus of the Company to the capital account.
IN WITNESS WHEREOF, we have hereunto signed our names this 8th day of
December, 1965.
/s/ Frank L. Farwell /s/ Bruce E. Boorman
President Secretary
/s/ Bryan E. Smith /s/ Joseph J. Snyder
Director Director
/s/ Boardman Bump /s/ Joseph A. Erickson
Director Director
/s/ William S. Brewster /s/ George D. Hart
Director Director
/s/ Samuel A. Groves /s/ S. Bruce Black
Director Director
COMMONWEALTH OF MASSACHUSETTS
SS.:
COUNTY OF SUFFOLK
On this eighth day of December, 1965, before me appeared Frank L.
Farwell, President and Director, and Bruce E. Boorman, Secretary, and Joseph
A. Erickson, S. Bruce Black, Samuel A. Groves, William S. Brewster, Bryan E.
Smith, Boardman Bump, Joseph J. Snyder and George D. Hart, Directors of the
Liberty Life Assurance Company, all being personally known to me, and took
oath that the foregoing statement is true.
/s/ Frederick H. Walter
RECEIVED
FEB 15 1966
CORPORATION DIVISION
SECRETARY'S OFFICE
RECEIVED
$25 CK.
FEB 15 1966
CORPORATION DIVISION
SECRETARY'S OFFICE
LIBERTY LIFE ASSURANCE COMPANY
INCREASE IN CAPITAL
G.L. CHAPTER 175, SECTIONS 50 AND 70
February 9, 1966
I find that the increase in capital has been made in conformity to law.
APPROVED:
/s/ Roger E. Ingalls
First Deputy Commissioner of Insurance
THE COMMONWEALTH OF MASSACHUSETTS
JOHN F. X. DAVOREAN
Secretary of the Commonwealth
STATE HOUSE, BOSTON, MASS.
ARTICLES OF AMENDMENT
General Laws, Chapter 175, Section 50B
This certificate must be submitted to the Commissioner of Insurance within
thirty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate with the Secretary of the
Commonwealth is prescribed by General Laws, Chapter 156B, Section 114. Make
check payable to the Commonwealth of Massachusetts.
We, Frank L. Farwell, President and Director, Bruce E. Boorman, Secretary and
a majority of the Directors of
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
(name of corporation)
located at 175 Berkeley Street, Boston, Massachusetts
do hereby certify that the following amendment to the articles of
organization of the corporation was duly adopted at a meeting duly called for
the purpose and held on March 13, 1974, by vote of
8000 shares of common out of 8000 shares outstanding
(class of stock)
- ---- shares of ------ out of --- shares outstanding
(class of stock)
- ---- shares of ------ out of --- shares outstanding
(class of stock)
being at least two-thirds of each class outstanding and entitled to
vote thereon and of each class or series of stock whose rights are
adversely affected thereby:
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
We, Frank L. Farwell, President and Director, and Bruce E. Boorman,
Secretary, and Melvin B. Bradshaw, Philip B. Hamilton, William S. Brewster,
George D. Hart, Boardman Bump, Joseph J. Snyder, Samuel A. Groves and C.
Robert Yeager, being a majority of the Directors of
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
located at Boston, Massachusetts, in compliance with the provisions of
General Laws, Chapter 175, Section 50B, do hereby certify that at a meeting
of the stockholders of the Company, duly called for the purpose, held March
13, 1974, by affirmative vote of the holders of 8000 shares of the Capital
Stock of the Company, being all the Capital Stock outstanding and entitled to
vote, the following amendment to the Articles of Organization of the Company
was duly adopted, namely:
VOTED that
(1) The par value of the shares of common stock of the Company is
hereby changed from one hundred twenty-five dollars ($125.00) to
one hundred thirty-seven and 50/100 ($137.50); and in conformity
therewith the Articles of Organization are hereby amended to read
as follows:
"The total capital stock to be authorized is as follows:
Eight thousand (8,000) shares of common stock having a
par value of one hundred thirty-seven and 50/100 ($137.50)
per share."
(2) Each issued share of common stock of the par value of one hundred
twenty-five dollars ($125.00) a share of the Company is hereby
changed into one share of common stock of the par value of one
hundred thirty-seven and 50/100 ($137.50)a share of the Company.
(3) Upon this Amendment to the articles of organization becoming
effective, each certificate which thereto represented shares of
common stock of the par value of one hundred twenty-five dollars
($125.00) a share of the Company shall represent the same number of
shares of common stock of the par value one hundred thirty-seven
and 50/100 ($137.50)a share of the Company;
and it is further
VOTED that the amount of one hundred thousand dollars ($100,000.00) shall be
transferred from the surplus of the Company to the capital account.
IT WITNESS WHEREOF, we have hereunto signed our names this 13th day of March,
1974.
/s/ Bruce E. Boorman
President and Director Secretary
/s/ George D. Hart /s/ Samuel A. Groves
Director Director
/s/ Joseph J. Snyder /s/ Boardman Bump
Director Director
/s/ Philip B. Hamilton /s/ Melvin B. Bradshaw
Director Director
/s/ C. Robert Yeager /s/ Frank L. Farwell
Director President and Director
(See enclosed sheets for amendment and execution by Directors.)
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 175 Section 50B of the General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such
filing, in which event the amendment will become effective on such later
date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed
our names this day of , in the
year 19 .
President/Vice President
Clerk/Assistant Clerk
DATE APPROVED: May 31, 1974
I hereby certify that upon examination of the within articles of
amendment duly submitted to me, it appears that the said articles conform to
the requirements of law and are duly approved.
Commissioner of Insurance
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 175 Section 50B)
The filing fee in the amount of $50.00
having been paid, said articles are deemed
to have been filed this 7th day of June, 1974.
/s/ John F. X. Davorean
John F. X. Davorean
Secretary of the Commonwealth
State House, Boston, Mass.
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO: F.H. Walter, Esq.
Liberty Mutual Insurance Company
175 Berkeley Street
Boston, Massachusetts 02117
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary FEDERAL IDENTIFICATION
NO. 04-6076039
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 175, Section 50B
This certificate must be submitted to the Commissioner of Insurance within
thirty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 1568, Section 114. Make check payable to the Commonwealth of
Massachusetts.
We, Stuart L. Lerner, President & Director
Jeanne Couillard, Secretary and a majority of the Directors of
Liberty Life Assurance Company of Boston
(Name of Corporation)
located at 175 Berkeley Street, Boston, Massachusetts 02117
do hereby certify the following amendment to the articles of organization of
the corporation was duly adopted at a meeting held on March 12, 1986, by vote
of
8000 shares of common out of 8000 shares outstanding
(class of stock)
- ---- shares of ------ out of --- shares outstanding
(class of stock)
- ---- shares of ------ out of --- shares outstanding
(class of stock)
being at least two-thirds of each class outstanding and entitled to
vote thereon and of each class or series of stock whose rights are
adversely affected thereby:
TO CHANGE the number of shares and the par value, if any, of each class of
stock within the corporation fill in the following:
The total presently authorized is:
NO. PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
COMMON 8,000 $137.50
PREFERRED
CHANGE the total to:
NO. PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
COMMON 8,000 $150.--
PREFERRED
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
We, Melvin B. Bradshaw, Chairman of the Board and Director, Stuart L. Lerner,
President and Director, Jeanne Couillard, Secretary, and William S. Brewster,
Gary L. Countryman, Frank L. Farwell, Austin B. Mason, Edward M. Mulligan,
Thomas Hedley Reynolds, Winthrop A. Short, Glenn P. Strehle and D. Thomas
Trigg, being a majority of the Directors of
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
located at Boston, Massachusetts, in compliance with the provisions of
General Laws, Chapter 175, Section 50B, do hereby certify that a meeting of
the stockholders of the Company, duly called for the purpose, held March 12,
1986, by affirmative vote of the holders of 8000 shares of the Capital Stock
of the Company, being all of the Capital Stock outstanding and entitled to
vote, the following amendment to the Articles of Organization of the Company
was duly adopted, namely;
VOTED (I) That
(1) The par value of the shares of common stock of the Company is
hereby changed from one hundred thirty-seven and 50/100 ($137.50)
to one hundred fifty dollars ($150.00); and in conformity therewith
the Articles of Organization are hereby amended to read as follows:
"The total capital stock to be authorized is as follows:
Eight thousand (8,000) shares of common stock having a
par value of one hundred fifty dollar ($150.00)per share."
(2) Each issued share of common stock of the par value of one hundred
thirty-seven and 50/100 ($137.50) a share of the Company is hereby
changed into one share of common stock of the par value of one
hundred fifty dollars ($150.00); a share of the Company.
(3) Upon this Amendment to the Articles of Organization becoming
effective, each certificate which theretofore represented shares of
common stock of the par value of one hundred thirty-seven and
50/100 ($137.50) a share of the Company shall represent the same
number of shares of common stock of the par value one hundred fifty
dollars ($150.00) a share of the Company.
(II) That the amount of one hundred thousand dollars ($100,000.00)
shall be transferred from the surplus of the Company to the
capital account;
(III) That the Officers and Directors of the Company are authorized
and directed to take such action as may be necessary or
required to effect the changes authorized by this vote.
IN WITNESS WHEREOF, we have hereunto signed out names this 12th day of March,
1986.
/s/ Melvin B. Bradshaw /s/ Jeanne Couillard
Chairman of the Board and Director Secretary
/s/ Stuart L. Lerner /s/ Frank L. Farwell
President and Director Director
/s/ Gary L. Countryman /s/ William S. Brewster
Director Director
/s/ Glenn P. Strehle /s/ Austin B. Mason
Director Director
/s/ Winthrop A. Short /s/ Thomas Hedley Reynolds
Director Director
/s/ D. Thomas Trigg /s/ Edward M. Mulligan
Director Director
EXCERPT FROM MINUTES OF MEETING
OF STOCKHOLDERS' MEETING OF
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
March 12, 1986
The Chairman stated that the authorized capital of the Company is $1,100,000,
and that the Articles of Organization authorize 8000 shares having a par
value of $137.50 per share. In order to continue to do business in North
Carolina, that State requires capital of $1,200.000.
We stated that one method of increasing the capital is to increase par value
of each share from $137.50 to $150.00, and to transfer $100,000 from surplus
to capital. The surplus of the Company's financial position. The resulting
surplus would be adequate for all known requirements. To do this requires an
amendment of the Articles of Organization to increase the par value of each
share from $137.50 to $150.00, and the transfer of $100,000 from surplus to
capital. Upon motion duly made and seconded, it was:
VOTED (I) That
(1) The par value of the shares of common stock of the Company is
hereby changed from one hundred thirty-seven and 50/100 ($137.50)
to one hundred fifty dollars ($150.00); and in conformity therewith
the Articles of Organization are hereby amended to read as follows:
"The total capital stock to be authorized is as follows:
Eight thousand (8,000) shares of common stock having a
par value of one hundred fifty dollars ($150.00)per share."
(2) Each issued share of common stock of the par value of one hundred
thirty-seven and 50/100 ($137.50) a share of the Company is hereby
changed into one share of common stock of the par value of one
hundred fifty dollars ($150.00) a share of the Company.
(3) Upon this Amendment to the Articles of Organization becoming
effective, each certificate which theretofore represented shares of
common stock of the par value of one hundred thirty-seven and
50/100 ($137.50) a share of the Company shall represent the same
number of shares of common stock of the par value one hundred fifty
dollars ($150.00) a share of the Company.
(II) That the amount of one hundred thousand dollars ($100,000.00)
shall be transferred from the surplus of the Company to the
capital account;
(III) That the Officers and Directors of the Company are authorized
and directed to take such action as may be necessary or
required to effect the changes authorized by this vote.
CERTIFIED: /s/ Jeanne Couillard
Secretary
(See enclosed sheets for Amendment and execution by Directors.)
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 175, Section 50B of The
General Laws unless these articles specify, in accordance with the vote
adopting the amendment, a later effective date not more than thirty days
after such filing, in which event the amendment will become effective on such
later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed
our names this 22nd day of July, in the year 1986
/s/ Stuart L. Lerner President
/s/ Jeanne Couillard Secretary
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment
and, the filing fee in the amount of $75.00 having been
paid, said articles are deemed to have been filed with
me this 27th day of August, 1986.
/s/ Michael Joseph Connolly
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO:
William J. O'Connell, Legal Dept.
Liberty Life Assurance Company of Boston
175 Berkeley St.
Boston, MA 02117
Telephone: (617) 357-9500
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary FEDERAL IDENTIFICATION
NO. 04-6076039
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 175, Section 50B
This certificate must be submitted to the Commissioner of Insurance within
thirty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 175, Section 50B. Make check payable to the Commonwealth of
Massachusetts.
We, Stuart L. Lerner, President & Director,
Jeanne Couillard, Secretary and a Majority of the Directors of
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
(Name of Corporation)
located at 175 Berkeley Street, Boston, Massachusetts 02117-0140
do hereby certify that the following amendment to the articles of
organization of the corporation was duly adopted at a meeting held on March
8, 1989, by vote of
8000 shares of common out of 8000 shares outstanding
(class of stock)
- ---- shares of ------ out of --- shares outstanding
(class of stock)
- ---- shares of ------ out of --- shares outstanding
(class of stock)
being at least two-thirds of each class outstanding and entitled to
vote thereon and of each class or series of stock whose rights are
adversely affected thereby:
TO CHANGE the number of shares and the par value, if any, of each class of
stock within the corporation fill in the following:
The total presently authorized is:
NO. PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
COMMON 8,000 $150.00
PREFERRED
CHANGE the total to:
NO. PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
COMMON 8,000 $312.50
PREFERRED
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
We, Gary L. Countryman, Chairman of the Board and Director, Stuart L. Lerner,
President and Director, Jeanne Couillard, Secretary, and Gerald E. Anderson,
Melvin B. Bradshaw, William S. Brewster, William L. Brown, Austin B. Mason,
Edward M. Mulligan, Thomas Hedley Reynolds, Winthrop A. Short, Richard A.
Smith and Glenn P. Strehle, being a majority of the Directors of
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
located at Boston, Massachusetts, in compliance with the provisions of
General Laws, Chapter 175, Section 50B, do hereby certify that a meeting of
the stockholders of the Company, duly called for the purpose, held March 8,
1989, by affirmative vote of the holders of 8000 shares of the Capital Stock
of the Company, being all of the Capital Stock outstanding and entitled to
vote, the following amendment to the Articles of Organization of the Company
was duly adopted, namely;
VOTED (I) That
(1) The par value of the shares of common stock of the Company is
hereby changed from one hundred fifty dollars ($150.00) to three
hundred twelve and 50/100 dollars ($312.50); and in conformity
therewith the Articles of Organization are hereby amended to read
as follows:
"The total capital stock to be authorized is as follows:
Eight thousand (8,000) shares of common stock having a
par value of three hundred twelve and 50/100 dollars
($312.50)per share."
(2) Each issued share of common stock of the par value of one hundred
fifty dollars ($150.00) a share of the Company is hereby
changed into one share of common stock of the par value of three
hundred twelve and 50/100 dollars ($312.50) a share of the
Company.
(3) Upon this Amendment to the Articles of Organization becoming
effective, each certificate which theretofore represented shares of
common stock of the par value of one hundred fifty dollars
($150.00) a share of the Company shall represent the same
number of shares of common stock of the par value three hundred
twelve and 50/100 dollars ($312.50) a share of the Company.
(II) That the amount of one million, three hundred thousand
dollars ($1,300,000.00) shall be transferred from the surplus
of the Company to the capital account;
(III) That the Officers and Directors of the Company are authorized
and directed to take such action as may be necessary or
required to effect the changes authorized by this vote.
IN WITNESS WHEREOF, AND UNDER THE PENALTIES OF PERJURY, we have hereunto
signed out names this 8th day of March, 1989.
/s/ Gary L. Countryman /s/ Jeanne Couillard
Chairman of the Board and Director Secretary
/s/ Stuart L. Lerner /s/ Austin B. Mason
President and Director Director
/s/ Melvin B. Bradshaw /s/ Thomas Hedley Reynolds
Director Director
/s/ Edward M. Mulligan /s/ Glenn P. Strehle
Director Director
/s/ William L. Brown /s/ Gerald E. Anderson
Director Director
/s/ Richard A. Smith /s/ Winthrop A. Short
Director Director
/s/ William S. Brewster
Director
EXCERPT FROM MINUTES OF MEETING
OF STOCKHOLDERS' MEETING OF
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
March 8, 1989
The Chairman stated that the authorized capital of the Company is $1,200,000,
and that the Articles of Organization authorize 8000 shares having a par
value of $150.00 per share. In order to continue to do business in Maine,
that State requires capital of $2,500,000.
He stated that one method of increasing the capital is to increase par value
of each share from $150.00 to $312.50, and to transfer $1,300,000 from
surplus to capital. The surplus of the Company is now $32,892,067.00. A
transfer from surplus would not adversely affect the Company's financial
position. The resulting surplus would be adequate for all known requirements.
To do this requires an amendment of the Articles of Organization to increase
the par value of each share from $150.00 to $312.50, and the transfer of
$1,300,000 from surplus to capital. Upon motion duly made and seconded, it
was:
VOTED (I) That
(1) The par value of the shares of common stock of the Company is
hereby changed from one hundred fifty dollars ($150.00) to three
hundred twelve and 50/100 dollars ($312.50); and in conformity
therewith the Articles of Organization are hereby amended to read
as follows:
"The total capital stock to be authorized is as follows:
Eight thousand (8,000) shares of common stock having a
par value of three hundred twelve and 50/100 dollars
($312.50)per share."
(2) Each issued share of common stock of the par value of one hundred
fifty dollars ($150.00) a share of the Company is hereby
changed into one share of common stock of the par value of three
hundred twelve and 50/100 dollars ($312.50); a share of the
Company.
(3) Upon this Amendment to the Articles of Organization becoming
effective, each certificate which theretofore represented shares of
common stock of the par value of one hundred fifty dollars
($150.00) a share of the Company shall represent the same
number of shares of common stock of the par value three hundred
twelve and 50/100 dollars ($312.50) a share of the Company.
(II) That the amount of one million, three hundred thousand
dollars ($1,300,000.00) shall be transferred from the surplus
of the Company to the capital account;
(III) That the Officers and Directors of the Company are authorized
and directed to take such action as may be necessary or
required to effect the changes authorized by this vote.
CERTIFIED: /s/ Jeanne Couillard
Secretary
(See enclosed sheets for Amendment and execution by President, Secretary and
a majority of the Directors.)
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 175, Section 50B of The
General Laws unless these articles specify, in accordance with the vote
adopting the amendment, a later effective date not more than thirty days
after such filing, in which event the amendment will become effective on such
later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed
our names this 10th day of March, in the year 1989.
/s/ Stuart L. Lerner President
/s/ Jeanne Couillard Secretary
March 21, 1989
It appears that upon examination of this
amendment that it conforms to Chapter 175 of the
Massachusetts General Laws, and I hereby approve
said amendment this date.
/s/ Roger M. Singer
Roger M. Singer
Commissioner of Insurance
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment
and, the filing fee in the amount of $1,300.00 having been
paid, said articles are deemed to have been filed with
me this 3rd day of April, 1989.
/s/ Michael Joseph Connolly
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO:
David William Shuckra
Associate Counsel
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
175 Berkeley St.
Boston, MA 02117
Telephone: (617) 574-5804
EXHIBIT 8(d)
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 2nd day of July 1996 , by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, a Massachusetts
corporation (the "Company") on its own behalf and on behalf of each of the
segregated asset accounts of the Company set forth in Schedule A hereto, as
may be amended from time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state
securities law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts
invest, is specified in Schedule A attached hereto as may be modified from
time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as
a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, Keyport Financial Services Corp., the underwriter for the
individual variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares
to the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such orders by 9:30 a.m. New York time
on the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such net
asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light of
its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares
except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy holders on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of
requests for redemption from Policy owners and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust receives
notice of such request for redemption by 9:30 a.m. New York time on the
next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section
1.1. hereof. In the event of net redemptions, the Trust shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable on
a Portfolio's Shares in additional Shares of that Portfolio. The Trust
shall notify the Company of the number of Shares so issued as payment of
such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon
as reasonably practical after the net asset value per share is calculated
and shall use its best efforts to make such net asset value per share
available by 6:30 p.m. New York time. In the event that the Trust is
unable to meet the 6:30 p.m. time stated herein, it shall provide
additional time for the Company to place orders for the purchase and
redemption of Shares. Such additional time shall be equal to the
additional time which the Trust takes to make the net asset value
available to the Company. If the Trust provides materially incorrect
share net asset value information, the Trust shall make an adjustment to
the number of shares purchased or redeemed for the Accounts to reflect
the correct net asset value per share. Any material error in the
calculation or reporting of net asset value per share, dividend or
capital gains information shall be reported promptly upon discovery to
the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
1940 Act. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable
law and that it has legally and validly established the Account as a
segregated asset account under applicable law and has registered or,
prior to any issuance or sale of the Policies, will register the Accounts
as unit investment trusts in accordance with the provisions of the 1940
Act (unless exempt therefrom) to serve as segregated investment accounts
for the Policies, and that it will maintain such registration for so long
as any Policies are outstanding. The Company shall amend the
registration statements under the 1933 Act for the Policies and the
registration statements under the 1940 Act for the Accounts from time to
time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company
shall register and qualify the Policies for sales accordance with the
securities laws of the various states only if and to the extent deemed
necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment
or annuity contract under applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), that it will maintain such
treatment and that it will notify the Trust or MFS immediately upon
having a reasonable basis for believing that the Policies have ceased to
be so treated or that they might not be so treated in the future.
2.3. The Company represents and warrants that Keyport Financial Services
Corp., the underwriter for the individual variable annuity and the
variable life policies, is a member in good standing of the NASD and is a
registered broker-dealer with the SEC. The Company represents and
warrants that the Company and Keyport Financial Services Corp. will sell
and distribute such policies in accordance in all material respects with
all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its Shares. The Trust
shall register and qualify the Shares for sale in accordance with the
laws of the various states only if and to the extent deemed necessary by
the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
The Trust and MFS represent that the Trust and the Underwriter will sell
and distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is
exempt from registration as an investment adviser under the securities
laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request
so that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the
SEC has granted exemptive relief to permit mixed and shared funding (the
"Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to existing
Policy owners whose Policies are funded by such Shares. The Trust or its
designee shall provide the Company, at the Company's expense, with as
many copies of the current prospectus for the Shares as the Company may
reasonably request for distribution to prospective purchasers of
Policies. If requested by the Company in lieu thereof, the Trust or its
designee shall provide such documentation (including a "camera ready"
copy of the new prospectus as set in type or, at the request of the
Company, as a diskette in the form sent to the financial printer) and
other assistance as is reasonably necessary in order for the parties
hereto once each year (or more frequently if the prospectus for the
Shares is supplemented or amended) to have the prospectus for the
Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a) the
Company and (b) the Trust or its designee in proportion to the number of
pages of the Policy and Shares' prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers,
columns, graphs and charts; the Trust or its designee to bear the cost of
printing the Shares' prospectus portion of such document for distribution
to owners of existing Policies funded by the Shares and the Company to
bear the expenses of printing the portion of such document relating to
the Accounts; provided, however, that the Company shall bear all printing
expenses of such combined documents where used for distribution to
prospective purchasers or to owners of existing Policies not funded by
the Shares. In the event that the Company requests that the Trust or its
designee provides the Trust's prospectus in a "camera ready" or diskette
format, the Trust shall be responsible for providing the prospectus in
the format in which it or MFS is accustomed to formatting prospectuses
and shall bear the expense of providing the prospectus in such format
(e.g., typesetting expenses), and the Company shall bear the expense of
adjusting or changing the format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require for
distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or
prospectuses for distribution to prospective purchasers or to owners of
existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract
owners. The Company will in no way recommend action in connection with
or oppose or interfere with the solicitation of proxies for the Shares
held for such Policy owners. The Company reserves the right to vote
shares held in any segregated asset account in its own right, to the
extent permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts holding
Shares calculates voting privileges in the manner required by the Mixed
and Shared Funding Exemptive Order. The Trust and MFS will notify the
Company of any changes of interpretations or amendments to the Mixed and
Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to such
use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional information
for the Shares, as such registration statement, prospectus and statement
of additional information may be amended or supplemented from time to
time, or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust, MFS or
their respective designees, except with the permission of the Trust, MFS
or their respective designees. The Trust, MFS or their respective
designees each agrees to respond to any request for approval on a prompt
and timely basis. The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Trust, MFS
or any of their affiliates which is intended for use only by brokers or
agents selling the Policies (i.e., information that is not intended for
distribution to Policy holders or prospective Policy holders) is so used,
and neither the Trust, MFS nor any of their affiliates shall be liable
for any losses, damages or expenses relating to the improper use of such
broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects
to such use within three (3) Business Days after receipt of such
material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to respond
to any request for approval on a prompt and timely basis. The parties
hereto agree that this Section 4.4. is neither intended to designate nor
otherwise imply that MFS is an underwriter or distributor of the
Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for no-
action letters, and all amendments to any of the above, that relate to
the Policies, or to the Trust or its Shares, prior to or
contemporaneously with the filing of such document with the SEC or other
regulatory authorities. The Company and the Trust shall also each
promptly inform the other or the results of any examination by the SEC
(or other regulatory authorities) that relates to the Policies, the Trust
or its Shares, and the party that was the subject of the examination
shall provide the other party with a copy of relevant portions of any
"deficiency letter" or other correspondence or written report regarding
any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and
of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration statement
or prospectus or statement of additional information for any Account.
The Trust and MFS will cooperate with the Company so as to enable the
Company to solicit proxies from Policy owners or to make changes to its
prospectus, statement of additional information or registration
statement, in an orderly manner. The Trust and MFS will make reasonable
efforts to attempt to have changes affecting Policy prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures,
or other public media), and sales literature (such as brochures,
circulars, reprints or excerpts or any other advertisement, sales
literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or all
agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution and Shareholder servicing expenses, then, subject to
obtaining any required exemptive orders or regulatory approvals, the
Trust may make payments to the Company or to the underwriter for the
Policies if and in amounts agreed to by the Trust in writing. Each
party, however, shall, in accordance with the allocation of expenses
specified in Articles III and V hereof, reimburse other parties for
expense initially paid by one party but allocated to another party. In
addition, nothing herein shall prevent the parties hereto from otherwise
agreeing to perform, and arranging for appropriate compensation for,
other services relating to the Trust and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement
of additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the
proxy materials and reports to Shareholders (to the extent provided by
and as determined in accordance with Article III above); the preparation
of all statements and notices required of the Trust by any federal or
state law with respect to its Shares; all taxes on the issuance or
transfer of the Shares; and the costs of distributing the Trust's
prospectuses and proxy materials to owners of Policies funded by the
Shares and any expenses permitted to be paid or assumed by the Trust
pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act. The
Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports and proxy materials
to Policy owners. The Company shall bear all expenses associated with
the registration, qualification, and filing of the Policies under
applicable federal securities and state insurance laws; the cost of
preparing, printing and distributing the Policy prospectus and statement
of additional information; and the cost of preparing, printing and
distributing annual individual account statements for Policy owners as
required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1)
of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these sections), as if those
requirements applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests
of the variable annuity contract owners and the variable life insurance
policy owners of the Company and/or affiliated companies ("contract
owners") investing in the Trust. The Board shall have the sole authority
to determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the
form of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Trust's exemptive application pursuant to which the SEC has
granted the Mixed and Shared Funding Exemptive Order by providing the
Board, as it may reasonably request, with all information necessary for
the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts of
which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable to
some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including (but
not limited to) another Portfolio of the Trust, or submitting to a vote
of all affected contract owners whether to withdraw assets from the Trust
or any Portfolio and reinvesting such assets in a different investment
medium and, as appropriate, segregating the assets attributable to any
appropriate group of contract owners that votes in favor of such
segregation, or offering to any of the affected contract owners the
option of segregating the assets attributable to their contracts or
policies, and (b) establishing a new registered management investment
company and segregating the assets underlying the Policies, unless a
majority of Policy owners materially adversely affected by the conflict
have voted to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately remedies
any material irreconcilable conflict. In the event that the Board
determines that any proposed action does not adequately remedy any
material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6) months
after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the disinterested
trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shares funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those contained
in the Mixed Shared Funding Exemptive Order, then (a) the Trust and/or
the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rule 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this
Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust, MFS,
any affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within
the meaning of Section 15 of the 1933 Act, and any agents or employees of
the foregoing (each an "Indemnified Party," or collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or expenses
(including reasonable counsel fees) to which an Indemnified Party may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the Policies
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the commission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to
the Company or its designee by or on behalf of the Trust or MFS
for use in the registration statement, prospectus or statement
of additional information for the Policies or in the Policies
or sales literature or other promotional material (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust not supplied by the Company or this designee, or
persons under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the
Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents
or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust) or
expenses (including reasonable counsel fees) to which any Indemnified
Party may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement therein
not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reasonable reliance upon and in conformity with information
furnished to the Trust, MFS, the Underwriter or their
respective designees by or on behalf of the Company for use in
the registration statement, prospectus or statement of
additional information for the Trust or in sales literature or
other promotional material for the Trust (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statement or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
for the Policies not supplied by the Trust, MFS, the
Underwriter or any of their respective designees or persons
under their respective control and on which any such entity has
reasonably relied) or wrongful conduct of the Trust or persons
under its control, with respect to the sale or distribution of
the Policies or Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of this
Agreement by the Trust; or
(d) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate; or
(e) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a
breach of any representation, warranty, and/or covenant made by the
Company hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties
and covenants; (ii) the failure by the Company or any Participating
Insurance Company to maintain its segregated asset account (which invests
in any Portfolio) as a legally and validly established segregated asset
account under applicable state law and as a duly registered unit
investment trust under the provisions of the 1940 Act (unless exempt
therefrom); or (iii) the failure by the Company or any Participating
Insurance Company to maintain its variable annuity and/or variable life
insurance contracts (with respect to which any Portfolio serves as an
underlying funding vehicle) as life insurance, endowment or annuity
contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of commencement of action, such Indemnified Party will, if a claim
in respect thereof is to be made against the indemnifying party under
this section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any Indemnified Party otherwise
than under this section. In case any such action is brought against any
Indemnified Party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party.
After notice from the indemnifying party of its intention to assume the
defense of an action, the Indemnified Party shall bear the expenses of
any additional counsel obtained by it, and the indemnifying party shall
not be liable to such Indemnified Party under this section for any legal
or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article
VIII. The indemnification provisions contained in this Article VIII
shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as
the SEC may grant and the terms hereof shall be interpreted and construed
in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the
NASD, the SEC, or any insurance department or any other regulatory body
regarding such party's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing, the
Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article VI
hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or 6e-
3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause shall
be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body regarding the Trust's or MFS' duties under this
Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio Shares
had been selected to serve as the underlying investment media.
The Company will give thirty (30) days' prior written notice to
the Trust of the Date of any proposed vote or other action
taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment exercised
in good faith, that the Company has suffered a material adverse
change in its business, operations, financial condition, or
prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations, financial
condition or prospects since the date of this Agreement or is
the subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under the
Policies, until thirty (30) days after the Company shall have notified
the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust
and MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and conditions
of this Agreement, for all Policies in effect on the effective date of
termination of this Agreement (the "Existing Policies"), except as
otherwise provided under Article VII of this Agreement. Specifically,
without limitation, the owners of the Existing Policies shall be
permitted to transfer or reallocate investment under the Policies, redeem
investments in any Portfolio and/or invest in the Trust upon the making
of additional purchase payments under the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at
such other address as such party may from time to time specify in writing to
the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
Liberty Life Assurance Company of Boston
175 Berkeley Street
Boston, MA 02117
Attn: Christopher C. Mansfield, General Counsel
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or utilize
such names and addresses and other confidential information without the
express written consent of the affected party until such time as it may
come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations
of each Portfolio hereunder shall be several and not joint, in accordance
with its proportionate interest hereunder, and the Company agrees not to
proceed against any Portfolio for the obligations of another Portfolio.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
By its authorized officer,
By: /s/Edmund F. Kelly
Title: President
MFS VARIABLE INSURANCE TRUST, on behalf of the
Portfolios
By its authorized officer and not individually,
By: /s/A. Keith Brodkin
A. Keith Brodkin
Chairman and President
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/Arnold D. Scott
Arnold D. Scott
Senior Executive Vice President
As of 7/2/96
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
Name of Separate Policies Funded Portfolios
Account and Date by Separate Account Applicable to Policies
Established by Board
of Directors
Variable Account K Variable Annuity Research Series
(Est. 9/13/89) Emerging Growth Series
EXHIBIT 8(e)
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 28th day of June, 1996, by and among The
Alger American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, Liberty Life Assurance Company
of Boston, a life insurance company organized as a corporation under the laws
of the State of Massachusetts, (the "Company"), on its own behalf and on
behalf of each segregated asset account of the Company set forth in Schedule
A, as may be amended from time to time (the "Accounts"), and Fred Alger and
Company, Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and
has an effective registration statement relating to the offer and sale of the
various series of its shares under the Securities Act of 1933, as amended
(the "1933 Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements
with the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into the
following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American
Growth Portfolio, Alger American Income & Growth Portfolio, Alger American
Balanced Portfolio, Alger American MidCap Growth Portfolio, and Alger
American Leveraged AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of
Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of
the Portfolios of the Trust to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from
registration under the 1940 Act is available and the Trust has been so
advised;
WHEREAS, the Company desires to use shares of one or more Portfolios as
investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
Purchase and Redemption of Trust Portfolio Shares
1.1. For purposes of this Article I, the Company shall be the Trust's
agent for the receipt from each account of purchase orders and requests
for redemption pursuant to the Contracts relating to each Portfolio,
provided that the Company notifies the Trust of such purchase orders and
requests for redemption by 9:30 a.m. Eastern time on the next following
Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the
Accounts at the net asset value next computed after receipt of a
purchase order by the Trust (or its agent), as established in accordance
with the provisions of the then current prospectus of the Trust
describing Portfolio purchase procedures. The Company will transmit
orders from time to time to the Trust for the purchase and redemption of
shares of the Portfolios. The Trustees of the Trust (the "Trustees")
may refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or if,
in the sole discretion of the Trustees acting in good faith and in light
of their fiduciary duties under federal and any applicable state laws,
such action is deemed in the best interests of the shareholders of such
Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to the
Trust, with the reasonable expectation of receipt by the Trust by 2:00
p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for this
purpose. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the
net asset value next computed after receipt by the Trust (or its agent)
of the request for redemption, as established in accordance with the
provisions of the then current prospectus of the Trust describing
Portfolio redemption procedures. The Trust shall make payment for such
shares in the manner established from time to time by the Trust.
Proceeds of redemption with respect to a Portfolio will normally be paid
to the Company for an Account in federal funds transmitted by wire to
the Company by order of the Trust with the reasonable expectation of
receipt by the Company by 2:00 p.m. Eastern time on the next Business
Day after the receipt by the Trust (or its agent) of the request for
redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market
conditions exist, but in no event shall payment be delayed for a greater
period than is permitted by the 1940 Act. The Trust reserves the right
to suspend the right of redemption, consistent with Section 22(e) of the
1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by
the Company under Section 1.3 and payments for the redemption of shares
of the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by
book entry only. Stock certificates will not be issued to the Company
or the Accounts. Portfolio Shares purchased from the Trust will be
recorded in the appropriate title for each Account or the appropriate
subaccount of each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice
to the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company hereby
elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the
net asset value per share for each Portfolio available to the Company or
its designated agent on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its best
efforts to make such net asset value per share available to the Company
by 6:30 p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended from
time to time.
1.10. The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting
and conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
Obligations of the Parties
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials such
as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of shares of the Portfolios,
preparation and filing of the documents listed in this Section 2.1 and
all taxes to which an issuer is subject on the issuance and transfer of
its shares.
2.2. The Company shall distribute such prospectuses, proxy statements
and periodic reports of the Trust to the Contract owners as required to
be distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy
of the Trust's prospectus as set in type or in camera-ready copy) and
other assistance as is reasonably necessary in order for the Company to
print together in one document the current prospectus for the Contracts
issued by the Company and the current prospectus for the Trust. The
Trust shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Contract owners, and the
Company shall bear the expense of printing copies of the Trust's
prospectus that are used in connection with offering the Contracts
issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the Company
shall require in accordance with applicable law in connection with
offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of
its proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably require for purposes of distributing to Contract owners. The
Trust, at the Company's expense, shall provide the Company with copies
of its periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably request
for use in connection with offering the Contracts issued by the Company.
If requested by the Company in lieu thereof, the Trust shall provide
such documentation (including a final copy of the Trust's proxy
materials, periodic reports to shareholders and other communications to
shareholders, as set in type or in camera-ready copy) and other
assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the
sole owner of the name and mark "Alger" and that all use of any
designation comprised in whole or part of such name or mark under this
Agreement shall inure to the benefit of the Distributor. Except as
provided in Section 2.5, the Company shall not use any such name or mark
on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other
materials relating to the Accounts or Contracts without the prior
written consent of the Distributor. Upon termination of this Agreement
for any reason, the Company shall cease all use of any such name or mark
as soon as reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust
or its designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to Contract
owners, proxy statement, application for exemption or request for
no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or shall cause to be furnished, to the Trust
or its designee each piece of sales literature or other promotional
material in which the Trust or the Distributor is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.8. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the
Trust or the Distributor in connection with the sale of the Contracts
other than information or representations contained in and accurately
derived from the registration statement or prospectus for the Trust
shares (as such registration statement and prospectus may be amended or
supplemented from time to time), annual and semi-annual reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the prior
written permission of the Trust, the Distributor or their respective
designees. The Trust and the Distributor agree to respond to any
request for approval on a prompt and timely basis. The Company shall
adopt and implement procedures reasonably designed to ensure that
"broker only" materials including information therein about the Trust or
the Distributor are not distributed to existing or prospective Contract
owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
the Distributor, in such form as the Company may reasonably require, as
the Company shall reasonably request in connection with the preparation
of registration statements, prospectuses and annual and semi-annual
reports pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented
from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials,
except as required by legal process or regulatory authorities or with
the prior written permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets the
1940 Act to require pass-through voting privileges for Contract owners,
the Company will provide pass-through voting privileges to Contract
owners whose cash values are invested, through the registered Accounts,
in shares of one or more Portfolios of the Trust. The Trust shall
require all Participating Insurance Companies to calculate voting
privileges in the same manner and the Company shall be responsible for
assuring that the Accounts calculate voting privileges in the manner
established by the Trust. With respect to each registered Account, the
Company will vote shares of each Portfolio of the Trust held by a
registered Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares for
which voting instructions are received. The Company and its agents will
in no way recommend or oppose or interfere with the solicitation of
proxies for Portfolio shares held to fund the Contacts without the prior
written consent of the Trust, which consent may be withheld in the
Trust's sole discretion. The Company reserves the right, to the extent
permitted by law, to vote shares held in any Account in its sole
discretion.
2.12. The Company and the Trust will each provide to the other
information about the results of any regulatory examination relating to
the Contracts or the Trust, including relevant portions of any
"deficiency letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by
the Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust, the
Accounts or both.
ARTICLE III.
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of
Massachusetts and that it has legally and validly established each
Account as a segregated asset account under such law as of the date set
forth in Schedule A, and that Keyport Financial Services Corp., the
principal underwriter for the Contracts, is registered as a
broker-dealer under the Securities Exchange Act of 1934 and is a member
in good standing of the National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each
Account as a unit investment trust in accordance with the provisions of
the 1940 Act and cause each Account to remain so registered to serve as
a segregated asset account for the Contracts, unless an exemption from
registration is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
3.4. The Trust represents and warrants that it is duly organized and
validly existing under the laws of the Commonwealth of Massachusetts and
that it does and will comply in all material respects with the 1940 Act
and the rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares
for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the rules and regulations thereunder, including without limitation
Treasury Regulation 1.817-5, and will notify the Company immediately
upon having a reasonable basis for believing any Portfolio has ceased to
comply or might not so comply and will immediately take all reasonable
steps to adequately diversify the Portfolio to achieve compliance within
the grace period afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as
a "regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify
the Company immediately upon having a reasonable basis for believing it
has ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less than
the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
ARTICLE IV.
Potential Conflicts
4.1. The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. A material
irreconcilable conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard
the voting instructions of contract owners. The Trust shall promptly
inform the Company of any determination by the Trustees that a material
irreconcilable conflict exists and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist
the Trustees in carrying out their responsibilities under the Shared
Funding Exemptive Order by providing the Trustees with all information
reasonably necessary for and requested by the Trustees to consider any
issues raised including, but not limited to, information as to a
decision by the Company to disregard Contract owner voting instructions.
All communications from the Company to the Trustees may be made in care
of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict
exists that affects the interests of contract owners, the Company shall,
in cooperation with other Participating Insurance Companies whose
contract owners are also affected, at its own expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever
steps are necessary to remedy or eliminate the material irreconcilable
conflict, which steps could include: (a) withdrawing the assets
allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of the Trust, or submitting the
question of whether or not such segregation should be implemented to a
vote of all affected Contract owners and, as appropriate, segregating
the assets of any appropriate group (i.e., annuity contract owners, life
insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of
making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account; provided, however that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end
of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the
Trustees inform the Company in writing that the Trust has determined
that such decision has created a material irreconcilable conflict;
provided, however, that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any
proposed action adequately remedies any material irreconcilable
conflict, but in no event will the Trust be required to establish a new
funding medium for any Contract. The Company shall not be required to
establish a new funding medium for the Contracts if an offer to do so
has been declined by vote of a majority of Contract owners materially
adversely affected by the material irreconcilable conflict. In the
event that the Trustees determine that any proposed action does not
adequately remedy any material irreconcilable conflict, then the Company
will withdraw the Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in
writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by
any such material irreconcilable conflict as determined by a majority of
the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and data
shall be submitted more frequently if reasonably deemed appropriate by
the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3, as
adopted, to the extent such rules are applicable.
ARTICLE V.
Indemnification
5.1. Indemnification By the Company. The Company agrees to indemnify
and hold harmless the Distributor, the Trust and each of its Trustees,
officers, employees and agents and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section 5.1) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company, which consent shall
not be unreasonably withheld) or expenses (including the reasonable
costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common
law or otherwise, insofar as such Losses are related to the sale or
acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved
by the Company on behalf of the Contracts or Accounts (or any
amendment or supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission
was made in reliance upon and was accurately derived from written
information furnished to the Company by or on behalf of the Trust
for use in Company Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under its
control, with respect to the sale or acquisition of the Contracts
or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust Documents as
defined in Section 5.2(a) or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately
derived from written information furnished to the Trust by or on
behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the
terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company to
the Trust of insufficient or incorrect information regarding the
purchase or sale of shares of any Portfolio, or the failure of the
Company to provide such information on a timely basis.
5.2. Indemnification by the Distributor. The Distributor agrees to
indemnify and hold harmless the Company and each of its directors,
officers, employees, and agents and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for the purposes of this
Section 5.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Distributor, which consent shall not be unreasonably withheld) or
expenses (including the reasonable costs of investigating or defending
any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under any
statute or regulation, or at common law or otherwise, insofar as such
Losses are related to the sale or acquisition of the Contracts or Trust
shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust Documents"
for the purposes of this Article V), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and was accurately derived from written information furnished
to the Distributor or the Trust by or on behalf of the Company for
use in Trust Documents or otherwise for use in connection with the
sale of the Contracts or Trust shares and; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful conduct of
the Distributor or persons under its control, with respect to the
sale or acquisition of the Contracts or Portfolio shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company Documents
or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written
information furnished to the Company by or on behalf of the Trust;
or
(d) arise out of or result from any failure by the Distributor or
the Trust to provide the services or furnish the materials required
under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the Trust
in this Agreement or arise out of or result from any other material
breach of this Agreement by the Distributor or the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed against an
Indemnified Party that arise from such Indemnified Party's willful
misfeasance, bad faith or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any claim made against an Indemnified party
unless such Indemnified Party shall have notified the other party in
writing within a reasonable time after the summons, or other first
written notification, giving information of the nature of the claim
shall have been served upon or otherwise received by such Indemnified
Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure
to notify the party against whom indemnification is sought of any such
claim shall not relieve that party from any liability which it may have
to the Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party,
the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel reasonably
satisfactory to the party named in the action. After notice from the
indemnifying party to the Indemnified Party of an election to assume
such defense, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the indemnifying party will
not be liable to the Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
ARTICLE VI.
Termination
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice
to the other parties, unless a shorter time is agreed to by the
parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or life
insurance contracts, as applicable, under the Code or if the
Contracts are not registered, issued or sold in accordance with
applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority
of the Trustees of the Trust, or a majority of its disinterested
Trustees, that a material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD, the
SEC, or any state securities or insurance department or any other
regulatory body regarding the Trust's or the Distributor's duties
under this Agreement or related to the sale of Trust shares or the
operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails
to meet the diversification requirements specified in Section 3.6
hereof; or.
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company, and
upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the Portfolio are not registered, issued or sold in accordance with
applicable state and/or federal law, or such law precludes the use
of such shares as the underlying investment media of the Variable
Contracts issued or to be issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to
qualify as a Regulated Investment Company under Subchapter M of the
Code; or
(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company and/or its
affiliated companies has suffered a material adverse change in its
business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall,
at the option of the Company, continue to make available additional
shares of any Portfolio and redeem shares of any Portfolio pursuant to
the terms and conditions of this Agreement for all Contracts in effect
on the effective date of termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of the Trust
are held on behalf of Contract owners in accordance with Section 6.2.
ARTICLE VII.
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Liberty Life Assurance Company of Boston
175 Berkeley Street
Boston, MA 02117
Attn: Christopher C. Mansfield, General Counsel
ARTICLE VIII.
Miscellaneous
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New
York. It shall also be subject to the provisions of the federal
securities laws and the rules and regulations thereunder and to any
orders of the Commission granting exemptive relief therefrom and the
conditions of such orders. Copies of any such orders shall be promptly
forwarded by the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be personally
liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the National Association of Securities Dealers, Inc. and
state insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by
both parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto, and
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year
first above written.
Fred Alger and Company, Incorporated
By: /s/Gregory S. Duch
Name: Gregory S. Duch
Title: Executive Vice President
Alger American Fund
By: /s/Gregory S. Duch
Name: Gregory S. Duch
Title: Treasurer
Liberty Life Assurance Company
of Boston
By: /s/Edmund F. Kelly
Name: Edmund F. Kelly
Title: President
EXHIBIT 8(f)
PARTICIPATION AGREEMENT
AMONG
ALLIANCE CAPITAL VARIABLE INSURANCE TRUST
ALLIANCE FUND DISTRIBUTORS, INC.
ALLIANCE CAPITAL MANAGEMENT, L.P.
AND
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
This Agreement, made and entered into this 3rd day of September, 1996 by
and among Liberty Life Assurance Company of Boston, a Massachusetts
corporation, (referred to as the "Company"), each on its own behalf and on
behalf of its Separate Account, which is a segregated asset account of the
Company; Alliance Variable Products Series Fund, Inc. (the "Fund"), a
corporation organized under the laws of the State of Maryland; Alliance
Capital Management L.P., ("Adviser"), a Delaware limited partnership and
Alliance Fund Distributors, Inc. ("Underwriter"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts ("Variable Insurance Products") to be offered by
insurance companies which have entered into participation agreements with the
Fund and Adviser on substantially the same terms as in this Agreement
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the shares of the Fund are divided into several series of
shares (such series being hereinafter referred to individually as a
"Portfolio" or collectively as the "Portfolios") as shown on Schedule A
attached hereto; and
WHEREAS, the Fund has been granted or currently intends to apply for an
order from the Securities and Exchange Commission ("SEC"), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of Sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the federal Investment Advisers Act of 1940, as amended and any applicable
state securities law; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, the Company has established duly organized, a validly existing
segregated asset account as shown on Schedule B attached hereto (the
"Separate Account") established by resolution of the Board of Directors of
the Company, and divided such Separate Account into subaccounts to set aside
and invest assets attributable to aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register the certain
Separate Account as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended, (hereinafter the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, Keyport Financial Services Corporation ("KFSC"), the
underwriter for the individual variable annuity and the variable life
policies, is registered as a broker-dealer with the SEC under the 1934 Act
and is a member in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of the Separate Account to fund certain Variable Insurance Products.
Underwriter is authorized to sell such shares to unit investment trusts such
as the Separate Account at net asset value, and acts as distributor of the
Portfolio shares.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, the Adviser and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter shall sell to the Company those shares of the Fund
which the Separate Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee
of the order for shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from the
Separate Account and receipt by such designee shall constitute receipt by the
Fund provided that each Company receives the order by 4:00 p.m. New York time
and the Fund receives notice from the Company, as the Company and Fund may
agree, by 9:00 a.m. New York time on the next Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for regular
trading and on which the Fund calculates its net asset value pursuant to the
rules of the SEC.
1.2 The Fund agrees subject to the terms of this Agreement, to make its
shares available indefinitely for purchase at the applicable net asset value
per share by the Company and the Separate Account on those days on which the
Fund calculates its net asset value pursuant to rules of the SEC and the Fund
shall use reasonable efforts to calculate such net asset value on each day on
which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Directors of the Fund (hereinafter the "Board") may
refuse to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by law or
by regulatory authorities having jurisdiction or is, in the sole discretion
of the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3 The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts which have
agreed to participate in the Fund to fund their Separate Accounts and/or
certain qualified plans, all in accordance with the requirements of Section
817(h) of the Internal Revenue Code of 1986, as amended (hereinafter "Code")
and Treasury Regulation 1.817-5. No shares of any Portfolio will be sold to
the general public.
1.4 The Fund and Adviser will not sell Fund shares to any insurance
company or separate account unless an agreement containing substantially
similar provisions as Articles I, III, V, VI and Sections 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 The Fund will redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests
on a daily basis at the net asset value next computed after receipt by the
Fund or its designee of redemption requests. For purposes of this Section
1.5, the Company shall be the designee of the Fund for receipt of requests
for redemption from the Separate Account, and receipt by such designee should
constitute receipt by the Fund; provided that the Company receives the
request for redemption by 4:00 p.m. New York time, and the Fund receives
notice from the Company, as the Company and Fund may agree, by 9:00 a.m. New
York time on the next Business Day.
Subject to the applicable rules and regulations, if any, of the SEC, the
Fund may pay the redemption price for shares of any Portfolio in whole or in
part by a distribution in kind of securities from the Portfolio of the Fund
allocated to such Portfolio in lieu of money, valuing such securities at
their value employed for determining net asset value governing such
redemption price, and selecting such securities in a manner the Board may
determine in good faith to be fair and equitable.
1.6 The Fund may suspend the redemption of any full or fractional
shares of the Fund (1) for any period (a) during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings) or (b)
during which trading on the New York Stock Exchange is restricted; (2) for
any period during which an emergency exists as a result of which (a) disposal
by the Fund of securities owned by it is not reasonably practicable or (b) it
is not reasonably practicable for the Fund fairly to determine the value of
its net assets; or (3) for such other periods as the SEC may by order permit
for the protection of shareholders of the Fund.
1.7 The Company will purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund in accordance with the
provisions of such prospectus and statement of additional information ("SAI")
(collectively referred to as "Prospectus," unless otherwise provided).
1.8 The Company shall pay for Fund shares on the same Business Day as
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire,
or may otherwise be provided by separate agreement. For purpose of Section
2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become
the responsibility of the Fund.
1.9 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Separate
Account. Shares ordered from the Fund will be recorded in an appropriate
title for the Separate Account or the appropriate subaccount of the Separate
Account.
1.10 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the shares of any Portfolio. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and
to receive all such income, dividends and capital gain distributions in cash.
The Fund shall notify the Company of the number of shares so issued as
payment of such income, dividends and capital gains distributions.
1.11 The Fund shall make the net asset value per share for each Series
available to the Company on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its best
efforts to make such net asset value per share available by 7 p.m., New York
time.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act to the extent required by the 1933 Act; that
the Contracts will be issued and distributed in compliance in all material
respects with all applicable federal and state laws and that the sale of the
Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that
it is an insurance company duly organized and in good standing under
applicable law and that prior to any issuance or sale of any Contract it has
legally and validly established the Separate Account as a segregated asset
account under the applicable state insurance laws and has registered or,
prior to any issuance or sale of the Contracts, will register the Separate
Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2 The Company represents and warrants that KFSC, the underwriter for
the individual variable annuity and the variable life policies, is a member
in good standing of the NASD and is a registered broker-dealer with the SEC.
The Company represents and warrants that the Company and KFSC will issue and
distribute such policies in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.3 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maryland, and
all applicable federal and any state securities laws and that the Fund is and
shall remain registered under the 1940 Act. The Fund shall amend the
registration statement for its shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of
its shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Adviser.
2.4 The Fund represents that it does or intends to qualify as a
Regulated Investment Company under Subchapter M of the Code and that it will
make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased
to so qualify or that it might not so qualify in the future. The Fund
represents and warrants that each Portfolio will comply with the
diversification requirements set forth in Section 817(h) of the Code, and the
rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify the Company immediately upon having a
reasonable basis for believing any Fund has ceased to comply or might not so
comply and will immediately take all reasonable steps to adequately diversify
the Fund to achieve compliance within the grace period afforded by Regulation
1.817-5. The Fund acknowledges that any failure to qualify as a Regulated
Investment Company will eliminate the ability of the subaccounts to avail
themselves of the "look through" provisions of section 817(h) of the Code,
and that as a result the Contracts will almost certainly fail to qualify as
annuity contracts under section 817(h) of the Code.
2.5 The Company represents that the Contracts are currently treated as
endowment or annuity contracts under applicable provisions of the Code and
that it will make every effort to maintain such treatment and that it will
notify the Fund and the Adviser immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states except that the Fund represents that it believes it currently complies
in all material respects and intends at all times to comply in all material
respects with the applicable insurance laws of the domiciliary states of the
Participating Insurance Companies to the extent that the Participating
Insurance Companies advise the Fund, in writing, of such laws or any changes
in such laws.
2.7 The Adviser represents and warrants that the Underwriter is a
member in good standing of the NASD and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and distribute
the Fund's shares in accordance with applicable state and federal securities
laws, including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.8 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.9 The Fund represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance
in all material respects with the applicable laws of the State of Delaware
and any applicable state and federal securities laws.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1 The Fund and the Adviser shall provide the Company with as many
copies of the Fund's current prospectus and Statement of Additional
Information (describing only the Portfolios listed in Schedule A) as the
Company may reasonably request in connection with delivery of the prospectus
to shareholders of Variable Insurance Products. If requested by Company in
lieu thereof, the Fund or the Adviser shall provide such documentation
(including a "camera ready" copy of the new prospectus as set in type or, at
the request of Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for the
parties hereto once a year (or more frequently if the prospectus for the
shares is supplemented or amended) to have the prospectus for the Variable
Insurance Products and the prospectus for the Fund shares printed together in
one document the expenses of such printing will be apportioned between (a)
the Company (b)Fund in proportion to the number of pages of the Policy and
Shares prospectuses, taking into account other relevant factors affecting the
cost of printing such as covers, columns, graphs, and charts; the Fund to
bear the cost with printing the Shares' prospectus portion of such document
and the Company to bear the expenses of printing the portion with such
documents relating to the Accounts. The Company will bear all printing costs
when the prospectuses are used for distribution to prospective purchasers. In
the event that the Company requests that the Fund or the Adviser provide the
Fund's prospectus in a "camera ready" or diskette format, the Fund shall be
responsible for providing the prospectus in the format in which it is
accustomed to formatting prospectuses and shall bear the expense of providing
the prospectus in such format (e.g. typesetting expenses) and the Company
shall bear the expense of adjusting or changing the format to conform with
any of its prospectuses.
3.2 The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from Fund and the Company, and at the
Fund's expense, the Fund shall provide a final copy of such Statement of
Additional Information to Company for duplication and provision to any Owner
of a Variable Insurance Product or prospective owner who requests it.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy materials, reports to shareholders and other communications (except
for prospectus and Statements of Additional Information, which are covered in
Section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distribution to Owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Owners;
(ii) vote the Fund shares in accordance with
instructions received from Owners; and
(iii) vote Fund shares for which no instructions have
been received in a particular Separate Account in the same
proportion as Fund shares of such Portfolio for which
instructions have been received in that Separate Account,
so long and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
Separate Accounts participating in the Fund calculates voting privileges in a
manner consistent with the standards to be provided in writing to the
Participating Insurance Companies.
3.5 The Fund shall comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well
as with Section 16(a) and, if and when applicable, 16(b). Further, the Fund
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, the form of each piece of sales literature or other
promotional material in which the Fund or its investment adviser is named, at
least three (3) Business Days prior to its use. No such material shall be
used unless the Fund or its designee approves such use within three (3)
Business Days after receipt of its material, which approval shall not be
unreasonably withheld.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of Variable Insurance Products other than the
information or representations contained in the registration statement or
Prospectus for the Fund shares, as such registration statement and Prospectus
may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional material
approved by the Fund or its designee, except with the permission of the Fund
or its designee.
4.3 The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its Separate
Account(s), are named at least three (3) Business Days prior to its use. No
such material shall be used unless the Company or its designee approves of
such use within three (3) Business Days after receipt of such material, which
approval shall not be unreasonably withheld.
4.4 The Fund shall not give any information or make any representations
or statements on behalf of the Company or concerning the Company, each
Separate Account, or the Variable Insurance Products other than the
information or representations contained in or accurately derived from a
registration statement or prospectus for such Variable Insurance Products, as
such registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for such Separate Account which
are in the public domain or approved by the Company for distribution to
Owners, or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5 The Fund shall provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or
its shares, contemporaneously with the filing of such document with the SEC
or other regulatory authorities.
4.6 The Company shall provide to the Fund at least one complete copy of
all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Variable Insurance Products or any Separate Account, contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, Statements of Additional
Information, shareholder reports, and proxy materials and any other material
constituting sales literature or advertising under the 1933 Act, the 1940 Act
or NASD rules.
ARTICLE V. Fees and Expenses
5.1 The Fund shall pay no compensation to the Company under this
Agreement (except for items covered in Article III).
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with
applicable federal law and if and to the extent deemed advisable by the Fund,
in accordance with applicable state laws prior to their sale. The Fund shall
bear the expenses of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting the prospectus in type, setting in type
and printing the proxy materials and reports to shareholders (including the
costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state
law, and all taxes on the issuance or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of distributing the Share's
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Fund's Shareholder reports and proxy materials to Policy
owners. The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal securities
and state insurance laws; the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by state
insurance laws.
5.4 Nothing herein shall prevent the parties hereto from otherwise
agreeing to perform, and arranging appropriate compensation for, other
services relating to the Fund, the Separate Accounts or both.
ARTICLE VI. Potential Conflicts
6.1 The Fund agrees that the Board, constituted with a majority of
disinterested directors, shall monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the Owners of
separate accounts of Participating Insurance Companies investing in the Fund.
A material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance policy Owners; (f) a decision by
an insurer to disregard the voting instructions of Owners; or (g) if
applicable, a decision of a Qualified Plan to disregard the voting
instructions of plan participants. The Board shall promptly inform the
Company if it determines that a material irreconcilable conflict exists and
the implications thereof.
6.2 The Company will report any potential or existing conflicts
(including the occurrence of any event specified in paragraph 6.1 which may
give rise to such a conflict) of which it is aware to the Board. The Company
will assist the Board in carrying out their responsibilities under the Shared
Funding Exemptive Order, by providing the Board with all information
reasonably necessary for the Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the
Board whenever Owner voting instructions are disregarded. The
responsibilities of the Company will be carried out with a view only to the
interests of the Owners.
6.3 If it is determined by a majority of the Board, or a majority of
its disinterested directors, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested trustees), take whatever steps are necessary to remedy
or eliminate the material irreconcilable conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts of
Participating Insurance Companies from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the question whether
such segregation should be implemented to a vote of all affected Owners and,
as appropriate, segregating the assets of any particular group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners
of one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Owners the option of making such a
change; and (2) establishing a new registered management investment company
or managed separate account.
6.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
shall be required, at the Fund's election, to withdraw the affected Separate
Account's (or subaccount's) investment in the Fund and terminate this
Agreement with respect to such Separate Account (or subaccount) and no charge
or penalty will be imposed as a result of such withdrawal; provided, however,
that such withdrawal and termination shall be limited to the extent required
by the foregoing material irreconcilable conflict as determined by a majority
of the disinterested members of the Board. The responsibility to take such
remedial action in the event of a Board determination of a material
irreconcilable conflict and to bear the cost of such remedial action is the
obligation of each Participating Insurance Company and the Company agrees to
carry out its responsibilities with a view only to the interests of the
Owners.
6.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Separate Account's investment in the Fund and terminate this
Agreement promptly after the Board informs the Company in writing that it has
determined that such decision has created a irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to
the extent required by the foregoing irreconcilable material conflict as
determined by a majority of the disinterested members of the Board.
6.6 For purposes of Sections 6.3 through 6.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund be required to establish a new funding medium
for the Variable Insurance Products. The Company shall not be required by
Section 6.4 to establish a new funding medium for the Variable Insurance
Products if an offer to do so has been declined by vote of a majority of
Owners materially adversely affected by the irreconcilable material conflict.
In the event that the Board determines that any proposed action does not
adequately remedy any irreconcilable material conflict, then the Company
shall withdraw the affected Separate Account's investment in the Fund and
terminate this Agreement promptly provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Members of the Board.
6.7 If and to the extent that Rule 6e-2 or Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to
comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to
the extent such Rules are applicable; and (b) Sections 3.4, 3.5, 6.1, 6.2,
6.3, 6.4, and 6.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VII. Indemnification
7.1 Indemnification By the Company
7.1(a) The Company shall indemnify and hold harmless the Underwriter,
the Adviser, the Fund and each member of the Board and officers and each
person, if any, who controls the Fund within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale of the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Variable Insurance
Products or in the sales literature for the Variable Insurance
Products (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Company by or on
behalf of the Fund for use in the registration statement or
prospectus for the Variable Insurance Products or in the sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Insurance Products or Fund
shares; or
(ii) arise out of or are based upon statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied
by the Company, or persons under its control) or wrongful conduct
of the Company or persons under its control, with respect to the
sale or distribution of the Variable Insurance Products; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or
sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the
Fund by or on behalf of the Company; or
(iv) arise as a result from any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Company, as limited by and in accordance
with the provisions of Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
7.1(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company
of any such claim shall not relieve the Company from any liability which it
may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any
such action is brought against an Indemnified Party, the Company shall be
entitled to participate, at its own expense, in the defense of such action.
The Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Company to such party of the election of one or both of the Company to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
7.1(d) The Indemnified Parties shall promptly notify the Company of
the commencement of any litigation or proceeding against them in connection
with the issuance or sale of Variable Insurance Products or the operation of
the Fund. This indemnification shall be in addition to any liability which
the Company may otherwise have.
7.2 Indemnification By the Fund
7.2(a) The Fund shall indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Fund) or litigation (including legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the operations of the Fund and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus or sales literature for the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished in writing to the Adviser, Underwriter
or the Fund by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in the sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of Fund shares; or
(ii) arise out of or are based upon statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
Variable Insurance Products not supplied by the Adviser,
Underwriter or persons under its control) or wrongful conduct of
one or both of the Fund or the Adviser or persons under its
control, with respect to the sale or distribution of Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Variable Insurance Products,
or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Company by
or on behalf of the Fund; or
(iv) arise out of or result from any failure by the Fund to provide
the services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article II of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
7.2(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or each
Separate Account, whichever is applicable.
7.2(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of
any such claim shall not relieve the Fund from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action
is brought against and Indemnified Party, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The Fund also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Fund to such party of the
Fund's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.2(d) The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with this Agreement, the issuance or sale
of the Variable Insurance Products or the operation of the Account. This
indemnification shall be in addition to any liability which the Fund may
otherwise have.
7.3 Indemnification by the Underwriter
7.3(a) The Underwriter shall indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section 7.3) against any and
all losses, claims, damages, liabilities or litigation (including legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares and:
(i) arise out of or are based upon statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Variable Insurance Products not supplied by the Underwriter,
Advisor, Fund or persons under its control) or wrongful conduct of
the Underwriter or persons under its control, with respect to the
sale or distribution of the Fund shares; or
(ii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in sales literature of the Variable
Insurance Products, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission
was made in reliance upon and in conformity with information
furnished to the Company by the Underwriter, or
(iii) arise out of or result from any failure by the
Underwriter to provide the services and furnish the materials under
the terms of this Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof.
7.3(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company or the Separate Account, whichever is
applicable.
7.3(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within
a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the
Underwriter of any such claim shall not relieve the Underwriter from any
liability which it may have to the Indemnified Party against and whom such
action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against an Indemnified Party,
the Underwriter will be entitled to participate, at its own expense, in the
defense thereof. The Underwriter also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from the Underwriter to such party of the Distributor's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Underwriter will
not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.3(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against them or any of their
respective officers or directors in connection with this Agreement, the
issuance or sale of the Variable Insurance Products or the operation of
either Account. This indemnification shall be in addition to any liability
which the Underwriter may otherwise have.
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of Massachusetts.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE XI. Termination
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by sixty days' advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund with
respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet
the requirements of the Contracts or not consistent with the
Company's obligations to Owners; or
(c) termination by the Company by written notice to the Fund with
respect to any Portfolio in the event any of the Portfolio's shares
are not registered, issued or sold in accordance with applicable
state and/or federal law or such law precludes the use of such
shares as the underlying investments media of the Variable
Insurance Products issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund with
respect to any Portfolio in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under Subchapter M of the
Code or any independent or resulting failure under Section 817 of
the Code, or under any successor or similar provision of either, or
if the Company reasonably believes that the Fund may fail to so
qualify; or
(e) termination by either the Fund or the Adviser by written
notice to the Company, if either one or both of the Fund or the
Adviser respectively, shall determine, in their sole judgement
exercised in good faith, that the Company has suffered a material
adverse change in their business, operations, financial condition
or prospects since the date of this Agreement or are the subject of
material adverse publicity; but no termination shall be effective
under this subsection (e) until the Company has been afforded a
reasonable opportunity to respond to a statement by the Fund or the
Adviser concerning the reason for notice of termination hereunder;
or
(f) termination by the Company by written notice to the Fund and
the Adviser, if the Company shall determine, in its sole judgement
exercised in good faith, that either the Fund or the Adviser has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement
or is the subject of material adverse publicity; but no termination
shall be effective under this subsection (f) until the Fund or
Adviser has been afforded a reasonable opportunity to respond to a
statement by the Company concerning the reason for notice of
termination hereunder; or
(g) at the option of the Fund, if the Variable Insurance Products
cease to qualify as annuity contracts or life insurance contracts,
as applicable, under the Code, or if the Fund reasonably believes
that the Variable Insurance Products may fail to so qualify; or
(i) at the option of the Fund, upon the Company's breach of any
material provision of this Agreement, which breach has not been
cured to the satisfaction of the Fund within ten (10) days after
written notice of such breach is delivered to the Company; or
(j) upon assignment of this Agreement, unless made with the
written consent of the parties hereto; or
(k) at the option of the Fund, if the Variable Insurance Products
are not registered and issued in accordance with applicable federal
and/or state law. Termination shall be effective immediately upon
such occurrence without notice.
9.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the
terms and conditions of this Agreement, for all Variable Insurance Products
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
Owners of the Existing Contracts shall be permitted to reallocate investments
in the Fund, redeem investments in the Fund and/or invest in the Fund upon
the making of additional purchase payments under the Existing Contracts. The
parties agree that this Section 9.2 shall not apply to any terminations under
Article VI and the effect of such Article VI terminations shall be governed
by Article VI of this Agreement. (However, in no event shall the Fund and the
Underwriter be required to make additional shares available to Existing
Contracts for more than six (6) months after the date of termination of the
Agreement).
9.3 The Company shall not redeem Fund shares attributable to the
Variable Insurance Products (as opposed to Fund shares attributable to the
Company's assets held in the Separate Account) except (i) as necessary to
implement Owner initiated or approved transactions, or (ii) as required by
state and/or federal laws or regulations or judicial or other legal precedent
of general application (hereinafter referred to as a "Legally Required
Redemption") or (iii) as permitted by an order of the SEC pursuant to Section
26(b) of the 1940 Act. Upon request, the Company will promptly furnish to the
Fund and the Underwriter the opinion of counsel for the Company (which
counsel shall be reasonably satisfactory to the Fund and the Underwriter) to
the effect that any redemption pursuant to the clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Variable Insurance Products, and as may be in the best interests
of Owners, as determined by the Company, the Company shall not prevent Owners
from allocating payments to a Portfolio that was otherwise available under
the Contracts without first giving the Fund or the Underwriter sixty (60)
days notice of its intention to do so.
9.4 Notwithstanding any termination of this Agreement for any reason,
the terms and conditions of the following provisions of this Agreement shall
remain in effect with respect to any Existing Contract, for so long as such
Existing Contract has assets invested in the Fund: Section 1.3 to 1.10 of
Article I (governing the pricing and redemption of shares); Article II
(Representations and Warranties); Sections 3.1 through 3.3 and 3.5 of Article
III (Prospectus and Proxy Statements, and Voting); Articles IV and VIII
(Sales Material and Information; Fees and Expenses, Diversification;
Potential Conflicts; Indemnification; and Applicable Law); Article X
(Notices); and Sections 11.1, 11.2, and 11.5 through 11.8 of Article XI
(Miscellaneous). Further, notwithstanding any termination of this Agreement
for any reason, the terms and conditions of the following provisions of this
Agreement shall remain in effect with regard to Variable Insurance Products
previously invested in the Fund: Article II (Representations and Warranties);
and Article VIII (Indemnification).
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Attn: Edmund Bergen
If to the Company:
Liberty Life Assurance Company of Boston
175 Berkeley Street
Boston, MA 02117
Attention: General Counsel
If to Adviser:
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Attn: Edmund Bergen
If to Underwriter:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attn: Edmund Bergen
ARTICLE XI. Miscellaneous
11.1 All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for any
obligations entered into on behalf of the Fund.
11.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the Owners and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come
into the public domain without the express written consent of the affected
party.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
11.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
11.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
11.8 No provision of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by the
Fund, the Adviser and the Company.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
By its authorized officer,
By: /s/Edmund F. Kelly
Title: President & Chief Operating Officer
Date: 9/3/96
ALLIANCE VARIABLE PRODUCTS SERIES
FUND, INC.
By its authorized officer,
By: /s/John Carifa
Title: Chairman and President
Date: 8/20/96
ALLIANCE CAPITAL MANAGEMENT L.P.
By its authorized officer,
By: /s/John Carifa
Title: President and Chief Operations Officer
Date: 8/20/96
ALLIANCE FUND DISTRIBUTORS, INC.
By its authorized officer,
By: /s/Richard A. Winge
Title: Managing Director
Date: 8/20/96
Schedule A
Alliance Variable Products Series Fund, Inc.
Premier Growth Portfolio
Global Bond Portfolio
As of _____________
Schedule B
Separate Accounts Selected Funds
Variable Account K Premier Growth Portfolio
(Est. 9/13/89) Global Bond Portfolio
Variable Account J Same as above
(Est. 9/13/89)
EXHIBIT 8(g)
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
AMONG
KEYPORT VARIABLE INVESTMENT TRUST,
KEYPORT FINANCIAL SERVICES CORP.,
KEYPORT LIFE INSURANCE COMPANY
and
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
This Agreement, made and entered into as of this 7th day of June, 1993
by and among Keyport Life Insurance Company and Liberty Life Assurance
Company of Boston (the "Companies"), on their own behalf and on behalf of
their Separate Accounts, each of which is a segregated asset account of one
of the Companies, Keyport Variable Investment Trust (the "Trust"), and
Keyport Financial Services Corp. ("KFSC").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares (such series being hereinafter referred to individually as a
"Series" or collectively as the "Series"); and
WHEREAS, the Trust relies on an order from the Securities and Exchange
Commission ("SEC"), dated July 1, 1988 (File No. 812-7044), granting life
insurance companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (the "1940 Act") and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder to the extent necessary to
permit shares of the Trust to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order");
and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Keyport Advisory Services Corp. ("KASC") is duly registered as
an investment adviser under the federal Investment Advisers Act of 1940
("Advisers Act") and any applicable state securities law; and
WHEREAS, Colonial Management Associates, Inc. ("Colonial") is duly
registered as an investment adviser under the Advisers Act and applicable
state securities laws; and provides certain administrative services; and
WHEREAS, Liberty Investment Services, Inc. ("LIS") serves as transfer
agent to the Trust; and
WHEREAS, the Companies have registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, the Companies have established duly organized, validly existing
segregated asset accounts (the "Separate Accounts") by resolution of the
Board of Directors of the Companies; and
WHEREAS, the Companies have registered or will register certain Separate
Accounts as unit investment trusts under the 1940 Act; and
WHEREAS, the Companies rely on certain provisions of the 1940 and 1933
Acts that exempt certain Separate Accounts and Variable Insurance Products
from the registration requirements of the Acts in connection with the sale of
Variable Insurance Products under certain tax-advantaged retirement programs,
described in Article II., Section 2.12. and as provided for by Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, KFSC is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Companies intend to purchase shares of the Trust on behalf
of each Separate Account to fund certain Variable Insurance Products and KFSC
is authorized to sell such shares to unit investment trusts such as each
Separate Account at net asset value; and
WHEREAS, this Agreement is being amended and restated hereby in order to
effect certain technical corrections to this Agreement from the form hereof
as originally executed and delivered, such amendment and restatement to be
effective nunc pro tunc as of the date first written above.
NOW, THEREFORE, in consideration of their mutual promises, the
Companies, the Trust and KFSC agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. KFSC will sell to the Companies those shares of the Trust which
each Separate Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Separate Accounts of
purchase payments or for the business day on which transactions under
Variable Insurance Products are effected by the Separate Accounts. For
purposes of this Section 1.1., LIS shall be the designee of the Trust for
receipt of such orders from each Separate Account and receipt by such
designee shall constitute receipt by the Trust. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and any
other day on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust will make its shares available indefinitely for purchase
at the applicable net asset value per share by the Companies and their
Separate Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall use reasonable efforts
to calculate such net asset value on each Business Day. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Trustees") may refuse to
sell shares of any Series to any person, or suspend or terminate the offering
of shares of any Series if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the
Trustees, acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Series.
1.3. The Trust and KFSC agree that shares of the Trust will be sold only
to Participating Insurance Companies and their Separate Accounts. No shares
of any Series will be sold to the general public.
1.4. The Trust and KFSC will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles I., III., V., VII. and Sections 2.5. and
2.12. of Article II. of this Agreement is in effect to govern such sales.
1.5. The Trust will redeem for cash, at the Companies' request, any full
or fractional shares of the Trust held by the Companies, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Separate Accounts of redemption requests or for the Business Day on
which transactions under Variable Insurance Products are effected by the
Separate Accounts. For purposes of this Section 1.5., Colonial shall be the
designee of the Trust for receipt of requests for redemption for each
Separate Account.
Subject to the applicable rules and regulations, if any, of the SEC, the
Trust may pay the redemption price for shares of any Series in whole or in
part by a distribution in kind of securities from the portfolio of the Trust
allocated to such Series in lieu of money, valuing such securities at their
value employed for determining net asset value governing such redemption
price, and selecting such securities in a manner the Trustees may determine
in good faith to be fair and equitable.
1.6. The Trust may suspend the redemption of any full or fractional
shares of the Trust (1) for any period (a) during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings) or (b)
during which trading on the New York Stock Exchange is restricted; (2) for
any period during which an emergency exists as a result of which (a) disposal
by the Trust of securities owned by it is not reasonably practicable or (b)
it is not reasonably practicable for the Trust fairly to determine the value
of its net assets; or (3) for such other periods as the SEC may by order
permit for the protection of shareholders of the Trust.
1.7. The Companies will purchase and redeem the shares of each Series
offered by the then current prospectus of the Trust and in accordance with
the provisions of such prospectus and statement of additional information
(the "SAI") (collectively referred to as "Prospectus," unless otherwise
provided). The Companies agree that all net amounts available under the
Variable Insurance Products with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as such
Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"), shall be invested in
the Trust, in such other trusts advised by KASC as may be mutually agreed to
in writing by the parties hereto, or in the Companies' general accounts,
provided that such amounts may also be invested in an investment company
other than the Trust if (a) such other investment company, or series thereof,
has investment objectives or policies that are substantially different from
the investment objectives and policies of each of the Series of the Trust; or
(b) one or both of the Companies give the Trust and KFSC forty-five (45) days
written notice of its or their intention to make such other investment
company available as a funding vehicle for the Contracts; or (c) such other
investment company was available as a funding vehicle for the Contracts prior
to the date of this Agreement and one or both of the Companies so inform the
Trust and KFSC prior to their signing this Agreement; or (d) the Trust or
KFSC consents to the use of such other investment company.
1.8. The Companies shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1. hereof. Payment shall be in federal funds
transmitted by wire, or may otherwise be provided by separate agreement.
1.9. Issuance and transfer of the Trusts' shares will be by book entry
only. Stock certificates will not be issued to either the Companies or the
Separate Accounts. Shares ordered from the Trust will be recorded in an
appropriate title for each Separate Account or the appropriate subaccount of
each Separate Account.
1.10. The Trust, through its designee LIS, shall furnish same day
notice (by wire or telephone, followed by written confirmation) to the
Companies of any income dividends or capital gain distributions payable on
the shares of any Series. The Companies hereby elect to receive all such
income, dividends and capital gain distributions as are payable on the shares
of each Series in additional shares of that Series. The Companies reserve
the right to revoke this election and to receive all such income, dividends
and capital gain distributions in cash. The Trust shall notify the Companies
through its designee, LIS, of the number of shares so issued as payment of
such income, dividends and distributions.
1.11. The Trust shall make the net asset value per share for each
Series available to the Companies on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m.,
Boston time.
ARTICLE II. Representations and Warranties
2.1. The Companies represent and warrant that the Contracts are or will
be registered under the 1933 Act to the extent required by the 1933 Act; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements. The Companies further represent and warrant that they are
insurance companies duly organized and in good standing under applicable law
and that prior to any issuance or sale of any Contract they have legally and
validly established each Separate Account as a segregated asset account under
the applicable state insurance laws and have registered or, prior to any
issuance or sale of the Contracts, will register each Separate Account as a
unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts, to the extent
required by the 1940 Act.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act to the extent
required by the 1933 Act, duly authorized for issuance and sold in compliance
with the laws of the Commonwealth of Massachusetts and all applicable federal
and any state securities laws and that the Trust is and shall remain
registered under the 1940 Act to the extent required by the 1940 Act. The
Trust shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Trust or KFSC.
2.3. The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Code and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Companies immediately upon
having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
2.4. The Companies represent that the Contracts are currently treated as
endowment, annuity or life insurance contracts under applicable provisions of
the Code and that they will make every effort to maintain such treatment and
that they will notify the Trust and KFSC immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that
they might not be so treated in the future.
2.5. The Trust currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future consistent with applicable
law. To the extent that it decides to finance distribution expenses pursuant
to Rule 12b-1, the Trust undertakes to have its Trustees, a majority of whom
are not interested persons of the Trust, formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states except that the Trust represents that it is currently in compliance
and shall at all times remain in compliance with the applicable insurance
laws of the domiciliary states of the Participating Insurance Companies to
the extent that the Participating Insurance Company advises the Trust, in
writing, of such laws or any changes in such laws.
2.7. KFSC represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the SEC. KFSC further
represents that it will sell and distribute the Trust shares in accordance
with the laws of the Commonwealth of Massachusetts and all applicable state
and federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.8. The Trust represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material aspects with the 1940 Act.
2.9. The Trust represents and warrants that KASC is and shall remain
duly registered as an investment adviser in all material aspects under all
applicable federal and state securities laws and that KASC shall perform its
obligations for the Trust in compliance in all material respects with the
applicable laws of the Commonwealth of Massachusetts and any applicable state
and federal securities laws.
2.10. The Trust represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
having access to securities or funds of the Trust are and shall continue to
be at all times covered by a joint fidelity bond in an amount not less than
three million seven hundred fifty thousand dollars ($3,750,000) with no
deductible amount. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable fidelity insurance company.
2.11. The Companies represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities having access to securities or funds of the Trust are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust, in an amount not less than ten
million dollars ($10,000,000) with no deductible amount. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable fidelity insurance company.
2.12. The Companies represent and warrant that they will not, without
the prior written consent of KFSC, purchase Trust shares with Separate
Account assets derived from the sale of Contracts to individuals or entities
which qualify under current or future state or federal law for any type of
tax advantage (whether by a reduction or deferral of, deduction or exemption
from, or credit against income or otherwise). Examples of such types of
funds under current law include: any tax-advantaged retirement program,
whether maintained by an individual, employer, employee association or
otherwise (including, without limitation, retirement programs which qualify
under Sections 401(a), 401(k), 403(a), 403(b), 408 and 457 of the Code), and
any retirement programs maintained for employees of the Government of the
United States or by the government of any state or political subdivision
thereof, or by any agency or instrumentality of any of the foregoing.
2.13. The Companies represent and warrant that they will not
transfer or otherwise convey shares of the Trust, without the prior written
consent of KFSC.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. KFSC shall provide the Companies with as many copies of the Trust's
current prospectus, excluding the SAI, as the Companies may reasonably
request in connection with delivery of the prospectus, excluding the SAI, to
shareholders and purchasers of Variable Insurance Products. If requested by
the Companies in lieu thereof, the Trust shall provide such documentation
(including a final copy of the new prospectus, excluding the SAI, as set in
type at the Trust's expense) and other assistance as is reasonably necessary
in order for the Companies once each year (or more frequently if the
prospectus for the Trust is amended) to have the prospectus for the Contracts
and the Trust's prospectus, excluding the SAI, printed together in one
document (such printing to be at the Companies' expense).
3.2. The Trust's prospectus shall state that the SAI for the Trust is
available from KFSC and the Trust, at its expense, shall provide final copy
of such SAI to KFSC for duplication and provision to any prospective owner
who requests the SAI and to any owner of a Variable Insurance Product
("Owners").
3.3. The Trust, at its expense, shall provide the Companies with copies
of its proxy material, reports to shareholders and other communications to
shareholders in such quantity as the Companies shall reasonably require for
distribution to Owners.
3.4. If and to the extent required by law, the Companies and, so long as
and to the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for Owners, the Trust shall:
(i) solicit voting instructions from Owners;
(ii) vote the Trust shares in accordance with
instructions received from Owners; and
(iii) vote Trust shares for which no instructions
have been received in the same proportion as Trust shares of
such Series for which instructions have been received;
The Companies reserve the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each
of their Separate Accounts participating in the Trust calculates voting
privileges in a manner consistent with the standards to be provided in
writing to the Participating Insurance Companies.
3.5. The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders. The Trust reserves the right to take all actions,
including but not limited to, the dissolution, merger, and sale of all assets
of the Trust upon the sole authorization of its Trustees, to the extent
permitted by the laws of the Commonwealth of Massachusetts and the 1940 Act.
ARTICLE IV. Sales Material and Information
4.1. The Companies shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or KASC, or any sub-adviser ("Sub-Adviser"), or
KFSC is named, at least fifteen (15) days prior to its use. No such material
shall be used if the Trust or its designee object to such use within fifteen
(15) days after receipt of such material.
4.2. The Companies shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus for the
Trust shares, as such registration statement and Prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust or its designee or by KFSC, except with the permission of the Trust or
KFSC or the designee of either.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Companies or their designees, each piece of sales
literature or other promotional material in which the Companies and/or their
Separate Account(s), are named at least fifteen (15) days prior to its use.
No such material shall be used if the Companies or their designee object to
such use within fifteen (15) days after receipt of such material.
4.4. The Trust and KFSC shall not give any information or make any
representations or statements on behalf of the Companies or concerning the
Companies, any Separate Account, or the Variable Insurance Products other
than the information or representations contained in a registration statement
or prospectus for such Variable Insurance Products, as such registration
statement and prospectus may be amended or supplemented from time to time, or
in published reports for such Separate Account which are in the public domain
or approved by the Company for distribution to Owners, or in sales literature
or other promotional material approved by the Companies or their designee,
except with the permission of the Companies.
4.5. The Trust will provide to the Companies at least one complete copy
of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications
for exemption, requests for no-action letters, and all amendments to any of
the above, that relate to the Trust or its shares, contemporaneously with the
filing of such document with the SEC or other regulatory authorities.
4.6. The Companies will provide to the Trust at least one complete copy
of all registration statements, prospectuses, SAIs, reports, solicitations
for voting instructions, sales literature and other promotional materials,
applications for exemption, requests for no-action letters, and all
amendments to any of the above, that relate to the Variable Insurance
Products or any Separate Account, contemporaneously with the filing of such
document with the SEC.
4.7. For purposes of this Article IV., the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, SAIs, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Trust and KFSC shall pay no fee or other compensation to the
Companies under this Agreement, except that if the Trust or any Series adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then KFSC may make payments to the Companies or to the underwriter
for the Variable Insurance Products if and in amounts agreed to by KFSC in
writing and such payments will be made out of existing fees payable to KFSC
by the Trust for this purpose. No such payments shall be made directly by
the Trust. Currently, no such plan pursuant to Rule 12b-1 or payments are
contemplated.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all its
shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the
Trust, in accordance with applicable state laws prior to their sale. The
Trust shall bear the expenses of registration and qualification of the
Trust's shares, preparation and filing of the Trust's prospectus and
registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by
any federal or state law, and all taxes on the issuance or transfer of the
Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
proxy materials and reports to Owners.
ARTICLE VI. Diversification
6.1. The Trust will at all times invest money from the Variable
Insurance Products in such a manner as to ensure that, insofar as such
investment is required to assure such treatment, the Variable Insurance
Products will be treated as variable contracts under the Code and the
regulations issued thereunder. Without limiting the scope of the foregoing,
the Trust will at all times comply with Section 817(h) of the Code and the
Treasury Regulations thereunder relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any
amendments or other modifications to such Section or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the Owners of
separate accounts of the Companies investing in the Trust. A material
irreconcilable conflict may arise for a variety of reasons, including: (a)
an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Series
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance policy owners; or (f) a decision
by an insurer to disregard the voting instructions of Owners. The Trustees
shall promptly inform the Companies if they determine that a material
irreconcilable conflict exists and the implications thereof.
7.2. The Companies will report any potential or existing conflicts
(including the occurrence of any event specified in paragraph 7.1. which may
give rise to such a conflict) of which they are aware to the Trustees. The
Companies will assist the Trustees in carrying out their responsibilities
under the Shared Funding Exemptive Order, by providing the Trustees with all
information reasonably necessary for the Trustees to consider any issues
raised. This includes, but is not limited to, an obligation by the Companies
to inform the Trustees whenever Owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists,
the Companies and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take whatever steps are necessary to remedy
or eliminate the material irreconcilable conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts of
Participating Insurance Companies from the Trust or any Series and
reinvesting such assets in a different investment medium, including (but not
limited to) another Series of the Trust, or submitting the question whether
such segregation should be implemented to a vote of all affected Owners and,
as appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable contract
owners of one or more Participating Insurance Companies) that votes in favor
of such segregation, or offering to the affected Owners the option of making
such a change; (2), establishing a new registered management investment
company or managed separate account; and (3) obtaining SEC approval.
7.4. If a material irreconcilable conflict arises because of a decision
by one or both of the Companies to disregard Owner voting instructions and
that decision represents a minority position or would preclude a majority
vote, one or both of the Companies may be required, at the Trust's election,
to withdraw the affected Separate Account's investment in the Trust and
terminate this Agreement; provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Any such withdrawal and termination must take place within six (6)
months after the Trust gives written notice that this provision is being
implemented, and until the end of that six (6) month period KFSC and Trust
shall continue to accept and implement orders by one or both of the Companies
for the purchase (and redemption) of shares of the Trust.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to one or both of the
Companies conflicts with the majority of other state regulators, then one or
both of the Companies will withdraw the affected Separate Account's
investment in the Trust and terminate this Agreement within six (6) months
after the Trustees inform one or both of the Companies in writing that they
have determined that such decision has created a material irreconcilable
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until
the end of the foregoing six (6) month period, KFSC and Trust shall continue
to accept and implement orders by one or both of the Companies for the
purchase (and redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3. through 7.6. of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in no
event will the Trust be required to establish a new funding medium for the
Variable Insurance Products. One or both of the Companies shall not be
required by Section 7.3. to establish a new funding medium for the Variable
Insurance Products if an offer to do so has been declined by vote of a
majority of Owners materially adversely affected by the material
irreconcilable conflict. In the event that the Trustees determine that any
proposed action does not adequately remedy any material irreconcilable
conflict, then one or both of the Companies will withdraw the affected
Separate Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform one or both of the Companies
in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) or terms
and conditions materially different from those contained in the Shared
Funding Exemptive Order, then (a) the Trust and/or the Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4., 3.5., 7.1., 7.2., 7.3., 7.4.,
and 7.5. of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Companies
8.1.(a). The Companies will indemnify and hold harmless the Trust
and each of its Trustees and Officers and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1.) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of one or both of the Companies) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or acquisition of
the Trust's shares or the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Variable
Insurance Products or contained in the sales literature for
the Variable Insurance Products (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this Agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to one or
both of the Companies by or on behalf of the Trust for use in
the registration statement or prospectus for the Variable
Insurance Products or in the Variable Insurance Products or
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Variable Insurance
Products or Trust shares; or
(ii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, Prospectus or sales
literature of the Trust not supplied by one or both of the
Companies, or persons under their control) or wrongful conduct
of one or both of the Companies or persons under their
control, with respect to the sale or distribution of the
Variable Insurance Products or Trust shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, Prospectus, or sales literature of the
Trust or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished in
writing to the Trust by or on behalf of one or both of the
Companies; or
(iv) arise out of or result from any failure by one or
both of the Companies to provide the services and furnish the
materials contemplated by this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by one or both of the
Companies in this Agreement or arise out of or result from any
other material breach of this Agreement by one or both of the
Companies.
8.1.(b). The Companies shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Trust, whichever is applicable.
8.1.(c). The Companies shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Companies in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but
failure to notify the Companies of any such claim shall not relieve the
Companies from any liability which they may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Companies shall be entitled to participate, at their
own expense, in the defense of such action. The Companies also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from one or both of the Companies to
such party of the election of one or both of the Companies to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Companies will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.1.(d). The Indemnified Parties will promptly notify the
Companies of the commencement of any litigation or proceedings against them
in connection with the issuance or sale of the Trust shares or the Contracts
or the operation of the Trust.
8.2. Indemnification By the Trust
8.2.(a). The Trust will indemnify and hold harmless the Companies,
and each of their directors and officers and each person, if any, who
controls the Companies within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2.)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Trust) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, regulation at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements result from the gross negligence, bad
faith or willful misconduct of the Trustees or any member thereof, are
related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to
provide the services and furnish the materials under the terms
of this Agreement (including a failure to comply with the
diversification requirements specified in Article VI. of this
Agreement); or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust;
as limited by and in accordance with the provisions of Sections 8.2.(b). and
8.2.(c). hereof.
8.2.(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise by subject by reason
of such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Companies, the Trust, KFSC or each Separate
Account, whichever is applicable.
8.2.(c). The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have served upon such
Indemnified Party (or after such Indemnified party shall have received notice
of such service on any designated agent), but failure to notify the Trust of
any such claim shall not relieve the Trust from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action
is brought against the Indemnified Parties, the Trust will be entitled to
participate, at its own expense, in the defense thereof. The Trust also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Trust to such party of
the Trust's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it,
and the Trustees will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable cases of
investigations.
8.2.(d). The Companies and KFSC agree promptly to notify the Trust
of the commencement of any litigation or proceedings against them or any of
their respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Trust.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts provided, however, that if such laws or any of the provisions
of this Agreement conflict with applicable provisions of the 1940 Act, the
latter shall control.
9.2. This Agreement shall be made subject to the provisions of the
1933, 1934, and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant (including, but not limited to, the Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one (1) year advance written
notice to the other parties; provided, however such notice shall not be given
earlier than one (1) year following the date of this Agreement; or
(b) at the option of one or both of the Companies to the extent
that shares of Series are not reasonably available to meet the requirements
of the Variable Insurance Products as determined by one or both of the
Companies, provided however, that such termination shall apply only to the
Series not reasonably available. Prompt notice of the election to terminate
for such cause shall be furnished by one or both of the Companies; or
(c) at the option of the Trust in the event that formal
administrative proceedings are instituted against one or both of the
Companies or KFSC by the NASD, the SEC, the Insurance Commissioner or any
other regulatory body regarding the duties of one or both of the Companies
under this Agreement or related to the sale of the Variable Insurance
Products, with respect to the operation of a Separate Account, or the
purchase of the Trust shares, provided, however, that the Trust determines in
its sole judgement exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of one or
both of the Companies to perform their obligations under this Agreement or of
KFSC to perform its obligations under its underwriting agreement with the
Trust; or
(d) at the option of one or both of the Companies in the event
that formal administrative proceedings are instituted against the Trust by
the NASD, the SEC, or any state securities or insurance department or any
other regulatory body, provided, however, that one or both of the Companies
determine in their sole judgement exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the
ability of the Trust to perform its obligations under this Agreement; or
(e) with respect to a Separate Account, upon requisite authority
to substitute the shares of another investment company for shares of the
corresponding Series of the Trust in accordance with the terms of the
Variable Insurance Products for which those Series shares had been selected
to serve as the underlying investment media. The Companies will give thirty
(30) days' prior written notice to the Trust of the date of any proposed
action to replace the Trust shares; or
(f) at the option of one or both of the Companies, in the event
any of the Trust's shares are not registered, issued or sold in accordance
with applicable federal and any state law or such law precludes the use of
such shares as the underlying investment media of the Variable Insurance
Products issued or to be issued by the Companies; or
(g) at the option of one or both of the Companies, if the Trust
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if one or both of the
Companies reasonably believes that the Trust may fail to so qualify; or
(h) at the option of one or both of the Companies, if the Trust
fails to meet the diversification requirements specified in Article VI.
hereof; or
(i) at the option of either the Trust or KFSC, if (1) the Trust or
KFSC, respectively, shall determine, in their sole judgement reasonably
exercised in good faith, that one or both of the Companies has suffered a
material adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse publicity
will have a material adverse impact upon the business and operations of
either the Trust or KFSC, (2) the Trust or KFSC shall notify one or both of
the Companies in writing of such determination and its intent to terminate
this Agreement, and (3) after considering the actions taken by one or both of
the Companies and any other changes in circumstances since the giving of such
notice, such determination of the Trust or KFSC shall continue to apply on
the sixtieth (60th) day following the giving of such notice, which sixtieth
(60th) day shall be the effective date of termination; or
(j) at the option of one or both of the Companies, if (1) one or
both of the Companies shall determine, in its sole judgment reasonably
exercised in good faith, that either the Trust or KFSC has suffered a
material adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse publicity
will have a material adverse impact upon the business and operations of one
or both of the Companies, (2) one or both of the Companies shall notify the
Trust and KFSC in writing of such determination and its intent to terminate
the Agreement, and (3) after considering the actions taken by the Trust
and/or KFSC and any other changes in circumstances since the giving of such
notice, such determination shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth (60th) day shall be the
effective date of termination; or
(k) at the option of either the Trust or KFSC, if one or both of
the Companies gives the Trust and KFSC the written notice specified in
Section 10.3.(a). hereof and at the time such notice was given there was no
notice of termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section 10.1.(k).
shall be effective forty-five (45) days after the notice specified in
10.3.(a). was given.
10.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 10.1.(a). may be exercised
for any reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) in the event that any termination is based upon the provisions
of Article VII., or the provision of Section 10.1.(a)., 10.1.(i)., 10.1.(j).
or 10.1.(k). of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions;
and
(b) in the event that any termination is based upon the provisions
of Section 10.1.(c). or 10.1.(d). of this Agreement, such prior written
notice shall be given at least ninety (90) days before the effective date of
termination.
10.4. Effect of Termination. Notwithstanding any termination of
this Agreement, the Trust and KFSC shall at the option of one or both of the
Companies, continue to make available additional shares of the Trust pursuant
to the terms and conditions of this Agreement, for all Variable Insurance
Products in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Products"). Specifically, without
limitation, the Owners of the Existing Products shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Products. The parties agree that this Section 10.4. shall not apply
to any terminations under Article VII. and the effect of such Article VII.
terminations shall be governed by Article VII. of this Agreement.
10.5. The Companies shall not redeem Trust shares attributable to
the Variable Insurance Products (as opposed to Trust shares attributable to
the Companies' assets held in a Separate Account) except (i) as necessary to
implement Owner initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption").
Upon request, the Companies will promptly furnish to the Trust and KFSC the
opinion of counsel for the Companies (which counsel shall be reasonably
satisfactory to the Trust and KFSC) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Variable Insurance
Products, the Companies shall not prevent Owners from allocating payments to
a Series that was otherwise available under the Variable Insurance Products
without first giving the Trustee or KFSC ninety (90) days notice of their
intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Trust:
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Secretary
If to one or both of the Companies:
Keyport Life Insurance Company
125 High Street
Oliver Street Tower
Thirteenth Floor
Boston, MA 02110
Attention: General Counsel
Liberty Life Assurance Company of Boston
175 Berkeley Street
Boston, MA 02117
Attention: General Counsel
If to KFSC:
Keyport Financial Services, Corp.
125 High Street
Boston, Massachusetts 02110
Attention: Secretary
ARTICLE XII. Miscellaneous
12.1. All persons dealing with Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust
hereunder and otherwise understand that neither the Trustees, officers,
agents or shareholders of the Trust have any personal liability for any
obligations entered into by or on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each Party hereto shall treat as confidential the names and
addresses of the Owners and all information reasonably identified as
confidential in writing be any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come
into the public domain without the express written consent of the affected
party.
12.3. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be effected thereby.
12.6. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the
SEC, the NASD, the Internal Revenue Service and state insurance regulators)
and shall permit such authorities reasonable access to its books and records
in connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
12.7. The Trust and KFSC agree that to the extent any advisory or
other fees received by the Trust, KFSC, Colonial or KASC are determined to be
unlawful in appropriate legal or administrative proceedings, the Trust shall
indemnify and reimburse the Companies for any out of pocket expenses and
actual damages the Companies have incurred as a result of any such
proceeding, provided however that the provision of Section 8.2.(b). of this
and 8.2.(c). shall apply to such indemnification and reimbursement
obligation. Such indemnification and reimbursement obligation shall be in
addition to any other indemnification and reimbursement obligations of the
Trust under this Agreement.
12.8. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligation, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
KEYPORT LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Johm W.Rosensteel
Title: President
Date: October 20, 1993
LIBERTY LIFE ASSURANCE
COMPANY OF BOSTON
By its authorized officer,
By: /s/Stuart L. Lerner
Title: President
Date: October 22, 1993
KEYPORT VARIABLE INVESTMENT TRUST
By its authorized officer,
By: /s/Ernest E. Dunbar
Title: Treasurer
Date: December 2, 1993
KEYPORT FINANCIAL SERVICES CORP.
By its authorized officer,
By: /s/Robert R. Baird
Title: President
Date: October 20, 1993
Schedule A
[List Policies and Contracts]
EXHIBIT (9)
July 17 1997
Edmund F. Kelly, President
Liberty Life Assurance Company
175 Berkeley Street
Boston, MA 02117
RE: OPINION OF COUNSEL - VARIABLE ACCOUNT J
Dear Mr. Kelly:
You have requested my opinion concerning the legality of the variable annuity
contracts being registered with the Securities and Exchange Commission by
Post-Effective Amendment No. 1.
I have made such examination of the law and have examined such records and
documents as in my judgment was necessary or appropriate to enable me to
render the opinion expressed below.
I am of the opinion that the contracts will be legally issued and will
represent binding obligations of the depositor (Liberty Life Assurance
Company of Boston).
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
Sincerely,
/s/Lee W. Rabkin
Lee W. Rabkin, Esq.
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Statement of Additional Information and to the use of our report dated
February 28, 1997, with respect to the financial statements of Liberty Life
Assurance Company of Boston, included in this Post-Effective Amendment No. 1
to the Registration Statement (Form N-4, No. 333-29811; 811-08269).
Boston, Massachusetts /s/Ernst & Young LLP
July 14, 1997
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Liberty Life Assurance Company:
We consent to the use of our report dated February 16, 1996 and to the
reference to our firm under the heading "Experts" in the Statement of
Additional Information.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
July 17 1997
