As Filed with the Securities and Exchange Commission on April 16, 1999
Registration No. 333-29811
811-08269
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 8 [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 Jorden Burt Boros Cicchetti
125 High Street, 13th Floor Berenson & Johnson LLP
Boston, MA 02110 1025 Thomas Jefferson Street, N.W.
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
(X) on May 3, 1999 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
Title of Securities Being Registered: Variable Portion of the Contracts
Funded Through the Separate Account.
No filing fee is due because an indefinite amount of securities is deemed to
have been registered in reliance on Section 24(f) of the Investment Company
Act of 1940.
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Exhibit 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. Definitions
3. Summary of Certificate Features
Fee Table
Examples
Explanation of Fee Tables and Examples
4. [Condensed Financial Information]
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 No. 7 to the Registration Statement on Form N-4 which
initially became effective on July 15, 1997 (the "Registration Statement")
is being filed pursuant to Rule 485(b) under the Securities Act of 1933, as
amended, to supplement the Registration Statement with a separate prospectus
and statement of additional information ("SAI"), and related exhibits,
describing a generic form of the Group and Individual Flexible Premium
Deferred Annuity Contracts. This Amendment relates only to the prospectus,
SAI and exhibits included in this Amendment and does not otherwise delete,
amend, or supersede any information contained in Post-Effective Amendment
Nos. 5, and 6 to the Registration Statement
PART A
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The information contained within double rows of asterisks is
provided at the request of the staff of the Securities and
Exchange Commission. It is not and will not be part of any
documents delivered to purchasers or existing owners, and is
included solely for purposes of clarifying the content of this
registration statement. In addition, throughout the prospectus and
statement of additional information ("SAI") that follow there are
similar inserts that specifically summarize the parameters of
change for the particular design feature.
This registration statement includes a prospectus and SAI that
describes a generic form of the Group Flexible Premium Deferred
Annuity Contracts (the "Contracts") that are the subject of the
registration statement. The prospectus and SAI contain numerous
bracketed portions to indicate those portions which may be
included or eliminated in any particular form of the Contracts,
including but not limited to those, as follows:
death benefits;
funding media;
withdrawal rights;
transfer privileges;
annuity options;
other features
such as dollar cost averaging,
asset allocation,
systematic withdrawals, and
Account rebalancing.
In all cases variations in other bracketed features, such as issue and
annuity ages and interest rates, will be in conformity with state
insurance law. Bracketed features representing maximum limits for
which a range is not provided will not exceed, but may be less than,
the amount shown. Bracketed features representing minimum limits for
which a range is not provided will not be less than, but may exceed,
the amount shown.
The prospectus and SAI also include bracketed references to the fees
and charges to be imposed under the particular form of the Contract. Of
course, in each case, Liberty only will impose such charges in a manner
and subject to the conditions of applicable rules. In connection with
the various charges under the Contracts, Liberty and its separate
accounts will comply with the requirements of Section 26(e) and will
rely upon and be limited by such rules as 0-1(e), 6c-8, and 22d-2 under
the Investment Company Act of 1940, as amended, and in compliance with
their respective requirements. Any descriptions of the potential range
of fees and charges should be read in the context of such rules
requirements.
Each form of the Contracts will be offered pursuant to a separate
prospectus and a separate or combined SAI, as appropriate. The content
of all prospectuses and SAIs will be identical with respect to
contractual and securities law related features to those contained in
this registration statement, except for provisions that are bracketed
and which will vary within the parameters established herein, and
except for non-material changes consistent with the requirements of
Rule 485(b) under the 1933 Act ("Rule 485(b)").
Except as provided for by Rule 485(b), each prospectus and SAI and
related exhibits will be filed pursuant to Rule 485(a) with a request
for expedited or selective review consistent with precedent and the
fact that all relevant disclosure is included in this Post-Effective
Amendment No. 7.
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Prospectus for
[Variable Annuity]
Group Flexible Purchase Payment
Deferred Variable Annuity Contracts
issued by
Variable Account A
of
Libery Life Assurance Company of Boston
This prospectus describes the [XXXXXXX] variable annuity group Contracts and
Certificates offered by Liberty Life Assurance Company of Boston. All
discussion of Certificates applies to the Contracts unless specified
otherwise.
Under the Certificate, you may elect to have value accumulate on a variable
[or fixed basis]. You may also elect to receive periodic annuity payments on
[either a variable or] a fixed basis. This prospectus generally describes
only the variable features of the Certificate. [For a summary of the Fixed
Account and its features, see Appendix A.] The Certificates are designed to
help you in your retirement planning. You may purchase them on a tax
qualified or non-tax qualified basis. Because they are offered on a flexible
payment basis, you are permitted to make multiple payments.
We will allocate your purchase payments to the investment options [and the
Fixed Account] in the proportions you choose. The Certificate currently
offers [XXXXXXXX] investment options, each of which is a Sub-account of
Variable Account A. Currently, you may choose among the following Eligible
Funds:
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The terms XXXXX Trust, YYYYY Fund, and XX-1 Sub-account are
included to indicate that disclosure relevant to an actual
Eligible Fund will be provided. The actual names of the Eligible
Funds and corresponding Sub-accounts will be included in the
subsequent forms of the prospectus and SAI.
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The Variable Account may offer other forms of the Contracts and Certificates
with features, and fees and charges which vary from the Certificates, and
provide for investment in other Sub-Accounts which may invest in different
or additional mutual funds. Other Contracts and Certificates will be
described in separate prospectuses and statements of additional information.
[The agent selling the Contracts and Certificates has information concerning
the eligibility for and the availability of the other forms of the Contracts
and Certificates.]
You may not purchase a Certificate if either you or the Annuitant are [90]
years old or older before we receive your application. You may not purchase
a tax-qualified Certificate if you or the Annuitant are [75] years old or
older before we receive your application [(age [90] applies to Roth IRAs)].
The purchase of a Contract or Certificate involves certain risks. Investment
performance of the Eligible Funds to which you may allocate purchase
payments may vary. We do not guarantee any minimum Certificate Value for
amounts allocated to the Eligible Funds. [Benefits provided by this
Certificate, when based on the Fixed Account, may be subject to a market
value adjustment, which may result in an upward or downward adjustment in
withdrawal benefits, death benefits, settlement values, transfers to
Eligible Funds, or periodic income payments.]
The Variable Account may offer other certificates with different features,
fees and charges, and other Sub-accounts which may invest in different or
additional mutual funds. Separate prospectuses and statements of additional
information will describe other certificates. [The agent selling the
Certificates has information concerning the eligibility for and the
availability of the other certificates.]
This prospectus contains important information about the Contracts and
Certificates you should know before investing. You should read it before
investing and keep it for future reference. We have filed a Statement of
Additional Information ("SAI") with the Securities and Exchange Commission.
The current SAI has the same date as this prospectus and is incorporated by
reference in this prospectus. You may obtain a free copy by writing the
principal underwriter, Keyport Financial Services Corp. at 125 High Street,
Boston, MA 02110, by calling Liberty's Service Office at (800) 437-4466, or
by returning the postcard on the back cover of this prospectus. A table of
contents for the SAI appears on page ___ of this prospectus.
The date of this prospectus is _____________________, [1999].
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
TABLE OF CONTENTS
Page
Definitions
Summary of Certificate Features
Fee Tables
Examples
Explanation of Fee Tables and Examples
[Condensed Financial Information]
Performance Information
Liberty 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 Daily Administrative Charge]
[Deductions for Contingent Deferred Sales Charge]
[Deductions for Transfers of Variable Account Value]
Deductions for Premium Taxes
Deductions for Income Taxes
Total Variable Account Expenses
Other Services
The Certificates
Variable Account Value
Valuation Periods
Net Investment Factor
Modification of the Certificate
Right to Revoke
Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Certificate Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Provisions
Annuity Benefits
Annuity Option and Income Date
Annuity Option and Change in Income Date
Annuity Options
Variable Annuity Payment Values
Proof of Age, Sex, and Survival of Annuitant
Suspension of Payments
[Year 2000 Matters]
Tax Status
Introduction
[Recent Developments]
Taxation of Annuities in General
Qualified Plans
[Tax-Sheltered Annuities]
Individual Retirement Annuities
[Corporate Pension and Profit-Sharing Plans]
[Deferred Compensation Plans with Respect to
Service for State and Local Governments]
Variable Account Voting Privileges
Sales of the Certificates
Legal Proceedings
Inquiries by Certificate Owners
Table of Contents-Statement of Additional Information
[Appendix A-The Fixed Account (also known as the Modified
Guaranteed Annuity Account)]
Appendix [B]-Telephone Instructions
DEFINITIONS
Accumulation Unit: A unit of measurement used to calculate Variable Account
Value.
Annuitant: The natural person on whose life annuity benefits are based and
who will receive annuity payments starting on the Income Date.
Certificate Anniversary: Each anniversary of the Certificate Date.
Certificate Date: The date when the Certificate becomes effective.
Certificate Owner ("You"): The person(s) having the privileges of ownership
defined in the Certificate
Certificate Value: The [sum of the] Variable Account Value [and the Fixed
Account Value].
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: Each twelve-month period beginning on the Certificate Date
and each Certificate Anniversary thereafter.
Company ("We", "Us", "Our". "Liberty"): Liberty Life Assurance Company of
Boston.
[Covered Person: The person(s) identified in Certificate whose death may
result in an adjustment of Certificate Value [and waiver of any Contingent
Deferred Sales Charges] [and a waiver of any Market Value Adjustment] [or
whose medically necessary stay in a hospital or nursing facility may allow
the Certificate Owner to be eligible for either a total or partial waiver of
the Contingent Deferred Sales Charge].]
Designated Beneficiary: The person designated to receive any death benefits
under the Certificate.
Eligible Funds: The underlying mutual funds in which the Variable Account
invests.
[Fixed Account: Part of our general account to which purchase payments or
Certificate Values may be allocated or transferred.]
[Fixed Account Value: The value of all Fixed Account amounts accumulated
under the Certificate prior to the Income Date.]
[Guarantee Period Anniversary: An anniversary of a Guarantee Period's Start
Date.]
[Guarantee Period Month: The first Guarantee Period Month is the monthly
period which begins on the Start Date. Later Guarantee Period Months begin
on the same day in the following months.]
[Guarantee Period Year: The twelve-month period begins on the Start Date.
Guarantee Period Years thereafter begin on each Guaranteed Period
Anniversary.]
In Force: The status of the Certificate before the Income Date so long as it
is not totally surrendered, the Certificate Value under a Certificate does
not go to zero, and there has not been a death of the Annuitant or any
Certificate Owner that will cause the Certificate to end within at most five
years of the date of death.
Income Date: The date on which annuity payments are to begin.
Non-Qualified Certificate: Any Certificate that is not issued under a
Qualified Plan.
Qualified Certificate: Certificates issued under Qualified Plans.
Qualified Plan: A retirement plan which receives special tax treatment under
Sections 401, 403(b), 408(b) or 408A of the Internal Revenue Code ("Code")
or a deferred compensation plan for a state and local government or another
tax exempt organization under Section 457 of the Code.
Service Office: Our executive and administrative office which is 125 High
Street, Boston, Massachusetts 02110.
[Start Date: The date money is first allocated to a Guarantee Period of the
Fixed Account].
Variable Account: Variable Account A which is a separate investment account
of the Company into which purchase payments under the Certificates may be
allocated. The Variable Account is divided into Sub-accounts which invest in
shares of an Eligible Fund.
Variable Account Value: The value of all Variable Account amounts
accumulated under the Certificate prior to the Income Date.
Written Request: A request written on a form satisfactory to us, signed by
you and a disinterested witness, and filed at our office.
SUMMARY OF CERTIFICATE FEATURES
Because this is a summary, it does not contain all of the information that
may be important to you. You should read the entire prospectus and Statement
of Additional Information before deciding to invest. Further, individual
state requirements, which are different from the information in this
prospectus, are described in supplements to this prospectus or in
endorsements to the Certificates.
The Certificate
The Certificate is a flexible premium deferred variable annuity certificate.
It is designed for retirement planning purposes. It allows you to allocate
purchase payments to and receive annuity payments from the Variable Account
[and/or the Fixed Account].
The Variable Account is a separate investment account we maintain. If you
allocate payments to the Variable Account, your accumulation values and
annuity payments will fluctuate according to the investment performance of
the Eligible Funds chosen.
[The Fixed Account is part of our "general account", which consists of all
our assets except the Variable Account and the assets of other separate
investment accounts we maintain. If you allocate payments to the Fixed
Account, your accumulation value will increase at guaranteed interest rates
and annuity payments will be of a fixed amount. Any surrender, withdrawal,
transfer or annuitization of your values in the Fixed Account may be subject
to a limited market value adjustment, which could increase or decrease the
applicable amount. (See Appendix A for more information on the Fixed
Account.)]
[If you allocate payments to both the Variable and the Fixed Accounts, then
the accumulation value and annuity payments will be variable in part and
fixed in part.]
Purchase of the Certificate
You may (except in Oregon) make multiple purchase payments. The minimum
initial payment is [$5,000]. [For individual retirement annuities the
minimum payment is [$2,000]]. The minimum amount for each subsequent payment
is [$1,000] or a lesser amount as we may permit from time to time which is
currently [$250]. (see "Purchase Payments and Applications".)
Investment Choices
You can allocate and reallocate your investment among the Sub-accounts of
the Variable Account which in turn invest in the Eligible Funds. Each
Eligible Fund holds its assets separately from the assets of the other
Eligible Funds. Each has its own investment objectives and policies
described in the accompanying prospectuses for the Eligible Funds. Under the
Certificate, the Variable Account currently invests in the following:
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TEXT HERE WILL LIST THE ELIGIBLE FUNDS
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[XXXXX Trust]
[XX-1]
[XX-2]
[XX-3]
[YYYYY Fund]
[YY-1]
[YY-2]
[YY-3]
Fees and Charges
[Contingent Deferred Sales Charge.
There are no sales charges at the time of your purchase payment. We deduct a
charge in the event of a total or partial surrender. That charge is based on
a table of charges. See page __. The charge will not exceed 7% of that
portion of the amount you surrender that represents purchase payments you
made during the seven years immediately preceding your request for
surrender. (See "Deductions for Contingent Deferred Sales Charge".)]
Mortality and Expense Risk Charge.
We deduct a mortality and expense risk charge at an annual rate of [1.25]%
of your average daily net asset value in the Variable Account. (See
Deductions for Mortality and Expense Risk Charge".)
[Distribution Charge.
We deduct a daily distribution charge at an annual rate of [.15%] of your
daily net asset value in the Variable Account. (See "Deductions for Daily
Distribution Charge".)]
[Administrative Charge
We deduct a daily administrative charge at an annual rate of [.15%] of your
daily net asset value in the Variable Account. (See "Deductions for Daily
Administrative Charge".)]
[Certificate Maintenance Charge.
We deduct an annual [$36] certificate maintenance charge from Variable
Account Value for administrative expenses. Prior to the Income Date, we
reserve the right to change this charge for future years. [In certain
instances, we may waive this charge.] (See "Deductions for Certificate
Maintenance Charge".)]
Transfer Charge.
[Currently, there is no transfer charge.] However, the Certificate permits
us to charge you up to [$25] for each transfer in excess of [12] in each
year your contract is In Force.
Premium taxes.
We charge premium taxes against your Certificate Value. Currently such
premium taxes range from 0% to 5.0%. (See "Deductions for Premium Taxes".)
Federal Income Taxes.
You will not pay federal income taxes on the increases in the value of your
Certificate. However, if you make a withdrawal in the form of a lump sum
payment, annuity payment or make a gift or assignment, you will be subject
to Federal income taxes on the increases in the value of your Certificate
and may also be subject to a 10% federal penalty tax. (See "Tax Status".)
Free Look
Generally, you may revoke the Certificate by returning it to us within 10
days after you receive it. (See "Right to Revoke".) We will refund your
Certificate Value, plus any distribution charges previously deducted, as of
the date we receive the returned Certificate. You will bear the investment
risk during the revocation period.
FEE TABLES
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Fee Tables will be completed in each Rule 485(a) filing.
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Certificate Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Contingent Deferred Sales Charge
(as a percentage of purchase payments): [7%
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 Charge $[36]
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: [1.25%]
[Distribution Charge:] [ .15%]
[Administrative Charge:] [ .15%]
Total Variable Account Annual Expenses: [1.55%]
[XXXXX Trust and YYYYY Fund] Annual Expenses[1]
(as a percentage of average net assets)
Management Other Total Fund
Fees Expenses Operating
[(After Any [(After Any Expenses [(After
Waiver and/or Waiver and/or Any Waiver and/or
Fund Reimbursement)][2] Reimbursement)][2] Reimbursement)][2]
The above expenses for the Eligible Funds were provided by the Funds. We
have not independently verified the accuracy of the information.
[[1][The XXXXX Trust] expenses are for [ ]. [The YYYYY Fund] expenses
[are estimated and] reflect the [YYYYY Fund's] [Manager's] [adviser's]
agreement to reimburse expenses above certain limits (see footnote [2]).
[[2][YYYYY Fund's] manager has agreed [until [a/bb/cc]] to reimburse all
expenses, including management fees, in excess of the following percentage
of the average annual net assets of each Eligible Fund, [xxx% for YY-1; xxx%
for YY-2 and xxx% for YY-3]. Each percentage shown in the parentheses is
what expenses would be without any expense reimbursement: for [YY-1 - xxx%
for other expenses and xxx% for total expenses; for YY-2 - xxx% for other
expenses and xxx% for total expenses; and for YYY-3 - xxx% for other
expenses and xxx% for total expenses.]]
EXAMPLES
[Example #1 - If you surrender your Certificate at the end of the periods
shown you would pay the following expenses on a $1,000 investment, assuming
5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
Example #2 - If you annuitize or if you do not surrender your Certificate at
the end of the periods shown, you would pay the following expenses on a
$1,000 investment, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years]
Example #3 - If your Certificate remains In Force through the periods shown,
you would pay the expenses shown in Example #2 on a $1,000 investment,
assuming 5% annual return on assets. ]
[Example -- If you annuitize or if you do not surrender your Certificate at
the end of the periods shown, you would pay the following expenses on a
$1,000 investment, assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years]
EXPLANATION OF FEE TABLE AND EXAMPLES
The purpose of the fee table is to illustrate the expenses you may directly
or indirectly bear under a certificate. The table reflects expenses of the
Variable Account as well as the Eligible Funds. You should read "Deductions"
in this prospectus and the sections relating to expenses of the Eligible
Funds in their prospectuses. The examples do not include any taxes or tax
penalties you may be required to pay if you surrender your Certificate.
[We deduct contingent deferred sales charges only if you totally or
partially surrender the Certificate. You will not incur a surrender charge
in the following instances:
1. In the first Certificate Year, you may withdraw an aggregate
amount up to the Certificate's earnings. Earnings equal the
Certificate Value at the time of withdrawal less the portion of
the purchase payments not previously withdrawn.
2. In the second and later Certificate Years you may withdraw:
(a) earnings, and
(b) an amount up to (i) 10% of the Certificate Value as of the
preceding Certificate Anniversary, (ii) less earnings.]
The examples assume you did not make any transfers. We reserve the right to
impose a transfer fee after we notify you. [Currently, we do not impose any
transfer fee.] Premium taxes are not shown. We deduct the amount of any
premium taxes (which range from 0% to 5%) from Certificate Value upon full
surrender, death or annuitization.
[We waive the certificate maintenance charge on the first Certificate
Anniversary and in certain other instances.]
The fee table and examples should not be considered a representation of past
or future expenses and charges of the Sub-accounts. Your actual expenses may
be greater or less than those shown. Similarly, the 5% annual rate of return
assumed in the example is not an estimate or a guarantee of future
investment performance. See "Deductions" in this prospectus, ["Trust
Management Organizations"] in the prospectus for [YYY Trust], and ["How the
Funds are Managed"] in the prospectus for [XXX Fund].
[CONDENSED FINANCIAL 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 contracts for periods
prior to the commencement of the offering of the Certificates described in
this prospectus. Any performance information for such periods will be based
on historical results of the Eligible Funds being applied to the Certificate
for the specified time periods.]
Performance information is not an indicator of either past or future
performance of a Certificate.
The Sub-accounts may advertise total return information for various periods
of time. Total return performance information is based on the overall
percentage change in value of a hypothetical investment in the specific Sub-
account over a given period of time.
Average annual total return information shows the average annual compounding
percentage applied to the value of an investment in the Sub-account from the
beginning of the measuring period to the end of that period. This average
annual total return reflects all historical investment results, less all Sub-
account and Certificate charges and deductions. [(This would include any
contingent deferred sales charge that would apply if you surrendered the
Certificate at the end of each period indicated)]. Average total return is
not reduced by any premium taxes. Average total return would be lower if
these taxes were deducted.
In order to calculate average annual total return, we divide the change in
value of a Sub-account under a Certificate surrendered on a particular date
by a hypothetical $1,000 investment in the Sub-account. We then annualize
the resulting total rate for the period to obtain the average annual
compounding percentage change during the period.
The Sub-accounts may present additional non-standardized total return
information computed on a different basis:
(a)[First, the Sub-accounts may present total return information as
described above, except for the deduction for 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. This is consistent with the long-term investment and retirement
objectives of the Certificate. The total return percentage will be higher
using this method than the standard method described above.]
(b)[Second,] the Sub-accounts may present total return information as
described above, except there are not Certificate deductions for [the
contingent deferred sales charge,] [the certificate maintenance charge and]
premium tax charges. Because there are no charges deducted, the calculation
is simplified. We divide the change in a Sub-account's Accumulation Unit
value over a specified time period by the Accumulation Unit value of that
Sub-Account at the beginning of the period. This computation results in a
twelve-month change rate. For longer periods it is a total rate for the
period. We annualize the total rate in order to obtain the average annual
percentage change in the Accumulation Unit value for that period. The
percentages would be lower if these charges were included.
(c)[Third, certain of the Eligible Funds have been available for other
variable annuity contracts prior to the commencement of the offering of the
Certificates described in this prospectus. Any performance information for
such periods will be based on historical results of the Eligible Funds and
applying the fees and charges of the Certificate for the specified time
periods.]
The [XX-1] Sub-Account is a money market Sub-account that also may advertise
yield and effective yield information. The yield of the Sub-account refers
to the income generated by an investment in the Sub-account over a
specifically identified seven-day period. We annualize this income by
assuming that the amount of income generated by the investment during that
week is generated each week over a fifty-two week period. It is shown as a
percentage. The yield reflects the deduction of all charges assessed
against the Sub-account and a Certificate but does not include [contingent
deferred sales charges and] premium tax charges. The yield would be lower
if these charges were included.
We calculate the effective yield of the [XX-1] Sub-Account in a similar
manner but, when annualizing the yield, we assume income earned by the Sub-
account is reinvested. This compounding effect causes effective yield to be
higher than yield.
LIBERTY AND THE VARIABLE ACCOUNT
We were incorporated on September 17, 1963 as a stock life insurance
company. Our executive and administrative offices are at 175 Berkeley
Street, Boston, Massachusetts 02117.
We write 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. We are 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. We have 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 our relative
financial strength and ability to meet our contractual obligations to our
policyholders. Even though we hold assets in the Variable Account separately
from our other assets, our ratings may still be relevant to you since not
all of our contractual obligations relate to payments based on those
segregated assets.
[We are a member of the Insurance Marketplace Standards Association
("IMSA"), and as such may use the IMSA logo and membership in IMSA in
advertisements. Being a member means that we have chosen to participate in
IMSA's Life Insurance Ethical Market Conduct Program.]
We are a wholly-owned 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.
We established the Variable Account 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 was registered with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940. Such registration
does not mean the Securities and Exchange Commission supervises us or the
management of the Variable Account.
Obligations under the Certificates are our obligations. Although the assets
of the Variable Account are our property, these assets are held separately
from our other assets and are not chargeable with liabilities arising out of
any other business we may conduct. Income, capital gains and/or capital
losses, whether or not realized, from assets allocated to the Variable
Account are credited to or charged against the Variable Account without
regard to the income, capital gains, and/or capital losses arising out of
any other business we may conduct.
PURCHASE PAYMENTS AND APPLICATIONS
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The minimums and maximums described in the following paragraph may
vary within any limits permitted under state insurance law and
Liberty's administrative guidelines in existence at the time of
issuance of the Certificate.
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The initial purchase payment is due on the Certificate Date. The minimum
initial purchase payment is [$5,000] [and [$2,000] for individual retirement
annuities]. You may make additional purchase payments. Each subsequent
purchase payment must be at least [$1,000] or any lesser amount we may
permit, which is currently [$250]. We may reject any purchase payment or any
application.
If your application for a Certificate is complete and amounts are to be
allocated to the Variable Account, we will apply your initial purchase
payment to the Variable Account within two business days of receipt. If the
application is incomplete, we will notify you and try to complete it within
five business days. If it is not complete at the end of this period, we will
inform you of the reason for the delay. The purchase payment will be
returned immediately unless you specifically consent to our keeping the
purchase payment until the application is complete. Once the application is
complete, the purchase payment will be applied within two business days of
its completion.
We will send you a written notification showing the allocation of all
purchase payments and the re-allocation of values after any transfer you
have requested. You must notify us immediately of any error.
We will permit others to act on your behalf in certain instances, including:
o We will accept an application for a Certificate signed by an
attorney-in-fact if we receive a copy of the power of attorney
with the application.
o We will issue a Certificate to replace an existing life
insurance or annuity policy that we or an affiliated company
issued even though we did not previously receive a signed
application from you.
Certain dealers or other authorized persons such as employers and Qualified
Plan fiduciaries may inform us of your responses to application questions by
telephone or by order ticket and cause the initial purchase payment to be
paid to us. If the information is complete, we will issue the Certificate
with a copy of an application containing that information. We will send you
the Certificate and a letter so you may review the information and notify us
of any errors. We may request you to confirm that the information is correct
by signing a copy of the application or a Certificate delivery receipt. We
will send you a written notice confirming all purchases. Our liability under
any Certificate relates only to amounts so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
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The percentage of required allocations to each Sub-Account may vary
from 1% to 10%.
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We will invest the purchase payments you applied to the Variable Account in
the Eligible Fund Sub-accounts chosen by you. Your selection must specify
the percentage of the purchase payment that is allocated to each Sub-account
[or must specify the asset allocation model selected. (See "Other Services,
The Programs".)] The percentage for each Sub-account, if not zero, must be
at least [10%] and a whole number. You may change the allocation percentages
without fee, penalty or other charge. You must notify us in writing of your
allocation changes unless you, your attorney-in-fact, or another authorized
person have given us written authorization to accept telephone allocation
instructions. By allowing us to accept telephone changes, you agree to
accept and be bound by our current conditions and procedures. The current
conditions and procedures are in Appendix B. We will notify you of any
changes in advance.
The Variable Account is segmented into Sub-accounts. Each Sub-account
contains the shares of one of the Eligible Funds and such shares are
purchased at net asset value. We may add or withdraw Eligible Funds and Sub-
accounts as permitted by applicable law.
Eligible Funds
The Eligible Funds are the separate funds of [XXXXX Trust, the separate
funds of YYYYY Fund]. Liberty and the Variable Account may enter into
agreements with other mutual funds for the purpose of making such mutual
funds available as Eligible Funds under certain Certificates.
We do not promise that the Eligible Funds will meet their investment
objectives. Amounts you have allocated to Sub-accounts may grow, decline, or
grow less in value than you expect, depending on the investment performance
of the Sub-accounts in which the Eligible Funds invest. You bear the
investment risk that those Sub-accounts possibly will not meet their
investment objectives. You should carefully review their prospectuses before
allocating amounts to the Sub-accounts of the Variable Account.
All the Eligible Funds are funding vehicles for variable annuity contracts
and variable life insurance policies offered by our separate accounts. The
Eligible Funds are also available for the separate accounts of insurance
companies affiliated and unaffiliated with us. The risks involved in this
"mixed and shared funding" are disclosed in the Eligible Fund prospectuses
under the following captions: [YYY Fund] ["Sales and Redemptions"] [XXX
Trust] ["The Trust"].
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TEXT HERE WILL DESCRIBE INDIVIDUAL INVESTMENT ADVISERS
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We have briefly described the Eligible Funds below. You should read the
current prospectus for the Eligible Funds for more details and complete
information. The prospectus is available, at no charge, from a salesperson
or by writing to us or by calling (800) 437-4466.
Eligible Funds of [XXXXX Trust]
and Variable Account Sub-Accounts Investment Objective
**************************************************************************
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TEXT HERE WILL DESCRIBE FUNDS AND INVESTMENT OBJECTIVES
**************************************************************************
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Eligible Funds of [YYYYY Fund]
and Variable Account Sub-Accounts Investment Objective
**************************************************************************
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TEXT HERE WILL DESCRIBE FUNDS AND INVESTMENT OBJECTIVES
**************************************************************************
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Transfer of Variable Account Value
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The number of transfers will vary between zero (0) and the maximum
number that Liberty determines is consistent with interpretations
of applicable tax law restrictions on contract owner control which
may permit an unlimited number of transfers. The transfer charge,
if any, imposed on transfers in excess of the stipulated number
will not exceed $50. The maximum number of free transfers,
assuming the imposition of a transfer charge, will be 12. The
minimum amount that may be transferred will range between $0 and
$500, and the minimum required remaining Sub-Account Value ranges
between $0 and $100.
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You may transfer Variable Account Value from one Sub-account to another Sub-
account [and/or to the Fixed Account]. [See "Recent Developments".]
We may charge a transfer fee and limit the number of transfers that you can
make in a time period. Transfer limitations may prevent you from making a
transfer on the date you select. This may result in your Certificate Value
being lower than it would have been if you had been able to make the
transfer.
Limits on Transfers
Currently, we do [not] limit the number or frequency of transfers. [The
minimum amount of Variable Account Value that may be transferred is [$500]
and the remaining Variable Account Value in the Sub-account is [$100]]. We
do [not] charge a transfer fee for each transfer in excess of [12] in each
Certificate Year, except as follows:
o We impose a transfer limit of one transfer every thirty days, or
such other period as we may permit, for transfers on behalf of
multiple Certificates by a common attorney-in-fact, or transfers
that are, in our determination, based on the recommendation of a
common investment adviser or broker/dealer, and
o We limit each transfer to a maximum of $500,000, or such greater
amount as we may permit. We treat all transfer requests for a
Certificate made on the same day as a single transfer. We may
treat as a single transfer all transfers you request on the same
day for every Certificate you own. The total combined transfer
amount is subject to the $500,000 limitation. If the total
amount of the requested transfers exceeds $500,000, we will not
execute any of the transfers, and
o We treat as a single transfer all transfers made on the same day
on behalf of multiple Certificates by a common attorney-in-fact,
or transfers that are, in our determination, based on the
recommendation of a common investment adviser or broker/dealer.
The $500,000 limitation applies to such transfers. If the total
amount of the requested transfers exceeds $500,000, we will not
execute any of the transfers.
If we have executed a transfer with respect to your Certificate as part of a
multiple transfer request, we will not execute another transfer request for
your Certificate for thirty days.
By applying these limitations we intend to protect the interests of
individuals who do and those who do not engage in significant transfer
activity among Sub-accounts. We have determined that the actions of
individuals engaging in significant transfer activity may cause an adverse
affect on the performance of the Eligible Fund for the Sub-account involved.
The movement of values from one Sub-account to another may prevent the
appropriate Eligible Fund from taking advantage of investment opportunities
because the Eligible Fund must maintain a liquid position in order to handle
redemptions. Such movement may also cause a substantial increase in fund
transaction costs which all Certificate owners must indirectly bear.
We will notify you prior to charging any transfer fee or a change in the
limitation on the number of transfers. The fee will not exceed [$25].
You must notify us in writing of your transfer requests unless you have
given us written authorization to accept telephone transfer requests from
you or your attorney-in-fact. By authorizing us to accept telephone transfer
instructions, you agree to accept and be bound by our current conditions and
procedures. The current conditions and procedures are in Appendix [B]. You
will be given prior notification of any changes. A person acting on your
behalf as an attorney-in-fact may make written transfer requests.
If we receive your transfer requests before 4:00 P.M. Eastern Time, we will
initiate them at the close of business that day. We will initiate any
requests received after that time at the close of the next business day. We
will execute your request to transfer value by both redeeming and acquiring
Accumulation Units on the day we initiate the transfer.
If you transfer 100% of any Sub-account's value, and the allocation formula
for purchase payments on your application includes that Sub-account, the
allocation formula for future purchase payments will automatically change
unless you tell us otherwise.
Substitution of Eligible Funds and Other Variable Account Changes
If shares of any of the Eligible Funds are no longer available for
investment by the Variable Account or further investment in the shares of an
Eligible Fund is no longer appropriate under the Certificate, we may add or
substitute shares of another Eligible Fund or of another mutual fund for
Eligible Fund shares already purchased or to be purchased in the future.
Any substitution of securities will comply with the requirements of the
Investment Company Act of 1940.
We also reserve the right to make the following changes in the operation of
the Variable Account and Eligible Funds:
o to operate the Variable Account in any form permitted by law;
o to take any action necessary to comply with applicable law or
obtain and continue any exemption from applicable law;
o to transfer any assets in any Sub-account to another or to one
or more separate investment accounts, or to our general account;
o to add, combine or remove Sub-accounts in the Variable Account;
and
o to change how charges are assessed, so long as the total
charges do not exceed the maximum amount that may be charged the
Variable Account and the Eligible Funds in connection with the
Certificates.
DEDUCTIONS
[Deductions for Certificate Maintenance Charge
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The Certificate Maintenance Charge will not exceed a maximum
dollar amount of $100. Under certain forms of the Certificate
Liberty may not impose any Certificate Maintenance Charge. The
amount of purchase payments necessary to support a waiver of the
charge ranges between $1000 and $5000.
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We charge an annual certificate maintenance charge of [$36] per Certificate
Year. Before the Income Date we do not guarantee the amount of the
certificate maintenance charge and may change it. This charge reimburses us
for our expenses incurred in maintaining your Certificate.
Before the Income Date, we will deduct the certificate maintenance charge
from the Variable Account Value on each Certificate Anniversary and on the
date of any total surrender not falling on the Certificate Anniversary. [We
will waive this charge before the Income Date if:
[o it is the first Certificate Anniversary;]
[o the Certificate Value is at least [$40,000] on the date we impose
this charge, or ]
[o in the prior Certificate Year, purchase payments of at least
[$2,000] have been made and you have not made any partial
withdrawals.]]
On the Income Date, we will subtract a pro-rata portion of the charge due on
the next Certificate Anniversary from the Variable Account Value. This pro-
rata charge covers the period from the prior Certificate Anniversary to the
Income Date. We will deduct the charge proportionally from each Sub-account
based upon the value each Sub-account bears to the Variable Account Value.
Once annuity payments begin, the certificate maintenance charge is
guaranteed not to increase. We will subtract this charge in equal parts from
each annuity payment. For example, if annuity payments are monthly, then we
will deduct one-twelfth of the annual charge from each payment.
[We will waive the charge on and after the Income Date for the current year
if:
o you have selected variable annuity Option A; and
o the present value of all of the remaining payments is at least
$40,000 at the time of the first payment of the year.]
**************************************************************************
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The Mortality and Expense Risk Charge as stated in the body of the
prospectus will vary between 35 and 125 basis points. The
variations will depend upon the precise combination of features
incorporated into the particular form of the Certificate.
**************************************************************************
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Deductions for Mortality and Expense Risk Charge
Variable annuity payments fluctuate depending on the investment performance
of the Sub-accounts. The payments will not be affected by the mortality
experience (death rate) of persons receiving such payments or of the general
population. We guarantee the Death Benefits in "Death Provisions". [We also
assume an expense risk that the daily administrative charge will not be
sufficient to cover our administrative expenses.] [We also assume an expense
risk since the certificate maintenance charge after the Income Date remains
the same and does not change to reflect variations in expenses.]
We deduct a mortality and expense risk charge from each Sub-account. The
mortality and expense risk charge is equal, on an annual basis to [.35 -
1.25]% of the average daily net asset value of the Sub-account. We deduct
the charge both before and after the Income Date. [We may deduct less than
the full charge from Sub-account values attributable to Certificates issued
to our employees and other persons specified in "Sales of the
Certificates".] [Additionally, we may, in certain circumstances described in
"Sales of the Certificates" offer to credit additional interest from our
general account to a purchase payment upon receipt as an allowance for
future deductions of the mortality and expense risk charge.]
[Deductions for Daily Distribution Charge
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A daily Distribution Charge may not apply to all forms of the
Certificate. It will be imposed at a maximum rate of 15 basis
points of net assets when such imposition combined with any
contingent deferred sales charge does not result in the imposition
of sales charges that exceed 9% of Purchase Payments.
**************************************************************************
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We do not deduct the distribution charge during the annuity period. We
deduct from each Sub-account for each valuation period a daily distribution
charge equal on an annual basis to 0.[15]% of the average daily net asset
value of each Sub-account. This charge compensates us for certain sales
distribution expenses relating to the Certificate.
We will not deduct this charge from your Sub-account values once we have
reached the maximum cumulative distribution charge limit. We do not deduct
this charge from the values of to Certificates issued to our employees and
other persons specified in "Sales of the Certificates". We 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 our
general account.]
[Deductions for Daily Administrative Charge
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A daily Administrative Charge may not apply to all forms of the
Certificate. The maximum daily Administrative Charge will be 15 basis
points. This charge may be adjusted giving consideration to the amount
of the Certificate Maintenance Charge.
**************************************************************************
**************************************************************************
We deduct from each Sub-account each valuation period an administrative
charge equal on an annual basis to [0.15]% of the average daily net asset
value of the Sub-account. This charge compensates us for a portion of the
administrative expenses relating to the Certificate.]
[Deductions for Contingent Deferred Sales Charge
**************************************************************************
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The Contingent Deferred Sales Charge may not apply to all forms of
the Certificate. The Contingent Deferred Sales Charge, including
any amounts deducted through the daily Sales Charge, will not
exceed 9% of Purchase Payments. The Contingent Deferred Sales
Charge, not including any amount deducted through the daily Sales
Charge, will in no event exceed a duration of 7 years and 7%.
**************************************************************************
**************************************************************************
We do not deduct a sales charge from the Certificate when you purchase it.
We may deduct such a charge if you surrender your Certificate.
To determine whether we will deduct a contingent deferred sales charge if
you surrender your Certificate, we maintain a separate set of records. These
records identify the date and amount of each purchase payment you have made
and the Certificate Value over time. This allows us to determine if a charge
is due with respect to a particular purchase payment.
You may make partial surrenders during the Accumulation Period without
incurring a contingent deferred sales charge. During the first Certificate
Year, you may withdraw an amount up to the Certificate's earnings. Earnings
equal the Certificate Value at the time of withdrawal, less purchase
payments not previously withdrawn. Beginning with the second Certificate
Year, you may withdraw earnings, and an amount up to 10% of the Certificate
Value on the prior Certificate Anniversary, less earnings. We will deduct a
contingent deferred sales charge with respect to withdrawals in excess of
these amounts.
We will deduct the contingent deferred sales charge resulting from an excess
withdrawal in any Certificate Year from the purchase payments beginning with
the oldest payment until we have deducted the full amount.
The amount of the contingent deferred sales charge we deduct will equal the
amount of your surrender multiplied by the applicable percentage for the
number of years that have elapsed from the date of the purchase payment to
the date of surrender. We measure years from the date of each purchase
payment you make. The applicable percentages for each year are [[7%] during
the first year, [and decreasing by 1% each following year] until the
percentage is [0%]]. We will deduct the contingent deferred sales charges
from the Sub-accounts [and the Fixed Account] in the same manner as we
deduct the amount you surrender.
We keep a record of all amounts we have deducted for all contingent deferred
sales charges [and daily distribution charges]. We will never deduct more
than a total of 9% from your purchase payments for sales [and distribution
charges].
The contingent deferred sales charge is used to cover the expenses of
selling the Certificate, including compensation paid to selling dealers and
the cost of sales literature. We pay any expenses not covered by the charge
from our general account, which may include monies deducted from the
Variable Account for the mortality and expense risk charge.
We will waive the contingent deferred sales charge in the event a Covered
Person is confined in a medical facility in accordance with the provisions
and conditions of an endorsement to the Certificate relating to such
confinement.
The contingent deferred sales charge is not applicable to Certificates
issued to our employees and other persons specified in "Sales of the
Certificates".
[We may reduce or change any contingent deferred sales charge percentage to
0% under a Certificate issued in an internal exchange or transfer of an
annuity contract from our general account.]
[Under the "Systematic Withdrawal Program" on page ____ and under other
permitted circumstances, we may allow the 10% withdrawal amount to be
available in the first Certificate Year. If so, the initial purchase
payment will be substituted for the Certificate Value.]]
[Deductions for Transfers of Variable Account Value
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The charge for transfers will range from zero to an amount not to
exceed $50.
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The Certificate allows us to charge a transfer fee. [Currently we do not
charge such a fee.] We will notify you prior to imposition of any fee and
the fee will not exceed $[50].]
Deductions for Premium Taxes
We deduct the amount of any premium taxes levied by any state or
governmental entity. Currently, we deduct premium taxes from Certificate
Value upon full surrender, death or annuitization. The actual amount of any
such premium taxes will depend, among other things, on the type of
Certificate you purchase (Qualified or Non-Qualified), on your state of
residence, the state of residence of the Annuitant, and the insurance tax
laws of such states. For New York Certificates, the current premium tax rate
is 0%.
Deductions for Income Taxes
We will deduct income taxes from any amount payable under the Certificate
that a governmental authority requires us to withhold. See "Income Tax
Withholding" [and "Tax-Sheltered Annuities"].
Total Variable Account Expenses
Total Variable Account expenses you will incur will be [the certificate
maintenance charge,] the mortality and expense risk charge, [the daily
distribution charge,] [and the daily administrative charge.]
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and the deductions and expenses paid out of the assets
of the Eligible Funds. The prospectuses for the Eligible Funds describe
these deductions and expenses.
[OTHER SERVICES
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Each of the following Programs may or may not be offered under any
form of the Certificate. If only one Program is offered, the
plural nature of the first two paragraphs will be adjusted
accordingly. The minimum amount that may be transferred under the
Dollar Cost Averaging Program ranges between $75 and $750. The
required notice period for the Rebalancing Program will not exceed
thirty days. The minimum Purchase Payment for the Systematic
Investment Program ranges between $50 and $1000. The minimum
amount that may be withdrawn under the Systematic Withdrawal
Program ranges between $100 and $250.
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[The Program[s]]. We offer the following investment related programs which
are available only prior to the Income Date:
o [asset allocation ];
o [dollar cost averaging];
o [systematic investment]; and
o [systematic withdrawal] programs.
[A rebalancing program is available before and after the Income Date.]
Under each program that uses transfers, the transfers between and among Sub-
accounts [and the Fixed Account] are not counted as one of the [twelve] free
transfers. Each of the programs has its own requirements, as discussed
below. We reserve the right to terminate any program.
If you have submitted a telephone authorization form, you may make certain
changes by telephone. For those programs involving transfers, you may change
instructions by telephone with regard to which Sub-accounts [or the Fixed
Account] Certificate Value may be transferred. We describe the current
conditions and procedures in Appendix [B].
[Dollar Cost Averaging Program. Under the program, we make automatic
transfers of Accumulation Units on a periodic basis from the [XX-1] Sub-
Account [or the One-Year Guarantee Period of the Fixed Account] to one or
more of the other available Sub-accounts you select. The program allows you
to invest in the Sub-accounts over time rather than all at once. The program
is available for purchase payments and amounts transferred into the [XX-1]
Sub-Account [or the One-Year Guarantee Period.] We reserve the right to
limit the number of Sub-accounts you may choose; currently there are no
limits.
If you wish to participate in the program, you must specify in writing the
[XX-1] Sub-Account [or the One Year Guarantee Period] from which you want
the transfers made. You must also tell us the monthly amount you want
transferred [(minimum $100)] and the Sub-account(s) to which you want the
transfers made. The first transfer will occur about 30 days after we receive
your request. Each subsequent periodic transfer will occur at the close of
the same valuation period. If you select monthly transfers and the first
transfer occurs on April 8, the second transfer will occur at the close of
the valuation period that includes May 8. When the remaining value is less
than the monthly transfer amount, we will transfer that remaining value and
the program will end. Before this final transfer, you may extend the program
by allocating additional purchase payments or by transferring Certificate
Value to the [XX-1] Sub-Account [or the One Year Guarantee Period.]
You may change the monthly amount you want transferred, the Sub-account(s)
to which you want transfers made, or end the program. The program will
automatically end on the Income Date. We reserve the right to end the
program at any time by sending you a notice one month in advance.
We must receive your written or telephone instructions by 4:00 PM Eastern
Time of the business day before the next scheduled transfer in order for the
new instructions to be in effect for that transfer. We establish conditions
and procedures for telephone instructions for dollar cost averaging from
time to time. The current conditions and procedures appear in Appendix [B],
and you will be notified prior to any changes.]
[Asset Allocation Program. You may select from five asset allocation model
portfolios separately developed by Ibbotson Associates and Standard &
Poor's:
o Model A -- Capital Preservation,
o Model B -- Income and Growth,
o Model C -- Moderate Growth,
o Model D -- Growth, and
o Model E -- Aggressive Growth.
If you elect one of the models, we will automatically allocate initial and
subsequent purchase payments among the Sub-accounts in the model. You may
use only one model in a Certificate at a time. You may use a questionnaire
and scoring system to determine the model that corresponds to your risk
tolerance and time horizons.
Periodically Ibbotson Associates and Standard & Poor's will review the
models and may determine that a reconfiguration of the Sub-accounts and
percentage allocations among those Sub-accounts is appropriate. You will
receive notification prior to any reconfiguration.
[The Fixed Account is not available in any asset allocation model. You may
allocate initial or subsequent purchase payments, or Certificate Value,
between an asset allocation model and the Fixed Account.]
[Rebalancing Program. If you elect purchase payment percentage allocations,
we will automatically rebalance the Certificate Value of each Sub-account on
the last day of [the] [either] [month,] [calendar quarter,] [or] [year] to
match your current purchase payments percentage allocations. You may
terminate the program at any time or change the percentages by notifying us
in writing. We must receive your changes [thirty (30)] days before the end
of the [period selected] [month] [calendar quarter] [year]. [Certificate
Value allocated to the Fixed Account is not included in the rebalancing
program.] After the Income Date, the rebalancing program applies only to
variable annuity payments and we will rebalance the number of Annuity Units
in each Sub-account. Annuity Units are used to calculate the amount of each
Sub-account annuity payment.]
[Systematic Investment Program. You may make purchase payments for Non-
Qualified Certificates through monthly deductions from your bank account [or
payroll]. You may elect this program by completing and returning a
systematic investment program application and authorization form to us. You
may obtain an application and authorization form from us or from your sales
representative. There is a current minimum of [$50] per payment for the
program.]
[Systematic Withdrawal Program. To the extent permitted by law, if you
enroll in the systematic withdrawal program, we will make monthly,
quarterly, semi-annual or annual distributions of a set dollar amount
directly to you. We will treat such distributions for federal tax purposes
as any other withdrawal or distribution of Certificate Value. You may
specify the amount of each partial withdrawal, subject to a minimum of
[$100]. [You may make systematic withdrawals from [only] [the] [any] Sub-
Account[s] [[or][and] the [One][, Three][, Five][and Seven] [Year] Guarantee
Period[s] of the Fixed Account.]
[In each Certificate Year, you may withdraw portions of Certificate Value
without any contingent deferred sales charge ("free withdrawal amount"). If
your withdrawals under the program exceed the free withdrawal amount, the
excess will be subject to the applicable contingent deferred sales charge.
We will add any unrelated voluntary partial withdrawal you make during a
Certificate Year with withdrawals pursuant to the program to determine the
applicability of any contingent deferred sales charge.]
Unless you specify the Sub-account(s) [or the Fixed Account] from which you
want withdrawals of Certificate Value made or if the amount in a specified
Sub-account is less than the predetermined amount, we will make withdrawals
under the program in the manner specified for partial withdrawals in
"Partial Withdrawals and Surrender". We will process all Sub-account
withdrawals under the program by canceling the number of Accumulation Units
equal in value to the amount to be distributed to you [and to the amount of
any applicable contingent deferred sales charge].
[You may combine the program with all other programs [except the Systematic
Investment Program].]
[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 where you have allocated values. We determine the value of each
Sub-account at any time by multiplying the number of Accumulation Units
attributable to that Sub-account by its Accumulation Unit value.
Each purchase payment you make results in the credit of additional
Accumulation Units to your Certificate and the appropriate Sub-account. The
number of additional units for any Sub-account will equal the amount
allocated to that Sub-account divided by the Accumulation Unit value for
that Sub-account at the time of investment.
Valuation Periods
We determine the value of the Variable Account each valuation period using
the net asset value of the Eligible Fund shares. A valuation period is the
period beginning at 4:00 P.M. (EST) which is the close of trading on the New
York Stock Exchange and ending at the close of trading for the next business
day. The New York Stock Exchange is currently closed on weekends, New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Net Investment Factor
Your Variable Account Value will fluctuate with the investment results of
the underlying Eligible Funds you have selected. In order to determine how
these fluctuations affect value, we use an Accumulation Unit value. Each Sub-
account has its own Accumulation Units and value per Unit. We determine the
Unit value applicable during any valuation period at the end of that period.
When we first purchased Eligible Fund shares on behalf of the Variable
Account, we valued each Accumulation Unit at a specified dollar amount. The
Unit value for each Sub-account in any valuation period thereafter is
determined by multiplying the value for the prior period by a net investment
factor. This factor may be greater or less than 1.0; therefore, the
Accumulation Unit may increase or decrease from valuation period to
valuation period. We calculate a net investment factor for each Sub-account
according to the following formula: (a , b) - c, where:
(a) is equal to:
(i) the net asset value per share of the Eligible Fund at the end of
the valuation period; plus
(ii) the per share amount of any distribution the Eligible Fund made
if the "ex-dividend" date occurs during that same valuation
period.
(b) is the net asset value per share of the Eligible Fund at the end of
the prior valuation period.
(c) is equal to:
(i) the valuation period equivalent of the mortality and expense
risk charge; plus
[(ii) the valuation period equivalent of the daily distribution
charge; plus]
[(iii) the valuation period equivalent of the daily administrative
charge; plus]
[(iv)] a charge factor for any tax provision established by us as a
result of the operations of that Sub-account.
[If we have deducted the maximum cumulative sales charge, we will not deduct
the daily distribution charge in (c)(ii) above.] For Certificates issued to
our employees and other persons specified in "Sales of the Certificates",
the mortality and expense risk charge in (c)(i) above is [.35]%[, and the
daily [distribution][administrative] charge in (c)[(ii)][(iii)] above is
eliminated. We may eliminate the daily distribution charge in (c)(ii) above
for certain Certificates issued in an internal exchange or transfer.]
Modification of the Certificate
Only our President or Secretary may agree to alter the Certificate or waive
any of its terms. A change may be made to the Certificate if there have been
changes in applicable law or interpretations of law. Any changes must be
made in writing and with your consent, except as may be required by
applicable law.
Right to Revoke
You may return the Certificate within 10 days after you receive it by
delivering or mailing it to us. The postmark on a properly addressed and
postage-prepaid envelope determines if a Certificate is returned within the
period. We will treat the Certificate as if we never issued it and we will
refund the Certificate Value.
DEATH PROVISIONS FOR NON-QUALIFIED CERTIFICATES
Death of Primary Owner, Joint Owner or Certain Non-Owner Annuitant.
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One or more of the three Death Benefit options described below may
be included under any form of the Certificate.
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If the Certificate is In Force, you or any joint Certificate Owner dies or
if the Annuitant dies when a non-natural person (such as a trust) owns the
Certificate, we will treat the Designated Beneficiary as the Certificate
Owner after such a death.
If the decedent's surviving spouse (if any) is the sole Designated
Beneficiary, he or she will automatically become the new sole primary
Certificate Owner as of the decedent's date of death. If the decedent is the
Annuitant, the new Annuitant will be any living contingent annuitant,
otherwise the surviving spouse. The Certificate can stay In Force until
another death occurs. Except for this paragraph, all of "Death Provisions"
will apply to that subsequent death.
In all other cases, the Certificate may remain In Force for a period not to
exceed five years from the date of death. During this period, the
Designated Beneficiary may exercise all ownership rights, including the
right to make transfers or partial surrenders or the right to totally
surrender the Certificate for its Surrender Value. If the Certificate is
still in effect at the end of the five-year period, we will automatically
end it by paying the Certificate Value to the Designated Beneficiary. If the
Designated Beneficiary is not then alive, we will pay any person(s) named by
the Designated Beneficiary in writing; otherwise we will pay the Designated
Beneficiary's estate.
The Covered Person under this paragraph shall be [the decedent if he or she
is the first to die among you], [any Joint Certificate Owner], [or
Annuitant]. If there is a non-natural Certificate Owner such as a trust, the
Annuitant shall be the Covered Person.
Upon the death of the Covered Person, we will increase the Certificate Value
so that it equals the death benefit amount if it is less than the death
benefit amount ("DBA"). The DBA is the[ greater of the "net purchase payment
death benefit"], [the current Certificate Value] [or the "greatest
Anniversary Value"].
[The net purchase payment death benefit is:
o the initial purchase payment, plus
o any additional purchase payments, minus
o any partial withdrawals [and any applicable surrender charges].]
[Each day we determine the value of your Certificate during a Certificate
Year, we will also value your "greatest Anniversary Value". The "greatest
Anniversary Value" on the issue date is the initial purchase payment. Each
day we will add to this amount any additional purchase payments made that
day, and subtract an adjustment for withdrawals made that day. This
adjustment equals the amount of the partial withdrawal:
o divided by the Certificate Value immediately before the
withdrawal; and
o multiplied by the "greatest Anniversary Value" immediately
before the withdrawal.
On each Certificate Anniversary, we compare the current Certificate Value to
"greatest Anniversary Value", adjusted as described above. If the current
Certificate Value exceeds the adjusted "greatest Anniversary Value", the
current Certificate Value will become the new "greatest Anniversary Value".
This new "greatest Anniversary Value" will be adjusted as described above
during the following Certificate Year, if necessary. This process will
continue until the Certificate Anniversary prior to the 81st birthday of the
Covered Person. On this Certificate Anniversary, the greater of the current
Certificate Value and the adjusted "greatest Anniversary Value" will become
the new "greatest Anniversary Value". From that point on, the "greatest
Anniversary Value" will not change unless subsequent purchase payments are
made or withdrawals are taken, in which case the "greatest Anniversary
Value" will be adjusted as described above.]
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The period of time during which the Surrender Charge may be waived following
death ranges between 60 and 180 days.
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When we receive due proof of the Covered Person's death, we will compare, as
of the date of death, the Certificate Value and the DBA. If the Certificate
Value was less than the DBA, we will increase the current Certificate Value
by the amount of the difference. Note that while the amount of the
difference is determined as of the date of death, that amount is not added
to the Certificate Value until we receive due proof of death.
We allocate the amount credited, if any, to the Variable Account [and/or the
Fixed Account] based on the purchase payment allocation selection in effect
when we receive due proof of death. The Designated Beneficiary may, by the
later of the 90th day after the Covered Person's death and the 60th day
after we receive proof of the death, surrender the Certificate for the
Certificate Value [without incurring any applicable contingent deferred
sales charge]. [If the Designated Beneficiary surrenders the Certificate
after the applicable 90 or 60 day period or surrenders it at any time after
the death of a non-Covered Person, we will deduct any applicable contingent
deferred sales charge.] If the Designated Beneficiary does not surrender the
Certificate, it will continue for the time period specified above.
Payment of Benefits. Instead of receiving a lump sum, you or any Designated
Beneficiary may direct us in writing to pay any benefit of $5,000 or more
under an annuity payment option that meets the following:
o the first payment to the Designated Beneficiary must be made no
later than one year after the date of death;
o payments must be made over the life of the Designated Beneficiary
or over a period not extending beyond that person's life
expectancy; and
o any payment option that provides for payments to continue after
the death of the Designated Beneficiary will not allow the
successor payee to extend the period of time during which the
remaining payments are to be made.
Death of Certain Non-Certificate Owner Annuitant. These provisions apply if,
while the Certificate is In Force, the Annuitant dies, the Annuitant is not
the Certificate Owner or a joint Certificate Owner, and the Certificate
Owner is a natural person. The Certificate will continue after the
Annuitant's death. The new Annuitant will be any living contingent
annuitant, otherwise you. If the Annuitant dies before you and any joint
Certificate Owner, then the Annuitant is the Covered Person and we will
increase the Certificate Value, as provided below, if it is less than the
DBA, as defined above.
When we receive due proof of the Annuitant's death, we will compare, as of
the date of death, the Certificate Value and the DBA. If the Certificate
Value is less than the DBA, we will increase the Certificate Value by the
difference. Note that while the amount of the difference is determined as of
the date of death, that amount is not added to the Certificate Value until
we receive due proof of death.
We allocate the amount credited, if any, to the Variable Account [and/or the
Fixed Account] based on the purchase payment allocation selection in effect
when we receive due proof of death. You may surrender the Certificate within
90 days of the date of the Annuitant's death for the Certificate Value
[without incurring any applicable contingent deferred sales charge]. [If you
surrender the Certificate after 90 days, we will deduct any applicable
contingent deferred sales charge.]
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
Death of Annuitant. If the Annuitant dies while the Certificate is In Force,
the Designated Beneficiary will control the Certificate. We will increase
the Certificate Value, as provided below, if it is less than the DBA as
defined above. When we receive due proof of the Annuitant's death, we will
compare, as of the date of death, the Certificate Value to the DBA. If the
Certificate Value was less than the DBA, we will increase the current
Certificate Value by the amount of the difference. Note that while the
amount of the difference is determined as of the date of death, that amount
is not added to the Certificate Value until we receive due proof of death.
We will allocate the amount credited, if any, to the Variable Account
[and/or the Fixed Account ]based on the purchase payment allocation
selection in effect when we receive due proof of death. The Designated
Beneficiary may, by the later of the 90th day after the Annuitant's death
and the 60th day after we are notified of the death, surrender the
Certificate for the Certificate Value [without incurring any applicable
contingent deferred sales charge]. [If the Designated beneficiary surrenders
the Certificate after the applicable 90 or 60 day period, we will deduct any
applicable contingent deferred sales charge.]
If the Designated Beneficiary does not surrender the Certificate, it may
continue for the time period permitted by the Internal Revenue Code
provisions applicable to the particular Qualified Plan. During this period,
the Designated Beneficiary may exercise all ownership rights, including the
right to make transfers or partial withdrawals or the right to totally
surrender the Certificate for its Certificate Withdrawal Value. If the
Certificate is still in effect at the end of the period, we will
automatically end it then by paying the Certificate Withdrawal Value
[(without the deduction of any applicable contingent deferred sales charge)]
to the Designated Beneficiary. If the Designated Beneficiary is not alive
then, we will pay any person(s) named by the Designated Beneficiary in
writing; otherwise we will pay the Designated Beneficiary's estate.
Payment of Benefits. You or any Designated Beneficiary may direct us in
writing to pay any benefit of $5,000 or more under an annuity payment option
that meets the following:
o the first payment to the Designated Beneficiary must be made no
later than one year after the date of death;
o payments must be made over the life of the Designated Beneficiary
or over a period not extending beyond that person's life
expectancy; and
o any payment option that provides for payments to continue after
the death of the Designated Beneficiary will not allow the
successor payee to extend the period of time over which the
remaining payments are to be made.
CERTIFICATE OWNERSHIP
You shall be the person designated in the application and may exercise all
the rights of the Certificate. Joint Certificate Owners are permitted.
Contingent Certificate Owners are not permitted.
You may direct us in writing to change the Certificate Owner, primary
beneficiary, contingent beneficiary or contingent annuitant. An irrevocably-
named person may be changed only with the written consent of that person.
Because a change of Certificate Owner by means of a gift may be a taxable
event, you should consult a competent tax adviser as to the tax consequences
resulting from such a transfer.
Any Qualified Certificate may have limitations on transfer of ownership.
You should consult the plan administrator and a competent tax adviser as to
the tax consequences resulting from such a transfer.
ASSIGNMENT
You may assign the Certificate at any time. You must file a copy of any
assignment with us. Your rights and those of any revocably-named person will
be subject to the assignment. A Qualified Certificate may have limitations
on your ability to assign the Certificate.
Because an assignment may be a taxable event, you should consult a competent
tax adviser as to the tax consequences resulting from any such assignment.
PARTIAL WITHDRAWALS AND SURRENDER
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The minimum amount to be withdrawn will range between $100 and
$500 and required Certificate Value following a withdrawal will
range between $500 to $2500.
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You may make partial withdrawals from the Certificate by notifying us in
writing. The minimum withdrawal amount is [$300]. We may permit a lesser
amount with the systematic withdrawal program. If the Certificate Value
after a partial withdrawal would be below $[2,500], we will treat the
request as a withdrawal of only the amount over $[2,500]. [The amount
withdrawn will include any applicable contingent deferred sales charge and
may be greater than the amount of the surrender check requested.] Unless
you specify otherwise, we will deduct the total amount withdrawn from all
Sub-accounts of the Variable Account in the ratio that the value in each Sub-
account bears to the total Variable Account Value. [If there is no or
insufficient value in the Variable Account, the amount surrendered, or the
insufficient portion, will be deducted from the Fixed Account in the ratio
that each Guarantee Period's value bears to the total Fixed Account Value.]
You may totally surrender the Certificate notifying us in writing.
Surrendering the Certificate will end it. Upon surrender, you will receive
the Certificate Withdrawal Value.
We will pay the amount of any surrender within seven days of receipt of your
request. Alternatively, you may purchase for yourself an annuity payment
option with any surrender benefit of at least $5,000. If the Certificate
Owner is not a natural person, we must consent to the selection of an
annuity payment option.
You may not surrender annuity options based on life contingencies after
annuity payments have begun. You may surrender Option A, described in
"Annuity Options" below, which is not based on life contingencies, if you
have selected a variable payout.
Because of the potential tax consequences of a full or partial surrender,
you 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, we will begin payments under the annuity option or options you have
chosen. We determine the amount of the payments on the Income Date by:
o applying payments to the option you choose for your Certificate
Value,
o [increasing or decreasing your Certificate Value by applying by a
limited market value adjustment of Fixed Account Value described
in Appendix A,] [and]
o subtracting any premium taxes not previously deducted, [and
o subtracting any applicable certificate maintenance charge]on the
Income Date in accordance with the option selected.
Annuity Option and Income Date
You may select an Annuity Option and Income Date at the time of application.
If you do not select an Annuity Option, we automatically choose Option B. If
you do not select an Income Date for the Annuitant, the Income Date will
automatically be the earlier of:
o the later of the Annuitant's 90th birthday and the 10th
Certificate Anniversary, and
o any maximum date permitted under state law.
Change in Annuity Option and Income Date
You may choose or change an Annuity Option or the Income Date by writing to
us at least 30 days before the Income Date. However, any Income Date must
be:
o for fixed annuity options, not earlier than the first Certificate
Anniversary, and
o not later than the earlier of
(i) the later of the Annuitant's 90th birthday and the 10th
Certificate Anniversary and
(ii) any maximum date permitted under state law.
Annuity Options
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Liberty does not currently anticipate offering any additional
variable annuity options, but may offer additional fixed annuity
options. Any additional variable annuity options would be limited
to those that could be added by a filing pursuant to Rule 497 or
Rule 485(b).
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The Annuity Options are:
Option A: Income for a Fixed Number of Years;
Option B: Life Income with 10 Years of Payments Guaranteed; and
Option C: Joint and Last Survivor Income.
You may arrange other options if we agree. Each option is available in two
forms-as a variable annuity for use with the Variable Account and as a fixed
annuity for use with [our general account] [Fixed Account]. Variable
annuity payments will fluctuate. Fixed annuity payments will not fluctuate.
. We will determine the dollar amount of each fixed annuity payment by:
o [deducting from the [Fixed Account Value], [increased or
decreased by a limited market value adjustment described in
Appendix A][, any premium taxes not previously deducted
and any applicable certificate maintenance charge];
o dividing the remainder] by $1,000; and
o multiplying the result by the greater of:
(i) the applicable factor shown in the appropriate table in the
Certificate; and
(ii) the factor we currently offer at the time annuity payments begin. We
may base this current factor on the sex of the payee unless we are
prohibited by law from doing so.
If you do not select an Annuity Option, we will automatically apply Option
B. Unless you choose otherwise, we will apply:
(a) Variable Account Value (less any premium taxes not previously deducted
[and less any applicable certificate maintenance charge]) in its entirety
to a variable annuity option, [and]
(b) [Fixed Account Value, increased or decreased by a limited market value
adjustment described in Appendix A less any premium taxes not previously
deducted, to a fixed annuity option.]
The same amount applied to a variable option and a fixed option will produce
a different initial annuity payment and different subsequent payments.
The payee is the person who will receive the sum payable under a payment
option. Any payment option that provides for payments to continue after the
death of the payee will not allow the successor payee to extend the period
of time over which the remaining payments are to be made.
If the amount available under any variable or fixed option is less than
$5,000, we reserve the right to pay such amount in one sum to the payee in
lieu of the payment otherwise provided for.
We will make annuity payments monthly unless you have requested in writing
quarterly, semi-annual or annual payments. However, if any payment would be
less than $100, we have the right to reduce the frequency of payments to
such a period that will result in each payment being at least $100.
Option A: Income For a Fixed Number of Years. We will pay an annuity for a
chosen number of years, not less than 5 nor over [50] [You may choose a
period of years over 30 only if it does not exceed the difference between
age 100 and the Annuitant's age on the date of the first payment]. [We refer
to Option A as Preferred Income Plan (PIP).] At any time while we are making
variable annuity payments, the payee may elect to receive the following
amount:
[(a)] 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 at the time you chose
Option A you selected [3]% per year in writing); [less
(b) any contingent deferred sales charge due by treating the value defined
in (a) as a total surrender. Instead of receiving a lump sum, the payee may
elect another payment option [and we will not reduce the amount applied to
the option by the market value adjustment above].
If, at the death of the payee, Option A payments have been made for fewer
than the chosen number of years:
(a) we will continue payments during the remainder of the period to the
successor payee; or
(b) the successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used
to create the annuity factor for this option. For the variable
annuity, this interest rate is [5%] per year, unless the payee chose
[3]% per year at the time the option was selected.
The mortality and expense risk charge is deducted during the Option A
payment period if a variable payout has been selected, but we have no
mortality risk during this period.
[You may choose a "level monthly" payment option for variable payments under
Option A. Under this option, we convert your annual payment into twelve
equal monthly payments. Thus the monthly payment amount changes annually
instead of monthly. We will determine each annual payment as described below
in "Variable Annuity Payment Values", place each annual payment in our
general account, and distribute it in twelve equal monthly payments. The
sum of the twelve monthly payments will exceed the annual payment amount
because of an interest rate factor we use, which will vary from year to
year. If the payments are commuted, (1) we will use the commutation method
described above for calculating the present value of remaining annual
payments and (2) use the interest rate that determined the current twelve
monthly payments to commute any unpaid monthly payments.]
See "Annuity Payments" for the manner in which Option A may be taxed.
Option B: Life Income with 10 Years of Payments Guaranteed. We will pay an
annuity during the lifetime of the payee. If, at the death of the payee,
payments have been made for fewer than 10 years:
(a) we will continue payments during the remainder of the period to the
successor payee; or
(b) such successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used
to create the annuity factor for this option. For the variable
annuity, this interest rate is [5%] per year, unless the payee had
chosen [3]% per year at the time the option was selected.
The amount of the annuity payments will depend on the age of the payee on
the Income Date and it may also depend on the payee's sex.
Option C: Joint and Last Survivor Income. We will pay an annuity for as long
as either the payee or a designated second natural person is alive. The
amount of the annuity payments will depend on the age of both persons on the
Income Date and it may also depend on each person's sex. It is possible
under this option to receive only one annuity payment if both payees die
after the receipt of the first payment or to receive only two annuity
payments if both payees die after receipt of the second payment and so on.
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The frequency with which Certificate Owners may transfer the Sub-accounts
from which variable annuity payments are made with vary between 0 and an
unlimited number of times during periods varying between 1 and 12 months.
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Variable Annuity Payment Values
We determine the amount of the first variable annuity payment by using an
annuity purchase rate based on an assumed annual investment return of [5%]
per year, unless you choose [3]% in writing. Subsequent variable annuity
payments will fluctuate in amount and reflect whether the actual investment
return of the selected Sub-account(s) (after deducting the mortality and
expense risk charge) 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, there is [no limit] on the number of times or the frequency with
which a payee may instruct us to change the Sub-account(s) used to determine
the amount of the variable annuity payments.
Proof of Age, Sex, and Survival of Annuitant
We may require proof of age, sex or survival of any payee upon whose age,
sex or survival payments depend. If the age or sex has been misstated, we
will compute the amount payable based on the correct age and sex. If income
payments have begun, we will pay in full any underpayments with the next
annuity payment and deduct any overpayments, unless repaid in one sum, from
future annuity payments until we are repaid in full.
SUSPENSION OF PAYMENTS
[We reserve the right to postpone surrender payments from the Fixed Account
for up to six months.] We also reserve the right to suspend or postpone any
type of payment from the Variable Account for any period when:
(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.
[YEAR 2000 MATTERS
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results
by or at the year 2000. This potential problem has become known as the "Year
2000 issue". The Year 2000 issue affects virtually all companies and
organizations.
Computer applications that are affected by the Year 2000 issue could impact
our business functions in various ways, ranging from a complete inability to
perform critical business functions to a loss of productivity in varying
degrees. Likewise, the failure of some computer applications could have no
impact on critical business functions.
We are assessing and addressing the Year 2000 issue by implementing a four-
step plan. The first two steps involve conducting an inventory of all
computer applications which support our business functions and prioritizing
computer applications which are affected by the Year 2000 issue, based upon
the degree of impact each application has on the functioning of our business
units. The first two steps of the plan are substantially complete.
The final two steps of the four-step plan involve repairing and replacing
affected computer programs and testing them for Year 2000 readiness. For
computer applications which are "mission critical" (i.e., their failure
would result in our complete inability to perform critical business
functions), we expect to complete the final two steps of the plan by June,
1999. We expect to complete the repair and replacement of non-critical
computer applications by December 31, 1999.
We believe the Year 2000 issue could have a material impact on our
operations if we do not implement the four-step plan in a timely manner.
However, based upon our progress, we believe we will meet our timetable, and
the Year 2000 issue will not pose significant operational problems for our
computer systems.
We do not expect the cost of addressing the Year 2000 issue to be material
to our financial condition or results of operations.]
TAX STATUS
Introduction
This discussion is general in nature and is not intended as tax advice. Each
person concerned should consult a competent tax adviser. We make no attempt
to consider any applicable state or other tax laws. Moreover, this
discussion is based upon our understanding of current federal income tax
laws as they are currently interpreted. We make no representation regarding
the likelihood of continuation of those current federal income tax laws or
of the current interpretations by the Internal Revenue Service.
The Certificate is for use by individuals in retirement plans which may or
may not be Qualified Plans under the provisions of the Internal Revenue Code
(the "Code"). The ultimate effect of federal income taxes on the Certificate
Value, on annuity payments, and on the economic benefit to the Certificate
Owner, Annuitant or Designated Beneficiary depends on the type of retirement
plan for which you purchase the Certificate and upon the tax and employment
status of the individual concerned.
Taxation of Annuities in General
Section 72 of the Code governs taxation of annuities in general. There are
no income taxes on increases in the value of a Certificate until a
distribution occurs, in the form of a full surrender, a partial 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. If you fully surrender your Certificate,
the portion of the payment that exceeds your cost basis in the Certificate
is subject to tax as ordinary income. For Non-Qualified Certificates, the
cost basis is generally the amount of the purchase payments made for the
Certificate. For Qualified Certificates, the cost basis is generally zero
and the taxable portion of the surrender payment is generally taxed as
ordinary income 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 your death or the death of the
Annuitant is taxed on the portion of the amount that exceeds your 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 you. For partial withdrawals under a
Qualified Certificate, payments are treated first as a non-taxable return of
principal up to the cost basis and then a taxable return of income. Since
the cost basis of Qualified Certificates is generally zero, partial
surrender amounts will generally be fully taxed as ordinary income.
If you assign or pledge a Non-Qualified Certificate, you will be treated as
if you had received the amount assigned or pledged. You will be subject to
taxation under the rules applicable to partial withdrawals or surrenders. If
you give away your Certificate to anyone other than your spouse, you are
treated for income tax purposes as if you had fully surrendered the
Certificate.
A special computational rule applies if we issue to you, during any calendar
year, two or more Certificates, or one or more Certificates and one or more
of our other annuity contracts. Under this rule, the amount of any
distribution includable in your gross income is determined under Section
72(e) of the Code. All of the contracts will be treated as one contract. We
believe this means the amount of any distribution under any one Certificate
will be includable in gross income to the extent that at the time of
distribution the sum of the values for all the Certificates or contracts
exceeds the sum of the cost bases for all the contracts.
Annuity Payments. We determine the non-taxable portion of each variable
annuity payment by dividing the cost basis of your values [allocated to
Variable Account Value] by the total number of expected payments. We
determine the non-taxable portion of each fixed annuity payment with an
"exclusion ratio" formula which establishes the ratio that the cost basis of
your values [allocated to Fixed Account Value] bears to the total expected
value of annuity payments for the term of the annuity. The remaining portion
of each payment is taxable. Such taxable portion is taxed at ordinary income
rates. For Qualified Certificates, the cost basis is generally zero. With
annuity payments based on life contingencies, the payments will become fully
taxable once the payee lives longer than the life expectancy used to
calculate the non-taxable portion of the prior payments. Because variable
annuity payments can increase over time and because certain payment options
provide for a lump sum right of commutation, it is possible that the IRS
could determine that variable annuity payments should not be taxed as
described above but instead should be taxed as if they were received under
an agreement to pay interest. This determination would result in a higher
amount (up to 100%) of certain payments being taxable.
With respect to the "level monthly" payment option available under Annuity
Option A, pursuant to which each annual payment is placed in our general
account and paid out with interest in twelve equal monthly payments, it is
possible the IRS could determine that receipt of the first monthly payout of
each annual payment is constructive receipt of the entire annual payment.
Thus, the total taxable amount for each annual payment would be accelerated
to the time of the first monthly payout and reported in the tax year in
which the first monthly payout is received.
Penalty Tax. Payments received by you, Annuitants, and Designated
Beneficiaries under Certificates may be subject to both ordinary income
taxes and a penalty tax equal to 10% of the amount received that is
includable in income. The penalty tax is not imposed on the following
amounts received:
o after the taxpayer attains age 59-1/2;
o in a series of substantially equal payments made for life or life
expectancy;
o after the death of the Certificate Owner (or, where the
Certificate Owner is not a human being, after the death of the
Annuitant);
o if the taxpayer becomes totally and permanently disabled; or
o under a Non-Qualified Certificate's annuity payment option that
provides for a series of substantially equal payments; provided
only that one purchase payment is made to the Certificate, that
the Certificate is not issued as a result of a Section 1035
exchange, and that the first annuity payment begins in the first
Certificate Year.
Income Tax Withholding. We are required to withhold federal income taxes on
taxable amounts paid under Certificates unless the recipient elects not to
have withholding apply. We will notify recipients of their right to elect
not to have withholding apply. [See "Tax-Sheltered Annuities" (TSAs) for an
alternative type of withholding that may apply to distributions from TSAs
that are eligible for rollover to another TSA or an individual retirement
annuity or account (IRA).]
Section 1035 Exchanges. You may purchase a Non-Qualified Certificate with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is our understanding that in such an event:
(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.
We base our understanding of the above principally on
legislative reports prepared by the Staff of the Congressional
Joint Committee on Taxation. [See "Recent Developments".]
Diversification Standards. The U.S. Secretary of the Treasury has issued
regulations that set standards for diversification of the investments
underlying variable annuity contracts (other than pension plan contracts).
The Eligible Funds intend to meet the diversification requirements for the
Certificate, as those requirements may change from time to time. If the
diversification requirements are not satisfied, the Certificate will not be
treated as an annuity contract. As a consequence, income earned on a
Certificate would be taxable to you in the year in which diversification
requirements were not satisfied, including previously non-taxable income
earned in prior years. As a further consequence, we would be subjected to
federal income taxes on assets in the Variable Account.
The Secretary of the Treasury announced in September 1986 that he expects to
issue regulations which will prescribe the circumstances in which your
control of the investments of a segregated asset account may cause you,
rather than us, to be treated as the owner of the assets of the account. The
regulations could impose requirements that are not reflected in the
Certificate. We, however, have reserved certain rights to alter the
Certificate and investment alternatives so as to comply with such
regulations. Since no regulations have been issued, there can be no
assurance as to the content of such regulations or even whether application
of the regulations will be prospective. For these reasons, you are urged to
consult with your tax adviser.
Qualified Plans
The Certificate is for use with several types of Qualified Plans. The tax
rules applicable to participants in such Qualified Plans vary according to
the type of plan and the terms and conditions of the plan itself. Therefore,
we do not attempt to provide more than general information about the use of
the Certificate with the various types of Qualified Plans. Participants
under such Qualified Plans as well as Certificate Owners, Annuitants, and
Designated Beneficiaries are cautioned that the rights of any person to any
benefits under such Qualified Plans may be subject to the terms and
conditions of the plans themselves regardless of the terms and conditions of
the Certificate issued in connection therewith. Following are brief
descriptions of the various types of Qualified Plans and of the use of the
Certificate in connection with them. Purchasers of the Certificate should
seek competent advice concerning the terms and conditions of the particular
Qualified Plan and use of the Certificate with that Plan.
[Tax-Sheltered Annuities
Section 403(b) of the Code permits public school employees and employees of
certain types of charitable, educational and scientific organizations
specified in Section 501(c)(3) of the Code to purchase annuity contracts
and, subject to certain contribution limitations, exclude the amount of
purchase payments from gross income for tax purposes. However, such purchase
payments may be subject to Social Security (FICA) taxes. This type of
annuity contract is commonly referred to as a "Tax-Sheltered Annuity" (TSA).
Section 403(b)(11) of the Code contains distribution restrictions.
Specifically, benefits may be paid, through surrender of the Certificate or
otherwise, only:
(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.
If you have requested a distribution from a Certificate, we will notify you
if all or part of such distribution is eligible for rollover to another TSA
or to an individual retirement annuity or account (IRA). Any amount eligible
for rollover treatment will be subject to mandatory federal income tax
withholding at a 20% rate unless you direct us in writing to transfer the
amount as a direct rollover to another TSA or IRA.]
Individual Retirement Annuities
Sections 408(b) and 408A of the Code permit eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" and "Roth IRA", respectively. These individual
retirement annuities are subject to limitations on the amount which may be
contributed, the persons who may be eligible to contribute, and on the time
when distributions may commence. In addition, distributions from certain
types of Qualified Plans may be placed on a tax-deferred basis into a
Section 408(b) Individual Retirement Annuity.
[Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such retirement
plans may permit the purchase of the Certificate to provide benefits under
the plans.]
[Deferred Compensation Plans With Respect to Service for State and Local
Governments
Section 457 of the Code, while not actually providing for a Qualified Plan
as that term is normally used, provides for certain deferred compensation
plans that enjoy special income tax treatment with respect to service for
tax-exempt organizations, state governments, local governments, and agencies
and instrumentalities of such governments. The Certificate can be used with
such plans. Under such plans, a participant may specify the form of
investment in which his or her participation will be made. However, all such
investments are owned by and subject to the claims of general creditors of
the sponsoring employer.]
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with our view of present applicable law, we will vote the
shares of the Eligible Funds held in the Variable Account at regular and
special meetings of the shareholders of the Eligible Funds in accordance
with instructions received from persons having the voting interest in the
Variable Account. We will vote shares for which we have not received
instructions in the same proportion as we vote shares for which we have
received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation should change, and as a
result we determine that we are permitted to vote the shares of the Eligible
Funds in our own right, we may elect to do so.
You have the voting interest under a Certificate prior to the Income Date.
The number of shares held in each Sub-account which are attributable to you
is determined by dividing your Variable Account Value in each Sub-account by
the net asset value of the applicable share of the Eligible Fund. The payee
has the voting interest after the Income Date under an annuity payment
option. The number of shares held in the Variable Account which are
attributable to each payee is determined by dividing the reserve for the
annuity payments by the net asset value of one share. During the annuity
payment period, the votes attributable to a payee decrease as the reserves
underlying the payments decrease.
We will determine the number of shares in which a person has a voting
interest as of the date established by the respective Eligible Fund for
determining shareholders eligible to vote at the meeting of the Fund. We
will solicit voting instructions in writing prior to such meeting in
accordance with the procedures established by the Eligible Fund.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to the Eligible Fund(s) in which he or she has an
interest, proxy material and a form with which to give such voting
instructions.
SALES OF THE CERTIFICATES
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Another registered broker-dealer that is an affiliate of Liberty
may serve as the principal underwriter of the Certificates.
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[Keyport Financial Services Corp. ("KFSC")] serves as the principal
underwriter for the Certificate described in this prospectus. Salespersons
who represent us, an affiliate of KFSC, as variable annuity agents will sell
the Certificates. Such salespersons are also registered representatives of
broker/dealers who have entered into distribution agreements with [KFSC].
[KFSC] is registered under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. It is
located at [125 High Street, Boston, Massachusetts 02110].
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The maximum compensation payable on the sale of Certificates is
7.00%.
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[A dealer selling the Certificate [may] receive[s] [no commission] [up to
[6.25%] of purchase payments] [and additional compensation later based on
the Certificate Value of those payments. The percentage may increase to
[7.00]% during certain time periods Liberty and [KFSC] select.] [In
addition, under certain circumstances, we or certain of our affiliates,
under a marketing support agreement with [KFSC] may pay certain sellers for
other services not directly related to the sale of the Certificates such as
special marketing support allowances.]]
[We may sell Certificates with lower or no dealer compensation (1) to a
person who is an officer, director, or employee of ours, or an affiliate of
ours, [a trustee or officer of an Eligible Fund,] [an employee of the
investment adviser or sub-investment adviser of an Eligible Fund,] [or an
employee or associated person of an entity which has entered into a sales
agreement with the principal underwriter for the distribution of
Certificates,] or (2) to any Qualified Plan established for such a person.
Such Certificates may be different from the Certificates sold to others in
that [(1) they are not subject to the deduction for the [certificate
maintenance charge,] [the asset-based distribution charge] [or the
contingent deferred sales charge] and (2)] they have a mortality and expense
risk charge of 0[.35]% per year. ]
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The exchange program, including the crediting of interest equal to 3%,
only applies to the particular version of the Contract and Certificates
that were initially declared effective in Post-Effective No. 1 on July
22, 1998. The exchange program will not be made available under any
other current or future version of the Contract and Certificates
contained in this Registration Statement.
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[We may sell Certificates with lower or no dealer compensation as part of an
exchange program for other fixed ("Old FA") and variable ("Old VA") annuity
contracts we previously issued. A Certificate issued in exchange for an Old
VA will be issued with an exchange endorsement. One effect of the
endorsement is that we will not assess a contingent deferred sales charge
under the Old VA at the time of the exchange. We will calculate any
contingent deferred sales charge assessed under the Certificate in relation
to the initial purchase payment (i.e., the amount exchanged) based on the
actual time of each purchase payment under the Old VA. The endorsement also
provides that we will not refund the amount described in "Right to Revoke"
if the Certificate is returned. Instead, we will return the Old VA to the
owner and treat it as if no exchange had occurred.
Additionally, under such an exchange program, we may offer to credit the
initial purchase payment upon receipt with additional interest equal to 3%
of the purchase payment. Interest credited represents an allowance for
future deductions of the mortality and expense risk charge consistent with
anticipated cost savings. Such interest will be allocated on a pro-rata
basis to the Sub-accounts you select. We will deduct the interest from the
Certificate Value payable in the event you return the Certificate pursuant
to the "Right to Revoke" provision.] [See "Recent Developments".]
LEGAL PROCEEDINGS
[There are no legal proceedings to which the Variable Account or the
principal underwriter are a party. We are engaged in various kinds of
routine litigation which in our judgment is not of material importance in
relation to our total capital and surplus.]
INQUIRIES BY CERTIFICATE OWNERS
You may write us with questions about your Certificates to Liberty's 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
Custodian
Principal Underwriter
Experts
Investment Performance
[Average Annual Total Return for a Certificate
that is Surrendered [and for a Certificate that Continues]]
[Change in Accumulation Unit Value]
Yield[s] for [XX-1] Sub-Accounts
Financial Statements
Variable Account [A]
Liberty Life Assurance Company of Boston
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The Certificate may or may not provide for a Fixed Account Option.
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[APPENDIX A
THE FIXED ACCOUNT [(ALSO KNOWN AS THE MODIFIED GUARANTEED ANNUITY ACCOUNT)]
Introduction
This appendix describes the Fixed Account option available under the
Certificate.
[Fixed Account Values are subject to a market value adjustment. The
adjustment may result in an increase or decrease in amounts transferred and
amounts paid to you or other payees (including withdrawals, surrenders,
death benefits, and amounts applied to purchase annuity payments). However,
a market value adjustment will not reduce the interest rate applied to
amounts you allocate to a Guarantee Period to less than 3% per year.
Payments made from Fixed Account Values at the end of a Guarantee Period are
not subject to the market value adjustment.]
Any purchase payments you allocate to the Fixed Account option become part
of our general account. Because of provisions in the securities laws, our
general account and Fixed Account, are not subject to regulation under the
Securities Act of 1933 or the Investment Company Act of 1940. The Securities
and Exchange Commission has not reviewed the disclosure in the prospectus
relating to the general account and the Fixed Account option.
Investments in the Fixed Account
We will allocate purchase payments to the Fixed Account according to your
selection in the application. Your selection must specify the percentage of
the purchase payment you want to allocate to each Guarantee Period. The
percentage, if not zero, must be at least [5%]. You may change the
allocation percentages without any charges. You must make allocation changes
in writing unless you have, in writing, authorized us to accept telephone
allocation instructions. By authorizing us to accept telephone changes, you
are agreeing to the conditions and procedures we establish from time to
time. The current conditions and procedures are in Appendix [B]. We will
notify you in advance of any changes.
Each Guarantee Period currently offered is available for initial and
subsequent purchase payments and for transfers of Certificate Value. We
currently offer Guarantee Periods of 1, [3, 5, and 7] years. We may change
at any time the number and/or length of Guarantee Periods we offer. If we no
longer offer a particular Guarantee Period, the existing Fixed Account Value
in that Guarantee Period will remain until the end of the Period. At that
time, you must select a different Guarantee Period.
[Capital Protection Plus
We offer a capital protection plus program. Under this program, we allocate
part of your purchase payment to the Guarantee Period you select. Currently,
you may select the [3, 5, and/or 7] year Guarantee Period. Based on the
length of the period and the period's interest rate, we determine how much
of your purchase payment must be allocated to the Guarantee Period so that,
at the end of the Guarantee Period, the allocated amount plus interest will
be equal to your total purchase payment. We will allocate the rest of your
purchase payment to the Sub-account(s) of the Variable Account based on your
allocation instructions. If you surrender or transfer any part of the Fixed
Account Value before the end of the Guarantee Period, the value at the end
of that period will not equal your original purchase payment amount.
For example, assume you choose the 7-year guarantee period and we receive
your purchase payment of $10,000 when the interest rate for the Guarantee
Period is 6.75% per year. We will allocate $6,331 to that Guarantee Period,
because $6,331 will increase at that interest rate to $10,000 after seven
years. The remaining $3,669 of the payment will be allocated to the Sub-
account(s) you selected.]
Fixed Account Value
Fixed Account Value is equal to:
(a) all purchase payments allocated or amounts transferred to the
Fixed Account plus the interest credited on those payments or
amounts transferred; less
(b) any prior partial withdrawals or transfers from the Fixed
Account, including any applicable charges.
Interest Credits
We credit interest daily. The interest we credit is based on an annual
compound interest rate. It is credited to purchase payments allocated to the
Fixed Account at rates we declare for Guarantee Periods of one or more years
from the month and day of allocation. Any rate we set will be at least [3%]
per year.
Our interest crediting method may result in each of your Guarantee Periods
being subject to different rates. For purposes of this section, we treat
Variable Account Value transferred to the Fixed Account and Fixed Account
Value renewed for or transferred to another Guarantee Period as a purchase
payment allocation.
[Application of Market Value Adjustment
No market value adjustment applies to Guarantee Periods of fewer than three
years.
A market value adjustment applies to any Fixed Account Value surrendered,
withdrawn, transferred, or applied to an Annuity Option from a Guarantee
Period of three years or more, unless:
(a) the transaction occurs at the end of the Guarantee Period, or
(b) the Certificate is surrendered within 90 days of the date of
death of the first Covered Person to die.
We apply the market value adjustment before we deduct any applicable
surrender charges or taxes.
If a market value adjustment applies to a surrender or the application to an
Annuity Option, we will add or deduct any positive or negative market value
adjustment amount, respectively, to your Certificate Value.
If a market value adjustment applies to either a partial withdrawal or a
transfer, we will add or deduct any positive or negative market value
adjustment, respectively, to, the partial withdrawal or transfer amount
after we have deducted the requested withdrawal or transfer amount from the
Fixed Account Value. This means that the net amount may be more or less than
the amount requested.
Effect of Market Value Adjustment
A market value adjustment reflects the change in prevailing current interest
rates since the beginning of a Guarantee Period. The market value adjustment
may be positive or negative. Any negative adjustment may be limited in
amount (see "Market Value Adjustment Factor" below).
Generally, if the treasury rate (see "Treasury Rate" below) for your
Guarantee Period is lower than the treasury rate for a new Guarantee Period
with a length equal to the time remaining in your Guarantee Period, the
market value adjustment will result in a reduction of the amount
surrendered, withdrawn, transferred, or applied to an Annuity Option.
On the other hand, if the treasury rate for your Guarantee Period is higher
than the treasury rate for a new Guarantee Period with a length equal to the
time remaining in your Guarantee Period, the market value adjustment will
result in an increase in the amount surrendered, withdrawn, transferred, or
applied to an Annuity Option.
Market Value Adjustment Factor
We compute the market value adjustment for each of your guarantee periods by
multiplying the applicable amount surrendered, withdrawn, transferred, or
applied to an Annuity Option, by the market value adjustment factor. The
market value adjustment factor is calculated as the larger of formulas (a)
and (b):
(a) (1+a)/(1+b)(n/12)-1
where:
"a" is the treasury rate for the initial number of years in your Guarantee
Period;
"b" is the treasury rate for a period equal to the time remaining (rounded
up to the next whole number of 12-month periods) to the expiration of your
Guarantee Period; and
"n" is the number of complete Guarantee Period Months remaining before the
expiration of your Guarantee Period.
(b) (1.03)/(1+i)(y+d/#)-1
where:
"i" is the guaranteed interest rate for your Guarantee Period;
"y" is the number of complete 12-month periods that have elapsed in your
Guarantee Period;
"d" is the number of calendar days since the end of the last complete 12-
month period in your guarantee period or, if "y" is zero, the number of
calendar days since the start of your Guarantee Period; and
"#" is the number of calendar days in the current 12-month period of your
Guarantee Period, which is generally 365 days.
As stated above, the formula (b) amount will apply only if it is greater
than the formula (a) amount. This will occur only when the formula (a)
amount is negative and the formula (b) amount is a smaller negative number.
Under these conditions, formula a's full (normal) negative market value
adjustment will be limited to the extent that adjustment would decrease your
Guarantee Period's Fixed Account Value below the following amount:
(i) the amount allocated to your Guarantee Period; less
(ii) any prior systematic or partial withdrawal amounts and amounts
transferred; less
(iii) interest on the above items (i) and (ii) credited annually
at a rate of 3% per year.
Treasury Rates
The treasury rate for a Guarantee Period is the interest rate in the
Treasury Constant Maturity Series, as published by the Federal Reserve
Board, for a maturity equal to the number of years specified in "a" and "b"
in formula (a) above. Weekly series are published at the beginning of the
following week. The Determination Dates are the last business day before the
first and fifteenth of each calendar month.
To determine the "a" treasury rate, we use the weekly series first published
on or after the most recent Determination Date that occurs on or before the
Start Date for the Guarantee Period. If the Start Date is the same as the
Determination Date or the date of publication, or any date in between, we
instead use the weekly series first published after the prior Determination
Date. To determine the "b" treasury rate, we use the weekly series first
published on or after the most recent Determination Date which occurs on or
before the date on which the market value adjustment factor is calculated.
If the calculation date is the same as the Determination Date or the date of
publication, or any date in between, we will instead use the weekly series
first published after the prior Determination Date.
If the number of years and or 12-month periods specified in "a" or "b" is
not equal to a maturity in the Treasury Constant Maturity Series, we
determine the treasury rate by straight line interpolation between the
interest rates of the next highest and next lowest maturities.
If the Treasury Constant Maturity Series becomes unavailable, we will adopt
a comparable constant maturity index. If such a comparable index is not
available, we will replicate calculation of the Treasury Constant Maturity
Series Index based on U.S. Treasury Security coupon rates.
End of A Guarantee Period
We will notify you in writing at least 30 days prior to the end of each of
your Guarantee Periods. At the end of your Guarantee Period, we will
automatically transfer your Guarantee Period's Fixed Account Value to the
Stein Roe Money Market Sub-account unless we have received:
(a) your election of a new Guarantee Period from among those we offer
at that time; or
(b) your instructions to transfer the ending Fixed Account Value to
one or more Sub-accounts of the Variable Account.
You may not elect a new Guarantee Period longer than the number of years
remaining until the Income Date.]
Transfers of Fixed Account Value
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The limits on the number of transfers will range between unlimited transfers
and 12 per year. The limitations on transfers from the Fixed Account will
range between 10% and 110%.
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You may transfer Fixed Account Value from one of your Guarantee Periods to
another or to one or more Sub-accounts of the Variable Account subject to
any applicable market value adjustment. If the Fixed Account Value
represents multiple Guarantee Periods, your transfer request must specify
from which values you want the transfer made.
The Certificate allows us to limit the number of transfers you may make in a
specified time period. Currently, we generally limit Variable Account and
Fixed Account transfers to [xxx] transfers per calendar year with a $500,000
per transfer dollar limit. See "Transfer of Variable Account Value" and
"Limits on Transfers". [Transfers from the Fixed Account to the Variable
Account are limited to [110%] of the Fixed Account Value at the beginning of
the Certificate Year.] [We will waive this limitation if a systematic
withdrawal program is in effect.] These limitations will not apply to any
transfer made at the end of a Guarantee Period. We will notify you prior to
changing the current limitations.
You must request transfers in writing unless you have authorized us in
writing to accept telephone transfer instructions from you or from a person
acting on your behalf as an attorney-in-fact under a power of attorney. By
authorizing us to accept telephone transfer instructions, you agree to the
conditions and procedures we establish from time to time. The current
conditions and procedures are in Appendix [B]. If you have authorized
telephone transfers, you will be notified in advance of any changes. A
person acting on your behalf as an attorney-in-fact under a power of
attorney may request transfers in writing.
If we receive your transfer requests before [4:00] PM Eastern Time, which is
the close of trading on the New York Stock Exchange, we will execute them at
the close of business that day. Any requests we receive later, we will
execute at the close of the next business day.
If you transfer 100% of a Guarantee Period's value and your current
allocation for purchase payments includes that Guarantee Period, we will
automatically change the allocation formula for future purchase payments
unless you instruct otherwise. For example, if the allocation formula is 50%
to the one-year Guarantee Period and 50% to Sub-account A and you transfer
all Fixed Account Value to Sub-account A, we will change the allocation
formula to 100% to Sub-account A.
[APPENDIX [B]
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are Joint Certificate Owners, both must authorize us to accept
telephone instructions but either Certificate Owner may give us telephone
instructions.
2. All callers must identify themselves. We reserve the right to refuse to
act upon any telephone instructions in cases where the caller has not
sufficiently identified himself/herself to our satisfaction.
3. Neither we nor any person acting on our behalf shall be subject to any
claim, loss, liability, cost or expense if we or such person acted in good
faith upon a telephone instruction, including one that is unauthorized or
fraudulent. However, we will employ reasonable procedures to confirm that a
telephone instruction is genuine and, if we do not, we may be liable for
losses due to an unauthorized or fraudulent instruction. You thus bear the
risk that an unauthorized or fraudulent instruction we execute may cause
your Certificate Value to be lower than it would be had we not executed the
instruction.
4. We record all conversations with disclosure at the time of the call.
5. The application for the Certificate may allow you to create a power of
attorney by authorizing another person to give telephone instructions.
Unless prohibited by state law, we will treat such power as durable in
nature and it shall not be affected by your subsequent incapacity,
disability or incompetency. Either we or the authorized person may cease to
honor the power by sending written notice to you at your last known address.
Neither we nor any person acting on our behalf shall be subject to liability
for any act executed in good faith reliance upon a power of attorney.
6. Telephone authorization shall continue in force until:
o we receive your written revocation,
o we discontinue the privilege, or
o we receive written evidence that you have entered into a market
timing or asset allocation agreement with an investment adviser
or with a broker/dealer.
7. If we receive telephone transfer instructions at 800-367-3653 before the
4:00 P.M. Eastern Time close of trading on the New York Stock Exchange, they
will be initiated that day based on the unit value prices calculated at the
close of that day. We will initiate instructions we receive after the close
of trading on the NYSE on the following business day.
8. Once we accept instructions, they may not be canceled.
9. You must make all transfers in accordance with the terms of the
Certificate and current prospectus. If your transfer instructions are not in
good order, we will not execute the transfer and will notify the caller
within 48 hours.
10. If you transfer 100% of any Sub-account's value and the allocation
formula for purchase payments includes that Sub-account, then we will change
the allocation formula for future purchase payments accordingly unless we
receive telephone instructions to the contrary. For example, if the
allocation formula is 50% to Sub-account A and 50% to Sub-account B and you
transfer all of Sub-account A's value to Sub-account B, we will change the
allocation formula to 100% to Sub-account B unless you instruct us
otherwise.
Telephone Changes to purchase payment Allocation Percentages
Numbers 1-6 above are applicable.]
PROSPECTUS
[DATE]
Distributed by:
[Keyport Financial Services Corp.
125 High Street, Boston, MA 02110-2712]
Issued by:
Liberty Life Assurance Company of Boston
125 High Street, Boston, MA 02110-2712
Yes. I would like to receive the Liberty [NAME OF ANNUITY] Statement of
Additional Information.
Yes. I would like to receive the [NAME OF FUND] Statement of Additional
Information.
Yes. I would like to receive the [NAME OF FUND] Statement of Additional
Information.
Name
Address
City, State Zip
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 6719 BOSTON, MA
POSTAGE WILL BE PAID BY ADDRESSEE
LIBERTY LIFE ASSURANCE CO OF BOSTON
125 HIGH STREET
BOSTON, MA 02110-2712
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
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 (SAI) is not a prospectus but it
relates to, and should be read in conjunction with, the variable annuity
prospectus dated , [1999]. The SAI is incorporated
by reference into the prospectus. The prospectus is available, at no
charge, by writing Liberty Life at 125 High Street, Boston, MA 02110 or by
calling (800) 437-4466.
TABLE OF CONTENTS
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............................................
Average Annual Total Return for a Certificate that is
Surrendered and for a Certificate that Continues
Change in Accumulation Unit Value
Yields for [XX-1] Sub-Accounts..................................
Financial Statements..............................................
Liberty Life Assurance Company of Boston........................
Variable Account J..............................................
The date of this statement of additional information is , [1999]
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
Insurance Company 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.
****************************************************************************
****************************************************************************
The formula for the net investment factor will vary depending upon
whether certain asset charges are imposed, as explained in the notes in
the Prospectus. With regard to the AIR, the AIR will vary within the
limits permitted under state insurance law, but no less than 3%.
****************************************************************************
****************************************************************************
When Liberty Life first purchased the Eligible Fund shares of [XXX
Trust and YYY Fund] 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 [6]% 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 times that Sub-Account(s) used to determine the amount of
variable annuity payments will range between unlimited times to once every
twelve months. The minimum percentage per Sub-Account will range between 1%
and 10%.
****************************************************************************
****************************************************************************
The number of Annuity Units for each Sub-Account under any variable
annuity option will remain fixed during the entire annuity payment period
unless the payee makes a written request for a change. Currently, a payee
can instruct Liberty Life to change the Sub-Account(s) used to determine the
amount of the variable annuity payments [1] time[s] every [12] months. The
payee's request must specify the percentage of the annuity payment that is
to be based on the investment performance of each Sub-Account. The
percentage for each Sub-Account, if not zero, must be at least [10]% and
must be a whole number. At the end of the Valuation Period during which
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 Certificates, which are offered continuously, are
distributed by [Keyport Financial Services Corp. ("KFSC")], an affiliate.
EXPERTS
The financial statements of Liberty Life Assurance Company of Boston at
December 31, [1997], 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.
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: Common Stocks, represented by the Standard and Poor's
Composite Price Index (an unmanaged weighted index of 90 stocks prior to
March 1957 and 500 stocks thereafter of industrial, transportation, utility
and financial companies widely regarded by investors as representative of
the stock market); Small Company Stocks, represented by the fifth
capitalization quintile (i.e., the ninth and tenth deciles) of stocks on the
New York Stock Exchange for 1926-1981 and by the performance of the
Dimensional Fund Advisors Small Company 9/10 (for ninth and tenth deciles)
Fund thereafter; Long Term Corporate Bonds, represented beginning in 1969 by
the Salomon Brothers Long-Term High-Grade Corporate Bond Index, which is an
unmanaged index of nearly all Aaa and Aa rated bonds, represented for 1946-
1968 by backdating the Salomon Brothers Index using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon
Brothers in computing its Index, and represented for 1925-1945 through the
use of the Standard and Poor's monthly High-Grade Corporate Composite yield
data, assuming a 4% coupon and a 20-year maturity. Long-Term Government
Bonds, measured each year using a portfolio containing one U.S. government
bond with a term of approximately twenty years and a reasonably current
coupon; U.S. Treasury Bills, measured by rolling over each month a one-bill
portfolio containing, at the beginning of each month, the shortest-term bill
having not less than one month to maturity; Inflation, measured by the
Consumer Price Index for all Urban Consumers, not seasonably adjusted, since
January, 1978 and by the Consumer Price Index before then. The stock
capital markets may be contrasted with the corporate bond and U.S.
government securities capital markets. Unlike an investment in stock, an
investment in a bond that is held to maturity provides a fixed rate of
return. Bonds have a senior priority to common stocks in the event the
issuer is liquidated and interest on bonds is generally paid by the issuer
before it makes any distributions to common stock owners. Bonds rated in
the two highest rating categories are considered high quality and present
minimal risk of default. An additional advantage of investing in U.S.
government bonds and Treasury bills is that they are backed by the full
faith and credit of the U.S. government and thus have virtually no risk of
default. Although government securities fluctuate in price, they are highly
liquid.
****************************************************************************
****************************************************************************
Information regarding the Performance of the Certificates will be
included in the subsequent filings.
****************************************************************************
****************************************************************************
[Average annual Total Return for A Certificate that is surrendered and for a
Certificate that Continues]
[Change in Accumulation Unit Value]
Yields for [XX-1 Sub-Account]
Yield and effective yield percentages for the [XX-1 Sub-Account] are
calculated using the method prescribed by the Securities and Exchange
Commission. Both yields reflect the deduction of the annual [1.25]% asset-
based Certificate charges. [Both yields also reflect, on an allocated
basis, the Certificate's annual $[36] Certificate Maintenance Charge.] 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 [XX-1] Sub-Account charge is equal to
the $[36] Certificate charge multiplied by a fraction equal to the
average number of Certificates with [XX-1] Sub-Account value
during the 7-day period divided by the average total number of
Certificates during the 7-day period. This annual amount is
converted to a 7-day charge by multiplying it by 7/365. It is
then equated to an Accumulation Unit size basis by multiplying it
by a fraction equal to the average value of one [XX-1] Sub-Account
Accumulation Unit during the 7-day period divided by the average
Certificate Value in [XX-1] Sub-Account during the 7-day period.]
C = the Accumulation Unit value at the beginning of the 7-day
period.
The yield formula assumes that the weekly net income generated by an
investment in the [XX-1] Sub-Account will continue over an entire year. The
effective yield formula also annualizes seven days of net income but it
assumes that the net income is reinvested over the year. This compounding
effect causes effective yield to be higher than the yield.
FINANCIAL STATEMENTS
The financial statements of Liberty Life and the Variable Account are
included in the statement of additional information. The financial
statements of Liberty Life are provided as relevant to its ability to meet
its financial obligations under the Certificates and should not be
considered as bearing on the investment performance of the assets held in
the Variable Account.
FINANCIAL STATEMENTS
VARIABLE ACCOUNT J
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
[To Be Filed by Amendment]
PART C
Item 24. Financial Statements and Exhibits
+ (a) Financial Statements:
Included in Part B:
Variable Account J
Statements of Assets and Liabilities - December 31, 1998
Statements of Operations and Changes in Net Assets for the years
ended December 31, 1998 and 1997
Notes to Financial Statements
Liberty Life Assurance Company of Boston:
Balance Sheets for the years ended December 31, 1998 and 1997.
Statements of Income for the years ended December 31, 1998,
1997, and 1996.
Statements of Stockholders' Equity for the years ended December
31, 1998, 1997, and 1996.
Statements of Cash Flows for the years ended December 31, 1998,
1997, and 1996.
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.
*** Incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement (File No. 333-29811; 811-08269) filed on or about
July 17, 1997.
****Incorporated by reference to Post-Effective Amendment No. 4 to
Registration Statement (File No. 333-29811; 811-08269) filed on or about
March 2, 1998.
+ 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
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
Joseph J. Poplaski, Jr. Vice President
S. Robin Pratt Vice President
Steven M. Sentler Vice President
John A. Tymochko Vice President
E. Janney Wilson Vice President
Barry S. Gilvar Secretary
Elliot J. Williams Treasurer
Gerald H. Dolan Assistant Treasurer
Bernard Gillen Assistant Treasurer
James W. Jakobek Assistant Treasurer
Charlene Albanese Assistant Secretary
Diane S. Bainton Assistant Secretary
Katherine Desiderio Assistant Secretary
James R. Pugh Assistant Secretary
Harvey Swedlove 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 Liberty Advisory Services Corp.
(LASC), a Massachusetts corporation functioning as an investment advisor.
LASC files separate financial statements and is ultimately owned by Liberty
Mutual Insurance Company.
Chart for the affiliations of the Depositor is incorporated by
reference to the Registration Statement (Files No. 333-29811; 811-08269)
filed on or about June 18, 1997.
Item 27. Number of Contract Owners.
As of March 31, 1999, there were 612 Qualified Contract Owners and
882 Non-Qualified Contract Owners.
Item 28. Indemnification.
Directors and officers of the Depositor and the principal
underwriter are covered persons under Directors and Officers/Errors and
Omissions liability insurance policies. 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 Liberty 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; for Variable Account A of Keyport Benefit
Life Insurance Company; and for the Independence Variable Annuity Account
and Independence Variable Life Account of Independence Life and Annuity
Company all are affiliated companies of Liberty Life.
The directors and officers are:
Name and Principal Position and Offices
Business Address* with Underwriter
Jacob M. Herschler Director
Paul T. Holman Director and Assistant Clerk
James J. Klopper Director, President and Clerk
Daniel C. Bryant Vice President
Rogelio P. Japlit Treasurer
Donald A. Truman Assistant Clerk
*125 High Street, Boston, Massachusetts 02110.
Item 30. Location of Accounts and Records.
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 meets the requirements of the
Securities Act Rule 485(b) for effectiveness of this Registration Statement
and has duly caused this Registration Statement to be signed on its behalf,
in the City of Boston and Commonwealth of Massachusetts, on this 16th day of
April, 1999.
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 4/16/99
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 04/16/99
/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 as Exhibit 16
in the Registration Statement (Files No. 333-29811; 811-08269) filed on or
about June 18, 1997.
