As Filed with the Securities and Exchange Commission on June 10, 1998
Registration No. 333-45727
811-08635
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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. 1 [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 [X]
Variable Account A
(Exact Name of Registrant)
Keyport Benefit Life Insurance Company
(Name of Depositor)
125 High Street, Boston, Massachusetts 02110
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: 617-526-1400
Bernard R. Beckerlegge, Esq.
Keyport Benefit Life Insurance Company
125 High Street
Boston, MA 02110
(Name and Address of Agent for Service)
Copies to:
Joan E. Boros, Esq.
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
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
( ) on [date] pursuant to paragraph (b) of Rule 485
( ) 60 days after filing pursuant to paragraph (a)(1) of Rule 485
( ) on [date] pursuant to paragraph (a)(1) of Rule 485
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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 A
KEYPORT BENEFIT LIFE INSURANCE COMPANY
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-4
N-4 Item Caption in Prospectus
1. Cover Page
2. Glossary of Special Terms
3. Summary of Expenses
4. Performance Information
5. Keyport Benefit and the Variable Account
Eligible Funds
6. Deductions
7. Allocations of Purchase Payments
Transfer of Variable Account Value
Substitution of Eligible Funds and Other Variable Account
Changes
Modification of the Certificate
Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Certificate Ownership
Assignment
Partial Withdrawals and Surrender
Annuity Benefits
Suspension of Payments
Inquiries by Certificate Owners
8. Annuity Provisions
9. Death Provisions for Non-Qualified Certificates
Death Provisions for Qualified Certificates
Annuity Options
10. Purchase Payments and Applications
Variable Account Value
Valuation Periods
Net Investment Factor
Sales of the Certificates
11. Partial Withdrawals and Surrender
Option A: Income For a Fixed Number of Years
Right to Revoke
12. Tax Status
13. Legal Proceedings
14. Table of Contents - Statement of Additional Information
Caption in Statement of Additional Information
15. Cover Page
16. Table of Contents
17. Keyport Benefit Life Insurance Company
18. Safekeeping of Assets, Experts
19. Not applicable
20. Principal Underwriter
21. Investment Performance
22. Variable Annuity Benefits
23. Financial Statements
PART A
June 24, 1998 Prospectus for
NEW YORK
MANNING & NAPIER VARIABLE ANNUITY
Including Eligible Fund Prospectuses for
MANNING & NAPIER INSURANCE FUND, INC.:
Manning & Napier Moderate Growth Portfolio
Manning & Napier Growth Portfolio
Manning & Napier Maximum Horizon Portfolio
Manning & Napier Small Cap Portfolio
Manning & Napier Equity Portfolio
Manning & Napier Bond Portfolio
STEINROE VARIABLE INVESTMENT TRUST:
Stein Roe Money Market Fund, Variable Series
Distributed by:
Keyport Financial Services Corp.
125 High Street, Boston, MA 02110-2712
Issued by:
Keyport Benefit Life Insurance Company
100 Manhattanville Road, Purchase, NY 10577
Keyport Benefit Service Office
125 High Street, Boston, MA 02110-2712
[ ] Yes. I would like to receive the New York Manning & Napier Variable
Annuity Statement of Additional Information.
[ ] Yes. I would like to receive the Manning & Napier Insurance Fund, Inc.
Statement of Additional Information.
[ ] Yes. I would like to receive the SteinRoe Variable Investment Trust
Statement of Additional Information.
Name
Address
City, State Zip
BUSINESS REPLY MAIL
FIRST CLASS MAIL PERMIT NO. 6719 BOSTON, MA
POSTAGE WILL BE PAID BY ADDRESSEE
KEYPORT BENEFIT SERVICE OFFICE
125 HIGH STREET
BOSTON, MA 02110-2712
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES.
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
Variable Account A
OF
KEYPORT BENEFIT LIFE INSURANCE COMPANY
This Prospectus offers Group Variable Annuity Contracts (the "Contracts") and
the related Certificates (the "Certificates") that are designed to fund
benefits under certain group arrangements including those that qualify for
special tax treatment under the Internal Revenue Code of 1986 (the "Code").
As required by certain states, the Certificates may be offered as individual
contracts. Unless otherwise noted or the context so requires all references
to the Certificates include the Contracts and the individual Contracts. The
Certificates are offered on a flexible payment basis.
The variable annuity Contract (form number DVA(1)NY) and the Certificates
described in this prospectus provide for accumulation of Certificate Values
on a variable basis, and payments of periodic annuity payments on either a
variable or a fixed basis. The Certificates are designed for use by
individuals for retirement planning purposes.
This Prospectus generally describes the variable features of the Certificate.
Purchase Payments will be allocated to a segregated investment account of
Keyport Benefit Life Insurance Company ("Keyport Benefit"), designated
Variable Account A ("Variable Account").
The Variable Account invests in shares of the following Eligible Funds of
Manning & Napier Insurance Fund, Inc. ("Manning & Napier Insurance Fund") at
their net asset value: Manning & Napier Moderate Growth Portfolio ("MNMGP"),
Manning & Napier Growth Portfolio ("MNGP"), Manning & Napier Maximum Horizon
Portfolio ("MNMHP"), Manning & Napier Small Cap Portfolio ("MNSCP"), Manning
& Napier Equity Portfolio ("MNEP"), and Manning & Napier Bond Portfolio
("MNBP"). The Variable Account also invests in shares of the following
Eligible Fund of SteinRoe Variable Investment Trust ("SteinRoe Trust") at its
net asset value: Stein Roe Money Market Fund, Variable Series ("SRMMF").
The Variable Account may offer other forms of the Contracts and Certificates
with features, and fees and charges which vary from the Certificates, and
that provide for investment in other Sub-Accounts which invest in different
or additional mutual funds. Other Contracts and Certificates will be
described in separate prospectuses and statements of additional information.
The agent selling the Contracts and Certificates has information concerning
the eligibility for and the availability of the other forms of the Contracts
and Certificates.
A Statement of Additional Information dated the same as this prospectus has
been filed with the Securities and Exchange Commission and is herein
incorporated by reference. It is available, at no charge, by writing the
Principal Underwriter, Keyport Financial Services Corp. at 125 High Street,
Boston, MA 02110, by calling Keyport Benefit's Service Office at (800) 437-
4466, or by returning the postcard on the back cover of this prospectus. It
may also be obtained by writing Manning & Napier Insurance Fund, Inc. at P.O.
Box 40610, Rochester, New York 14604, or calling (800) 466-3863. A table of
contents for the Statement of Additional Information is on Page 17.
The Certificates may be sold by or through banks or other depository
institutions. The Contract and Certificates: are not insured by the FDIC; are
not a deposit or other obligation of, or guaranteed by, the depository
institution; and are subject to investment risks, including the possible loss
of principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS SETS FORTH THE INFORMATION A PROSPECTIVE INVESTOR SHOULD KNOW
BEFORE INVESTING. THE PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE OR JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED BY
KEYPORT BENEFIT TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THIS OFFERING,
AND IF GIVEN OR MADE, SUCH UNAUTHORIZED INFORMATION OR REPRESENTATIONS SHOULD
NOT BE RELIED UPON.
The date of this prospectus is June 24, 1998
TABLE OF CONTENTS
Page
Glossary of Special Terms 3
Summary of Expenses 4
Synopsis 5
Performance Information 5
Keyport Benefit and the Variable Account 6
Year 2000 Matters 6
Purchase Payments and Applications 6
Investments of the Variable Account 7
Allocations of Purchase Payments 7
Eligible Funds 7
Transfer of Variable Account Value 8
Substitution of Eligible Funds and Other
Variable Account Changes 9
Deductions 9
Deductions for Certificate Maintenance Charge 9
Deductions for Mortality and Expense Risk Charge 10
Deductions for Transfers of Variable Account Value 10
Deductions for Premium Taxes 10
Deductions for Income Taxes 10
Total Variable Account Expenses 10
Other Services 11
The Certificates 10
Variable Account Value 10
Valuation Periods 11
Net Investment Factor 11
Modification of the Certificate 11
Right to Revoke 11
Death Provisions for Non-Qualified Certificates 11
Death Provisions for Qualified Certificates 12
Certificate Ownership 12
Assignment 13
Partial Withdrawals and Surrender 13
Annuity Provisions 13
Annuity Benefits 13
Income Date and Annuity Option 13
Change in Income Date and Annuity Option 13
Annuity Options 13
Variable Annuity Payment Values 14
Proof of Age, Sex, and Survival of Annuitant 14
Suspension of Payments 14
Tax Status 15
Introduction 15
Taxation of Annuities in General 15
Qualified Plans 16
Individual Retirement Annuities 16
Variable Account Voting Privileges 16
Sales of the Certificates 17
Legal Proceedings 17
Inquiries by Certificate Owners 17
Table of Contents_Statement of Additional Information 17
Appendix A_Telephone Instructions 18
GLOSSARY OF SPECIAL TERMS
Accumulation Unit: An accounting unit of measure used to calculate Variable
Account Value.
Annuitant: The Annuitant is the natural person to whom any annuity payments
will be made starting on the Income Date. The Annuitant may not be over age
80 on the Certificate Date (age 75 for Qualified Certificates and age 90 for
Roth IRA Qualified Certificates).
Certificate Anniversary: The same month and day as the Certificate Date in
each subsequent year of the Certificate.
Certificate Date: The effective date of the Certificate; it is shown on Page
3 of the Certificate Schedule.
Certificate Owner: The person (or persons in the case of joint ownership) who
possesses all the ownership rights under the Certificate. The primary
Certificate Owner may not be over age 80 on the Certificate Date (age 75 for
Qualified Certificates, age 90 for Roth IRA Qualified Certificates and age 85
for a joint Owner).
Certificate Value: The Variable Account Value.
Certificate Withdrawal Value: The Certificate Value less any premium taxes
and Certificate Maintenance Charge.
Certificate Year: Any period of 12 months commencing with the Certificate
Date and each Certificate Anniversary thereafter shall be a Certificate Year.
Designated Beneficiary: The person who may be entitled to receive benefits
following the death of the Annuitant, Certificate Owner, or joint Certificate
Owner. The Designated Beneficiary will be the first person among the
following who is alive on the date of death: primary Certificate Owner; joint
Certificate Owner; primary beneficiary; contingent beneficiary; and if none
of the above is alive, the primary Certificate Owner's estate. If the
primary Certificate Owner and joint Certificate Owner are both alive, they
will be the Designated Beneficiary together.
Eligible Funds: The mutual funds that are eligible investments for the
Variable Account under the Certificates.
In Force: The status of the Certificate before the Income Date so long as it
is not totally surrendered, the Certificate Value under a Certificate does
not go to zero, and there has not been a death of the Annuitant or any
Certificate Owner that will cause the Certificate to end within at most five
years of the date of death.
Income Date: The date on which annuity payments are to begin.
Non-Qualified Certificate: Any Certificate that is not issued under a
Qualified Plan.
Office: Keyport Benefit's executive office which is 125 High Street, Boston,
Massachusetts 02110.
Qualified Certificate: Certificates issued under Qualified Plans.
Qualified Plan: A retirement plan established pursuant to the provisions of
Section 408(b) or 408A of the Internal Revenue Code.
Service Office: Keyport Benefit's service office which is 125 High Street,
Boston, Massachusetts 02110.
Variable Account: A separate investment account of Keyport Benefit into which
Purchase Payments under the Certificates may be allocated. The Variable
Account is divided into Sub-Accounts ("Sub-Account") that correspond to the
Eligible Funds in which they invest.
Variable Account Value: The value of all Variable Account amounts accumulated
under the Certificate prior to the Income Date.
Written Request: A request written on a form satisfactory to Keyport Benefit,
signed by the Certificate Owner and a disinterested witness, and filed at
Keyport Benefit's Service Office.
SUMMARY OF EXPENSES
The expense summary format below, including the examples, was adopted by the
Securities and Exchange Commission to assist the owner of a variable annuity
certificate in understanding the transaction and operating expenses the owner
will directly or indirectly bear under a certificate. The values reflect
expenses of the Variable Account as well as the Eligible Funds under the
Certificates. The expenses shown for the Eligible Funds and the examples
should not be considered a representation of future expenses.
Certificate Owner Transaction Expenses
Sales Load Imposed on Purchases: 0%
Maximum Contingent Deferred Sales Charge
(as a percentage of Purchase Payments): 0%
Maximum Total Certificate Owner Transaction Expenses1
(as a percentage of Purchase Payments): 0%
Annual Certificate Maintenance Charge $35
Variable Account Annual Expenses
(as a percentage of average net assets)
Mortality and Expense Risk Charge: .35%
Total Variable Account Annual Expenses: .35%
Manning & Napier Insurance Fund and SteinRoe Trust Annual Expenses2
(as a percentage of average net assets)
Total
Fund Operating
Management Other Expenses (After
Fees Expenses Any Reimbursement)3
MNMGP 0.00% 1.20% 1.20%(14.16%)3
MNGP 0.00% 1.20% 1.20%(10.98%)3
MNMHP 0.00% 1.20% 1.20%(12.76%)3
MNSCP 0.00% 1.20% 1.20%(12.53%)3
MNEP 0.00% 1.20% 1.20%(12.44%)3
MNBP 0.00% .85% .85%(14.27%)3
SRMMF .35% .25% .60%
THE ABOVE EXPENSES FOR THE ELIGIBLE FUNDS WERE PROVIDED BY MANNING & NAPIER
INSURANCE FUND AND STEINROE TRUST. KEYPORT BENEFIT HAS NOT INDEPENDENTLY
VERIFIED THE ACCURACY OF THE INFORMATION.
Example _ Whether the Certificate stays in force through the periods shown or
is surrendered or annuitized4 at the end of the periods shown, a $1,000
investment in each Sub-Account listed would be subject to the expenses shown,
assuming 5% annual return on assets.
Sub-Account 1 Year 3 Years 5 Years 10 Years
MNMGP $15 $49 $89 $220
MNGP 15 49 89 220
MNMHP 15 49 89 220
MNSCP 15 49 89 220
MNEP 15 49 89 220
MNBP 12 38 69 172
SRMMF 9 30 55 136
1Keyport Benefit reserves the right to impose a transfer fee after prior
notice to Certificate Owners, but currently does not impose any charge.
Premium taxes are not shown. Keyport Benefit deducts the amount of premium
taxes, if any, when paid unless Keyport Benefit elects to defer such
deduction.
2All Manning & Napier Insurance Fund and SteinRoe Trust expenses are for
1997. The Manning & Napier Insurance Fund expenses reflect the manager's
agreement to reimburse expenses above certain limits (see footnote 3).
3The managers of Manning & Napier Insurance Fund and SteinRoe Trust have
agreed to reimburse all expenses, including management fees, in excess of the
following percentage of the average annual net assets of each Eligible Fund,
so long as such reimbursement would not result in the Eligible Fund's
inability to qualify as a regulated investment company under the Internal
Revenue Code: MNMGP 1.2%, MNGP 1.2%, MNMHP 1.2%, MNSCP 1.2%, MNEP 1.2%, MNBP
.85%, SRMMF .65%. The Manning & Napier Insurance Fund manager's fee waiver
and assumption of expenses agreement is voluntary and may be terminated at
any time. The SteinRoe Trust manager's fee waiver and assumption of expenses
agreement is effective until April 30, 1999. The SteinRoe Trust's manager was
not required to reimburse expenses as of the date of this Prospectus. The
total percentages shown in the table for MNMHP, MNSCP, MNEP, MNGP, MNMGP, and
MNBP are after expense reimbursement. Each percentage shown in the
parentheses is what the total expenses would be in the absence of expense
reimbursement: for MNMGP--14.16%; for MNGP--10.98%; for MNMHP--12.76%; for
MNSCP--12.53%; for MNEP--12.44%; and for MNBP--14.27%.
4The annuity is designed for retirement planning purposes. Surrenders prior
to the Income Date are not consistent with the long-term purposes of the
Certificate and the applicable tax laws.
The example should not be considered a representation of past or future
expenses and charges of the Sub-Accounts. Actual expenses may be greater or
less than those shown. Similarly, the assumed 5% annual rate of return is
not an estimate or a guarantee of future investment performance. See
"Deductions" in this Prospectus, "Management" in the prospectus for Manning &
Napier Insurance Fund, and "How the Funds are Managed" in the prospectus for
SteinRoe Trust.
SYNOPSIS
The following Synopsis should be read in conjunction with the detailed
information in this Prospectus and the Statement of Additional Information.
Please refer to the Glossary of Special Terms for the meaning of certain
defined terms. Variations from the information appearing in this Prospectus
due to individual state requirements are described in supplements which are
attached to this Prospectus, or in endorsements to the Certificates, as
appropriate.
The Certificate allows Certificate Owners to allocate Purchase Payments to
the Variable Account. The Variable Account is a separate investment account
maintained by Keyport Benefit. Certificate Owners may allocate payments to,
and receive annuity payments from the Variable Account. If the Certificate
Owner allocates payments to the Variable Account, the accumulation values and
annuity payments will fluctuate according to the investment experience of the
Sub-Accounts chosen.
The Certificate permits Purchase Payments to be made on a flexible Purchase
Payment basis. The minimum initial payment is $5,000 and $2,000 for
individual retirement annuities. The minimum amount for each subsequent
payment is $1,000 or such lesser amount as Keyport Benefit may permit from
time to time. (See "Purchase Payments and Applications" on Page 6.)
There are no deductions made from Purchase Payments for sales charges at the
time of purchase or upon surrender.
Keyport Benefit deducts a Mortality and Expense Risk Charge, which is equal
on an annual basis to .35% of the average daily net asset values in the
Variable Account attributable to the Certificates. (See "Deductions for
Mortality and Expense Risk Charge" on Page 10.)
Keyport Benefit deducts an annual Contract Maintenance Charge (currently
$35.00) from the Variable Account Value for administrative expenses. Prior
to the Income Date, Keyport Benefit reserves the right to change this charge
for future years. (See "Deductions for Certificate Maintenance Charge" on
Page 9.)
Keyport Benefit reserves the right to deduct a charge of $25 for each
transfer in excess of 12 per Certificate Year but currently does not do so.
Premium taxes will be charged against the Certificate Value. Currently such
premium taxes range from 0% to 5.0%. (See "Deductions for Premium Taxes" on
Page 10.)
There are no federal income taxes on increases in the value of a Certificate
until a distribution occurs, in the form of a lump sum payment, annuity
payments, or the making of a gift or assignment of the Certificate. A
federal penalty tax (currently 10%) may also apply. (See "Tax Status" on
Page 15.)
The Certificate allows the Certificate Owner to revoke the Certificate
generally within 10 days of delivery (see "Right to Revoke" on Page 11).
Since Keyport Benefit will refund the Certificate Value, the Certificate
Owner will bear the investment risk during the revocation period.
The Certificates described in this prospectus have not previously been made
available for sale. Therefore, no condensed financial information is
provided. The full financial statements for Keyport Benefit are in the
Statement of Additional Information.
PERFORMANCE INFORMATION
The Variable Account may from time to time advertise certain performance
information concerning its various Sub-Accounts.
Performance information is not intended to indicate either past performance
under an actual Certificate or future performance.
The Sub-Accounts may advertise total return information for various periods
of time. Total return performance information is based on the overall
percentage change in value of a hypothetical investment in the specific Sub-
Account over a given period of time.
Average annual total return information shows the average percentage change
in the value of an investment in the Sub-Account from the beginning date of
the measuring period to the end of that period. This standardized version of
average annual total return reflects all historical investment results, less
all charges and deductions applied against the Sub-Account and a Certificate.
Average total return does not take into account any premium taxes and would
be lower if these taxes were included.
In order to calculate average annual total return, Keyport Benefit divides
the change in value of a Sub-Account under a Certificate surrendered on a
particular date by a hypothetical $1,000 investment in the Sub-Account made
by the Certificate Owner at the beginning of the period illustrated. The
resulting total rate for the period is then annualized to obtain the average
annual percentage change during the period. Annualization assumes that the
application of a single rate of return each year during the period will
produce the ending value, taking into account the effect of compounding.
The Sub-Accounts may present additional total return information computed on
a different basis.
The Sub-Accounts may present total return information calculated by dividing
the change in a Sub-Account's Accumulation Unit value over a specified time
period by the Accumulation Unit value of that Sub-Account at the beginning of
the period. This computation results in a 12-month change rate or, for
longer periods, a total rate for the period which Keyport Benefit annualizes
in order to obtain the average annual percentage change in the Accumulation
Unit value for that period. The change percentages do not take into account
the Certificate Maintenance Charge and premium tax charges. The percentages
would be lower if these charges were included.
The SRMMF Sub-Account is a money market Sub-Account that also may advertise
yield and effective yield information. The yield of the Sub-Account refers
to the income generated by an investment in the Sub-Account over a
specifically identified 7-day period. This income is annualized by assuming
that the amount of income generated by the investment during that week is
generated each week over a 52-week period and is shown as a percentage. The
yield reflects the deduction of all charges assessed against the Sub-Account
and a Certificate but does not take into account premium tax charges. The
yield would be lower if these charges were included.
The effective yield of the SRMMF Sub-Account is calculated in a similar
manner but, when annualizing such yield, income earned by the Sub-Account is
assumed to be reinvested. This compounding effect causes effective yield to
be higher than yield.
KEYPORT BENEFIT AND THE VARIABLE ACCOUNT
Keyport Benefit Life Insurance Company was organized under the laws of the
State of New York in 1987 as a stock life insurance company, and is a wholly-
owned subsidiary of Keyport Life Insurance Company. The executive offices of
Keyport Benefit are at 125 High Street, Boston, Massachusetts 02110. The home
office is located at 100 Manhattanville Road, Purchase, New York 10577.
Keyport Benefit is admitted to conduct life insurance business in New York
and Rhode Island.
The Variable Account was established by Keyport Benefit pursuant to the
provisions of New York Law on February 6, 1998. The Variable Account meets
the definition of "separate account" under the federal securities laws. The
Variable Account is registered with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940. Such
registration does not involve supervision of the management of the Variable
Account or Keyport Benefit by the Securities and Exchange Commission.
Keyport Benefit is a member of the Insurance Marketplace Standards
Association ("IMSA"), and as such may use the IMSA logo and membership in
IMSA in advertisements. Being a member means that Keyport Benefit has chosen
to participate in IMSA's Life Insurance Ethical Market Conduct Program.
Keyport Benefit is one of the Liberty Financial Companies. Keyport Benefit is
ultimately controlled by Liberty Mutual Insurance Company of Boston,
Massachusetts, a multi-line insurance and financial services institution.
Obligations under the Certificates are the obligations of Keyport Benefit.
Although the assets of the Variable Account are the property of Keyport
Benefit, these assets are held separately from the other assets of Keyport
Benefit and are not chargeable with liabilities arising out of any other
business Keyport Benefit may conduct. Income, capital gains and/or capital
losses, whether or not realized, from assets allocated to the Variable
Account are credited to or charged against the Variable Account without
regard to the income, capital gains, and/or capital losses arising out of any
other business Keyport Benefit may conduct. Thus, Keyport Benefit does not
guarantee the investment performance of the Variable Account. The Variable
Account Value and the amount of variable annuity payments will vary with the
investment performance of the investments in the Variable Account.
YEAR 2000 MATTERS
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the
year 2000. This potential problem has become known as the "Year 2000 issue".
The Year 2000 issue affects virtually all companies and organizations.
Computer applications which are affected by the Year 2000 issue could impact
Keyport Benefit's business functions in various ways, ranging from a complete
inability to perform critical business functions to a loss of productivity in
varying degrees. Likewise, the failure of some computer applications could
have no impact on critical business functions.
Keyport Benefit is assessing and addressing the Year 2000 issue by
implementing a four-step plan. The first two steps involve inventorying all
the computer applications which support Keyport Benefit's business functions
and prioritizing computer applications which are affected by the Year 2000
issue based upon the degree of impact each has on the functioning of Keyport
Benefit's business units. The first two steps of the plan are substantially
complete.
The final two steps of the four-step plan involve remediation of affected
computer applications (i.e., repairing or replacing programs, including those
which interface with third-party computer applications that have unremediated
Year 2000 issues, and appropriate testing) and reinstallation of computer
applications. For computer applications which are "mission critical" (i.e.,
their failure would result in the complete inability to perform critical
business functions), Keyport Benefit expects to complete the final two steps
of the plan by December 31, 1998. Remediation and reinstallation of non-
critical computer applications is scheduled to be completed by December 31,
1999.
Keyport Benefit believes that the Year 2000 issue could have a material
impact on Keyport Benefit's operations if the four-step plan is not timely
implemented. However, based upon the progress that is being made, Keyport
Benefit believes that the timetable for implementing the plan will be met and
that the Year 2000 issue will not pose significant operational problems for
its computer systems.
Keyport Benefit does not expect that the cost of addressing the Year 2000
issue will be material to its financial condition or its results of
operations.
PURCHASE PAYMENTS AND APPLICATIONS
The initial Purchase Payment is due on the Certificate Date. The minimum
initial Purchase Payment is $5,000 and $2,000 for individual retirement
annuities. Additional Purchase Payments can be made at the Certificate
Owner's option. Each subsequent Purchase Payment must be at least $1,000 or
such lesser amount as Keyport Benefit may permit from time to time. Keyport
Benefit may reject any Purchase Payment.
If the application for a Certificate is in good order and it calls for
amounts to be allocated to the Variable Account, Keyport Benefit will apply
the initial Purchase Payment to the Variable Account and credit the
Certificate with Accumulation Units within two business days of receipt. If
the application for a Certificate is not in good order, Keyport Benefit will
attempt to get it in good order within five business days. If it is not
complete at the end of this period, Keyport Benefit will inform the applicant
of the reason for the delay and that the Purchase Payment will be returned
immediately unless the applicant specifically consents to Keyport Benefit's
keeping the Purchase Payment until the application is complete. Once the
application is complete, the Purchase Payment will be applied within two
business days of its completion. Keyport Benefit has reserved the right to
reject any application.
Keyport Benefit confirms, in writing, to the Certificate Owner the allocation
of all Purchase Payments and the re-allocation of values after any requested
transfer. Keyport Benefit must be notified immediately by the Certificate
Owner of any processing error.
Keyport Benefit will permit others to act on behalf of an applicant in
certain instances, including the following two examples. First, Keyport
Benefit will accept an application for a Certificate that contains a
signature signed under a power of attorney if a copy of that power of
attorney is submitted with the application. Second, Keyport Benefit will
issue a Certificate that is replacing an existing life insurance or annuity
policy that was issued by Keyport Benefit or an affiliated company, without
having previously received a signed application from the applicant. Certain
dealers or other authorized persons such as employers and Qualified Plan
fiduciaries will inform Keyport Benefit of an applicant's answers to the
questions in the application by telephone or by order ticket and cause the
initial Purchase Payment to be paid to Keyport Benefit. If the information
is in good order, Keyport Benefit will issue the Certificate with a copy of
an application completed with that information. The Certificate will be
delivered to the Certificate Owner with a letter from Keyport Benefit that
will give the Certificate Owner an opportunity to respond to Keyport Benefit
if any of the application information is incorrect. Alternatively, Keyport
Benefit's letter may request the Certificate Owner to confirm the correctness
of the information by signing either a copy of the application or a
Certificate delivery receipt that ratifies the application in all respects
(in either case, a copy of the signed document would be returned to Keyport
Benefit for its permanent records). All purchases are confirmed, in writing,
to the applicant by Keyport Benefit. Keyport Benefit's liability under a
Certificate extends only to amounts so confirmed.
INVESTMENTS OF THE VARIABLE ACCOUNT
Allocations of Purchase Payments
Purchase Payments applied to the Variable Account will be invested in one or
more of the Eligible Fund Sub-Accounts designated as permissible investments
in accordance with the selection made by the Certificate Owner in the
application. Any selection must specify the percentage of the Purchase
Payment that is allocated to each Sub-Account. The percentage for each Sub-
Account, if not zero, must be at least 10% and must be a whole number. A
Certificate Owner may change the allocation percentages without fee, penalty
or other charge. Allocation changes must be made by Written Request unless
the Certificate Owner has by Written Request authorized Keyport Benefit to
accept telephone allocation instructions from the Certificate Owner or from a
person acting for the Certificate Owner as an attorney-in-fact under a power
of attorney. By authorizing Keyport Benefit to accept telephone changes, a
Certificate Owner agrees to accept and be bound by the conditions and
procedures established by Keyport Benefit from time to time. The current
conditions and procedures are in Appendix A and Certificate Owners
authorizing telephone allocation instructions will be notified, in advance,
of any changes.
The Variable Account is segmented into Sub-Accounts. Each Sub-Account
contains the shares of one of the Eligible Funds and such shares are
purchased at net asset value. Eligible Funds and Sub-Accounts may be added
or withdrawn as permitted by applicable law. The Sub-Accounts in the
Variable Account and the corresponding Eligible Funds currently are as
follows:
Eligible Funds of Manning & Napier Insurance Fund Sub-Accounts
Manning & Napier Moderate Growth Portfolio ("MNMGP") MNMGP Sub-Account
Manning & Napier Growth Portfolio ("MNGP") MNGP Sub-Account
Manning & Napier Maximum Horizon Portfolio ("MNMHP") MNMHP Sub-Account
Manning & Napier Small Cap Portfolio ("MNSCP") MNSCP Sub-Account
Manning & Napier Equity Portfolio ("MNEP") MNEP Sub-Account
Manning & Napier Bond Portfolio ("MNBP") MNBP Sub-Account
Eligible Fund of SteinRoe Trust Sub-Account
Stein Roe Money Market Fund, Variable Series ("SRMMF") SRMMF Sub-Account
(formerly named Cash Income Fund)
Eligible Funds
The Eligible Funds which are the permissible investments of the Variable
Account are the separate funds of Manning & Napier Insurance Fund, the
separate funds of SteinRoe Trust, and any other mutual funds with which
Keyport Benefit and the Variable Account may enter into a participation
agreement for the purpose of making such mutual funds available as Eligible
Funds under certain Certificates.
Manning & Napier Insurance Fund is an open-end management investment company
that offers separate series (Portfolios). Manning & Napier Advisors, Inc.
("Manning & Napier Advisors"), 1100 Chase Square, Rochester, New York 14604,
acts as Manning & Napier Insurance Fund's investment adviser. Mr. William
Manning controls the Advisor by virtue of his ownership of the securities of
the Advisor. Manning & Napier Advisors also is generally responsible for
supervision of the overall business affairs of Manning & Napier Insurance
Fund, including supervision of service providers to the Fund and direction of
Manning & Napier Advisors' directors, officers or employees who may be
elected as officers of Manning & Napier Insurance Fund to serve as such.
Stein Roe & Farnham Incorporated ("Stein Roe"), One South Wacker Drive,
Chicago, Illinois 60606, is the investment adviser for the Eligible Fund of
SteinRoe Trust. In 1986, Stein Roe was organized and succeeded to the
business of Stein Roe & Farnham, a partnership. Stein Roe is an affiliate of
Keyport Benefit. Stein Roe and its predecessor have provided investment
advisory and administrative services since 1932.
The investment objectives of the Eligible Funds are briefly described below.
More detailed information, including investor considerations related to the
risks of investing in a particular Eligible Fund, may be found in the current
prospectus for that Fund. An investor should read that prospectus carefully
before selecting a Sub-Account that invests in an Eligible Fund. The
prospectus is available, at no charge, from a salesperson or by writing the
Principal Underwriter, Keyport Financial Services Corp. at 125 High Street,
Boston, MA 02110 or by calling (800) 437-4466. The prospectus may also be
obtained by writing Manning & Napier Insurance Fund, Inc., at P.O. Box 40610,
Rochester, NY 14604, or calling (800) 466-3863.
Eligible Funds of Manning & Napier Insurance
Fund and Variable Account Sub-Accounts Investment Objective
Manning & Napier Moderate Growth Portfolio
(MNMGP Sub-Account) Seeks with equal emphasis
long-term growth and
preservation of capital.
Manning & Napier Growth Portfolio
(MNGP Sub-Account) Seeks long-term growth of
capital. The secondary
objective is the
preservation of capital.
Manning & Napier Maximum Horizon Portfolio
(MNMHP Sub-Account) Seeks to achieve the high
level of long-term
capital growth typically
associated with the stock
market.
Manning & Napier Small Cap Portfolio
(MNSCP Sub-Account) Seeks to achieve long-term
growth of capital by
investing principally in
the equity securities of
small issuers.
Manning & Napier Equity Portfolio
(MNEP Sub-Account) Seeks long-term growth of
capital.
Manning & Napier Bond Portfolio
(MNBP Sub-Account) Seeks to maximize total
return in the form of
both income and capital
appreciation by investing
in fixed income
securities without regard
to maturity.
Eligible Fund of SteinRoe Trust and
Variable Account Sub-Account Investment Objective
Stein Roe Money Market Fund, Variable Series Seeks to provide high
(SRMMF Sub-Account) current income from
short-term money market
instruments while
emphasizing preservation
of capital and
maintaining excellent
liquidity.
There is no assurance that the Eligible Funds will achieve their stated
objectives.
The Manning & Napier Insurance Fund and SteinRoe Trust are funding vehicles
for variable annuity contracts and variable life insurance policies offered
by separate accounts of Keyport Benefit and of insurance companies affiliated
and unaffiliated with Keyport Benefit. The risks involved in this "mixed and
shared funding" are disclosed in the Manning & Napier Insurance Fund and in
the SteinRoe Trust prospectuses under the captions "Sales And Redemptions"
and "The Trust", respectively.
Transfer of Variable Account Value
Certificate Owners may transfer Variable Account Value from one Sub-Account
to another Sub-Account.
The Certificate allows Keyport Benefit to charge a transfer fee and to limit
the number of transfers that can be made in a specified time period.
Certificate Owners should be aware that transfer limitations may prevent a
Certificate Owner from making a transfer on the date he or she wants to, with
the result that the Certificate Owner's future Certificate Value may be lower
than it would have been had the transfer been made on the desired date.
Currently, Keyport Benefit has no limit on the number or frequency of
transfers and it is not charging a transfer fee of $25 for each transfer in
excess of 12 per Certificate Year. For transfers under different Certificates
that are being requested under powers of attorney with a common attorney-in-
fact or that are, in Keyport Benefit's determination, based on the
recommendation of a common investment adviser or broker/dealer, there is a
transfer limitation of one transfer every 30 days or such other time period
as Keyport Benefit may permit.
Keyport Benefit is also limiting each transfer to a maximum of $500,000 or
such greater amount as Keyport Benefit may permit. All transfers requested
for a Certificate on the same day will be treated as a single transfer and
the total combined transfer amount will be subject to the $500,000
limitation. If the $500,000 limitation is exceeded, no amount of the
transfer will be executed by Keyport Benefit.
In applying the $500,000 limitation, Keyport Benefit may treat as one
transfer all transfers requested by a Certificate Owner for multiple
Certificates he or she owns. If the $500,000 limitation is exceeded for
multiple transfers requested on the same day that are treated as a single
transfer, no amount of the transfer will be executed by Keyport Benefit.
In applying the $500,000 limitation to transfers requested by a common
attorney-in-fact or investment adviser, Keyport Benefit will treat as one
transfer all transfers requested under different Certificates that are being
requested under powers of attorney with a common attorney-in-fact or that
are, in Keyport Benefit's determination, based on the recommendation of a
common investment adviser or broker/dealer. If the $500,000 limitation is
exceeded for multiple transfers requested on the same day that are treated as
a single transfer, no amount of the transfer will be executed by Keyport
Benefit. If a transfer is executed under one Certificate and, within the
next 30 days, a transfer request for another Certificate is determined by
Keyport Benefit to be related to the executed transfer under this paragraph's
rules, the transfer request will not be executed by Keyport Benefit. In order
for it to be executed, it would need to be requested again after the 30 day
period has expired and it, along with any other transfer requests that are
collectively treated as a single transfer, would need to total less than
$500,000.
Keyport Benefit's interest in applying these limitations is to protect the
interests of both Certificate Owners who are not engaging in significant
transfer activity and Certificate Owners who are engaging in such activity.
Keyport Benefit has determined that the actions of Certificate Owners
engaging in significant transfer activity among Sub-Accounts may cause an
adverse effect on the performance of the Eligible Fund for the Sub-Account
involved. The movement of Sub-Account values from one Sub-Account to another
may prevent the appropriate Eligible Fund from taking advantage of investment
opportunities because it must maintain a liquid position in order to handle
redemptions. Such movement may also cause a substantial increase in Fund
transaction costs which must be indirectly borne by Certificate Owners.
Certificate Owners will be notified, in advance, of the imposition of any
transfer fee or of a change in the limitation on the number of transfers. The
fee will not exceed $25.
Transfers must be made by Written Request unless the Certificate Owner has by
Written Request authorized Keyport Benefit to accept telephone transfer
requests from the Certificate Owner or from a person acting for the
Certificate Owner as an attorney-in-fact under a power of attorney. By
authorizing Keyport Benefit to accept telephone transfer instructions, a
Certificate Owner agrees to accept and be bound by the conditions and
procedures established by Keyport Benefit from time to time. The current
conditions and procedures are in Appendix A and Certificate Owners
authorizing telephone transfers will be notified, in advance, of any changes.
Written transfer requests may be made by a person acting for the Certificate
Owner as an attorney-in-fact under a power of attorney.
Transfer requests received by Keyport Benefit before the close of trading on
the New York Stock Exchange (currently 4:00 PM Eastern Time) will be
initiated at the close of business that day. Any requests received later
will be initiated at the close of the next business day. Each request from a
Certificate Owner to transfer value will be executed by both redeeming and
acquiring Accumulation Units on the day Keyport Benefit initiates the
transfer.
If 100% of any Sub-Account's value is transferred and the allocation formula
for Purchase Payments includes that Sub-Account, then the allocation formula
for future Purchase Payments will automatically change unless the Certificate
Owner instructs otherwise. For example, if the allocation formula is 50% to
Sub-Account A and 50% to Sub-Account B and all of Sub-Account A's value is
transferred to Sub-Account B, the allocation formula will change to 100% to
Sub-Account B unless the Certificate Owner instructs otherwise.
Substitution of Eligible Funds and Other Variable Account Changes
If the shares of any of the Eligible Funds should no longer be available for
investment by the Variable Account or if in the judgment of Keyport Benefit's
management further investment in such fund shares should become inappropriate
in view of the purpose of the Certificate, Keyport Benefit may add or
substitute shares of another Eligible Fund or of another mutual fund for
Eligible Fund shares already purchased under the Certificate. No
substitution of Fund shares in any Sub-Account may take place without prior
approval of the Securities and Exchange Commission and notice to Certificate
Owners, to the extent required by the Investment Company Act of 1940.
Keyport Benefit has also reserved the right, subject to compliance with the
law as currently applicable or subsequently changed: (a) to operate the
Variable Account in any form permitted under the Investment Company Act of
1940 or in any other form permitted by law; (b) to take any action necessary
to comply with or obtain and continue any exemptions from the Investment
Company Act of 1940 or to comply with any other applicable law; (c) to
transfer any assets in any Sub-Account to another Sub-Account, or to one or
more separate investment accounts, or to Keyport Benefit's general account;
or to add, combine or remove Sub-Accounts in the Variable Account; and (d) to
change the way Keyport Benefit assesses charges, so long as the aggregate
amount is not increased beyond that currently charged to the Variable Account
and the Eligible Funds in connection with the Certificates.
DEDUCTIONS
Deductions for Certificate Maintenance Charge
Keyport Benefit has responsibility for all administration of the Certificates
and the Variable Account. This administration includes, but is not limited
to, preparation of the Certificates, maintenance of Certificate Owners'
records, and all accounting, valuation, regulatory and reporting
requirements. Keyport Benefit makes a Certificate Maintenance Charge for
such services during the accumulation and annuity payment periods. At the
present time the Certificate Maintenance Charge is $35 per Certificate Year.
PRIOR TO THE INCOME DATE THE CERTIFICATE MAINTENANCE CHARGE IS NOT GUARANTEED
AND MAY BE CHANGED BY KEYPORT BENEFIT.
Prior to the Income Date, the full amount of the charge will be deducted from
the Variable Account Value on each Certificate Anniversary and on the date of
any total surrender not falling on the Certificate Anniversary. On the
Income Date, a pro-rata portion of the charge due on the next Certificate
Anniversary will be deducted from the Variable Account Value. This pro-rata
charge covers the period from the prior Certificate Anniversary to the Income
Date. For example, if the Income Date occurs 73 days after that prior
anniversary, then one-fifth (i.e., 73 days/365 days) of the annual charge
would be deducted on the Income Date. The charge will be deducted from each
Sub-Account in the proportion that the value of each bears to the Variable
Account Value.
Once annuity payments begin on the Income Date or once they begin after
surrender benefits are applied under a settlement option, the yearly cost of
the Certificate Maintenance Charge for a payee's annuity will be the same as
the yearly amount in effect immediately before the annuity payments begin.
Keyport Benefit may not later change the amount of the Certificate
Maintenance Charge deducted from the annuity payments. The charge will be
deducted on a pro-rata basis from each annuity payment. For example, if
annuity payments are monthly, then one-twelfth of the annual charge will be
deducted from each payment.
Deductions for Mortality and Expense Risk Charge
Although variable annuity payments made to Annuitants will vary in accordance
with the investment performance of the investments of the Variable Account,
they will not be affected by the mortality experience (death rate) of persons
receiving such payments or of the general population. Keyport Benefit
guarantees the Death Benefits described below (see "Death Benefit"). Keyport
Benefit assumes an expense risk since the Certificate Maintenance Charge
after the Income Date will stay the same and not be affected by variations in
expenses.
To compensate it for assuming these mortality and expense risks, for each
Valuation Period Keyport Benefit deducts from each Sub-Account a Mortality
and Expense Risk Charge equal on an annual basis to .35% of the average daily
net asset value of the Sub-Account. The charge is deducted during both the
accumulation and annuity periods (i.e., both before and after the Income
Date). Less than the full charge will be deducted from Sub-Account values
attributable to Certificates issued to employees of Keyport Benefit and other
persons specified in "Sales of the Certificates".
Deductions for Transfers of Variable Account Value
The Certificate allows Keyport Benefit to charge a transfer fee. Currently
no fee is being charged. Certificate Owners will be notified, in advance, of
the imposition of any fee. The fee will not exceed $25.
Deductions for Premium Taxes
Keyport Benefit deducts the amount of any premium taxes levied by any state
or governmental entity when paid unless Keyport Benefit elects to defer such
deduction. Such premium taxes depend, among other things, on the type of
Certificate (Qualified or Non-Qualified), on the state of residence of the
Certificate Owner, the state of residence of the Annuitant, the status of
Keyport Benefit within such states, and the insurance tax laws of such
states. For New York Certificates, the current premium tax rate is 0%.
Deductions for Income Taxes
Keyport Benefit will deduct from any amount payable under the Certificate any
income taxes that a governmental authority requires Keyport Benefit to
withhold with respect to that amount. See "Income Tax Withholding".
Total Variable Account Expenses
The Variable Account's total expenses in relation to the Certificate will be
the Certificate Maintenance Charge and the Mortality and Expense Risk Charge.
The value of the assets in the Variable Account will reflect the value of
Eligible Fund shares and therefore the deductions from and expenses paid out
of the assets of the Eligible Funds. These deductions and expenses are
described in the Eligible Fund prospectus.
OTHER SERVICES
The Program. Keyport Benefit offers the following investment related program
which is available only prior to the Income Date: Systematic Withdrawal
Program. This Program has its own requirements, as discussed below. Keyport
Benefit reserves the right to terminate the Program.
If the Certificate Owner has submitted the required telephone authorization
form, certain changes may be made by telephone. The current conditions and
procedures are described in Appendix A.
Systematic Withdrawal Program. To the extent permitted by law, Keyport
Benefit will make monthly, quarterly, semi-annual or annual distributions of
a predetermined dollar amount to a Certificate Owner that has enrolled in the
Systematic Withdrawal Program. Under the Program, all distributions will be
made directly to the Certificate Owner and will be treated for federal tax
purposes as any other withdrawal or distribution of Certificate Value. (See
"Tax Status".) A Certificate Owner may specify the amount of each partial
withdrawal, subject to a minimum of $100.
Unless the Certificate Owner specifies the Sub-Account or Sub-Accounts from
which withdrawals of Certificate Value shall be made or if the amount in a
specified Sub-Account is less than the predetermined amount, Keyport Benefit
will make withdrawals under the Program from the Sub-Accounts in amounts
proportionate to the amounts in the Sub-Accounts. All withdrawals under the
Program will be effected by canceling the number of Accumulation Units equal
in value to the amount to be distributed to the Certificate Owner.
THE CERTIFICATES
Variable Account Value
The Variable Account Value for a Certificate is the sum of the value of each
Sub-Account to which values are allocated under a Certificate. The value of
each Sub-Account is determined at any time by multiplying the number of
Accumulation Units attributable to that Sub-Account by the Accumulation Unit
value for that Sub-Account at the time of determination. The Accumulation
Unit value is an accounting unit of measure used to determine the change in
an Accumulation Unit's value from Valuation Period to Valuation Period.
Each Purchase Payment that is made results in additional Accumulation Units
being credited to the Certificate and the appropriate Sub-Account thereunder.
The number of additional units for any Sub-Account will equal the amount
allocated to that Sub-Account divided by the Accumulation Unit value for that
Sub-Account at the time of investment.
Valuation Periods
The Variable Account is valued each Valuation Period using the net asset
value of the Eligible Fund shares. A Valuation Period is the period
commencing at the close of trading on the New York Stock Exchange on each
Valuation Date and ending at the close of trading for the next succeeding
Valuation Date. A Valuation Date is each day that the New York Stock
Exchange is open for business. The New York Stock Exchange is currently
closed on weekends, New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Net Investment Factor
The Variable Account Value will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect value, Keyport Benefit utilizes an Accumulation Unit
value. Each Sub-account has its own Accumulation Units and value per Unit.
The Unit value applicable during any Valuation Period is determined at the
end of that period.
When Keyport Benefit first purchased Eligible Fund shares on behalf of the
Variable Account, Keyport Benefit valued each Accumulation Unit at a
specified dollar amount. The Unit value for each Sub-Account in any
Valuation Period thereafter is determined by multiplying the value for the
prior period by a net investment factor. This factor may be greater or less
than 1.0; therefore, the Accumulation Unit may increase or decrease from
Valuation Period to Valuation Period. Keyport Benefit calculates a net
investment factor for each Sub-Account by dividing (a) by (b) and then
subtracting (c) (i.e., (a/b) _ c), where:
(a) is equal to:
(i) the net asset value per share of the Eligible Fund at the end of
the Valuation Period; plus
(ii) the per share amount of any distribution made by the Eligible Fund
if the "ex-dividend" date occurs during that same Valuation Period.
(b) is the net asset value per share of the Eligible Fund at the end of the
prior Valuation Period.
(c) is equal to:
(i) the Valuation Period equivalent of the daily Mortality and Expense
Risk Charge; plus
(ii) a charge factor, if any, for any tax provision established by
Keyport Benefit as a result of the operations of that Sub-Account.
Modification of the Certificate
Only Keyport Benefit's President or Secretary may agree to alter the
Certificate or waive any of its terms. Any changes must be made in writing
and with the Certificate Owner's consent, except as may be required by
applicable law.
Right to Revoke
The Certificate Owner may return the Certificate within 10 days after he or
she receives it by delivering or mailing it to either Keyport Benefit's
Service Office or Manning & Napier Insurance Fund, Inc. 1100 Chase Square,
P.O. Box 40610, Rochester, New York, 14604. The return of the Certificate by
mail will be effective when the postmark is affixed to a properly addressed
and postage-prepaid envelope. The returned Certificate will be treated as if
Keyport Benefit never issued it and Keyport Benefit will refund the
Certificate Value.
DEATH PROVISIONS FOR NON-QUALIFIED CERTIFICATES
Death of Primary Owner, Joint Owner or Certain Non-Owner Annuitant
These provisions apply if, before the Income Date while the Certificate is In
Force, the primary Certificate Owner or any joint Certificate Owner dies
(whether or not the decedent is also the Annuitant) or the Annuitant dies
under a Certificate with a non-natural Certificate Owner such as a trust. The
Designated Beneficiary will control the Certificate after such a death.
If the decedent's surviving spouse (if any) is the sole Designated
Beneficiary, the surviving spouse will automatically become the new sole
primary Certificate Owner as of the decedent's date of the death. And, if
the Annuitant is the decedent, the new Annuitant will be any living
contingent annuitant, otherwise the surviving spouse. The Certificate may
continue until another death occurs (i.e., until the death of the Annuitant,
primary Certificate Owner or joint Certificate Owner). Except for this
paragraph, all "Death Provisions" will apply to that subsequent death.
In all other cases, the Certificate can continue up to five years from the
date of death. During this period, the Designated Beneficiary may exercise
all ownership rights, including the right to make transfers or partial
surrenders or the right to totally surrender the Certificate for its
Surrender Value. If the Certificate is still in effect at the end of the
five-year period, Keyport Benefit will automatically end it then by paying
the Certificate Value to the Designated Beneficiary. If the Designated
Beneficiary is not alive then, Keyport Benefit will pay any person(s) named
by the Designated Beneficiary in a Written Request; otherwise the Designated
Beneficiary's estate.
The covered person under this paragraph shall be the primary Certificate
Owner or, if there is a non-natural Certificate Owner such as a trust, the
Annuitant shall be the covered person. If the covered person dies, the
Certificate Value will be increased, as provided below, if it is less than
the Death Benefit Amount ("DBA"). The DBA is:
The DBA at issue is the initial Purchase Payment. Thereafter, it is the prior
death benefit plus any additional Purchase Payments, less any partial
withdrawals, including any applicable surrender charge.
When Keyport Benefit receives due proof of the covered person's death,
Keyport Benefit will compare, as of the date of death, the Certificate Value
to the DBA. If the Certificate Value was less than the DBA, Keyport Benefit
will increase the current Certificate Value by the amount of the difference.
Note that while the amount of the difference is determined as of the date of
death, that amount is not added to the Certificate Value until Keyport
Benefit receives due proof of death. The amount to be credited will be
allocated to the Variable Account based on the Purchase Payment allocation
selection that is in effect when Keyport Benefit receives due proof of death.
If the Certificate is not surrendered, it will continue for the time period
specified above.
Payment of Benefits. Instead of receiving a lump sum, the Certificate Owner
or any Designated Beneficiary may direct by Written Request that Keyport
Benefit pay any benefit of $5,000 or more under an annuity payment option
that meets the following: (a) the first payment to the Designated Beneficiary
must be made no later than one year after the date of death; (b) payments
must be made over the life of the Designated Beneficiary or over a period not
extending beyond that person's life expectancy; and (c) any payment option
that provides for payments to continue after the death of the Designated
Beneficiary will not allow the successor payee to extend the period of time
over which the remaining payments are to be made.
Death of Certain Non-Certificate Owner Annuitant. These provisions apply if,
before the Income Date while the Certificate is In Force, (a) the Annuitant
dies, (b) the Annuitant is not a Certificate Owner, and (c) the Certificate
Owner is a natural person. The Certificate will continue in force after the
Annuitant's death. The new Annuitant will be any living contingent
annuitant, otherwise the primary Certificate Owner. If the Annuitant is the
first to die of the Certificate's primary Certificate Owner, Joint
Certificate Owner and Annuitant, then the Annuitant is the Covered Person and
the Certificate Value will be increased, as provided below, if it is less
than the Death Benefit Amount ("DBA"), as defined above. When Keyport Benefit
receives due proof of the Annuitant's death, Keyport Benefit will compare, as
of the date of death, the Certificate Value to the DBA. If the Certificate
Value was less than the DBA, Keyport Benefit will increase the current
Certificate Value by the amount of the difference. Note that while the
amount of the difference is determined as of the date of death, that amount
is not added to the Certificate Value until Keyport Benefit receives due
proof of death. The amount to be credited will be allocated to the Variable
Account based on the Purchase Payment allocation selection that is in effect
when Keyport Benefit receives due proof of death.
DEATH PROVISIONS FOR QUALIFIED CERTIFICATES
Death of Annuitant. If the Annuitant dies before the Income Date while the
Certificate is In Force, the Designated Beneficiary will control the
Certificate after such a death. The Certificate Value will be increased, as
provided below, if it is less than the Death Benefit Amount ("DBA") as
defined above. When Keyport Benefit receives due proof of the Annuitant's
death, Keyport Benefit will compare, as of the date of death, the Certificate
Value to the DBA. If the Certificate Value was less than the DBA, Keyport
Benefit will increase the current Certificate Value by the amount of the
difference. Note that while the amount of the difference is determined as of
the date of death, that amount is not added to the Certificate Value until
Keyport Benefit receives due proof of death. The amount to be credited will
be allocated to the Variable Account based on the Purchase Payment allocation
selection that is in effect when Keyport Benefit receives due proof of death.
If the Certificate is not surrendered, it may continue for the time period
permitted by the Internal Revenue Code provisions applicable to the
particular Qualified Plan. During this period, the Designated Beneficiary
may exercise all ownership rights, including the right to make transfers or
partial withdrawals or the right to totally surrender the Certificate for its
Certificate Withdrawal Value. If the Certificate is still in effect at the
end of the period, Keyport Benefit will automatically end it then by paying
the Certificate Withdrawal Value to the Designated Beneficiary. If the
Designated Beneficiary is not alive then, Keyport Benefit will pay any
person(s) named by the Designated Beneficiary in a Written Request; otherwise
the Designated Beneficiary's estate.
Payment of Benefits. Instead of receiving a lump sum, the Certificate Owner
or any Designated Beneficiary may direct by Written Request that Keyport
Benefit pay any benefit of $5,000 or more under an annuity payment option
that meets the following: (a) the first payment to the Designated Beneficiary
must be made no later than one year after the date of death; (b) payments
must be made over the life of the Designated Beneficiary or over a period not
extending beyond that person's life expectancy; and (c) any payment option
that provides for payments to continue after the death of the Designated
Beneficiary will not allow the successor payee to extend the period of time
over which the remaining payments are to be made.
CERTIFICATE OWNERSHIP
The Certificate Owner shall be the person designated in the application. The
Certificate Owner may exercise all the rights of the Certificate. Joint
Certificate Owners are permitted but not contingent Certificate Owners.
The Certificate Owner may by Written Request change the Certificate Owner,
primary beneficiary, contingent beneficiary or contingent annuitant. An
irrevocably-named person may be changed only with the written consent of such
person.
Because a change of Certificate Owner by means of a gift (i.e., a transfer
without full and adequate consideration) may be a taxable event, a
Certificate Owner should consult a competent tax adviser as to the tax
consequences resulting from such a transfer.
Any Qualified Certificate may have limitations on transfer of ownership. A
Certificate Owner should consult the Plan Administrator and a competent tax
adviser as to the tax consequences resulting from such a transfer.
ASSIGNMENT
The Certificate Owner may assign the Certificate at any time. A copy of any
assignment must be filed with Keyport Benefit. The Certificate Owner's
rights and those of any revocably-named person will be subject to the
assignment. Any Qualified Certificate may have limitations on assignability.
Because an assignment may be a taxable event, a Certificate Owner should
consult a competent tax adviser as to the tax consequences resulting from any
such assignment.
PARTIAL WITHDRAWALS AND SURRENDER
The Certificate Owner may make partial withdrawals from the Certificate.
Keyport Benefit must receive a Written Request and the minimum amount to be
withdrawn must be at least $300 or such lesser amount as Keyport Benefit may
permit in conjunction with a Systematic Withdrawal Program. If the
Certificate Value after a partial withdrawal would be below $2,500, Keyport
Benefit will treat the request as a withdrawal of only the excess amount over
$2,500. Unless the request specifies otherwise, the total amount withdrawn
will be deducted from all Sub-Accounts of the Variable Account in the ratio
that the value in each Sub-Account bears to the total Variable Account Value.
The Certificate Owner may totally surrender the Certificate by making a
Written Request. Surrendering the Certificate will end it. Upon surrender,
the Certificate Owner will receive the Certificate Withdrawal Value.
Keyport Benefit will pay the amount of any surrender within seven days of
receipt of such request. Alternatively, the Certificate Owner may purchase
for himself or herself an annuity option with any surrender benefit of at
least $5,000. Keyport Benefit's consent is needed to choose an option if the
Certificate Owner is not a natural person.
Annuity Options based on life contingencies cannot be surrendered after
annuity payments have begun. Option A, which is not based on life
contingencies, may be surrendered if a variable payout has been selected.
Because of the potential tax consequences of a full or partial surrender, a
Certificate Owner should consult a competent tax adviser regarding a
surrender.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Income Date and the Certificate is In Force,
payments will begin under the annuity option or options the Certificate Owner
has chosen. The amount of the payments will be determined by applying the
Certificate Value (less any premium taxes not previously deducted and less
any applicable Certificate Maintenance Charge) on the Income Date in
accordance with the option selected.
Income Date and Annuity Option
The Certificate Owner may select an Income Date and Annuity Option at the
time of application. If the Certificate Owner does not select an Annuity
Option, Option B will automatically be designated. If the Certificate Owner
does not select an Income Date for the Annuitant, the Income Date will
automatically be the ealier of (i) the later of the Annuitant's 90th birthday
and the 10th Certificate Anniversary and (ii) any maximum date permitted
under state law.
Change in Income Date and Annuity Option
The Certificate Owner may choose or change an Annuity Option or the Income
Date by making a Written Request to Keyport Benefit at least 30 days prior to
the Income Date. However, any Income Date must be: (a) for fixed annuity
options, not earlier than the first Certificate Anniversary; and (b) not
later than the earlier of (i) the later of the Annuitant's 90th birthday and
the 10th Certificate Anniversary and (ii) any maximum date permitted under
state law.
Annuity Options
The Annuity Options are:
Option A: Income for a Fixed Number of Years;
Option B: Life Income with 10 Years of Payments Guaranteed; and
Option C: Joint and Last Survivor Income.
Other options may be arranged by mutual consent. Each option is available in
two forms--as a variable annuity for use with the Variable Account and as a
fixed annuity for use with Keyport Benefit's general account. Variable
annuity payments will fluctuate while fixed annuity payments will not. The
dollar amount of each fixed annuity payment will be determined by deducting
from the Certificate Value any premium taxes not previously deducted and any
applicable Certificate Maintenance Charge and then dividing the remainder by
$1,000 and multiplying the result by the greater of: (a) the applicable
factor shown in the appropriate table in the Certificate; or (b) the factor
currently offered by Keyport Benefit at the time annuity payments begin.
This current factor may be based on the sex of the payee unless to do so
would be prohibited by law.
If no Annuity Option is selected, Option B will automatically be applied.
Unless the Certificate Owner chooses otherwise, Variable Account Value, less
any premium taxes not previously deducted and less any applicable Certificate
Maintenance Charge will be applied to a variable annuity option. Whether
variable or fixed, the same Certificate Value applied to each option will
produce a different initial annuity payment as well as different subsequent
payments.
The payee is the person who will receive the sum payable under an annuity
option. Any annuity option that provides for payments to continue after the
death of the payee will not allow the successor payee to extend the period of
time over which the remaining payments are to be made.
If the amount available to apply under any variable or fixed option is less
than $5,000, Keyport Benefit has reserved the right to pay such amount in one
sum to the payee in lieu of the payment otherwise provided for.
Annuity payments will be made monthly unless quarterly, semi-annual or annual
payments are chosen by Written Request. However, if any payment provided for
would be or becomes less than $100, Keyport Benefit has the right to reduce
the frequency of payments to such an interval as will result in each payment
being at least $100.
Option A: Income For a Fixed Number of Years. Keyport Benefit will pay an
annuity for a chosen number of years, not fewer than 5 nor over 50 (a period
of years over 30 may be chosen only if it does not exceed the difference
between age 100 and the Annuitant's age on the date of the first payment).
Option A is referred to as Preferred Income Plan (PIP). At any time while
variable annuity payments are being made, the payee may elect to receive the
following amount: the present value of the remaining payments, commuted at
the interest rate used to create the annuity factor for this option (this
interest rate is 5% per year, unless 3% per year is chosen by Written Request
at the time the option is selected). Instead of receiving a lump sum, the
payee can elect another payment option. If, at the death of the payee,
Option A payments have been made for less than the chosen number of years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity,
this interest rate is 5% per year, unless 3% per year had been chosen by
the payee at the time the option was selected.
The Mortality and Expense Risk Charge is deducted during the Option A payment
period if a variable payout has been selected, but Keyport Benefit has no
mortality risk during this period.
Keyport Benefit has available a "level monthly" payment option that can be
chosen for variable payments under Option A. Under this option, the monthly
payment amount changes every twelve months instead of every month as would be
the case under the standard monthly payment frequency. The "level monthly"
option converts an annual payment amount into twelve equal monthly payments
as follows. Each annual payment will be determined as described below in
"Variable Annuity Payment Values". Each annual payment will then be placed
in Keyport Benefit's general account, from which it will be paid out in
twelve equal monthly payments. The sum of the twelve monthly payments will
exceed the annual payment amount because of an interest rate factor used by
Keyport Benefit that will vary from year to year. If the payments are
commuted, (1) the commutation method described above for calculating the
present value of remaining payments applies to any remaining annual payments
and (2) any unpaid monthly payments out of the current twelve will be
commuted at the interest rate that was used to determine those twelve current
monthly payments.
See "Annuity Payments" for the manner in which Option A may be taxed.
Option B: Life Income with 10 Years of Payments Guaranteed. Keyport Benefit
will pay an annuity during the lifetime of the payee. If, at the death of
the payee, payments have been made for less than 10 years:
(a) payments will be continued during the remainder of the period to the
successor payee; or
(b) that successor payee may elect to receive in a lump sum the present
value of the remaining payments, commuted at the interest rate used to
create the annuity factor for this option. For the variable annuity,
this interest rate is 5% per year, unless 3% per year had been chosen by
the payee at the time the option was selected.
The amount of the annuity payments will depend on the age of the payee on
the Income Date and it may also depend on the payee's sex.
Option C: Joint and Last Survivor Income. Keyport Benefit will pay an
annuity for as long as either the payee or a designated second natural person
is alive. The amount of the annuity payments will depend on the age of both
persons on the Income Date and it may also depend on each person's sex. IT
IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF BOTH
PAYEES DIE AFTER THE RECEIPT OF THE FIRST PAYMENT OR TO RECEIVE ONLY TWO
ANNUITY PAYMENTS IF BOTH PAYEES DIE AFTER RECEIPT OF THE SECOND PAYMENT AND
SO ON.
Variable Annuity Payment Values
The amount of the first variable annuity payment is determined by Keyport
Benefit using an annuity purchase rate that is based on an assumed annual
investment return of 5% per year, unless 3% is chosen by Written Request.
Subsequent variable annuity payments will fluctuate in amount and reflect
whether the actual investment return of the selected Sub-Account(s) (after
deducting the Mortality and Expense Risk Charge) is better or worse than the
assumed investment return. The total dollar amount of each variable annuity
payment will be equal to: (a) the sum of all Sub-Account payments; less (b)
the pro-rata amount of the annual Certificate Maintenance Charge. Currently,
a payee can instruct Keyport Benefit to change the Sub-Account(s) used to
determine the amount of the variable annuity payments once every 6 months.
Proof of Age, Sex, and Survival of Annuitant
Keyport Benefit may require proof of age, sex or survival of any payee upon
whose age, sex or survival payments depend. If the age or sex has been
misstated, Keyport Benefit will compute the amount payable based on the
correct age and sex. If income payments have begun, any underpayments Keyport
Benefit may have made will be paid in full with the next annuity payment.
Any overpayments, unless repaid in one sum, will be deducted from future
annuity payments until Keyport Benefit is repaid in full.
SUSPENSION OF PAYMENTS
Keyport Benefit reserves the right to suspend or postpone any type of payment
from the Variable Account for any period when: (a) the New York Stock
Exchange is closed other than customary weekend or holiday closings; (b)
trading on the Exchange is restricted; (c) an emergency exists as a result of
which it is not reasonably practicable to dispose of securities held in the
Variable Account or determine their value; or (d) the Securities and Exchange
Commission permits delay for the protection of security holders. The
applicable rules and regulations of the Securities and Exchange Commission
shall govern as to whether the conditions described in (b) and (c) exist.
TAX STATUS
Introduction
The Certificate is designed for use by individuals in retirement plans which
may or may not be Qualified Plans under the provisions of the Internal
Revenue Code (the "Code"). The ultimate effect of federal income taxes on
the Certificate Value, on annuity payments, and on the economic benefit to
the Certificate Owner, Annuitant or Designated Beneficiary depends on the
type of retirement plan for which the Certificate is purchased and upon the
tax and employment status of the individual concerned. The discussion
contained herein is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax adviser. No attempt is
made to consider any applicable state or other tax laws. Moreover, the
discussion herein is based upon Keyport Benefit's understanding of current
federal income tax laws as they are currently interpreted. No representation
is made regarding the likelihood of continuation of those current federal
income tax laws or of the current interpretations by the Internal Revenue
Service.
Taxation of Annuities in General
Section 72 of the Code governs taxation of annuities in general. There are
no income taxes on increases in the value of a Certificate until a
distribution occurs, in the form of a full surrender, a partial surrender, an
assignment or gift of the Certificate, or annuity payments.
Surrenders, Assignments and Gifts. A Certificate Owner who fully surrenders
his or her Certificate is taxed on the portion of the payment that exceeds
his or her cost basis in the Certificate. For Non-Qualified Certificates,
the cost basis is generally the amount of the Purchase Payments made for the
Certificate and the taxable portion of the surrender payment is taxed as
ordinary income. For Qualified Certificates, the cost basis is generally
zero and the taxable portion of the surrender payment is generally taxed as
ordinary income subject to special 5-year income averaging. A Designated
Beneficiary receiving a lump sum surrender benefit after the death of the
Annuitant or Certificate Owner is taxed on the portion of the amount that
exceeds the Certificate Owner's cost basis in the Certificate. If the
Designated Beneficiary elects to receive annuity payments within 60 days of
the decedent's death, different tax rules apply. See "Annuity Payments"
below. For Non-Qualified Certificates, the tax treatment applicable to
Designated Beneficiaries may be contrasted with the income-tax-free treatment
applicable to persons inheriting and then selling mutual fund shares with a
date-of-death value in excess of their basis.
Partial withdrawals received under Non-Qualified Certificates prior to
annuitization are first included in gross income to the extent Certificate
Value exceeds Purchase Payments. Then, to the extent the Certificate Value
does not exceed Purchase Payments, such withdrawals are treated as a non-
taxable return of principal to the Certificate Owner. For partial
withdrawals under a Qualified Certificate, payments are treated first as a
non-taxable return of principal up to the cost basis and then a taxable
return of income. Since the cost basis of Qualified Certificates is generally
zero, partial surrender amounts will generally be fully taxed as ordinary
income.
A Certificate Owner who assigns or pledges a Non-Qualified Certificate is
treated as if he or she had received the amount assigned or pledged and thus
is subject to taxation under the rules applicable to partial withdrawals or
surrenders. A Certificate Owner who gives away the Certificate (i.e.,
transfers it without full and adequate consideration) to anyone other than
his or her spouse is treated for income tax purposes as if he or she had
fully surrendered the Certificate.
A special computational rule applies if Keyport Benefit issues to the
Certificate Owner, during any calendar year, (a) two or more Certificates or
(b) one or more Certificates and one or more of Keyport Benefit's other
annuity contracts. Under this rule, the amount of any distribution
includable in the Certificate Owner's gross income is to be determined under
Section 72(e) of the Code by treating all the Keyport Benefit contracts as
one contract. Keyport Benefit believes that this means the amount of any
distribution under one Certificate will be includable in gross income to the
extent that at the time of distribution the sum of the values for all the
Certificates or contracts exceeds the sum of the cost bases for all the
contracts.
Annuity Payments. The non-taxable portion of each variable annuity payment
is determined by dividing the cost basis of the Certificate by the total
number of expected payments while the non-taxable portion of each fixed
annuity payment is determined by an "exclusion ratio" formula which
establishes the ratio that the cost basis of the Certificate bears to the
total expected value of annuity payments for the term of the annuity. The
remaining portion of each payment is taxable. Such taxable portion is taxed
at ordinary income rates. For Qualified Certificates, the cost basis is
generally zero. With annuity payments based on life contingencies, the
payments will become fully taxable once the payee lives longer than the life
expectancy used to calculate the non-taxable portion of the prior payments.
Because variable annuity payments can increase over time and because certain
payment options provide for a lump sum right of commutation, it is possible
that the IRS could determine that variable annuity payments should not be
taxed as described above but instead should be taxed as if they were received
under an agreement to pay interest. This determination would result in a
higher amount (up to 100%) of certain payments being taxable.
With respect to the "level monthly" payment option available under Annuity
Option A, pursuant to which each annual payment is placed in Keyport
Benefit's general account and paid out with interest in twelve equal monthly
payments, it is possible the IRS could determine that receipt of the first
monthly payout of each annual payment is constructive receipt of the entire
annual payment. Thus, the total taxable amount for each annual payment would
be accelerated to the time of the first monthly payout and reported in the
tax year in which the first monthly payout is received.
Penalty Tax. Payments received by Certificate Owners, Annuitants, and
Designated Beneficiaries under Certificates may be subject to both ordinary
income taxes and a penalty tax equal to 10% of the amount received that is
includable in income. The penalty tax is not imposed on amounts received:
(a) after the taxpayer attains age 59 1/2; (b) in a series of substantially
equal payments made for life or life expectancy; (c) after the death of the
Certificate Owner (or, where the Certificate Owner is not a human being,
after the death of the Annuitant); (d) if the taxpayer becomes totally and
permanently disabled; or (e) under a Non-Qualified Certificate's annuity
payment option that provides for a series of substantially equal payments,
provided only one Purchase Payment is made to the Certificate, the
Certificate is not issued as a result of a Section 1035 exchange, and the
first annuity payment begins in the first Certificate Year.
Income Tax Withholding. Keyport Benefit is required to withhold federal
income taxes on taxable amounts paid under Certificates unless the recipient
elects not to have withholding apply. Keyport Benefit will notify recipients
of their right to elect not to have withholding apply.
Section 1035 Exchanges. A Non-Qualified Certificate may be purchased with
proceeds from the surrender of an existing annuity contract. Such a
transaction may qualify as a tax-free exchange pursuant to Section 1035 of
the Code. It is Keyport Benefit's understanding that in such an event: (a)
the new Certificate will be subject to the distribution-at-death rules
described in "Death Provisions for Non-Qualified Certificates"; (b) Purchase
Payments made between August 14, 1982 and January 18, 1985 and the income
allocable to them will, following an exchange, no longer be covered by a
"grandfathered" exception to the penalty tax for a distribution of income
that is allocable to an investment made over ten years prior to the
distribution; and (c) Purchase Payments made before August 14, 1982 and the
income allocable to them will, following an exchange, continue to receive the
following "grandfathered" tax treatment under prior law: (i) the penalty tax
does not apply to any distribution; (ii) partial withdrawals are treated
first as a non-taxable return of principal and then a taxable return of
income; and (iii) assignments are not treated as surrenders subject to
taxation. Keyport Benefit's understanding of the above is principally based
on legislative reports prepared by the Staff of the Congressional Joint
Committee on Taxation.
Diversification Standards. The U.S. Secretary of the Treasury has issued
regulations that set standards for diversification of the investments
underlying variable annuity contracts (other than pension plan contracts).
The Eligible Funds are designed to be managed to meet the diversification
requirements for the Certificate as those requirements may change from time
to time. If the diversification requirements are not satisfied, the
Certificate would not be treated as an annuity contract. As a consequence to
the Certificate Owner, income earned on a Certificate would be taxable to the
Certificate Owner in the year in which diversification requirements were not
satisfied, including previously non-taxable income earned in prior years. As
a further consequence, Keyport Benefit would be subjected to federal income
taxes on assets in the Variable Account.
The Secretary of the Treasury announced in September 1986 that he expects to
issue regulations which will prescribe the circumstances in which a
Certificate Owner's control of the investments of a segregated asset account
may cause the Certificate Owner, rather than the insurance company, to be
treated as the owner of the assets of the account. The regulations could
impose requirements that are not reflected in the Certificate. Keyport
Benefit, however, has reserved certain rights to alter the Certificate and
investment alternatives so as to comply with such regulations. Since the
regulations have not been issued, there can be no assurance as to the content
of such regulations or even whether application of the regulations will be
prospective. For these reasons, Certificate Owners are urged to consult with
their own tax advisers.
Qualified Plans
The Certificate is designed for use with Qualified Plans. The tax rules
applicable to participants in Qualified Plans vary according to the type of
plan and the terms and conditions of the plan itself. Therefore, no attempt
is made herein to provide more than general information about the use of the
Certificate with Qualified Plans. Participants under a Qualified Plan as
well as Certificate Owners, Annuitants, and Designated Beneficiaries are
cautioned that the rights of any person to any benefits under a Qualified
Plan may be subject to the terms and conditions of the plan regardless of the
terms and conditions of the Certificate issued in connection therewith.
Following is a brief description of the type of Qualified Plans offered and
of the use of the Certificate in connection therewith. Purchasers of the
Certificate should seek competent advice concerning the terms and conditions
of the particular Qualified Plan and use of the Certificate with that Plan.
Individual Retirement Annuities
Sections 408(b) and 408A of the Code permit eligible individuals to
contribute to an individual retirement program known as an "Individual
Retirement Annuity" and "Roth IRA", respectively. These individual retirement
annuities are subject to limitations on the amount which may be contributed,
the persons who may be eligible, and on the time when distributions may
commence. In addition, distributions from certain types of Qualified Plans
may be placed on a tax-deferred basis into a Section 408(b) Individual
Retirement Annuity.
VARIABLE ACCOUNT VOTING PRIVILEGES
In accordance with its view of present applicable law, Keyport Benefit will
vote the shares of the Eligible Funds held in the Variable Account at regular
and special meetings of the shareholders of the Eligible Funds in accordance
with instructions received from persons having the voting interest in the
Variable Account. Keyport Benefit will vote shares for which it has not
received instructions in the same proportion as it votes shares for which it
has received instructions.
However, if the Investment Company Act of 1940 or any regulation thereunder
should be amended or if the present interpretation thereof should change, and
as a result Keyport Benefit determines that it is permitted to vote the
shares of the Eligible Funds in its own right, it may elect to do so.
The person having the voting interest under a Certificate prior to the Income
Date shall be the Certificate Owner. The number of shares held in each Sub-
Account which are attributable to each Certificate Owner is determined by
dividing the Certificate Owner's Variable Account Value in each Sub-Account
by the net asset value of the applicable share of the Eligible Fund. The
person having the voting interest after the Income Date under an annuity
payment option shall be the payee. The number of shares held in the Variable
Account which are attributable to each payee is determined by dividing the
reserve for the annuity payments by the net asset value of one share. During
the annuity payment period, the votes attributable to a payee decrease as the
reserves underlying the payments decrease.
The number of shares in which a person has a voting interest will be
determined as of the date coincident with the date established by the
respective Eligible Fund for determining shareholders eligible to vote at the
meeting of the Fund and voting instructions will be solicited by written
communication prior to such meeting in accordance with the procedures
established by the Eligible Fund.
Each person having the voting interest in the Variable Account will receive
periodic reports relating to the Eligible Fund(s) in which he or she has an
interest, proxy material and a form with which to give such voting
instructions with respect to the proportion of the Eligible Fund shares held
in the Variable Account corresponding to his or her interest in the Variable
Account.
SALES OF THE CERTIFICATES
Keyport Financial Services Corp. ("KFSC") serves as the Principal Underwriter
for the Certificate described in this Prospectus. The Certificate will be
sold by salespersons who represent Keyport Benefit Life Insurance Company, an
affiliate of KFSC, as variable annuity agents and who are registered
representatives of broker/dealers who have entered into distribution
agreements with KFSC. KFSC is registered under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities Dealers,
Inc. It is located at 125 High Street, Boston, Massachusetts 02110. A dealer
selling the Certificate receives no commission.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account or the Principal
Underwriter are a party. Keyport Benefit is engaged in various kinds of
routine litigation which in its judgment is not of material importance in
relation to the total capital and surplus of Keyport Benefit.
INQUIRIES BY CERTIFICATE OWNERS
Certificate Owners with questions about their Certificates may either write
Keyport Benefit's Service Office, 125 High Street, Boston, MA 02110, or call
(800) 367-3653 or write Manning & Napier Insurance Fund, Inc. at P.O. Box
40610 Rochester, New York 14604 or call (800) 466-3863.
TABLE OF CONTENTS_STATEMENT OF ADDITIONAL INFORMATION
Page
Keyport Benefit Life Insurance Company 2
Variable Annuity Benefits 2
Variable Annuity Payment Values 2
Re-Allocating Sub-Account Payments 3
Safekeeping of Assets 4
Principal Underwriter 4
Experts 4
Investment Performance 4
Yields for Stein Roe Money Market Fund (SRMMF) Sub-Account 6
Financial Statements 6
Keyport Benefit Life Insurance Company 7
APPENDIX A
TELEPHONE INSTRUCTIONS
Telephone Transfers of Certificate Values
1. If there are joint Certificate Owners, both must authorize Keyport
Benefit and Manning & Napier Insurance Fund, Inc. ("Manning & Napier
Insurance Fund") to accept telephone instructions but either Certificate
Owner can give telephone instructions.
2. All callers will be required to identify themselves. Keyport Benefit
reserves the right to refuse to act upon any telephone instructions in cases
where the caller has not sufficiently identified himself/herself to Keyport
Benefit's or Manning & Napier Insurance Fund's satisfaction.
3. Neither Keyport Benefit, Manning & Napier Insurance Fund, nor any person
acting on its behalf shall be subject to any claim, loss, liability, cost or
expense if it or such person acted in good faith upon a telephone
instruction, including one that is unauthorized or fraudulent; however,
Keyport Benefit and/or Manning & Napier Insurance Fund will employ reasonable
procedures to confirm that a telephone instruction is genuine and, if Keyport
Benefit and/or Manning & Napier Insurance Fund does not, Keyport Benefit
and/or Manning & Napier Insurance Fund may be liable for losses due to an
unauthorized or fraudulent instruction. The Certificate Owner thus bears the
risk that an unauthorized or fraudulent instruction that is executed may
cause the Certificate Value to be lower than it would be had no instruction
been executed.
4. All conversations will be recorded with disclosure at the time of the
call.
5. The application for the Certificate may allow a Certificate Owner to
create a power of attorney by authorizing another person to give telephone
instructions. Unless prohibited by state law, such power will be treated as
durable in nature and shall not be affected by the subsequent incapacity,
disability or incompetency of the Certificate Owner. Either Keyport Benefit,
Manning & Napier Insurance Fund or the authorized person may cease to honor
the power by sending written notice to the Certificate Owner at the
Certificate Owner's last known address. Neither Keyport Benefit, Manning &
Napier Insurance Fund nor any person acting on its behalf shall be subject to
liability for any act executed in good faith reliance upon a power of
attorney.
6. Telephone authorization shall continue in force until (a) Keyport
Benefit and/or Manning & Napier Insurance Fund receives the Certificate
Owner's written revocation, (b) Keyport Benefit and/or Manning & Napier
Insurance Fund discontinues the privilege, or (c) Keyport Benefit and/or
Manning & Napier Insurance Fund receives written evidence that the
Certificate Owner has entered into a market timing or asset allocation
agreement with an investment adviser or with a broker/dealer.
7. Telephone transfer instructions received by Keyport Benefit at 800-367-
3653 and/or Manning & Napier Insurance Fund at (800) 466-3863 before the
close of trading on the New York Stock Exchange (currently 4:00 P.M. Eastern
Time) will be initiated that day based on the unit value prices calculated at
the close of that day. Instructions received after the close of trading on
the NYSE will be initiated the following business day.
8. Once instructions are accepted by Keyport Benefit and/or Manning &
Napier Insurance Fund, they may not be canceled.
9. All transfers must be made in accordance with the terms of the
Certificate and current prospectus. If the transfer instructions are not in
good order, Keyport Benefit and/or Manning & Napier Insurance Fund will not
execute the transfer and will notify the caller within 48 hours.
10. If 100% of any Sub-Account's value is transferred and the allocation
formula for Purchase Payments includes that Sub-Account, then the allocation
formula for future Purchase Payments will change accordingly unless Keyport
Benefit receives telephone instructions to the contrary. For example, if the
allocation formula is 50% to Sub-Account A and 50% to Sub-Account B and all
of Sub-Account A's value is transferred to Sub-Account B, the allocation
formula will change to 100% to Sub-Account B unless Keyport Benefit is
instructed otherwise.
Telephone Changes to Purchase Payment Allocation Percentages
Numbers 1-6 above are applicable.
PART B
STATEMENT OF ADDITIONAL INFORMATION
GROUP FLEXIBLE PURCHASE PAYMENT
DEFERRED VARIABLE ANNUITY CONTRACT
ISSUED BY
VARIABLE ACCOUNT A
OF
KEYPORT BENEFIT LIFE INSURANCE COMPANY ("Keyport Benefit")
This Statement of Additional Information (SAI) is not a prospectus but it
relates to, and should be read in conjunction with, the Manning & Napier
variable annuity prospectus dated June 24, 1998. The SAI is incorporated by
reference into the prospectus. The prospectus is available, at no charge, by
writing Keyport Financial Services Corp. at 125 High Street, Boston, MA 02110
or by calling (800) 437-4466. It may also be obtained by writing Manning &
Napier Insurance Fund, Inc. at P.O. Box 40610, Rochester, New York 14604, or
by calling (800) 466-3868.
TABLE OF CONTENTS
Page
Keyport Benefit Life Insurance Company.....................................2
Variable Annuity Benefits..................................................2
Variable Annuity Payment Values..........................................2
Re-Allocating Sub-Account Payments.......................................3
Safekeeping of Assets......................................................4
Principal Underwriter......................................................4
Experts....................................................................4
Investment Performance.....................................................4
Yields for Stein Roe Money Market Fund (SRMMF) Sub-Account...............6
Financial Statements.......................................................6
Keyport Benefit Life Insurance Company...................................7
The date of this statement of additional information is June 24, 1998.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
Liberty Mutual Insurance Company ("Liberty Mutual"), a multi-line insurance
company, is the ultimate corporate parent of Keyport Benefit. Liberty Mutual
ultimately controls Keyport Benefit through the following intervening holding
company subsidiaries: Liberty Mutual Equity Corporation, LFC Holdings Inc.,
Liberty Financial Companies, Inc. ("LFC"), SteinRoe Services, Inc. and
Keyport Life Insurance Company. Liberty Mutual, as of December 31, 1997,
owned, indirectly, approximately 73% of the combined voting power of the
outstanding stock of LFC (with the balance being publicly held). For
additional information about Keyport Benefit, see page 8 of the prospectus.
VARIABLE ANNUITY BENEFITS
Variable Annuity Payment Values
For each variable payment option, the total dollar amount of each periodic
payment will be equal to: (a) the sum of all Sub-Account payments; less (b)
the pro-rata amount of the annual Certificate Maintenance Charge.
The first payment for each Sub-Account will be determined by deducting any
applicable Certificate Maintenance Charge and any applicable state premium
taxes and then dividing the remaining value of that Sub-Account by $1,000 and
multiplying the result by the greater of: (a) the applicable factor from the
Certificate's annuity table for the particular payment option; or (b) the
factor currently offered by Keyport Benefit at the time annuity payments
begin. This current factor may be based on the sex of the payee unless to do
so would be prohibited by law.
The number of Annuity Units for each Sub-Account will be determined by
dividing such first payment by the Sub-Account Annuity Unit value for the
Valuation Period that includes the date of the first payment. The number of
Annuity Units remains fixed for the annuity payment period. Each Sub-Account
payment after the first one will be determined by multiplying (a) by (b),
where: (a) is the number of Sub-Account Annuity Units; and (b) is the Sub-
Account Annuity Unit value for the Valuation Period that includes the date of
the particular payment.
Variable annuity payments will fluctuate in accordance with the investment
results of the underlying Eligible Funds. In order to determine how these
fluctuations affect annuity payments, Keyport Benefit uses an Annuity Unit
value. Each Sub-Account has its own Annuity Units and value per Unit. The
Annuity Unit value applicable during any Valuation Period is determined at
the end of such period.
When Keyport Benefit first purchased Eligible Fund shares on behalf of the
Variable Account, Keyport Benefit valued each Annuity Unit for each Sub-
Account at a specified dollar amount. The Unit value for each Sub-Account in
any Valuation Period thereafter is determined by multiplying the value for
the prior period by a net investment factor. This factor may be greater or
less than 1.0; therefore, the Annuity Unit may increase or decrease from
Valuation Period to Valuation Period. For each assumed annual investment
rate (AIR), Keyport Benefit calculates a net investment factor for each Sub-
Account by dividing (a) by (b), where:
(a) is equal to the net investment factor as defined in the
prospectus; and
(b) is the assumed investment factor for the current Valuation Period.
The assumed investment factor adjusts for the interest assumed
in determining the first variable annuity payment. Such factor for
any Valuation Period shall be the accumulated value, at the end of
such period, of $1.00 deposited at the beginning of such period at
the assumed annual investment rate (AIR). The AIR for Annuity
Units based on the Contract's annuity tables is 5% per year. An AIR
of 3% per year is also currently available upon Written Request.
With a particular AIR, payments after the first one will increase or decrease
from month to month based on whether the actual annualized investment return
of the selected Sub-Account(s) (after deducting the Mortality and Expense
Risk Charge) is better or worse than the assumed AIR percentage. If a given
amount of Sub-Account value is applied to a particular payment option, the
initial payment will be smaller if a 3% AIR is selected instead of a 5% AIR
but, all other things being equal, the subsequent 3% AIR payments have the
potential for increasing in amount by a larger percentage and for decreasing
in amount by a smaller percentage. For example, consider what would happen
if the actual annualized investment return (see the first sentence of this
paragraph) is 9%, 5%, 3%, or 0% between the time of the first and second
payments. With an actual 9% return, the 3% AIR and 5% AIR payments would
both increase in amount but the 3% AIR payment would increase by a larger
percentage. With an actual 5% return, the 3% AIR payment would increase in
amount while the 5% AIR payment would stay the same. With an actual return
of 3%, the 3% AIR payment would stay the same while the 5% AIR payment would
decrease in amount. Finally, with an actual return of 0%, the 3% AIR and 5%
AIR payments would both decrease in amount but the 3% AIR payment would
decrease by a smaller percentage. Note that the changes in payment amounts
described above are on a percentage basis and thus do not illustrate when, if
ever, the 3% AIR payment amount might become larger than the 5% AIR payment
amount. Note though that if Option A (Income for a Fixed Number of Years) is
selected and payments continue for the entire period, the 3% AIR payment
amount will start out being smaller than the 5% AIR payment amount but
eventually the 3% AIR payment amount will become larger than the 5% AIR
payment amount.
Re-Allocating Sub-Account Payments
The number of Annuity Units for each Sub-Account under any variable annuity
option will remain fixed during the entire annuity payment period unless the
payee makes a written request for a change. Currently, a payee can instruct
Keyport Benefit to change the Sub-Account(s) used to determine the amount of
the variable annuity payments 1 time every 6 months. The payee's request
must specify the percentage of the annuity payment that is to be based on the
investment performance of each Sub-Account. The percentage for each Sub-
Account, if not zero, must be at least 10% and must be a whole number. At
the end of the Valuation Period during which Keyport Benefit receives the
request, Keyport Benefit 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
Keyport Benefit is responsible for the safekeeping of the assets of the
Variable Account.
Keyport Benefit 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. Keyport Benefit has contracted with Keyport Life
Insurance Company, its corporate parent, to provide all administration for
the Contracts and Certificates, as its agent. Keyport Benefit pays Keyport
Life Insurance Company for the costs it incurs for providing those
administrative services.
PRINCIPAL UNDERWRITER
The Contracts and Certificates, which are offered continuously, are
distributed by Keyport Financial Services Corp. ("KFSC"), which is an
affiliate of Keyport Benefit.
EXPERTS
The statutory-basis financial statements of Keyport Benefit Life Insurance
Company (formerly American Benefit Life Insurance Company) as of December 31,
1997 and 1996, and for each of the three years in the period ended December
31, 1997 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.
Yields for Stein Roe Money Market Fund (SRMMF) Sub-Account
Yield and effective yield percentages for the SRMMF Sub-Account are
calculated using the method prescribed by the Securities and Exchange
Commission. Both yields reflect the deduction of the annual 0.35% asset-
based Certificate charge. Both yields also reflect, on an allocated basis,
the Certificate's annual $35 Certificate Maintenance Charge. Both yields do
not reflect 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 SRMMF Sub-Account charge is equal to the $35
Certificate
charge multiplied by a fraction equal to the average number of
Certificates with SRMMF 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 SRMMF Sub-Account Accumulation Unit during the 7-day period
divided by the average Certificate Value in SRMMF 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 SRMMF Sub-Account will continue over an entire year. The
effective yield formula also annualizes seven days of net income but it
assumes that the net income is reinvested over the year. This compounding
effect causes effective yield to be higher than the yield.
FINANCIAL STATEMENTS
The Variable Account has not yet commenced operations and therefore no
financial statements are included. The financial statements of Keyport
Benefit are provided as relevant to its ability to meet its financial
obligations under the Certificates.
Report of Independent Auditors
The Board of Directors and Stockholder
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
We have audited the accompanying statutory-basis balance sheets of Keyport
Benefit Life Insurance Company (formerly American Benefit Life Insurance
Company, a wholly-owned subsidiary of American Republic Insurance Company) as
of December 31, 1997 and 1996, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New York, which
practices differ from generally accepted accounting principles. The variances
between such practices and generally accepted accounting principles also are
described in Note 1. The effects on the financial statements of these
variances are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting principles,
the financial position of Keyport Benefit Life Insurance Company at December
31, 1997 and 1996, or the results of its operations or its cash flows for
each of the three years in the period ended December 31, 1997.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Keyport Benefit
Life Insurance Company at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New York.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Des Moines, Iowa
March 13, 1998
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Balance Sheets - Statutory-Basis
December 31
1997 1996
Admitted assets
Bonds D at amortized cost $2,995,943 $ 8,416,743
Cash and cash equivalents:
Short-term investments 2,498,556 210,000
Cash 952,919 74,858
3,451,475 284,858
Total cash and investments 6,447,418 8,701,601
Investment income due and accrued 86,829 152,615
Receivable from securities sold - 873
Other admitted assets 9 151
Separate account assets 2,777,522 3,690,792
Total admitted assets $9,311,778 $12,546,032
Liabilities and capital and surplus
Liabilities:
Policy reserves:
Annuity $ 73,095 $ 88,053
Accident and health 95,961 79,526
169,056 167,579
Policy and contract claims 47,460 45,600
Due to parent under tax allocation agreement 87,449 132,559
Transfer to separate accounts due or accrued, net (3,214) (10,285)
Asset valuation reserve - 58,296
Interest maintenance reserve 38,672 20,116
Other liabilities 105,833 20,825
Separate account liabilities 2,777,522 3,690,792
Total liabilities 3,222,778 4,125,482
Lease commitment (Note 9)
Capital and surplus:
Common Stock, par value $2,000
per share D 1,000 shares authorized,
issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 2,500,000 5,000,000
Separate account contingency reserve - 92,270
Unassigned surplus 1,589,000 1,328,280
Total capital and surplus 6,089,000 8,420,550
Total liabilities and capital and surplus $9,311,778 $12,546,032
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Operations - Statutory-Basis
Year ended December 31
1997 1996 1995
Premiums and other considerations:
Annuity deposits $ 37,387 $ 43,705 $ 51,449
Accident and health - 9,100 18,200
37,387 52,805 69,649
Net investment income 562,822 590,018 570,073
Miscellaneous income 7,902 7,651 134,395
608,111 650,474 774,117
Benefits and expenses:
Benefits paid or provided for:
Surrender benefits 1,312,171 1,804,050 3,285,960
Annuity and other benefits 27,546 86,818 58,768
Accident and health benefits 27,420 - 37,326
Decrease in policy reserves 1,477 (30,370) (131,774)
1,368,614 1,860,498 3,250,280
Insurance expenses:
Commissions 3,149 4,479 6,175
General insurance expenses 389,107 327,700 300,049
Insurance taxes, licenses and fees 27,001 7,749 7,039
Net transfers from separate account (1,356,208)(1,895,913)(3,230,846)
(936,951)(1,555,985)(2,917,583)
431,663 304,513 332,697
Gain from operations before federal
income taxes and net realized capital
gains 176,448 345,961 441,420
Federal income taxes 66,328 118,372 130,420
Net gain from operations before net
realized capital gains 110,120 227,589 311,000
Net realized capital gains, net of
federal income taxes (1997 - $14,672;
1996 D $1,628; 1995 D $1,580) and amounts
transferred to interest maintenance
reserve (1997 D $27,249; 1996 D $3,024;
1995 D $2,934) - - -
Net income $110,120 $227,589 $311,000
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Changes in Capital and Surplus - Statutory-Basis
Separate
Additional Account
Common Paid-In Contingency Unassigned
Stock Capital Reserve Surplus Total
Balance at
January 1,
1995 $2,000,000 $5,000,000 $185,557 $ 769,276 $7,954,833
Net income - - - 311,000 311,000
Decrease in
asset
valuation
reserve - - - 3,917 3,917
Decrease in
nonadmitted
assets - - - 356 356
Decrease in
surplus of
separate
account - - - (69,062) (69,062)
Transfer of
contingency
reserve back
to unassigned
surplus - - (57,755) 57,755 -
Other - - - (7,522) (7,522)
Balance at
December 31,
1995 2,000,000 5,000,000 127,802 1,065,720 8,193,522
Net income - - - 227,589 227,589
Increase in
asset valuation
reserve - - - (751) (751)
Decrease in
nonadmitted
assets - - - 190 190
Transfer of
contingency
reserve back to
unassigned
surplus - - (35,532) 35,532 -
Balance at
December 31,
1996 2,000,000 5,000,000 92,270 1,328,280 8,420,550
Net income - - - 110,120 110,120
Decrease in
asset valuation
reserve - - - 58,296 58,296
Decrease in
nonadmitted
assets - - - 34 34
Transfer of
contingency
reserve back
to unassigned
surplus - - (92,270) 92,270 -
Dividend paid
to parent - (2,500,000) - - (2,500,000)
Balance at
December 31,
1997 $2,000,000 $2,500,000 $ - $1,589,000 $6,089,000
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Statements of Cash Flows - Statutory-Basis
Year ended December 31
1997 1996 1995
Operating activities
Premiums and other
considerations $ 37,529 $ 52,808 $ 69,504
Investment income, less expenses 648,361 598,768 599,720
Miscellaneous income (792) 186 126,915
Accident and health claims (25,560) - (43,526)
Annuity surrenders (1,312,171) (1,804,050) (3,285,960)
Annuity and other benefits paid (27,546) (86,818) (58,768)
Insurance expenses (340,984) (344,366) (326,057)
Federal income taxes paid (126,110) (119,441) (65,501)
Net transfers from separate account 1,363,279 1,910,019 3,230,846
Net cash provided by operating
activities 216,006 207,106 247,173
Investing activities
Proceeds from bonds sold,
matured or repaid 5,743,126 2,978,253 1,692,370
Cost of bonds acquired (293,966) (3,388,068) (1,826,241)
Dividend paid to parent (2,500,000) - -
Other 1,451 49,070 1
Net cash provided by (used in)
investing activities 2,950,611 (360,745) (133,870)
Increase (decrease) in cash and
cash equivalents 3,166,617 (153,639) 113,303
Cash and cash equivalents at
beginning of year 284,858 438,497 325,194
Cash and cash equivalents at end
of year $3,451,475 $ 284,858 $ 438,497
See accompanying notes.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements
December 31, 1997
1. Organization and Significant Accounting Policies
Organization
Through December 31, 1997, Keyport Benefit Life Insurance Company (formerly
American Benefit Life Insurance Company) was wholly owned by American
Republic Insurance Company (American Republic), a mutual life insurance
company. The Company was sold on January 2, 1998 to Keyport Life Insurance
Company including the assumption of all responsibilities related to the
Separate Account. The name of the Company was changed in conjunction with the
sale from American Benefit Life Insurance Company to Keyport Benefit Life
Insurance Company. The Company offers flexible premium annuities and long-
term care products. The Company is licensed in the State of New York.
Basis of Presentation
The accompanying financial statements of Keyport Benefit Life Insurance
Company (formerly American Benefit Life Insurance Company) have been prepared
in conformity with accounting practices prescribed or permitted by the
Insurance Department of the State of New York, which practices differ from
generally accepted accounting principles ("GAAP").
Prescribed statutory accounting practices include state laws, regulations and
general administrative rules, as well as a variety of publications of the
National Association of Insurance Commissioners (NAIC). Permitted statutory
accounting practices encompass all accounting practices that are not
prescribed. Such practices may differ from state to state, may differ from
company to company within a state and may change in the future.
The NAIC is in the process of codifying statutory accounting practices
(Codification). Codification will likely change, to some extent, prescribed
statutory accounting practices and may result in changes to the accounting
practices that the Company uses to prepare its statutory-basis financial
statements. Codification, which was approved by the NAIC in March 1998, will
require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within
those states. Accordingly, before Codification becomes effective for the
Company, the State of Iowa must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis
results to the Insurance Division. At this time, it is unclear whether the
State of Iowa will adopt Codification.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
The more significant differences between statutory accounting practices and
GAAP are as follows: (a) investments in bonds are reported at amortized cost
or market value based on their NAIC rating. For GAAP purposes, such
investments in debt securities are designated at purchase as held-to-
maturity, trading or available-for-sale. Held-to-maturity investments in debt
securities are reported at amortized cost. The remaining investments in debt
securities are reported at fair value with the unrealized holding gains and
losses reported in operations for those designated as trading and as a
separate component of equity for those designated as available-for-sale; (b)
the costs of acquiring and renewing business are charged to current
operations as incurred rather than deferred and amortized over the premium-
paying period or in proportion to the present value of expected gross profit
margins; (c) policy reserves on certain annuity contracts use discounting
methodologies utilizing statutory interest rates rather than full account
values; (d) deferred federal income taxes are not provided for the difference
between the financial reporting and income tax bases of assets and
liabilities for statutory purposes, whereas, they are required for GAAP; (e)
under a formula determined by the NAIC, the Company defers in the Interest
Maintenance Reserve (IMR) the portion of realized gains and losses on sales
of bonds attributable to changes in the general level of interest rates and
amortizes those deferrals over the remaining period to maturity. Realized
capital gains and losses are reported in operations net of federal income
taxes and transfers to the IMR rather than reported in the statements of
operations on a pretax basis in the period that the asset giving rise to the
gain or loss is sold; (f) declines in the estimated realizable value of
investments are provided for through the establishment of a formula
determined statutory asset valuation reserve (carried as a liability) with
changes charged directly to surplus, rather than through recognition in the
statements of operations for declines in value, when such declines are judged
to be other than temporary; (g) certain assets designated as "non-admitted
assets" have been charged directly to surplus rather than being reported as
assets; and (h) revenues for annuity deposits consist of premiums received
rather than policy charges for the cost of insurance, policy initiation and
administration, surrender charges and other fees that have been assessed
against policy account values.
The effects of the foregoing variances from GAAP on the accompanying
statutory-basis financial statements have not been determined, but are
presumed to be material.
Use of Estimates
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
Investments
Investments in bonds and short-term investments are stated at cost adjusted
for amortization of premiums or accrual of discounts. The discounts or
premiums on bonds are amortized using the scientific (interest) method, which
results in a constant yield over the investmentsO expected lives. Other
admitted assets are valued as required or permitted by the Insurance
Department of the State of New York.
Realized capital gains and losses on investments are determined on the basis
of specific identification and are recorded in the statements of operations
net of related federal income taxes and amounts transferred to the interest
maintenance reserve. The Asset Valuation Reserve (AVR) is established by the
Company to provide for anticipated losses in the event of default by issuers
of certain invested assets. These amounts are determined using a formula
prescribed by the NAIC and are reported as a liability. The formula for the
AVR provides for a corresponding adjustment for realized gains and losses,
net of amounts attributed to changes in the general level of interest rates.
Under a formula prescribed by the NAIC, the Company defers, in the IMR, the
portion of realized gains and losses on sales of fixed income investments,
principally bonds, attributable to changes in the general level of interest
rates and amortizes those deferrals over the remaining period to maturity of
the security.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of one year or less when purchased to be
cash equivalents.
Policy Reserves
The annuity policy reserves are established and maintained using assumed
interest rates and valuation methods that will provide, in the aggregate,
reserves that are greater than the minimum valuation required by law or
guaranteed policy cash values.
The accident and health policy reserves represent unearned premiums on
accident and health policies and an estimate of unpaid claims. Policy and
contract claims are determined using individual claim evaluations and
statistical analyses. Policy and contract claims represent estimates of the
ultimate net costs of all losses, reported and unreported, which remain
unpaid at December 31 of each year. These estimates are necessarily subject
to the impact of future changes in claim severity, frequency and other
factors. In spite of the variability inherent in such situations, management
believes that the unpaid claim amounts are adequate. The estimates are
continuously reviewed and as adjustments to these amounts become necessary,
such adjustments are reflected in current operations.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
1. Organization and Significant Accounting Policies (continued)
Recognition of Premium Revenue and Costs
Premiums are recognized as revenue over the premium-paying period and all
costs related to the acquisition of new business are charged to operations as
incurred.
Separate Account
Separate account assets and liabilities represent funds held for the
exclusive benefit of variable annuity contractholders. Fees are received for
administrative expenses and for assuming certain mortality, distribution and
expense risks. The statement of operations includes the premiums, benefits
and other items (including transfers to and from the separate account)
arising from the operations of the separate account.
2. Fair Values of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate that value. In cases
where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparisons to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value
of the Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts of $3,451,475 and $284,858
at December 31, 1997 and 1996, respectively, for these instruments
approximate their fair values.
Bonds: Fair values for bonds are based on quoted market prices, where
available. For bonds not actively traded, fair values are estimated using
values obtained from independent pricing services. The carrying amounts
and fair values of the CompanyOs bonds were $2,995,943 and $3,060,000 at
December 31, 1997 and $8,416,743 and $8,517,444 at December 31, 1996,
respectively.
Separate account assets: The carrying amount of $2,777,522 and $3,690,792
at December 31, 1997 and 1996, respectively, represents the fair value of
these assets.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
2. Fair Values of Financial Instruments (continued)
Investment contracts: Fair values for the CompanyOs liabilities under
investment-type insurance contracts are based on the cash surrender values
of the underlying contracts. The carrying amounts and fair values of the
CompanyOs liabilities for investment-type insurance contracts, including
separate account liabilities, was $2,847,403 and $2,771,755 at December
31, 1997 and $3,768,560 and $3,752,000 at December 31, 1996, respectively.
3. Investment Operations
At December 31, 1997 and 1996, the amortized cost and estimated fair values
of the CompanyOs portfolio of debt securities is as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
December 31, 1997
Bonds:
United States
Government and
agencies $2,995,943 $ 64,057 $ - $3,060,000
Short-term investments:
Industrial and
miscellaneous 2,498,556 - - 2,498,556
$5,494,499 $ 64,057 $ - $5,558,556
December 31, 1996
Bonds:
United States
Government and
agencies $3,293,758 $ 68,533 $ (9,291) $3,353,000
State, municipal
and other government 99,270 2,730 - 102,000
Public utilities 1,679,494 14,927 (7,640) 1,686,781
Industrial and
miscellaneous 3,344,221 45,872 (14,430) 3,375,663
8,416,743 132,062 (31,361) 8,517,444
Short-term investments:
Industrial and
miscellaneous 210,000 - - 210,000
210,000 - - 210,000
$8,626,743 $132,062 $(31,361) $8,727,444
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
3. Investment Operations (continued)
The amortized cost and estimated fair value of debt securities at December
31, 1997, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Estimated
Amortized Fair
Cost Value
Due in one year or less $3,498,500 $3,498,556
Due after one year through
five years 1,995,999 2,060,000
$5,494,499 $5,558,556
For the years ended December 31, 1997, 1996 and 1995, net realized investment
gains as shown in the statement of operations includes gross gains on the
sale of debt securities of $41,921, $4,652 and $4,514, respectively.
Major categories of net investment income are summarized as follows:
Year ended December 31
1997 1996 1995
Bonds $502,118 $583,777 $561,809
Short-term investments 76,180 14,582 15,440
Miscellaneous 29 - -
578,327 598,359 577,249
Less investment expenses 15,505 8,341 7,176
Net investment income $562,822 $590,018 $570,073
At December 31, 1997, affidavits of deposits covering bonds of $500,000 were
on deposit with state agencies to meet regulatory requirements.
4. Federal Income Taxes
The Company filed a consolidated federal income tax return with American
Republic through December 31, 1997. It is American RepublicOs policy to
compute taxes allocated to the Company as if the Company filed a separate tax
return.
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
4. Federal Income Taxes (continued)
The effective tax rate is different than the prevailing federal income tax
rates of 35% in 1997, 1996 and 1995, principally due to the following:
Year ended December 31
1997 1996 1995
Federal income tax at statutory
rate $61,757 $121,086 $154,497
Tax increase (decrease) from:
Separate account loss - - (24,171)
Market discount on bonds D net (9,427) (5,752) (5,884)
Deferred acquisition costs D
tax basis (3,603) (2,951) (4,044)
Realized gains 14,672 1,628 1,580
Other 2,929 4,361 8,442
Federal income taxes $66,328 $118,372 $130,420
5. Annuity Reserves
The CompanyOs annuity policy reserves (including separate account
liabilities) relate to liabilities established on a variety of the CompanyOs
products that are not subject to significant mortality and morbidity risk;
however, there may be certain restrictions placed upon the amount of funds
that can be withdrawn without penalty. The amount of reserves on these
products, by withdrawal characteristics, and the related percentage of the
total, are summarized as follows:
December 31
1997 1996
Amount Percentage Amount Percentage
Subject to discretionary
withdrawal at book value
less surrender charge $2,758,820 97% $3,673,369 98%
Not subject to
discretionary withdrawal 88,583 3 95,191 2
Total annuity reserves and
deposit fund liabilities $2,847,403 100% $3,768,560 100%
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
6. Liability for Unpaid Claims
Activity in the liability for unpaid accident and health claims is summarized
as follows:
Year ended December 31
1997 1996 1995
Balance at January 1 $45,600 $45,600 $100,000
Incurred related to:
Current year - - -
Prior years 38,984 - (10,874)
Total incurred 38,984 - (10,874)
Paid related to:
Current year - - -
Prior years 25,560 - 43,526
Total paid 25,560 - 43,526
Balance at December 31 $59,024 $45,600 $ 45,600
7. Separate Account
A reconciliation of the amounts transferred to and from the separate account
is as follows:
Year ended December 31
1997 1996 1995
Transfers as reported in the
summary of operations of the
separate account statement:
Transfers to separate account $ - $ 22,638 $ 81,085
Transfers from separate
account (1,354,731) (1,918,111) (3,410,160)
Net transfers from separate
account (1,354,731) (1,895,473) (3,329,075)
Reconciling adjustments:
General account annuity
management fee income - - 97,387
Separate account
miscellaneous income (1,477) (440) 842
(1,477) (440) 98,229
Transfers as reported in the
summary of operations of the
life, accident and health annual
statement $(1,356,208) $(1,895,913) $(3,230,846)
Keyport Benefit Life Insurance Company
(formerly American Benefit Life Insurance Company)
Notes to Statutory-Basis Financial Statements (continued)
8. Related Party Transactions
Under a service agreement with American Republic, the Company reimburses
American Republic for the cost of services which it provides to the Company.
The cost of these services was $69,415, $52,586 and $49,933 for 1997, 1996
and 1995, respectively.
9. Lease Commitment
The Company has entered into an operating lease agreement for rental of space
for the home office. Rent expense was $16,316 for 1997, $10,080 for 1996 and
$10,050 in 1995.
10. Year 2000 (Unaudited)
Based on a study of its computer software and hardware, the Company has
determined its exposure to the Year 2000 change of the century date issue.
The Company has developed a plan to modify its information technology to be
ready for the Year 2000. Efforts began in 1996 to modify its systems. This
project is expected to be substantially completed early in 1999. While
additional testing will be conducted on its systems through the Year 2000,
the Company does not expect this project to have a significant effect on the
Company's operations. To mitigate the effect of outside influences and other
dependencies relative to the Year 2000, the Company is contacting significant
customers, suppliers and other third parties. To the extent these third
parties would be unable to transact business in the Year 2000 and thereafter,
the Company's operations could be adversely affected.
PART C
Item 24. Financial Statements and Exhibits
(a) Statutory-Basis Financial Statements:
Included in Part B:
Keyport Benefit Life Insurance Company (formerly American Benefit
Life Insurance Company):
Balance Sheets as of December 31, 1997 and 1996.
Statements of Operations for the years ended December 31, 1997,
1996 and 1995.
Statements of Changes in Capital and Surplus for the years ended
December 31, 1997, 1996 and 1995.
Statements of Cash Flows for the years ended December 31, 1997,
1996 and 1995.
Notes to Financial Statements
(b) Exhibits:
** (1) Resolution of the Board of Directors establishing Variable
Account A
(2) Not applicable
** (3a) Form of Principal Underwriter's Agreement
** (3b) Specimen Agreement between Principal Underwriter and Dealer
** (4a) Form of Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company
** (4b) Form of Group Variable Annuity Certificate of Keyport Benefit
Life Insurance Company
** (4c) Form of Tax-Sheltered Annuity Endorsement
** (4d) Form of Individual Retirement Annuity Endorsement
** (4e) Form of Corporate/Keogh 401(a) Plan Endorsement
** (4f) Form of Unisex Endorsement
** (4g) Form of Qualified Plan Endorsement
(4h) Specimen Group Variable Annuity Contract of Keyport Benefit
Life Insurance Company (M&N)
(4i) Specimen Variable Annuity Certificate of Keyport Benefit
Life Insurance Company (M&N)
** (5a) Form of Application for a Group Variable Annuity Contract
** (5b) Form of Application for a Group Variable Annuity Certificate
(6a) Articles of Incorporation of Keyport Benefit Life Insurance
Company
(6b) By-Laws of Keyport Benefit Life Insurance Company
(7) Not applicable
** (8a) Form of Participation Agreement
(8b) Form of Participation Agreement Among Manning & Napier
Insurance Fund, Inc., Manning & Napier Investor Services,
Inc.,
Manning & Napier Advisors, Inc., and Keyport Benefit Life
Insurance Company
(8c) Participation Agreement By and Among Keyport Benefit Life
Insurance Company, Keyport Financial Services Corp., and
SteinRoe Variable Investment Trust
** (9) Opinion and Consent of Counsel
(10) Consent 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) Form of Administrative Services Agreement
(27) Financial Data Schedule
* Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement (Files No. 333-1043; 811-7543) filed on or about
February 6, 1998.
** Incorporated by reference to Registration Statement (Files No. 333-
45727;
811-08635) filed on or about February 6, 1998.
*** To be Filed by Amendment.
Item 25. Officers and Directors of the Depositor.
Name and Position and Offices
Business Address* with Depositor
William P. Donohue Director
Senior Advisor
Bentley Associates LP
1155 Avenue of the Americas
New York, NY 10036
Peter M. Lehrer Director
Opus Three Ltd.
550 Mamaroneck Ave.
Harrison, NY 10528
Jeff S. Liebmann Director
Partner
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019-6092
Christopher C. York Director
Principal
C.C. York Company
200 Rector Place, 18-E
New York, NY 11280-1101
John W. Rosensteel Chairman of the Board, Director, President and
Chief Executive Officer
Stephen B. Bonner Director and Executive Vice President
Paul H. LeFevre, Jr. Director and Executive Vice President
Bernard R. Beckerlegge Director, Senior Vice President and General
Counsel
Bernhard M. Koch Director, Senior Vice President and Chief
Financial Officer
Stewart R. Morrison Senior Vice President and Chief Investment
Officer
Francis E. Reinhart Senior Vice President and Chief Information
Officer
Mark R. Tully Senior Vice President and Chief Sales Officer
Garth A. Bernard Vice President
Daniel C. Bryant Vice President and Assistant Secretary
James P. Greaton Vice President and Corporate Actuary
Jacob M. Herschler Vice President
Kenneth M. Hughes Vice President
James J. Klopper Vice President and Secretary
Jeffrey J. Lobo Vice President-Risk Management
Suzanne E. Lyons Vice President-Human Resources
Jeffery J. Whitehead Vice President and Treasurer
John G. Bonvouloir Assistant Vice President and Assistant
Treasurer
Alan R. Downey Assistant Vice President
Scott E. Morin Assistant Vice President and Controller
Edward M. Shea Assistant Vice President
Donald A. Truman Assistant Secretary
Daniel Yin Assistant Vice President
*125 High Street, Boston, Massachusetts 02110, unless noted otherwise
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
The Depositor controls the Registrant, and is a wholly-owned subsidiary
of Keyport Life Insurance Company, which controls KMA Variable Account,
Keyport 401 Variable Account, Keyport Variable Account I, and Keyport
Variable Account II.
The Depositor is under common control with Keyport Financial Services
Corp. (KFSC), a Massachusetts corporation functioning as a broker/dealer of
securities. KFSC files separate financial statements.
The Depositor is under common control with Liberty Advisory Services
Corp. (LASC), a Massachusetts corporation functioning as an investment
adviser. LASC files separate financial statements.
The Depositor is under common control with Independence Life and Annuity
Company ("Independence Life"), a Rhode Island corporation functioning as a
life insurance company. Independence Life files separate financial
statements.
Chart for the affiliations of the Depositor is incorporated by reference
to Post-Effective Amendment No. 7 to the Registration Statement (Files No.
333-1043; 811-7543) filed on or about February 6, 1998.
Item 27. Number of Contract Owners.
None.
Item 28. Indemnification.
Directors and officers of the Depositor and the principal underwriter
are covered persons under Directors and Officers/Errors and Omissions
liability insurance policies. Insofar as indemnification for liability
arising under the Securities Act of 1933 may be permitted to directors and
officers under such insurance policies, or otherwise, the Depositor has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Depositor of expenses
incurred or paid by a director or officer in the successful defense of any
action, suit or proceeding) is asserted by such director or officer in
connection with the variable annuity contracts, the Depositor will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
Keyport Financial Services Corp. (KFSC) is principal underwriter of the
SteinRoe Variable Investment Trust and the Liberty Variable Investment Trust,
which offer eligible funds for variable annuity and variable life insurance
contracts. KFSC is the principal underwriter for Variable Account A of
Keyport Benefit Life Insurance Company. KFSC is also principal underwriter
for Variable Account J and Variable Account K of Liberty Life Assurance
Company of Boston and for the KMA Variable Account, Variable Account A and
Keyport Variable Account-I of Keyport Life Insurance Company and for the
Independence Variable Annuity Account and Independence Variable Life Account
of Independence Life and Annuity Company, which are affiliated companies of
Keyport Benefit.
The directors and officers are:
Name and Principal Position and Offices
Business Address* with Underwriter
John W. Rosensteel Chairman of the Board and President
James J. Klopper Director and Clerk
Francis E. Reinhart Director and Vice President-Administration
Rogelio P. Japlit Treasurer
Paul T. Holman Assistant Clerk
Donald A. Truman Assistant Clerk
*125 High Street, Boston, Massachusetts 02110.
Item 30. Location of Accounts and Records.
Keyport Benefit Life Insurance Company, 125 High St., Boston, MA 02110
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 included as Exhibit 17 in this Registration Statement.
Representation
Depositor represents that the fees and charges deducted under the
contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
Depositor. Further, this representation applies to each form of the contract
described in a prospectus and statement of additional information included in
this Registration Statement.
SIGNATURES
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it has duly caused this Registration
Statement to be signed on its behalf, in the City of Boston and Commonwealth
of Massachusetts, on this 10th day of June, l998.
Variable Account A
(Registrant)
By: Keyport Benefit Life Insurance Company
(Depositor)
By: /s/ John W. Rosensteel*
John W. Rosensteel
President
*BY: /s/James J. Klopper June 10, 1998
James J. Klopper Date
Attorney-in-Fact
* James J. Klopper has signed this document on the indicated date on behalf
of Mr. Rosensteel pursuant to power of attorney duly executed by him and
included as part of Exhibit 16 in the Registration Statement on Form N-4
filed on or about February 6, 1998 (Files No. 333-45727; 811-08635).
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/JOHN W. ROSENSTEEL* /s/JOHN W. ROSENSTEEL*
JOHN W. ROSENSTEE. JOHN W. ROSENSTEEL
Chairman of the Board President
/s/BERNARD R. BECKERLEGGE* /s/BERNHARD M. KOCH*
BERNARD R. BECKERLEGGE BERNHARD M. KOCH
Director Chief Financial Officer
/s/STEPHEN B. BONNER*
STEPHEN B. BONNER
Director
/s/WILLIAM P. DONOHUE*
WILLIAM P. DONOHUE
Director
/s/BERNHARD M. KOCH*
BERNHARD M. KOCH
Director
/s/PAUL H. LEFEVRE, JR.*
PAUL H. LEFEVRE, JR.
Director
*BY: /s/James J. Klopper June 10, 1998
/s/PETER M. LEHRER* James J. Klopper Date
PETER M. LEHRER Attorney-in-Fact
Director
/s/JEFF S. LIEBMANN*
JEFF S. LIEBMANN
Director
/s/CHRISTOPHER C. YORK*
CHRISTOPHER C. YORK
Director
* James J. Klopper has signed this document on the indicated date on behalf
of each of the above Directors and Officers of the Depositor pursuant to
powers of attorney duly executed by such persons and included as Exhibit 16
in the Registration Statement on Form N-4 filed on or about February 6, 1998
(Files No. 333-45727; 811-08635).
EXHIBIT INDEX
Exhibit Page
(4h) Specimen Group Variable Annuity Contract of Keyport Benefit Life
Insurance Company (M&N)
(4i) Specimen Variable Annuity Certificate of Keyport Benefit Life
Insurance Company (M&N)
(6a) Articles of Incorporation of Keyport Benefit Life Insurance
Company
(6b) By-Laws of Keyport Benefit Life Insurance Company
(8b) Form of Participation Agreement Among Manning & Napier Insurance
Fund, Inc., Manning & Napier Investor Services, Inc., Manning
& Napier Advisors, Inc., and Keyport Benefit Life Insurance Company
(8c) Participation Agreement By and Among Keyport Benefit Life Insurance
Company, Keyport Financial Services Corp., and SteinRoe Variable
Investment Trust
(10) Consent of Independent Auditors
(27) Financial Data Schedule
EXHIBIT 4(h)
KEYPORT BENEFIT LIFE INSURANCE COMPANY
Read this Contract carefully. This document is a description of the legal
contract between the Group Contract Owner and Us.
A Certificate Owner may return a Certificate to Us within 10 days after
receipt by delivering or mailing it to Our Office. The return of the
Certificate by mail will be effective when the postmark is affixed to a
properly addressed and postage prepaid envelope. This returned Certificate
will be treated as if We never issued it and We will refund the Certificate
Value plus any amount deducted from the purchase payment before it was
allocated to the Variable Account. The Certificate Value will be determined
as of the date of surrender (i.e., for a mailed contract, the postmark date).
The Group Contract, as issued to the Group Contract Owner by Us with
any riders or endorsements, alone makes up the agreement under which benefits
are paid. The Group Contract may be inspected at the office of the Group
Contract Owner. In consideration of any application for a Certificate and
the payment of purchase payments, We agree, subject to the terms and
conditions of the Group Contract, to provide the benefits described in the
Certificate to the Certificate Owner. If a Certificate is In Force on the
Income Date, We will begin making income payments to the Annuitant. We will
make such payments according to the terms of the Certificate and Group
Contract.
Signed for the Company on the Issue Date at Our Executive Office, 100
Manhattanville Road, Purchase, New York 10577:
_________________________ _________________________
Secretary President
POLICY DESCRIPTION
This is a GROUP VARIABLE ANNUITY CONTRACT with limited purchase payment
flexibility. This contract is nonparticipating with no dividends.
Annuity payments and other values provided by this certificate when based
on the investment experience of a separate account, may increase or decrease
and are not guaranteed as to dollar amount. Variable annuity payments will
not decrease over time if the separate account (before deduction of the
annual .35% asset charge) has an annualized investment return of at least
5.0%. See pages 12-13 and 19 for further explanation. Certificate assets
allocated to the separate account incur charges of .35% before annuity
payments begin and .35% once annuity payments begin. Income, capital gains,
and/or losses whether or not realized, from assets allocated to the separate
account are credited to or charges against the separate account without
regard to income, capital gains, and/or losses arising out of any other
business the company may conduct.
.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
100 Manhattanville Road, Purchase, New York 10577
Service Office
125 High Street, 11th Floor
Boston, Massachusetts 02110
Contract Schedule
GROUP CONTRACT OWNER Keyport Benefit Insurance Trust I
GROUP CONTRACT NUMBER DVA(NY)001
GROUP CONTRACT ISSUE DATE 10/1/97
MINIMUM INITIAL PAYMENT $5,000
MINIMUM ADDITIONAL PAYMENT $1,000
Charges
Distribution Charge We deduct 0.000411% of the assets in each Variable
Account Sub-Account on a daily basis (equivalent to an annual rate of 0.15%)
to compensate Us for a portion of Our distribution costs.
Administrative Charge We deduct 0.000411% of the assets in each Variable
Account Sub-account on a daily basis (equivalent to an annual rate of 0.15%)
to compensate Us for a portion of Our administrative expenses.
Mortality and Expense Risk Charge We deduct 0.003403% of the assets in each
Variable Account Sub-account on a daily basis (equivalent to an annual rate
of 1.25%) for Our mortality and expense risks.
Certificate Maintenance Charge We charge $36 to cover a portion of Our
ongoing Certificate maintenance expenses. The charge is incurred at the
beginning of the Certificate Year and is deducted from the assets of the
Variable Account on each Certificate Anniversary and at the time of total
surrender. We reserve the right to charge up from the assets of the Variable
Account $100 per year. This charge will not apply after annuitization.
Transfer Charge Currently none, however, We reserve the right to charge $25
for a transfer if a Certificate Owner makes more than 12 transfers per
Certificate Year.
Surrender Charge At the time of each partial withdrawal or at total surrender
a contingent deferred sales charge is imposed as a percentage of each
Purchase Payment during the seven years after the date of its payment, as
follows:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
7% 6% 5% 4% 3% 2% 1%
Thereafter 0%.
Initial Purchase Payment Allocation
Currently, Certificate Owners can select 7 Sub-accounts and the Fixed
Account. We reserve the right to increase or decrease the number of
available Sub-accounts. The minimum a Certificate Owner may allocate to any
Sub-account or the Fixed Account is 10% of any Purchase Payment. An initial
Purchase Payment may be invested as follows:
Manning & Napier Moderate Growth x%
Manning & Napier Growth x%
Manning & Napier Maximum Horizon x%
Manning & Napier Small Cap x%
Manning & Napier Equity x%
Manning & Napier Bond x%
SteinRoe Cash Income x%
Interest Rate at Issue
Fixed Account - 1 Year x% ____%
Transfer Guidelines
Number of Transfers and Transfer Charge: Currently, Certificate Owners are
permitted 12 transfers per Certificate Year during the Accumulation Period
and 1 transfer every 6 months during the Annuity Period. We reserve the
right to change, upon notice, the frequency of transfers a Certificate Owner
can make. We also reserve the right to impose a charge for any transfer in
excess of 12 per Certificate Year. The transfer charge is shown in the
Charges section of the Schedule.
Minimum amount to be transferred: None
Minimum amount which must remain in a Sub-account after transfer: None
Limitations on transfers from Fixed Account: Transfers during a Certificate
Year from the Fixed Account to the Variable Account are limited to 25% of the
Fixed Account Value at the beginning of the Certificate Year. This
limitation will be waived if a systematic program of monthly transfers has
been established.
Partial Withdrawals
A Certificate Owner may make partial withdrawals during the Accumulation
Period without incurring a Surrender Charge, as follows:
(1) In any Certificate Year a Certificate Owner may withdraw an aggregate
amount not to exceed, at the time of withdrawal:
(a) the Certificate Value, less
(b) the portion of the Purchase Payments not previously withdrawn by
that Certificate Owner; and
(2) In any Certificate Year after the first, a Certificate Owner may
also withdraw the positive difference, if any, between the amount
withdrawn pursuant to (1) above in any such subsequent year and 10%
of the Certificate Value as of the preceding Certificate
Anniversary.We will collect the Surrender Charge shown on the
Schedule with respect to partial withdrawals in excess of the
amounts described in (1) and (2) above.
Minimum withdrawal amount: $300, unless the withdrawal is made pursuant to
Our Systematic
Withdrawal Program described below, in which case the minimum withdrawal is
$100.
Minimum Certificate Value which must remain after a partial withdrawal:
$2,000, provided no additional Purchase Payments have been made within the 3
years preceding the partial withdrawal.
Death Benefits
Adjustment of Certificate Value
When We receive due proof of death of the Certificate Owner, any Joint
Certificate Owner, or the Annuitant if the Certificate Owner is a non-natural
Person, We will compare, as of the date of death, the Certificate Value to
the Death Benefit amount defined in the Certificate Schedule. If the
Certificate Value is less than the Death Benefit, We will increase the
current Certificate Value by the amount of the difference. Any amount
credited will be allocated to the Variable Account and/or the Fixed Account
based on the Purchase Payment allocation selection that is in effect when We
receive due proof of death.
Waiver of Surrender Charges
If the Certificate is surrendered within 90 days of the date of death of the
Certificate Owner, any Joint Certificate Owner, or the Annuitant if the
Certificate Owner is a non-natural Person, any applicable Surrender Charges
will not be deducted from the Certificate Withdrawal Value.
Death Benefit Amount
A Certificate Schedule will contain one or more of the following Death
Benefit provisions.
Purchase Payment Death Benefit
On the Certificate Date the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) Start with the Death Benefit from the prior Valuation Date;
(2) Add to (1) any additional Purchase Payments paid during the current
Valuation Period and subtract from (1) any partial withdrawals
(including any associated Surrender Charge incurred) made during the
current Valuation Period.
Certificate Anniversary Death Benefit
On the Certificate Date, the Death Benefit is the initial Purchase Payment.
On subsequent Valuation Dates, the Death Benefit is calculated as follows:
(1) (a) Start with the Death Benefit from the Certificate Date;
(b) Add to (a) any additional Purchase Payments paid since the
Certificate Date and subtract from (a) any partial withdrawals
(including any associated Surrender Charge incurred) made since
the Certificate Date;
(2) (a) Determine the Certificate Value for each Certificate Anniversary
(the "Anniversary Value") before the 81st birthday of the
Certificate Owner or, if the Certificate Owner is a non-natural
Person, the Annuitant;
(b) Increase each "Anniversary Value" by any Purchase Payments made
after that Value's Anniversary;
(c) Decrease each "Anniversary Value" by the following amount
calculated at the time of each partial withdrawal made after
that Value's Anniversary: (i) the partial withdrawal amount
(including any associated Surrender Charge incurred) divided by
the Certificate Value immediately preceding the withdrawal, (ii)
multiplied by the "Anniversary Value" immediately preceding the
withdrawal;
(d) Select the highest "Anniversary Value" after the adjustments in
(b) and (c) above;
(3) Set the Death Benefit equal to the greater of (1) and (2).
If there is a change of Certificate Owner, the new Certificate Owner's age
will be used to determine the amount in (2) above.
The Variable Separate Accounts
Sub-accounts investing in shares of mutual funds
Variable Account J is a unit investment trust variable separate account,
organized in and governed by the laws of the State of Massachusetts, Our
state of domicile. Variable Account J is divided into Sub-accounts. Each
Sub-account listed below invests in shares of the corresponding Portfolio of
the Eligible Fund shown.
Sub-account Eligible Fund and Portfolio
Manning & Napier Insurance Fund, Inc.
Moderate Growth Manning & Napier Moderate Growth Portfolio
Sub-account -seeks with equal emphasis long-term
growth and preservation of capital.
Growth Sub-account Manning & Napier Growth Portfolio - seeks
long-term growth of capital. The
secondary objective is the preservation of
capital.
Maximum Horizon account Manning & Napier Maximum Horizon Portfolio
- seeks to achieve the high level of long-
term capital growth typically associated
with the stock market.
Small Cap Sub- Manning & Napier Small Cap Portfolio -
account seeks to achieve long term growth of
capital by investing principally in the
equity securities of small issuers.
Equity Sub-account Manning & Napier Equity Portfolio - seeks
long-term growth of capital.
Bond Sub-account Manning & Napier Bond Portfolio - seeks to
maximize total return in the form of both
income and capital appreciate by investing
in fixed income securities without regard
to maturity.
Stein Roe Money Market Stein Roe Money Market Fund - seeks high
Sub-account current income from short-term money
("Money Market" Sub-account) market instruments while emphasizing
preservation of capital and maintaining
excellent liquidity.
Variable Account M is an investment company variable separate account which
invests directly in securities, organized in and governed by the laws of the
State of Massachusetts, Our state of domicile. Variable Account M is divided
into Sub-accounts. The investment advisor to each Sub-account is set forth
opposite each Sub-account shown below:
